There's no better example of California law being inconsistent with Solomonic justice than this case.
Plaintiff buys a retail business from defendant and pays $400,000. Defendant fraudulently represents that the business grosses $700,000 and nets $500,000 when she knows that isn't the case.
Sounds like a good case of fraud, and authorizes rescission, right?
The complicated part is that between 30-70% of the business involves the sale of knock-off -- e.g., counterfeit -- merchandise (i.e., fake Louis Vuitton and Gucci bags). And both parties to the contract know that. Plaintiff still was lied to, right? Still gets to rescind the purchase, which was based on fraud, right?
Nope. Because we don't enforce a contract to engage in illegality (e.g., the sale of counterfeit goods). Even if that part of the contract might be only a portion (e.g., 30-70%) of the deal.
That part I get. At least as a matter of precedent. And that's precisely what Justice Klein says in holding that plaintiff can't recover anything.
But, honestly, I liked -- fairly a lot -- more what Judge Buckley did in the trial court. He basically said: "Yeah, there was fraud, but there was also misconduct on both sides, so I'm going to split the baby and award plaintiff $125,000 0f the $400,000 purchase price." Sort of like that guy. (No, not that guy.)
So I agree with Justice Klein that California law (apparently) doesn't allow such an intermediate approach, and instead insists upon a more categorical imperative. But I'm not entirely sure that's the most just approach.
Plus, if that's indeed the law, does that mean I can go out tomorrow and enter into fraudulent contracts to buy and sell all sorts of retail establishments that are engaged in (at least partially) illegal acts: department stores, head shops, etc., obtain $500,000 a pop, and then keep the money with no recourse to the other side? Sure, the law deters such contracts by refusing to enforce them. But I promise you I can find people that'll enter into them. So if that's really okay, please let me know. 'Cause I got some shopping to do.
