RELIANCE FINANCE CORPORATION and Romer, O’Connor & Co., Inc., Appellants, v. Clyde E. MILLER and Arline A. Miller, Appellees

This case arose as the result of the sale of a California collection agency, Romer, O’Connor & Company, Inc. (“Romer”). When business became impaired shortly after the consummation of the sale, the purchaser, Reliance Finance Corp. (“Reliance”) and the Romer agency sued the seller, Clyde E. Miller, for damages and rescission on a number of theories. Mrs. Miller, who joined in the sale, was also named in the complaint but played, no active role in the events at issue. Federal jurisdiction was predicated on the alleged violation of 15 U.S.C. § 78j(b) and Rule 10b-5; pendent claims were stated under state securities law and on several other theories (fraudulent misrepresentation, negligent misrepresentation, failure of consideration, breach of contract and breach of warranty). The complaint was amended just prior to trial to add an additional count, mutual mistake of fact. Defendants stated several counterclaims, seeking payment on a promissory note made and executed by Reliance in connection with the sale, damages for breach of an employment contract between Miller and Reliance and related expenses due in connection therewith, money due under a contingent fee contract between…