WLD Investors Inc. v. Xecom Corp.

MEMORANDUM ***

Rick and Harvey Hartman owned shares of a now defunct corporation, Select Switch Systems, Inc. (“SSSI”). In need of capitalization, the owners of SSSI stock entered into a Share Purchase Agreement with a corporation, Xecom Corp. (“Xe-com”), in which Joseph Lanza was a substantial shareholder. The agreement provided the owners of SSSI would convey their shares of SSSI stock in exchange for an amount of Xecom stock of equal value.

Subsequent to the execution of the Share Purchase Agreement, the former owners of SSSI discovered Xecom could not provide the capital promised. The Hartmans loaned Xecom approximately $250,000 in February 1996. The loan was evidenced by two promissory notes executed by Xecom and two written personal guarantees executed by Lanza.

When SSSI eventually failed, Xecom and Lanza defaulted on the notes and guarantees. The Hartmans also discovered that Xecom and Lanza had made fraudulent misrepresentations in the Share Purchase Agreement. The Hartmans brought suit asserting claims for rescission of the Share Purchase Agreement, damages against Xe-com for fraud and breach of the promissory notes, and damages against Lanza for breach of his…