Jack L. Hargrove is president and majority shareholder of Jack L. Hargrove Builders, Inc. (Hargrove). Gerald A. Heinz is president and majority shareholder of Gerill Corporation. After engaging in a series of preliminary discussions, Heinz and Hargrove decided to form a joint venture for the purpose of developing a tract of 110 acres of undeveloped land. The land in question was owned by Gerill and was called “the Woodridge properties.” As part of the joint venture, Gerill agreed to contribute the land. Hargrove agreed to assume primary management responsibilities. He oversaw the construction process and managed the financial affairs of the joint venture. Hargrove secured a \($352,000\) loan from the Concordia Federal Savings and Loan Association. Hargrove used part of the proceeds to loan \($290,000\) to the joint venture, which in turn was used to pay off a mortgage held on a parcel of land in the Woodridge properties. At Heinz’s request, Hargrove prepared a 19-page list of the joint venture’s outstanding debt, including all outstanding loans and unpaid invoices. Determining that he had insufficient resources to purchase Hargrove’s interest, Heinz approached a third party (Rosch) about the possibility of Rosch purchasing the interest. Roach decided to purchase Hargrove’s interest. The parties signed a contract specifying that Rosch would pay \($200,000\) for Hargrove’s interest. The contract included the following assurance by Hargrove: That to the best of Jack L. Hargrove Builders, Inc. and Jack L. Hargrove individual’s knowledge, they have advised the Gerill Corporation, Gerald Heinz and John Rosch of any and all open invoices and any and all liabilities in the form of monies due and owing on the properties. The contract also stated “that Rosch, Gerill, and Heinz would assume all liabilities and responsibilities for the Woodridge properties and hold Hargrove harmless and indemnify him from any and all debts, liabilities and claims of every kind and nature which may arise in reference to said Woodridge properties.” After the parties signed the contract, it was discovered that the liabilities of the joint venture were significantly understated by Hargrove. Based on this discovery, Rosch, Gerill, and Heinz filed a legal complaint in court against Hargrove alleging among other complaints that Hargrove had purposely misrepresented the facts and intentionally defrauded them. Do you believe Rosch, Gerill, and Heinz will be successful in their case against Hargrove?
Explain.