Follo v. Florindo

970 A.2d 1230 (2009)

Purchase the Printed Copy at bsmsphd.com

Nature of the Case

To access this section all you need to do is click here and register.

Facts

Ds created Cranberry Farm, LLC to acquire an inn in Vermont and purchased the land for $825,000. Ds also formed a second company to acquire personal property for the Inn and to operate it. Ds as individuals also purchased a single-family house (cottage) on twenty acres of land adjacent to the Inn for $175,000. Ds operated the Inn while also separately renting out the Cottage. In the summer of 2002, Ds decided to sell the Inn and the Cottage. A real estate company, Hospitality Consultants. Hospitality Consultants marketed the Inn and the Cottage together in one brochure, listing the Inn for $1,195,000 and the Cottage for $225,000. P wanted to buy a bed and breakfast and learned about a 'gross revenue multiplier' approach to calculating sales prices for inns. P decided he would buy only an inn that showed it was profitable, that he could acquire for a maximum of five times the inn's gross sales, and that it would cost less than $1 million. P entered into negotiations with Ds. P asked for and received reports, including tax returns on the revenues, sales, expenses, and net income of the Inn during 2001 and 2002. P calculated that the property was worth $1,130,000 by multiplying the Inn's reported 2001 sales of $226,000 by five. P then offered $1,080,000 for the Inn. P also felt it was necessary to bid simultaneously on the Cottage because another bidder was prepared to make a bid on both properties at the same time. P discussed with the real estate agent and D whether they thought he could raise sufficient revenue from the Cottage to cover its purchase price if he remodeled the Cottage to contain three suites, then rented those as part of the Inn business. Both the real estate agent and D expressed the opinion that he would 'absolutely' get his money back using that plan, at least in part due to the occupancy rates and demand during certain times of the year. P purchased both the Inn and the Cottage for $1,245,000 in March 2003. Immediately P realized that the Inn's sales for the first few months were less than one-quarter of the sales figures he expected. P decided to try a mailing directed at the Inn's former customers and requested guest registration information from D. P began to suspect that Ds had not truthfully represented the Inn's actual revenues and occupancy rates in the realtor's marketing brochure and the various reports and tax returns Ds provided plaintiff during sale negotiations. P eventually sued Ds. After trial, but before the case went to the jury, P dropped all claims except for common law and consumer fraud claims. The jury returned a verdict against Ds for common-law fraud and consumer fraud. The jury awarded$645,000. The court concluded that the evidence presented was sufficient to support a damages award of only $295,000. P agreed to remittitur, and the court entered final judgment against defendants for damages of $295,000 plus prejudgment interest, costs, and attorney's fees. Both parties appealed.