Hoffman v. Red Owl Stores, Inc.

Facts

Hoffman (P) owned and operated a bakery. In 1959, P contacted Red Owl (D), which operated a supermarket chain, seeking to obtain a D franchise. P was assured by D that his $18,000 investment was sufficient. In February 1961, P acquired a grocery store under the advice of D to gain operating experience. Three months later D told him to sell that store, assuring P that they would find him a larger store. P sold the store and fixtures but was reluctant to do so because it meant losing summer tourist business. Once again, P was assured that $18,000 was a sufficient investment for a larger Red Owl store. On September 1961, P put $1,000 down on a lot in another town under the advice of D. The option stipulated a price of $6,000 with $1,000 to be paid on election to purchase and the balance to be paid in 30 days. A meeting was held on September 27, 1961, in which all the financial projections were prepared. Part of the funds that P was to invest were to come from the sale of his bakery building. On the basis of this meeting, P was told that 'everything is ready to go. Get your money together, and we are set.' D then told P to sell his bakery as that was the only hitch left in the transaction, which he did for $10,000. P was to retain the bakery equipment as it was contemplated that he would use it in the new store. After the sale of the bakery, P obtained employment on the night shift at an Appleton bakery. D was to procure a third party to buy the lot from P, construct the building and then lease it to P. No final plans were ever made nor were bids let or a construction contract entered. The lease was to be for $550 a month plus 6 percent of the land cost divided on a monthly basis. At the end of ten years, P was to have an option to renew the lease or to buy the property on an installment basis. There was no actual discussion of what the installments would be. Another meeting was held on November 22^nd, and projected financial statements were drawn up again. They showed that P was contributing $24,100 of which only $4,600 was to be cash possessed by P. Eight thousand was to be procured as a loan from a bank secured by the mortgage on the bakery fixtures and $7,500 was to be obtained from a loan from P’s father-in-law and $4,600 was to be obtained by the sale of the lot to the lessor at a profit. Two weeks later, P got a telegram from D to the effect that if P could get another $2,000 for promotional expenses, the deal was done for $26,000. P contacted his father-in-law who agreed to put $13,000 up if he could become a partner. D told P that the partnership sounded fine. On January 16, 1952 D’s credit manager told is representative that P would have to sign an agreement that the $13,000 was either a gift or a loan subordinate to all general creditors and that the agreement would be prepared. A final agreement was sent, and trouble began. P interpreted the final statement to require a total of $34,000 cash. D claims $18,000 is the total of the unborrowed and unencumbered cash. P informed D that he could not go through and objected to his father-in-law signing an agreement that the $13,000 was an absolute gift. The negotiations terminated between the parties. P sued D for reliance damages, lost profits, and expenses. P sued D and was awarded by special verdict $2,000 for the sale of the bakery, $1,000 for the option on the lot, $140 for moving expenses, and $125 for rent. The trial court ordered a new trial on the jury's award of $16,735 for the sale of the grocery store. D appealed. 

Issues

Rule of Law

Holding and Decision

Legal Analysis

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