Horner v. Wagy

146 P.2d 92 (1944)

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Nature of the Case

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Facts

D is the widow of Ernest who died May 18, 1940, and was, at the time of his death, the owner of the Crystal Laundry and Economy Cleaners. D took over the management of the business and continued to manage it until September 3, 1940, at which time she delivered possession of the property to P. P was then a resident of Kansas and had been in the laundry business there for twenty-one years. D and her co-executor entered into an agreement in writing for the sale of the laundry, including the goodwill of the business, for the sum of $17,000.00, $6,500.00 of which was paid in cash and the balance agreed to be paid at the rate of $00.00 per month with interest at the rate of six percent per annum on the deferred payments. By the contract, the executors also agreed to rent the building in which the laundry was housed to P for $50.00 per month. Possession was agreed to be given on September 1, 1940. During the six days that P was in Tillamook before the execution of the contract, he spent most of his time in the laundry and made one or two trips with the drivers on their regular routes. D testified that all the books of the concern, except the 'large monthly journal', were in the laundry, where P had access to them; P swore that the only records he saw were certain sheets showing the weekly revenue for July and a part of August 1940 and that D told him that the other books were at the office of her attorney, Mr. Barrick, who was out of town. P testified that he talked to employees about the business and also made inquiry at the bank concerning it. The alleged misrepresentations submitted to the jury were as follows: (1) That the Crystal Laundry and Economy Cleaners was a profitable business, taking in from $450.00 to $600.00 per week, and that plaintiff would not have the least bit of trouble in making the payments on said contract out of the profits of the business. It is alleged that in fact the business was not operating at any substantial profit, and it was entirely impossible to meet the payments required by the contract or any substantial portion of them out of the profits of the business, and that the normal gross income from the business was running from $289.00 to approximately $500.00 per week. (2) That the prices charged by the defendant for all laundry work were those shown on a certain price list, a copy of which is attached to the complaint; whereas in fact these were not the prices charged the customers, but the defendant had built up a practice of cutting prices on all laundry sent in by commercial establishments, which cut prices varied as to each establishment and were in general at least thirty-five percent below the prices shown on the price list. (3) That the only other laundry in town furnished no competition and was practically out of business; whereas the competing laundry was doing a large volume of business and furnished very serious competition. The books of the defendant reveal that during the first four months of 1940 the weekly income reached $450.00 only three times, and in many weeks, fell considerably below that sum. During May, June, July, and August the income measured up substantially to the alleged misrepresentation, but these are shown to be the best months of the year in the laundry business. The net income for the period October 1, 1939, to August 1, 1940, was $595.79. There was evidence that several months prior to the transaction, while her husband was still living, the defendant had stated that the laundry was not making a profit; that 'they did not take in enough to cover the payroll.' There was evidence that the gross revenue of the competing laundry during the year 1940, up to September, ranged from $1,160.00 a month to $1,500.00 a month, the latter amount being the income for August. This income, it was shown, was not sufficient to enable the owner to realize a net profit. He testified that he was in no financial difficulty in the summer of 1940, but admitted that he was delinquent in his rent, 'two or three years, I guess.' P asked for diminution in value damages of $11,200 which was the difference in the $17,000 price and the $5,800 alleged real value. P got the verdict for $5,000, and D appealed.