Arbour v. Hazelton

• Decision Date: 21 December 1987
• Citation: 534 A.2d 1303
• Parties: Michael ARBOUR et al. v. Ralph HAZELTON et al.
• Court: Maine Supreme Court

Page 1303

534 A.2d 1303

Michael ARBOUR et al. v. Ralph HAZELTON et al.

Supreme Judicial Court of Maine.

Argued Nov. 4, 1987.

Decided Dec. 21, 1987.

Thomas R. Downing (orally), Hardy, Wolf & Downing, Lewiston, for plaintiff.

David W. Austin (orally), Rumford, for Hazeltons.

William C. Nugent (orally), Hunt, Thompson & Bowie, Portland, for Geronda.

Before McKUSICK, C.J., and NICHOLS, ROBERTS, WATHEN, SCOLNIK and CLIFFORD, JJ.

NICHOLS, Justice.

The Plaintiff-Purchasers, Michael and Regina Arbour, appeal from the directed verdicts entered in Superior Court, Oxford County, for the Defendant-Sellers, Ralph and Annie Hazelton, and their agent, Alphonse Geronda, in their action for rescission and misrepresentation. The Plaintiffs challenge the trial court's conclusion that the Plaintiffs failed to establish a prima facie case of the Defendants' knowledge of, or reckless disregard for, the untruth of the alleged false representations.

We vacate the judgments.

The Defendant-Sellers had engaged Defendant Geronda, a Rumford realtor, to sell their variety store in East Peru. In May, 1981, Plaintiff Michael Arbour met with Defendant Geronda to discuss this opportunity to purchase. Subsequently Geronda represented to him by letter that this was a "typical general store.... Sales include gas, oil, all foods--fresh, frozen, canned, meats and produce.... Sales also include kerosene, beer, ... hardware and sundries.... The past records indicate a gross of over $100,000 recently." The agent also provided an accountant's report verifying that the gross receipts for "goods sold" were over $100,000 in both 1978 and 1979. The report did not define "goods" which, contrary to the assertion in Geronda's letter, included both variety store wares and new lawn and garden equipment. Indeed, sale of that equipment generated approximately one-third of the Sellers' profit.

The first visit to the store by Arbour only confirmed the representation that this was a "typical general store" and that its gross receipts derived from a sale of a "typical general store's" goods. Arbour did not discern that the Hazeltons sold lawn and garden equipment there, but he did observe that Hazelton operated a repair service on the premises. This observation was consistent with the representation in the agent's letter that a garage on the premises was used for repairs of such equipment.

Concerned about the store's profitability, the Plaintiffs twice requested specific profit and loss statements from the agent. Geronda provided only the Hazeltons' tax returns from 1978-1980. These returns reported that the Sellers' gross income was based on sales of "general merchandise." The Arbours, relying on the representations in Geronda's letter, never inquired further about what constituted "general merchandise." Understanding the sale of store wares to constitute the store sales and understanding the store sales to constitute the Hazeltons' gross income, the Arbours believed that these income tax returns reflected the store's actual gross receipts.

Both Arbours visited the store in August, 1981. No promotional materials on the premises indicated that the Hazeltons operated an equipment distributorship there. Mrs. Arbour inspected one bay of the garage after being told by Geronda that Hazelton was repairing something in the closed bay. Geronda told Mrs. Arbour that it was Hazelton's "hobby" to repair equipment. Mrs. Arbour did not regard this information of the Hazelton's hobby of repairing old equipment as notice of his business of selling new lawn and garden equipment.

Although no Defendant explicitly denied the sales of lawn and garden equipment, none likewise corrected the inaccurate representation in Geronda's letter that only the sales of wares of a typical general store made up the store's gross sales for the reported period. The contract for sale that the parties entered into September 25, 1981, did not clarify that salient point either. The only reference in their writing to such equipment alluded to prior servicing, not prior sales, by the Sellers. ¹ Moreover, the store inventory purchased thereunder by the Arbours did not include any new lawn or garden equipment.

The Plaintiffs promptly took over the store in East Peru, and, not realizing that approximately one-third of the store's income depended upon lawn and yard equipment sales, attempted no sales of such items. When the store's early sales yielded a minimal gross, the Arbours consulted Hazelton, who then disclosed to them his prior equipment sales. After unsuccessful attempts to sell the store, the Plaintiffs commenced an action, equitable in nature, against the Sellers for rescission of the contract, cancellation of the Purchasers' promissory note, repayment of the Purchasers' down payment, an acceptance of the surrendered premises, and, in the alternative, an action, legal in nature, for diminution of the value of the store. Plaintiffs subsequently filed a complaint against the Sellers' agent, Geronda, seeking damages for misrepresentation and professional malpractice in misrepresenting the value of the store. ² Notwithstanding that the relief sought was in part equitable, it appears that the parties acquiesced in trying the case before a jury, and no question in that regard has been raised on appeal.

At the close of the Plaintiffs' evidence, the Superior Court granted the motions for directed verdict of both the Sellers and the agent. The court concluded that the Purchasers had failed to prove by clear and convincing evidence that the allegedly false representations made by the Sellers were made with knowledge of their falsity or with reckless disregard of their truth or falsity. This conclusion is not error if, after viewing the evidence and all of the reasonable inferences therefrom in the light most favorable to the Plaintiffs, a contrary verdict could not be sustained. Butler v. Poulin, 500 A.2d 257, 260 (Me.1985); Seiders v. Testa, 464 A.2d 933, 935 (Me.1983).

We note at the threshold of our analysis that directed verdicts should be granted sparingly, as the exception rather than the rule. Butler v. Poulin, 500 A.2d at 260 (quoting Moore v. Fenton, 289 A.2d 698, 700 n. 1 (Me.1972)). Only if all reasonable doubts of possible error or uncertainty have been removed should the court direct a verdict. Moore v. Fenton, 289 A.2d at 700 n. 1. To avoid a directed verdict in a fraud action a plaintiff must establish a prima facie case for each of the five elements by clear and convincing evidence. Butler v. Poulin...