DeBow v. Higgins
| Decision Date | 11 March 1968 |
| Docket Number | No. 52812,No. 2,52812,2 |
| Parties | Kenneth L. DeBOW and Patricia DeBow, Appellants, v. Alma E. HIGGINS, Respondent |
| Court | Missouri Supreme Court |
Church, Jones & Karchmer, Donald W. Jones Springfield, for plaintiffs-appellants.
Theo G. Scott, Buffalo, for defendant-respondent.
This suit was instituted in Dallas County and was removed by change of venue to Laclede County. Appellants (herein referred to as plaintiffs) sought judgment in the trial court for actual damages of $15,000 and punitive damages of $50,000 arising out of alleged fraudulent misrepresentations of respondent (herein referred to as defendant) in the sale of a motel and gasoline service station. During and after the trial plaintiffs unsuccessfully sought to amend the prayer of their petition to conform to the alleged proof of actual damages of $18,600. The case was tried by the court without a jury and judgment was entered in favor of plaintiffs in the sum of $3,000. Plaintiffs after having unsuccessfully sought to have the findings of fact, conclusions of law and judgment amended to award plaintiffs actual damages in the amount of $18,600 and punitive damages in the amount of $50,000, or for a new trial on damages alone, have appealed to this court on the ground that the trial court erred in awarding only $3,000 actual damages and in refusing an award of punitive damages. Since the difference in the amount prayed for and the recovery exceeds $15,000, this court has jurisdiction. Jack L. Baker Companies, Inc. v. Pasley Manufacturing and Distributing Company, Mo., 413 S.W.2d 268, 270; Glore v. Bone, Mo., 324 S.W.2d 633, 634.
Mr. Kenneth L. DeBow, one of the plaintiffs, testified that in November 1963 he and his wife, who were living in Springfield, Missouri, were looking for a motel to purchase. On November 14, 1963, he was taken by a Mrs. Smith, a real estate saleslady, to a motel and service station located on Highway 65 in Buffalo, Missouri, known as the 'Shady Nook Motel,' where he met defendant. Defendant was uncooperative and would not show them around and they left. The next day he and his wife returned to the motel and learned from defendant that the motel was listed with the Queen City Real Estate Company and they were referred by defendant to a Mrs. Riddle. The next day plaintiffs went to see Mrs. Riddle and were told that the motel was listed for sale for $35,000. The same day Mrs. Riddle took them to see defendant who showed them around the motel. Mr. DeBow asked defendant to see her books or an income tax statement. According to DeBow defendant said that she did not have them as her lawyer was working on them and she handed him 'two brochures' to take and look over. These so-called brochures were introduced into evidence as Plaintiffs' Exhibits 1 and 2. Exhibit 1 was a one-page printed 'flyer' describing the properties, and Exhibit 2 was a handwritten statement of 'Motel and Station Income.' Since they constitute the basis of plaintiffs' allegations of fraudulent representations, we set them out in full.
'Shady Nook Motel and Standard Station is at the junction of Main Street and U.S. Highway 65 in Buffalo, Missouri, just 32 miles north of Springfield. Located on 3 1/2 level acres, 600 ft. highway frontage, with 2 acres suitable for development or expansion. Neat and attractive with 2 neon signs and all buildings neon trimmed.
SEPARATE HOME of 6 rooms only 4 years old, consists of office, kitchen, living room, bath, 2 bedrooms, and a large laundry and linen room. Office desk and mangle included, as well as 1 1/2 extra changes of linen, towels, etc.
MOTEL UNITS consist of 5 singles, 2 doubles and 2 kitchenettes, all modern. 9 butane heaters, 4 TV's 5 air-conditioners, 2 gas ranges, 2 refrigerators, 6 hot water heaters, and all motel furnishings and 8 lawn chairs included.
GAS STATION is the only Standard Station on Highway 65 between Springfield and Warsaw (81 miles) and only sells gas and oil. All equipment included--soda box, counter, stove, fan, signs, nozzles, filters, etc. Pumps and tanks owned by Standard Oil. Inventory averaging $500.00 to be inventoried.
In 1962 the Motel grossed over $10,000, about 80% net. The station pumped over 100,000 gallons, netting about $100 a week, with help. There is a 1150 gallon owned butane tank connected to all buildings. Entire property recently redecorated.
All taxes $290.00 a year, fire insurance $132.00, liability $51.00. Property is clear and is a steady year-round business.
Since the owner is now handicapped and wishes to retire, the price has been reduced to $_ _, 1--3 down, balance $100 a month, plus 6% interest. Possession in 30 days.
SHADY NOOK MOTEL, Buffalo, Mo.'
Sept utilities, etc phone, water for motel and station $40.13'
Thereafter on November 25, 1963, plaintiffs entered into a contract for the purchase of the motel and service station for an agreed price of $33,000, paying $1,000 earnest money. On January 25, 1964, they closed the purchase by paying defendant an additional $11,000 cash, the defendant taking back a note and mortgage for the balance of $21,000 which was payable $200 per month, including principal and interest. Plaintiffs moved into the motel on January 6, 1964, and took over operation the same day. According to DeBow it was about two or three months later that they learned that the information they were given with respect to the income was false. He testified that he relied on the income information and would not have purchased the motel if he had known the motel profits were not as defendant represented. The plaintiffs continued to operate the motel and service station until February 1965. Sometime before February 1965 the plaintiffs listed the property for sale at $30,000 but were not able to sell it. In May 1964 plaintiffs placed the property for sale at public sale and tried to get what they owed on it but received no bids. In February 1965 they sold it to Lake Front Investment Corporation, the purchaser assuming the balance of plaintiffs' mortgage in the amount of $19,900 or $20,000 and plaintiffs accepted two houses and a trailer and a second mortgage as part of the purchase price. Both houses were mortgaged and it is not clear from the evidence at what value plaintiffs accepted them in trade. It appears from DeBow's testimony that plaintiffs netted $408.50 on one and $486 on the other. The second mortgage taken in trade by plaintiffs had a face value of $1,500 but was in arrears and they netted $250 on it. Plaintiff DeBow estimated the trailer as being worth $2,600 at the time of trial after he fixed it up.
Mabel Riddle testified that in November 1963 she was a real estate salesaldy for Queen City Real Estate Company and showed plaintiffs the motel. She testified that defendant stated that the information on Exhibit 1 was true. The was questioned by defendant as to the value of the property purchased by plaintiffs. She testified that she had been in the real estate business ten years and was out for six and back in for six years. She had experience in selling and appraising real estate to determine its value, was familiar with defendant's property, and thought it was worth what plaintiffs paid for it. She said, however, she was not an expert nor a qualified appraiser. She had sold two motels and had owned two herself. She had never appraised a motel. In her opinion the motel and station were worth $33,000 whether the representations made on Exhibit 1 were true or not. She based her estimate of the value by breaking it down into units, including the land, the separate motel units, the house, and the station. She did not appraise this motel as it was given to her for listing at a price. She had never seen Exhibit 2.
William A. Ryan testified for plaintiffs as an expert witness. He testified he was a real estate broker specializing in the sale of motels and hotels. He had listed for sale between 400 and 500 motels in 28 states and sold 11 in the year of trial. In determining the market value of a motel he considers the location, age of the property, its general condition, and its income. Considering these factors a motel is placed in a certain scale and the gross income is multipled by a variable factor to determine the market value. He tried to sell defendant's motel in the latter part of 1963. At that time he went over the figures on Exhibit 2 with defendant and she represented to him that they came off of her books. It was his opinion based on the 1962 income as represented that the motel was worth $32,600. This was based on a factor of 2 1/2 times the annual gross income and one year net on the service station. Based on actual 1962 income figures as an operating property the motel and station were worth, in his opinion, $11,650. As a physical structure converted to best economic use for monthly tenants he placed a value of $14,000 on the properties. The witness had listed the property for sale in June 1961 for $38,500. Plaintiffs offered as Exhibit 4, copies of the joint Federal Income Tax returns of Ernest F. and Alma Higgins for 1960, 1961 and 1962 which showed a gross and net income for the Shady Nook Motel for three years as follows:
Year Gross Net
---- -------- ------
1960 2,161.00 351.00
1961 3,179.27 811.31
1962 4,291.10 895.56
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