Delta Investing Corporation v. Moore, 16493.

• Decision Date: 02 September 1966
• Docket Number: No. 16493.,16493.
• Citation: 366 F.2d 516
• Parties: DELTA INVESTING CORPORATION, Plaintiff-Appellant, v. Elmer C. MOORE, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

366 F.2d 516 (1966)

DELTA INVESTING CORPORATION, Plaintiff-Appellant, v. Elmer C. MOORE, Defendant-Appellee.

No. 16493.

United States Court of Appeals Sixth Circuit.

September 2, 1966.

W. Keith McCord, Knoxville, Tenn., Egerton, McAfee, Armistead & Davis, Knoxville, Tenn., of counsel, for appellant.

James H. Jarvis, Knoxville, Tenn., O'Neil, Jarvis, Parker & Williamson, Knoxville, Tenn., of counsel, for appellee.

Before EDWARDS, Circuit Judge, and CECIL and McALLISTER, Senior Circuit Judges.

McALLISTER, Senior Circuit Judge.

Plaintiff-appellant, Delta Investing Corporation, filed its complaint against defendant-appellee, Elmer C. Moore, for judgment in the amount of $74,000, represented by fifty promissory notes executed by Mr. Moore, payable to plaintiff-appellant in consideration of an assignment to him of a leasehold interest owned by Delta in the Marion E. Taylor Building in Louisville, Kentucky. All of the notes except two were in the amount of $750; one of the remaining two was in the amount of approximately $7,000, and the other, in the amount of approximately $31,000, making the total of $74,000. In addition to the notes, Mr. Moore, as part of the consideration, paid $1,000 to Delta at the time of the assignment of the lease to him.

The district court, in its opinion, found that Delta induced Mr. Moore to enter the transaction by means of fraudulent representations; that the agreement should be rescinded; that the notes should be cancelled; and that Mr. Moore was entitled to recover the sum of $1,000 which he had made as a down payment. In a subsequent memorandum and order, the court modified its prior opinion as to the $1,000 down payment, holding that, because Mr. Moore could not return the lease to Delta, he was not in a position to restore the status quo, and was, therefore, not entitled to recover the down payment. The court, therefore, entered a judgment, cancelling the notes in the aggregate amount of $74,000, but denying Mr. Moore recovery of the sum of the down payment of $1,000. From the judgment, plaintiff, Delta Investing Corporation, appeals.

Delta Investing Corporation is a company with offices in New York City, primarily engaged in extensive dealings in real estate. Defendant-appellee, Elmer C. Moore, was, on the date of the transaction here involved, a shop foreman at the Blue Ridge Transportation Company, a trucking firm in Knoxville, Tennessee, owned and operated by his brother, and his duties there were to take care of the equipment. He was raised on a farm in Tennessee, and had a twelfth-grade education, but, as the court found on the trial of this case, was, in business affairs, an unlearned and inexperienced person.

One of the properties of appellant, Delta Investing Corporation, was the leasehold interest in the Marion E. Taylor Building, above mentioned. This was an office and business building consisting of eight stories, occupied by what are described as miscellaneous tenants common to such buildings.

In early 1963, Delta decided to dispose of its interest in the Marion E. Taylor Building and, accordingly, listed it with various real estate brokers, one of whom was Saul Siegel, of New York City, who had had various real estate dealings with appellee.

The unusual or rather bizarre nature of Mr. Moore's dealings is illustrated by the fact that while he was shop foreman at his brother's trucking firm, he had owned a bottling plant in Asheville, North Carolina, a 60-lane bowling alley in Philadelphia, Pennsylvania, the Alcazar Hotel in Miami, Florida, a 250-room hotel on Biscayne Boulevard, and bottling plants in Knoxville, Tennessee, and Columbus, Mississippi; and that while he was negotiating for the leasehold of the Marion E. Taylor Building, he was also negotiating for the purchase of a chain of seventeen hotels. In spite of what sounds like vast interests, his financial stakes in these transactions must have been minuscule. In all of these dealings, his total investment was $3,500. It would take more time to go into these matters than is possible in an opinion. Appellant, referring to them, states, without any sense of mystery or bewilderment, that "Primarily his business history was that of trading properties for profit rather than operating them for their income-producing character." He never realized any profit on any of these so-called business ventures, and ended up completely insolvent. How and why a person of small means gets entangled in what appears, on the surface, to be enterprises of great pitch and moment, is obscure.

Prior to the listing of the Marion E. Taylor Building by Delta, Mr. Siegel had dealings with Mr. Moore on some of the above mentioned transactions. During a meeting with Mr. Siegel in January or February, 1963, Mr. Moore expressed an interest in the Taylor Building and was given a flysheet on the building by Mr. Siegel. The flysheet showed that for the fiscal year of 1962, the building showed a net profit of $16,310.43, and a gross annual profit of $30,250. Thereafter, Mr. Moore also discussed the matter with the Delta officials. On March 31, 1963, Mr. Siegel mailed Mr. Moore a rent roll for January, 1963, and a profit and loss statement on the building for the fiscal year ending July 31, 1962. The rent roll included the name of each tenant, the expiration date of each lease, and showed a rental income of $289,475.21 for the fiscal year ending July 31, 1962, or an average monthly rental of $24,122.91.

As of the date of the closing of the contract on September 18, 1963, Delta gave Mr. Moore a rent roll for October of 1963; and it is undisputed that the last rent roll gave a substantially different picture of the rentals and tenants than appeared in the other three statements that appellant had theretofore given Mr. Moore.

The district court, in its opinion, outlined the principal claims of the parties and stated that Mr. Moore claimed that the representatives of Delta told him that the lease on the building was making money over and above the ground rent, taxes, and operating expenses; that Mr. Moore believed the statements of such representatives, to this effect, to be true; and that this was an inducement for him to execute the notes in consideration for the assignment of the lease. The court further recited that Delta denied that any such statements were made; that Mr. Moore was told that the lease was not making money; and that he stated to the representatives of Delta that he knew it was not making money, but that he would reduce expenses when he took possession of the property, and would see that the lease did make money for him.

The court then referred to the testimony of Mrs. Marjorie W. Ruka, the representative of the superintendent of the Marion E. Taylor Building, who handled and collected the rentals, and stated that her testimony and the exhibits introduced showed, beyond question, that, beginning in October, 1962, and ending in October, 1963, except for one or two months, the Marion E. Taylor Building did not produce enough rent to pay the operating expenses, the ground rental which amounted to approximately $159,300 per year, and the real estate taxes which amounted to $25,804 per year. The court declared that these exhibits showed that Delta was losing money during this period; that although the testimony showed that the building had made money during the fiscal year of 1962, nevertheless, before Mr. Moore attempted to take possession of the property, Delta had lost its best tenant, the Bon Marche Shop, and was about to lose another, Kay Jewelers; and that the loss of these tenants was the cause, or the primary cause, for the building's losing money for some twelve months prior to the time Delta assigned the lease to Mr. Moore.

While Delta stated that Mr. Moore was told about the loss of these tenants and, in addition, that he had observed the Bon Marche vacancy when he subsequently visited the building in Louisville, Mr. Moore testified that he knew nothing about the loss of this tenant, and did not know that the jewelry concern had been paying less rent than it had agreed to pay, and that it was on shaky financial ground.

During all of the negotiations with Delta in 1963 and before he purchased the assignment of the lease, Mr. Moore never went to Louisville, Kentucky, to examine the building, and between September 18, 1963, when he secured the assignment of the lease, to October 1, 1963, he did not visit Louisville nor ascertain the existence of any facts or conditions which would acquaint him with the operation of the building. On October 1, 1963, Mr. Moore visited the office of John M. Hennessy & Son, Inc., the managing agent for the Taylor Building, and gave the lease assignment to an official of the agency, directing him to have it recorded at the county courthouse. He then hired the Hennessy firm to be his managing agent for the building and demanded the October rent. He was advised by the firm that it would be several days before the October rentals were collected. On October 2, 1963, Benjamin Kaufman, agent for the owners of the...