Elkind v. Woodward

• Court: California Court of Appeals
• Writing for the Court: KAUFMAN
• Citation: 152 Cal.App.2d 170,313 P.2d 66
• Parties: Mike ELKIND, Eve Elkind, Sam Elkind, Lester Golub and Norty Golub, Plaintiffs and Appellants, v. H. E. WOODWARD, W. E. Drysdale and W. E. Lyons, Defendants and Respondents. Civ. 17373.
• Decision Date: 01 July 1957

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313 P.2d 66 152 Cal.App.2d 170 Mike ELKIND, Eve Elkind, Sam Elkind, Lester Golub and Norty Golub, Plaintiffs and Appellants,
v.
H. E. WOODWARD, W. E. Drysdale and W. E. Lyons, Defendants and Respondents. Civ. 17373. District Court of Appeal, First District, Division 2, California. July 1, 1957.

[152 Cal.App.2d 171] Yale H. Smulyan, San Francisco, for appellants.

Alfred M. Miller, San Francisco, for respondents.

KAUFMAN, Presiding Justice.

Plaintiffs commenced an action against the defendants to recover damages alleged to have been sustained by reason of false representations in the sale to the plaintiffs of a bar, located at 115 Mason Street, San Francisco, California. Plaintiffs appeal from the Judgment entered in favor of the defendants reciting that the plaintiffs did not rely on the alleged misrepresentations. The case was heard in the Superior Court of the City and County of San Francisco without a jury.

On Sunday, January 18, 1953, the following ad appeared in the San Francisco Examiner:

'Bar--Gross $10,500 Mo. No show or food. Low overhead. Nets $3,000 Mo. 1235 Van Ness. Tu 5-5077'.

The above address and phone number was that of the Hughey Investment Company. On January 19, in response to this ad, Mike Elkind, one of the appellants, contacted

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Mr. Chester Hughey, owner of the above company. He was told the ad referred to the Robin Hood bar, located at 115 Mason Street. Hughey stated the bar was now doing $10,000 a month [152 Cal.App.2d 172] but during the winter months business increased to $10,500. The 'Prospective Buyers Agreement' signed by Mr. Elkind stated the Bar's gross to be $10,500. This Agreement contained the following clause, 'Hughey Investment does not warrant any information as to the status of the above-named business and/or businesses.' The bar's owners, respondents H. E. Woodward, W. E. Drysdale and W. E. Lyon, testified they had never represented that the Robin Hood Bar grossed $10,500 or that it grossed over $6,000-$7,000 a month.

An exclusive sellers agreement between respondents and the Hughey Investment Company was introduced into evidence. It showed the gross as $10,500 and the earnings as $3,000 net per month. Respondents testified these figures had not been inserted into the agreement at the time they signed it or they had not looked at the paper when they signed it. The agreement was signed on June 17, 1952 and was to run for 60 days. The bar was not sold by the Investment Company during that period.

After signing the 'Prospective Buyer's Agreement', Mike Elkind went to the Robin Hood Bar with Mr. Hughey. Elkind testified he had never been in the bar before this time and that he had not previously known of a Mason Street in San Francisco, although he has lived in the San Francisco area for 35 years. Mr. Elkind owned a wine and beer establishment at Fourth and Howard for four years and at the present time owns several pieces of income property as well as conducting an egg business. His net worth is over $100,000 but he did not know the exact amount.

On the first visit to the Robin Hood Bar Mr. Woodward quoted the gross at $10,500, the net profits at $3,000 per month and told him the rent. He was shown the Daily Book when he requested to see the Books.

Mr. Kohn, Elkind's accountant, testified Elkind had asked him to stop by the bar sometime and see him so they could look over the books. No time was specified. Elkind was behind the bar when Kohn went there. There is no testimony showing an attempt to look at the books on this visit. Kohn stated he later tried to see the books but he was only at the bar in the mornings and it was closed. Several years before he had checked the books of a bar at 3rd and Townsend for Elkind. Since Mr. Kohn was busy with income tax returns, Elkind hired another accountant, a Mr. Price. Mr. Price testified that he became acquainted with the appellant several months before, when Mr. Elkind had been interested in purchasing[152 Cal.App.2d 173] a bar in Marin County. Price had gone over those books with him.

Elkind told Price he had arranged an appointment with the owners to examine the books. Price went to the bar at the appointed hour and was met by Woodward who informed him he did not have the books. Woodward told him the bookkeeper kept the books. Price asked if he could get in touch with the bookkeeper and was gold that did not have a phone, did not have an office and would just drop into the bar on Saturdays. He did not tell him the bookkeeper's name and indicated there was no need to look at the books. Price stated that Woodward seemed a little put out because he mentioned Elkind's bookkeeper had been there asking to examine the records and that Elkind had been observing the operations of the bar several nights in a row.

Price was given copies of sales tax returns for April 1952, to March 1953. After examining the returns he reported to Elkind that there was no prima facie evidence showing the gross as $10,500 and the returns indicated the volume to be between $6,000-$6,800. He told Elkind he was in no position to report the actual gross of the bar.

The next day Elkind returned to Price's office with Hughey. Hughey insisted the

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bar was doing $10,000-$10,500 and indicated all the sales were not being reported.

It was shown Elkind was familiar with sales tax returns, having made them out when he had the wine and beer establishment and in his egg business. When Elkind confronted Woodward with Price's report he was told they were doing $10,500. Woodward then copied figures from a Day Book, saying they represented the average per day for ten days, the total amounted to $3,891.35. Woodward stated the figures represented the business they would have to do to gross $10,000. Elkind testified that at Woodward's suggestion he helped make up the deposits and these showed a gross of between $350-$400 and a little less than $300 per day.

Mr. Dunlap, respondents' bookkeeper, testified that he talked with Elkind and an auditor at the bar before March 23. At that time he laid out the books and the sales tax returns. He remembered seeing the auditor list the sales tax but did not remember whether he looked at the books. He saw Elkind again before the purchase and told him the bar was doing about $6,500. In addition to their drawing account, they would get a monthly commission ranging from $75 and $150 a month. He said he would make the books available if [152 Cal.App.2d 174] Elkind wanted someone to check them and suggested doing this. After Elkind purchased the bar he retained Dunlap as his bookkeeper.

Testimony showed Elkind observed the bar continuously from the time he saw the ad. He visited the bar at different hours of the day and night and length of these visits varied. He was frequently seen behind the bar before March 23rd.

From January 19th until March 23rd, Elkind testified he went to the bar to look it over and to determine if he was satisfied with the trade. He knew it was almost exclusively sailors. He told respondents he was satisfied but intended to clean the place up and to bring in businessmen. He was determined to get rid of a certain amount of patronage. After buying the bar, if he believed a person came in for an immoral purpose he would turn his back and refuse to serve them. While he had seen girls in the bar, he stated he did not know what a 'B' girl was until after he took over the management when he decided the girls were there for an immoral purpose and refused to serve them.

The following agreement was introduced into evidence,

'It is agreed that H. W. Woodward and W. E. Drysdale are to remain with purchaser for a period of thirty days at bar tenders' wages. Date of possession to be April 1, 1953.'

Elkind did not take possession until May 13. Evidence was introduced to show the purpose of the agreement was for the partners to introduce Elkind to the regular customers as the new owner and to teach him to mix drinks. The partners did not stay for 30 days after possession but left on May 13. They did not stay for 30 days after possession as Elkind told them he was keeping the same help and therefore it would not be necessary for them to remain. Testimony showed Elkind had been behind the bar on many occasions before May 13th and that he had been introduced...