Gass v. Gamble-Skogmo, Inc.

• Decision Date: 16 May 1966
• Docket Number: No. 15283,15284.,15283
• Citation: 357 F.2d 215
• Parties: Albert W. GASS and Gass & Schroeder, Inc., an Illinois corporation, Plaintiffs-Appellees Counterdefendants-Appellants, v. GAMBLE-SKOGMO, INC., a Delaware Corporation, Defendant-Appellant Counterclaimant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

357 F.2d 215 (1966)

Albert W. GASS and Gass & Schroeder, Inc., an Illinois corporation, Plaintiffs-Appellees Counterdefendants-Appellants, v. GAMBLE-SKOGMO, INC., a Delaware Corporation, Defendant-Appellant Counterclaimant-Appellee.

Nos. 15283, 15284.

United States Court of Appeals Seventh Circuit.

February 25, 1966.

Certiorari Denied May 16, 1966.

John A. Cook, Samuel M. Lanoff, Chicago, Ill., for Albert W. Gass and Gass & Schroeder, Inc.; Morgan, Halligan, Lanoff & Cook, Chicago, Ill., of counsel.

R. Lawrence Storms, Thomas A. Reynolds, Edward J. Wendrow, Chicago, Ill., for Gamble-Skogmo, Inc.; Winston, Strawn, Smith & Patterson, Chicago, Ill., of counsel.

Before SCHNACKENBERG, CASTLE and KILEY, Circuit Judges.

Certiorari Denied May 16, 1966. See 86 S.Ct. 1464.

CASTLE, Circuit Judge.

Plaintiffs Albert W. Gass and Gass & Schroeder, Inc., a corporation owned by Gass, brought this diversity action against Gamble-Skogmo, Inc. (hereinafter referred to as Gamble) to recover compensatory and punitive damages for fraud and deceit. Gamble counterclaimed for goods sold. Plaintiffs defended the counterclaim on the ground that the orders for the goods were obtained by the fraud declared upon in their complaint.

The cause was tried to a jury which returned a verdict for plaintiffs in the sum of $100,000, approximately $72,000 of which represents punitive damages and the balance the claimed actual damages. The jury also returned a verdict in favor of Gamble in the sum of $10,241.66 on its counterclaim. Judgments were entered on the verdicts.

Gamble in its appeal (No. 15283) contends that there is no evidence to establish fraud or deceit upon its part and therefore the District Court erred in failing to grant its motion for judgment notwithstanding the verdict. Gamble additionally contends the court erred in the procedure followed with respect to instructions, erred in giving certain instructions, and asserts that inconsistency in the verdicts requires that they be set aside. Although plaintiffs prosecuted an appeal (No. 15284) from the judgment entered on the counterclaim they do not urge it is erroneous insofar as it serves only as a set-off against the judgment awarded plaintiffs.

The District Court properly denied Gamble's motion for judgment n. o. v. if the record discloses evidence which justified the submission of the case to the jury. Gunning v. Cooley, 281 U.S. 90, 50 S.Ct. 231, 74 L.Ed. 720; Lambie v. Tibbits, 7 Cir., 267 F.2d 902. In determining that question we must view the evidence and all reasonable inferences that may be drawn therefrom in the light most favorable to the plaintiffs. Woods v. Geifman Food Stores, Inc., 7 Cir., 311 F.2d 711, 713; Pinkowski v. Sherman Hotel, 7 Cir., 313 F.2d 190, 192.

Our examination of the record in the light of the governing principle above set forth convinces us that it contains evidence which warrants a jury finding of the presence of those elements requisite to establish liability in Gamble for fraud and deception wantonly and designedly perpetrated by Gamble upon plaintiff Gass and his corporation.

We will not extend this opinion to accommodate a detailed recital of the evidence but will briefly relate the factual background which formed the setting in which the pertinent events occurred and point to some of the conduct on the part of Gamble's representatives, with respect to which there is support in the record, and which serves to sustain the verdict.

During the period here pertinent Gamble was engaged in the wholesale distribution and retail sale of hardware, appliances, and miscellaneous merchandise. It owned 500 stores in its own account. It franchised over 2000 retail stores in the United States and Canada to operate under its name as a part of the Gamble "chain". These franchised dealers are private, investors-owners, who purchase their products for resale from Gamble, and receive general business assistance from Gamble in the operation of their respective stores. Such assistance includes a bookkeeping-accounting service in connection with which the franchised dealer or store operator submits a weekly report of the store's receipts and expenditures to Gamble on a form furnished by it and receives a monthly report or statement from Gamble.

Gass is a semi-retired former retail grocery chain and advertising agency executive. He was interested in investing in a business but not in becoming the operating owner. In October, 1961, Gass responded to a Gamble advertisement for franchise-store dealers. Gamble sent him its brochure entitled "Planned Success" containing representations concerning Gamble's relationship with its franchise dealers, describing the accounting and business services furnished, and setting forth representative sales and profit figures of Gamble store operators. This was followed by a visit from Ora McCarger, Gamble's development representative for a six-state area, including Illinois. McCarger's duty was to develop new stores.

Gass explained to McCarger his requirements for investing in the operation of a Gamble franchise store. These criteria, which were later repeated in correspondence and subsequent oral discussions, and remained constant during the period which ensued, involved the factors that Gass desired as a co-owner, who would operate the store, an individual who was a successful person capable of assuming control of the enterprise, and who had $15,000 to invest in the venture. Gass was prepared to invest the balance of the funds required. The co-owner would receive a salary and in addition a share of the net profits, which he could use to buy out Gass' interest.

After a proposal to open a store near Rockford, Illinois, on the basis outlined failed to materialize, McCarger, in July, 1962, advised Gass that he might have a new prospect at a new location. In October, McCarger disclosed the location to be Hoopeston, Illinois, and the prospective co-owner to be Harold Schroeder, the operator of a Gamble franchise store at Tuscola, Illinois, since 1959, who, it was stated, was looking for a larger operation. Schroeder was a high school graduate. He had no training in accounting and the Tuscola store was his first business venture. He had formerly worked as a truck driver and a salesman. Hoopeston was a potentially desirable market estimated as capable of producing a sales volume in excess of $200,000 per year. McCarger represented Schroeder as being the operator of a "very successful" Gamble store at Tuscola; a good salesman who had done a "terrific job"; and who had bought the Tuscola store "on a shoestring" and had developed the business to the point where he had a sizeable investment and the necessary funds to make the $15,000 investment Gass required. Following McCarger's October visit Gass wrote him on November 3, 1962, requesting that he be furnished "a picture of the store operations at Tuscola" and an estimate of Schroeder made by his supervisor. The letter went unanswered but shortly thereafter McCarger and Bernard C. Heile, Gamble's zone superintendent for 18 Illinois stores, including Schroeder's operation at Tuscola, met with Gass. When Gass inquired as to when he would receive the store operating statements requested he was informed by Heile that they were regarded as confidential and couldn't be shown to him. Gass stated he wanted to see them for the purpose of determining how successful a store manager Schroeder was, how the store was running, and if Schroeder had the $15,000 to invest. Heile assured Gass that Schroeder had the $15,000 and was a successful store manager. He promised to furnish Gass with written information on Schroeder's financial ability.

Gass, Heile, and McCarger met with Schroeder, the proposal was outlined, and the group went to Hoopeston to examine the location. On November 27, 1962, the group met again at Hoopeston where the terms of a lease for the building to be occupied by the proposed store were negotiated...