Gibson v. Home Folks Mobile Home Plaza, Inc.

• Decision Date: 10 March 1982
• Docket Number: Civ. A. No. CV181-002.
• Parties: Paul F. GIBSON, Plaintiff, v. HOME FOLKS MOBILE HOME PLAZA, INC., Defendant.
• Court: U.S. District Court — Southern District of Georgia

533 F. Supp. 1211

Paul F. GIBSON, Plaintiff, v. HOME FOLKS MOBILE HOME PLAZA, INC., Defendant.

Civ. A. No. CV181-002.

United States District Court, S. D. Georgia, Augusta Division.

March 10, 1982.

COPYRIGHT MATERIAL OMITTED

Douglas D. Batchelor, Jr., Augusta, Ga., for plaintiff.

C. B. Thurmond, Jr., Augusta, Ga., for defendant.

ORDER

BOWEN, District Judge.

Prior to September 17, 1976, defendant Home Folks Mobile Home Plaza, Inc. Home Folks owned fifteen and one-half acres of land in Richmond County, Georgia, upon which it operated a mobile home park. The business was essentially twofold: (1) leasing to tenants some seventeen mobile homes owned by defendant and located in the park, and (2) leasing spaces in the park on which tenants could place their own mobile homes. The total 116 park spaces for mobile homes were equipped with connections for water, electric, natural gas and sewer services.¹ Sewage disposal was provided by a septic system in the park and water service was provided by park wells; natural gas was sold by Home Folks to the tenants in the park.

Sometime in 1975, Home Folks listed the land and business, constituting the mobile home park, for sale with a real estate broker. Plaintiff, a New Jersey resident interested in an investment property, saw an advertisement for the park in December, 1975, and subsequently in the spring and summer of 1976, entered into discussions with Mr. W. S. May, Sr., president of Home Folks, concerning the possible purchase of the park.

Pursuant to these discussions, plaintiff first visited the park in May, 1976, at which time plaintiff counted ninety-two spaces occupied, and thus a concomitant vacancy of twenty-four spaces. During this visit also, various statements were made by Mr. May concerning the mobile home park, its facilities, and the conditions of its business. While the exact content of these statements is in dispute, plaintiff, by writing in his own hand dated May 18 and 19, 1976, purports to show a series of questions about the property and answers thereto by Mr. May. Of relevance to this case, the question and answers purport to show that the following representations were made by Mr. May: (1) the water and sewage systems were in good condition and no major expenditures could be expected in the short term; (2) the profit on natural gas sold to tenants was 40%; and (3) the normal vacancy was 5% with fluctuations. Separate from these questions and answers transcribed by plaintiff, Mr. May gave plaintiff an income statement for the park prepared by an accountant showing a gross rental income of $55,776.42 and a net rental income of $38,220.80 for an eight-month period, January 1, 1975 through August 31, 1975. The income statement did not provide a separate accounting for income derived from the sale of natural gas as opposed to rental income.

Following receipt of this income statement, plaintiff, by letter to Mr. May dated June 2, 1976, projected a twelve-month gross income of $83,664.63 and a net profit before debt service in the amount of $57,331.20. In his letter, plaintiff asked Mr. May if this twelve-month figure, derived from the income statement, was accurate for the last three years of Home Folks' business. By letter dated June 16, 1976, Mr. May responded in part as follows: "The figures you gave on your letter are very accurate. Our business is steadily improving we have at this time five vacant spaces and have two different customers that want to park four mobile homes each."

Plaintiff again visited the park in July, 1976, and determined that ninety-five of the park spaces were occupied. During this visit, as well as his prior inspection, plaintiff visually ascertained no problems with the sewage and water systems. Furthermore, during his visits, plaintiff never asked to inspect the books and records of Home Folks, and there is no indication that the records were in any way concealed; nor is there any indication that plaintiff was prevented from inspecting any part of the premises.

After these negotiations and visits to the park, plaintiff decided to make the purchase. The sale was consummated on September 17, 1976, at which time the parties executed a sales contract, promissory note and security deed and a sales closing statement. Additionally, a schedule was prepared by the secretary-treasurer of Home Folks, Louise M. May, listing the park's present tenants and prorating the amounts due from those tenants for the month of September between the parties. Both parties at closing were represented by counsel.

The sales contract provided for a total purchase price of $275,000 paid as follows: a down payment of $60,000 and a promissory note for the balance, secured by certain personal property in the park. Paragraph 15 of the sales contract contained the following merger and disclaimer clause: "This writing contains the full, final, and exclusive statement of the contract of Seller and Buyer. No representations or statements have been made by Seller concerning collateral except as herein stated, and no warranty, express or implied, by Seller arises apart from this writing."

The schedule prepared by Mrs. May, at the time of closing, consisted of three pages. Pages one and two provided a list of sixty-one tenants, identified by park-space number, who had prepaid their amounts due to Home Folks and for which plaintiff was due a credit. The total buyer credit came to $1,508.69. Page three listed twenty-eight tenants whose amounts due would be collected by plaintiff-buyer and for which defendant-seller was due a credit for the days prior to September 17, 1976. The total credit due defendant, including "cokes on hand" was $957.66. The balance of $551.03 (i.e., $1,508.69 minus $957.66) was paid to plaintiff by check on the date of closing, and was subsequently negotiated by plaintiff on September 21, 1976. The "amounts due" from the tenants was a lump sum figure, not separated into rental payments and natural gas payments; the total number of park spaces occupied, as reflected by the schedules, was eighty-nine.

Subsequent to the above-described proration of amounts due from tenants, plaintiff undertook a reaudit of Mrs. May's figures and found an error in several of the credits. By letter dated October 6, 1976, plaintiff informed Mr. May of the errors. Following receipt of this letter, Home Folks acknowledged the error and made an appropriate payment to plaintiff.

After plaintiff purchased the park, he made certain expenditures on the water and septic systems. In the first six months of his ownership, plaintiff spent $3,899.00 on repairing the wells and $1,485.00 on the septic system. According to plaintiff's resident manager, who had previously been employed by Mr. May, the water and septic systems in the park had presented recurring problems prior to September 17, 1976. Ultimately, when plaintiff sold the park some three years after the purchase, he expended $7,531.00 on the water wells and $8,125.00 on the septic system.

In the first year of plaintiff's operation of the park, the number of spaces occupied never exceeded ninety-eight. Plaintiff raised the rent, as well as the charges for natural gas, and made a gross income for the year in the amount of $69,764.00. Since plaintiff's operating expenses exceeded $45,572.00, his net income before debt service was approximately $24,192.00. After payment of his debt to Mr. May, in the sum of $27,244.00, plaintiff was operating at a deficit. Plaintiff first notified Mr. May of his financial problems with the park in April, 1977, and again in May, 1977.

Plaintiff filed the present case on January 5, 1981, some four years and four months after the date of the sale closing on September 17, 1976. The complaint alleges that Mr. May, on behalf of defendant Home Folks, made certain false, untrue and fraudulent statements to plaintiff for the purpose of inducing plaintiff to purchase the mobile home park. Specifically, the alleged fraudulent representations include the following: (1) the eight month income statement and Mr. May's assurance that the twelve month income projection by plaintiff was accurate; (2) statements that the property had three water wells in good operating condition; (3) statement that an approximate forty percent profit was realized on the sale of natural gas to the park's tenants; (4) statement that the sewage disposal system was in good condition and functioned satisfactorily; and (5) statement that the number of vacancies in the park was as low as five in June, 1976. Plaintiff seeks $100,000.00 actual damages and $100,000.00 punitive damages.

The case is presently before the Court on defendant's motion for summary judgment. The bases for the motion appear to be threefold: (1) plaintiff, in the exercise of due diligence, should have discovered the verity of any alleged representations made by defendant; (2) the action is barred by the applicable statute of limitations; and (3) the merger and disclaimer clause in the sales contract precludes plaintiff's action predicated on alleged prior fraudulent representations.

In resolving whether to grant defendant's motion, the bounds of the Court's discretion are well established. Summary judgment may be granted only "`if everything in the record — pleadings, depositions, interrogatories, affidavits, etc. — demonstrates that no genuine issue of material fact exists'." Erco Industries Ltd. v. Seaboard Coast Line R. Co., 644 F.2d 424, 428 (5th Cir. 1981) (quoting Keiser v. Coliseum Properties, Inc., 614 F.2d 406, 410 (5th Cir. 1980) (emphasis in original)); see Cubbage v. Averett, 626 F.2d 1307, 1308 (5th Cir. 1980). The burden of establishing the absence of a genuine issue as to material facts rests with the movant. Everhart v. Drake Management, Inc., 627 F.2d 686, 690 (5th Cir. 1980). This burden is not lightly met since the district court must view all evidence in the light most favorable to the non-movant as well as resolve all...