Hewitt v. Hutter

• Decision Date: 13 April 1977
• Docket Number: Civ. A. No. 74-35(H).
• Citation: 432 F. Supp. 795
• Parties: Dorothy F. HEWITT and Abram S. Hewitt, Plaintiffs, v. Charles G. HUTTER and Luigi Gentile, Defendants.
• Court: U.S. District Court — Western District of Virginia

432 F. Supp. 795

Dorothy F. HEWITT and Abram S. Hewitt, Plaintiffs, v. Charles G. HUTTER and Luigi Gentile, Defendants.

Civ. A. No. 74-35(H).

United States District Court, W. D. Virginia, Harrisonburg Division.

April 13, 1977.

J. Sloan Kuykendall, Kuykendall, Whiting & Costello, Winchester, Va., and Gilbert McKown, Berryville, Va., for plaintiffs.

James E. Farnham, Hunton, Williams, Gay & Gibson, Richmond, Va., for defendants.

OPINION and JUDGMENT

DALTON, District Judge.

This is an action for specific performance of a contract for the sale of Virginia real estate which is presently before this court for rendition of findings of fact and conclusions of law pursuant to Rule 52 of the Federal Rules of Civil Procedure. In accordance with the provisions of this rule, the court enters the following findings:

(1) By a written opinion and order dated November 17, 1975, this court held that the defendants, Drs. Charles G. Hutter and Luigi Gentile, through their agent, Charles Tijerina, had entered into a valid and binding contract to purchase "Long Branch", a farm owned by the plaintiffs. Hewitt v. Hutter, 406 F.Supp. 976 (W.D.Va.1975). Thereafter, the defendants were granted leave to file an amended answer wherein they averred that Dorothy F. Hewitt, the plaintiff, committed independent acts of fraud by misrepresenting the profitability of the farming operation. In a Supplemental Pre-Trial Order dated July 28, 1976, the court defined the remaining issue in the case as "whether Mrs. Hewitt defrauded the defendants by making material misrepresentations with regard to the earnings, the profitability and/or the general financial status of the farming operation at Long Branch." (Supplemental Pre-Trial Order, Par. 2, Pp. 1-2) In the event that the court should resolve the fraud issue against the defendants, then the court must also decide whether the plaintiffs are entitled to recover interest on the purchase price, which plaintiffs contend is payable from April 30, 1974, the alleged date on which the parties agreed to close the transaction.

(2) On August 12, 1976, ore tenus testimony was taken from the plaintiff, Dorothy F. Hewitt, and the defendants, Charles G. Hutter and Luigi Gentile. In addition to such testimony, the defendants offered into evidence several affidavits and depositions relating to matters not covered at the ore tenus hearing, including the deposition of Charles J. Tijerina taken in the case of Luigi Gentile v. Tijerina, now pending in a court in the state of California. The defendants rely heavily on the Tijerina-California deposition to support their allegations that Mrs. Hewitt perpetrated a fraud by misrepresenting to Tijerina the profitability of the farming operations at Long Branch. They specifically allege that in January, 1974, Mrs. Hewitt showed Tijerina figures relating to farm production that indicated a net profit of $90,000 for the calendar year 1973 and $70,000 for 1972, when in fact the property sustained operating losses for those two years in question. (Tijerina-California Deposition, Pp. 165-168) The plaintiff has strenuously objected to the introduction of the California deposition on the grounds that the Hewitts were not parties to that action and counsel for the plaintiff was not given notice of the taking of the deposition, nor was counsel present at the taking of the deposition.

(3) At the ore tenus hearing on August 12, 1976, Mrs. Hewitt was called to testify as an adverse witness by counsel for the defendants and she flatly denied that she had made any numerical representations to Tijerina concerning the yearly profitability of the farm. She recalled her conversation with Tijerina in early 1974 as follows:

A . . . He did ask me if I farmed it, and he asked me how the cattle business was, and I said well it had been very good in 1973, which it had been, and I said, "I figure if I am buying them at that price and selling them at that, I must be making money, but I don't know." And he never asked me anything whatsoever about the production, and if he had, I couldn't have told him. I could have gotten it from the accountant, but I couldn't have told him, because I didn't know.

Q So your testimony would be then that if Mr. Tijerina subsequently represented to the doctors or to accountants in California that your farm in 1973 made a net profit of $90,000, either one, he had information that you didn't have, or two, he made it up. Is that right?

A That's right.

Mr. Farnham, if my farm had produced anything like that, it would not have been for sale, and if it had been for sale, people would have been lined up out to Route 50 with cash in their hands to buy it.

Q So you have no idea where that figure came from?

A No, I didn't know. I am absolutely incapable of fabricating those things. There are no books or anything that I have that could possibly substantiate those figures. The fact was that the farm, we never ran it to make money on the farm. We never attempted to make money on it. Every time that we thought that we going to have a little something, we put it back into the farm.

Q Was it essentially a tax shelter?

A Yes. Now in 1973, I had fifty acres that I put into soy beans, and the normal yield for soy beans in my part of the world is forty bushels to the acre, so that would be two thousand bushels of soy beans. Soy beans in 1973 were selling for $12 a bushel. So that is $24,000 extra I could have made in 1973. Do you know what I did with those soy beans? I plowed them in to make green manure to enrich the earth. (Tr. 18-19, August 12, 1976)

(4) As stated above, Mrs. Hewitt not only denied that she had shown Mr. Tijerina figures that indicated a net profit, respectively, of $70,000 and $90,000 in 1972 and 1973, she stated that she had no knowledge of any books that could possibly substantiate those figures. The only document she ever admitted having shown to Tijerina was a ledger sheet containing statistics on the cost and sale of cattle. (Defendant's Exh. # 5, August 12, 1976) In connection with the statements therein, Mrs. Hewitt testified that she simply told Tijerina that, "If I am buying them at this price and selling them at that, then I must be making money, but I don't know. That is all I said to him." (Tr. 26, August 12, 1976).

(5) While Mrs. Hewitt was subjected to lengthy and vigorous cross-examination by counsel for the defendants, she consistently denied the accusations of fraud and her version of events remained virtually intact. Unlike Mrs. Hewitt, however, Mr. Tijerina has been deposed on two occasions and has rendered conflicting accounts of his meetings with the plaintiff. On October 27, 1974, Mr. Tijerina gave a deposition in connection with the present litigation wherein he stated that during negotiations with Mrs. Hewitt, he had an opportunity to review some charts on cattle and crops, but that Mrs. Hewitt couldn't determine what the net profit was going to be on her farm. (Tijerina Deposition October 27, 1974) That testimony is set forth below as follows:

Q Mr. Tijerina, did Drs. Hutter and Gentile ever request that you obtain copies of the books of the Long Branch for them?

A They asked me if I had looked at the books of the Long Branch farm and I told them that I had gone through the previous year's. Not the books per se, but her charts of cattle and crops and so on. And, what was the gross profits she made. Because she couldn't determine — due to the fact that she still had siladge (sic) she didn't know what her net would be and so on and so forth. (Pp. 85-86, Tijerina Deposition, October 27, 1974).

(6) Although Tijerina stated in his October, 1974 deposition that he eventually saw copies of books of Long Branch, he did not make copies of the records for his principals, Drs. Hutter and Gentile, because "they were so simple and, . . . so little." (Pg. 86) While he made some notes for his own reference purposes, he was unable to produce them at the time his deposition was taken. (Pg. 87) When he testified at the October, 1974 hearing, he never once intimated that Mrs. Hewitt had made any specific representations concerning the value of the farming operations at Long Branch. Mr. Tijerina waited until June 1, 1976 to come forward and testify in his California deposition that Mrs. Hewitt had shown him any figures on net profits for the years in question. Unlike his previous deposition, however, his testimony in the California case was developed by Dr. Gentile's attorney without the benefit of cross-examination by plaintiff's counsel.

(7) The defendants argue that the testimony of Mr. Tijerina is accurate because he also expressed to two other witnesses besides the doctors that Mrs. Hewitt had, during negotiations for the sale of the farm, stated that the farm had resulted in an operating profit in the amounts previously mentioned in this opinion. (Harland Gaynor Deposition, pp. 17-18; Clarence Agress Deposition, Pg. 16) Much of this testimony is based on hearsay, however, and its accuracy is dependent upon the credibility of Mr. Tijerina. In order to prove a case of fraud, the defendants must rest almost exclusively on the testimony of Charles J. Tijerina.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

(8) Because this is a diversity action concerning a Virginia real estate contract, the court must apply...