Plumley v. Stanelle

• Decision Date: 30 May 1974
• Docket Number: No. 2--473A102,2--473A102
• Citation: 160 Ind.App. 271,311 N.E.2d 626
• Parties: Dean PLUMLEY and Rose A. Plumley, Plaintiffs-Appellants, v. Albert L. STANELLE, Sr., et al., Defendants-Appellees.
• Court: Indiana Appellate Court

Page 626

311 N.E.2d 626

160 Ind.App. 271

Dean PLUMLEY and Rose A. Plumley, Plaintiffs-Appellants, v. Albert L. STANELLE, Sr., et al., Defendants-Appellees.

No. 2--473A102.

Court of Appeals of Indiana, Second District.

May 30, 1974.

Kenneth M. Waterman, Parker, Hoover & Roush, Fort Wayne, for plaintiffs-appellants.

Alfred H. Plummer III, Plummer, Tiede, Magley & Metz, Wabash, for defendants-appellees.

SULLIVAN, Presiding Judge.

Plaintiffs-appellants (Plumley) appeal from a negative judgment. Plumley had sought recovery from defendants-appellees (Stanelle) alleging fraud in the sale of business property. Plumley argues that the decision was contrary to the weight of the evidence and contrary to law.

Insofar as Plumley attacks the weight or sufficiency of the evidence, no issue is before us for review. Graves v. City of Muncie (1970), 255 Ind. 360, 264 N.E.2d 607; Booher v. Alhom, Inc. (1973 Ind.App.), 295 N.E.2d 841.

In circumstances before us, we may reverse a judgment as being contrary to law only where the evidence leads to but one conclusion and the trial court has reached the contrary conclusion. Yellow Mfg. Acceptance Corp. v. Voss (1973 Ind.App.), 303 N.E.2d 281; State Farm Life Insurance v. Spidel (1964), 246 Ind. 458, 202 N.E.2d 886. We will not weigh the evidence nor judge the credibility of witnesses, but will look only to the evidence most favorable to the appellee and all reasonable inferences to be drawn therefrom. Muehlman v. Keilman (1971), 257 Ind. 100, 272 N.E.2d 591; Houser v. Board of Comm'rs of DeKalb County (1969), 252 Ind. 301, 247 N.E.2d 670; State Farm Life Insurance v. Spidel, supra.

In so viewing the record, we find the following evidence pertinent to the issue.

Stanelle purchased the Miami Brass Company in the fall of 1965. In early 1966, the foundry was incorporated as Miami Brass Co., Inc., and it began a new fiscal year on April 1, 1966. Thus, the first full callendar year under Stanelle's ownership or management ended December 31, 1966, and the first fiscal year was fiscal 1967, ending March 31, 1967. ¹

On April 26, 1968, Plumley visited Associated Business Brokers in Chicago with the intention of purchasing a business. Associated informed him that they had a listing for Miami Brass. It appears that Plumley had no experience in foundry operations. He was, in fact, a Certified Public Accountant with 20 years experience in accounting.

As Associated Business Brokers, Plumley was shown three documents:

A) A listing sheet for the Miami Brass Company. In the form spaces 'Total Monthly Income', '1966 $159,000' was filed in. 'Total Monthly Net' was '1966 $34,000.00.'

B) A balance sheet for the year ending March 31, 1968 which revealed Gross Sales of $67,375.30, Gross Profit of $37,736.50, and net profit of $10,424.88.

C) A letter from Stanelle to Associated Business Brokers stating that 'in 1966 the owner realized a profit of $34,000 on sales of $159,000.'

Plumley does not question the accuracy of the gross sales figures, nor does he allege confusion arising from the use of annual figures in the monthly spaces on the listing sheet. The primary confusion apparently concerns whether the 1966 figures were for a fiscal or calendar year, and whether the profit of $34,000 was a net or gross amount.

Plumley visited Miami Brass that same day. After talking with Stanelle, he stated that he would return in May to examine tax returns.

On May 7, Plumley returned to Miami Brass and received for his inspection Corporate Tax Returns for the years ending March 31, 1967 and March 31, 1968, Stanelle's personal tax return for calendar year 1966 and Miami's profit and loss sheet for calendar year 1966. These revealed the following figures: ²

The Profit and Loss Statement establishes that the '1966' figures Plumley had been shown at Business Brokers were for the calendar year 1966, and not the fiscal period which began April 1, 1966. A glance at the declining pattern of the figures reveals the importance of this distinction.

Plumley was offered the opportunity to have his accountant ³ examine the complete books of the corporation, but did not conduct further investigation.

Plumley resolved to buy the corporation and on May 15, 1968, paid $62,545.00 therefor.

There was testimony that when Plumley took over operation of Miami Brass, he had a negative attitude. He had no technical expertise, lacked the knack of handling people, and was unable to obtain competent help. In September, 1968, after four months of operation, Plumley gave up the business as unprofitable and subsequently began this action on October 14, 1968 by filing a complaint alleging fraud on the part of Stanelle. A first trial was had in 1970, resulting in a judgment for Stanelle. A new trial was subsequently granted and on August 15 and 16, 1972, the case was tried anew by the Court sitting without intervention of a jury.

On October 10, 1972, the trial court returned a finding and judgment for defendants. The finding states in pertinent part:

'The Court further finds upon the evidence for Defendant, Albert L. Stanelle, Sr. and against Plaintiffs, finding that Defendant, Albert L. Stanelle, Sr., did make statements or cause to be published and exhibited to (Plumley) matters concerning his 'income' and such statements and publications relative to monetary income never defined whether such income was gross, net, or taxable income. Further, the Court finds that Defendant interchanged his years of income from that of an annual basis to that of a fiscal basis for the years 1966 and 1967. Without more such statements, publications, and interchanging of annual and fixcal taxable (sic) would entitle Plaintiffs to relief. However, the Court finds that from April 26, 1968 to May 15, 1968, Plaintiff, Dean Plumley, was told and shown, by his own admission, Plaintiffs' (sic) income and tax information, which the Court finds, based upon Plaintiffs' experience as an accountant, is sufficient notice of true facts regarding Defendant's income that he cannot be said to rely upon Defendants' prior statements and publication about his income as a matter of right or fact.'

Plumley summarizes his argument on appeal thusly:

'A

The information which 'was told and shown, by his own admission' to Plumley does not account to constructive 'notice of true facts' such as would preclude him from relying on Stanelle's false statements, which were unknown to Plumley to be false.

B

Even if there are facts sufficient to give Plumley 'constructive notice,' the doctrine of constructive notice can never be so applied as to prevent a defrauded party from recovering for fraudulent misrepresentations.'

We first point out that the trial court did not find that Stanelles' statements were false. What the trial court stated was that the change from annual to fiscal years and the lack of definition as to whether income was gross, net or taxable in the documents shown Plumley at Associated Business Brokers would, without qualifying circumstances, entitle Plumley to relief. As was quoted with approval in McClellan v. Tobin (1942), 219 Ind. 563, 569--570, 39 N.E.2d 772, 774:

'A false representation may nevertheless be made by presenting that which is true so as to create an impression which is false, and then profiting by the false impression thus created, for in such case the state of mind produced falsely represents the facts, and to take advantage of such a state of mind is to profit by a false representation.'

See also Restatement of Torts, §§ 527 and 529; Prosser on Torts (4th Ed.) § 106.

Thus, the trial court found that, without clarification, the figures received from Associated Business Brokers and later affirmed by Stanelle were sufficiently misleading or ambiguous to allow Plumley to recover. The court, however, states that the corporate and personal tax returns and Profit and Loss Statement shown to Plumley on May 7, when coupled with Plumley's experience as an accountant, was 'sufficient notice of true facts regarding Defendant's income that he cannot be said to rely upon Defendant's prior statements and publication about his income as a matter of right or fact.'

Plumley construes this as a finding by the court that he had 'constructive notice' of the true facts. The finding may not be so characterized.

Constructive notice may exist only by virtue of legal inference. Under the theory of constructive notice, notice is imputed by law to one who does not have actual notice.

There is no inference of law involved in the case at bar. The evidence supports the trial court's finding, i.e., that Plumley either had actual knowledge of the facts contained in the returns and profit and loss statement, or, having had them in his possession, knowledge of the contents is implied as a matter of fact. We must therefore examine what effect such knowledge has on Plumley's claim for relief.

The elements of fraud are misrepresentation of a material fact, scienter, deception, reliance and injury. See Grissom v. Moran (1972 Ind.App.), 290 N.E.2d 119; Automobile Underwriters, Inc. v. Smith (1960), 131 Ind.App. 454, 166 N.E.2d 341, reh. dismissed 167 N.E.2d 882, Tr. denied 241 Ind. 302, 171 N.E.2d 823.

Deception and reliance involve the state of mind of the victim. As such, their existence or absence is a question for the trier of fact. Once resolved, we cannot disturb that finding without a clear showing that it was not supported by the evidence. Edwards v. Hudson (1938), 214 Ind. 120, 14 N.E.2d 705; Smart & Perry Ford Sales, Inc. v. Weaver (1971), 149 Ind.App. 693, 274 N.E.2d 718.

In the present case, the evidence that Plumley had received the tax forms and profit and loss statement on May 7, was sufficient to establish that he had actual knowledge of the true facts before he purchased Miami Brass, without regard to the ambiguity and/or falsity of the figures previously furnished him.

Where one acts upon representation known by him to be false or misleading, he...