Warren v. Wheeler, 49A02-8901-CV-31

Docket NºNo. 49A02-8901-CV-31
Citation566 N.E.2d 1096
Case DateFebruary 26, 1991
CourtCourt of Appeals of Indiana

Page 1096

566 N.E.2d 1096
William O. WARREN and Employment Telecom Systems, Inc.,
Appellants (Defendants Below),
Daniel L. WHEELER, John P. Brown, and Roger E. Bird,
Appellees (Plaintiffs Below).
No. 49A02-8901-CV-31. 1
Court of Appeals of Indiana,
First District.
Feb. 26, 1991.

Page 1098

Terrill D. Albright, Joseph H. Yeager, Jr., Baker & Daniels, Indianapolis, for appellants.

Michael L. Hanley, Vernon J. Petri, Vernon J. Petri, P.C., Indianapolis, for appellees.


William O. Warren and his company, the Employment Telecom Systems, Inc. [ETS] appeal the judgment after a jury trial in favor of plaintiffs, Daniel L. Wheeler, John P. Brown, and Roger E. Bird, in their action based on fraud. Judgments were entered upon the jury's verdicts in the amounts of $144,705.13 for Wheeler, $146,944.33 for Brown, and $62,985.00 for Bird. Wheeler's Brown's, and Bird's company, The Exchange Network, Inc., [TEN] appeals the trial court's removal of its claim against the defendants from the jury. We affirm the decision below in all respects.


In 1981, William O. Warren, who was experienced and knowledgeable in the fields of personnel and human relations, decided to start a new business. Warren developed a computer network system to be called the "Human Resource Information Network or "HRIN" [the System] which would make available to corporate subscribers a large library of human relations data. The system was designed so that the human relations director of a corporate subscriber could scan a data bank of job seekers to fill job openings in that subscriber's company. In addition to the recruiting function described above, the System would permit subscribers to communicate by electronic mail. Warren incorporated Employment Telecom Systems, Inc. [ETS] to market the HRIN System.

In 1981, Warren solicited Wheeler to provide a source of employee candidates for the corporate subscribers to the System. Wheeler had been in the employment agency business for years and had been running his own employment agency. Warren represented to Wheeler that 22 corporations had subscribed to the System having paid a substantial sum of money, approximately $10,000.00 each, to subscribe. Warren represented that each of these corporate subscribers had the necessary equipment and capability to access the System, were on-line, and had a present need to use the system.

Warren made the same representations as set out above to Brown. Wheeler and Brown founded The Exchange Network, Inc. [TEN] to sell HRIN subscriptions to employment agencies who then could interact electronically with the corporate subscribers to place job seekers.

Bird owned and operated one of the first employment agencies to subscribe to TEN. Bird joined forces with Wheeler and Brown and invested his time and money in TEN and became a stockholder and officer of TEN.

Warren's representations turned out to be false as only three (3) of the original 22 corporations were paid subscribers on the network. Some of the corporations originally listed as being paid subscribers had been given free subscriptions and others were simply not on-line. One of the manufacturing plants listed on the System as needing employees had been closed. One of the companies Warren had listed on the System had a policy of hiring from within and had never had any interest in or intention of using the System.

Warren had discouraged the TEN group from contacting the corporations by telephone and encouraged them to communicate with the corporations via the electronic mail service. Warren explained that the Human Relations directors of these corporations were annoyed by telephone calls

Page 1099

from employment agencies. The TEN group members--having experience in the business--knew this to be true as a general proposition and complied with Warren's wishes. However, when electronic mail messages were sent, the System would indicate that the corporate subscribers had received the messages when in fact they had not--or were not even connected to the network.

As time went on, Warren continued to misrepresent the number of corporate subscribers to the TEN group and others. He continuously represented ever higher numbers. In October of 1983, Warren represented to TEN and a group of employment agencies that he had 1500 locations on line. It was later discovered that by June of 1983, at the most, only 17 paid corporate subscribers were on-line, and even this number was disputed.

After fifteen months of operation, the TEN group became discouraged because the System had only succeeded in placing three (3) job seekers. After Warren succeeded in stalling the TEN group some more, the TEN group made telephone calls to the supposed corporate subscribers and discovered the fraud. Soon afterwards, the TEN group ceased operations.

The TEN group expended substantial time, energy, and money in recruiting employment agencies to subscribe to the System. When TEN ceased operations, it had unpaid bills to creditors outstanding. In addition, TEN accepted almost $75,000.00 in fees from the employment agencies who subscribed to the System, many of whom--since the fraud was discovered--have demanded to be reimbursed. The corporation, TEN, through its officers, feels obliged to reimburse these agencies should it prevail in its lawsuit. TEN had other shareholders who are not parties to this suit.

The present trial lasted 13 days spread over six weeks. The record consists of 4,164 pages bound in 18 (Eighteen) volumes.

Additional facts are supplied as necessary.



Whether Exhibit 203 was erroneously admitted?

Warren's company, ETS, ultimately prospered and was sold to the Bureau of National Affairs, Inc. [BNA] in a complex transaction that required the continued involvement of Warren and another co-owner, Wingington. 2 A dispute arose and Warren and Wingington sued BNA praying for judgment in the amount of $4,560,000 each representing their unfulfilled interest in the sale transaction.

Exhibit 203 was admitted into evidence over Warren's objection. Exhibit 203 is a settlement demand letter from Warren's attorneys to BNA's attorneys. In this letter, Warren and Wingington each demand $2,500,000.00 in settlement of their claims.

Warren claims the trial court erred in admitting this letter into evidence because the letter is irrelevant in the present lawsuit and even if it is relevant, its prejudicial nature outweighs its probative value. Warren asserts the real effect of this document was to convince the jury that Warren is a very wealthy man with a deep pocket. He argues that the value of his claim in the lawsuit was tangential to the real issues of trial and was injected into the case by Brown's emotional statement that Warren had earned $10,000,000.00 impliedly from the efforts of the TEN group.

Warren equates the demand letter to a mere offer to sell which is properly excluded as evidence of value. State v. Lincoln Memory Gardens, Inc. (1961), 242 Ind. 206, 177 N.E.2d 655. In State v. Lincoln Memory Gardens, Inc., the value of a certain piece of property was at issue in a condemnation case. The trial court excluded testimony of an offer to sell the property. Our supreme court affirmed holding:

A mere offer to buy or sell property is not a measure of the market value of a

Page 1100

similar property. It is incompetent to prove the market value of the property because the asking price is only the opinion of one who is not bound by his statement, and is too unreliable to be accepted as a correct test of value.

177 N.E.2d at 658.

Exhibit 203 is more than a mere offer to sell as properly excluded in State v. Lincoln Memory Gardens, Inc. The demand letter is four (4) pages long and contains a detailed analysis of the computation of the value of Warren's and Wingington's claims arising out of the sale of ETS, the company that markets the HRIN System to corporate subscribers.

Moreover, the evidence concerning the value of Warren's claim is not limited to the demand letter, Exhibit 203, alone. Other evidence was presented concerning the value of the claim. For example, the complaint in the lawsuit against BNA was admitted into evidence without objection. In the complaint, Warren and Wingington asserted that the payout under the BNA purchase plan was worth $4,900,000.00 to each of them. They pray for judgment in the amount of $4,560,000.00 each. Further, Exhibit 203 was admitted through Wingington who testified that BNA had offered them significantly less than $200,000.00 each to settle the claims.

The admissibility of evidence is within the sound discretion of the trial court. English Coal Co., Inc. v. Durcholz (1981), Ind.App., 422 N.E.2d 302. Evidence of the defendant's worth is relevant to the issue of punitive damages. Nate v. Galloway (1980), Ind.App., 408 N.E.2d 1317.

In the present case, the plaintiffs claimed punitive damages. Therefore, Warren's net worth was at issue and evidence regarding the value of Warren's claim relating to the sale of his interest in ETS was relevant to prove Warren's net worth and the calculation of punitive damages. Further, considering all the evidence regarding the value of the claim, the demand letter--which contained a detailed valuation analysis--was not excludable as being a mere offer to sell.

We hold the trial court did not abuse its discretion in admitting Exhibit 203 into evidence. Therefore, we find no error.



Warren argues the TEN group failed to carry its burden of proof on every element of its claim of fraud. The elements of fraud, which must be proved by the preponderance of the evidence, are: a material misrepresentation of past or existing fact made with the knowledge that the representation was untrue or recklessly made and reliance on that representation by another party resulting in that party's acting to his detriment. South v. Colip (1982), Ind.App., 437 N.E.2d 494. In order to reverse a fraud judgment, the...

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  • Wedmore v. Jordan Motors, Inc., 71A05-9106-CV-204
    • United States
    • Indiana Court of Appeals of Indiana
    • April 13, 1992
    ...awarded by this jury was ridiculous! * * * * * * One of the latest cases to be handed down by the Court of Appeals is Warren v. Wheeler, 566 N.E.2d 1096 (Ind.App. 1 Dist.1991) where at page 1102 Judge Robertson 'The amount of punitive damages should depend upon the nature of the wrong and w......

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