Bell v. Carter ( 1997 )

IN THE COURT OF APPEALS OF TENNESSEE
EASTERN SECTION AT KNOXVILLE FILED
May 13, 1997
Cecil Crowson, Jr.
Appellate C ourt Clerk
CARL F. BELL, ) GREENE CHANCERY
)
Plaintiff/Appellant ) NO. 03A01-9610-CH-00334
)
v. ) HON. THOMAS R. FRIERSON, II,
) CHANCELLOR
ROBERT CARTER, )
)
Defendant/Appellee )
) AFFIRMED
E. Ronald Chesnut, Greeneville, for Appellant.
Jeffrey A. Powell, Chattanooga, for Appellee.
OPINION
INMAN, Senior Judge
The motion of the appellee to dismiss this appeal because of the failure of the
appellant to serve a copy of the Notice of Appeal on the Clerk of the Appellate Court
is denied in accordance with the holding of the Supreme Court in Cobb v. Beier,
_____S.W.2d_____, No. 03S01-9610-CV-00106, filed at Knoxville on April 28, 1997,
for publication.
This is an action for the rescission of (1) a contract of sale, (2) a lease, and (3)
a promissory note, arising out of a transaction involving Ford’s Package Store, Inc. in
Greeneville, together with compensatory and punitive damages.
The defendant, Carl F. Bell, was the sole stockholder of the package store,
the sale of which to the plaintiff was arranged by the defendant, Glen Simerly, as
agent for Southeast Business Brokers, Inc.
Parenthetically, we note at this juncture that the Chancellor exonerated
Simerly and Southeast Business Brokers, Inc. from liability to the plaintiff and the
judgment, as to them, has become final.
The plaintiff, in June 1994, responded to a newspaper advertisement that
Ford’s Package Store was for sale. He requested the business records, including
profit and loss statements for the prior three years, and inquired about the
mechanics of transferring a liquor license. On the basis of a representation that the
store generated a net income yearly of $40,000.00, the plaintiff executed an offer to
purchase. Documentation was post facto, and consisted of an “income expense”
statement prepared by the defendant Bell that the package store had an annual net
income ranging from $42,864.00 to $51,529.00 for the years 1991, 1992 and 1993.
The purchase was finalized on September 13, 1994.
The plaintiff entered upon his entrepreneurial adventure, but soon learned that
much was amiss. He obtained copies of the store’s tax returns for each of the prior
three years, together with copies of business tax returns from the Internal Revenue
Service, the latter of which revealed a loss for each of these years. The sales tax
returns revealed that the store’s sales were remarkably less than as represented.
The plaintiff thereupon requested of Mr. Bell that he be allowed to rescind the
contract. This request was refused, and the plaintiff continued to struggle with his
newly-acquired store. When his resources were depleted the store was closed, and
this action was filed seking the relief mentioned.
The defendant Bell generally denied the material allegations of the complaint
and “demanded strict proof.”
Our review of the findings of fact made by the trial court is de novo upon the
record of the trial court, accompanied by a presumption of the correctness of the
finding, unless the preponderance of the evidence is otherwise. TENN. R. APP. P.,
RULE 13(d).
The Chancellor essentially found that the material allegations of the Complaint
were supported by a preponderance of the evidence. He found that the defendant
Bell falsely represented to the plaintiff, then a prospective purchaser only, that the
business generated an annual net profit of $40,000.00, which was later documented
by an “Income Expense Statement” purportedly verifying the representation
previously made. Lesser indicia of fraud were found: store suppliers were wary of
Mr. Bell, and had required him to pay upon delivery of merchandise; a cash register
repair service refused further repair service until prior charges were settled; the TVA
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was about to repossess a heat pump which it financed. As to these lesser indicia,
the defendant argues that he made no representations about them, and takes the
plaintiff to task for his failure to make proper inquiry of the affected creditors. The
appellant in effect excoriates the plaintiff for his failure to investigate the business
history of the store in a more thorough way. We have searched his brief and
nowhere do we find any discussion of the telling evidence that he represented to the
plaintiff that the store generated a net profit of $40,000.00 annually as alleged by the
plaintiff and found by the Chancellor.
The appellant presents for review the issues of whether the alleged fraud and
misrepresentation of the defendant were established by clear and convincing
evidence, and whether the business tax records of the defendant were properly
required to be produced by him.
To sustain a claim for fraud and misrepresentation, a plaintiff must prove that
representations of existing or past facts that are material and false were made
knowingly, recklessly, carelessly, or without belief in their truth and were relied upon.
Keller v. West-Morr Investors, Ltd., 770 S.W.2d 543 (Tenn. Ct. App. 1988). The
Chancellor applied this standard, and we cannot find that the evidence
preponderates against his determination. With respect to the second issue, the
appellant argues that his “business tax records” were not material and should not
have been considered on the issue of fraud, since they were never revealed to the
appellee prior to his purchase of the store. We think a short answer to this argument
is found in the fact that the sworn data in the tax returns directly contradicted the
financial data supplied to the purchaser before the sale was consummated, and
therefore could hardly be more relevant on the issue of calculated fraud.
The judgment is affirmed at the costs of the appellant and the case is
remanded for the enforcement of the judgment.
__________________________________
William H. Inman, Senior Judge
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CONCUR:
_______________________________
Houston M. Goddard, Presiding Judge
_______________________________
Charles D. Susano, Jr., Judge
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