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Macauley v. Rickel

JUNE 20, 1968.




Appeal from the Circuit Court of Winnebago County, Seventeenth Judicial Circuit; the Hon. JOHN S. GHENT, Judge, presiding. Judgment affirmed.


Plaintiffs, as the purchasers of a car wash business, sued for rescission of the contracts of sale, and for a recovery of sufficient monies to make them whole. From a judgment on a jury verdict in favor of the plaintiffs, granting rescission and a money judgment of $29,100, the defendants appeal.

Defendants urge that no actionable representations were made and that plaintiffs purchased the business with understanding of the risk involved. They further argue that error was committed in receiving the testimony of a former purchaser, in the refusal of an instruction, and in the failure to direct a verdict both at the close of plaintiffs' proof and at the close of all the evidence. Plaintiffs counter that the evidence established fraud in the knowingly false representations of the profitability of the business, of its monthly gross receipts and expenses, and of the condition of equipment sold, which were relied on by the plaintiffs to their damage.

The facts are that in February, 1966, an automobile washing business known as the Auburn Car Wash was being operated in Rockford, Illinois. The defendant Illinois Car Wash, Inc. was at that time the owner of the business and the tenant of the premises at which the business was operated, while defendant Auto Laundry Equipment Sales Co. owned the equipment used in the business. Both of the defendant corporations were principally owned and controlled by the defendant Allen D. Rickel. At that time defendant Rickel placed an advertisement in a Rockford newspaper for the apparent purpose of finding a partner for the business. The plaintiffs, Arthur and Eleanor MacAuley, answered the advertisement, and discussions ensued with the view that MacAuley would invest in the business and become a partner-manager.

It should here be noted that MacAuley had previously worked as an accountant for approximately eighteen years, and had served in a managerial capacity in other businesses. At the time he began negotiations with defendant he was "semi-retired" but drew an annual salary and bonus from another business in Rockford.

The negotiations between the parties culminated in a general agreement whereby plaintiffs would purchase the business from defendants, operating under a sublease of the premises. At no time during these discussions did plaintiffs ask to see defendants' books pertaining to the business, nor did defendants offer these books for plaintiffs' inspection. According to plaintiffs, Rickel represented in the course of these negotiations that the business was "very profitable," and that plaintiffs would clear about $1,200 per month from the business operation. Rickel further allegedly represented that about 3,000 cars were washed each month in the business. It was further alleged that Rickel represented all of equipment to be "operable and that there was nothing about the equipment breaking down or anything like that."

Defendants denied that Rickel made any representations as to the profitability of the business or as to the number of cars washed there. Rickel, however, admitted stating that "all the equipment except the wheel washer was in A-1 condition." While Rickel testified that he offered to show MacAuley the records pertaining to the car count, it is unclear as to whether MacAuley actually looked at these records. In any event, it is undisputed that MacAuley, from a vantage point across the street from the business, made random car counts of his own, although he did not actually record these on paper.

It is undisputed that the parties themselves wrote and rewrote the contracts of sale, although the plaintiffs tried without success to telephone their attorney prior to placing their signatures thereon. Mrs. MacAuley testified that when plaintiffs' attorney could not be contacted, Rickel "pounded on the counter and he said nobody leaves this building until I have this contract signed." This was denied by Rickel. Mrs. MacAuley further testified that, shortly after the contracts were signed, Rickel advised plaintiffs for the first time that the road on which the business fronted was to be widened. When Mrs. MacAuley expressed dismay at this information, Rickel allegedly said that "you should do a much better business with the road being wider and it will only be a matter of two or three days." In fact, according to Mrs MacAuley's testimony, the road was completely closed from six weeks to two months, during which time the business was closed for lack of access.

From the time the plaintiffs operated the business from late March, 1966, until the time of trial — a period of about nine months — they had taken no salaries, and in fact had drawn a total of only slightly more than $700, and had spent from $1,000 to $1,500 for equipment repairs. According to the testimony of their accountant, the plaintiffs' estimated net loss during this time, after allowance for depreciation and a salary of $650 per month, was $13,000. They filed their complaint below less than two months after acquiring the business.

For the reasons stated hereafter, it is the conclusion of this court that the judgment be affirmed.

[1-3] As noted, there is great dispute as to what representations were made by defendant Rickel. If plaintiffs' testimony is to be believed, there were representations as to profitability, gross receipts, expenses, the state of repair of the equipment, and the number of cars that could be expected to be washed. Obviously the jury chose to believe the plaintiffs, at least insofar as some of these representations were concerned, and the trial judge was sufficiently satisfied with the choice to enter judgment on the verdict. It is not for this court to conclude, as a matter of law, that both the jury and the trial judge believed the wrong witnesses. On the contrary, the trial judge and jury, having had the opportunity to hear the testimony and observe the witnesses, were in a better position, than we, to weigh the conflicting evidence and resolve questions of credibility. Stevens v. Fanning, 59 Ill. App.2d 285, 295, 207 N.E.2d 136 (1965). We cannot say, that viewing all the evidence, it so overwhelmingly favors defendants, that no verdict contrary to defendants could ever stand. Therefore, the court did not err in refusing to direct a verdict. Pedrick v. Peoria & Eastern R. Co., 37 Ill.2d 494, 510, 229 N.E.2d 504 (1967).

[4-6] Accepting the finding that defendants made the misrepresentations complained of, or even some of them, it would follow that actionable fraud would exist. Nowhere do defendants challenge the materiality of the misrepresentations, nor do they contend that plaintiffs did not rely thereon. These elements of fraud, therefore, are not before this court. Furthermore, we are not here concerned with misrepresentations as to future facts or promises, which are generally held not to be actionable. Brodsky v. Frank, 342 Ill. 110, 117-118, 173 N.E. 775 (1930); Federal Deposit Ins. Corp. v. Wainer, 4 Ill. App.2d 233, 237, 124 N.E.2d 29 (1955). Defendants' representations in this case, at least for the most part, related to existing facts, namely, that "it was a very profitable business," that the Auburn Car Wash "did three thousand cars a month," and that the equipment "was operable" and "was going good."

Defendants argue that the representations have not been shown to be false, but we do not agree. There was ample evidence in the record to sustain the finding that the business had not been a profitable one — and certainly not a "very profitable" one — either prior to or at the time of the transaction, and the evidence is uncontradicted that the plaintiffs suffered a net loss of $13,000 in the nine months thereafter. Similarly, there was evidence tending to show that the ...

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