Hoffman v. Red Owl Stores

HOFFMAN v. RED OWL STORES, INC., 26 Wis. 2d 683, 133 N.W.2d 267 (1965). Hoffman and his wife, the plaintiffs, owned and operated a bakery in Wautoma, Wisconsin. Wanting to expand his operations, Hoffman contacted the District Manager of Red Owl Stores to inquire about obtaining a franchise. Hoffman mentioned that $18,000 was all the capital he had to invest, and was repeatedly assured that this was enough. On the recommendation of the manager, Hoffman bought the inventory and fixtures of a small local grocery store to gain experience. The store made a profit, but Hoffman sold it within three months on the insistence of the manager, who promised that Red Owl would find him a larger store in another city. The manager then advised Hoffman to spend $1000 on an option on a piece of land costing $6000 in Chilton, where the future store would be. After spending $1000 for the option, Hoffman, again on the advice of the manager, sold his bakery business and the bakery building, which he and his wife owned. Hoffman rented a house in Chilton on the assurance that "everything would be set" after the sale of the bakery. He never moved to Chilton, however, Red Owl having advised him to get experience at a Red Owl store in Neenah. The family moved to Neenah, but Hoffman never got the job.


Having done all this on the advice of the District Manager, Hoffman was informed that he would have to invest $34,000, not $18,000. Negotiations were abandoned when the parties were unable to agree on the terms of the financing agreement.


The Hoffmans sued Red Owl to recover the losses incurred in reliance on defendant's representations and assurances.


The court, relying on ยง90, upheld a damage award to plaintiffs for losses on the sale of the bakery, the rental and moving expenses, and the down payment on the Chilton property. The court also sustained an order for a new trial on the issue of damages incurred in the sale of the grocery store fixtures and inventory, since the damages awarded by the jury were not sustained by the evidence. On this latter issue, the court followed the trial court in ruling that damages for the sale of the grocery store be "limited to the difference between the sales price received and the fair market value of the assets sold, giving consideration to any goodwill attaching thereto by reason of the transfer of a going business." The court rejected the plaintiff's contention that the damages should include loss of profits. When the plaintiffs sold the store they were concerned about the loss of large profits during the ensuing summer months (profits that the buyer of the store subsequently realized). After noting that this was not a breach of contract action, the court said that [w]here damages are awarded in promissory estoppel instead of specifically enforcing the promisor's promise, they should be only such as in the opinion of the court are necessary to prevent injustice .... At the time Hoffman bought the equipment and inventory of the [grocery store] he did so in order to gain experience in the grocery store business .... Thus Hoffman made this purchase more or less as a temporary experiment. Justice does not require that the damages awarded him, because of selling those assets at the behest of defendants, should exceed any actual loss sustained measured by the difference between the sales price and the fair market value." The court, however, did point out that evidence of past profits would be admissible to aid in determining the fair market value of the assets in question.