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Approximately 1 year after petitioners’ purchase of the
Truckee Hotel, the county hotel tax assessor asked petitioners
for a “Revenue Forecast” of their room revenues and room
occupancy taxes that the county could use for budgeting purposes.
Petitioners obtained copies of transient occupancy tax returns
that had previously been filed for the hotel. Petitioners
discovered that the gross receipts listed on the returns were
less than those shown on the documents provided by Mr. Meglin
during escrow. The actual gross receipts received by petitioners
from operating the hotel were less than they had anticipated.
On May 10, 1993, petitioners filed a complaint for damages
in the Superior Court of the State of California against MHP and
Mr. Meglin alleging breach of contract, intentional
misrepresentation, and negligent misrepresentation. Petitioners
alleged that Mr. Meglin breached the real estate contract by
providing petitioners with false, incorrect, or incomplete
financial statements showing that the income of the hotel was
greater than it was, which proximately resulted in petitioners’
suffering damages for the difference between the purchase price
and actual value of the hotel at the time of sale and the
difference between the reasonable projected profit of the hotel
and the actual income. Petitioners further alleged that Mr.
Meglin intentionally misrepresented the income and expenses of
the hotel, which induced petitioners to purchase the hotel for a
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