Roberts v. United New Mexico Bank at Roswell

• Decision Date: 28 February 1994
• Docket Number: No. 93-8024,93-8024
• Citation: 14 F.3d 1076
• Parties: Joe W. ROBERTS and Donald D. Roberts, Plaintiffs-Appellees, v. UNITED NEW MEXICO BANK AT ROSWELL, f/k/a First Interstate Bank of Roswell, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1076

14 F.3d 1076

Joe W. ROBERTS and Donald D. Roberts, Plaintiffs-Appellees, v. UNITED NEW MEXICO BANK AT ROSWELL, f/k/a First Interstate

Bank of Roswell, Defendant-Appellant.

No. 93-8024.

United States Court of Appeals, Fifth Circuit.

Feb. 28, 1994.

Steven L. Hughes, Corey W. Haughland, Mounce & Galatzan, El Paso, TX, for defendant-appellant.

Jeffrey S. Alley, Scott, Hulse, Marshall, Feuille, Finger & Thurmond, P.C., El Paso, TX, for plaintiffs-appellees.

Appeal from the United States District Court for the Western District of Texas.

Before DUHE and EMILIO M. GARZA, Circuit Judges, and BLACK ^*, District Judge.

EMILIO M. GARZA, Circuit Judge:

This is an appeal from a jury verdict for the plaintiffs, Donald and Joe Roberts ("the Roberts"), in an action for fraud and negligent misrepresentations. The jury awarded the Roberts $69,154.40 in damages, finding that employees of the United New Mexico Bank ("the Bank") had made both fraudulent and negligent misrepresentations to the Roberts. The Bank now appeals, and we affirm.

I

Donald Roberts owns an Oregon-based plant research company that researches, develops, and produces coriander and other spices. In 1987, Roberts, who had been commercially cultivating coriander in Oregon since 1982, began examining the possibility of growing coriander in West Texas because of the relatively longer growing season there. Roberts, along with Joe Roberts, his brother, successfully cultivated two test plots of coriander near El Paso and Van Horn, Texas. Based on their success, the Roberts began searching for farmland that could accommodate a large-scale production of coriander.

Joe Roberts, after learning that the Bank owned property in the Dell City area, contacted the Bank and inquired about the land's availability. Roberts subsequently met with two Bank employees--Melvin Adams, whom the Bank hired to liquidate its real estate holdings, and J. Wesley Willis, a senior vice-president--to discuss leasing the land. ¹ Roberts testified that Adams told him that the farm consisted of "very good land [with] very good water." Adams also provided Roberts with a written appraisal of the farm prepared for the Bank; the appraisal described the farm as being "highly productive" with "good" quality well-water. The Roberts eventually decided to lease part of the west farm in March 1989.

The Roberts attempted to grow three coriander crops. Unfortunately, however, the coriander plants died before maturity each time. After the last crop died, the Roberts sued the Bank, alleging that the salt content of the soil and the well-water caused the crops to fail. Evidence adduced at trial established that the three wells on the leased land contained between 3,000 and 4,000 parts per million ("ppm") of salt, "good" wells in the Dell City area average only 1,700 ppm of salt, and "average" wells contain between 2,500 and 2,700 ppm. Based on that evidence, the jury found that the statements made by the Bank as to the land's productivity and the quality of the water supply constituted both fraudulent and negligent misrepresentations and awarded the Roberts their out-of-pocket costs. The Bank, which had moved for judgment as a matter of law at the close of the evidence, moved for judgment notwithstanding the verdict. The district court denied the Bank's motion, and the Bank appeals, arguing that the Roberts failed to carry their burden on several key issues at trial.

II

Under Texas law, a plaintiff may recover for fraud upon establishing that:

(1) a material representation was made; (2) it was false when made; (3) the speaker knew it was false, or made it recklessly without knowledge of its truth and as a positive assertion; (4) the speaker made it with the intent that it should be acted upon; and (5) the party acted in reliance and suffered injury as a result.

Beijing Metals & Minerals Import/Export Corp. v. American Business Ctr., Inc., 993 F.2d 1178, 1185 (5th Cir.1993); Boggan v. Data Sys. Network Corp., 969 F.2d 149, 151-52 (5th Cir.1992). Additionally, "to establish fraud, [the plaintiff] must show that its reliance on [the defendant's] representations was justifiable as well as actual." ² Beijing Metals, 993 F.2d at 1186. "To determine justifiability, courts inquire whether--given [the] plaintiff's individual characteristics, abilities, and appreciation of facts and circumstances at or before the time of the alleged fraud--it is extremely unlikely that there is actual reliance on the plaintiff's part." Haralson v. E.F. Hutton Group, Inc., 919 F.2d 1014, 1026 (5th Cir.1990). The Bank argues that the evidence is insufficient to sustain the jury's finding of fraud because the Roberts failed to prove both that the Bank made any misrepresentations and that they justifiably relied on any statements made by Bank employees alleged to be misrepresentations.

On appeal, we employ the same standard used by the district court in reviewing the Bank's motion: we "must review the evidence in the light and with all reasonable inferences most favorable to the party opposing the directed verdict or judgment notwithstanding the verdict." Fruge v. Penrod Drilling Co., 918 F.2d 1163, 1165-66 (5th Cir.1990); see also Boeing Co. v. Shipman, 411 F.2d 365, 374-75 (5th Cir.1969) (en banc). This standard of review

is exacting. The verdict must be upheld unless the facts and inferences point so strongly and so overwhelmingly in favor of one party that reasonable [persons] could not arrive at any verdict to the contrary. If there is evidence of such quality and weight that reasonable and fair minded [persons] in the exercise of impartial judgment might reach different conclusions, the jury function must not be invaded.

Western Co. of North Am. v. United States, 699 F.2d 264, 276 (5th Cir.), cert. denied, 464 U.S. 892, 104 S.Ct. 237, 78 L.Ed.2d 228 (1983). We review questions of law, however, de novo. Nealy v. Hamilton, 837 F.2d 210, 211 (5th Cir.1988).

A

The Bank initially contends that the statements regarding the farm's productivity and the quality of the water were opinions, which cannot constitute actionable misrepresentations under Texas law. However, "[r]epresentations as to matters not equally open to parties are legally statements of fact and not opinions." Wright v. Carpenter, 579 S.W.2d 575, 580 (Tex.Civ.App.--Corpus Christi 1979, writ ref'd n.r.e.); see also Haralson, 919 F.2d at 1029 (finding that representations as to the value of a financial institution were not statements of opinion "given [the defendant's] superior access to information"). The record adequately demonstrates that the facts concerning the quality of the water were not equally available to the Bank and the Roberts. For example, the Bank had owned the property for approximately twenty months before the Roberts sought to lease it, and Adams had been told by Bank employee Larry Brewton ³ that the water on the leased land was "really bad" and that the Bank should sell that land at any price because of the water problem. The Roberts, on the other hand, presented evidence demonstrating that they could not have discovered the water problems without paying over $7,000. See Wright, 579 S.W.2d at 580 (noting that the plaintiff home purchasers "could not have easily discovered the rotten roof because of the foliage hanging over it at the time of contract"). Accordingly, we find that the statements made about the water quality constitute actionable statements of fact about the present condition of the land. See Commonwealth Mortgage Corp. v. First Nationwide Bank, 873 F.2d 859, 865 (5th Cir.1989) (finding a statement that certain property was "an excellent location" to be "an assertion about the present condition of the land"); Gibraltar Sav. v. LDBrinkman Corp., 860 F.2d 1275, 1301 (5th Cir.1988) (finding a representation that a business was "ongoing and successful" to be "unambiguous declarations of positive fact"), cert. denied, 490 U.S. 1091, 109 S.Ct. 2432, 104 L.Ed.2d 988 (1989).

The Bank further argues that even if it did make any representations as to the farm's soil and water quality, those representations were true statements as to the farm's average water and soil quality. To bolster its argument, the Bank points out that any statements made about the farm pertained to the farm as a whole and not to the tracts of land leased by the Roberts and that the average water quality of the Estes farm's eleven wells was "good."

As an initial matter, we note the Bank represented that the "West Farm [was] highly productive" and that the Estes farm's "[w]ater quality [was] good." Neither the appraisal nor Adams indicated to the Roberts that these representations were true only as to the average productivity and water quality of the farm. Moreover, "[a] representation literally true is actionable if designed to create an impression substantially false." State Nat'l Bank v. Farah Mfg. Co., 678 S.W.2d 661, 681 (Tex.App.--El Paso 1984, writ dism'd by agreement of the parties); see also Commonwealth Mortgage, 873 F.2d at 865; Blanton v. Sherman Compress Co., 256 S.W.2d 884, 887 (Tex.Civ.App.--Dallas 1953, no writ). In the context of this case, it was within the province of the jury to find that the Bank's representations were designed to create a substantially false impression. Accordingly, regardless of the literal truth of the statements, the jury could reasonably conclude that the Bank's description of the property was designed to mislead and, hence, constituted fraudulent misrepresentations. See Commonwealth Mortgage, 873 F.2d at 865.

B

The Bank, without citing any authority, next contends that because Donald Roberts was a coriander expert and the Bank's employees were not, the Roberts "could not justifiably rely on any representations [made] by the Bank." However, the mere fact that Roberts was an expert regarding coriander does not preclude a recovery for fraudulent misrepresentations as to the nature of the farm and its water supply. Cf...