Federal Land Bank Ass'n of Tyler v. Sloane
| Decision Date | 31 May 1990 |
| Docket Number | No. 12-88-00231-CV,12-88-00231-CV |
| Citation | 793 S.W.2d 692 |
| Parties | FEDERAL LAND BANK ASSOCIATION OF TYLER, Appellant, v. William C. SLOANE, Lettie Sloane, and Robert C. Sloane, Appellees. |
| Court | Texas Court of Appeals |
David M. Bond, Charles T. Newton, Jr., Houston, for appellant.
Blair A. Bisbey, Jasper, for appellees.
This appeal arises from the award of damages in an action for negligent misrepresentation. We affirm the trial court's decision as to liability and reform the judgment to reflect the proper award of damages.
Appellees, William C. Sloane, Lettie Sloane, and Robert C. Sloane (hereinafter "Sloanes"), brought suit against appellant, Federal Land Bank Association of Tyler (hereinafter "Bank"), for negligently misrepresenting that the Sloanes' loan application had been approved.
The testimony shows that in March of 1986 the Sloanes approached the Bank's loan officer, David Weeks (hereinafter "Weeks"), about obtaining financing to build at least two chicken houses so that the Sloanes could raise broilers for Pilgrim's Pride (hereinafter "Pilgrim"). On March 7, 1986, the Sloanes, while in the presence of Weeks at the Bank's San Augustine office, completed a financial statement in which Mrs. Sloane inadvertently left two creditors off of the financial statement.
In May of 1986, Weeks orally informed the Sloanes that their loan application had been approved by the Bank's board. In reliance upon Weeks' representation, the Sloanes moved utility lines and had the sites for the chicken houses prepared. When the Sloanes told their general contractor, Sid Coufal of D & B Poultry, that the loan had been orally approved and that they were free to begin work on the site, Coufal stated that it was unusual to start work before the loan papers had been signed, so he contacted Weeks to confirm that the loan had indeed been approved. Weeks told Coufal that the loan had been approved as an "add on" type transaction. 1 Thereafter, in August of 1986 and prior to the beginning of construction on the site, the Sloanes received a letter from the Bank informing them that the loan would not be Although the Sloanes did not seek to have the committee review the denial of their loan application, they did unsuccessfully seek to obtain financing elsewhere. Because they were not able to quickly obtain other financing, Pilgrim withdrew its commitment to contract with the Sloanes to raise broilers. Damages alleged by the Sloanes included: (1) marital discord resulting in the separation of Mr. and Mrs. Sloane; (2) treatment for migraine headaches suffered by Mrs. Sloane; (3) inability to make their annual farm mortgage payment due to personal funds invested in the aborted construction project and increased interest rates due to the requirement that the Sloanes refinance their farm mortgage; (4) costs estimated at $15,000 incurred in moving utility lines and having the "dirt work" done to prepare a pad for the chicken house sites; (5) mental anguish suffered by Robert Sloane as a result of the additional financial strain placed upon him due to denial of the loan; (6) loss of 5 acres of pasture land previously used for the growing and harvesting of hay; and (7) lost profits estimated at $12,000 per year for at least five years as a result of losing the contract with Pilgrim.
approved. They were advised that they could seek a review of the Bank's decision with the credit review committee.
After hearing the evidence, the Court entered judgment in favor of the Sloanes, and based upon the jury's verdict, awarded $70,000 in damages and $11,974.48 in prejudgment interest.
By its first point of error, the Bank contends that the trial court erred in denying its motion for judgment n.o.v. because the Sloanes were, in effect, suing for breach of an oral contract to loan money, and such contracts are unenforceable under the Statute of Frauds. 2
The elements necessary to prove negligent misrepresentation are set forth in Rosenthal v. Blum, 529 S.W.2d 102 (Tex.Civ.App.--Waco 1975, writ ref'd n.r.e.):
One who, in the course of his business, profession, or employment, or in a transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.
Id. 529 S.W.2d at 104 (quoting Tentative Draft No. 12, Restatement of Torts (2nd ed. 1966), § 552 (1977)). Furthermore, it is immaterial whether such misrepresentation was made by accident or intent, since it needs only to have been made and to have been false when made. Susser Petroleum Co. v. Latina Oil Corp., 574 S.W.2d 830, 832 (Tex.Civ.App.--Texarkana 1978, no writ).
It is clear from the Plaintiff's Second Amended Petition that the Bank's denial of the loan is not at issue in the instant case. In fact, the Sloanes concede that the Bank acted reasonably in turning down the Sloanes' loan. Mrs. Sloane testified as follows during trial: "You see, we're not questioning Federal Land Bank turning down our loan ... that's not what we're objecting to." In Collins v. McCombs, 511 S.W.2d 745, 747 (Tex.Civ.App.--San Antonio 1974, writ ref'd n.r.e.), the Court held that:
Even if it be conceded that an action in tort [for misrepresentation] is unaffected by the provisions of the Statute of Frauds, the judicial disregard of the statute should be limited to situations in which the essence of the action truly sounds in tort [not contract]. (Emphasis ours.)
Where the injury to the subject matter is only the economic loss of the contract itself, the action sounds in contract alone. Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617, 618 (Tex.1986); Webber v. Kellogg The case at bar is distinguishable from Reed and Webber because the Sloanes were not seeking to enforce a contract for the loan which they alleged was promised to them. 3 Instead, they sought damages which were the purported result of their reliance upon Weeks' oral representation that the loan had been approved. The cases cited by the Bank in support of its Statute of Frauds argument involve recovery for breach of an unenforceable contract by disguising the true contractual nature of the complaint as a suit for recovery based upon fraud; in these cases the wolf drops his sheep's clothing by seeking damages for breach of contract rather than damages sounding in tort. However, in the case at bar, the Statute of Frauds is clearly inapplicable because the damages sought by the Sloanes are separate and distinct from those which would have been sought had a breach of contract action been pursued. The Bank's first point of error is therefore overruled.
Co., 720 S.W.2d 124, 129 (Tex.App.--Houston [14th Dist.] 1986, writ ref'd n.r.e.).
By its second point, the Bank argues that the Sloanes are not entitled to recover for negligent misrepresentation because the representations made the subject of complaint were allegedly induced by the Sloanes' misrepresentations to the Bank.
The sole case which the Bank cites in support of this point of error is Monier v. Guaranty Trust Co. of N.Y., 82 F.2d 252, 254 (2d Cir.1936), which stands for the proposition that "any material falsity in the facts asserted existing on that date [the date of the financial statement] would be ground for rescinding a loan made in reliance on the statement, regardless of the borrower's innocence in making the false assertion." Once again, the Bank relies upon its right to rescind the oral agreement to loan money. The fact that the Bank had the right to refuse the loan does not bar the Sloanes' right to recover for negligent misrepresentation because this is not an action for breach of contract. Furthermore, Ted Conover, the Bank's president, who ultimately made the decision to refuse the Sloane's loan, testified that the fact that the Sloanes failed to include two creditors on their financial statement was not the reason for the Bank's refusal to approve their loan. Thus, even if the reasonableness of the Bank's refusal of the loan were at issue, the Monier case would not be applicable.
While it is conceivable that the Sloanes' allegedly inadvertent omissions of debt disclosures to the Bank could have been viewed by the trier of fact as contributory negligence on the part of the Sloanes, 4 the jury specifically found that the Sloanes were not contributorily negligent. The Bank did not raise a point of error challenging the jury's negative finding on that issue; therefore, the issue is not before us. San Jacinto River Authority v. John Thomas Duke, 783 S.W.2d 209. The Bank's second point of error is overruled.
In its third through sixth points of error, the Bank contends that there is no evidence, or in the alternative, insufficient evidence to support the jury's award of damages in the amount of $70,000; that the Sloanes are only entitled to recover "out-of-pocket expenses" if any; that "lost profits" are not properly considered a part of out-of-pocket expenses; that lost profits and out-of-pocket expenses are legally inconsistent with each other; and that damages for mental anguish are not recoverable in a negligent misrepresentation case. 5 Since each of these points deals with the recovery of damages, they will be considered together.
In response to Special Issue No. 6, the jury awarded the following damages categorized as follows:
$25,000.00 " past damages for monetary losses other than lost profits
$1,500.00 " future damages for monetary losses other than lost profits
$15,000.00 " past damages for lost profits
$13,500.00 " future damages for lost profits
$15,000.00 " past damages for mental anguish
$ "0" " future damages for mental anguish
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$70,000.00
PAST AND FUTURE DAMAGES FOR MONETARY LOSSES OTHER THAN LOST PROFITS
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