Leyendecker & Associates, Inc. v. Wechter

• Decision Date: 05 December 1984
• Docket Number: No. C-2814,C-2814
• Citation: 683 S.W.2d 369
• Parties: LEYENDECKER & ASSOCIATES, INC., et al., Petitioners, v. William WECHTER et al., Respondents.
• Court: Texas Supreme Court

Page 369

683 S.W.2d 369

LEYENDECKER & ASSOCIATES, INC., et al., Petitioners, v. William WECHTER et al., Respondents.

No. C-2814.

Supreme Court of Texas.

Dec. 5, 1984.

Rehearing Denied Feb. 6, 1985.

Barry G. Flynn, Houston, for petitioners.

Haynes and Fullenweider, Robert B. Wallis, Scott Ramsey, Houston, for respondents.

ON MOTION FOR REHEARING

ROBERTSON, Justice.

We withdraw our judgment and opinion of July 11, 1984, and substitute the following.

William Wechter and his wife, Mildred Wechter, sued Leyendecker and Associates, Inc., the developer of a subdivision who built and sold the Wechters a townhouse in Houston, Texas. They sought damages under the Texas Deceptive Trade Practices-Consumer Protection Act for misrepresentation and for defective workmanship. In addition, they sought damages for libel. The trial court rendered judgment for the Wechters. The court of appeals substantially affirmed that judgment but reformed the measure of damages for misrepresentation. 667 S.W.2d 822. We affirm in part the judgment of the court of appeals, and we reverse and render in part.

On June 6, 1976, the Wechters executed an earnest money contract to purchase a townhouse from the defendant, Leyendecker & Associates, Inc. At the time the contract was executed, the townhouse had not been built. The Wechters agreed to the purchase after touring a similar model home and being told they could buy a corner lot slightly larger than the standard lot in the development. At the signing of the contract, the Wechters received only a block and lot number description; no other description or specific measurements of the lot were given. The Wechters had no knowledge or expectation of the size of the lot except that the lot was to be slightly larger than the standard lot in the development.

The contract for sale was closed on November 22, 1976. At closing the Wechters were given, for the first time, a metes and bounds description of the property plus a survey of the lot purchased. A few days after the Wechters moved in, employees of Leyendecker began constructing a fence around the Wechters' lot. Mr. Wechter, noticing that the fence did not conform to his deed, contacted Leyendecker and the title company. Investigation by the title company and Leyendecker revealed that the legal description contained in the deed and the survey tendered at closing had inadvertently included 2,411 square feet of the "common area" of the subdivision. In an effort to correct the deed description, the title company and Leyendecker tendered a correction deed to the Wechters. However, the Wechters refused to sign the correction deed.

The Wechters also complained to Leyendecker of construction defects which allegedly were never satisfactorily corrected. In an effort to have these construction defects repaired, the Wechters complained to the Greater Houston Builders Association. Leyendecker responded with a letter by an employee, Chris Hilliard, which falsely accused the Wechters of suing their neighbors over a small portion of the common area and of having asked Leyendecker to make fraudulent insurance claims. This letter was sent to the Greater Houston Builders Association as well as to the Veterans Administration through whom the Wechters had received financing.

After a jury trial, the trial judge rendered a judgment awarding the Wechters $9,644 for misrepresentation of the size of the lot, plus $4,500 for construction defects. On his claim for libel, Mr. Wechter was awarded $1,500 in damages against Chris Hilliard and Leyendecker, jointly and severally. As exemplary damages, $4,000 was awarded against each defendant individually.

The jury had awarded attorney fees to the Wechters in the amount of $9,700 for the trial, $5,000 in the event of appeal to the court of appeals, and $2,500 in the event of appeal to the Supreme Court. However, in its final judgment, the trial court denied the award of attorney fees in the Supreme Court and allowed attorney fees in the court of appeals only if none of the relief sought by Leyendecker was granted.

The court of appeals affirmed in part and reversed and rendered in part. That court held that the trial court improperly measured the damages for Leyendecker's misrepresentation of the lot size and awarded the Wechters actual damages equal to the 1976 value of the land inadvertently included in the deed description plus the loss of use of the property from 1976 to 1982, the time of judgment. These damages were then trebled. The award for construction defects was sustained. The court of appeals also sustained the trial court's award of actual damages for libel to Mr. Wechter and in addition, that court followed the jury's findings and awarded Mrs. Wechter $1,500 in damages for mental anguish arising from the libelous letter. The court of appeals sustained the award of exemplary damages. In addition, the court of appeals held that the trial judge should have followed the jury's findings on attorney fees and so rendered judgment for attorney fees based upon the jury findings.

MEASURE OF DAMAGES

In response to special issues regarding misrepresentation, the jury found that Leyendecker had initially represented to the Wechters that the lot would contain 5,800 square feet. The jury then found that the representation was false, that it was made for the purpose of inducing the Wechters to purchase the lot, that the Wechters relied on that representation, that the representation was made willfully and knowingly, and that the lot in question was represented as having characteristics which it did not have. Further, the jury found that such representation was a producing cause of the Wechters' damages.

The Deceptive Trade Practices-Consumer Protection Act (DTPA), Tex.Bus. & Comm.Code Ann. § 17.46(a), declares all false representations in the conduct of any trade or commerce to be unlawful and subject to action by a consumer for damages. Texas courts have recognized two measures of damages for misrepresentation. Texas common law allows an injured party to recover the actual injury suffered measured by "the difference between the value of that which he has parted with, and the value of that which he has received." George v. Hesse, 100 Tex. 44, 93 S.W. 107 (1906). This measure of damages is known as the "out of pocket" measure and is calculated as of the time of sale. W. Prosser, Handbook of the Law of Torts § 110 (4th ed. 1971). The second remedy available in Texas, known as the "benefit of the bargain" measure, allows the plaintiff to recover the difference between the value as represented and the actual value received. Johnson v. Willis, 596 S.W.2d 256, 262 (Tex.Civ.App.--Waco, writ ref'd n.r.e. per curiam, 603 S.W.2d 828 (Tex.1980)). The DTPA permits a plaintiff to recover under either the "out of pocket" rule or the "benefit of the bargain" rule, whichever gives the consumer the greater recovery. Id., at 263.

The jury found the value of the 2,411 square foot shortage to have been $4,822 in 1976 and $9,644 in 1982. However, in response to a special issue measuring "benefit of the bargain" damages, the jury found there was no difference in the value of the property as represented and as received. The trial court awarded the Wechters the 1982 value of the shortage. The court of appeals reversed and awarded the 1976 value, stating that the jury's negative finding on "benefit of the bargain" damages was contrary to common sense. Neither the award of the trial court nor the award of the court of appeals is founded on legal precedent or justification.

The Wechters could have sought recovery on either of the alternative theories described above. The negative jury finding precluded recovery on the "benefit of the bargain" theory, leaving open the "out of pocket" measure. As stated above, this measure requires a comparison of the value received against the value parted with. The jury found the value of the 2,411 square feet to have been $4,822 when purchased, but no issue was submitted inquiring as to the value the Wechters paid for the 2411 square feet as distinct from the purchase price of the entire lot and improvements. Furthermore, the record contains no evidence of this value. The...