El Paso Development Co. v. Ravel

• Decision Date: 05 October 1960
• Docket Number: No. 5404,5404
• Citation: 339 S.W.2d 360
• Parties: EL PASO DEVELOPMENT COMPANY, Appellant, v. Dr. Vincent M. RAVEL and wife, Annette Ravel, Appellees.
• Court: Texas Court of Appeals

Page 360

339 S.W.2d 360

EL PASO DEVELOPMENT COMPANY, Appellant, v. Dr. Vincent M. RAVEL and wife, Annette Ravel, Appellees.

No. 5404.

Court of Civil Appeals of Texas, El Paso.

Oct. 5, 1960.

Rehearing Denied Oct. 26, 1960.

R. Neill Walshe, Richard C. White, El Paso, for appellants.

Mayfield, Broaddus & Goodman, El Paso, for appellees.

LANGDON, Chief Justice.

This is an action for damages based on fraud and deceit in a real estate transaction. Appellees, Dr. Vincent M. Ravel, and wife, recovered judgment against appellant, El Paso Development Company, developer of the land, and against one W. A. Steinbach, contractor, for damages sustained by appellees to a dwelling constructed for them by defendant contractor, on a vacant lot (located at 3916 Flamingo Drive), in the City of El Paso, Texas, purchased from appellant El Paso Development Company.

Appellees alleged that appellant El Paso Development Company fraudulently represented to them that the lot in question was free of 'clay and fill' and was a suitable site for the construction of a large and expensive dwelling thereon. Suit was also against the defendant Steinbach, contractor, for damages for breach of contract.

The judgment was for $4,000 against defendant contractor, Steinbach, for breach of contract; and for $22,250 against appellant El Paso Development Company, developer of the land, for misrepresentation of the sub-soil condition of the lot. No appeal was taken from the judgment by defendant Steinbach. El Paso Development Company alone has appealed. All prerequisites of appeal have been complied with, and this case is properly before us.

The case was submitted to the jury on sixteen special issues, the first four of which related to the cause of action alleged against the defendant contractor, and the remaining issues to the appellant El Paso Development Company. The jury found against the defendant-contractor on the following numbered issues: (3), that defendant Steinbach failed to construct the improvements upon the lot in question in a good and workmanlike manner; and, (4), the damages, $4,000. The remaining issues relating to appellant El Paso Development Company were found by the jury as follows: (5), that defendant, El Paso Development Company, through its president, represented to plaintiff Ravel, prior to April 17, 1954, that the lot in question was free of clay and fill; (6), that such representation was false; (7), that defendant El Paso Development Company knew such representation was false at the time that it was made; (8), that such defendant, in the exercise of ordinary care, should have known that such representation was false; (9), that such defendant knew at the time such representation was made that plaintiff intended to have a four-bedroom house erected on said lot; (10), that plaintiff was induced by such representation to construct a four-bedroom house on said lot; (11-12), that defendant El Paso Development Company did not know that if said house was built on said lot, it would be damaged as a result of the soil conditions thereunder, but defendant, in the exercise of ordinary care, should have known if said house was built thereon, it would be damaged as a result of the soil conditions thereunder; (13-14), that plaintiffs learned of the falsity of the representations in January, 1957; and, also, in the exercise of ordinary care, plaintiffs should have learned of its falsity in January, 1957; and finally, the damage questions, special issues (15) and (16), in which the jury found, first, that the reasonable market value of said house and land in August 1954 (at the time of the delivery of same to plaintiffs) would have been $52,250, if said house had been constructed on soil without clay or fill; and secondly, found the reasonable market value of the house and land in August 1954, in the actual condition of the house constructed thereon and delivered to plaintiffs at such time, was $30,000.

The damages awarded appellees was the difference between these two figures--the sum of $22,250. The measure of damages under the statute, Article 4004, Vernon's Annotated Texas Civil Statutes, is stated as follows:

'* * * the rule of damages being the difference between the value of the property as represented or as it would have been worth had the promise been fulfilled, and the actual value of the property in the condition it is delivered at the time of the contract.'

The only property represented by appellant was the vacant lot; and, under the facts of this case, no other property was delivered by appellant except the vacant lot. Appellant is not charged with, nor does the evidence reflect, that he made any representation with respect to the house that was subsequently constructed thereon. Thus, this case does not fall within that line of cases where the house or other improvements are already constructed, represented to have been constructed, or promised to be constructed on the land made the subject of the alleged false representation.

Appellant's appeal is predicated upon fourteen points of error.

By Points 1 and 2, appellant contends that appellees are limited, as a matter of law, to such damages as they may show are related to the purchase of the vacant, unimproved lot. It is also contended that the remedy provided by the statute (Art. 4004) is exclusive, and that in Texas the only damages that may be recovered, in an action based on fraud in a real estate transaction, are confined to the damages allowed by the statute.

By approrpriate counter-points, appellees submit that this was not a suit for damages arising out of the purchase of the lot, but is a suit for special damages sustained by appellees directly resulting from appellant's fraudulent representations as to the suitability of the lot in question as a building site for the construction of a dwelling thereon. Appellees state that this was not a suit founded upon any representation as to the price or the value of the lot in question, as contemplated by Article 4004, but is, instead, based upon a fact situation which was misrepresented by the appellant, and which directly resulted in damage to appellees when acted upon by appellees in reliance thereon.

Prior to the enactment of Article 4004, supra, in 1919, the Texas rule for measuring damages in fraud cases involving transactions in land was the rule announced in 1906 by the Supreme Court of Texas, in the case of George v. Hesse, 100 Tex. 44, 93 S.W. 107, 8 L.R.A.,N.S., 804, and followed by that Court in Booth v. Coward, Tex.Com.App., 265 S.W. 1026, 1027, in which the Court said:

'* * * that since the cause of action was not upon breach of contract but to recover damages for fraudulent representations, the measure of compensation was the difference between the values that were exchanged and not the difference between the value of the land received by aplaintiff without a well on it and the value of that land if a well had been upon it.' (Emphasis ours.)

The statute (Art. 4004) enlarged the measure of damages from the 'out of pocket' damages allowed by the rule announced in the Hesse case (supra) to the damages which are measured by the difference between the value of the property as represented, or as it would have been worth had the promise been fulfilled, and the actual value of the property in the condition in which it is delivered or received at the time of the contract. The statutory measure of damages is sometimes referred to as the 'benefit of the bargain' rule.

In the case at hand, appellees caused an expensive home to be constructed on the lot in question, before discovering that falsity of the representations concerning the sub-soil conditions of the lot. Since the value of the lot was not shown to have been affected by the truth or falsity of the representation, the measure of damages allowed by the statute would afford no relief, and neither would the equitable remedy of rescission.

The damages, alleged and sought to be recovered by appellees in this action, are not the direct or general damages provided by the statute (Art. 4004), which the law implies or presumes to have occurred from the wrong complained of, but are in the nature of special or consequential damages. The only difference between general and special damages is that general damages are the necessary and usual result of the wrong complained of, while special damages need not be, but must be the proximate result thereof.

Special damages, predicated upon a wrong, which are not necessarily the usual or ordinary result of such wrong, but are directly traceable to the wrongful act complained of and result therefrom, may be recovered in a common law action based on fraud and deceit; but all other damages will be held to be too remote.

We believe the law to be well settled in Texas, as well as under general principles as to damages, that an injured party is entitled to recover in a tort action such damages as result directly, naturally and proximately from fraud. However, remote damages, or those which are too uncertain for ascertainment, or are purely conjectural, speculative or contingent, cannot be recovered. Connally & Shaw v. Saunders, Tex.Civ.App., 142 S.W. 975; Parker v. Solis, Tex.Civ.App., 277 S.W. 714; Bantuelle v. Jones, Tex.Civ.App., 52 S.W.2d 93.

Bearing on the question of whether the statute (Art. 4004) superseded the common-law rule and provided an exclusive remedy for the recovery of damages in an action based on fraud in a real estate transaction, we believe this question has been settled by the case law of Texas, and that the answer is 'No.'

In the case of Sibley v. Southland Life Ins. Co., 36 S.W.2d 145, 146, decided in 1931 by the Supreme Court of Texas, it was said:

'The rule announced in the year 1906, in the case of George v. Hesse, * * * and followed in Booth v. Coward, * * * has been supplemented, if not superseded, by the above statutory rule.'

Sibley had represented to the plaintiff company that each...