Ratcliff v. Trenholm

• Decision Date: 13 March 1980
• Docket Number: No. 1311,1311
• Citation: 596 S.W.2d 645
• Parties: Raymond RATCLIFF et al., Appellants, v. George H. TRENHOLM, Jr. and Oxford Building Systems, Inc., Appellees.
• Court: Texas Court of Appeals

Page 645

596 S.W.2d 645

Raymond RATCLIFF et al., Appellants, v. George H. TRENHOLM, Jr. and Oxford Building Systems, Inc., Appellees.

No. 1311.

Court of Civil Appeals of Texas, Tyler.

March 13, 1980.

Rehearing Denied April 3, 1980.

Edward S. Koppman, Akin, Gump, Hauer & Feld, Robert E. Goodfriend, Jeffrey C. Slade, Dallas, for appellants.

John M. Gillis, Dallas, for appellees.

MOORE, Justice.

This is a suit brought under both the Deceptive Trade Practices-Consumer Protection Act, Tex.Bus. & Com.Code Ann. sections 17.41 et seq. (Vernon Supp.1980) ¹ and the Fraud in Real Estate and Stock Transactions provisions, Tex.Bus. & Com.Code Ann. section 27.01 (Vernon 1968). ² Plaintiffs, George H. Trenholm, Jr., and Oxford Building Systems, Inc., a corporation through which Trenholm conducted his business of home building, instituted suit against defendants, Raymond Ratcliff and Ramahal Development Corporation, alleging that in November or December, 1975, defendant Raymond Ratcliff made certain deceptive, false, and misleading representations in connection with the sale to plaintiffs of eighteen lots in the Greenhollow Addition to the city of Plano, Texas. Plaintiffs alleged that in reliance upon the false representations, they subsequently purchased the eighteen lots for the purpose of building homes thereon for resale to the public and suffered damages as a result of the false representations. Plaintiffs sought a recovery for the "benefit of the bargain" damages and exemplary damages as provided under section 27.01, supra. Plaintiffs further sought a recovery for treble damages for lost profits under section 17.50 of the Deceptive Trade Practices Consumer Protection Act, supra. Defendants answered with a general denial and specially denied that plaintiffs were consumers entitled to protection under the DTPA. Trial was before the court and a jury. Pursuant to the jury's verdict, the trial court entered judgment awarding plaintiffs a recovery in the amount of $75,000.00 for loss of profits under the DTPA which amount was trebled in accordance with section 17.50 of the DTPA. As a result, the court entered judgment for plaintiffs for the total sum of $225,000.00, together with attorney's fees. The jury further found in plaintiffs' favor on each of the constituent elements of fraud under section 27.01 and assessed damages in the amount of $111,000.00 plus exemplary damages in the amount of $50,000.00. The trial court, for reasons to be discussed later, limited the plaintiffs' recovery to the damages sustained by plaintiffs under the provisions of the DTPA in the amount of $225,000.00 plus attorney's fees. Defendants filed a motion for judgment non obstante veredicto as well as a motion for a new trial. After both motions had been overruled, defendants perfected this appeal.

We reverse and render in part and reverse and remand in part.

The facts, other than for those alleging that certain representations were false, do not appear to be in dispute. The eighteen lots in question were owned by Richardson Savings & Loan Association. Defendant, Raymond Ratcliff, a land developer, undertook to develop and sell the lots for the Association. Sometime either in November or December, 1975, Ratcliff held a "draw" meeting for homebuilders for the purpose of advertising and explaining the proposed development of the Greenhollow project. The meeting was attended by several builders, including the plaintiff, George H. Trenholm, Jr. At the meeting, Ratcliff made a sales presentation and answered various questions with regard to the future development of the lots. At the meeting, plaintiffs selected and purchased six lots on which six homes were later built. Although some of the homes were sold at a profit, others were sold at a loss which resulted in an over-all net loss on the six homes. Later, plaintiffs entered into a joint venture with Richardson Savings & Loan Association under the terms of which plaintiffs agreed to build homes on twelve additional lots on the basis of fifty percent of the net profits or net losses. Homes were subsequently built on these twelve lots and sold to the public. The joint venture turned out to be unprofitable resulting in a large loss to plaintiffs and Richardson Savings & Loan Association.

According to the allegations of plaintiffs' petition, the losses sustained were a direct result of the following false representations made by Ratcliff: (1) that a trailer park near the entrance of Greenhollow Development would be timely moved; (2) that a designated elementary school would be built on a nearby tract of land forthwith; (3) that a bridge would be built on Alma Road by midyear 1976; and (4) that the residences to be built in the Greenhollow Development would contain a minimum of 2,200 square feet. Plaintiffs alleged that the foregoing representations were false, deceptive, and misleading, and as a result they were forced to sell the houses at a lower price than they would have been sold had the promises or representations been fulfilled, thereby causing plaintiffs to suffer a net loss on all eighteen houses.

The jury found that defendant, Ratcliff, made each of the foregoing representations and further found in plaintiffs' favor each of the constituent elements of a cause of action under section 27.01. In response to the damage issues submitted in accordance with the last mentioned statute, the jury found in response to Special Issue No. 3 that the value of the lots purchased by Oxford Building Systems in the Greenhollow Development would have been $223,500.00 if they had been as represented. In response to Special Issue No. 4, the jury found that the value of the lots purchased by Oxford in the Greenhollow Development was $112,500.00 as actually sold. The jury also found that plaintiffs were entitled to exemplary damages in the amount of $50,000.00. In response to the special issues submitted in connection with plaintiffs' claim under the DTPA, the jury found, in response to Special Issue No. 6, that Ratcliff represented that the lots had or would have a characteristic or characteristics, or a use or uses, or a benefit or benefits, which they did not have. In response to Special Issue No. 7, the jury found that Ratcliff represented that the lots were or would be of a particular standard or quality when they were of another. In response to Special Issue No. 8, the jury found that the representations made by Ratcliff were false, misleading, or deceptive, and in response to Special Issue No. 9, the jury found that such false, misleading, or deceptive representations was a producing cause of the damages sustained by plaintiffs. In response to Special Issue No. 10, the jury found that the sum of $75,000.00 would reasonably compensate plaintiffs for their loss of profit incurred as a result of the alleged false, misleading, and deceptive representations.

Under the first point of error, defendants assert that the trial court erred in rendering judgment in favor of the plaintiffs under the Deceptive Trade Practices Consumer Protection Act, since appellees were merchants and not consumers and therefore were not entitled to the protection of the act as it existed when the plaintiffs' cause of action accrued in December 1975. Plaintiffs' rejoinder is that the purchase of the lots for improvement and resale is a purchase for use, and they are therefore entitled to the protection of the Act. We have concluded that at the time the plaintiffs' cause of action accrued, they were not consumers and therefore we sustain defendants' contention.

Section 17.50 of the Deceptive Trade Practices Consumer Protection Act is entitled "Relief for Consumers." At the time this case arose, section (b) provided:

"In a suit filed under this section, each consumer who prevails may obtain:

(1) three times the amount of actual damages plus court cost and attorneys' fees reasonable in relation to the amount of work expended . . . ."

It has been held that only individuals, partnerships, or corporations who are found to be within the class of "consumers" are entitled to sue under the DTPA. Trial v. McCoy, 553 S.W.2d 199 (Tex.Civ.App. El Paso 1977, no writ); Russell v. Hartford Casualty Insurance Co., 548 S.W.2d 737, 741 (Tex.Civ.App. Austin 1977, writ ref'd n. r. e.); Bourland v. State, 528 S.W.2d 350, 358 (Tex.Civ.App. Austin 1975, writ ref'd n. r. e.).

At the time this case arose, section 17.45 provided:

"(1) 'Goods' means tangible chattels or real property purchased or leased for use.

"(2) 'Services' means work, labor, or service purchased or leased for use, for other than commercial or business use, including services furnished in connection with the sale or repair of goods.

"(4) 'Consumer' means an individual, partnership, or corporation who seeks or acquires by purchase or lease, any goods or services.

"(5) 'Merchant' means a party to a consumer transaction other than a consumer." (Emphasis added.)

From a reading of the foregoing definitions, it is reasonable to infer that the purchase of goods for commercial purposes, such as for resale or for use in the production of other goods, is not within the contemplation of the DTPA. A construction of the act, including purchases of goods for resale, would be wholly inconsistent with the provisions excluding purchases of services for business or commercial use. In enacting the Deceptive Trade Practices Act, the Texas Legislature intended to create an effective remedy for individuals, partnerships, and corporations placed at a disadvantage in the market place and not to govern the commercial relationship involving merchants. In the instant case, plaintiffs were engaged in the commercial trade of building homes for sale to the public. Pursuant to their business they purchased six lots and an interest in twelve other lots for development and resale to individuals desiring to reside in the Greenhollow Development. Plaintiffs clearly acted as merchants with respect to the...