Trenholm v. Ratcliff

• Decision Date: 23 February 1983
• Docket Number: No. C-1474,C-1474
• Citation: 646 S.W.2d 927
• Parties: George A. TRENHOLM, Jr. et al., Petitioners, v. Raymond F. RATCLIFF, Jr. et al., Respondents.
• Court: Texas Supreme Court

Page 927

646 S.W.2d 927

George A. TRENHOLM, Jr. et al., Petitioners, v. Raymond F. RATCLIFF, Jr. et al., Respondents.

No. C-1474.

Supreme Court of Texas.

Feb. 23, 1983.

Rehearing Denied March 30, 1983.

Scott, Douglass & Keeton, Page Keeton and Steve Selby, Austin, John Gillis, Dallas, for petitioners.

Brice & Barron, Jim K. Choate, Dallas, for respondents.

SPEARS, Justice.

Trenholm, a homebuilder, sued Ratcliff, a developer, under the Deceptive Trade Practices Act and the fraud in real estate transaction provisions of the Business and Commerce Code. There have been two trials. After the first, the trial court rendered judgment on a jury verdict in favor of Trenholm. The court of appeals reversed the judgment and remanded for trial solely the issue of common law fraud. Ratcliff v. Trenholm, 596 S.W.2d 645 (Tex.Civ.App.--Tyler 1980, writ ref'd n.r.e.).

The cause before us involves the appeal from the second trial for fraud. After the jury returned its answers to the special issues, both parties moved for judgment on the verdict, and Ratcliff, in the alternative, filed a motion for judgment non obstante veredicto. The trial court rendered judgment for Ratcliff, and rendered a take nothing judgment against Trenholm. The court of appeals affirmed the judgment, holding the evidence established, as a matter of law, that Trenholm did not rely on Ratcliff's representations. 636 S.W.2d 718. We reverse the judgment of the court of appeals and render judgment for plaintiff Trenholm.

George and Robert Trenholm were the principal stockholders in Oxford Building Systems, a corporation engaged in the building of custom homes. Robert sold his interest to George prior to the filing of this lawsuit. Respondent, Raymond Ratcliff is the principal owner of Ratcliff Investments and Ramahal Development Corporation.

Ratcliff, a land developer, entered into a joint venture agreement with Richardson Savings & Loan to develop and sell lots in the Greenhollow subdivision in West Plano, Texas. In November 1975, Ratcliff held a "draw meeting" to solicit local builders. The meeting was attended by several builders, including George Trenholm. At the meeting Ratcliff discussed the Greenhollow development, and invited the builders to purchase lots in the subdivision. During the presentation, Ratcliff stated a mobile home park located near Greenhollow would be a future shopping center. At the conclusion of his presentation, Ratcliff invited questions. George Trenholm asked:

Ray, you talked in, around and about this mobile home park through your presentation, and you definitely left me with the impression that its going to be moved, but before I buy any lots I specifically want to know what disposition is going to be made on that property.

Ratcliff answered:

Don't worry about it, that's zoned commercial, and that property has already been sold. Those people have been notified that their leases will not be renewed, so the park should close up sometime in April and after that, why, after they get everything moved out over there, they will come in and bulldoze it down so by June or July it will be like there's never been a park there, and that will coincide actually just fine with the grand opening out there. ¹

Trenholm built eighteen houses in the Greenhollow development. Six houses were built for his account, and twelve were built pursuant to a joint venture with Richardson Savings & Loan. Richardson Savings & Loan would furnish the money, and Trenholm would build and sell the houses. The profits or losses of the joint venture would be split 50/50 between them.

The mobile home park was not owned by Ratcliff or by Richardson Savings & Loan, but rather by a third party. The mobile home park was not moved by the time the houses were completed for sale. The Greenhollow subdivision did poorly and on June 23, 1976, a meeting was held by Ratcliff to discuss the slow sales. Trenholm asked about the continued presence of the mobile home park, and he was told that the park would not be moved. The closings on seven of the twelve joint venture lots were held after June 23. The houses were ultimately sold at a net loss, and Trenholm settled his joint venture losses with Richardson Savings & Loan.

In the second trial for common law fraud the jury found: (1) that Ratcliff made false representations to Trenholm as to material facts with the intent to induce Trenholm to purchase Greenhollow lots, and which were relied on by Trenholm; (2) that the representations concerning the trailer park were not known by Ratcliff to be false, but were made recklessly and with a purported special knowledge; (3) that the false representations were made with malice; (4) that Trenholm did not waive his claim against Ratcliff; (5) that Trenholm could not have discovered the falsity of the false representation by reasonable investigation; (6) that Trenholm suffered $68,750 out-of-pocket losses on the six Oxford homes, $37,500 lost net profits on the twelve joint venture homes and $37,500 lost net profits on the Oxford homes; and (7) that $250,000 exemplary damages should be awarded. Both parties moved for judgment on the verdict. Ratcliff contended the jury's finding of recklessness would not support a cause of action for fraud. In the alternative, Ratcliff asked for judgment non obstante veredicto. The trial court rendered judgment for Ratcliff and that Trenholm take nothing.

The trial court's take nothing judgment, as we construe it, was based on one of two grounds: that a finding of recklessness would not support a cause of action for fraud concerning a future prediction, or that there was no evidence to support the jury findings in Trenholm's favor.

Ratcliff contends the necessary elements of a common law fraud action have not been established, and therefore, the jury verdict does not support a judgment for Trenholm. The elements of actionable fraud in Texas were stated in Wilson v. Jones, 45 S.W.2d 572, 574 (Tex.Comm.App.1932, holding app'd) as follows:

(1) that a material representation was made; (2) that it was false; (3) that, when the speaker made it, he knew it was false or made it recklessly without any knowledge of its truth and as a positive assertion; (4) that he made it with the intention that it should be acted upon by the party; (5) that the party acted in reliance upon it; and (6) that he thereby suffered injury.

Ratcliff argues the "trailer park representations" are matters of opinion or predictions of future events, and therefore, Trenholm must prove that Ratcliff knew they were false at the time they were made. The jury, in answer to special issue number two did not find that Ratcliff knew his representations were false. Ratcliff argues, therefore, he could not and did not make fraudulent representations.

Pure expressions of opinion are not actionable. It has been held that a representation, to be actionable, must be a representation of a material fact. Wilson v. Jones, supra at 574; W. Prosser, Law of Torts § 109 at p. 720-724 (4th ed. 1971). There are exceptions to this general rule that an expression of an opinion cannot support an action for fraud. An opinion may constitute fraud if the speaker has knowledge of its falsity. Texas Industrial Trust, Inc. v. Luck, 312 S.W.2d 324, 327 (Tex.Civ.App.--San Antonio 1958, writ ref'd); T.M. Brooks v. Parr, 507 S.W.2d 818, 820 (Tex.Civ.App.--Amarillo 1974, no writ). An expression of an opinion as to the happening of a future event may also constitute fraud where the speaker purports to have special knowledge of facts that will occur or exist in the future. Russell v. Industrial Transportation Co., 113 Tex. 441, 251 S.W. 1034, 1037 (Tex.Comm.App.1923, holding app'd), aff'd on rehearing, 113 Tex.Sup. 441, 258 S.W. 462 (1924); Ratcliff v. Trenholm, 596 S.W.2d 645, 651 (Tex.Civ.App.--Tyler 1980, writ ref'd n.r.e.); Wright v. Carpenter, 579 S.W.2d 575, 580 (Tex.Civ.App.--Corpus Christi 1979, writ ref'd n.r.e.). Additionally, when an opinion is based on past or present facts, an action for fraud may be maintained. Buchanan v. Burnett, 102 Tex. 492, 119 S.W. 1141, 1142 (1909); Mutual Life & Loan Ass'n v. Jackson, 76 S.W.2d 547, 548 (Tex.Civ.App.--Texarkana 1934, writ dism'd); Burcum v. Gaston, 196 S.W.2d 257, 259 (Tex.Civ.App.--Amarillo 1917, no writ). Thus, the Texas courts have held a jury finding of recklessness or special knowledge establishes a basis for fraud in the last two exceptions.

Ratcliff's representation was not merely an expression of an opinion that the trailer park would be moved in the future. He falsely represented that the trailer park had been sold, and that notices had been given to the tenants. These are direct representations of present facts which are so intertwined with his future prediction that the whole statement amounts to a representation of facts. A jury finding of recklessness is sufficient to establish a basis for misrepresentation of facts. Stone v. Lawyer's Title Insurance Corp., 554 S.W.2d 183, 185 (Tex.1977); Custom Leasing v. Texas Bank & Trust, 516 S.W.2d 138, 144 (Tex.1974).

The jury findings were favorable to Trenholm and judgment should have been rendered in his favor unless the trial court was justified in rendering judgment notwithstanding the verdict. To sustain the action of the trial court in granting a motion for judgment notwithstanding the verdict, it must be determined that there is no evidence upon which the jury could have made the findings relied upon. In acting on the motion, all testimony must be viewed in a light most favorable to the party against whom the motion is sought, and every reasonable intendment deducible from the evidence is to be indulged in that party's favor. Dowling v. NADW Marketing, Inc., 631 S.W.2d 726, 728 (Tex.1982); Dodd v. Texas Farm Products Co., 576 S.W.2d 812, 814-15 (Tex.1979); Douglass v. Panama, Inc., 504 S.W.2d 776, 777 (Tex.1976).

The court of appeals affirmed the take nothing judgment, holding that the...