350 S.W.3d 659
Tex. App.2011Background
- Appellees are limited partnerships and LLCs formed by BNC Real Estate to invest in commercial properties; Defterios, a broker for Henry S. Miller, allegedly induced Flaven to buy properties with funds from a multimillion-dollar trust, which Flaven did not have.
- Contracts were signed in April 2004 with August 2004 closings that were repeatedly extended as trust funds were purportedly delayed.
- Defterios claimed funds existed and closings were imminent; he spoke for Flaven and claimed verification of funds.
- Flaven never funded or closed on the nine contracts; some properties were foreclosed or sold at a loss, harming investors.
- Jury found no direct benefit-of-the-bargain damages but awarded over $12 million in consequential damages for fraud and negligent misrepresentation.
- The trial court denied appellants’ challenges to the damages, leading to this appeal and the court’s modification and affirmation as modified.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the damages were legally and factually sufficient to show proximate causation | Defterios and Miller argue no causal link between misrepresentation and damages | Appellants contend damages stem from market factors and normal risk, not misrepresentations | Yes; damages causally linked to misrepresentations were legally and factually sufficient |
| Whether the damages awarded are invalid as benefit-of-the-bargain damages | Plaintiffs contend Question 4 measures consequential damages within fraud law | Appellants contend the damages are prohibited benefit-of-the-bargain damages | Damages are consequential, not benefit-of-the-bargain; issue resolved against appellants |
| Whether the judgment incorrectly awarded $4 million jointly to BNC Regency Walk, L.P. and BN Regency, L.L.C. | Appellees contend both entities were plaintiffs and damages should be collective | No evidence BN Regency, L.L.C. incurred damages; improper joint/several award | Partially sustained; reform judgment to delete joint/several award for BN Regency, L.L.C.; award remains to BNC Regency Walk, L.P. |
Key Cases Cited
- Arthur Andersen v. Perry Equip. Corp., 945 S.W.2d 812 (Tex. 1997) (consequential damages required foreseeability and proximate causation)
- Formosa Plastics Corp. USA v. Presidio Eng'rs & Contractors, Inc., 960 S.W.2d 41 (Tex. 1998) (consequential damages may be recoverable in fraud cases; distinguish from benefit-of-the-bargain)
- Trenholm v. Ratcliff, 646 S.W.2d 927 (Tex. 1983) (recognizes lost profits as consequential damages in fraud)
- Doe v. Boys Clubs of Greater Dallas, Inc., 907 S.W.2d 472 (Tex. 1995) (foreseeability standard for damages in fraud cases)
- Basic Capital Mgmt., Inc. v. Dynex Commercial, Inc., 348 S.W.3d 894 (Tex. 2011) (foreseeability and proximately caused damages in investment context)
- Washington Mut. v. Houston Windcrest West Road I, L.P., 262 S.W.3d 856 (Tex.App.-Dallas 2008) (distinguishes recovery limits in certain damages contexts)