664 S.W.3d 102
Tex.2023Background:
- In 2011 MSW sold a one-half interest in a landfill; a 2015 Mediated Settlement Agreement required MSW to convey clear title to GH by Sept. 24, 2015, and required GH to refinance a $5 million loan and write off a $3.5 million note by Jan. 23, 2016.
- MSW conveyed the interest; GH wrote off the $3.5 million note but did not timely refinance the $5 million loan (though GH continued making payments under that loan).
- By trial the landfill’s total market value had risen substantially; MSW’s half interest was valued at about $17.735 million versus the contract price of $7.5 million.
- A jury awarded MSW $10.235 million in "benefit of the bargain" damages (calculated as market value minus contract price) and $372,484.70 in lost "opportunity cost" consequential damages.
- The trial court granted JNOV deleting the jury’s benefit-of-the-bargain award (reduced to $0) but entered judgment for the lost opportunity amount; the court of appeals affirmed.
- The Texas Supreme Court affirmed deletion of the benefit-of-the-bargain award (holding the measure was wrong) and reversed the lost-opportunity award for lack of proven foreseeability, rendering a take-nothing judgment as to damages.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper measure of seller’s benefit-of-the-bargain damages after buyer breaches post-performance when market value at breach exceeds contract price | MSW argued damages equal market value at breach minus what seller received (i.e., recover the lost higher market price) | GH argued damages are the difference between the contract price and what seller actually received (cannot recover more than contract price) | Held: Measure is contract price minus what seller received; jury instruction using market value was incorrect and JNOV deleting that award affirmed (benefit damages = $0) |
| Recoverability of consequential "lost opportunity" (investment) damages — foreseeability | MSW argued GH’s failure to refinance prevented MSW from obtaining another loan and earning investment returns (expert testimony quantified loss) | GH argued those consequential damages were not foreseeable at contract formation; no evidence GH knew MSW’s intended use of refinancing proceeds or that MSW would be unable to obtain alternatives | Held: Reversed award; MSW failed to show damages were reasonably foreseeable at contract formation (take-nothing as to these damages) |
| Whether MSW conveyed title (delivery/intent) when it provided the deed | MSW argued it did not intend to convey until GH performed; thus title never transferred | GH argued the signed, delivered, and recorded deed creates a presumption of intent to convey; surrounding facts support conveyance | Held: MSW conveyed its interest; summary-judgment record did not raise fact issue on intent to withhold conveyance |
| Entitlement to rescission or post-transfer profits | MSW sought rescission or award of half the landfill’s accrued profits after transfer | GH opposed; rescission not preserved or supported in record | Held: Rescission not preserved; no reversal on profits claim because transfer was effective and record insufficient to show abuse of discretion in denying rescission |
Key Cases Cited
- Baylor Univ. v. Sonnichsen, 221 S.W.3d 632 (Tex. 2007) (explaining benefit-of-the-bargain/expectancy damages principle)
- Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41 (Tex. 1998) (describing benefit-of-the-bargain measure)
- Stewart v. Basey, 245 S.W.2d 484 (Tex. 1952) (damages should compensate actual loss, not create a windfall)
- Signature Indus. Servs., LLC v. Int’l Paper Co., 638 S.W.3d 179 (Tex. 2022) (breach must cause damages; consequential-damages foreseeability standard)
- Basic Capital Mgmt., Inc. v. Dynex Com., Inc., 348 S.W.3d 894 (Tex. 2011) (lender must know borrower’s intended use of loan proceeds to support consequential damages for lost loan profits)
- Paull & Partners Invs., LLC v. Berry, 558 S.W.3d 802 (Tex. App.—Houston [14th Dist.] 2018) (presumption of intent to convey when deed is signed, delivered, and recorded)