Opinion ID: 2329163
Heading Depth: 1
Heading Rank: 10

Heading: Diminution damages

Text: As previously noted, Davis contends that the Doughertys' compensatory damages should not be measured by their diminution damages, but instead should be ascertained by their out-of-pocket losses, which is a measure of damages used in fraud cases. While we agree that, under the particular facts of this case, it is appropriate to determine the Doughertys' compensatory damages under NRS 645.257 by general reference to the measure of damages for fraud, Davis's contention that this means the Doughertys' recovery is limited to their out-of-pocket losses does not withstand scrutiny. To be sure, the out-of-pocket measure, which, in the misrepresentation context, is comprised of the difference between what [the defrauded party] gave and what he actually received, is frequently used to compute the damages for fraud. Collins v. Burns, 103 Nev. 394, 398-99, 741 P.2d 819, 822 (1987). The benefit-of-the-bargain measure, which consists of the value of what [the defrauded party] would have received had the representations been true, less what he actually received, is also often utilized to calculate damages in fraud cases. Id. at 398, 741 P.2d at 822. Sometimes, however, neither the out-of-pocket nor benefit-of-the-bargain measure is particularly helpful or appropriate. Strebel v. Brenlar Investments, Inc., 135 Cal.App.4th 740, 37 Cal.Rptr.3d 699, 705 (2006). As the California Court of Appeal has observed, these measures are often mistakenly portrayed as being the sole antagonists on the battlefield of damages when at times neither is truly applicable. Overgaard v. Johnson, 68 Cal.App.3d 821, 137 Cal.Rptr. 412, 413 (1977). In Strebel, the court explained that a circumstance in which the out-of-pocket rule and the benefit-of-the-bargain measure may both be inapplicable is where, as here, the facts that were fraudulently concealed ... [have] nothing to do with the value of the [property]. 37 Cal.Rptr.3d at 705. Accordingly, in Strebel, the court concluded that a homeowner who was fraudulently induced by his real estate agent into selling his home was properly awarded damages constituting the appreciation that he would have accrued had he not sold his home, rather than his more limited out-of-pocket damages. Id. at 706. In reaching this conclusion, the Strebel court rejected the same argument that Davis advances here, namely, that damages proximately caused by fraud are determined as of the date when the fraud took effectnot by a later increase or decline in value. Id. (internal quotation marks omitted). The court rejected this argument for many reasons. First and foremost, measuring [the homeowner's] damages at the time of the sale would provide no compensation for the most significant portion of the loss he suffered as a result of defendants' fraud. Id. at 707. Next, the fraud was perpetrated by a real estate agenta fiduciary that has a broad responsibility to compensate his or her clients. Id. at 708. Additionally, in contrast to situations involving a tortfeasor who merely acts with negligence, [a]llowing recovery for lost appreciation ... provide[s] a significant deterrent to a real estate agent fraudulently misleading prospective buyers under similar circumstances in the future. Id. Finally, the jury was correctly instructed on the issue of proximate cause, and substantial evidence supported the jury's finding that the homeowner's lost appreciation damages were substantially related to the defendants' fraud. Id. We find the Strebel court's analysis sound and instructive on the appropriate measure of compensatory damages in this case because measuring damages based on loss of appreciation is conceptually analogous to measuring damages based on diminution. Here, as in Strebel, the vast majority of the Doughertys' losses were incurred after the date of Davis's wrongdoing. Rigidly measuring the Doughertys' damages as of the date of Davis's transgressions would thus defeat the irrefutable goal of compensatory damages. See Hanneman v. Downer, 110 Nev. 167, 172-73, 871 P.2d 279, 283 (1994) ([D]amages are awarded to make the aggrieved party whole....). And, as in Strebel, Davis is a fiduciary with a heightened responsibility to compensate the clients that she deceived. See Holland Rlty. v. Nev. Real Est. Comm'n, 84 Nev. 91, 97, 436 P.2d 422, 425 (1968) (the consequences of a real estate licensee's breach of trust are the same as those that are provided for a disloyal or recreant trustee); Pepitone v. Russo, 64 Cal.App.3d 685, 134 Cal.Rptr. 709, 711 (1976) ([T]he faithless fiduciary is obligated to make good the full amount of the loss of which his breach of faith is a cause.). Finally, as in Strebel, Davis did not act with mere negligence; rather, the record shows that she acted intentionally, and she will therefore be deterred from misleading clients in the future if she is made to compensate the Doughertys for their diminution damages. Cf. Safeco Ins. Co. v. J & D Painting, 17 Cal.App.4th 1199, 21 Cal.Rptr.2d 903, 907 (1993) (rejecting award of diminution damages for a negligence claim); Goodrich & Pennington v. J.R. Woolard, 120 Nev. 777, 781, 101 P.3d 792, 795 (2004) (indicating that liability for negligent misrepresentation may not extend to losses arising from a subsequent downturn in the real estate market). Accordingly, we conclude that the district court did not err in determining that the diminution in the value of the Ping Property was an appropriate measure of compensatory damages for the Doughertys' NRS 645.257 claims. [7]