Court Opinion

ID: 9396350
Source: CourtListenerOpinion
Date Created: 2023-05-22 07:09:23.051265+00
Date Added: 2024-06-11T17:19:16.329760
License: Public Domain

In the
            Court of Appeals
    Second Appellate District of Texas
             at Fort Worth
          ___________________________
               No. 02-22-00327-CV
          ___________________________

   TEXAS REAL ESTATE COMMISSION, Appellant

                          V.

RYAN CHANCE NEEL AND AMANDA NEEL, Appellees

      On Appeal from County Court at Law No. 3
               Tarrant County, Texas
           Trial Court No. 2020-003686-3

     Before Sudderth, C.J.; Wallach and Walker, JJ.
              Opinion by Justice Walker
                                     OPINION

      After obtaining summary judgment against a licensed realtor for fraud and

violations of the Texas Real Estate License Act (the Act), Appellees Ryan and

Amanda Neel applied for the judgment to be paid out of the real estate recovery trust

account (the fund). See Tex. Occ. Code Ann. § 1101.601. The trial court granted their

application and ordered that they be paid $50,000 from the fund. In a single issue on

appeal, Appellant Texas Real Estate Commission (TREC) contends that the Neels

were not entitled to have their actual damages paid out of the fund because they were

not out-of-pocket losses. See id. §§ 1101.601, 1101.604, 1101.608 (providing that

TREC shall maintain and manage the fund and act to protect it “from spurious or

unjust claims”).

      We will hold that the Neels’ actual damages and related pre-judgment interest

are not recoverable from the fund and will modify the trial court’s order accordingly.

However, we will affirm the trial court’s award of $11,500 in attorney’s fees and $452

in court costs, modify the order accordingly, and will remand the case for the trial

court to determine the reasonable amount of additional attorney’s fees.

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             I. FACTUAL AND PROCEDURAL BACKGROUND

      The Neels entered into a real estate contract to purchase a residential property

from LT Equity Investments, LLC (LT Equity).1 The listing agent for the property

was Lisa Turnbow, who was also the managing member of LT Equity—a fact that she

did not disclose to the Neels. In reliance on this contract and other representations

made by Turnbow, the Neels agreed to lease their then-current home to a third party.

The lease was set to commence after the Neels closed on their contract with LT

Equity. But, despite the contract with the Neels, Turnbow sold the property to

another third party who offered more money.

      The Neels sued Turnbow, LT Equity, and Omnikey Realty, LLC,2 alleging

various contract causes of action, fraud, negligent misrepresentation, and violations of

the Act and the Texas Deceptive Trade Practices Act. They then moved for partial

summary judgment against Turnbow and LT Equity in which they requested $50,881

in damages for (1) the difference between the contracted price and the property’s fair

market value at the time the contract was breached ($33,001) and (2) the lost rental

income and equity with respect to their then-current home ($20,880). They also

requested costs of court, pre- and post-judgment interest, and $11,500 in attorney’s

      1
        The only money paid by the Neels pursuant to this transaction was $3,715 in
earnest money, all of which was returned to them by the title company. They did not
seek this amount as damages in their suit.
      2
       Omnikey Realty, LLC, was Turnbow’s sponsoring broker.

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fees. The trial court granted the Neels’ summary judgment in its entirety and awarded

them “all relief requested.” After writs of execution were returned nulla bona and the

judgment lien was perfected, the Neels applied for an order directing the judgment to

be paid out of the fund. See id. 1101.606(a)–(b). In their application, the Neels sought

(1) $50,881 in actual damages; (2) $11,500 in attorney’s fees as provided in the

judgment and an additional $500 for attorney’s fees incurred “in connection with the

filling and pursuing” of the application; (3) $452 in court costs; and (4) pre- and post-

judgment interest. TREC objected to the application, raising the same arguments as

those asserted on appeal.

      The trial court granted the Neels’ application and found that they were entitled

to payment out of the fund for $50,881 in actual damages, $11,500 in attorney’s fees,

$3,604.07 in pre-judgment interest, $452 in court costs, post-judgment interest, and

additional attorney’s fees in connection with filing and pursuing the application. The

trial court did not, however, make a finding as to the amount of the post-judgment

interest or the additional attorney’s fees, ostensibly because it ultimately ordered that

the fund pay a total of $50,000 to the Neels—the maximum payment allowed in this

case. See id. § 1101.610(a). TREC appeals from this order.

                               II. RELEVANT LAW

                             A. GOVERNING STATUTES

      The Act prohibits licensed real estate brokers from taking certain actions,

including engaging in fraudulent or dishonest behavior while engaged in real estate

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brokerage. Id. § 1101.652(a-1), (b). TREC is required to maintain the fund, the

purpose of which is “to reimburse aggrieved persons who suffer actual damages caused by

an act described by Section 1101.602 committed by . . . a license holder[.]” Id.

§ 1101.601(a)(1) (emphasis added).      Section 1101.602—entitled “Entitlement to

Reimbursement”—reiterates that the fund is available to reimburse aggrieved persons

when a license holder engages in violative conduct. Id. § 1101.602 (emphasis added).

Section 1101.610(a) provides that payments from the fund “for claims, including

attorney’s fees, interest, and court costs, arising out of a single transaction may not

exceed a total of $50,000, regardless of the number of claimants.” Id. § 1101.610.

                                    B. CASELAW

      In Pace v. State, the Texas Supreme Court interpreted Section 1101.601’s

predecessor statute that provided that the fund be used “for reimbursing aggrieved

persons who suffer monetary damages.” 650 S.W.2d 64, 65 (Tex. 1983). The court

drew from Black’s Law Dictionary to define “reimburse” as “‘to pay back, to make

restoration, to pay that expended.’” Id. at 65 (citing Black’s Law Dictionary 1157 (5th

ed. 1979)). Based on this definition, the court held that punitive damages were not

available out of the fund because the Act “provides that the fund is to be used to pay

back the monetary damages suffered by the victims of an unscrupulous real estate

agent or broker.” Id. (emphasis added); see Tex. Real Est. Comm’n v. Murphy, No. 02-22-

00199-CV, 2023 WL 2926411, at *3–4 (Tex. App.—Fort Worth Apr. 13, 2023, no pet.

h.) (mem. op.) (explaining that, though the legislature changed “monetary damages”

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to “actual damages” after Pace, it was significant that it did not also change the

reimbursement language).

      Following Pace, the Dallas Court of Appeals held—in a case decided after the

Act was amended to allow for “actual” rather than “monetary” damages—that a

person could not recover from the fund for “lost profits and deception.” Arlington

Equities, Inc. v. Tex. Real Est. Comm’n, 765 S.W.2d 472, 473 (Tex. App.—Dallas 1988,

writ denied). The court reasoned that, because such damages did not constitute “out-

of-pocket” losses, the person had “expended nothing for which it was entitled to be

reimbursed” from the fund. Id.

      Similarly, we recently held that a person is not entitled to recover mental

anguish damages from the fund. Murphy, 2023 WL 2926411, at *9. In Murphy, we

stated that “[t]he ‘reimbursement’ language in the statute has already been construed

by the Texas Supreme Court” and that this construction “does not encompass

payment for damages that serve any purpose other than reimbursement.” Id. at *4.

Thus, even though mental anguish damages are generally understood as actual

damages that compensate a person for their harm, they are not payable out of the

fund because “they do not ‘pay back’ the [person] for something [the person]

expended.” Id.

                                 III. DISCUSSION

      TREC’s sole contention on appeal is that, due to Pace’s construction of the

reimbursement language from the Act, the fund is available only to reimburse out-of-

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pocket money that is expended by an aggrieved person. According to TREC, because

the Neels’ actual damages do not constitute such expenditures, the trial court erred in

requiring that they be paid from the fund. TREC requests that we reverse the entirety

of the trial court’s order. The Neels argue that they are entitled to all of their damages

paid from the fund because the Act does not limit recovery to only out-of-pocket

expenditures but clearly allows for recovery of all unpaid actual damages.

              A. THE NEELS DID NOT EXPEND MONEY ENTITLING
               A REIMBURSEMENT OF DAMAGES FROM THE FUND

      The Neels are correct that the Act allows a person to recover their actual

damages from the fund. Tex. Occ. Code Ann. § 1101.601. And the parties do not

dispute that the Neels’ awarded damages (i.e. benefit of the bargain and lost rental

income) fall within generally recognized categories of actual damages. See Formosa

Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 49–50 (Tex.

1998). However, the Act—as construed by Pace and its progeny—also makes it clear

that recovery of one’s actual damages from the fund is available only to reimburse or

“pay back” money that the person actually expended.              Tex. Occ. Code Ann.

§ 1101.601; Pace, 650 S.W.2d at 65; Murphy, 2023 WL 2926411, at *3–4; Arlington

Equities, 765 S.W.2d at 473. Because the Neels’ actual damages were not awarded for

money that they had expended—the parties agree that the only money they expended

was their earnest money, which was returned to them by the title company—they are

not entitled to have these damages paid out of the fund. Thus, we sustain TREC’s

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issue insofar as it complains that the Neels’ $50,881 in actual damages and the related

$3,604.07 in related pre-judgment interest were not payable out of the fund, and we

modify the trial court’s order to delete these amounts. See Murphy, 2023 WL 2926411,

at *4 (modifying order for payment out of the fund to delete mental anguish

damages).

                 B. ATTORNEY’S FEES AND COSTS ARE AVAILABLE

      Our discussion does not end there, however, because the Neels were also

awarded attorney’s fees and costs that are available to them from the fund.3 See Tex.

Occ. Code Ann. § 1101.610(a); Murphy, 2023 WL 2926411, at *9 (noting that the Act’s

“authorization for awarding reasonable attorney’s fees is separate from the provision

for reimbursement of damages”). Section 1101.606 allows an aggrieved person to

“file a verified claim” and to apply for “an order for payment from the trust account

of the amount unpaid on the judgment.” Tex. Occ. Code Ann. §§ 1101.606(a), (b).

And Section 1101.610(a) provides that such claims specifically include attorney’s fees

and costs. Id. § 1101.610(a).

      The trial court’s order awarded the Neels $11,500 in attorney’s fees for fees

incurred before the filing of their application and $452 in related court costs.4 The

trial court also found that the Neels were entitled to additional attorney’s fees incurred

      3
       TREC did not address the issue of attorney’s fees or costs in their brief.
      4
       There is no dispute that the underlying judgment remains unpaid.

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for filing their application for payment from the fund, but it did not make a finding as

to the reasonable amount of these fees. See Tex. Occ. Code Ann. § 1101.610(d)

(providing that “[a] person receiving payment from the trust account is entitled to

receive reasonable attorney’s fees in the amount determined by the court”). For these

reasons, we affirm the portion of the trial court’s order awarding the Neels $11,500 in

attorney’s fees and $452 in court costs, thus modifying the order to reflect an award

of $11,952 from the fund. And we remand for further proceedings to determine the

reasonable amount of any additional attorney’s fees.

                                IV. CONCLUSION

      Having held that the Neels’ actual damages are not recoverable from the fund,

we modify the trial court’s order to delete their actual damages and related pre-

judgment interest. We affirm the portion of the trial court’s order awarding them

$11,500 in attorney’s fees and $452 in court costs, modify the judgment to reflect an

award of $11,952 from the fund, and remand to the trial court for proceedings

consistent with this opinion.

                                                       /s/ Brian Walker

                                                       Brian Walker
                                                       Justice

Delivered: May 18, 2023

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