Court Opinion

ID: 3074923
Source: CourtListenerOpinion
Date Created: 2015-10-16 01:05:06.597667+00
Date Added: 2024-06-11T11:41:55.187325
License: Public Domain

COURT OF APPEALS
                                 EIGHTH DISTRICT OF TEXAS
                                      EL PASO, TEXAS

 HARSTAN, LTD, A TEXAS LIMITED                   §
 PARTNERSHIP, and TBI, INC., ITS                                 No. 08-12-00086-CV
 GENERAL PARTNER,                                §
                                                                    Appeal from the
                              Appellants,        §
                                                              County Court at Law No. 3
 v.                                              §
                                                               of El Paso County, Texas
 SI KYU KIM and SARAH KYUNG-AL                   §
 KIM,                                                              (TC# 2003-4083)
                                                 §
                              Appellees.

                                            OPINION

          In this statutory fraud action involving the “as is” sale of commercial real property,

Harstan, Ltd. and TBI, Inc., (collectively, “Harstan”) appeal the trial court’s judgment in favor of

Si Kyu Kim and Sarah Kyung-Al Kim (collectively, “the Kims”).             In three issues, Harstan

argues that the “as is” nature of the sale precludes the Kims from recovering on their claim and

that the evidence is legally insufficient to support the jury’s verdict and damages award. We

affirm.

                      FACTUAL AND PROCEDURAL BACKGROUND

          In November 2001, the Kims purchased a dilapidated apartment complex from Harstan,
an entity owned and operated by Ronald Stading.1           Approximately seven months earlier, some

of the buildings comprising the complex had sustained damage from severe windstorms.              At

that time, the complex was owned by Roberto Lopez, who had purchased it six months earlier

from Harstan’s predecessor-in-interest, CEDB, LLC, an entity owned by Stading, a

then-practicing attorney.          Lopez hired Antonio Velasquez, a registered professional civil

engineer, to examine the extent of the damage sustained by the complex. Velasquez concluded

that Building B had “experience[d] . . . structural failure” and recommended that its roof be

replaced and its exterior walls and second floor walkway be reinforced. The Kims never

received Velazquez’s report, nor were its contents discussed with them.

          Lopez, who was represented by Stading’s law firm, filed an insurance claim. Stading

informed Lopez’s insurance agent in May 2001 that tenants were vacating the property because

of structural issues. While his insurance claim was pending, Lopez received a letter from the

City of El Paso in June 2001. The letter stated, in relevant part, that an inspection had revealed

the “structure” was unsafe and that, if Lopez failed to correct the violations identified in the

letter, “the case will be submitted to the City Attorney’s Office for condemnation proceedings.”

Stading received a copy of the letter, which, according to him, constituted the first written notice

he had received from the City concerning the property’s condition.

          In July 2001, Stading submitted Velasquez’s report to the insurance company in support

of Lopez’s claim.         Lopez, however, defaulted on his loan the following month, and Harstan

acquired the complex by deed in lieu of foreclosure.           Shortly thereafter, Harstan listed the

complex for sale.

          As the new owner, Harstan continued to pursue the insurance claim filed by Lopez.
1
    Stading died during the pendency of this appeal.
                                                       2
Stading forwarded several documents to the insurance company, including the June 2001 letter

from the City. Stading also hired Salvador Nuñez, a structural engineer, to inspect Building B.

Nuñez, like Velazquez, concluded that Building B had sustained structural damage, and he

recommended that a portion of the building’s roof be replaced and that some of its masonry walls

be reinforced.

       On November 13, 2001, Mr. Kim submitted an offer to purchase the complex after his

real estate agent showed it to him.   Before Stading accepted the offer or made a counteroffer on

behalf of Harstan, he asked to meet Mr. Kim to discuss several issues, chief among them

Mr. Kim’s qualifications to operate an apartment complex and “the condition of the damage of

Building B and the City and the threat of condemnation.”       At this meeting, Stading explained to

Mr. Kim that Nuñez’s report was the basis for the repairs to Building B required by the City and

represented to Mr. Kim that “[he] would correct Building B as required by the City . . . .”

Following further negotiations, Mr. Kim signed a commercial property contract to purchase the

complex “as is” for $515,000, based in part on Stading’s representation “that at the time . . . all

the repairs the City was requesting were done.”

       Ten days after Mr. Kim submitted his original offer, the parties closed on the complex.

At closing, the Kims signed three documents—a purchase contract, a deed of trust, and a lien

note—each containing an “as is” clause. The “as is” clause in the one-page “Contract for Sale

of Real Estate” provides:

       (1) Buyer has had full opportunity to inspect the conditions of the units, knows
           the apartment complex is in need of repair and upgrade to meet City building
           code requirements and accepts the property ‘AS IS – WHERE IS’, without
           representation of condition or occupancy. [Emphasis in orig.].

The “as is” clauses in the deed of trust and lien note both state:

                                                  3
          a. The property is sold in an ‘AS IS – WHERE IS’ condition. Grantor [Maker]
          acknowledges and represents he has had an opportunity to conduct extensive
          examination of the property, is aware of the property condition and repairs needed
          to the exterior and interior of the property, as well as the condition of the
          apartments contained within the complex.

Both the deed and trust also contain clauses representing the condition of the complex and, in

particular, Building B:

          Beneficiary [Payee] has disclosed to Grantor [Maker] the property condition and
          any repairs and claims exercised against the property prior to Grantor’s [Maker’s]
          purchase of said property. The following Building ‘B’ repairs will be completed
          by Beneficiary: repairs and/or replace cinder block front [from] walls of three (3)
          units sustaining wind damage; install GFI electrical outlets in kitchen and baths of
          all eighteen (18) units; repair stairwell; replace electrical panels and meter boxes
          to all units. The City of El Paso, when learning of alleged structural damage to
          Building ‘B’, initially sought the authority to condemn the building. Structural
          Engineers and City Inspectors have since determined the building is in excellent
          structural condition [structurally sound] and have removed all concerns regarding
          the building.2

With regard to the repairs required by the City, Stading told Mrs. Kim at closing “that

everything required by the City are all fixed and that the building’s in very good

condition.”

          Three days after closing, Stading sent the Kims a letter informing them that “the repairs

to Building B have been completed” and that he “will soon complete modification and repair of

the stairwell for Building B.” Shortly thereafter, the Kims listed the complex for sale because,

among other reasons, they were experiencing difficulty in collecting rents.          The Kims received

and accepted an offer in May 2002.            But the sale fell through primarily because they received a

letter from the City of El Paso in June 2002 informing them that the “structure” was unsafe and

that “[t]his case is being submitted to the City Attorney’s office for condemnation proceedings.”

          Some of the code violations identified in this letter included:
2
    The use of the brackets denotes the differences between the two documents.
                                                          4
       b. The walls have not been maintained in a safe manner free of holes and cracks.

       c. The roof structure has not been maintained free of defects that may cause
       leaks.

                             .                  .                   .

       e. The electrical system is inadequate and does not meet minimum code
       requirements.

As Stading himself admitted at trial, the violations identified in the June 2002 letter are nearly

identical to those identified in the June 2001 letter. Stading too received a copy of the June

2002 letter. He then wrote a letter to the Kims advising them that they had seven days to

comply with the City’s demands and, that if they did not, Harstan would initiate foreclosure

proceedings. The Kims, who were unable to make the repairs, stopped making payments on the

note in July 2002.    In September 2002, Harstan initiated foreclosure proceedings.        At the

foreclosure sale held in October 2002, Harstan purchased the complex for $406,000.

       The Kims subsequently filed suit against Harstan, asserting causes of action for

common-law fraud and statutory fraud in a real estate transaction under Section 27.01 of the

Texas Business and Commerce Code (Section 27.01).          At trial, the parties disputed whether

Harstan concealed material information and made material misrepresentations to induce the

Kims to purchase the complex.        Mr. Kim testified that, although he was aware of the

dilapidated condition of the complex, including Building B, he relied on Stading’s oral and

written representations concerning the extent and status of the repairs required by the City in

agreeing to purchase the complex. According to Mr. Kim, he bought the property “because [he]

was not aware of the problem in the City.”   Like her husband, Mrs. Kim testified that she would

not have bought the property if she had known “about the problems with the City” or “of any

                                                5
other problems that existed on the property.”     The jury found that Harstan committed statutory

fraud and awarded $141,000 in out-of-pocket expenses as damages.

                                     “AS IS” AGREEMENT

       In its first issue, Harstan—citing Prudential Ins. Co. of Am. v. Jefferson Assocs., Ltd., 896
S.W.2d 156 (Tex. 1995)—argues the Kims cannot recover on their statutory fraud claim as a

matter of law because they accepted the apartment complex “as is” without representation of its

condition despite knowing that the complex was in poor condition and in need of repair.          We

disagree.

       In Prudential, a buyer purchased a commercial building “as is,” and later sued the seller

for DTPA violations, fraud, negligence, and breach of the duty of good faith and fair dealing,

claiming the seller failed to disclose that the building contained asbestos. 896 S.W.2d at

159-60.     The Supreme Court held the “as is” clause in the purchase agreement negated the

buyer’s claim that the seller’s action caused his injury.   Id. at 161.   This is because by agreeing

to purchase something “as is,” a buyer agrees to make his own appraisal of the bargain and to

accept the risk that he may be wrong.    Id. at 160.   As the court stated:

       The sole cause of a buyer’s injury [when he agrees to purchase something ‘as is’],
       by his own admission, is the buyer himself. He has agreed to take the full risk of
       determining the value of the purchase. He is not obliged to do so; he could insist
       instead that the seller assume part or all of that risk by obtaining warranties to the
       desired effect. If the seller is willing to give such assurances, however, he will
       ordinarily insist upon additional compensation. Rather than pay more, a buyer
       may choose to rely entirely upon his own determination of the condition and
       value of his purchase. In making this choice, he removes the possibility that the
       seller’s conduct will cause him damage.

Id.
       But the Supreme Court’s holding in Prudential rests upon a “valid ‘as is’ agreement.”

Id. at 161. Recognizing this, the Court expressly stated that its holding was not intended to

                                                  6
“suggest that an ‘as is’ agreement can have this determinative effect in every circumstance.     A

buyer is not bound by an agreement to purchase something ‘as is’ that he is induced to make

because of a fraudulent representation or concealment of information by the seller.”

Prudential, 896 S.W.2d at 162. To the contrary, the Court expressly recognized that “other

aspects of a transaction may make an ‘as is’ agreement unenforceable. The nature of the

transaction and the totality of the circumstances surrounding the agreement must be considered.”

Id.     In undertaking this examination, courts must be mindful of the following:

          Where the ‘as is’ clause is an important part of the basis of the bargain, not an
          incidental or ‘boiler-plate’ provision, and is entered into by parties of relatively
          equal bargaining position, a buyer’s affirmation and agreement that he is not
          relying on representations by the seller should be given effect. . . . We think it
          too obvious for argument that an ‘as is’ agreement freely negotiated by similarly
          sophisticated parties as part of the bargain in an arm’s-length transaction has a
          different effect than a provision in a standard form contract which cannot be
          negotiated and cannot serve as the basis of the parties’ bargain.

Id.

          In sum, Prudential mandates that courts assess the validity of an “as is” agreement in

light of three factors:     (1) the sophistication of the parties; (2) the terms of the “as is”

agreement; and (3) whether there was a knowing misrepresentation or concealment of a known

fact.    Smith v. Levine, 911 S.W.2d 427, 432 (Tex.App.--San Antonio 1995, pet. denied).

When the agreement in this case is examined in light of these factors and compared to the

agreement in Prudential, it is evident the “as is” provisions in the Kims’ agreement are invalid as

a matter of law.

          In Prudential, both the buyer and seller were sophisticated parties. The buyer was “a

knowledgeable real estate investor who owned an interest in at least thirty commercial

buildings,” the president of a commercial property management firm, and an “as is” purchaser of

                                                   7
“several large investment properties.”     Prudential, 896 S.W.2d at 159. The seller was an

insurance company that financed the construction of the building and acquired it four years later

through foreclosure.    Id. Unlike the parties in Prudential, the parties here did not share the

same level of sophistication. Harstan is in the business of providing real estate lending, and

Stading is a licensed attorney who makes his living in the real estate industry and owns several

businesses in that industry.   The Kims, on the other hand, were first-time property buyers.

       In Prudential, the “as is” clause expressly disclaimed reliance upon any representation.

The clause provided that the buyer “is taking the Property ‘AS IS’ with any and all latent and

patent defects and . . . is not relying upon any representation, statements, or other assertion with

respect to the Property condition, but is relying upon its examination of the Property.”

Prudential, 896 S.W.2d at 160.        This type of disclaimer, if it clearly and unequivocally

expresses the parties’ intent to disclaim reliance on the specific representations at issue, could

potentially provide a seller with a viable defense to a buyer’s claims for fraud, fraudulent

inducement, and negligent misrepresentation, because reliance is a necessary element of each of

those claims. See Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 56 (Tex. 2008)(fraudulent

inducement claim); Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 179 (Tex.

1997)(fraudulent inducement and common-law fraud claims); Henry Schein, Inc. v. Stromboe,

102 S.W.3d 675, 686 & n.24 (Tex. 2002)(negligent misrepresentation claim).                 Here, by

contrast, the “as is” provisions in the contract for sale, deed of trust, and note are silent on the

issue of reliance. They merely state the property is sold “AS IS—WHERE IS.”             Further, the

Kims testified they in fact relied on Harstan’s oral and written representations that all the repairs

required by the City had been completed and, believing that no more repairs would be required

                                                 8
by the City, purchased the complex based on Harstan’s representations.

       In Prudential, there was no evidence the seller was actually aware of the presence of

asbestos in the building or that it made an affirmative move to conceal the presence of asbestos.

Prudential, 896 S.W.2d at 162.       Indeed, the Supreme Court characterized the seller’s alleged

misrepresentations as “merely ‘puffing’ or opinion.”       Id. at 163.    In this case, on the other

hand, there is evidence Harstan knew the structural damage to Building B had not been repaired

at the time the Kims purchased the building but nonetheless assured them that all repairs required

by the City had been completed and that:

               The City of El Paso, when learning of alleged structural damage to
       Building ‘B’, initially sought the authority to condemn the building. Structural
       Engineers and City Inspectors have since determined the building is in excellent
       structural condition [structurally sound] and have removed all concerns regarding
       the building. [Emphasis added].

       Because the “as is” agreement in this case, unlike that in Prudential, does not negate

producing cause as a matter of law in the circumstances presented, Prudential is not dispositive

of the outcome here.

       Harstan’s first issue is overruled.

                                      STATUTORY FRAUD

       In its second issue, Harstan challenges the legal sufficiency of the evidence to support the

jury’s finding of statutory fraud.    A plaintiff may recover for statutory fraud in a real estate

transaction by establishing:   (1) the defendant made a false, material promise to do an act; (2)

with the intention of not fulfilling it; (3) for the purpose of inducing the plaintiff to enter into a

contract; and (4) the plaintiff relied on the promise in entering into the contract.

TEX.BUS.&COM.CODE ANN. § 27.01(a)(2)(West 2009).             According to Harstan, “the controlling

                                                  9
question in this appeal is what existing material fact did [it] allegedly misrepresent and did the

Kims justifiably rely on the alleged misrepresentation.” By framing the issue in that manner,

Harstan is arguing the Kims failed to adduce legally sufficient evidence on the elements of

falsity and reliance.   We disagree.

                                            1. Reliance

        Harstan asserts the Kims were required to prove that their reliance on its alleged

misrepresentations was justifiable.    Harstan maintains the Kims could not have justifiably relied

on its representations because:    (1) they failed to “do everything reasonably possible to learn all

about the property;” and (2) because the representations were contradicted by the express terms

of the documents signed by them. But the jury charge did not require that the Kims’ reliance be

justifiable.

        The charge as submitted instructed the jury that “[s]tatutory fraud occurs when:”

        (a) there is a false representation of a past or existing material fact, (b) the false
        representation is made to a person for the purpose of inducing that person to enter
        into a contract, and (c) the false representation is relied on by that person in
        entering into that contract.

At the charge conference, neither Harstan nor the Kims complained of the charge’s failure to

require justifiable reliance.   Because no objection was raised to the instruction given the jury,

the sufficiency of the evidence is measured against the trial court’s charge as submitted to the

jury, not some other unidentified law.     Wal-Mart Stores, Inc. v. Sturges, 52 S.W.3d 711, 715

(Tex. 2001); Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000).          Therefore, in measuring the

sufficiency of the evidence, we do not consider whether there is sufficient evidence of justifiable

reliance.      Ghosh v. Grover, 412 S.W.3d 749, 756 (Tex.App.--Houston [14th Dist.] 2013, no

pet.); Energy Maint. Servs. Grp. I, LLC v. Sandt, 401 S.W.3d 204, 214 (Tex.App.--Houston [14th

                                                 10
Dist.] 2012, pet. denied). Given that, the absence of legally sufficient evidence to support a

finding of justifiable reliance is immaterial and would not prevent the trial court from rendering

judgment on the Kims’ statutory fraud claim.          See Ghosh, 412 S.W.3d at 756; Sandt, 401
S.W.3d at 214.

                                            2. Falsity

       Harstan argues there is no evidence “that [it] falsely represented all repairs the City

required of the apartment complex were made[,]” and, “[m]ore importantly, the statements

regarding repairs . . . were true.”       In support of its contention that it made no false

representations, Harstan directs our attention to conflicting testimony by Mr. Kim regarding his

assertion that Stading “[orally] represented at closing that all repairs the City required were

made.” According to Harstan, “the source of this alleged representation necessarily must be the

documents[,] . . . [and] none of the documents contain this alleged representation[]” because they

disclose the:    (1) repairs made; (2) need for additional repairs; (3) threat of condemnation; and

(4) structural soundness of Building B.    In support of its argument that its representations were

true, Harstan directs our attention to evidence that the City council removed from its agenda the

condemnation proceeding mentioned in the June 2001 letter based on representations from City

personnel that the “work as indicated here was completed . . . .” According to Harstan, this

evidence conclusively proves the veracity of its representations because the Kims presented no

evidence to the contrary.

       But all of this evidence, including the alleged weakness in Mr. Kim’s testimony, was

presented to the jury, and therein lies the rub for Harstan.   In essence, Harstan is asking us to

invade the province of the jury and reweigh the evidence and reevaluate the credibility of

                                                 11
witnesses.     This we may not do.        In conducting our legal sufficiency review, we do not

substitute our judgment for that of the jury, as it is the sole judge of the evidence’s credibility

and weight.     City of Keller v. Wilson, 168 S.W.3d 802, 819-20 (Tex. 2005).        Consequently, we

must assume that, where reasonable, the jury resolved all conflicts in the evidence in a manner

consistent with its verdict.    Id. at 820.   If reasonable jurors could resolve conflicting evidence

either way, reviewing courts must presume they did so in favor of the prevailing party, and

disregard the conflicting evidence in their legal sufficiency review.      City of Keller, 168 S.W.3d

at 820.    Where conflicting inferences can be drawn from the evidence, it is within the province

of the jury to choose which inference to draw, so long as more than one inference can reasonably

be drawn.      Id.   Therefore, we must assume jurors made all inferences in favor of their verdict

if reasonable minds could, and disregard all other inferences in our legal sufficiency review.      Id.

          In light of the standards, the evidence adduced at trial was legally sufficient to support the

jury’s finding of falsity.

          Although Mr. Kim contradicted his testimony by testifying that Stading did not speak to

him at closing and that Stading told him and his wife at closing that all repairs required by the

City had been completed, and although his credibility may have been called into question, the

jury was free to believe some, none, or all of his testimony.          City of Keller, 168 S.W.3d at

819-20. Furthermore, there is nothing inherently improbable or so clearly unbelievable about

the inconsistency in Mr. Kim’s testimony that reasonable minds could reach but one conclusion.

For example, Mr. Kim may have been confused. After all, he did not speak English well and

required the services of a translator at trial.   He may even have confounded the events at closing

with the events of a prior meeting. After all, he dealt with Stading more than once.             In any

                                                   12
event, the jury also heard Mrs. Kim’s testimony that Stading told her and her husband at closing

that all repairs required by the City had been completed, and Harstan does not challenge the

veracity of her testimony on appeal.            The jury also heard Stading’s testimony that he told the

Kims at closing that the repairs required by the City were in progress and nearly complete.

         The same principals articulated in the preceding paragraph apply to the testimony of the

building inspector, Tom Maguire, that the condemnation proceeding was removed from the City

council’s agenda because “the work as indicated here was completed . . . .” While it is true, as

Harstan points out, that Maguire’s testimony was not controverted, the jury was free to

disbelieve his testimony in light of the letter the Kims received in June 2002 threatening to

condemn the complex due to the existence of hazards nearly identical to those identified in the

2001 letter. Again, the issue of inconsistencies in the evidence is a matter of credibility left to

the jury’s discretion.         City of Keller, 168 S.W.3d at 819-20.                    Accordingly, Maguire’s

testimony does not constitute conclusive evidence of the contrary position urged by Harstan.

         In sum, while the jury heard conflicting evidence, and may have chosen to accept as

credible or reject as incredible some or all of any witness’s testimony, the record presented does

not support Harstan’s arguments on appeal that the evidence is legally insufficient.3

         Harstan’s second issue is overruled.

3
  Evidence is legally insufficient if: (1) the record discloses a complete absence of evidence of a vital fact; (2) the
court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact;
(3) the evidence offered to prove a vital fact is no more than a mere scintilla; or (4) the evidence establishes
conclusively the opposite of a vital fact. Uniroyal Goodrich Tire Co. v. Martinez, 977 S.W.2d 328, 334 (Tex.
1998), cert. denied, 526 U.S. 1040, 119 S. Ct. 1336, 143 L. Ed. 2d 500 (1999); Robert W. Calvert, “No Evidence”
and “Insufficient Evidence” Points of Error, 38 TEX.L.REV. 361, 362-63 (1960). Anything more than a scintilla of
evidence is legally sufficient to support the finding. Cont’l Coffee Prods. Co. v. Cazarez, 937 S.W.2d 444, 450
(Tex. 1996); Leitch v. Hornsby, 935 S.W.2d 114, 118 (Tex. 1996). More than a scintilla of evidence exists if the
evidence furnishes some reasonable basis for differing conclusions by reasonable minds about the existence of a
vital fact. Rocor Int’l, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 77 S.W.3d 253, 262 (Tex. 2002). As
revealed by the discussion above, more than a scintilla of evidence on the elements of reliance and falsity was
adduced at trial.
                                                         13
                                                    DAMAGES

         In its third and final issue, Harstan argues the evidence is legally insufficient to support

the jury’s award of $141,000 for the Kims’ out-of-pocket expenses. We disagree.

                                          Proper Measure of Damages

         Harstan first argues the trial court did not use the proper measure of damages in a

statutory fraud claim.4        According to Harstan, the correct measure of damages in this case is the

difference between the value paid and the value received, and because “the Kims presented

absolutely no evidence on the value of the apartment complex they received[,]” they were not

entitled to “out-of-pocket” damages.5

         “Out-of-pocket” damages are one of two measures of direct damages available in a fraud

case under the common law; the other is “benefit-of-the-bargain” damages.                               See Formosa

Plastics Corp. USA v. Presidio Eng’rs and Contractors, Inc., 960 S.W.2d 41, 49 (Tex. 1998).

But a plaintiff who proves fraud in connection with the purchase or transfer of property is

entitled to recover not only direct damages but also restitutional damages for out-of-pocket

expenses caused by his reliance upon the defendant’s misrepresentation.                       ISG State Operations,

Inc. v. Nat’l Heritage Ins. Co., Inc., 234 S.W.3d 711, 718 (Tex.App.--Eastland 2007, pet.

denied); Hart v. Moore, 952 S.W.2d 90, 97 (Tex.App.--Amarillo 1997, pet. denied); Texas

4
  A person who has been statutorily defrauded is entitled to “actual damages.” TEX.BUS.&COMM.CODE ANN.
§ 27.01(b)(West 2006). The statute does not define the term “actual damages,” but that term has been construed to
mean “those damages recoverable under common law.” Rhey v. Redic, 408 S.W.3d 440, 454 (Tex.App.--El Paso
2013, no pet.).
5
  In Question Number 3 of the charge, the jury was asked “[w]hat sum of money, if any, paid now in cash, would
fairly and reasonably compensate . . . [the Kims] for their damages, if any, that resulted from . . . fraud . . . .?” The
charge used the term “[o]ut-of-pocket expenses,” but did not define that term for the jury. Harstan objected on the
ground that the jury was not given the proper legal standard for measuring “out-of-pocket” damages in a fraud
action and requested that the jury be charged using the proper standard. The trial court overruled Harstan’s
objection and denied its request.
                                                           14
Commerce Bank Reagan Through Texas Commerce Bank Nat. Ass’n v. Lebco Constructors, Inc.,

865 S.W.2d 68, 73 (Tex.App.--Corpus Christi 1993, writ denied), overruled on other grounds by

Johnson & Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 530 (Tex. 1998).

Consequently, Texas law permits the recovery of out-of-pocket expenses in a statutory fraud

case, and the Kims are not precluded per se from proving and recovering those expenses.

                                     Evidence of Damages

       Harstan next argues the amount awarded for out-of-pocket expenses was not supported

by the evidence. According to Harstan, “[t]he damages the Kims were seeking, excluding the

unsubstantiated repair costs, totaled $127,738.33; not $141,000.” The Kims computed their

damages to be approximately $178,000, based on expenses attributable to their down payment on

the complex (approximately $80,000), their monthly payments on the note (approximately

$29,000), their monthly payments for insurance and property taxes ($24,000), and their cost for

labor and repairs ($45,000).   The jury’s award of $141,000 fell within the range of evidence

presented by the Kims.    When the trial evidence supports a range of damages, an award within

that range is an appropriate exercise of the jury's discretion, and we are not permitted to

disregard the jury’s award on the basis that the jury’s reasoning is unclear.   SAS & Associates,

Inc. v. Home Mktg. Servicing, Inc., 168 S.W.3d 296, 303 (Tex.App.--Dallas 2005, pet. denied).

Because $141,000 is within the range of evidence presented to the jury, the evidence is legally

sufficient to support the damages award.

       Harstan does not argue the Kims’ out-of-pocket expenses were not directly attributable to

its misrepresentations and therefore not legally recoverable.   Instead, Harstan contends the jury

did not make a proper calculation of damages because Mr. Kim’s testimony regarding the

                                               15
$45,000 in expenses for labor and repairs was not substantiated by written documentation and

because the Kims received tax benefits from the $24,000 they spent on insurance and property

taxes. But Harstan cites no authority for its first assertion, and, with respect to its second

assertion, Harstan is simply wrong.     See Lee v. Lee, 47 S.W.3d 767, 780 (Tex.App.--Houston

[14th Dist.] 2001, pet. denied)(“[N]o authority supports an offset for tax benefits.”).

       Harstan also contends the damages were awarded on the basis of rescission, and because

rescission was not pled, the trial court could not base its judgment on rescission.        But the

soundness of Harstan’s argument hinges on the erroneous premise that the evidence was legally

insufficient to support the jury’s award of out-of-pocket expenses as restitutional damages.    As

discussed above, the evidence is legally sufficient to support the award.

       Because the evidence is legally sufficient to support the full amount of actual damages

awarded, we decline Harstan’s invitation to “order a remittitur reducing the principal award from

$141,000 to $80,000.”    See TEX.R.APP.P. 46.5 (remittitur is appropriate if trial court’s judgment

is reversed because of a legal error affecting only part of the damages awarded).

       Harstan’s third issue is overruled.

                                         CONCLUSION

       Having overruled all three of Harstan’s issues, we affirm the trial court’s judgment.

July 25, 2014
                                              YVONNE T. RODRIGUEZ, Justice

Before McClure, C.J., Rivera, and Rodriguez, JJ.

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