Opinion
No. 4204.
June 21, 1932. Rehearing Denied June 30, 1932.
Appeal from District Court, Gregg County; Will C. Hurst, Judge.
Action by J. D. Jones and another against Fred Bantuelle. From a judgment in favor of plaintiffs, defendant appeals.
Modified, and as modified affirmed.
This is an action by appellees against the appellant for damages based upon alleged representations fraudulently made with the intent to induce the appellees to sign a lease contract. The appellant owned block 135 in the town of Kilgore, Tex., and subdivided it into lots. The appellees were partners engaged in the occupation of tailors and cleaning and pressing and dyeing clothes. On February 12, 1931, appellant and appellees executed a written lease, omitting formal parts, reading:
"That whereas party of the first part, who is the owner in fee simple of a lot of land 60 feet wide off the ends of Lots One, Two and Three in Block One Hundred Thirty-five in the town of Kilgore, Texas, has this day leased and let the surface rights to a strip off the southeast end of said lot 16 feet in width same being 16 feet off the SE side of Lot 3 in Block One Hundred Thirty-five of the part of said lot owned by party of the first part said surface lease to be for the full period of twelve months, with the right on the part of the parties of the second part to renew said lease for another full twelve months after Feb. 12th, 1932, provided said right be exercised by an instrument in writing on or before January 12th, 1932.
"It is fully agreed and understood that parties of the second part is to pay a monthly rental of sixty dollars in advance on the 5th day of each month after the signing of this lease contract except on March 12th, 1931, the parties of the second part having paid two months rent ($120.00) in advance, the first monthly rental to be due after the signing hereof will be on April 12th, 1931.
"It is further agreed and understood that in the event the parties of the second part should exercise their right of renewal for an additional twelve months the monthly rental shall be $60.00 per month in advance, the same as the rental for the first twelve months.
"It is also understood and agreed that in the event parties of the second part should fail or refuse, for a period of ten days after any installment of rent is due to pay said installment, then and in that event party of the first part may at his option declare this lease cancelled and shall have and retain a lien on any building erected on said land to secure any unpaid installments of rent provided for herein.
"Parties of the second part shall have the right to assign this lease and the rights there-in provided.
"Witness our hands this the 12th day of Feb. 1932."
The appellees' petition set up, as respects pertinent material allegations, namely:
"That for the purpose of inducing such lease, said defendant had prepared a map and plat of said land showing the same to be subdivided into lots and showing on said map a water tower and tank, to be used for the purpose of supplying water to plaintiffs, located on said block, and showing a bath house and septic tank for the convenience of such tenants and for the purpose of taking care of the sewer connections of said tenants; that said defendant then and there through his authorized agent stated and represented that said tanks were to be built immediately and that the bath house and the septic tanks were to be installed at once and that the same would be ready for use by the time that the tenants, and in particular these plaintiffs, should have their building completed and ready for business, said lots being at the time unimproved property.
"That the plaintiffs then and there stated to said defendant and his agents, that they were planning to engage in the cleaning, pressing and tailoring business, and that it would be necessary to have an abundant supply of water and sewer connections in order to operate; that if they were unable to secure water or sewer connections the property would be valueless to them and they would be unable to conduct the business, all of which defendant well knew; that thereupon, said defendant and his agent stated, represented and guaranteed that in the event said plaintiffs should secure a lease on any of said lots, that said tanks, water connections and sewer connections would be ready by the time that the said building (in which plaintiffs contemplated conducting their said cleaning and pressing business) was completed, and that said defendant would furnish water at the prevailing rate charged in any modern city, and in a sufficient amount for the conducting of their business. That relying upon said representations and statements and believing same to be true, and relying upon the statement that water would be furnished and the sewer connection would be made, and that they would be ready by the time that said building was completed, these plaintiffs leased a part of the surface rights of said Lots One, Two and Three in Block No. 135, and being a plot of land 16x60 feet, and erected a building thereon at a cost of approximately Six Hundred ($600.00) Dollars (which was the reasonable market value of said building in Gregg County, Texas,) in which to conduct their business, as aforesaid; that as a consideration therefor they agreed and became liable to pay to the defendant the sum of Sixty ($60.00) Dollars per month for a period of one year, and with an option of renewal for another year, under the same terms and conditions.
"These plaintiffs would further show to the court that the said defendant, with the intent and purpose of defrauding and cheating these plaintiffs, and with the purpose and intent of wantonly defrauding and swindling other tenants, formed within his mind a fraudulent scheme to rent to various tenants tracts of land out of the land owned by him, and under the false and fraudulent representations that he would erect thereupon a water tank, bath house, septic tanks and furnish gas, and without any intent or purpose at any time to comply with such agreement and representations, that he formed the fraudulent scheme for the purpose of having tenants, including these plaintiffs, to erect on his property, under the above false representations, buildings and houses, and then refuse to supply water, gas or sewer connections, making it impossible for said tenants to operate their business, and to fraudulently and with a purpose of defrauding, take over and get possession of such improvements. That because of the failure and refusal on the part of the defendant to live up to his statements and agreement it was impossible for these plaintiffs to comply with the sanitary rules and regulations of the town of Kilgore. That they had no place to dispose of their suds and drainage, and the town of Kilgore refused to further let plaintiffs operate said business and forced and compelled them to close the same, all of which was the direct and proximate result of the wrongful and fraudulent refusal of the defendant to perform his part of the contract. That when the town of Kilgore closed said business these plaintiffs were forced and compelled to remove their equipment from the building and to vacate same. That the defendant, without the consent or knowledge of these plaintiffs entered upon said premises and appropriated said building to his own use and benefit to the plaintiffs' damage in the sum of $600.00; that the defendant had no lawful right to enter upon said premises and to use the building and to operate it for his own use and benefit for the reason that he had breached the contract and had failed to supply the utilities, and there were no rents due."
The petition further set up as damages claimed the particulars of $500, as expenses incurred in moving into and removing from the building the machinery and trade fixtures used in the operation of the business, and $5,000, as the aggregate sum of profits of the business that would reasonably have been made during the future occupation of the building for the period of the lease contract "if water had been furnished and the sewer connections had been installed" in accordance with the defendant's statements and representations. The plaintiffs removed their machinery from the place on April 15, 1931, after occupying the building for sixty days.
The case was tried before a jury, on special issues, and they made answers, in substance, that the representations set out in the petition were fraudulently made with the intent to induce the plaintiffs to execute the lease contract and that by reason of the representations the plaintiffs were induced to sign the lease. They found that the plaintiffs incurred the expense of $435 in moving their trade fixtures and machinery for operating their business in and out of building. The further issues were submitted and answered:
"6. From a preponderance of the evidence before you, how much profit, if any, per day would the plaintiffs have reasonably made for the year following February 21, 1931, in the operation of their cleaning and pressing business on the property in question, had they been furnished with a sufficient supply of water and gas and sewage connections promised?" Answer: "$8.00."
"7. From a preponderance of the, evidence before you, how much profit, if any, did the plaintiffs reasonably make per day in the operation of their said cleaning and pressing business on the property in question?" Answer: "$19.85."
"8. Do you find from a preponderance of the evidence that the defendant appropriated to his own use and benefit the building erected by the plaintiffs on the property in question?" Answer: "Yes."
"9. From a preponderance of the evidence how much money, if any, did the plaintiffs reasonably spend in erecting said building on the lot in question?" Answer: "$600.00."
Judgment was entered in keeping with the verdict in favor of plaintiffs for the aggregate sum of $3,419.05 in the items of $600 for the cost of the building, $435 as expense of moving the trade fixtures and machinery, and $2,384.05, loss of profits during the future period of the lease.
The evidence sustains the allegations of the petition.
E. B. Levee, Jr., and E. Newt Spivey, both of Texarkana, for appellant.
Hatchell Campbell, of Longview, and Caldwell, Gillen, Francis Gallagher, of Dallas, for appellees.
The points on appeal in effect bring in review the elements of damages recoverable in the circumstances shown for the alleged wrong done by the lessor to the lessees. The assignments of errors upon which the lessor chiefly relies are those relating to the admission of evidence, the measure of damages, and the amount of the judgment.
In the precise facts of the case, as established by the jury, the lessor induced the lessees to take the lease by the fraudulent representations that he was going to erect a water tower and tank in his block, which was subdivided into lots, for the purpose of supplying water to the respective tenant houses on the lots in the block, and was going to install in each house connections for water, sewer, and gas, and was going to furnish gas and water at the prevailing rates. He specially represented to the lessees that these particular things would be "installed at once and that same would be ready for use by the time the tenants, and in particular these plaintiffs, would have their building completed and ready for business, the lots being at the time unimproved property." The written lease does not covenant, nor contain language amounting to a covenant, that these things shall be done or installed. The lessees were leasing the premises especially to conduct the business of cleaning and pressing clothes, and water, gas, and sewer connections were necessary to conduct the business in the building. After sixty days' occupancy of the building the lessees were compelled to desist operating their business on the leased premises because of the official action taken by the health and sanitary department of the town of Kilgore in respect to the use and occupancy of the premises. The further use of the premises was interdicted during such interval of time as the water and sewer connections mentioned should remain not duly made to the premises. Such system and utilities had been installed in the town. In consequence of the enforcement of the ordinances regulating the use of the type of building and the method of conducting the particular business, the lessees' beneficial enjoyment of the premises was in fact greatly impaired. And by reason of the actual interdiction of the use of the premises, upon the failure or refusal of the lessor to carry out his representations for an uncertain and apparently undeterminable period of time in the future, the disturbance of the lessees' possession may be considered as amounting, in effect, to an eviction, as a direct product of the fraud of the lessor. The premises became useless during such uncertain interdicted period of time for carrying on the business of the lessees, and the lessees so regarded them, and they yielded the use of the building, as they had the legal right to do in virtue of the disturbance of their possession, and moved their trade fixtures and machinery to another place. Such compulsory suspension of business, as the effect of the fraud, involved, as proven, the expense of making the change from the building to another place of the trade fixtures and machinery. These expenditures incurred in moving the trade fixtures and machinery to and from the rented building in suit may therefore be regarded, it is believed, as proper elements of special damages arising directly out of the commission of the tort charged against the lessor. They were damages for an injury the lessees sustained as the natural and proximate result of having been put in a position worse than they would have occupied if there had been no fraudulent representations. It is according to the general principle that the recovery should be commensurate with the injury where one who is fraudulently induced to enter into a lease contract pursues a necessary course of action from which expenditures have naturally succeeded or in consequence of which he has been compelled to pay money. The party guilty of the fraud is to be charged with such damages as have naturally and proximately resulted therefrom. 3 Sutherland on Damages (3d Ed.) § 864; 26 C.J. § 78, p. 1169. It was allowable even in the view of expenses incurred in reducing damages for interruption of the business. 17 C.J. § 132, p. 806.
As respects the item awarded as damages for value of the building erected on the premises, it likewise, in the special circumstances, may be regarded as recoverable. This building was erected on the leased premises, as seemingly appears from the record and the theory of the trial, by the lessees, and as theirs, to be removable by them. It was specially claimed that the building was by the lessor "appropriated to his own use and benefit" or converted after the trade fixtures were moved from the building, and that particular transaction was made the basis for the recovery of the damages suffered by the taking over of the building. Consequently the damages recoverable for the loss of the building arose wholly out of the commission of the act of conversion and not, in a legal sense, out of the commission of the tort based on fraudulent representation. It is not claimed by the appellant that the particular damages are not allowable as for conversion.
It is believed the lessees may not in the situation shown predicate the right to recover the profits or gains of the business which, as they claim, would have been yielded or earned during the unexpired period of the lease, and which, as claimed, they lost as the proximate result of the alleged tort based on fraudulent representations. Assume as a fact that the lessees might have realized profits or gains of business in the future occupation of the leased premises, yet, in view of the findings of the jury, such profits or gains that might have been earned could not be made the basis of compensation for the commission of the alleged tort. The lessees would be entitled to compensation only for the loss the particular tort caused or brought about, and if the particular tort did not cause or bring about any loss, then no damages could be said to have been occasioned or sustained as a consequence of the tort. According to the jury findings, the profits made by the lessees in the operation of their business on the leased premises during their sixty-day occupancy without being furnished the water, gas, and sewer connections that the lessor fraudulently represented would be made, were in the daily sum of "$19.85," whereas the profits or gains that the lessees "would have reasonably made" in the operation of their business "on the property in question" in the future occupancy of the premises for the period of the lease "had they been furnished with a sufficient supply of water, gas and sewerage connections" were in the daily sum of "$8.00." Such findings may not be regarded as reflecting a special damage or loss directly and necessarily occasioned to the business by the alleged wrongful act or default of the lessor. More daily gains were yielded by the business operated without the water and sewer connections than were represented would be made. And the recovery by the lessees of the profits or earnings of $8 daily that would have come from the future occupancy of the building may, not be predicated in this case upon being prevented by the alleged fraud of the lessor from carrying on their business at all in the future occupancy of any building during the unexpired period of the lease. There is no pretense of evidence that the lessees were prevented from leasing another building. The claim in the suit was to the extent only that the lessees' business was lessened in the use of the particular building by reason of the alleged wrongful representation that water, gas, and sewer connections would be promptly made. And, further, the recovery of the alleged future profits or earnings of the business may not be predicated upon breach of a contract in that respect. Such special loss does not appear to be based on any term of contract express or implied. The lease does not contain a covenant or language amounting to a covenant that the premises shall be suitable for a particular purpose nor that connections shall be made for water, gas and sewer purposes. If such covenants were made, reformation of the written lease contract was not sought nor prayed for.
The judgment is accordingly modified so as to eliminate the recovery for the amount of the future profits or gains, and as so modified will be in all things affirmed. The costs of appeal to be taxed against the appellees.