Oliver v. Benton

VALLÉE, J.

Appeal by plaintiff from a judgment for defendants in an action for damages for fraud in the sale of real property.

The facts as found by the trial court are these. On August 26, 1946, defendants Benton and Marlow, with intent to deceive plaintiff and to induce her to purchase the real property which was improved, falsely represented to her that one of the dwelling units on the property was leased for a period of one year at a rental of $125 a month furnished, and that the rent was being paid. The actual rent provided by the lease was $77.50 a month, which was known by said defendants. Defendant Benton had granted the lessee an option to renew the lease for an additional period of six months. Plaintiff relied upon the representations and was induced thereby to purchase the property. Plaintiff was not damaged. The “actual value of the purchase price paid for the property did not exceed its actual value. ’ ’

[855]

Appellant contends that the finding of the difference between the represented and the actual rental income established damage suffered by her as a direct result of the fraud; that this finding is irreconcilable with the finding that plaintiff suffered no damage and, therefore, the judgment is unsupported by the findings.

The measure of damages in an action based on fraud in the sale of real property is prescribed by Civil Code, section 3343 enacted in 1935. So far as pertinent it reads: “One defrauded in the purchase, sale or exchange of property is entitled to recover the difference between the actual value of that with which the defrauded person parted and the actual value of that which he received, together with any additional damage arising from the particular transaction.” This rule is known as the “out-of-pocket” loss rule, sometimes “the tort” rule. It was enacted to provide a uniform rule in all cases of fraud and it is the exclusive measure of damages.

(Bagdasarian

v.

Gragnon,

31 Cal.2d 744 [192 P.2d 935].) The majority rule is the “benefit-of-the-bargain” rule which allows recovery of the difference between the actual value of what is received and the value it would have had if it had been as represented. It is generally referred to as the “loss-of-the-bargain” rule, sometimes as “the warranty” rule. (The Supreme Court of California refers to this rule as the “benefit-of-the-bargain” rule.) Prior to Civil Code, section 3343, some of the cases in this state applied the “benefit-of-the-bargain” rule; others the “out-of-pocket” rule.