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AGO v. BEGG

December 15, 1988

ELISABETTA and PIETRO AGO, Plaintiffs,
v.
BEGG, INC., et al., Defendants



The opinion of the court was delivered by: REVERCOMB

 GEORGE H. REVERCOMB, UNITED STATES DISTRICT JUDGE

 After the Court entered judgment pursuant to a jury verdict on October 26, 1988, the parties each filed post-trial motions. The Court grants defendants' motion to amend judgment to remit the amount of damages, grants defendant Betty Jacobsen's motion for a judgment notwithstanding the verdict on the fraud count, denies defendant Mount Vernon Realty's motion to set aside judgment, and denies plaintiffs' motion for a partial new trial or for a judgment notwithstanding the verdict.

 This case arose after plaintiffs entered into a contract with Mr. Edgar Weisman for the sale of their house on Klingle Street in Washington, D.C. Defendant Betty Jacobsen, a realtor, was the selling agent in this transaction. She was employed by Noah-Cummings, Inc., which had a licensing agreement with Mount Vernon Realty, Inc., which in turn allowed Noah-Cumming's agents to use Mount Vernon's tradename. Defendants Begg, Inc., Suzanne Madden, and Catherine Wojciak were the listing agents. Defendant Ms. Jacobsen presented Begg with a sales contract from Mr. Edgar Weisman. Begg contacted Mr. and Mrs. Ago.

 The final contract price was $ 265,000, of which Mr. Weisman paid $ 70,000 in cash as a down payment. Mr. Weisman placed a first trust on the property, which was to be used to pay for and improve the property. Plaintiff Elisabetta Ago took back a second trust of $ 195,000, the amount of the purchase price minus the down payment. Mr. Weisman, who agreed to pay 12 percent on the second trust, failed to make any payments on the second trust. Had Mr. Weisman made these payments, plaintiffs argued, plaintiffs would have received $ 341,811 up to the day of deliberation.

 Weisman also defaulted on the first trust and the property was foreclosed. With a total indebtedness in excess of the purchase price, there was no money to pay the second trust at foreclosure, and the plaintiffs lost their equity and entire interest in the property.

 Plaintiffs sued Begg, Inc., Suzanne Madden, Catherine Wojciak, Betty Jacobsen, and Mount Vernon Realty for negligent breach of fiduciary duty and fraud. The Court directed a verdict on the fraud count in favor of defendants Begg, Inc., Suzanne Madden, and Catherine Wojciak. The jury found all defendants liable on all counts, except that Mount Vernon Realty was found not liable for fraud. The jury awarded plaintiffs $ 400,000.

 Defendants' Motion to Amend Judgment to Remit the Amount of Damages

 All defendants moved to amend the judgment to remit the amount of damages to $ 195,000, the amount of the contract price minus the down payment received by plaintiffs. The Court has authority Under Federal Rule of Civil Procedure 59 to amend the judgment if the jury verdict is unsupported by the evidence or by the law.

 The Court believes that it is clear as a matter of fact and law that plaintiffs are entitled only to $ 195,000 in damages, the amount of "out-of-pocket" loss suffered by them. In the District of Columbia, the usual standard for measuring damages in real estate fraud or negligence cases is the "out-of-pocket" rule or, more precisely, the difference between the market value of the property sold and the amount actually received. See Dresser v. Sunderland Apartments Tenants Association, Inc., 465 A.2d 835, 840 (D.C. 1983); Horning v. Ferguson, 52 A.2d 116, 119 (D.C. 1947). In the instant case, plaintiffs are entitled as a matter of law to only $ 195,000, the difference between the contract price, $ 265,000, and the amount they received, $ 70,000. Plaintiffs are not entitled to $ 341,811, which in essence would give plaintiffs the full "benefit of their bargain" with Mr. Weisman. A number of courts outside the District wisely have refused the "benefit of the bargain" calculation in cases in which, as here, third-parties to the transaction are being sued. See, e.g Horning; Scholz Homes Inc. v. Wallace, 590 F.2d 860, 864 (10th Cir. 1979); Nailor v. Western Mortgage Co., 54 Wash. 2d 151, 338 P.2d 737, 739 (1959).

 In any event, plaintiffs also note that Dresser stated that the "out-of-pocket" rule may be departed from where necessary to effect justice. 465 A.2d at 840 n.18. Assuming this statement to be true, the Court believes that departure from the "out-of-pocket" rule clearly is not justified in this case. The thrust of plaintiffs' case is that defendants were negligent or fraudulent in leading plaintiffs to Mr. Weisman in the first place. Had they not breached their responsibilities, plaintiffs argue, they would never have encouraged plaintiffs to enter into the contract with Mr. Weisman. If this had been the case, plaintiffs would have saved their "out-of-pocket" losses and would never have had the opportunity to hope for the "benefit of their bargain."

 Accordingly, the Court concludes without doubt that the jury's award of $ 400,000 was unreasonable and unjustified by the evidence or the law, and that plaintiffs are entitled as a matter of law under the jury's verdict to only their "out-of-pocket" losses of $ 195,000. *fn1"

 Finally, plaintiffs argue in their opposition to defendants' post-trial motions that the Court should accept the jury's award of $ 400,000 -- a total more than $ 58,000 in excess of the amount requested by plaintiffs -- because this excess represents the justifiable award of "attorneys' fees." Defendants are correct, however, in noting that attorney's fees were never a part of this suit and were never mentioned at trial. There is no reason, and can be no reason, to characterize a portion of the jury's award as justifiable attorney's fees. Moreover, if plaintiffs are asking to the Court to award attorney's fees, the Court believes that the award of attorney's fees is not justified in this ...


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