Baker v. Dorfman

Texas Court of Civil Appeals · Torts

Tortsdamageswrongful resale of propertytrust relationshipmeasure of damagesdouble saleroyalty interestinnocent purchaser

Facts

On October 26, 1940, appellants bought a five-acre royalty interest from appellees for $300 per acre, and appellees executed and delivered the deed that day. Before appellants recorded their deed, appellees sold the same royalty interest on December 23, 1940, to Montex Petroleum Company for $500 per acre, and Montex was an innocent purchaser for value without notice. Montex recorded first, on December 28, 1940, while appellants recorded on December 31, 1940. The parties agreed that the royalty's fair market value when suit was filed was $2250 per acre, and appellees tendered appellants the $2500 received in the second sale.

Issue

When a vendor wrongfully makes a second sale of property already conveyed, but no trust or fiduciary relationship exists between the original buyer and seller, are the original buyers' damages measured by the property's market value at trial or by the amount received in the second sale?

Rule

If no trust or fiduciary relationship exists between the parties, damages for a wrongful second sale of property previously conveyed are measured by the amount the seller received in the second sale, with interest to the date of tender. A higher valuation at the time of trial applies only in cases grounded on an actual trust relationship, such as where property is held for another or under a bond for title.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Odessa, Texas, Lena Ortiz paid cash for a mineral-interest assignment from Reed Hollow Exploration, and the assignment was executed and delivered that day. Before Lena recorded, Reed Hollow sold the same interest to Cedar Bluff Energy, an innocent purchaser without notice, for a higher price; by the time Lena sued, the interest had increased dramatically in value.

Assuming no continuing relationship existed after the first cash conveyance, what is Lena's proper measure of damages against Reed Hollow?

Explanation. When the seller fully conveyed the property for cash and retained no trust-type role, no trust or fiduciary relationship exists. In that situation, damages for the wrongful second sale are measured by the consideration received on the second sale, with interest to the date of tender, not by the appreciated trial-date value. (Derived from Baker v. Dorfman (n.d.).)