Litigation

Cost of repair fails as measure of fraud damages, Oregon Court of Appeals holds

By Lori Bauman

The wrong measure of damages sunk a claim for fraud in a case decided yesterday by the Oregon Court of Appeals.  In Morasch v. Hood, the plaintiffs alleged fraud in connection with defendants' sale of real property to plaintiffs.  Plaintiffs offered evidence of the cost of repairing or altering the property to bring it into conformity with defendants' representations, and the jury used that evidence to award damages to plaintiffs.  On appeal, defendants disputed whether the cost to repair is the proper measure of damages. 

The Court of Appeals held that the "out-of-pocket" damages rule applies, which means that plaintiff must show the difference between the purchase price and the fair market value on the date of sale.  And the fair market value is the value it would have had if defendants hadn't misrepresented the property.  Because plaintiff failed to show the value the property would have had if defendants had told the truth, the jury was unable to apply the correct measure of damages, and its verdict was properly vacated.

Full post as published by Northwest Business Litigation Blog on December 10, 2009 (boomark / email).