The Availability of Benefit of the Bargain Expectancy-based Damages for Buyers Defrauded in California Real Estate Transactions

Lawrence Steckman, Lester Schwab Katz & Dwyer, LLP
Robert Conner, Thornapple Associates

Abstract

This article provides a detailed discussion of many of California’s leading cases on real estate damages and analysis of different damage remedies available to defrauded purchasers of real property. While some courts have held defrauded buyers may only recover out of pocket damages under CC 3343, others conclude benefit of the bargain damages are permissible under CC 3333 and 1709, at least where financial injury incurred in a real estate purchase transaction traces to fiduciary fraud or recklessness. Certain cases hold that although CC 3333 and 1709 permit a damage recovery to make the injured plaintiff whole, because neither explicitly provides for a plaintiff to receive a benefit of the bargain damage award, such damages are unavailable even if the statute “tends” to award benefit of the bargain damages or its equivalent. California courts have upheld a broad range of expectancy-based remedies in cases involving the sale of California real estate including award of market appreciation damages measured through date of trial. The authors conclude that California law protects real property purchaser expectancies in the contexts of either fiduciary fraud or fiduciary recklessness, as well as instances of constructive fraud, by making benefit of the bargain damages (or their equivalent) available to injured plaintiffs.