Chastain v. Koonce
29 Tex. Sup. Ct. J. 79, 700 S.W.2d 579, 1985 Tex. LEXIS 1503 (1985)
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Rule of Law:
For an action to be unconscionable under the Texas Deceptive Trade Practices Act (DTPA) by taking advantage of a person's lack of knowledge, the resulting unfairness must be glaringly noticeable, flagrant, complete, and unmitigated, determined by an objective standard without requiring proof of the defendant's intent. Separately, a property buyer qualifies as a 'consumer' when their complaint stems from misrepresentations about the nature of the surrounding development, as these representations are an integral part of the transaction for the purchased property.
Facts:
- In 1979, Charles Koonce and J.P. Stroud began selling five-acre tracts from their larger farm property.
- Koonce and Stroud told Gary M. Chastain and three other couples that lots 2 through 15 would be restricted for single-family residential use only.
- Relying on these verbal representations, the couples purchased lots 4, 5, 6, and 9. The deeds for their lots contained residential restrictions but did not mention restrictions on other lots.
- After the couples had built homes on their properties, Koonce and Stroud sold lot 2 to David Metts in January 1981.
- Approximately seven months later, Metts constructed a commercial oil field pipe storage yard on lot 2.
- About a year after the original land purchase, when Gary Chastain complained, J.P. Stroud threatened him with physical violence and with building a rubber-burning plant in the area.
Procedural Posture:
- Gary M. Chastain and other purchasers sued Charles G. Koonce and J.P. Stroud in a Texas trial court, alleging violations of the Deceptive Trade Practices-Consumer Protection Act (DTPA).
- A jury found in favor of the purchasers, concluding that the sellers had engaged in an unconscionable course of action.
- The trial court rendered a judgment for the purchasers based on the jury's verdict.
- Koonce and Stroud, as appellants, appealed to the Texas Court of Appeals.
- The Court of Appeals reversed the trial court's judgment, holding there was no evidence to support the finding of unconscionability.
- The Chastains and other purchasers, as petitioners, were granted review by the Supreme Court of Texas.
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Issue:
Does a seller's misrepresentation about future land use restrictions constitute an unconscionable action under the Texas Deceptive Trade Practices Act (DTPA) where the buyers presented no evidence that they were taken advantage of to a 'grossly unfair degree'?
Opinions:
Majority - Justice Kilgarlin
No, a seller's misrepresentation about future land use restrictions does not constitute an unconscionable action where the buyers fail to prove they were taken advantage of to a 'grossly unfair degree.' The court first determined that the purchasers were 'consumers' under the DTPA because their complaint was based on the sellers' representations which were an integral part of the transaction for the lots they purchased. However, to prove an 'unconscionable action,' the DTPA requires showing either (A) a defendant took advantage of a consumer's lack of knowledge to a grossly unfair degree, or (B) there was a gross disparity between the value received and consideration paid. The purchasers presented no evidence of a gross disparity in value (Part B). For Part A, the court established that 'grossly unfair' requires an objective showing that the resulting unfairness was 'glaringly noticeable, flagrant, complete and unmitigated.' The sellers' misrepresentations did not meet this high standard. Furthermore, Stroud's threats, occurring a year after the transaction, were not relevant to assessing the unfairness of the original sale.
Concurring - Justice Gonzalez
No, the sellers' actions were not unconscionable, but the court should not have reached this question because the purchasers lack standing as 'consumers' under the DTPA. While I agree with the result that there is no evidence of unconscionability, the majority errs in finding the purchasers are consumers. The DTPA's two-prong test requires that the goods purchased must form the basis of the complaint. Here, the purchasers bought lots 4, 5, 6, and 9, but their complaint is about the use of lot 2, a piece of property they never sought or acquired. Since their deeds granted them no rights over lot 2, the goods they actually purchased are not the basis of their complaint, and they therefore fail the second prong of the consumer test.
Analysis:
This decision significantly clarifies two components of the Texas DTPA. First, it broadens the scope of consumer standing by establishing that misrepresentations about the character of a larger development can form the basis of a complaint, even if the issue arises on a property the consumer did not purchase. Second, and more critically, it establishes a high, objective standard for proving unconscionability based on taking 'grossly unfair' advantage of a consumer, defining it as glaring and flagrant unfairness. This raises the evidentiary bar for plaintiffs, making it easier to qualify as a consumer but potentially more difficult to win on the merits of an unconscionability claim without showing extreme, rather than simple, unfairness in the transaction.
