Cruz v. Andrews Restoration, Inc
In Cruz v. Andrews Restoration, Inc., 364 S.W.3d 817 (Tex. 2012), a contractor sued a homeowner, Cruz, for breach of contract, and Cruz counterclaimed under the Texas Deceptive Trade Practices Act (DTPA).
Although Cruz obtained a partial summary judgment on DTPA liability, the jury returned a zero damages finding. Id.
The court of appeals and supreme court affirmed the resulting judgment awarding Cruz nothing on his DTPA claim. A principal question on appeal was whether Cruz was entitled to the DTPA remedy of restoration of the consideration that had been paid to the contractor. Id. at 824-27.
To answer this question, the supreme court turned to the common law of rescission and restitution. See id.
The supreme court observed that under the common law, a rescission claimant generally must return the parties to the status quo ante by returning whatever the claimant has received from the defendant--what the court called "counter-restitution." Id. at 825-26.
However, a defendant's wrongdoing may excuse the claimant from this obligation when counter-restitution is not feasible. Id. at 826.
The supreme court concluded these principles apply to the DTPA remedy of restoration of consideration, but the claimant need not make or tender counter-restitution as a prerequisite to relief as long as the award to the claimant can be reduced accordingly. Id. at 826-27.
Because Cruz had not deducted the value he received from the contractor, or proved how much he rather than his insurer had paid the contractor, the court held that Cruz had failed to prove conclusively that he was entitled to the sum he claimed as restoration of consideration under the DTPA. Id. at 827.
In Cruz, the Texas Supreme Court relied heavily on the Restatement (Third) of Restitution and Unjust Enrichment in explaining the law of rescission. 364 S.W.3d at 825-27.
The court held that rescission is "generally limited to cases in which counter-restitution by the claimant will restore the defendant to the status quo ante." Id. at 826 (citing Restatement (Third) of Restitution and Unjust Enrichment 54(3)).
The court also held that a defendant's wrongdoing may factor into whether it should bear an uncompensated loss in situations in which the claimant cannot restore the defendant to the status quo ante, but a defendant's wrongdoing does not excuse the claimant from counter-restitution when counter-restitution is feasible. Id. (citing Restatement 54(3)(b) & cmt. c).
Finally, incorporating Restatement principles into its interpretation of the rescission remedy available under the DTPA, the court held that a DTPA claimant does not have to make restitution or a tender of restitution to the defendant before seeking the remedy "as long as the affirmative relief to the consumer can be reduced by (or made subject to) the consumer's reciprocal obligation of restitution." Id. at 827 (citing Restatement 54(5)).