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IN THE DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT JANUARY TERM 2004
TOTALE, INC., a Florida corporation, and
award. As to the other issues, we find no error.1
HAROLD VAN ARNEM,
The evidence at trial was that Smith sent a
Appellants,
$100,000 check to a law firm for his investment in
Totale. According to the pretrial stipulation,
v.
Totale received the check on March 3, 1999.
DONALD C. SMITH,
The trial focused on the issue of liability. Smith
presented a convincing and comprehensive case
Appellee.
for liability on the securities and common law
fraud counts. During the trial, the parties paid little
attention to the issue of damages. With the
CASE NO. 4D02-4801
consent of the parties, the court's charge to the
jury on damages was vague. Once it finished the
instructions on the elements of the various theories
Opinion filed July 7, 2004
of recovery, the court charged the jury:
Appeal from the Circuit Court for the
If you find for the defendants, you will not
Seventeenth Judicial Circuit, Broward County;
consider the matter of damages, but if you find
Miette K. Burnstein, Judge; L.T. Case No.
for Mr. Smith, you should award him an amount
99-17273 CACE 21.
of money that the greater weight of the
evidence shows will fairly and adequately
Drew M. Levitt and Lee D. Sarkin, Boca Raton,
compensate him.
for appellants.
After posing interrogatory questions on the
Robert B. Macaulay, Isaac J. Mitrani and
theories of recovery, the verdict form asked one
Pamela Chamberlin of Mitrani, Rynor, Adamsky
damages question: "What was the amount of
& Macaulay, P.A., Miami, for appellee.
damages suffered by Plaintiff?"
GROSS, J.
During closing argument, the only damages
figure argued by Smith's attorneys was $100,000.
In the circuit court, Donald Smith brought suit
One attorney said:
against appellants, Totale, Inc. and Harold Van
Arnem, over a $100,000 investment gone bad. A
Obviously, [Smith's] injured. He's out $100,000
jury found that (1) both Totale and Van Arnem
had committed securities fraud and common law
1
fraud; (2) Totale was unjustly enriched at Smith's
The court's dismissal of the third-party complaint
expense; and (3) that Totale, but not Van Arnem,
without prejudice was well within the trial court's
discretion. See Fla. R. Civ. P. 1.270(b); Gortz v. Lytal,
had committed civil theft. The jury assessed
Reiter, Clark, Sharpe, Roca, Fountain & Williams, 769
damages of $350,000.
So. 2d 484, 487-88 (Fla. 4th DCA 2000); Brodfueher v.
Estate of Brodfueher, 833 So. 2d 784, 787 (Fla. 3d DCA
We write to address the propriety of the damage
2002). The trial court properly excluded evidence of a
settlement with a non-party. There was abundant proof
to support the securities and common law fraud claims
against Van Arnem.

. . . and I'm asking you to find, for Don Smith,
DuPuis v. 79th Street Hotel, Inc., 231 So. 2d 532
civil theft against Mr. Van Arnem in the amount
(Fla. 3d DCA 1970), instructs how to apply the
of $100,000, the exact amount of his check.
"flexibility theory" to do justice in a particular
case:
Moments later, while discussing the fraud counts,
the attorney mentioned damages by stating: "So
(1) [I]f the defrauded party is content with the
what Mr. Van Arnem did . . . is he lied to Don
recovery of only the amount that he actually
Smith through his agent . . . and again, it's the
lost, his damages will be measured under that
same $100,000 damages."
rule; (2) if the fraudulent representation also
amounts to a warranty, recovery may be had
The goal of damages in tort actions is to "restore
for loss of the bargain, because a fraud
the injured party to the position it would have been
accompanied by a broken promise should cost
in had the wrong not been committed." Nordyne,
the wrongdoer as much as the latter alone; (3)
Inc. v. Fla. Mobile Home Supply, Inc., 625 So. 2d
where the circumstances disclosed by the
1283, 1286 (Fla. 1st DCA 1993). In Martin v.
proof are so vague as to cast virtually no light
Brown, 566 So. 2d 890 (Fla. 4th DCA 1990), we
upon the value of the property had it
described the "flexibility theory" which allows two
conformed to the representations, the court
standards for measurement of damages in a fraud
will award damages equal only to the loss
case:
sustained; and (4) where the damages under
the `benefit of the bargain' rule are proved
Florida has adopted two standards for the
with sufficient certainty, that rule will be
measurement of damages in an action for
employed.
fraudulent representation. Either may be used to
do justice as the circumstances demand. The
Id. at 536 (quoting 37 AM. JUR. 2D Fraud and
first standard is the "benefit of the bargain" rule
Deceit � 352). In cases involving a fraudulent
which awards as damages the difference
sale of stock, "[u]nder either measure of damages,
between the actual value of the property and its
plaintiffs must prove the actual value of the
value had the alleged facts regarding it been
stock[] . . . at the time of purchase." Strickland v.
true. The second standard is the "out-of-pocket"
Muir, 198 So. 2d 49, 51 (Fla. 4th DCA 1967),
rule whic h awards as damages the difference
receded from on other grounds by Teca, Inc. v.
between the purchase price and the real or
WM-TAB, Inc., 726 So. 2d 828 (Fla. 4th DCA
actual value of the property.
1999) (en banc).
Id. at 891-92; see also Nystrom v. Cabada, 652
Under this approach to determining damages,
So. 2d 1266, 1268 (Fla. 2d DCA 1995); Nordyne,
the crucial time for the measurement is the time of
625 So. 2d at 1286. "The `flexibility theory'
the fraudulent representation. Later appreciation
permits the court to use either the `out-of-pocket'
or depreciation of the property that is subject of
or the `benefit-of-the-bargain' rule, depending
the false representation generally does not alter
upon which is more likely [to fully] compensate
the fraud damage computation. For example,
the injured party." Nordyne, 625 So. 2d at 1286.
Schryburt v. Olesen, 475 So. 2d 715 (Fla. 2d DCA
The "trial court may instruct the jury on the `out of
1985), involved the sale of a home by fraud. One
pocket' rule or the `benefit of the bargain' rule as
item of damages awarded by the trial court was
justice demands." Getelman v. Levey, 481 So. 2d
$15,393 for "loss of appreciation." Id. at 717.
1236, 1239 n.4 (Fla. 4th DCA 1985) (emphasis
The second district struck that item of damages
added).
from the award, analogizing it to the loss of
anticipated profits. The court wrote that
-2-

"[a]nticipated profits may constitute an element of
remittitur, that "[t]here wasn't any testimony by
damages where resale of the subject matter is
anybody that said [Smith] lost anything other than
contemplated by the parties and known to the
the $100,000."
representor, and where the plaintiffs pursue an
action for both breach of contract and for fraud in
For these reasons we affirm the final judgment,
inducing the contract." Id.; see also Nordyne, 625
reverse the damage award, and remand to the trial
So. 2d at 1286-87 (holding that in a case involving
court for entry of an amended final judgment, with
fraud that induced the buyer to purchase a
pre-judgment interest since March 3, 1999.
business, evidence of lost profits was properly
admitted under either the "out-of-pocket" or the
GUNTHER and TAYLOR, JJ., concur.
"benefit-of-the- bargain" approach to damages).
NOT FINAL UNTIL DISPOSITION OF ANY TIMELY
In this case, Smith had no problem
FILED MOTION FOR REHEARING.
demonstrating a loss under the "out-of-pocket"
measure of damages. He received nothing in
return for his $100,000 investment so his loss is
$100,000 plus pre-judgment interest since March
3, 1999. However, using the DuPuis approach,
Smith may not recover "benefit of bargain"
damages because the evidence at trial of a loss in
excess of the $100,000 was "so vague as to cast
virtually no light upon the value of the property had
it conformed to the representations." DuPuis, 231
So. 2d at 536 (citation omitted).
Smith argues that the testimony of Philip
McKnight, an associate of Van Arnem who
worked for Totale, supports the $350,000 verdict.
McKnight testified that the value of the company,
in connection with a 2000 private placement of up
to $20 million in financing, was between $130
million and $155 million; in November 1998, in
connection with the completely different financing
program that lured Smith, "there were discussions
about the valuation, and there was a range, and
the number that I recall was approximately $25
million." There was no other testimony
concerning the value of the company in 1998 and
1999, at the time Smith made his investment. The
argument that the five-fold increase in value
reflects the valuation of the company as it was
fraudulently represented to Smith is too
speculative to support a damage award in excess
of the $100,000 in lost principal. The trial judge
recognized this weakness in the damages award
by its comment at the hearing on a motion for
-3-

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