B. Mahler Interests, LP v. DMAC Construction, Inc.
Opinion
ACCEPTED 14-15-00061-CV FOURTEENTH COURT OF APPEALS HOUSTON, TEXAS 12/9/2015 11:38:11 PM CHRISTOPHER PRINE CLERK
NO. 14-15-00061-CV FILED IN 14th COURT OF APPEALS IN THE COURT OF APPEALS HOUSTON, TEXAS FOURTEENTH JUDICIAL DISTRICT 12/9/2015 11:38:11 PM HOUSTON, TEXAS CHRISTOPHER A. PRINE Clerk
B. MAHLER INTERESTS, L.P., APPELLANT
V.
DMAC CONSTRUCTION, INC., APPELLEE
On Appeal from Case Number 2012-64035 in the 152nd District Court, Harris County, Texas
APPELLEE’S BRIEF
REYNOLDS FRIZZELL LLP Brandon T. Allen State Bar No: 24009353 James A. Schuelke State Bar No: 24075037 Drew D. Pennebaker State Bar No: 24083645 1100 Louisiana Street, Suite 3500 Houston, Texas 77002 Telephone: (713) 485-7200 Facsimile: (713) 485-7250 ballen@reynoldsfrizzell.com jschuelke@reynoldsfrizzell.com ATTORNEYS FOR APPELLEE DMAC CONSTRUCTION, INC. TABLE OF CONTENTS 1 Page(s)
TABLE OF CONTENTS ....................................................................................... i-iii
TABLE OF AUTHORITIES ................................................................................ iv-v
ISSUE PRESENTED .................................................................................................1
STATEMENT OF FACTS ........................................................................................2
SUMMARY OF THE ARGUMENT ........................................................................ 6
ARGUMENT ...........................................................................................................12
A. The Parties Agree that Mahler’s Claims Are Subject to Four-year Statutes of Limitations, and that Barring Application of the Discovery Rule or Fraudulent Concealment, They Are Time-barred .........................................12
B. The Trial Court Properly Granted Summary Judgment Rejecting Mahler’s Discovery Rule Counter-defense ...................................................................13
1. The Discovery Rule Does Not Apply to Mahler’s UCC Claims ........ 13
2. The Parties’ Contract Eliminates the Discovery Rule ........................14
3. The Discovery Rule Does Not Apply to Mahler’s Claims Because Mahler’s Alleged Injuries Are Not Inherently Undiscoverable .......... 17
a. The Discovery Rule Does Not Defer Accrual of Mahler’s Claims Concerning the Doors and Flooring, because a Manufacturer’s Basic Product Information Is Not Inherently Undiscoverable; Indeed, It Was Actually Known to Mahler .... 18 1 Appellant’s Brief begins by addressing DMAC’s no-evidence motion for summary judgment. Appellee’s no-evidence points pertain only to Mahler’s fraudulent concealment counter-defense, so they are addressed in Section C.6 of this Brief with the remainder of the argument concerning fraudulent concealment. Appellee’s traditional summary judgment addressed all Appellant’s claims and counter-defenses and is treated first herein. Similarly, Mahler’s second issue pertains to the burden of pleading and proving fraudulent concealment and is addressed in Section C.1 of this Brief. i b. The Discovery Rule Does Not Apply to Mahler’s Claims Concerning the Porch Roofs .....................................................23
i. The Materials and Finish Work for the Porch Roofs Were Both Discoverable and Discovered More than Four Years Before Mahler Filed Suit .............................23
ii. The Alleged Deficiencies in the Structural Framing for the Porch Roofs Were Both Discoverable and Discovered More than Four Years Before Mahler Filed Suit .........................................................................25
c. Conclusion on the Discovery Rule—Inapplicable ................... 33
C. The Trial Court Properly Granted Summary Judgment over Mahler’s Fraudulent Concealment Counter-Defense ...................................................34
1. Mahler Did Not Even Plead Fraudulent Concealment with Respect to its Claims Concerning the Porch Roof Construction, Much Less Introduce Evidence Sufficient to Carry Its Burden .............................35
2. Even if Mahler Had Properly Pled Fraudulent Concealment Concerning the Porch Roofs, DMAC’s Motion for Summary Judgment Refuted an Element of that Counter-Defense as a Matter of Law..................................................................................................39
3. The Summary Judgment Evidence Conclusively Demonstrates that DMAC Never Misrepresented or Concealed Any Information about the Floors or the Doors ..............................................................41
4. Even if DMAC Had Made a Misrepresentation About the Floors or the Doors (It Did Not), Fraudulent Concealment Would Be Unavailable to Toll Limitations Because the Relevant Facts Could Have Been Discovered Through Reasonable Diligence .....................44
5. Mahler Did Not Rely on Any DMAC Representations Concerning
ii the Doors or Floors, and Any Reliance Would Have Been Unreasonable .......................................................................................46
6. The Trial Court Properly Granted DMAC’s No-Evidence Motion on Fraudulent Concealment Because Mahler Failed to Meet its Burden to Produce Evidence Supporting Each Element of its Counter-Defense..................................................................................48
CONCLUSION ........................................................................................................50
CERTIFICATION OF COMPLIANCE ..................................................................51
CERTIFICATE OF SERVICE ................................................................................51
iii TABLE OF AUTHORITIES
CASES PAGE(S)
Am. Alloy Steel, Inc. v. Armco, Inc., 777 S.W.2d 173 (Tex. App.—Houston [14th Dist.] 1989, no writ)………………………………………………………………13
Barker v. Eckman, 213 S.W.3d 306 (Tex. 2006)……………………………………………17-18
Bayou Bend Towers Council of Co-Owners v. Manhattan Const. Co., 866 S.W.2d 740 (Tex. App.—Houston [14th Dist.] 1993, writ denied) ………………………………….30, 34, 39-40, 43, 45, 48
Booker v. Real Homes, Inc., 103 S.W.3d 487 (Tex. App.—San Antonio 2003) as clarified on denial of reh’g (Feb. 26, 2003) ……………..……...…43-44
BP America Production Co. v. Marshall, 342 S.W.3d 59 (Tex. 2011) ……………………………...9-10, 28, 40, 44-47
Brisbane Lodging, L.P. v. Webcor Builders, Inc., 216 Cal. App. 4th 1249 (Cal. Ct. App. 2013) ……………………………..15
Clear Lake Ctr., L.P. v. Garden Ridge, L.P., 416 S.W.3d 527 (Tex. App.—Houston [14th Dist.] 2013, no pet) ……………………………………………………………….18
Computer Associates International, Inc. v. Altai, Inc., 918 S.W.2d 453 (Tex. 1996) ……………………………………………...19
EZ Pawn Corp. v. Mancias, 934 S.W.2d 87 (Tex. 1996) …………………………………………….....16
Goswami v. Metro. Sav. & Loan Ass’n, 751 S.W.2d 487 (Tex. 1988) ……………………..……………………….38
iv HECI Expl. Co. v. Neel, 982 S.W.2d 881 (Tex. 1998) ………………………….….……19, 22, 31, 43
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ACCEPTED 14-15-00061-CV FOURTEENTH COURT OF APPEALS HOUSTON, TEXAS 12/9/2015 11:38:11 PM CHRISTOPHER PRINE CLERK
NO. 14-15-00061-CV FILED IN 14th COURT OF APPEALS IN THE COURT OF APPEALS HOUSTON, TEXAS FOURTEENTH JUDICIAL DISTRICT 12/9/2015 11:38:11 PM HOUSTON, TEXAS CHRISTOPHER A. PRINE Clerk
B. MAHLER INTERESTS, L.P., APPELLANT
V.
DMAC CONSTRUCTION, INC., APPELLEE
On Appeal from Case Number 2012-64035 in the 152nd District Court, Harris County, Texas
APPELLEE’S BRIEF
REYNOLDS FRIZZELL LLP Brandon T. Allen State Bar No: 24009353 James A. Schuelke State Bar No: 24075037 Drew D. Pennebaker State Bar No: 24083645 1100 Louisiana Street, Suite 3500 Houston, Texas 77002 Telephone: (713) 485-7200 Facsimile: (713) 485-7250 ballen@reynoldsfrizzell.com jschuelke@reynoldsfrizzell.com ATTORNEYS FOR APPELLEE DMAC CONSTRUCTION, INC. TABLE OF CONTENTS 1 Page(s)
TABLE OF CONTENTS ....................................................................................... i-iii
TABLE OF AUTHORITIES ................................................................................ iv-v
ISSUE PRESENTED .................................................................................................1
STATEMENT OF FACTS ........................................................................................2
SUMMARY OF THE ARGUMENT ........................................................................ 6
ARGUMENT ...........................................................................................................12
A. The Parties Agree that Mahler’s Claims Are Subject to Four-year Statutes of Limitations, and that Barring Application of the Discovery Rule or Fraudulent Concealment, They Are Time-barred .........................................12
B. The Trial Court Properly Granted Summary Judgment Rejecting Mahler’s Discovery Rule Counter-defense ...................................................................13
1. The Discovery Rule Does Not Apply to Mahler’s UCC Claims ........ 13
2. The Parties’ Contract Eliminates the Discovery Rule ........................14
3. The Discovery Rule Does Not Apply to Mahler’s Claims Because Mahler’s Alleged Injuries Are Not Inherently Undiscoverable .......... 17
a. The Discovery Rule Does Not Defer Accrual of Mahler’s Claims Concerning the Doors and Flooring, because a Manufacturer’s Basic Product Information Is Not Inherently Undiscoverable; Indeed, It Was Actually Known to Mahler .... 18 1 Appellant’s Brief begins by addressing DMAC’s no-evidence motion for summary judgment. Appellee’s no-evidence points pertain only to Mahler’s fraudulent concealment counter-defense, so they are addressed in Section C.6 of this Brief with the remainder of the argument concerning fraudulent concealment. Appellee’s traditional summary judgment addressed all Appellant’s claims and counter-defenses and is treated first herein. Similarly, Mahler’s second issue pertains to the burden of pleading and proving fraudulent concealment and is addressed in Section C.1 of this Brief. i b. The Discovery Rule Does Not Apply to Mahler’s Claims Concerning the Porch Roofs .....................................................23
i. The Materials and Finish Work for the Porch Roofs Were Both Discoverable and Discovered More than Four Years Before Mahler Filed Suit .............................23
ii. The Alleged Deficiencies in the Structural Framing for the Porch Roofs Were Both Discoverable and Discovered More than Four Years Before Mahler Filed Suit .........................................................................25
c. Conclusion on the Discovery Rule—Inapplicable ................... 33
C. The Trial Court Properly Granted Summary Judgment over Mahler’s Fraudulent Concealment Counter-Defense ...................................................34
1. Mahler Did Not Even Plead Fraudulent Concealment with Respect to its Claims Concerning the Porch Roof Construction, Much Less Introduce Evidence Sufficient to Carry Its Burden .............................35
2. Even if Mahler Had Properly Pled Fraudulent Concealment Concerning the Porch Roofs, DMAC’s Motion for Summary Judgment Refuted an Element of that Counter-Defense as a Matter of Law..................................................................................................39
3. The Summary Judgment Evidence Conclusively Demonstrates that DMAC Never Misrepresented or Concealed Any Information about the Floors or the Doors ..............................................................41
4. Even if DMAC Had Made a Misrepresentation About the Floors or the Doors (It Did Not), Fraudulent Concealment Would Be Unavailable to Toll Limitations Because the Relevant Facts Could Have Been Discovered Through Reasonable Diligence .....................44
5. Mahler Did Not Rely on Any DMAC Representations Concerning
ii the Doors or Floors, and Any Reliance Would Have Been Unreasonable .......................................................................................46
6. The Trial Court Properly Granted DMAC’s No-Evidence Motion on Fraudulent Concealment Because Mahler Failed to Meet its Burden to Produce Evidence Supporting Each Element of its Counter-Defense..................................................................................48
CONCLUSION ........................................................................................................50
CERTIFICATION OF COMPLIANCE ..................................................................51
CERTIFICATE OF SERVICE ................................................................................51
iii TABLE OF AUTHORITIES
CASES PAGE(S)
Am. Alloy Steel, Inc. v. Armco, Inc., 777 S.W.2d 173 (Tex. App.—Houston [14th Dist.] 1989, no writ)………………………………………………………………13
Barker v. Eckman, 213 S.W.3d 306 (Tex. 2006)……………………………………………17-18
Bayou Bend Towers Council of Co-Owners v. Manhattan Const. Co., 866 S.W.2d 740 (Tex. App.—Houston [14th Dist.] 1993, writ denied) ………………………………….30, 34, 39-40, 43, 45, 48
Booker v. Real Homes, Inc., 103 S.W.3d 487 (Tex. App.—San Antonio 2003) as clarified on denial of reh’g (Feb. 26, 2003) ……………..……...…43-44
BP America Production Co. v. Marshall, 342 S.W.3d 59 (Tex. 2011) ……………………………...9-10, 28, 40, 44-47
Brisbane Lodging, L.P. v. Webcor Builders, Inc., 216 Cal. App. 4th 1249 (Cal. Ct. App. 2013) ……………………………..15
Clear Lake Ctr., L.P. v. Garden Ridge, L.P., 416 S.W.3d 527 (Tex. App.—Houston [14th Dist.] 2013, no pet) ……………………………………………………………….18
Computer Associates International, Inc. v. Altai, Inc., 918 S.W.2d 453 (Tex. 1996) ……………………………………………...19
EZ Pawn Corp. v. Mancias, 934 S.W.2d 87 (Tex. 1996) …………………………………………….....16
Goswami v. Metro. Sav. & Loan Ass’n, 751 S.W.2d 487 (Tex. 1988) ……………………..……………………….38
iv HECI Expl. Co. v. Neel, 982 S.W.2d 881 (Tex. 1998) ………………………….….……19, 22, 31, 43
In re Bank One, N.A., 216 S.W.3d 825 (Tex. 2007) ………………………………….…….……..16
In re Ledet, 2004 WL 2945699 (Tex. App.—San Antonio Dec. 22, 2004, no pet.) ………………………….………….….………......16
In re McKinney, 167 S.W.3d 833 (Tex. 2005) …………………………………………...….16
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (Tex. 1998) …………………………………………..35, 49
Key v. Viera, 01-07-00587-CV, 2009 WL 350602 (Tex. App.—Houston [1st Dist.] Feb. 12, 2009, no pet.) ……………………………………….....12
KPMG Peat Marwick v. Harrison County Hous. Fin. Corp., 988 S.W.2d 746 (Tex. 1999) …………………………………………..…..34
Medina v. Tate, 01-12-00496-CV, 2013 WL 3421973 (Tex. App.—Houston [1st Dist.] July 9, 2013, no pet.) ……………………………………...…..44
PPG Indus., Inc. v. JMB/Houston Centers Partners Ltd. P’ship, 146 S.W.3d 79 (Tex. 2004) ………..…………….…………13, 17-18, 30, 43
Royston, Rayzor, Vickery, & Williams, LLP v. Lopez, 467 S.W.3d 494 (Tex. 2015), reh’g denied (Sept. 11, 2015) .…………..…16
Safeway Stores, Inc. v. Certainteed Corp., 710 S.W.2d 544 (Tex. 1986) ………………………………...…………….12
Shell Oil Co. v. Ross, 356 S.W.3d 924 (Tex. 2011) ...………………………………6, 34-35,48-49
v Vera v. N. Star Dodge Sales, Inc., 989 S.W.2d 13 (Tex. App.—San Antonio 1998, no pet.) .…..…..…….16-17
Via Net v. TIG Insurance Co., 211 S.W.3d 310 (Tex. 2006) ………...…………12, 17-18, 21-22, 31-32, 43
Wagner & Brown, Ltd. v. Horwood, 58 S.W.3d 732 (Tex. 2001) …………………………...……………18-20, 46
Williams v. Khalaf, 802 S.W.2d 651 (Tex. 1990) ……………………………………...……….12
Wilson v. Magaro, 01-12-00952-CV, 2013 WL 3243389 (Tex. App.—Houston [1st Dist.] June 25, 2013, no pet.) ……………………….25
Wortham v. Dow Chem. Co., 179 S.W.3d 189 (Tex. App.—Houston [14th Dist.] 2005, no pet.) ………………………………………………………………36
RULES AND STATUTES
Tex. Bus. & Com. Code §2.725(a) ……………………………………...………..12
Tex. Bus. & Com. Code §2.725(b) ……………………………………..…….12-13
C.P.R.C. §16.004 ………………..………………………………………………..12
vi ISSUE PRESENTED
1. Did the trial court correctly grant summary judgment in favor of Defendant- Appellee DMAC Construction, Inc. because Plaintiff-Appellant’s claims are barred by the applicable statutes of limitations?
1 STATEMENT OF FACTS Appellant B. Mahler Interests, L.P. (“Mahler”), hired Appellee DMAC
Construction, Inc. (“DMAC”) in 2005 as the general contractor for the construction
of a multi-building event center and reception hall called Briscoe Manor (the
“Project”). (C.R. 2 151, 216). This lawsuit involves three components of the
Project that Mahler now claims were installed in breach of the parties’ contract: (1)
certain wooden doors installed at exterior locations; (2) the flooring installed in
certain rooms; and (3) the porch roofs built on either side of the main reception
building. (C.R. 6-11, 215-16).
DMAC performed its work on these items in a good and workmanlike
manner, consistent with its contractual obligations. This lawsuit is an attempt by
the owner of a highly successful, award-winning wedding reception venue to force
the original builder of that venue to pay for the cost of building upgrades and
renovations years after the work was complete. Mahler did not file suit until the
Project had been in use as a commercial reception venue for nearly six years, when
Mahler was engaged in an expansion and extensive renovations on the Project.
(C.R. 151, 214, 219). For the purposes of this appeal, the only relevant facts are
those reflecting when Mahler knew or should have known of the facts giving rise
to its claims. A review of the record evidence reveals that even if Mahler’s claims 2 Citations to the Clerk’s Record are designated “C.R.” followed by the page number. Citations to the Supplemental Clerk’s Record are designated “S.C.R.#” followed by the page number. Citations to the Reporter’s Record are designated “R.R.” followed by the page number. 2 against DMAC were substantively valid (and they are not), they are plainly barred
by the relevant statutes of limitations—just as Judge Schaffer found below.
Mahler and DMAC executed the construction contract at issue on November
29, 2005, and DMAC broke ground on the Project two months later, in January
2006. (C.R. 151, 154). Mahler was actively involved in the construction process.
For example, Jorden Mahler3—part owner (along with other members of his
family) and sole day-to-day manager of Appellant’s business—selected the
wooden doors at issue and was involved in the selection of the flooring product,
which Mr. Mahler knew was made of a cost-effective composite material. (S.C.R.2
104, C.R. 221).
Construction, including installation of the doors, flooring, and porch roofs at
issue, was substantially complete by October 25, 2006. (C.R. 161, 215, 225-26).
The Project was opened and in regular use as an event venue before the end of
2006. (C.R. 151, 214). DMAC performed punch-list items and change-order work
during the end of 2006 and for much of 2007. (C.R. 151).
In August 2007—over five years before filing this lawsuit—Mahler hired
both a licensed professional inspector and a licensed professional engineer to
inspect the property after it had been in use as a commercial event venue for almost
3 Jorden Mahler is the only officer or employee of Appellant to offer any summary judgment evidence, either by deposition or affidavit (C.R. 207-60, S.C.R.2 29). He and his father, Bill Mahler, have made all material decisions for Mahler since its inception. (C.R. 212). 3 a year. (C.R. 163-90, 217, 236). These inspectors produced a detailed report of the
condition of the Project, including evaluations of the structure, foundation, roof,
load-bearing walls, ceilings, floors, plumbing system, electrical power system,
heating and cooling systems, and appliances (the “2007 Report”). (C.R. 163).
The licensed professional engineer that Mahler hired, Edward Robinson,
provided a standard inspection for patent defects, meaning that the report relied on
visual observation of the property and that no special or destructive testing was
performed. (C.R. 173-74). In this routine inspection report, Mr. Robinson
specifically noted two of the three issues that would become the subject of this
lawsuit more than five years later: according to Mr. Robinson, (1) the porch roof
visibly sagged, indicating a “structure of insufficient stiffness to prevent the sag,”
and (2) the “owner had already expressed a concern that the wood exit doors from
the buildings were not intended for exterior use.” (C.R. 175, 179, 186).
On the basis of the 2007 Report and its own inspections and use of the
Project, Mahler requested that DMAC perform certain limited corrective work on
the Project, which DMAC did. (C.R. 151, 217). In 2007 and early 2008, Mr.
Mahler had concerns about the structural framing of the porch roofs (C.R. 245),
and he knew that DMAC never addressed these concerns (C.R. 241-42), but he
chose not to perform any further inspection to follow up on the structural
anomalies noted in the 2007 Report, (251-52)—the same alleged anomalies about
4 which Mahler now complains, (C.R. 244). Similarly, in 2007, Mahler knew that
(as Mahler now complains) the wood exit doors were not warranted for exterior
applications. (C.R. 227, 196-202). This fact was discussed openly between the
parties on multiple occasions in 2007. (C.R. 204-05, 232-33).
All work on the project was fully and finally complete, and all payments
were made and received by the end of January 2008. (C.R. 152). In April 2012,
more than four years later, Mahler hired a professional engineer, Stephen Schilder,
to inspect the Project and investigate potential deficiencies, including the issues
raised in Mr. Robinson’s 2007 Report concerning the porch roof framing and the
concern about the wood exit doors. (S.C.R.2 13). By the time of Mr. Schilder’s
investigation, the award-winning Project had already been in use as an event center
for approximately five and a half years. (C.R. 214).
Mahler filed this suit on October 26, 2012, more than six years after
substantial completion and well more than four years after the last work on the
Project was complete, asserting causes of action for breach of warranty and breach
of contract. (C.R. 6-12).
DMAC filed its Amended Traditional and No-Evidence Motion for
Summary Judgment (the “Motion”) on July 18, 2014, and the Motion was set for
hearing on August 8, 2014. On the afternoon of August 7, 2014, one day before
the summary judgment hearing, Mahler, without prior leave of Court, filed an
5 amended petition. (C.R. 296). DMAC immediately filed an objection and
requested that the amendment be stricken. (C.R. 307). At the summary judgment
hearing, the trial court refused to consider Mahler’s amendment, and stated that he
would rule on the Motion based only on Mahler’s Original Petition, which is
therefore the live pleading on this appeal. (R.R. 31).
SUMMARY OF THE ARGUMENT
The trial court, Judge Robert Schaffer, correctly granted DMAC’s Motion
because all of Mahler’s claims are barred by the applicable four-year statutes of
limitations. Mahler concedes that its claims are time-barred unless they were
fraudulently concealed or the discovery rule applies. For the reasons set forth
below, the summary judgment evidence conclusively demonstrates that neither the
discovery rule nor fraudulent concealment can save Mahler’s stale and meritless
claims.
The discovery rule has no application to Mahler’s claims. First, the parties’
contract, written on a standard industry form, expressly precludes it. (C.R. 61).
Even if it did not, the discovery rule applies only to “inherently undiscoverable”
injuries that “by [their] nature [are] unlikely to be discovered within the prescribed
limitations period despite due diligence.” Shell Oil Co. v. Ross, 356 S.W.3d 924,
930 (Tex. 2011) (internal quotations omitted). The injuries of which Mahler
complains are all readily discoverable, and indeed, the alleged factual bases for
6 each of Mahler’s claims were not only discoverable more than four years before
Mahler filed this lawsuit; most were actually discovered before that time.
Mahler’s claims, all of which pertain to only three limited components or
aspects of the work provided by DMAC, (C.R. 215-16), are as follows:
1. Mahler contends the wooden doors installed on the perimeter of the Project’s ballroom were “interior grade” rather “exterior grade” and therefore unsuitable for their applied use (C.R. 8-11); • However, Mahler does not dispute that in 2007, more than five years before filing suit, Mr. Mahler requested and received the door manufacturer’s official product specification sheets and warranty information, and an explanation from the door vendor that the doors were not warranted for exterior use. (C.R. 124-30, 226-26, 230). • Mahler also cannot dispute that the suitability of the doors was discussed openly between the parties in late 2007, nearly five years before suit was filed, when Mr. Mahler was in possession of all relevant information about their specifications, grade, and warranty. (C.R. 204-05).
2. Mahler contends the flooring installed in certain portions of the Project was “residential grade” rather than “commercial grade” and therefore unsuitable for its application in the Project (C.R. 8-11); • However, Mahler does not dispute that DMAC left a box of unused flooring material on the Project site, in Mahler’s possession, following construction. (C.R. 222). Mahler was able to obtain relevant product specifications and warranty information simply by locating the manufacturer’s contact information on the box of material and “pick[ing] up the phone.” (C.R. 222-23).
3. Mahler contends the porch roofs or “porta cache” [sic] suffered from defects or deficiencies in their construction (C.R. 7-9). • However, Mahler does not dispute that it received the 2007 Report contemporaneously and understood that it raised a structural concern about the porch roofs. (C.R. 240-41). • Mahler also cannot dispute that on January 1, 2008, Mahler had concerns about the structural framing of the porch roofs, and expressed them to
7 DMAC. (C.R. 192-94, 245-46). Mahler knew that DMAC did not make any structural changes or repairs to the porch roofs, (C.R. 241-42), but waited more than four years to perform any independent follow-up investigation or file suit, (C.R. 252).
Based on the undisputed evidence, by the end of 2007 at the latest, Mahler
either had “discover[ed], or through the exercise of reasonable care and diligence
should have discovered, the nature of [its] injury.” Bayou Bend Towers Council of
Co-Owners v. Manhattan Const. Co., 866 S.W.2d 740, 742 (Tex. App.—Houston
[14th Dist.] 1993, writ denied). Accordingly, even if the discovery rule were not
contractually eliminated, Mahler’s claims accrued by the end of 2007 and the
statute of limitations expired well before Mahler filed suit in October 2012.
Fraudulent concealment is equally inapplicable to Mahler’s untimely claims.
First, Mahler did not plead fraudulent concealment concerning the alleged defects
in the porch roofs. Mahler’s Original Petition pled fraudulent concealment only as
to the claims relating to the doors and the floors, never alleging that DMAC made
any misrepresentation or concealment concerning the porches. (C.R. 6-12). Mahler
made an untimely attempt to amend its pleadings one day before the summary
judgment hearing without leave of court, but the trial court properly rejected the
amendment as untimely on the record at the hearing, expressly dispelling any
presumption that the amendment was considered for purposes of determining the
Motion.
8 With respect to the doors and the floors, Jorden Mahler—Mahler’s owner
and manager—unequivocally testified that DMAC never made any
misrepresentations:
Q. And did anybody ever tell you -- anybody with DMAC ever tell you these doors are commercial grade? A. No.
Q. They never told you that, right?
A. No. Q. All right. And did they -- did anybody with DMAC ever tell you these doors are warranted for use in an exterior application? A. No.
Q. Nobody ever told you that, right? A. No. (C.R. 254-56 (emphasis added)). These admissions are fatal to Mahler’s fraudulent
concealment counter-defense.
Moreover, even assuming DMAC had made some false statement
concerning the floors or the doors (which Mr. Mahler himself denies), the doctrine
of fraudulent concealment requires a plaintiff to demonstrate reasonable reliance
on a misrepresentation. Under Texas law, “reliance is not reasonable when
information revealing the truth could have been discovered within the limitations
period.” BP Am. Prod. Co. v. Marshall, 342 S.W.3d 59, 68 (Tex. 2011). The
summary judgment evidence demonstrates that Mahler had access to several
9 sources of information revealing the nature of any injury of which Mahler now
complains. Mahler therefore plainly failed to exercise the level of diligence that is
required of a plaintiff seeking to invoke fraudulent concealment:
Because the [plaintiffs] were obliged to perform additional investigation to protect their interests, if [plaintiffs] could have discovered [defendant’s] wrongdoing . . . through means other than [defendant’s] representations before limitations expired, they did not exercise reasonable diligence in relying on [defendant’s] representations and limitations barred their claim. BP Am. Prod., 342 S.W.3d at 67-68 (emphasis added).
The following table provides a timeline with record citations illustrating that
Mahler’s claims were filed well after the four-year statutes of limitations had
expired:
10 Timeline of Events Date Event Nov. 29, 2005 •Contract formation. (C.R. 151, 154) Jan. 2006 - •Primary construction phase. (C.R. 161) Oct. 2006 •Doors, floors, & porches built. (C.R. 215, 225-26; S.C.R.2 29) Oct. 25, 2006 •Substantial completion. (C.R. 161) •Accrual of all claims arising from work performed before substantial completion. (C.R. 61) 2006-2011 •DMAC leaves box of excess flooring material bearing manufacturer information on Mahler’s property. (C.R. 222-23) Apr. 9, 2007 •Mahler obtains specs and warranty info for doors (C.R. 124-30) •Mahler has actual knowledge doors are not warranted for external use. (C.R. 232-33) Aug. 16, 2007 •Robinson issues 2007 Report noting structural issue with porch roof & concern that doors are interior grade. (C.R. 163, 175, 186) •Actual notice of problem with porch roof. (C.R. 240-41). Jan. 1, 2008 • Mahler emails DMAC expressing concern about porch framing & attaching photos of porches under construction (C.R. 192-94, 245-46) Jan. 31, 2008 •All work on project complete & final payment made. (C.R. 152) Apr. 2012 •Mahler hires engineer/litigation consultant to investigate Project. (S.C.R.2 13) Oct. 26, 2012 •Mahler files suit. (C.R. 6).
11 ARGUMENT
A. The Parties Agree that Mahler’s Claims Are Subject to Four-year Statutes of Limitations, and that Barring Application of the Discovery Rule or Fraudulent Concealment, They Are Time-barred.
Mahler has pled claims for breach of contract and breach of warranties.
Breach of contract and breach of warranty claims have a four-year statute of
limitations. Tex. Bus. & Com. Code §2.725(a); see Williams v. Khalaf, 802
S.W.2d 651, 653 (Tex. 1990) (stating that C.P.R.C. §16.004’s “four-year statute of
limitations . . . applies to breach of contract actions”); Key v. Viera, 01-07-00587-
CV, 2009 WL 350602 (Tex. App.—Houston [1st Dist.] Feb. 12, 2009, no pet.)
(recognizing “four-year statute of limitations applicable to common law claims of
. . . breach of express warranty”).
The limitations period for breach of warranty actions accrues when the
goods are delivered or services are rendered. Tex. Bus. & Com. Code §2.725(b)
(goods); Safeway Stores, Inc. v. Certainteed Corp., 710 S.W.2d 544, 546 (Tex.
1986) (services). For breach of contract claims, accrual occurs at the time of a
breach. Via Net v. TIG Ins., 211 S.W.3d 310, 314 (Tex. 2006). Thus, accrual of
any claims related to work on the Project occurred at the time that item of work
was performed or delivered; at the latest, by January 31, 2008, when all work on
the Project was complete and final payment made. (C.R. 152).
12 In any event, the parties agree that absent application of the discovery rule or
fraudulent concealment, the limitations periods for Mahler’s claims expired before
this action was instituted in October 2012.
B. The Trial Court Properly Granted Summary Judgment Rejecting Mahler’s Discovery Rule Counter-defense.
Mahler’s attempt to make use of the discovery rule to save its time-barred
claims fails for three reasons: (1) the discovery rule does not apply to Mahler’s
UCC claims; (2) the parties’ contract expressly precludes the discovery rule’s
application; and (3) as a matter of law, Mahler’s alleged injuries were not
inherently undiscoverable.
1. The Discovery Rule Does Not Apply to Mahler’s UCC Claims.
Mahler has alleged both common-law and UCC warranty claims. The
discovery rule is categorically inapplicable to UCC claims under the Texas
Business & Commerce Code, which “generally requires suit on breach of warranty
claims within four years of delivery, regardless of when the buyer discovers
defects in the goods.” See PPG Indus., Inc. v. JMB/Houston Centers Partners Ltd.
P’ship, 146 S.W.3d 79, 92 (Tex. 2004) (emphasis added); Am. Alloy Steel, Inc. v.
Armco, Inc., 777 S.W.2d 173, 176 (Tex. App.—Houston [14th Dist.] 1989, no
writ) (reciting that under Section 2.725(b), a cause of action accrues when tender
of delivery is made, “regardless of the aggrieved party’s lack of knowledge of the
breach”). 13 Mahler has not attempted to refute this well-settled point of law. Therefore,
the discovery rule is unavailable to delay accrual of Mahler’s UCC claims, which
accrued when the doors and floors were tendered in 2006 and became time-barred
in 2010, two or more years before Mahler filed suit. (C.R. 215, 225-26). At the
absolute latest, any UCC claims had accrued by January 31, 2008, when DMAC
had completed all its work on the project (C.R. 151-52), and became time-barred
four years later on January 31, 2012—more than eight months before Mahler filed
suit.
2. The Parties’ Contract Eliminates the Discovery Rule.
The parties’ construction contract includes the AIA General Conditions of
the Contract for Construction. (C.R. 20-63). Section 13.7.1, “Commencement of
Statutory Limitations Period,” provides that for all work done before the date of
substantial completion, “any applicable statute of limitations shall commence to
run and any alleged cause of action shall be deemed to have accrued in any and all
events not later than such date of substantial completion.” (C.R. 61). For any
breaches after the date of substantial completion, the latest possible accrual date
provided under the contract is the “date of the actual commission of any act of
failure to perform any duty or obligation” including the “correction of the Work or
failure to correct the Work by the Contractor.” (C.R. 59, 61).
14 There is no dispute that the porches, floors, and doors were all installed prior
to substantial completion. (C.R. 215, 225-26; S.C.R.2 29). There is no dispute that
DMAC did not make any modifications to the porch framing after substantial
completion, (C.R. 241-42), and Mahler has never contended that DMAC modified
the flooring or the exterior doors after substantial completion. Even assuming any
of the work at issue was done after substantial completion, the last time any
DMAC representative was on site at the Project was January 2008 (C.R. 151)—
well over four years before Mahler filed suit in October 2012. Accordingly, in no
event could Mahler’s causes of action accrued late enough to avoid being time-
barred.
The Texas Courts of Appeals have not construed this language in the AIA
General Conditions of the Contract for Construction, but many others have.
Recently, in Brisbane Lodging, L.P. v. Webcor Builders, Inc., 216 Cal. App. 4th
1249 (Cal. Ct. App. 2013), the California court of appeals reported:
[N]umerous out-of-state authorities have examined this same clause; and without exception, have concluded the provision altered the normal rules governing accrual of causes of action, including the delayed discovery rule, and was valid and enforceable.
Id. at 1259 (emphasis added) (assembling cases). Mahler has not and cannot
provide this Court with any sound basis for departing from the tide of authority
holding contracting parties to the plain language of the AIA General Conditions.
15 Instead, Mahler contends that it should not be held to its agreement because
it was unsophisticated and unrepresented by counsel. This argument is unavailing
on both counts. Under Texas law, a party cannot avoid enforcement of a contract
simply because he chose not to have legal representation in connection with the
formation of the contract. As the Texas Supreme Court recently reaffirmed,
“absent fraud, misrepresentation, or deceit, one who signs a contract is deemed to
know and understand its contents and is bound by its terms.” Royston, Rayzor,
Vickery, & Williams, LLP v. Lopez, 467 S.W.3d 494, 500 (Tex. 2015), reh’g
denied (Sept. 11, 2015).
In addition, a long line of Texas precedent rejects Mahler’s argument that it
should be able to avoid enforcement of its contract because it was
“unsophisticated.” See, e.g., In re Halliburton Co., 80 S.W.3d 566, 572 (Tex.
2002) (contract enforceable despite alleged “gross disparity in bargaining power”
and lack of “opportunity to negotiate”); EZ Pawn Corp. v. Mancias, 934 S.W.2d
87, 90 (Tex. 1996) (enforcing agreement even “assuming unequal bargaining
power between” parties); In re Ledet, 2004 WL 2945699 (Tex. App.—San Antonio
Dec. 22, 2004, no pet.) (“Whether a party is illiterate or incapable of understanding
English is not a defense to a contract.”); In re Bank One, N.A., 216 S.W.3d 825,
826 (Tex. 2007); In re McKinney, 167 S.W.3d 833, 835 (Tex. 2005); Vera v. N.
16 Star Dodge Sales, Inc., 989 S.W.2d 13, 17 (Tex. App.—San Antonio 1998, no
pet.).
In signing the contract, Mahler entered into a large commercial transaction:
the contract price exceeded $1.3 million. (C.R. 18). 4 Mahler must be held to the
terms of the business agreement it negotiated. 5
3. The Discovery Rule Does Not Apply to Mahler’s Claims Because Mahler’s Alleged Injuries Are Not Inherently Undiscoverable.
Even if the discovery rule were not excluded by statute and the parties’
agreement, it still would not apply to any of Mahler’s claims. The discovery rule
applies only when “the nature of the injury incurred is inherently undiscoverable,”
meaning that the injury “is, by its nature, unlikely to be discovered within the
prescribed limitations period despite due diligence.” Via Net v. TIG Ins. Co., 211
S.W.3d 310, 313-14 (Tex. 2006) (emphases added).
Even if the injury is not inherently undiscoverable, the rule applies to defer
accrual of a cause of action only “until the plaintiff knew or, by exercising
reasonable diligence, should have known of the facts giving rise to a cause of
4 Mahler’s Brief emphasizes that Jorden Mahler was professionally inexperienced, but this is not especially relevant because his father, Bill Mahler, signed the contract on Mahler’s behalf. Mahler has made no attempt to demonstrate how the Mahlers had the wherewithal to pay for a $1.3 commercial building but were too unsophisticated to be held to their contract. 5 Mahler’s argument that enforcement of Section 13 of the parties’ contract would be against public policy is wholly unsupported by Texas law. In any event, Mahler’s Brief only discusses the application of that contractual provision to eliminate a counter-defense of fraudulent concealment, while DMAC’s contention is that the provision eliminates application of the discovery rule. 17 action.” Barker v. Eckman, 213 S.W.3d 306, 311-12 (Tex. 2006). Once a claimant
learns of an injury, the statute of limitations begins to run “even if the claimant
does not yet know . . . the full extent of it.” PPG Indus., Inc. v. JMB/Houston Ctrs.
Partners Ltd. P’ship, 146 S.W.3d 79, 93–94 (Tex. 2004).
Texas courts have repeatedly held that the discovery rule should rarely be
applied in breach of contract cases, “as diligent contracting parties should
generally discover any breach during the relatively long four-year limitations
period provided for such claims.” Clear Lake Ctr., L.P. v. Garden Ridge, L.P., 416
S.W.3d 527, 543 (Tex. App.—Houston [14th Dist.] 2013, no pet.) (quoting Via
Net, 211 S.W.3d at 315); accord Wagner & Brown, Ltd. v. Horwood, 58 S.W.3d
732, 734 (Tex. 2001).
a. The Discovery Rule Does Not Defer Accrual of Mahler’s Claims Concerning the Doors and Flooring, because a Manufacturer’s Basic Product Information Is Not Inherently Undiscoverable; Indeed, It Was Actually Known to Mahler.
Mahler’s claims relating to the doors and the flooring are that they were not
of the appropriate “commercial grade,” that the doors were warranted only for
interior rather exterior applications, and that the flooring was warranted only for
residential rather than commercial use.
Accrual of these types of claims cannot be deferred by the discovery rule,
which applies only to “inherently undiscoverable” injuries. Basic product
information, including whether a product is “commercial grade” or is warranted for 18 particular uses, is easily discoverable through basic and routine inquiries. The
owner of a commercial construction project can, and often does, participate
directly in the selection and approval of materials and component products.
Mahler was involved in such selection in connection with the Project. (S.C.R.2
104, C.R. 221). That alone ends the inquiry.
However, even if Mahler had not been involved in selecting the products
about which it now complains, it could easily have obtained product specifications
and warranty information from a variety of sources, including the contractor, the
product vendor, and the product manufacturer. Texas case law makes it abundantly
clear that the availability of that information to Mahler negates the discovery rule.
For example, in Computer Associates International, Inc. v. Altai, Inc., 918
S.W.2d 453, 456 (Tex. 1996), the Texas Supreme Court determined that an alleged
trade secret misappropriation was not inherently undiscoverable where the plaintiff
“could have detected [defendant’s] theft by using document control logs—a
common practice among high technology companies dependent upon trade
secrets.” Id. at 456-57; see also HECI Expl. Co. v. Neel, 982 S.W.2d 881, 886
(Tex. 1998) (details about oil and gas operations in common underground reservoir
could have been obtained from the lessee or filings with the Texas Railroad
Commission); Wagner & Brown, Ltd. v. Horwood, 58 S.W.3d 732, 737 (Tex.
19 2001) (“[T]hose who receive statements listing fees charged should be alerted to
the need to perform additional investigation to protect their interests.”).
By the same token, the owner of a commercial construction project can (and
must, if it wishes to avail itself of the discovery rule) protect its interests by
obtaining basic information about the materials and products utilized in
construction. That information was available to Mahler all throughout construction
and through full completion of the Project in January 2008, so the discovery rule is
not.
Finally, Mr. Mahler, Mahler’s owner and manager, actually had by 2007 all
of the same information about the doors and the floors that formed the basis of the
lawsuit he filed in 2012. As to the wooden doors, Mr. Mahler testified that he
started to notice what he considered problems “[s]hortly after construction” in
2006—six years before suit was filed:
Q. And when you say construction, you mean the original construction back in 2006, right? A. Yes, sir.
(C.R. 225-26 (emphasis added)).
Mr. Mahler later personally contacted the vendor of the doors to obtain
product information on April 9, 2007, five and a half years before filing suit. (C.R.
124, 226). In a response received the very same day, he received the door
manufacturer’s official product specification sheets, warranty information, and an
20 explanation from the vendor that the doors were warranted by the manufacturer
only for interior use.6 (C.R. 124-130); see also (C.R. 186-87) (2007 Robinson
report reflecting Mahler’s stated concern that doors were not intended for exterior
use); (C.R. 204-05) (December 2007 email from Mahler to DMAC) (“The issue
about the exterior doors being hung while they were made for ‘Interior use’ still
bothers me.”). Mr. Mahler confirmed in his deposition that the basis of his claims
about the doors was fully known to him in 2007:
Q. Both you and DMAC were aware in 2007 that these doors didn’t have a warranty if they were hung in an exterior application, right? A. Correct.
Q. All right. And now it’s – it’s – we’re here seven years later and we’re part of a lawsuit about whether the doors have a warranty when they’re hung in the exterior, right? A. Correct.
(C.R. 232-33 (emphasis added)).
As to the floors, Mahler does not allege that he was unable to obtain the
product information when the flooring was first selected in 2006. Mahler does not
allege that he asked DMAC for information about the floors at all, much less that
DMAC refused to provide it. “[F]ailing to even ask for such information is not due
6 Incidentally, the manufacturer’s warranty on the doors was good for five years if the doors were used for interior applications. (C.R. 198). By the time Mahler filed suit, the doors had already been in exterior use for roughly six years, meaning that even if the manufacturer warranty had applied, it would have expired well before Mahler filed this suit. 21 diligence.” Via Net, 211 S.W.3d at 314. A party cannot wait until the limitations
period has expired without ever making an inquiry and then invoke the discovery
rule. Mahler could easily have contacted the flooring vendor or manufacturer—
just as he did the manufacturer of the doors.
Mr. Mahler testified that he noticed wear in the flooring material in 2010,
but he did not make any inquiries about the material at that time. (C.R. 220). (He
admits that he already knew then that the flooring product installed by DMAC was
an inexpensive composite material. (C.R. 221).) It was not until 2011, when Mr.
Mahler was replacing some of the flooring with a higher-end, more expensive
material that he claims he made his first attempt to learn anything about the
original flooring material. (C.R. 222). When he did decide to make that inquiry, he
admits that all he had to do (and all he actually did) was to find the box of excess
material DMAC had left in his possession five years earlier, read the manufacturer
information on the box, and make a simple phone call. (C.R. 223-23).
The bottom line is that Mahler could have discovered all of the information
forming the basis of its complaints through reasonable diligence well before
January 2008—the last time DMAC set foot on Project property—by availing itself
of “ready source[s] of information,” HECI Expl. Co., 982 S.W.2d at 887, such as
the manufacturer’s labels and product materials containing it. Failure to do so
precludes application of the discovery rule to these claims.
22 b. The Discovery Rule Does Not Apply to Mahler’s Claims Concerning the Porch Roofs.
Mahler’s complaints concerning the porch roofs adjoining the reception hall
are that (1) certain porch-roof materials and finishing were deficient, and (2) the
structural framing of the porch roofs was defective or deficient. Neither of these
alleged deficiencies is inherently undiscoverable, as they are precisely the types of
anomalies that can be discovered through a routine, visual inspection of a
substantially complete construction project. Indeed, Mahler’s claims concerning
the porch roofs are clearly barred by limitations because Mahler actually
discovered the factual basis of a claim more than five years before filing suit.
i. The Materials and Finish Work for the Porch Roofs Were Both Discoverable and Discovered More than Four Years Before Mahler Filed Suit
Mahler’s Original Petition complains that (1) the porch roofs were covered
with a “rolled roofing material” rather than a metal roof like the one installed on
the primary structures; (2) flashing on parts of the porch roofs was improperly or
incompletely installed; and (3) “interior paint compound” was used on the exterior
porch ceilings or “soffits.” (C.R. 8).
Mr. Mahler’s own deposition testimony confirms that he actually discovered
that (1) the porch roofs were covered with a “rolled roofing material” more than
four years before Mahler filed this October 2012 lawsuit:
23 Q. And you knew at the time that the -- that the roofs were originally -- the porch roofs were originally constructed [sometime in 2006] that they were constructed using a rolled roof material, right?
A. Yes.
.... Q. All right. So to know what kind of material was used on the roof, all you had to do was just get up on a ladder and take a look at it and you would see that it was rolled roofing material like a tarpaper, right?
A. Correct.
(C.R. 249-50 (emphasis added)); see also (C.R. 180) (2007 Report noting the
roofing materials used).
Mr. Mahler’s own deposition testimony also confirms that he actually
discovered more than four years before filing this lawsuit in October 2012 the facts
that allegedly give rise to Mahler’s claim that (2) flashing on parts of the porch
roofs was improperly or incompletely installed:
Q. And what about flashing? Flashing, that’s another thing that you can just take a look at, right? It’s right out there in the open? A. I think so, yeah, if -- if I -- if what I think is flashing, yeah.
Q. All right. And that’s something that your original inspector back in 2007 looked at, right, was flashing?
A. Yes. (C.R. 249-50 (emphasis added)); see also (C.R. 174-75, 181-84) (2007 Report
noting poor flashing in numerous places).
24 Finally, (3) the interior paint compound that was applied was actually
discussed by the parties before it was applied more than four years before Mahler
filed this suit. In an email dated December 29, 2007, a DMAC representative gave
Mahler the option of applying a “‘feather float’ with ceiling texture and paint
which will help hide the joints” in the soffits beneath the porch roofs. (S.C.R.2 82).
This compound was applied on an exterior surface, and was open to further
inspection at any time. Nothing about its use was inherently undiscoverable.
ii. The Alleged Deficiencies in the Structural Framing for the Porch Roofs Were Both Discoverable and Discovered More than Four Years Before Mahler Filed Suit
Construction defects “noticeable upon a basic inspection” are by definition
discoverable. Wilson v. Magaro, 01-12-00952-CV, 2013 WL 3243389, at *4 (Tex.
App.—Houston [1st Dist.] June 25, 2013, no pet.). In Wilson, a closely analogous
case, the court explained that
The summary judgment evidence in this case establishes that [plaintiff] discovered problems with the drywall when he ‘made a periodic walkthrough’ of the residence in the late afternoon. . . . This does not establish that the alleged defects were inherently undiscoverable. To the contrary, it establishes that the defects were noticeable upon a basic inspection with proper lighting. Similarly, the inspector’s report identified problems with the drywall . . . . All of this indicates visible and obvious problems with the drywall, not an “inherently undiscoverable” injury. Id. at *4 (emphases added).
25 By Mr. Mahler’s own admission, the alleged structural defects in the porch
framing were detectable shortly after their construction in 2006, because they
resulted in visible sag:
Q. And at the time of this [2007 structural engineering] report, had you personally observed the sags and the unevenness that Mr. Robinson is describing? A. Yes, sir.
Q. You had already noticed it before he [the investigator] ever came out there? A. Yes, sir. (C.R. 239 (emphases added)). 7
Mahler contends that visible sags in the porch roofs were not enough to
place it on notice of the extent of the structural defects in the porch roofs. As a
threshold matter, Mahler certainly had sources of information through which it
could have discovered any defects in the porch roofs: Mr. Mahler is the owner of
the Project, he had unfettered access to the work since its inception (including
throughout the construction phase), was able to (and did) hire independent
inspectors (C.R. 163-90), and has photographs of the Project under construction
that reveal the structural components of the porch roofs (C.R. 192-94)—just to
name a few of the sources of information that Mahler had available.
7 Mahler attempts to rely on testimony from Don McIntyre to support a contention that there were no visible indications of a structural defect, Mahler’s Brief at 38, but Mr. McIntyre testified clearly that he never personally observed the porch roofs. (S.C.R.3 92) (“I have no personal knowledge. I did not inspect the porch. I have no personal knowledge of that particular item.”). 26 But more importantly, the sags in the porch roofs were precisely the
conditions that Mr. Robinson, Mahler’s inspector, characterized in 2007 as
indicative of structural deficiency. (C.R. 174-75). Mr. Robinson’s 2007
professional inspection report was based on simple visual observations. Although
Mr. Robinson disclaimed any attempt to find latent structural defects, he noted the
sagging in the porch roof near the front under the heading “Significant
Exceptions”:
The surface of the roof at the east porch off the reception building was uneven . . . . There was significant sag observed over the barbeque area outside the bar which was abnormal and may be due to structure of insufficient stiffness to prevent the sag. (C.R. 174-75 (emphasis added)). He continued,
It is recommended that these irregularities be further investigated by the builder to determine the extent of reinforcement necessary for the ceiling structure to prevent further unevenness or deflections.
Id. (emphasis added). In other words, Mr. Robinson’s report actually notified
Mahler that the porch roof sagging indicated a more serious structural defect.
Because it was observed and reported to Mahler in 2007, any defect could not have
been inherently undiscoverable.
Mahler’s contention that the extent of the alleged damage was inherently
undiscoverable because it would not have been apparent to his own untrained eye
fails for two reasons: First, Texas precedent establishes that the discovery rule does
not take into account whether expertise is required to discover an alleged defect;
27 the test is whether the information that would lead to its discovery is readily
available to one who has the training to understand it.
In BP America Production Co., the Texas Supreme Court held as a matter of
law that the discovery rule did not apply to the plaintiffs’ claim even though
discovering the basis for their claim would have required an expert to understand
well logs containing “highly technical information” about “resistivity,
conductivity, and spontaneous potential.” BP Am. Prod. Co. v. Marshall, 342
S.W.3d 59, 66 (Tex. 2011). Because the information that the plaintiffs’ expert
eventually relied upon had been available to them all along, the Court determined
that the injury was not inherently undiscoverable:
Although technical, the public documents concerning [defendant’s] operations were available to the [plaintiffs]. . . . It is not significant that [defendant’s] internal documents helped the [plaintiffs] discover the injury in this case, as the information was otherwise discoverable. Because the [plaintiffs] had a duty to exercise reasonable diligence in protecting their [] interests, and since the [alleged injury] could have been discovered with the exercise of reasonable diligence, the injury was not inherently undiscoverable.
Id. at 66-67.
Second, and more importantly, Mr. Mahler was actually alerted about
potential structural defects by Mr. Robinson, his trained inspector, and he has
testified that he read Mr. Robinson’s 2007 Report contemporaneously and
understood that the inspector was flagging a structural issue. See, e.g., (C.R. 73-
74) (Q: “So you knew in 2007 that according to the professional engineer that
28 you had hired to inspect the building, that he thought maybe some further
investigation should be done, right? A. Yes.” (emphasis added)).
The record conclusively demonstrates that Mr. Mahler had an actual
subjective concern about the structure of the porch roofs well over four years
before filing suit. On January 1, 2008, Mr. Mahler sent an email to a DMAC
stating that it looked from pictures of the porches like a “2x4 (header) is what is
attached at the building side. I’m not an expert, but looks a little weak.” (C.R. 192,
S.C.R.2 29). Mr. Mahler confirmed in his deposition that he was concerned at the
time about a structural deficiency in the porch roofs. (C.R. 245-46). Mr. Mahler
concedes that he did not receive a response to his email and did not follow-up
further, (S.C.R.2 29), yet despite his concerns he did not attempt to consult an
independent inspector or otherwise perform a follow-up investigation until mid-
2012. (C.R. 251-52) (“Q. All right. And chose not to do an additional inspection
that could have been done, right? That’s right, isn’t it? A. Could have, should
have, you know . . . .”)
Moreover, the affidavit submitted by Mahler’s own litigation expert, a
structural engineer, confirms that the 2007 Report had already pointed out the very
same structural problems with the porch roofs that Mahler’s expert further
investigated when he was hired in 2012:
29 “The sags and unevenness noted in the [2007] Robinson report were caused by the structural deficiencies noted in my report dated May 22, 2012 . . . .”
(S.C.R.2 10 (emphasis added)).
While Mahler’s litigation expert ventures that the 2007 report’s recognition
of a “structure of insufficient stiffness” in the porch “amounts to approximately ten
percent of the structural defects in the shed roofs that [the litigation expert]
reported five years later in [his] report,” (S.C.R.2 10), that is more than sufficient
to start the statute of limitations running: “[After a] claimant learns of a wrongful
injury . . . the limitations clock is running, even if the claimant does not yet know
. . . the full extent of it.” PPG Indus., Inc. v. JMB/Houston Ctrs. Partners Ltd.
P’ship, 146 S.W.3d 79, 93–94 (Tex. 2004) (emphasis added); see also Bayou Bend
Towers Council of Co-Owners v. Manhattan Const. Co., 866 S.W.2d 740, 742
(Tex. App.—Houston [14th Dist.] 1993, writ denied) (“A party need only be
aware of enough facts to apprise him of his right to seek a judicial remedy.”
(emphasis added)).
Had Mahler exercised reasonable diligence and performed a follow-up
examination as Mr. Robinson suggested in 2007, it would have discovered the full
extent of its “injuries” in 2007, as all parties agree that any structural deficiency
found in 2012 would have been there in 2007. (S.C.R.2 10). However, Mr. Mahler
30 frankly admitted that he did not conduct an independent follow-up investigation
because he did not believe it was his responsibility to do so:
Q. All right. So you don’t think that you had any responsibility to investigate what you believe were problems -- A. No.
...
Q. -- once you brought it up with them [DMAC], that’s it? A. Correct.
Q. That’s all you did because it wasn’t your responsibility; that’s your testimony? A. Correct. ....
Q. And that’s an investigation that you could have -- had you chosen to, you could have hired somebody to come out there and do that investigation right then in 2007, right?
(C.R. 248-49, 252 (emphasis added)). The discovery rule does not protect a
contracting party who chooses to rely solely on his counter-party to protect his
interests because outside the context of a fiduciary relationship, reliance on a
counter-party does not constitute “reasonable diligence.” HECI Expl. Co. v. Neel,
982 S.W.2d 881, 887 (Tex. 1998) (expressly rejecting plaintiffs’ “conten[tion] that
they were entitled to rely on [defendant] to safeguard their interests” and
distinguishing fiduciary from normal contractual relationships); accord Via Net v.
31 TIG Insurance Co., 211 S.W.3d 310, 314 (Tex. 2006) (holding that “the duties the
law imposes” on a counter-party “do not dispense with the need for royalty owners
to exercise due diligence in enforcing their contractual rights, express or implied,
within the statutory limitations period. Contracting parties are generally not
fiduciaries. Thus, due diligence requires that each protect its own interests.”
(internal quotation omitted)).
That DMAC representatives returned to the site in 2007 following the 2007
Report to address cosmetic concerns with the ceiling panels or “soffits” under the
porches does not negate Mahler’s obligation to conduct its own investigation of the
work. In any event, the summary judgment evidence demonstrates that Mahler
could not have relied on DMAC to repair or reinforce the porch roof framing:
DMAC never made any changes to the structure or framing of the porch roofs, and
Mahler was fully aware of that fact. (C.R. 241-42). Mr. Mahler testified that
DMAC never addressed the structure of the roof:
Q. All right. DMAC came out and observed it and -- and did they add any additional reinforcement to the structure of the porch? A. I don't believe so.
(C.R. 241).
Q. All right. Did DMAC come out and somehow conceal the roof of the porches? A. I don’t believe they did anything to the roof. It was strictly underneath the porch --
32 Q. All right.
A. -- the soffit. (C.R. 242). The contemporaneous documentary evidence confirms that DMAC
representatives made minor cosmetic changes to the ceiling of the porches, but
never made structural changes, and Mahler observed and understood that the work
did not address structural components of the roofs. (C.R. 204-05) (December 11,
2007 email from Jordan Mahler to DMAC characterizing DMAC’s follow-up work
as a “daily worker guy[]” who “just went around with a box of screws and shot
them into the ceiling”). 8
This undisputed evidence conclusively shows that, at the very latest, by
August of 2007—over five years before the filing of this suit—the existence of a
structural issue with the porch roofs was readily detectable, even on a visual
inspection requiring no sophisticated methods or destructive testing. This was
more than enough to start the running of the statute of limitations.
c. Conclusion on the Discovery Rule—Inapplicable.
Because all of the alleged injuries asserted by Mahler were either visually
detectible upon a basic inspection or were easily discoverable from readily
8 Indeed, Mahler’s litigation expert reported that during his interview of Jordan Mahler, Mahler reported that in conducting its follow-up work, DMAC had merely applied “a textured compound to the face of the soffit to cover the defects,” after which the “roof continued to leak and the sagging worsened.” (S.C.R.2 14 (emphasis added)). Taken as true, DMAC’s follow-up work did not address the alleged structural defects about which Mahler was on notice, nor did DMAC ever claim that it did. 33 available sources of information about the materials installed in the project, the
discovery rule simply has no applicability to this case.
C. The Trial Court Properly Granted Summary Judgment over Mahler’s Fraudulent Concealment 9 Counter-Defense. The party seeking to assert fraudulent concealment as an affirmative defense
to the statute of limitations has the burden to raise it in response to a summary
judgment motion on limitations. KPMG Peat Marwick v. Harrison County Hous.
Fin. Corp., 988 S.W.2d 746, 749-50 (Tex. 1999). To satisfy that burden, the party
must come forward with its own summary judgment evidence sufficient to “rais[e]
a fact issue on each element of the fraudulent concealment defense.” Id.
(footnotes omitted) (emphasis added). A “mere pleading,” without more, cannot
satisfy that burden. Id.; see also Bayou Bend Towers, 866 S.W.2d at 746-47.
As such, Mahler had the burden of both pleading fraudulent concealment
and producing sufficient summary judgment evidence on each of the following
elements: that DMAC “[1] actually knew a wrong occurred, [2] had a fixed
purpose to conceal the wrong, and [3] did conceal the wrong,” and that Mahler “[4] 9 In a few places, Appellant’s Brief mentions the doctrine of “equitable estoppel” in conjunction with the doctrine of fraudulent concealment. “Fraudulent concealment is based upon the doctrine of equitable estoppel . . . [and] estops a defendant from relying on the statute of limitations as an affirmative defense to plaintiff’s claim.” Borderlon v. Peck, 661 S.W.2d 907, 908 (Tex.1983). This brief addresses both using the fraudulent-concealment framework. See, e.g., Robinson v. Ultramar Diamond Shamrock Corp., 01-02-00738-CV, 2003 WL 21101730, at *2 (Tex. App.—Houston [1st Dist.] May 15, 2003, pet. denied) (holding that “Robinson’s equitable-estoppel defense is identical to her fraudulent-concealment defense” because both arose from the same alleged facts, and analyzing them together).
34 reasonabl[y] reli[ed] on [the] fraudulent representations.” Shell Oil Co. v. Ross,
356 S.W.3d 924, 927 (Tex. 2011).10 Mahler has not carried either burden.
1. Mahler Did Not Even Plead Fraudulent Concealment with Respect to its Claims Concerning the Porch Roof Construction, Much Less Introduce Evidence Sufficient to Carry Its Burden.
Mahler’s Original Petition, which is the live pleading on appeal, pleads the
discovery rule exception as to all of its claims, and pleads fraudulent concealment
with respect to the doors and the flooring, but does not plead fraudulent
concealment with respect to the porch roofs. The totality of Mahler’s pleadings
concerning fraudulent concealment were as follows:
FRAUDULENT CONCEALMENT 25. The accrual period related to MAHLER’s causes of action should be deferred until the date MAHLER learned of, or should have discovered, the deceitful conduct or facts giving rise to the causes of action asserted herein.
26. DMAC, its agent and its representative had actual knowledge of that [sic] the doors and flooring was of a residential grade when they should have been of a commercial grade and concealed that wrong by making affirmative misrepresentations that the flooring and doors actually installed were adequate for MAHLER’s commercial purpose. DMAC had a fixed purpose to conceal the wrong and knew the statements made to MAHLER were false when actually made. MAHLER reasonably relied on DMAC’s, its agents and its
10 The elements of equitable estoppel are similar: “[T]the doctrine of equitable estoppel requires: (1) a false representation or concealment of material facts; (2) made with knowledge, actual or constructive, of those facts; (3) with the intention that it should be acted on; (4) to a party without knowledge or means of obtaining knowledge of the facts; (5) who detrimentally relies on the representations.” Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 515-16 (Tex. 1998). 35 representative [sic] misrepresentations and silence causing actual damages.
(C.R. 11).11
Texas is a “notice pleading” jurisdiction and pleadings are usually construed
liberally in favor of the pleader, “but, ‘liberally’ does not require a court to read
into a petition what is plainly not there.” Wortham v. Dow Chem. Co., 179 S.W.3d
189, 199 (Tex. App.—Houston [14th Dist.] 2005, no pet.). To give fair notice, a
court must be able to ascertain “from an examination of the [] pleadings alone,” the
elements of a cause of action or defense. Wortham v. Dow Chem. Co., 179 S.W.3d
189, 198 (Tex. App.—Houston [14th Dist.] 2005, no pet.).
There is simply no way that any reader can ascertain from the Original
Petition that Mahler was alleging DMAC had fraudulently concealed or
misrepresented any facts concerning that porch roof construction. In order to put
DMAC on fair notice that it was being accused of making a misrepresentation
concerning the porch roofs, Mahler’s petition would have needed to give some
indication of what was concealed or misrepresented. Mahler’s petition specifically
alleges misrepresentations as to two sets of claims (those concerning the doors and
floors) while entirely omitting any allegation of fraud or concealment concerning
the porch roofs. DMAC could not reasonably be required to infer from Mahler’s
11 Mahler’s Original Petition also pled the related counter-defense of “equitable estoppel” with respect to the doors and floors, making similar allegations to those made in the fraudulent concealment section. (C.R. 10-11). The estoppel pleadings do not include any allegations relating in any way to the porch roofs. 36 allegations of misrepresentations concerning the doors and floors that Mahler also
contended misrepresentations were made concerning the porch roofs.
Mahler now contends that if its Original Petition did not sufficiently plead
fraudulent concealment with respect to its claims concerning the porch roofs, the
Court should consider its Amended Petition, which pleads fraudulent concealment
with respect to all claims. 12 Surprisingly, Mahler argues that the trial court should
be presumed to have accepted its Amended Petition, failing to mention that the
trial court expressly rejected the Amended Petition on the record after Mahler
attempted to file the amendment, which pled a new cause of action in addition to
the new counter-defense, one day before the summary judgment hearing without
seeking prior leave from the trial court. 13 At the hearing, Judge Schaffer
specifically rejected the amended pleading and made clear that his ruling on
DMAC’s Motion would be based on Mahler’s Original Petition:
[DMAC’s Counsel]: The Plaintiff yesterday filed its First Amended Petition.
THE COURT: Doesn’t work. Doesn’t work. I am not going on the First Amended Petition.
[DMAC’s Counsel]: Okay.
12 Of course, the very fact that Mahler attempted to amend its Original Petition to expressly include a new fraudulent-concealment counter-defense as to the porch roofs betrays Mahler’s claim that its Original Pleading adequately pled that counter-defense. 13 Mahler’s Brief asserts that Mahler sought leave to file its amendment, but it did so after the summary judgment hearing, at which the trial court had already refused the amendment. (S.C.R.3 3). 37 THE COURT: I'm not even looking at it. The Rules are clear that I go -- my burden or my duty is to look at what was in the file seven days out. And that absent leave to file an Amended Petition --
....
THE COURT: No. Summary Judgment it requires you -- in a Motion for Summary Judgment you’re required to stand on the Pleadings seven days out. You don’t get to replead one day out and change the whole nature of the case. (R.R. 31:8-14, 19-22). 14
Accordingly, Mahler’s reliance on Goswami v. Metro. Sav. & Loan Ass’n,
751 S.W.2d 487 (Tex. 1988), is misplaced. In Goswami, “the record [gave] no
indication that the trial court refused leave to file nor [did] it contain a motion to
strike the amended petition.” Id. at 490. Here, on the other hand, the record clearly
demonstrates that DMAC immediately objected and asked the court to strike the
untimely amendment, (C.R. 307-08), and that the court in fact did strike it, (R.R.
31). The presumption in Goswami that the amendment was considered was
predicated entirely on the fact that “the record is silent of any basis to conclude that
the amended petition was not considered by the trial court,” 751 S.W.2d at 490,
which makes it wholly inapposite to the present case. (R.R. 31:8-14, 19-22) (“I’m
not even looking at it.”). 15
14 Mahler’s Brief incorrectly states that the record does not reflect whether the trial court considered the amended pleading. Mahler had not requested preparation of the Reporter’s Record at the time it originally filed its Brief. 15 Mahler’s Brief to this Court failed to even acknowledge the trial court’s bench ruling; accordingly, Mahler has waived any argument that the ruling was somehow in error. 38 2. Even if Mahler Had Properly Pled Fraudulent Concealment Concerning the Porch Roofs, DMAC’s Motion for Summary Judgment Refuted an Element of that Counter-Defense as a Matter of Law.
Fraudulent concealment tolls the statute of limitations only until a plaintiff
either learns the truth or has “[k]nowledge of facts, conditions, or circumstances
which would cause a reasonable person to make inquiry leading to the discovery of
the concealed cause of action.” Bayou Bend Towers, 866 S.W.2d at 747. Once a
plaintiff acquires that knowledge, it can no longer meet the “reasonable reliance”
element necessary to sustain a fraudulent concealment counter-defense.
In Bayou Bend Towers, this Court, affirming summary judgment on
limitations grounds, determined that summary judgment evidence demonstrating a
plaintiff either knew or should have known of facts giving rise to a cause of action
is sufficient to defeat both the discovery rule and fraudulent concealment:
[W]e have already determined [in the discovery rule context] that [plaintiff] had notice of facts sufficient to terminate any estoppel effect of fraudulent concealment. Knowledge of facts, conditions, or circumstances which would cause a reasonable person to make inquiry leading to the discovery of the concealed cause of action is in the law equivalent to knowledge of the cause of action for limitation purposes.
866 S.W.2d at 747.
As detailed above in Section B.3.b, it is undisputed that by the end of 2007,
Mahler (1) had personally observed sagging in the porch roofs, (C.R. 239); (2) had
obtained a professional inspection report giving it actual notice of structural defects
39 in the porch roofs, (C.R. 163, 240-41); and (3) had a subjective concern about the
porch roof framing, (C.R. 193-94, 245-46). By that point in time, Mahler was on
sufficient notice as a matter of law that it was charged to “make inquiry leading to
the discovery of [any] concealed cause of action.” Bayou Bend Towers, 866
S.W.2d at 747.
Thus, even if Mahler’s Original Petition is construed to have pled fraudulent
concealment as to the porch roofs (it did not), and even if this Court were to
consider Mahler’s eleventh-hour Amended Petition that Judge Schaffer refused to
consider as untimely (it should not), DMAC’s Motion cited to all of this evidence,
specifically arguing that any defects in the porch roofs had actually been
discovered more than five years before suit was filed. (C.R. 139-41). DMAC’s
Motion also cited the applicable legal standards for fraudulent concealment,
including the principle that “[f]raudulent concealment only tolls the running of
limitations until the fraud is discovered or could have been discovered with
reasonable diligence.” BP Am. Prod. Co., 342 S.W.3d at 68. (C.R. 146). Under
any scenario, DMAC’s Motion negated Mahler’s fraudulent-concealment counter-
defense as to the porch roofs.
40 3. The Summary Judgment Evidence Conclusively Demonstrates that DMAC Never Misrepresented or Concealed Any Information about the Floors or the Doors.
Mahler also contends that its counter-defense of fraudulent concealment
saves its claims as to the floors and doors from being time barred. This contention
is refuted by the uncontroverted summary judgment evidence—particularly Mr.
Mahler’s own testimony—that DMAC never concealed or misrepresented any
information about these items.
During his deposition, Jordan Mahler specifically denied that anyone ever
represented the doors as being “commercial grade” or “exterior grade”:
Q. And did anybody ever tell you -- anybody with DMAC ever tell you these doors are commercial grade? A. No. Q. They never told you that, right? A. No.
Q. All right. And did they -- did anybody with DMAC ever tell you these doors are warranted for use in an exterior application? A. No. …
Q. Yeah. It’s true, isn’t it, that nobody at DMAC ever lied to you about the doors or the floors, right? A. Correct.
41 (C.R. 254-55 (emphasis added)).16 In addition to Mahler’s fatal admissions, the
remaining evidence demonstrates that, far from being concealed, the issue of the
doors being intended for interior use was repeatedly the subject of open discussion
between the parties in 2007. (C.R. 204-05). This evidence and Mr. Mahler’s
admissions that DMAC never made affirmative misrepresentations about the doors
conclusively negate the counter-defense of fraudulent concealment on that issue.
Moreover, nothing about the flooring was misrepresented or concealed.
Neither Mahler’s Brief nor its summary judgment evidence identifies any false
statement concerning the floors. Mahler was fully aware that the selected flooring
was an inexpensive composite material, not high-end hardwood. (C.R. 221).
Mahler does not allege that it ever asked DMAC for information about the floors.
Far from concealing information about the floors, DMAC simply left the excess
flooring material in a box bearing the manufacturer’s contact information on site in
Mr. Mahler’s possession upon completion of the job (C.R. 222-23). As Mr. Mahler
16 Mahler attempts to avoid the impact of these admissions only be nakedly disavowing the sworn testimony of its sole witness. See Mahler’s Brief at 58. Mahler’s counsel cannot generate a genuine issue of material fact by calling its client’s sworn testimony “mistaken.” See Farroux v. Denny’s Restaurants, Inc., 962 S.W.2d 108, 111 (Tex. App.—Houston [1st Dist.] 1997, no pet.) (“Parties are not free to disavow unequivocal testimony in an attempt to avoid summary judgment. A party cannot file an affidavit to contradict his own deposition testimony without any explanation for the change in the testimony, for the purpose of creating a fact issue to avoid summary judgment. If a party’s own affidavit contradicts his earlier testimony, the affidavit must explain the reason for the change. Without an explanation of the change in the testimony, we assume the sole purpose of the affidavit was to avoid summary judgment. As such, it presents merely a ‘sham’ fact issue.”).
42 testified, as soon as he wanted to inquire about the flooring specifications, all he
had to do was find the manufacturer’s information on the box on his property and
make a quick phone call. (C.R. 222-23).
Faced with these fatal admissions, Mahler asks the Court to create a new
duty of disclosure between contracting parties that Texas courts have roundly
rejected. See, e.g., Via Net, 211 S.W.3d at 314; PPG Indus., 146 S.W.3d at 98;
Bayou Bend Towers, 866 S.W.2d at 747. Only in the context of a fiduciary
relationship is mere non-disclosure sufficient to support the counter-defense of
fraudulent concealment. Bayou Bend Towers, 866 S.W.2d at 747 (“[Defendant]
owed [plaintiff] no duty to disclose [construction defects] because there was no
fiduciary relationship between the parties.” (emphasis added)); PPG Indus., Inc.,
146 S.W.3d at 98 (“[M]ere silence is not fraudulent unless there is a duty to
disclose; no such duty existed between these contracting corporations.”).
Contracting parties are obligated to protect their own interests, including by using
reasonable diligence to confirm the compliance of counter-parties. HECI Expl. Co.,
982 S.W.2d at 887.
Mahler relies on Booker v. Real Homes, Inc., 103 S.W.3d 487 (Tex. App.—
San Antonio 2003) as clarified on denial of reh’g (Feb. 26, 2003), for the
proposition that a builder has a duty to disclose to a laymen in a construction defect
case, (Mahler’s Brief at 57-58). Perhaps Mahler did not read that case to the end:
43 on rehearing, the San Antonio court of appeals specifically amended its opinion to
clarify that it rested not just on a duty of disclosure, but on the defendant’s
affirmative misrepresentations. Id. at 494. Mahler has identified no such
misrepresentations here, nor can it.
4. Even if DMAC Had Made a Misrepresentation About the Floors or the Doors (It Did Not), Fraudulent Concealment Would Be Unavailable to Toll Limitations Because the Relevant Facts Could Have Been Discovered Through Reasonable Diligence.
“Fraudulent concealment only tolls the running of limitations until the fraud
is discovered or could have been discovered with reasonable diligence.” BP Am.
Prod. Co., 342 S.W.3d at 67. 17 For the reasons stated in Section B.3.a above,
Mahler either knew or should have discovered through reasonable diligence any
injury relating to the doors and floors well over four years before it filed this suit.
As explained above, the product and warranty information for the floors and
doors was always readily available; Mahler knew how to make inquiries of the
vendors or manufacturers of those products; and Mahler did in fact obtain the
relevant information as soon as it made inquiries. (C.R. 196-202, 222-23).
Mahler counters that whether it failed to exercise reasonable diligence is
necessarily a fact issue. This position is unsupported by the applicable case law
17 Similarly, equitable estoppel applies only where “a party without knowledge or the means of knowledge of the real facts” relies on a false representation or concealment. Medina v. Tate, 01- 12-00496-CV, 2013 WL 3421973 (Tex. App.—Houston [1st Dist.] July 9, 2013, no pet.) (emphasis added). 44 from this Court and the Texas Supreme Court. Mahler’s evidence of reasonable
diligence is woefully lacking even compared to other plaintiffs whose claims have
been held barred as a matter of law.
For example, in Bayou Bend Towers, the plaintiffs conducted numerous
independent investigations and hired at least four different consulting and
engineering firms to investigate their claims, but these investigations failed to
disclose the actual cause and party responsible for the defects. 866 S.W.2d at 743-
45. This Court still held that plaintiff’s claims were time barred as a matter of law:
It is clear that even if Bayou Bend did not actually discover the cause of its leakage problem until January 1990 as it asserts, it should have discovered the nature of its injury years earlier by the use of reasonable diligence.
Id. at 744 (emphasis added).
Similarly, in BP America Production Co., the Texas Supreme Court held in
the face of a jury finding of fraudulent concealment that, as a matter of law,
plaintiffs had not acted with diligence to discover the truth within the limitations
period, and could not therefore rely on the fraudulent concealment doctrine. 342
S.W.3d at 69. Even though discovering the basis for their claim would have
required them to hire an expert who understood well logs containing “highly
technical information” about “resistivity, conductivity, and spontaneous potential,”
the information was available to the plaintiffs from a source other than the
45 defendant, which was sufficient to defeat any claim of fraudulent concealment. Id.
at 66 & 67-68.
By the standard articulated in these cases, Mahler clearly failed to exercise
reasonable diligence by failing to avail itself, within the limitations period, of the
readily available sources of information about the floors and the doors. Even if
DMAC had made contrary representations (it did not), they would not excuse
Mahler’s failure to exercise reasonable diligence.
5. Mahler Did Not Rely on Any DMAC Representations Concerning the Doors or Floors, and Any Reliance Would Have Been Unreasonable.
Even if DMAC had made a false representation about the floors or the doors
(it did not), limitations was not tolled past the time that Mahler was capable of
discovering the truth itself, because “reliance is not reasonable when information
revealing the truth could have been discovered within the limitations period.” See
BP Am. Prod. Co., 342 S.W.3d at 68.18
18 Plaintiff disagrees with DMAC’s contention that “reliance is not reasonable when information revealing the truth could have been discovered within the limitations period.” See Plaintiff’s Brief at 49, n. 16, but this statement is a direct quote from the Texas Supreme Court. BP Am. Prod. Co., 342 S.W.3d at 68. Mahler’s contention that reliance is only unreasonable when information is available in the public record has been rejected by the Supreme Court. Id. at 67-68 (“[I]f the Marshalls could have discovered BP’s wrongdoing by reviewing information available in the public record, or through means other than BP’s representations before limitations expired, they did not exercise reasonable diligence in relying on BP’s representations and limitations barred their claim.” (emphasis added)); see also Wagner & Brown, Ltd. v. Horwood, 58 S.W.3d 732, 736 (Tex. 2001) (“[Plaintiffs] cite HECI to support their argument that information must be publicly available to be inherently discoverable, but their reliance on that case is misplaced. Although we noted in HECI that information about the oil reservoir was available from several sources, including public records at the Railroad Commission, it does not 46 It is well documented that Mahler did not rely on anything DMAC said
about the floors or the doors. Mahler paid independent professional inspectors to
examine the Project and report on its condition (C.R. 163-90), specifically
requesting that those inspectors opine on the suitability of the doors. (C.R. 186-87).
He also made inquiries of the vendor of the doors, obtaining the manufacturer’s
product information and spec sheets and an explanation of the doors’ warranty.
(C.R. 196-202). Moreover, by December of 2007 at the latest, Mr. Mahler was
clearly no longer relying on DMAC’s statements because he was already accusing
DMAC of having misled him about the doors. (S.C.R.2 78).19
Possessed of the manufacturer’s specifications and warranty information, an
independent inspector’s report, with an open line of communication to its vendors,
and already expressing mistrust of its contractual counter-party, any continued
reliance on DMAC’s representations about the doors beyond December 2007
would have been objectively unreasonable.
follow, and we did not imply, that an injury is inherently undiscoverable if it cannot be detected by examining public records.”). 19 Mahler has never identified any allegedly false or misleading statements concerning the floors. 47 6. The Trial Court Properly Granted DMAC’s No-Evidence Motion on Fraudulent Concealment Because Mahler Failed to Meet its Burden to Produce Evidence Supporting Each Element of its Counter- Defense.
Mahler contends that the trial court erred in granting its no-evidence motion
for summary judgment because the Motion lacked sufficient specificity. DMAC’s
Motion did specify particular elements of fraudulent concealment for which
Mahler has no evidence,20 but Mahler’s argument misapprehends the parties’
respective burdens. DMAC was not obligated to affirmatively disprove Mahler’s
affirmative counter-defenses to the statute of limitations (though DMAC has done
so); rather, Mahler had the burden, in response to DMAC’s limitations Motion, to
present evidence supporting each of its defenses to limitations. See KPMG Peat
Marwick, 988 S.W.2d at 749-50; Bayou Bend Towers, 866 S.W.2d at 746-47.
Because Mahler failed to do so, the trial court properly granted no-evidence
summary judgment against Mahler’s fraudulent concealment and equitable
estoppel counter-defenses.
Mahler failed to carry its burden of presenting any summary judgment
evidence to support two essential elements of its affirmative counter-defense: that
DMAC “had a fixed purpose to conceal the wrong,” and “did conceal the wrong” 20 DMAC’s Motion stated: “With respect to the floors, Mahler has no evidence either (1) that DMAC had any knowledge concerning their grade or quality since they were chosen by Mahler working with a third-party flooring vendor or (2) that DMAC concealed or misrepresented anything. With respect to the doors, Mahler has no evidence of concealment or misrepresentation, because all information concerning their quality and manufacturer warranty was known equally and discussed openly by the parties.” (C.R. 143). 48 with respect to Mahler’s claims concerning the floors and doors. Shell Oil Co.,
356 S.W.3d at 927.21
There is no evidence that DMAC intended to, or did, conceal any facts about
the floors or the doors. As discussed above, far from trying to hide any facts about
the flooring, DMAC simply left the remaining flooring material in a box bearing
the manufacturer’s information on Mahler’s property at the end of the job—not the
actions of a party with a “fixed purpose to conceal.” (C.R. 222-23). A DMAC
representative referencing a tight construction budget in reference to the floors, see
Mahler Brief at 57, is not evidence of fraud or an intent to conceal material facts
from Mahler—budget restraints are a legitimate consideration in making material
choices.
Moreover, Mr. Mahler’s own testimony confirms that DMAC made no
misrepresentations about the floors or doors. (C.R. 254-56). And even if DMAC
had intended to conceal information about the doors, there is no evidence it
actually succeeded in doing so, since Mr. Mahler obtained all of the relevant
information about them in April 2007. (C.R. 124-30, 226).
21 Similarly, Mahler failed to present any evidence to support the following elements of equitable estoppel: “(1) a false representation or concealment of material facts; (2) made with knowledge, actual or constructive, of those facts; (3) with the intention that it should be acted on; (4) to a party without knowledge or means of obtaining knowledge of the facts.” Johnson & Higgins of Texas, Inc., 962 S.W.2d at 515-16. 49 CONCLUSION
For the reasons set forth above, the judgment of the trial court should be
affirmed.
Respectfully submitted,
REYNOLDS FRIZZELL LLP
By: /s/ James A. Schuelke Brandon T. Allen State Bar No: 24009353 James A. Schuelke State Bar No: 24075037 Drew D. Pennebaker State Bar No: 24083645
1100 Louisiana Street, Suite 3500 Houston, Texas 77002 Telephone: (713) 485-7200 Facsimile: (713) 485-7250 ballen@reynoldsfrizzell.com jschuelke@reynoldsfrizzell.com
COUNSEL FOR APPELLEE DMAC CONSTRUCTION, INC.
50 CERTIFICATE OF COMPLIANCE
Pursuant to Texas Rule of Appellate Procedure 9.4(i)(3), I hereby certify that this Brief contains 11,635 words, excluding the words not included in the word count pursuant to Texas Rule of Appellate Procedure 9.4(i)(1). This is a computer-generated document created in Microsoft Word, using 14-point typeface for all text, except for footnotes which are in 12-point typeface. In making this certificate of compliance, I am relying on the word count provided by the software used to prepare the document.
/s/ James A. Schuelke James A. Schuelke
CERTIFICATE OF SERVICE
As required by Texas Rules of Appellate Procedure 6.3 and 9.5, I certify that I have served this document on all parties on December 9, 2015 via e-filing and/or e- mail.
Jeffrey J. Tompkins jeffrey.tompkins@jefftompkinslaw.com 1413 Brittmoore Road Houston, Texas 77043 (713) 787-5333
Christopher D. Nunnallee chrisnunnallee@yahoo.com 1413 Brittmoore Road Houston, Texas 77043 (713) 787-5333
B. Mahler Interests, LP v. DMAC Construction, Inc. (B. Mahler Interests, LP v. DMAC Construction, Inc.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.