Dragon Fish, LLC v. Santikos Legacy, Ltd.

383 S.W.3d 175, 2012 Tex. App. LEXIS 3439, 2012 WL 1523041
CourtCourt of Appeals of Texas
DecidedMay 2, 2012
DocketNo. 04-11-00682-CV
StatusPublished

This text of 383 S.W.3d 175 (Dragon Fish, LLC v. Santikos Legacy, Ltd.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Dragon Fish, LLC v. Santikos Legacy, Ltd., 383 S.W.3d 175, 2012 Tex. App. LEXIS 3439, 2012 WL 1523041 (Tex. Ct. App. 2012).

Opinion

OPINION

Opinion by:

CATHERINE STONE, Chief Justice.

Five tenants and their lease guarantors sued the developers of the Legacy Shopping Center and their agents asserting numerous causes of action. The claims were based on representations by the developers and their agents that the Legacy Shopping Center would be a “lifestyle center” and include upscale residential development which arguably would result in a higher traffic volume. The trial court granted partial summary judgment in favor of the developers and their agents based on a disclaimer of reliance provision contained in the leases, and the trial court and the parties agreed to an interlocutory appeal of the ruling. On appeal, the tenants and guarantors contend the disclaimer of reliance provision does not bar their claims, and claim the trial court erred in striking portions of their summary judgment evidence. We affirm the trial court’s order.

Background

The developers, Santikos Legacy, Ltd., Santikos Income Property, LLC, and John L. Santikos (collectively “Santikos”), and the developers’ agents, C. Hodges & Associates, PLLC d/b/a Hodges & Associates, C. Hodges Development, Inc., and Charles M. Hodges (collectively “Hodges”), do not dispute that the summary judgment evidence established that representations were made regarding the Legacy Shopping Center being constructed as a “lifestyle center,” to include office space, retail [179]*179development, restaurants, entertainment (a Santikos movie theater), and multi-family residences. The “lifestyle center” as represented would allegedly ensure a higher volume of traffic than other shopping centers like power centers which rely on big box retailers to draw traffic. Summary judgment evidence was also presented, however, to establish that the developers knew the multi-family residences would not be included in the development at the time each of the following tenants and their guarantors signed their leases/guaranties: (1) Dragon Fish, LLC d/b/a Motif Modern Living; (2) Greektown Restaurants, Ltd. d/b/a Papouli’s Greek Grill Restaurants;1 (3) Spa Jane, LLC; (4) All About Shoes, Inc.; and (5) Team Spears, LLC d/b/a Sharkey’s Cuts for Kids.

Hodges and Santikos moved for summary judgment based on the following provision contained in each of the leases:

“Reliance. LANDLORD AND TENANT HEREBY ACKNOWLEDGE THAT THEY ARE NOT RELYING UPON ANY BROCHURE, RENDERING, INFORMATION, REPRESENTATION OR PROMISE OF THE OTHER, OR AN AGENT OR BROKER, IF ANY, EXCEPT AS MAY BE EXPRESSLY SET FORTH IN THIS LEASE.

Although the trial court initially denied the motions, the trial court subsequently granted Hodges’ motion to reconsider based on the Texas Supreme Court’s decision in Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of America, 341 S.W.3d 323 (Tex.2011).

Discussion

Although the tenants/guarantors subdivide their first issue into seven sub-issues, several of the sub-issues simply address reasons the tenants/guarantors believe the disclaimer of reliance provision is unenforceable under the legal standards pronounced by the Texas Supreme Court in the following trio of cases: Italian Cowboy Partners, Ltd., cited above, Forest Oil Corp. v. McAllen, 268 S.W.3d 51 (Tex. 2008), and Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171 (Tex.1997). The tenants/guarantors also assert that the disclaimer of reliance provision is ambiguous. In addition to asserting that the disclaimer of reliance provision is unenforceable, the tenants/guarantors also argue: (1) the lease provision does not bar recovery against the developers and their agents who were not parties to the lease; (2) the lease provision does not bar recovery by the guarantors who were not parties to the lease; (3) the lease provision is not applicable to claims based on misrepresentations made after the lease was signed; and (4) the lease provision is not applicable to DTPA claims that do not include reliance as an element of the claim. Finally, the tenants/guarantors argue that the trial court erred in excluding portions of their summary judgment evidence.

A. Enforceability of Disclaimer of Reliance Provision

1. Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171 (Tex.1997)

In Schlumberger Tech. Corp. v. Swanson, a dispute arose over a joint venture formed to mine diamonds in South Africa. 959 S.W.2d at 173-74. Schlumberger was a member of the joint venture, and John and George Swanson were to be paid a royalty on the diamonds mined by the joint venture. Id. at 173. A dispute arose, and in settlement negotiations between Schlumberger and the Swansons, Schlum-berger represented that the sea-diamond [180]*180project was neither technologically feasible nor commercially viable. Id. at 174. Eventually, the Swansons agreed to sell their interest in the project for $814,000. Id. In connection with the settlement, the Swansons signed a release which specifically stated that they were not relying on any statement or representation made by Schlumberger but were relying on their own judgment, and that they had been represented by counsel who explained the entire contents and legal consequences of the release to them. Id. Schlumberger later sold its interest to the remaining members of the joint venture for a substantial profit. Id.

The Swansons sued Schlumberger asserting it fraudulently induced them to sell their interest at an undervalued price based on misrepresentations regarding the project’s viability and value. Id. A jury found in favor of the Swansons; however, the trial court granted a judgment notwithstanding the verdict in favor of Schlumberger. Id. at 174-75. The court of appeals reversed and rendered judgment in favor of the Swansons, holding the disclaimer of reliance provision in the release did not preclude the fraudulent inducement claim. Id. at 173.

The Texas Supreme Court first assumed, based on the evidence presented, that Schlumberger misrepresented the project’s technological feasibility and commercial viability and that such misrepresentations were actionable as fraudulent inducement. Id. at 178. Schlumberger argued that if a party is represented by independent legal counsel in negotiating a release, the presence of counsel should always preclude a claim that the release was fraudulently induced. Id. The Texas Supreme Court rejected this bright-line test. Id.

After examining conflicting authorities on whether a disclaimer of representations was enforceable, the court asserted:

Parties should be able to bargain for and execute a release barring all further dispute. This principle necessarily contemplates that parties may disclaim reliance on representations. And such a disclaimer, where the parties’ intent is clear and specific, should be effective to negate a fraudulent inducement claim. As an example, a disclaimer of reliance may conclusively negate the element of reliance, which is essential to a fraudulent inducement claim.

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Related

In Re Prudential Insurance Co. of America
148 S.W.3d 124 (Texas Supreme Court, 2004)
Forest Oil Corp. v. McAllen
268 S.W.3d 51 (Texas Supreme Court, 2008)
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Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd.
940 S.W.2d 587 (Texas Supreme Court, 1996)
Schlumberger Technology Corp. v. Swanson
959 S.W.2d 171 (Texas Supreme Court, 1997)
Cantu v. Peacher
53 S.W.3d 5 (Court of Appeals of Texas, 2001)
Downer v. Aquamarine Operators, Inc.
701 S.W.2d 238 (Texas Supreme Court, 1985)
McLernon v. Dynegy, Inc.
347 S.W.3d 315 (Court of Appeals of Texas, 2011)
Wilbanks v. State ex rel. Needham
519 S.W.2d 280 (Court of Appeals of Texas, 1975)
Polansky v. Southwest Airlines Co.
75 S.W.3d 99 (Court of Appeals of Texas, 2002)
James V. Mazuca & Associates v. Schumann
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Cite This Page — Counsel Stack

Bluebook (online)
383 S.W.3d 175, 2012 Tex. App. LEXIS 3439, 2012 WL 1523041, Counsel Stack Legal Research, https://law.counselstack.com/opinion/dragon-fish-llc-v-santikos-legacy-ltd-texapp-2012.