COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 2-03-296-CV
JACQUELINE
C. HEAD, INDIVIDUALLY APPELLANT
AND
AS SUCCESSOR TRUSTEE UNDER
THE
FTW LIVING TRUST
V.
ALFRED
L. FINLEY AND SUSAN N. FINLEY APPELLEES
------------
FROM
THE 17TH DISTRICT COURT OF TARRANT COUNTY
MEMORANDUM OPINION1
Appellant
Jacqueline C. Head appeals the summary judgment rendered in favor of Appellees,
Afred L. Finley and Susan N. Finley. We affirm.
I. Factual and
Procedural Background
In
the Spring of 1998, Appellant began looking for a home to purchase in the Fort
Worth area. As part of her search, she attended an open house at Appellees’
home and obtained a Seller’s Disclosure Notice executed by Appellees on July
14, 1997. The 1997 disclosure denied awareness of any defects in the roof or
that the roof needed repair and denied that the house had any “water
penetration.” Appellant directed attorney Leonard Rodes to make an offer on
the house. By letter dated June 3, 1998, Rodes made a conditional offer of
$300,000 and informed Appellees that the ultimate buyer would be a trust and not
Appellant individually. Rodes advised that if the pre-contract property
inspections were satisfactory, the trust would purchase the house “as is.”
Appellant
retained the services of four independent inspectors. One of the inspections was
performed by Affordable Inspections, Inc. on June 19, 1998. Although Affordable
Inspections determined that the roof was “[p]erforming its function as
intended” at the time of the inspection, the inspector identified defective
conditions, which included a condensation problem and water penetration damage
in the dining room and garage. Rodes and Appellees executed an earnest money
contract for the purchase of the home in July 1998. As part of that agreement,
Rodes checked a box stating that he had not received a Seller’s Disclosure
Notice and reserved the right to terminate the contract if he did not receive a
notice within two days. Appellees provided Rodes with an updated Seller’s
Disclosure Notice that was executed on July 15, 1998. Rodes acknowledged receipt
of the 1998 Seller’s Disclosure Notice by initialing each page and signing the
acknowledgment in his capacity as Trustee of the FTW Living Trust. The 1998
disclosure advised that the roof was damaged in a hail storm and repaired in
1995, as previously stated in the 1997 disclosure. The 1998 disclosure
acknowledged that the house had a defective roof, windows, walls, plumbing,
sidewalks, and fence. Rodes completed the trust’s purchase of the home on July
23, 1998.
Less
than four months after the purchase, Appellant had the property inspected by a
structural engineer. During the inspection, the engineer discovered defects in
the home, including a defective roof that needed replacement and a leak that
caused substantial water penetration to the interior of the home. Appellant
claims that Appellees knew of the defects and affirmatively concealed them from
Appellant.
Appellant
filed suit against Appellees, Affordable Inspections, and John Fox, a licensed
inspector who performed an inspection on the home. Appellant asserted Deceptive
Trade Practices Act (DTPA) violations and fraud claims against Appellees, and
breach of warranty, breach of contract, negligence, and DTPA claims against
Affordable Inspections and Fox. The trial court awarded summary judgment against
Affordable Inspections and Fox in the amount of $348.27 on January 24, 2003. In
doing so, the trial court found that Appellant’s DTPA causes of action were
exempted by the professional services clause in section 17.49(c). Tex. Bus. & Com. Code Ann. §
17.49(c) (Vernon Supp. 2004). Although the trial court rendered judgment against
Affordable Inspections and Fox as to the negligence and breach of contract
claims, the court found that damages were limited by a limitation of liability
clause in the contract between the parties to $348.47. The trial court noted
that this amount was tendered to Appellant on December 11, 2001, and the tender
was rejected. The court ordered judgment against Appellant for attorneys’ fees
in the amount of $25,861.58.
On
April 1, 2003, Appellees filed no evidence and traditional motions for summary
judgment asserting the following grounds:
1.Appellant
failed to produce any evidence that:
a.
Appellees knew mold existed in the house at the time of sale;
b.
Appellees knew of any water penetration damage at the time of the sale;
c.
mold actually existed at the house at the time of the sale;
d.
water penetration damage existed at the house at the time of the sale;
e.
water penetration damage or mold existed at the time Appellees executed the
Seller’s Disclosure Statement; and
f.
the Trustee of the FTW Living Trust relied upon any statements made by
Appellees.
2.Appellants
claims are barred as a matter of law because “as is” contracts negate
causation.
3.Appellant
is not a consumer under the DTPA.
4.Appellant
lacks standing to sue in her individual capacity.
5.Appellant
admitted she did not rely on the 1998 Seller’s Disclosure Statement.
The
record includes a response filed by Appellant on May 16, 2003, and a reply filed
by Appellees on May 22, 2003. On July 7, 2003, the trial court signed a final
summary judgment in favor of Appellees, ordering Appellant to pay $75,000 in
attorneys’ fees and $5,000 in costs. The trial court’s judgment did not
specify which grounds it relied upon in granting Appellees’ summary judgment
motion. This appeal ensued.
II. Standard of
Review
In
a summary judgment case, the issue on appeal is whether the movant met his
summary judgment burden by establishing that no genuine issue of material fact
exists and that the movant is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c); S.W. Elec.
Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 2002); City of Houston v.
Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979). The burden of
proof is on the movant, and all doubts about the existence of a genuine issue of
material fact are resolved against the movant. S.W. Elec. Power Co., 73
S.W.3d at 215; Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 223 (Tex.
1999); Great Am. Reserve Ins. Co. v. San Antonio Plumbing Supply Co., 391
S.W.2d 41, 47 (Tex. 1965). Therefore, we must view the evidence and its
reasonable inferences in the light most favorable to the nonmovant. Great Am.,
391 S.W.2d at 47.
In
deciding whether there is a material fact issue precluding summary judgment, all
conflicts in the evidence are disregarded and the evidence favorable to the
nonmovant is accepted as true. Rhone-Poulenc, 997 S.W.2d at 223; Harwell
v. State Farm Mut. Auto. Ins. Co., 896 S.W.2d 170, 173 (Tex. 1995).
Evidence that favors the movant's position will not be considered unless it is
uncontroverted. Great Am., 391 S.W.2d at 47.
A
defendant is entitled to summary judgment if the summary judgment evidence
establishes, as a matter of law, that at least one element of a plaintiff’s
cause of action cannot be established. Elliott-Williams Co. v. Diaz, 9
S.W.3d 801, 803 (Tex. 1999). The defendant as movant must present summary
judgment evidence that negates an element of the plaintiff’s claim. Centeq
Realty, Inc. v. Siegler, 899 S.W.2d 195, 197 (Tex. 1995). Once the defendant
produces sufficient evidence to establish the right to summary judgment, the
burden shifts to the plaintiff to come forward with competent controverting
evidence raising a genuine issue of material fact with regard to the element
challenged by the defendant. Id.
III. Discussion
When
a summary judgment order is general and does not specify the grounds on which
the trial court granted summary judgment, on appeal the non-movant must negate
any grounds on which the court could have granted the summary judgment. FM
Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872-73 (Tex. 2000).
Accordingly, in nine issues, Appellant challenges each of the grounds asserted
in Appellees’ motion for summary judgment, as well as the trial court’s
order to pay attorneys’ fees and costs.
A. Standing
Because
Appellant’s standing issues are potentially dispositive of her individual
claims, we first address whether Appellant is a “consumer” under the DTPA
and whether she has standing to sue in her individual capacity. Under the DTPA,
a consumer is defined as one who acquires by purchase or lease any goods or
services. Tex. Bus. & Com. Code Ann.
§ 17.45(4) (Vernon 2002). The Texas Supreme Court has stated that the DTPA,
under the rule of liberal construction, must be given its most comprehensive
application without doing any violence to its terms. Cameron v. Terrell &
Garrett, Inc., 618 S.W.2d 535, 541 (Tex. 1981). A party's consumer status
does not turn on whether there is a contractual relationship with the defendant,
but rather, it is determined by the party's relationship to the transaction. Arthur
Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 815 (Tex. 1997).
Consequently, a person does not have to be a direct purchaser in order to
qualify as a consumer under the DTPA. Kennedy v. Sale, 689 S.W.2d 890,
892-93 (Tex. 1985); Lukasik v. San Antonio Blue Haven Pools, Inc., 21
S.W.3d 394, 401 (Tex. App.—San Antonio 2000, no pet.). In limited
circumstances, a third party may qualify as a consumer if the transaction was
specifically intended to benefit the third party and the good or service was
rendered to benefit the third party. See Kennedy, 689 S.W.2d at 892-93.
Whether a plaintiff is a consumer is a question of law. Wright v. Gundersen,
956 S.W.2d 43, 47 (Tex. App.—Houston [14th Dist.] 1996, no writ).
The
summary judgment evidence before us establishes that Appellant falls within the
narrow scope of circumstances wherein a third party qualifies as a consumer
under the DTPA. Appellant provided uncontroverted summary judgment evidence that
the house was purchased as Appellant’s personal residence at the direction of
Appellant, settlor of the trust. Furthermore, the note executed for the purchase
of the home indicates that Appellant, in addition to the trust, was personally
liable as a borrower on the loan.
Appellees,
citing several cases as authority, assert that Appellant is not a consumer under
the DTPA because she is merely a beneficiary of the trust. Those cases, however,
are distinguishable. Two of the cases cited by Appellees held that the
plaintiffs were not consumers under the DTPA because they were incidental
beneficiaries to the purchase. See Querner v. Rindfuss, 966 S.W.2d 661,
668 (Tex. App.—San Antonio 1998, pet. denied); Vinson & Elkins v. Moran,
946 S.W.2d 381, 407-08 (Tex. App.—Houston [14th Dist.] 1997, writ dism’d by
agr.). Here, Appellant is more than a mere incidental beneficiary of the
purchase—the house was purchased as Appellant’s residence, specifically for
her benefit. A third case cited by Appellees denied consumer status under the
DTPA because plaintiffs acquired a home through inheritance and not through
“purchase or lease” as required by the Act. See March v. Thiery, 729
S.W.2d 889, 896 (Tex. App.—Corpus Christi 1987, no writ); see also
Tex. Bus. & Com. Code Ann. §
17.45(4). The house in the present case was purchased, as opposed to inherited,
and is therefore distinguishable from Thiery. 729 S.W.2d at 896. Finally,
Appellees cite a Fifth Circuit case holding that a father assisting his son in
the purchase of a car for the benefit of the son was not a consumer of the DTPA.
See Plumley v. Landmark Chevrolet, Inc., 122 F.3d 308, 311 (5th Cir.
1997). Plumley, like the other cases cited by Appellees, is
distinguishable from the facts of this case because Appellant, unlike the
plaintiff in Plumley, is the primary beneficiary of the purchase. Id.
at 311.
We
agree with Appellant that she “was at the core of this transaction” and hold
that she is a consumer under the DTPA. See Kennedy, 689 S.W.2d at
892. Accordingly, she has standing to pursue a DTPA claim in her individual
capacity.
Notwithstanding
Appellant’s standing to sue under the DTPA, we must also determine whether
Appellant has standing to pursue her fraud claims. Because we conclude,
regardless of whether Appellant has standing, that she cannot establish
essential elements of her fraud claims as a matter of law, we need not address
Appellant’s standing, as a trust beneficiary, to sue a third party for fraud.
Both of Appellant’s fraud claims require proof that Appellant acted in
reliance on false representations made by Appellees. See Wal-Mart Stores,
Inc. v. Sturges, 52 S.W.3d 711, 727 (Tex. 2001); Tex. Bus. & Com. Code Ann. §
27.01(a) (Vernon 2002). Appellee contends that Appellant cannot establish
reliance on false representations by Appellees because the trust, rather than
Appellant, purchased the home. As addressed below in greater detail, the
evidence reflects that Rodes, as Trustee of the FTW Living Trust and executor of
the contract for the purchase of the home, did not see the 1997 Seller’s
Disclosure and did not rely on the 1998 Seller’s Disclosure in deciding to
purchase the home. We therefore hold that the trial court did not err in
dismissing Appellant’s individual claims for common law fraud and statutory
fraud in real estate transactions against Appellees. This leaves us with
addressing Appellees’ asserted grounds for summary judgment as they apply to
Appellant’s individual claim under the DTPA and the trust’s DTPA and fraud
claims.
B. Fraud Claims
The
essential elements of common law fraud are: 1) a material representation was
made; 2) the representation was false; 3) when the representation was made, the
speaker knew it was false or made it recklessly without any knowledge of the
truth and as a positive assertion; 4) the speaker made the representation with
the intent that the other party should act upon it; 5) the party acted in
reliance on the representation; and 6) the party thereby suffered injury. Sturges,
52 S.W.3d at 727.
Under
the Texas Business and Commerce Code, a claim for statutory fraud in a real
estate transaction consists of:
(1)
false representation of a past or existing material fact, when the false
representation is
(A)
made to a person for the purpose of inducing that person to enter into a
contract; and
(B)
relied on by that person in entering into that contract.
Tex. Bus. & Com. Code Ann. §
27.01(a).
Appellant
claims that Appellees made numerous representations in a Seller’s Disclosure
Notice regarding the condition of the house, which were relied on in making the
decision to purchase the home. The record reflects that Appellees executed a
Seller’s Disclosure Notice on July 14, 1997, over a year before the sale of
the home. The 1997 disclosure denied awareness of any defects in the roof or
that the roof needed repair and denied that the house had any “water
penetration.” As previously discussed, Appellees provided Rodes with an
updated Seller’s Disclosure Notice on his request, which acknowledged that the
house had a defective roof, windows, walls, plumbing, sidewalks, and fence.
Rodes acknowledged receipt of the 1998 Seller’s Disclosure Notice by
initialing each page and by signing the acknowledgment in his capacity as
Trustee of the FTW Living Trust. At the time of the purchase, Rodes served as
Trustee of the FTW Living Trust and executed the contract for sale between
Appellees and the trust. According to Rodes’ affidavit, he:
discussed
the offer with Ms. Head. Because I had not seen the Home or the Sellers
Disclosure Notice, I relied upon Ms. Head’s impression that the general
condition of the Home was excellent, and her review of the Sellers Disclosure
stating that the Home had no known defects, and no damage needing repair. (I now
understand, but did not at the time, that the Sellers Disclosure reviewed by Ms.
Head was dated July 15, 1997.) Since the Home appeared to Ms. Head to be in good
shape, and Ms. Head was clearly taken with the Home, I told her that as Trustee
of the FTW Trust, which had been newly formed to take title to the Home, I would
agree to enter into a contract for the purchase price of $300,000.
.
. . .
I
have no special knowledge or expertise in the areas of construction or
purchasing real estate. Therefore, I relied upon the report of a licensed Texas
Real Estate Inspector to determine that there were no patent defects in the
Home, as well as information from the Sellers Disclosure Notice communicated to
me by Ms. Head that there were no known latent defects or damage in the home.
The
Sellers Disclosure Notice dated July 15, 1998 was faxed to me along with, and
among, numerous other closing documents, and I initialed all such documents,
after the inspection period was over. No one informed me that [the] July 15,
1998 Sellers Disclosure Notice differed from the 1997 Sellers Disclosure that
had led Ms. Head to say to me in June 1998 that there were no known latent
defects or damage in the Home, in reliance upon which I had agreed to sign a
contract as Trustee of the FTW Trust.
As
they did in their motion for summary judgment, Appellees assert that despite
Appellant’s alleged reliance, there is no evidence of reliance on the part of
Rodes, the Trustee of the FTW Living Trust and executor of the contract for the
purchase of the home. We agree. In fact, the evidence reflects that Rodes relied
on an inspection report and Appellant’s own statements and assurances in
reaching the decision to purchase the home. We further note that when Rodes
entered into the earnest money contract on behalf of the trust, he represented
that he did not receive a Seller’s Disclosure Notice and retained the right to
terminate the contract in the event that he did not receive the notice. Rodes
additionally reserved the right to terminate the contract for any reason within
seven days after receiving the notice.
Because
Rodes’ affidavit reflects that he did not rely on the Seller’s Disclosure
Notices in deciding to purchase the home and did not even see the 1997 notice,
we conclude that there is no evidence of reliance as required to maintain claims
for common law fraud and statutory fraud in real estate transactions.
Accordingly, we hold that the trial court did not err in dismissing the
trust’s fraud claims. Having concluded that the trial court’s dismissal of
the trust’s fraud claims was proper, we need not address the remaining grounds
for summary judgment asserted by Appellees as they relate to these claims. See
Tex. R. App. P. 47.1.
C. DTPA Claims
Appellant
claims that Appellees violated several provisions of the DTPA, including five
laundry list violations under section 17.46(b) and section 17.50(a)(3)
prohibiting an unconscionable action or course of action. Tex. Bus. & Com. Code Ann. §
17.46(b) (Vernon Supp. 2004); § 17.50(a)(3) (Vernon 2002). Under section
17.50(a) of the DTPA, which addresses laundry list violations,
(a)
A consumer may maintain an action where any of the following constitute a
producing cause of economic damages or damages for mental anguish:
(1)
the use or employment by any person of a false, misleading, or deceptive act or
practice that is:
(A)
specifically enumerated in a subdivision of Subsection (b) of Section 17.46 of
this subchapter; and
(B)
relied on by a consumer to the consumer's detriment.
Id.
§ 17.50(a). Because there is no evidence of reliance, an essential element of
proof for DTPA laundry list violations, the trial court did not err in
dismissing Appellant’s individual and representative claims that fall under
the DTPA’s laundry list of actions. See Henry Schein, Inc. v. Stromboe,
102 S.W.3d 675, 686 (Tex. 2003).
Appellant’s
sole remaining claim, under section 17.50(a)(3) of the DTPA, provides that a
consumer may recover actual damages for “any unconscionable action or course
of action” that is the producing cause of damages. See Tex. Bus. & Com. Code Ann. §
17.50(a)(3). Here, Appellant claims that her reliance on the 1997 Seller’s
Disclosure was the producing cause of her alleged damages. Thus, for the same
reasons that support our conclusion that Appellant’s claims requiring proof of
reliance must fail, we conclude that there is no evidence that the Sellers’
Disclosure was the producing cause of Appellant’s alleged damages.
Consequently, Appellant’s claim under section 17.50(a)(3) also fails.
Having
concluded that each of Appellants’ claims was properly dismissed, we overrule
Appellant’s first eight issues.
D. Attorneys’
Fees
Appellant,
in her final issue, poses five arguments in support of her contention that
Appellees are not entitled to attorneys’ fees. First, Appellant argues,
without citing any supporting authority, that Appellees cannot recover
attorneys’ fees because they did not request them in their motion for summary
judgment. Appellant's argument is inadequately briefed, as it fails to cite any
legal authority for the proposition that a failure to request attorneys’ fees
in a motion for summary judgment precludes the successful movant from receiving
attorneys’ fees. See Tex. R.
App. P. 38.1(h); Fredonia State Bank v. Gen. Am. Life Ins. Co.,
881 S.W.2d 279, 284 (Tex. 1994). Therefore, Appellant presents nothing for
review regarding Appellees’ failure to request attorneys’ fees in their
summary judgment motion.
Appellant’s
second argument refuting Appellees’ entitlement to attorneys’ fees contends
that Appellees never pled for attorneys’ fees under the earnest money
contract, which states that:
The
prevailing party in any legal proceeding brought under or with respect to the
transaction described in this contract is entitled to recover from the
non-prevailing party all costs of such proceeding and reasonable attorney’s
[sic] fees.
According
to Appellant, Appellees’ first amended answer requested attorneys’ fees only
under section 17.50(c) of the DTPA, which is the provision allowing attorneys’
fees under the Act for claims brought in bad faith and for the purpose of
harassment. See Tex. Bus. &
Com. Code Ann. § 17.50(c). Appellant claims that Appellees did not
subsequently request attorneys’ fees under the contract in their second
through fifth amended responses. The record reflects, however, that Appellees
specifically pled a counterclaim for their contractual right to attorneys’
fees in their fifth amended answer:
A.
Contractual Right to Attorneys’ Fees.
2.
Plaintiffs and Defendants executed an Earnest Money Contract for the sale of a
house to Plaintiffs. Pursuant to the contract, in the event of a dispute arising
out of the Earnest Money Contract, the prevailing party in that dispute is
entitled to recover attorneys’ fees.
Regardless,
Appellant contends that the earnest money contract is extinguished by the merger
doctrine. Appellant relies on judicial precedent holding that where a deed has
been executed and accepted as performance on an earnest money contract to convey
real estate, all rights and duties created by an earnest money contract are
merged into the deed when the seller delivers and the buyer accepts the deed. See
Commercial Bank, Unincorporated v. Satterwhite, 413 S.W.2d 905, 909 (Tex.
1967); Perry v. Stewart Title Co., 756 F.2d 1197, 1205 (5th Cir. 1985).
“Though the terms of the deed may vary from those contained in the contract,
still the deed must be looked to alone to determine the rights of the
parties.” Alvarado v. Bolton, 749 S.W.2d 47, 48 (Tex. 1988).
The
doctrine of merger, however, does not operate to bar claims of fraud, accident,
or mistake in transactions leading up to the deed. Munawar v. Cadle Co.,
2 S.W.3d 12, 17 (Tex. App.—Corpus Christi 1999, pet. denied). As one court of
appeals posited, “To adopt the position that written real estate contracts are
never actionable upon delivery of a deed, would foreclose every cause of action
for deceptive trade practices or fraud in the sale of real estate, unless the
misrepresentation appeared in the deed itself.” Id. Here, Appellees
asserted a counterclaim arising out of their defense to claims of fraud and DTPA
violations, and logically brought with respect to the transaction described in
the earnest money contract. Appellant relied on the Seller’s Disclosure Notice
required under the earnest money contract in asserting her claims, despite the
doctrine of merger; we will not allow her to now use that doctrine as a shield
from liability for attorneys’ fees. The Texas Supreme Court has explained that
the merger doctrine does not apply in circumstances where the earnest money
contract contains contractual obligations apart from the mere conveyance of
property. Harris v. Rowe, 593 S.W.2d 303, 307 (Tex. 1979); see also
Sanchez v. Dickinson, 551 S.W.2d 481, 486 (Tex. Civ. App.—San Antonio
1977, no writ) (holding merger doctrine did not destroy right of first refusal
from contract); Pleasant Grove Builders, Inc. v. Phillips, 355 S.W.2d
818, 823 (Tex. Civ. App.—Dallas 1962, writ ref’d n.r.e.) (holding that
agreement to furnish title policy was not superseded by deed). Appellant agreed
that a non-prevailing party in any legal proceeding brought under or with
respect to the transaction described in the earnest money contract would pay
costs and reasonable attorneys’ fees. As the non-prevailing party, Appellant
is obligated to pay the costs and attorneys’ fees as ordered by the trial
court.
Appellant’s
alternative arguments, that Appellees’ claims for attorneys’ fees are barred
by the statute of limitations and for lack of presentment, relate to claims for
attorneys’ fees under Chapter 38 of the Texas Civil Practices and Remedies
Code. Tex. Civ. Prac. & Rem. Code
Ann. § 38.001(8) (Vernon 1997). Appellees base their request for fees on
an express provision in the earnest money contract, not Chapter 38. Therefore,
Appellant’s contentions concerning Chapter 38 are not relevant to the trial
court’s award of attorneys’ fees and costs.
Appellant
additionally asserts that if attorneys’ fees and costs were proper, they
should be reduced because a portion of the bills from Appellees’ attorney are
inadmissible hearsay. Because Appellant does not discuss or cite authority in
her brief on this issue, she has not properly presented this issue on appeal,
and we need not address it. See Tex.
R. App. P. 38.1(h); Fredonia, 881 S.W.2d at 284. Having addressed
all of Appellant’s arguments regarding attorneys’ fees in favor of
Appellees, we overrule Appellant’s ninth issue.
IV. Conclusion
Because
we overrule all of Appellant’s issues, we affirm the trial court’s judgment.
PER
CURIAM
PANEL
B: HOLMAN, DAUPHINOT, and MCCOY, JJ.
DELIVERED:
July 29, 2004
NOTES
1.
See Tex. R. App. P. 47.4.