Osborne, Ansell L. and Mary F. v. Coldwell Banker United, Realtors, Carol Kappler, Robert M. Atkinson and Denise D. Atkinson

• Court: Court of Appeals of Texas
• Decided: July 11, 2002
• Docket: 01-01-00463-CV
• Status: Published

Opinion

In The

Court of Appeals

For The

First District of Texas

____________

NO. 01-01-00463-CV

ANSELL L. OSBORNE AND MARY F. OSBORNE, Appellants

V.

COLDWELL BANKER UNITED REALTORS, CAROL KAPPLER,

ROBERT M. ATKINSON, AND DENISE D. ATKINSON, Appellees

* * *

ROBERT M. ATKINSON AND DENISE D. ATKINSON, Appellants

VILLAGE OF TIKI ISLAND, AND

OMAHA PROPERTY AND CASUALTY CO., Appellees

On Appeal from the 212th District Court

Galveston County, Texas

Trial Court Cause No. 99CV1167

O P I N I O N

This is an appeal of summary judgments in favor of Coldwell Banker United Realtors, Carol Kappler, and Robert M. Atkinson and Denise D. Atkinson against Ansell L. Osborne and Mary F. Osborne and in favor of Coldwell Banker United Realtors, Carol Kappler, Village of Tiki Island, and Omaha Property and Casualty Co. against Robert M. Atkinson and Denise D. Atkinson. We affirm in part and reverse in part and remand the cause for further proceedings.

BACKGROUND

In 1982 or 1983, Robert M. Atkinson, a home builder, and his wife, Denise D. Atkinson, built a home on one of two adjacent lots they owned on Tiki Island in Galveston County, Texas. The house, located at 1246 Oahu, was a one-story house built on piers, as required by the building code of the Village of Tiki Island ("the Village"). Between 1983 and 1991, the Atkinsons made several alterations and additions to the house, including a 1000 square foot enclosed area at the ground level under the main floor. This area was finished as a living area or game room with a full bath and some kitchen facilities. The Village's building code prohibited enclosed areas below the base flood elevation of more than 300 square feet and required that they have non-load-bearing, break-away walls and be used only for parking and storage. The Village's building restrictions were consistent with the requirements of the Federal Emergency Management Agency (FEMA) and the National Flood Insurance Program (NFIP), which also required that structures below the base flood elevation have non-load-bearing, break-away walls and be used only for parking and storage. The Atkinsons obtained flood insurance on their house through the NFIP and were insured continuously until 1999, when they sold the house to appellants, Ansell and Mary Osborne.

In May 1992, FEMA notified the Village that between 50 and 80 percent of the houses in the Village were out of compliance with FEMA requirements. FEMA placed the Village on probation and gave the Village one year in which to bring the houses into compliance or risk losing the Village's participation in the NFIP. In the summer of 1992, Michael Loomis, Building Administrator for the Village, informed the Atkinsons by letter that their property at 1246 Oahu was in violation of the Village building code ordinance and/or FEMA codes. The letter stated that failure to correct the violations could result in the house being uninsurable and that a complaint and citation could be issued. The letter stated the specific violations as "Unpermitted enclosure of more than 300 sq. ft. below the base flood elevation; appears to be habitable."

In about October 1992, the Village attorney, Ellis Ortego, cited the Atkinsons in municipal court for violations of the Village building code as it related to flood insurance. The Atkinsons were represented by Darrell Apffel in the proceedings. Although the record on this appeal does not contain the final judgment in the municipal court case, affidavits and deposition testimony indicate that the municipal judge dismissed the citation. Also in October 1992, Loomis advised FEMA that the structure at 1246 Oahu was in violation of the Village building regulations, having a habitable enclosure below the base flood elevation, and requested that FEMA deny flood insurance coverage to the structure pursuant to section 1316 of the National Flood Insurance Act of 1968. ⁽¹⁾ In this letter, Loomis listed the location of the house at 1246 Oahu as section 1, lot 63, which was the vacant lot owned by the Atkinsons. The legal description of 1246 Oahu is section 1, lot 64. Section 1316 actions, which apply only to buildings, are not filed on vacant lots.

In February 1993, after the dismissal of the municipal court action against the Atkinsons, Apffel wrote FEMA to challenge, as a frivolous claim intended to harass the Atkinsons, the Village's recommendation that a section 1316 notice be filed against the Atkinsons' property at 1246 Oahu. He enclosed a professional engineer's report stating that the walls of the house complied with FEMA regulations. The letter indicated that a copy was sent to the Atkinsons. In March 1993, a representative of FEMA wrote Apffel in response to Apffel's challenge to the section 1316 notice. The letter referenced "Implementation of Section 1316 of the National Flood Insurance Act of 1968" and explained that, under section 1316, an owner would suffer, in addition to the denial of flood coverage, the loss of potential federal disaster assistance after a loss and the denial of grants and loans from federal agencies for development or construction. The letter outlined the steps to be taken to restore flood insurance coverage after a section 1316 determination has been applied to a structure. These steps included "a clear and unequivocal statement by an authorized public body rescinding the declaration [of a violation] and giving the reason(s) for the rescission." A copy of this letter was sent to the mayor of the Village.

In July 1993, Ortego wrote Apffel in response to Apffel's request to cancel the section 1316 restriction on the Atkinson's property at 1246 Oahu based on the outcome of the municipal court hearing in which the Atkinsons were found not guilty of alleged violations of the Village ordinances. Ortego gave his opinion, as Village attorney, that a finding of not guilty in the municipal court was not determinative of imposition of section 1316. Ortego further stated that, when the property was in compliance with FEMA requirements, as established by an inspection by the Village, the Village would request a cancellation of the section 1316 notice on the house.

The Atkinsons continued to renew their flood insurance coverage on the house each year. At least once after the Atkinsons received notice of the imposition of section 1316 on their property, Denise Atkinson asked their insurance agent to check on the existence of a section 1316 restriction on the house. The agent told her that, if a section 1316 notice had been filed on the property, it would show up at renewal time. Because the section 1316 restriction was listed on the empty lot adjacent to the Atkinson's house, the Atkinsons were never denied renewal of their flood insurance during the time they owned the house.

In 1999, the Atkinsons listed their house at 1246 Oahu with Coldwell Banker United Realtors ("Coldwell Banker") through Carol Kappler, a real estate agent. Kappler had owned property in the Village since 1988, had been a full-time resident since 1990, and had worked with Coldwell Banker selling real estate in the Village since 1994. The Oahu house was listed as having a "large game room." The Osbornes were interested in purchasing the house because the game room and a full bath were on the ground level, and Mrs. Osborne had back problems that made it difficult for her to climb stairs. Kappler told the Osbornes, "You could live downstairs." The Osbornes asked if the house was eligible for flood insurance, and the Atkinsons either told them it was or showed them their insurance policy to indicate that flood insurance was available.

In their seller's disclosure notice, the Atkinsons checked "Yes" in a box on the form to indicate that they were aware of "Room additions, structural modifications, or other alterations or repairs made without necessary permits or not in compliance with building codes in effect at that time." Although the form gave an instruction to explain any "Yes" answers in the space provided, the Atkinsons did not give any written explanation. The Atkinsons checked "No" in a box on the form to indicate that they were not aware of "Any notices of violations of deed restrictions or governmental ordinances affecting the condition or use of the Property." They also checked "No" to indicate that they were not aware of "Any lawsuits or other legal proceedings directly or indirectly affecting the Property."

The Osbornes asked to delay the closing date to give them time to be sure they could get flood insurance, and the Atkinsons agreed to the delay. On February 19, 1999, the sale of the house by the Atkinsons to the Osbornes was closed.

In April 1999, the Osbornes asked John Pearce, the Village's building inspector, about remodeling the downstairs windows of the house. Pearce told them that the downstairs enclosed area was not in compliance with the building code, but had been "grandfathered" because of its age. However, he told them that, if they did any remodeling, they would be required to bring the structure into compliance. He also told them that the Village had charged the Atkinsons in municipal court with violations of FEMA regulations. In March 2000, Pearce notified FEMA that the section 1316 notice gave the wrong legal description for 1246 Oahu and asked that the section 1316 notice be attached to lot 64 and removed from lot 63. In June, the Osbornes received a letter from FEMA informing them that their house was considered "a Section 1316 property." This letter explained the nature of the violation and how to have the section 1316 notice removed.

The Osbornes sued the Atkinsons, Kappler, and Coldwell Banker for violations of the Deceptive Trade Practices Act (DTPA), ⁽²⁾ common law fraud, fraud in a real estate transaction, and negligent misrepresentation. The Atkinsons counterclaimed against the Osbornes for bringing a groundless or bad faith lawsuit and cross-claimed against Coldwell Banker and Kappler for contribution and indemnity, breach of contract, breach of fiduciary duty, and negligence. The Atkinsons filed third-party claims against the Village, Omaha Property and Casualty Co. ("Omaha Property"), and their agent, Rust, Ewing, Watt & Haney, Inc. ("Rust Ewing"). Coldwell Banker filed cross-actions against the Village, Omaha Property, and the Atkinsons and a counterclaim against the Osbornes.

Rust Ewing filed a motion for summary judgment, which the trial court granted. That summary judgment was not appealed. The trial court granted the motions for summary judgment filed by (1) the Atkinsons against the Osbornes, (2) Coldwell Banker and Kappler against the Osbornes, (3) Coldwell Banker and Kappler against the Atkinsons, (4) Omaha Property against the Atkinsons, and (5) the Village against the Atkinsons. ⁽³⁾ These last five summary judgments are the subject of this appeal.

DISCUSSION

Standard of Review

Summary judgment is proper only when the movant establishes that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. Randall's Food Mkts., Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex. 1995); Lawson v. B Four Corp., 888 S.W.2d 31, 34 (Tex. App.--Houston [1st Dist.] 1994, writ denied). In reviewing a summary judgment, we must indulge every reasonable inference in favor of the nonmovant and resolve any doubts in its favor. Johnson, 891 S.W.2d at 644; Lawson, 888 S.W.2d at 33. We will take all evidence favorable to the nonmovant as true. Lawson, 888 S.W.2d at 33. In a 166a(c) motion for summary judgment, the defendant, as movant, is entitled to summary judgment if the evidence disproves as a matter of law at least one element of each of the plaintiff's causes of action. Lear Siegler, Inc. v. Perez, 819 S.W.2d 470, 471 (Tex. 1991); Marchal v. Webb, 859 S.W.2d 408, 412 (Tex. App.--Houston [1st Dist.] 1993, writ denied).

Under rule 166a(i), a party is entitled to summary judgment if, after adequate time for discovery, there is no evidence of one or more essential elements of a claim or defense on which an adverse party would have the burden of proof at trial. Tex. R. Civ. P. 166a(i). Thus, a no-evidence summary judgment is similar to a directed verdict. Flameout Design & Fabrication, Inc. v. Pennzoil Caspian Corp., 994 S.W.2d 830, 834 (Tex. App.--Houston [1st Dist.] 1999, no pet.). The motion for summary judgment may not be general, but must state the elements on which there is no evidence. Tex. R. Civ. P. 166a(i). The trial court must grant the motion unless the nonmovant produces more than a scintilla of evidence raising a genuine issue of material fact on each of the challenged elements. See id.; Macias v. Fiesta Mart, Inc., 988 S.W.2d 316, 317 (Tex. App.--Houston [1st Dist.] 1999, no pet.). The party with the burden of proof at trial has the same burden of proof in the summary judgment proceeding. Galveston Newspapers, Inc. v. Norris, 981 S.W.2d 797, 799-800 (Tex. App.--Houston [1st Dist.] 1998, pet. denied). In reviewing a summary judgment, we must indulge every reasonable inference in favor of the nonmovant and resolve any doubts in its favor. Flameout Design, 994 S.W.2d at 834.

If the judgment does not specify the ground relied on, we will affirm the summary judgment if any theory advanced in the motion for summary judgment and preserved on appeal is meritorious. See State Farm Fire & Cas. Co. v. S.S., 858 S.W.2d 374, 380 (Tex. 1993).

I. The Osbornes' Claims

In their petition, the Osbones alleged that the Atkinsons told them there were no problems with the flood insurance and that the Atkinsons and Kappler told them the property was insurable for flood and they could live in the downstairs. The Osbornes also alleged that the defendants failed to disclose that the ground floor was in violation of NFIP regulations and that the violation jeopardized their ability to obtain flood insurance. The Osbornes further alleged that the defendants failed to disclose information that the property was in violation of a government ordinance affecting the condition or use of the property, in that (1) the property was in violation of FEMA and NFIP regulations, (2) charges had been brought in municipal court because of these violations, and (3) a section 1316 notice had been imposed on the property. The Osbornes alleged that these disclosures were required by the sales contract. Finally, the Osbornes alleged that the defendants falsely represented that the property was "grandfathered" because it was built in 1982 and that the Osbornes could do anything they wanted to with the structure. The Osbornes alleged that they purchased the house in reliance on these misrepresentations and would not have bought the house if they had known that the downstairs living area violated federal or municipal regulations or that there was any problem with flood insurance.

A. The Atkinsons' Summary Judgment

In their first issue on appeal, the Osbornes contend that the trial court erred in entering summary judgment in favor of the Atkinsons. The Osbornes assert that the Atkinsons falsely stated that the house was eligible for flood insurance, did not use reasonable care in obtaining and communicating information concerning the house's compliance with FEMA regulations, and failed to disclose material information prior to the sale. The Osbornes also argue that the evidence shows that the Atkinsons knew their house was in violation of FEMA regulations.

The Atkinsons filed a no-evidence motion for summary judgment in which they asserted, "Plaintiffs can produce no evidence to support their claims that Atkinsons made any misrepresentations or failed to provide any information with an intent to mislead the Osbornes," thus challenging an element of the Osbornes' DTPA cause of action. See Tex. Bus. & Com. Code Ann. §§ 17.46(b)(5), (24) (Vernon Supp. 2002). They also challenged three elements of common-law fraud by asserting that there was no evidence of a material misrepresentation made knowingly or with recklessness as to the truth or falsity of the statement with the intent that the plaintiffs rely on the statement. See Tex. Capital Sec., Inc. v. Sandefer, 58 S.W.3d 760, 771 (Tex. App.--Houston [1st Dist.] 2001, pet. denied).

The Atkinsons did not specifically challenge any element of the Osbornes' claim for fraud in a real estate transaction. ⁽⁴⁾ In addition, they did not specifically make a no-evidence challenge to any element of negligent misrepresentation, but, rather, asserted that "the evidence demonstrates diligence" on their part "rather than recklessness." ⁽⁵⁾

In their response to the Atkinsons' motion, the Osbornes attached, as summary judgment evidence, the affidavit of Michael Loomis, which stated, in part, "I personally spoke to Mr. Atkinson on more than one occasion and explained that his home violated the FEMA and NFIP regulations due to the ground floor living area." Attached to this affidavit was Loomis's letter to Robert Atkinson stating that the property at 1246 Oahu was in violation of the Village building code ordinance and/or FEMA codes, and that, if not corrected, the home could be uninsurable. This is some evidence that the Atkinsons had knowledge that the house did not comply with FEMA regulations and was not supposed to be eligible for flood insurance under the NFIP.

The Osbornes also attached the affidavit of Ortego stating, "After the conclusion of the [municipal court] Proceeding, I explained to Mr. Apffel, as Mr. Atkinson's attorney, that the Atkinson home was not in compliance with FEMA and was still subject to restrictions relating to flood insurance regardless of the outcome of the Proceeding." Ortego attached a copy of the letter he sent to Apffel on July 12, 1993 informing Apffel that the section 1316 notice on the Atkinson's house could not be cancelled without an inspection by the Village to certify that the house complied with FEMA regulations. This is some evidence that the Atkinsons also had at least constructive knowledge through their attorney that the house did not comply with FEMA regulations and was not supposed to be eligible for flood insurance. See Lehrer v. Zwernemann, 14 S.W.3d 775, 778 (Tex. App.--Houston [1st Dist.] 2000, pet. denied) (stating that knowledge or notice to attorney during existence of attorney-client relationship and while acting within scope of authority is imputed to client).

Although the evidence in this case establishes that the Atkinsons, at all relevant times, had flood insurance on their house, there is some evidence that the Atkinsons knew that the house did not meet FEMA and NFIP regulations and that the failure to meet those regulations could result in being denied flood insurance on the house.

In addition, the Osbornes attached the affidavit of Ansell Osborne, which reads, in part, "The Atkinsons told us that there were no problems with the flood insurance. In fact, Ms. Kappler and the Atkinsons told us that the house as it was built was insurable for flood and that 'you could live in the downstairs.' . . . At no time did the Atkinsons or Ms. Kappler inform us or discuss that the Atkinsons had been charged with violations of FEMA regulations and/or municipal ordinances by the Village of Tiki Island officials."

Osborne's affidavit is some evidence of affirmative misrepresentations by the Atkinsons that there was no problem with maintaining flood insurance on the property. In addition, the affidavit is some evidence that the Atkinsons did not disclose the information regarding the violation of FEMA regulations or the municipal court action in connection with the building code violations.

Osborne's affidavit stating that the Atkinsons' representations and failure to disclose information were in connection with the purchase of the Atkinsons' house is some evidence of the Atkinsons' intent to mislead the Osbornes and to have the Osbornes rely on the representations. Thus, the Osbornes have produced evidence sufficient to raise a genuine issue of material fact regarding the challenged elements of their causes of action for violation of the DTPA and common-law fraud.

Accordingly, we sustain the Osbornes' first issue.

B. Coldwell Banker and Kappler's Summary Judgment

In their second issue on appeal, the Osbornes contend that the trial court erred in entering summary judgment in favor of the realtors. The Osbornes argue that their causes of action are not based on the existence of a section 1316 notice, but on knowing misrepresentations regarding the insurability of the property against flooding and approval by the Village of the ground level enclosure and on the failure to disclose violations of federal regulations and the municipal court action.

In their motion for summary judgment on the Osbornes' claims against them, Coldwell Banker and Kappler asserted, "There is no evidence whatsoever that Ms. Kappler or Coldwell Banker ever knew about the Section 1316 Notice on the lot adjoining the house which the Atkinson's owned." In a supplemental motion, Coldwell Banker and Kappler contended that the lack of knowledge of a section 1316 notice on the property defeats at least one element of each of the Osbornes' causes of action--violation of the DTPA, common law and statutory fraud, and negligent misrepresentation. Thus, the only basis for Coldwell Banker and Kappler's motion for summary judgment is Kappler's lack of knowledge of the section 1316 notice.

We agree that there is no evidence that Kappler knew that a section 1316 notice had been filed on the Atkinsons' property--either the vacant lot or 1246 Oahu. However, failure to disclose a section 1316 notice was not the only allegation made by the Osbornes against Kappler and Coldwell Banker. The motion for summary judgment did not address the alleged misrepresentations or alleged failure to disclose material facts other than the section 1316 notice.

In response to Coldwell Banker and Kappler's motion, the Osbornes filed the following relevant summary judgment evidence:

1. The affidavit of Ansell Osborne, which stated, "Ms. Kappler and the Atkinsons told us that the house as it was built was insurable for flood and that 'you could live in the downstairs.'"

2. Deposition excerpts of Kappler in which she admitted that she knew about the 1992 citations for building code violations and did not tell the Osbornes about them, but told them there had been a "meeting" with the Village and the Atkinsons were permitted to have the larger enclosure.

3. Deposition excerpts of Pearce in which he testified that he had explained the Tiki Island building code requirements to Kappler in late 1997 or early 1998 when she built a house on Tiki Island.

The Osbornes' summary judgment evidence establishes an issue of material fact regarding whether Kappler made material misrepresentations or failed to disclose facts material to the Osbornes' purchase of the house. Accordingly, we sustain the Osbornes' second issue.

II. The Atkinsons' Claims

The Atkinsons filed a cross-claim against Coldwell Banker and Kappler and a third-party claim against Omaha Property and the Village. The cross-defendants and third-party defendants filed motions for summary judgment, which were granted.

A. Coldwell Banker and Kappler's Summary Judgment

In their first issue, the Atkinsons contend that the trial court erred in granting summary judgment dismissing their claims against Coldwell Banker and Kappler. The Atkinsons cross-claim against Coldwell Banker and Kappler alleged that they were assisted in the sale of their house by Kappler, who worked for Coldwell Banker. The Atkinsons asserted that they were entitled to contribution and/or indemnity from Coldwell Banker and Kappler in the event that any representations made by cross-defendants resulted in a finding of liability against the Atkinsons. The Atkinsons also alleged causes of action against Coldwell Banker and Kappler for breach of contract, breach of fiduciary duty, and negligence. The Atkinsons did not specify the acts by which Coldwell Banker and Kappler breached their contract or fiduciary duty. Regarding their negligence claims, the Atkinsons alleged that Coldwell Banker and Kappler failed to perform with care, skill, reasonable expedience, and faithfulness the things they agreed to do, but did not specify any particular negligent act.

Coldwell Banker and Kappler filed a no-evidence motion for summary judgment asserting that the Atkinsons (1) failed to establish any conduct by the movants that was a breach of the listing agreement, (2) were unable to articulate any conduct that constituted a breach of fiduciary duty, and (3) were not critical of Coldwell Banker or Kappler in their handling of the sales transaction. To be entitled to a no-evidence summary judgment, Coldwell Banker and Kappler were required to specifically challenge at least one element of each of the Atkinsons' causes of action to shift the burden to the Atkinsons to produce more than a scintilla of evidence on the challenged elements. See Tex. R. Civ. P. 166a(i); Macias, 988 S.W.2d at 317.

1. Breach of Contract

The elements of breach of contract are (1) the existence of a valid contract, (2) the performance or tendered performance by the claimant, (3) a breach of the contract by the defendant, and (4) damages resulting from that breach. See Southwell v. Univ. of Incarnate Word, 974 S.W.2d 351, 354-55 (Tex. App.--San Antonio 1998, pet. denied). Coldwell Banker and Kappler asserted in their motion that there was no evidence of the third element--a breach of the contract.

In their response, the Atkinsons attacked the motion as general, rather than specific as required by rule 166a(i), and argued that fact issues precluded a summary judgment on the their claims. They attached, as summary judgment evidence, 56 pages of insurance policies and related correspondence and 40 pages of excerpts from the depositions of Robert Atkinson, Denise Atkinson, Kappler, and Caren McLauchlin, another Coldwell Banker realtor. They did not attach a copy of the listing agreement, and they did not direct the trial court to any evidence of a breach of the listing agreement or identify any term of the agreement that was breached by Coldwell Banker or Kappler. Therefore, the Atkinsons did not carry their burden to produce some evidence that Coldwell Banker or Kappler were in breach of the listing agreement.

2. Breach of Fiduciary Duty

Regarding the Atkinsons' claim for breach of fiduciary duty, Coldwell Banker and Kappler asserted that the Atkinsons had not articulated any conduct that would constitute such a breach. In their response to this motion, the Atkinsons complain that Kappler assisted them in completing the Sellers' Disclosure form, but did not advise them to provide any explanation to their responses. However, the Atkinsons did not argue that Kappler had a duty to give such advice or that she should have given such advice. The Atkinsons do not relate any of their facts to any fiduciary duty owed to them by Kappler, and they produced no summary evidence of a breach of such a duty. Moreover, the form itself instructed the seller to explain any "yes" responses to the questions on the form. We conclude that the Atkinsons did not carry their burden of producing more than a scintilla of evidence that Coldwell Banker or Kappler breached a fiduciary duty to them.

3. Negligence

Coldwell Banker and Kappler's motion for summary judgment on the Atkinsons' negligence cause of action stated, in its entirety,

In their depositions, both Cross-Plaintiffs confirmed that they were not critical of Carol Kappler or Coldwell Banker Realtors, United, for the manner and method which they handled the transaction made the basis of this litigation.

For further grounds if same need be shown, Movants attach and rely upon the affidavit of Carol Kappler establishing their entitlement to summary judgment.

The motion for summary judgment does not make a no-evidence challenge to any element of the negligence claim. ⁽⁶⁾

Accordingly, we sustain the Atkinsons' first issue as it relates to their negligence claim against Coldwell Banker and Kappler and overrule the issue as it relates to their breach of contract and breach of fiduciary duty claims against Coldwell Banker and Kappler.

B. Omaha Property's Summary Judgment

In their second issue, the Atkinsons contend that the trial court erred in granting summary judgment dismissing their claims against Omaha Property. The Atkinsons asserted a third-party claim against Omaha Property for contribution and indemnity. ⁽⁷⁾ The Atkinsons also asserted a negligence action against Omaha Property, contending that Omaha Property breached its duty (1) to provide flood insurance on the property, (2) to tell the Atkinsons whether the property was insurable, and (3) to investigate thoroughly whether a section 1316 notice had been filed on the property. In the alternative, the Atkinsons asserted a claim for negligent misrepresentation, contending that Omaha Property represented that the property had flood insurance when it did not.

In their motion for summary judgment, Omaha Property asserted that they had no duty to tell the Atkinsons what the Atkinsons already knew--that the house was uninsurable--and no duty to investigate to determine whether a section 1316 notice had been filed on the property. Omaha Property also asserted that there was no evidence that it knew of the section 1316 notice until after the Atkinsons sold the property to the Osbornes. Omaha Property further asserted that the house was, in fact, insured until the Atkinsons cancelled the insurance, thus negating the claims that Omaha Property breached its duty to provide insurance on the house and negligently represented that the house was insured. Regarding the Atkinsons' claims for contribution or indemnity, Omaha Property asserted that, because it had no duty to the Atkinsons, there was no basis for an award of contribution or indemnity. Omaha Property attached, as summary judgment evidence, copies of the declarations pages of two flood insurance policies and a notice of cancellation, dated February 19, 1999, stating that the insurance was cancelled because the house had been sold.

In their response to Omaha Property's motion, the Atkinsons argued that fact issues precluded summary judgment in favor of Omaha Property on the Atkinsons' indemnity and negligence claims. The Atkinsons attached the affidavit of Denise Atkinson and excerpts from her deposition and that of Robert Atkinson. However, they did not direct the trial court to any summary judgment evidence showing a basis for their claims of contribution or indemnity, nor do they point out any summary judgment evidence to show that Omaha Property had a duty to tell them their house was uninsurable or to investigate the property to discover a section 1316 notice. In addition, they did not controvert the evidence establishing that their house was insured prior to the sale to the Osbornes.

Because the Atkinsons did not produce any summary judgment evidence to create a fact issue regarding whether they had flood insurance or whether Omaha Property owed any duty to the Atkinsons, we overrule their issue relating to their negligence and negligent misrepresentation claims against Omaha Property and their claims for contribution and indemnity.

Accordingly, we overrule the Atkinsons' second issue. ⁽⁸⁾

C. The Village's Summary Judgment

In their third issue, the Atkinsons contend that the trial court erred in granting summary judgment dismissing their claims against the Village. The Atkinsons' third-party claim against the Village contended that the Village violated the equal protection and due process clauses of the United States Constitution and the Texas Constitution by its selective and discriminatory enforcement of its building codes and regulations and the FEMA and NFIP regulations. The Atkinsons also asked for declarations, under the Uniform Declaratory Judgment Act, that (1) the property at issue does not violate any municipal ordinance of the City; (2) the City's report to FEMA was not a valid declaration under NFIP; (3) a section 1316 notice was not placed on the residential property at the time it was sold to the Osbornes; and (4) the dismissal of the City's prior enforcement actions against the Atkinsons are res judicata or collateral estoppel to the claims by the City that the residential property violates a municipal ordinance of the City. The Atkinsons alleged that FEMA issues section 1316 notices only after a property is declared by a state or local zoning authority to be in violation of state or local laws, regulations, or ordinances and that, because the municipal court actions were resolved in the Atkinsons' favor, the Village improperly declared the Atkinsons' property to be in violation of the building code. The Atkinsons also asserted a claim against the Village for contribution and indemnity.

The Village filed a motion for summary judgment asserting that the Atkinsons' constitutional claims were barred by limitations, the declaratory judgment action was untimely and was improperly pleaded, and the Atkinsons had no right to contribution or indemnity from the Village.

1. Constitutional Claims

In its motion for summary judgment, the Village asserted that, because the Atkinsons' claims were more than six years old when they filed suit, under the Texas Constitution, the Atkinsons' due process claim was barred by the two-year statute of limitations and their equal-protection claim was barred by the four-year statute. The Village further asserted that the Atkinsons' federal constitutional claims were likewise barred by the two-year statute of limitations.

The Village attached to its motion, as summary judgment evidence, the letter from Apffel to FEMA, dated February 17, 1993, in which Apffel stated that, with regard to the municipal court charges, Atkinson "was found not guilty," and that the Village's notice of a violation was frivolous and an attempt to harass Atkinson. Apffel requested FEMA's immediate attention to the matter. The Village also attached Ortego's letter to Apffel dated July 12, 1993 informing Apffel that a finding of not guilty in the municipal court--a criminal court--was not determinative of the imposition of section 1316, and the section 1316 notice could be cancelled after the Village inspected the house and determined that it was in full compliance with FEMA regulations. As noted above, these letters established that the Atkinsons had at least constructive knowledge, since 1993, that their house was in violation of FEMA regulations and the Village had attempted to enforce its building codes and the FEMA regulations.

In response to the Village's defense of limitations to the Atkinsons' constitutional claims, the Atkinsons contend that their constitutional claims did not accrue until they learned that a section 1316 notice had been filed on their property, rendering it uninsurable. This contention does not comport with the claim asserted by the Atkinsons, which was selective and discriminatory enforcement of the Village's building codes. The Atkinsons were aware of the attempted enforcement at the time it occurred. Therefore, their cause of action, if any, accrued, at the latest, in 1993, and their constitutional claims asserted in 2000 were barred by limitations.

2. Declaratory Judgment

a. Standing

The Village contended in its motion that the Atkinsons had no standing to request a declaration that the Osbornes' house did not violate a municipal ordinance because the Atkinsons no longer owned the house and had no justiciable interest in the controversy. The Atkinsons responded that they had standing to seek a declaration that the property did not violate any municipal ordinance because they had been sued by the Osbornes as a result of the erroneous filing of the section 1316 notice on the property.

Standing is a prerequisite to subject-matter jurisdiction, and subject-matter jurisdiction is essential to a court's power to decide a case. M.D. Anderson Cancer Ctr. v. Novak, 52 S.W.3d 704, 708 (Tex. 2001). Standing requires a real controversy between the parties that will be determined by the declaration sought. Tex. Workers' Comp. Comm'n v. Garcia, 893 S.W.2d 504, 517-18 (Tex. 1995).

In this case, there is no justiciable controversy between the Atkinsons and the Village regarding whether the property at issue violates any municipal ordinance. That controversy, if it exists, is between the Osbornes and the Village. Accordingly, we hold that the Atkinsons did not have standing to request a declaration that the property does not violate any municipal ordinance of the Village.

b. Limitations

The Atkinsons also requested a declaration that the 1992 report to FEMA was invalid. The Village asserted in its motion that this request was time barred because the request was made more than six years after the Atkinsons received notice, through their attorney, of the report. The Atkinsons respond, without any supporting authority, that they cannot be charged with constructive knowledge based on the letter to their attorney in light of the representations of their insurance agent and the insurance policies issued each year. We disagree.

In February 1993, Apffel wrote a letter to FEMA, with a copy to the Atkinsons, about the Village's report to FEMA. In March, Apffel received a response from FEMA explaining how to restore insurance coverage. In July 1993, Ortego responded, on behalf of the Village, to a request by Apffel that the section 1316 notice be cancelled. As with the Atkinsons' constitutional claims, the Atkinsons had at least constructive knowledge of the Village's report to FEMA by 1993 at the latest, and any complaint about the validity of that report was time-barred when they filed their lawsuit in 2000.

c. Indispensable Party

The Village further contended in its motion that, because a section 1316 notice is administered by FEMA, the Atkinsons' request for a declaration that a section 1316 notice was not placed on their house prior to the time it was sold to the Osbornes was not properly raised against the Village. The Village asserted that the cause of action should be dismissed because FEMA was not joined as an essential party. Whether a section 1316 notice was placed on the house prior to the sale is irrelevant because it has no effect on the Osbornes' claims, which are based on allegations of the Atkinsons' misrepresentations and failure to disclose material facts other than the existence of a section 1316 notice. The requested declaration would not determine the rights, status, or legal relations between the Atkinsons and the Village, and it would not resolve any controversy. See Tex. Civ. Prac. & Rem. Code Ann. § 37.004 (Vernon 1997); Bonham State Bank v. Beadle, 907 S.W.2d 465, 467 (Tex. 1995).

d. Res judicata/Collateral Estoppel

The Village also asserted in their motion that, because the prosecution of the citations in municipal court against the Atkinsons was a criminal matter, the adjudication did not act as res judicata or estoppel by judgment in a civil matter.

An adjudication of an issue in a criminal matter is not res judicata or estoppel by judgment to a later civil action involving the same fact issue. State v. Benavidez, 365 S.W.2d 638, 640 (Tex. 1963). One reason for this rule is that, in criminal prosecutions, the state must prove its case beyond a reasonable doubt, whereas, in civil trials, the burden of proof is generally a preponderance of the evidence. See id. Thus, if the Atkinsons were acquitted of the charges in the municipal court citations (they have not directed us to a judgment of acquittal in this record), the acquittal is no more than a finding that the Village failed to prove, beyond a reasonable doubt, that they were in violation of the Village building code. Therefore, the Atkinsons, as a matter of law, were not entitled to a declaration that the Village's prior enforcement action against them was res judicata or collateral estoppel to the Village's claim that the property at issue violates a municipal building code.

3. Contribution and Indemnity

The Village's motion for summary judgment asserted that the Atkinsons were not entitled to indemnity because there is no common-law indemnity and there is no liability by the Village to the Osbornes that would create indemnification rights under the DTPA. ⁽⁹⁾ The Village also asserted that the Atkinsons had no right of contribution because any claim for contribution is derivative of the plaintiffs' right to recover from the defendant against whom contribution is sought.

In response to the Village's motion, the Atkinsons argued that indemnity continues to be a viable claim when a party's liability is purely vicarious or when there is contractual indemnity. The Atkinsons contended that indemnity may be based on the relationship between the parties. The Atkinsons argue on appeal that the Village's failure to ensure the removal of the section 1316 notice after the dismissal of the municipal citations entitles them to be indemnified by the Village. Thus, their claim for indemnity is based on their assumption that the section 1316 notice was improperly filed.

The Atkinsons have not prevailed on any claim they asserted against the Village. In addition, they have not established any relationship between themselves and the Village that would result in the Village's vicarious liability for the Atkinsons' actions. Therefore, there is no basis for the Atkinsons' claim for contribution or indemnity against the Village.

In light of our rulings on each of the Atkinsons' causes of action against the Village, we overrule the Atkinsons' third issue.

CONCLUSION

We reverse the summary judgments against the Osbornes and in favor of the Atkinsons and Coldwell Banker and Kappler and remand that portion of this cause to the trial court for further proceedings.

We reverse that portion of Coldwell Banker and Kappler's summary judgment concerning the Atkinsons' claim for negligence and remand that portion of this cause to the trial court for further proceedings.

We affirm all remaining portions of the trial court's judgments.

Sam Nuchia

Justice

Panel consists of Chief Justice Schneider and Justices Hedges and Nuchia.

Do not publish. Tex. R. App. P. 47.

1.

42 U.S.C.S. § 4023 (Law. Co-op. 1989).

2.

Texas Deceptive Trade Practices-Consumer Protection Act, Tex. Bus. & Com. Code Ann. §§ 17.41-.63 (Vernon 1987 & Supp. 2002).

3.

Coldwell Banker and Kappler nonsuited their claims against the Atkinsons, the Village, Omaha Property, and the Osbornes. The Atkinsons nonsuited their claims against the Osbornes.

4.

Fraud in a real estate transaction consists of a false representation of a past or existing material fact, when the false representation is made to a person for the purpose of inducing that person to enter into a contract and the representation is relied on by that person in entering into that contract. Tex. Bus. & Com. Code Ann. § 27.01(a)(1) (Vernon 1987).

5.

The elements of negligent misrepresentation are (1) a defendant makes a representation in the course of his business or in a transaction in which he has a pecuniary interest; (2) the defendant supplies "false information" for the guidance of others in their business; (3) the defendant did not exercise reasonable care of competence in obtaining or communicating the information; and (4) the plaintiff suffers pecuniary loss by justifiably relying on the representation. Allied Vista, Inc. v. Holt, 987 S.W.2d 138, 141 (Tex. App.--Houston [14th Dist.] 1999, pet. denied).

6.

Coldwell Banker and Kappler's motion does not address the Atkinsons' claim for contribution and indemnity. However, on appeal, the Atkinsons do not complain of this omission, and the trial court's final judgment dismisses all unadjudicated claims.

7.

The Atkinsons made these same claims against their insurance agent, Rust, Ewing, Watt & Haney, Inc. The trial court granted Rust Ewing's motion for summary judgment, and the Atkinsons have not appealed that judgment.

8.

Omaha Property's motion for summary judgment included a request for a "traditional" summary judgment based on limitations, contending that the one-year statute of limitations under the federal act had expired and the Texas two-year statute of limitations for claims of negligence and negligent misrepresentations had expired because the Atkinsons knew about the non-compliance with the FEMA and NFIP regulations in 1992, but did not file their claim until October 2000. In light of our ruling on Omaha Property's no-evidence motion, we need not reach this issue.

9.

See Tex. Bus. & Com. Code Ann. § 17.555 (Vernon 1987).