Texas Causes of Action & Affirmative Defenses

Texas Causes of Action & Affirmative Defenses

Need a little legal ammo? Search for caselaw on legal theories and defenses here:

Thursday, December 15, 2011

Unknowingly bought a termite-infested home in Texas? What cause of action provides relief?

  
A case decided by the Dallas Court of Appeals today discusses fraud by non-disclosure and DTPA in a case involving sale of a termite-infested house.
 

FRAUD, MISREPRESENTATION, FAILURE TO MAKE DISCLOSURE OF DEFECTS IN CONNECTION WITH
SALE OF RESIDENCE

ELEMENTS OF FRAUD & FRAUDULENT NON-DISCLOSURE  
  
The elements of a cause of action for fraud are: (1) that a material misrepresentation 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. In re FirstMerit Bank, N.A., 52 S.W.3d 749, 758 (Tex. 2001). Fraud also occurs when a party fails to disclose a material fact within the knowledge of that party; the party knows that the other party is ignorant of the fact and does not have an equal opportunity to discover the truth; the party intends to induce the other party to take some action by failing to disclose the fact; and the other party suffers injury as a result of acting without knowledge of the undisclosed fact. New Process Steel Corp. v. Steel Corp. of Texas, 703 S.W.2d 209, 214 (Tex. App.-Houston [1st Dist.] 1985, writ ref'd n.r.e.). A seller is charged with disclosing such material facts as to put a buyer exercising reasonable diligence on notice of the condition of the house. Cole v. Johnson, 157 S.W.3d 856, 860-61 (Tex. App.-Fort Worth 2005, no pet.).

Under certain circumstances, a buyer's independent inspection of the property may conclusively defeat two elements of a fraud claim: causation and reliance. A buyer's independent inspection precludes a showing of causation and reliance if it reveals to the buyer the same information that the seller allegedly failed to disclose. See Lesieur v. Fryar, 325 S.W.3d 242, 246-49 (Tex. App.-San Antonio 2010, no pet.).

SOURCE: DALLAS COURT OF APPEALS - 05-10-00173-CV - 12/15/11

DECEPTIVE TRADE PRACTICES ACT (Texas DTPA)

“The DTPA grants consumers a cause of action for false, misleading, or deceptive acts or practices.”Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 649 (Tex.1996); see Tex. Bus. & Com. Code Ann. § 17.50(a) (West Supp. 2010); see also id. §§ 17.45(5), 17.46(b). The trial court found the Home-Sellers knowingly engaged in a misleading, deceptive act that the Homebuyers relied on to their detriment and which was a producing cause of damages to the Homebuyers. The elements of a DTPA claim are: (1) the plaintiff was a consumer; (2) the defendant either engaged in false, misleading or deceptive acts (i.e., violated a specific laundry-list provision of the DTPA) or engaged in an unconscionable action or course of action; and (3) the DTPA laundry-list violation or unconscionable action was a producing cause of the plaintiff's injury. Amstadt, 919 S.W.2d at 649; see Doe v. Boys Clubs of Greater Dallas, Inc., 907 S.W.2d 472, 478 (Tex.1995). In our review of a DTPA claim, we must liberally construe and apply the statute to promote the underlying goals of the statute, which include protecting consumers against false, misleading, and deceptive business practices and unconscionable actions. See Tex. Bus. & Com. Code Ann. § 17.44(a) (West 2002); Latham v. Castillo, 972 S.W.2d 66, 68 (Tex.1998).
  
WHAT DAMAGES CAN BE RECOVERED UNDER THE DTPA?
 
A consumer who prevails on a claim under the DTPA may obtain the amount of economic damages found by the trier of fact. Tex. Bus. & Com. Code Ann. § 17.50(b)(1) (West Supp. 2010). If the trier of fact finds that the conduct of the defendant was committed knowingly, the consumer may also recover damages for any mental anguish found by the trier of fact. Id. A prevailing party shall be awarded reasonable and necessary attorney's fees and any other relief which the court deems proper. Id. §§17.50(d); 17.50(b)(4).
  
An award of mental anguish damages will survive a legal sufficiency challenge when the plaintiffs have introduced direct evidence of the nature, duration, and severity of their mental anguish, thus establishing a substantial disruption in the plaintiffs' daily routine. Parkway Co. v. Woodruff, 901 S.W.2d 434, 444 (Tex. 1995). Direct evidence of mental anguish may be in the form of the parties' own testimony, that of third parties, or experts. Id. There must also be some evidence to justify the amount awarded, and the amount awarded must be fair and reasonable. Saenz v. Fid. & Guar. Ins. Underwriters, 925 S.W.2d 607, 614 (Tex. 1996).
  
Direct evidence of mental anguish may be in the form of the parties' own testimony, that of third parties, or experts. Parkway, 901 S. W. 2d at 444.

SOURCE: DALLAS COURT OF APPEALS - 05-10-00173-CV - 12/15/11


BUYERS vs. SELLERS 
of termite-infested home
Firth Court of Appeals affirms judgment for Buyers
in unsuccessful appeal by Sellers

Rick and Kathy [Home-Sellers] appeal the trial court's judgment awarding Jerry and Connie [Homebuyers] damages on their claims arising out of their purchase of a termite-infested house from the Home-Sellers. In four issues, the Home-Sellers argue the evidence is factually insufficient to support the trial court's judgment, and the trial court erred by (1) declining to make findings of fact and conclusions of law, (2) rendering judgment in favor of the Homebuyers when the evidence was factually insufficient to support the judgment, (3) failing to grant the Home-Sellers' motion for judgment as a matter of law, and (4) awarding judgment for out-of-pocket expenses, loss of fair market value, mental anguish, and attorney's fees. We affirm the trial court's judgment.



NOTE: The court of appeals' opinion refers to the parties by their real names; they have here been replaced with functional labels



In the summer of 2006, the Homebuyers, interested in purchasing a property in Sherman, were driving through a residential neighborhood when they saw a for sale sign in front of the Home-Sellers' home. The Homebuyers stopped and got out to look at the house, and the Home-Sellers came out and offered to give them a tour of the house. During the tour, the Home-Sellers discussed the remodeling they had done to the house. The Homebuyers decided to buy the house and offered $125,000, which the Home-Sellers accepted. The Homebuyers hired James Langford to do a home and termite inspection before the closing. The Homebuyers and Home-Sellers were all present at the time of the inspection. In the seller's disclosure statement, the Homebuyers had seen the Seller's disclosure that the house had been “sprayed and treated in spring for termite[s]. Outside only.” The Home-Sellers had told the realtor that it was “for maintenance purposes only.” During the inspection, Langford asked where the termites were. Rick Seller did not respond to Langford's question, and Langford asked, “Where did you spray?” Rick Seller said “it was outside, out down around the old storage building.” Connie Home-Buyer “felt a concern” and asked Rick Seller if there were any termites or if there had ever been any termites. Rick Seller said no. The sale proceeded to closing.



The Homebuyers began moving into the house and found termites on September 1, 2006, nine days after closing. At that time, the interior of the home appeared freshly painted. Connie Home-Buyer set a box down and bumped into a picture and a dry erase board that the Home-Sellers had left in the kitchen. The dry erase board and picture fell down, revealing a hole in the wall behind each one. Connie Home-Buyer began removing the wallpaper in the kitchen because she knew she was “going to have to redo it” and “get that hole fixed in the kitchen.” When Connie Home-Buyer removed the “very first piece of wallpaper” she discovered what she recognized were termite holes.



The Homebuyers hired a licensed exterminator and termite inspector, Roy Reed, to perform an inspection on September 8, 2006. In the den ceiling, Reed immediately identified an area where the termites had already eaten the wood, and it was “not even wood anymore, [it was] caulk.” Reed pushed up with his thumb on the ceiling and “termites just showered down on him.” Reed told Connie Home-Buyer “what pictures to take as he was going through the inspection,” and the photos were admitted at trial. The inspection revealed termite infestation in the house, and the Homebuyers “never unpacked.” The Homebuyers got estimates on repairing the termite damage, but they could not afford to make the repairs, and they decided to move. The Homebuyers rented a place to live and sold the house approximately eight months later for $74,000, a thousand dollars less than they owed the bank. In July 2007, the Homebuyers sued the Home-Sellers and Langford. The Homebuyers settled their claims against Langford. Following a bench trial, the trial court entered judgment in favor of the Homebuyers, and this appeal followed.



In their first issue, the Home-Sellers argue the trial court erred in failing to make findings of fact and conclusions of law. Contrary to the Home-Sellers' assertion, the record contains the trial court's letter to the parties making findings that (1) the Home-Sellers engaged in a misleading, deceptive act that the Homebuyers relied on to their detriment and which was a producing cause of damages to the Homebuyers; (2) the Home-Sellers engaged in such conduct knowingly; and (3) the Home-Sellers committed fraud against the Homebuyers. The trial court went on to find the Homebuyers were entitled to benefit of the bargain damages, out of pocket expenses, mental anguish damages, “additional damages permitted by the DTPA,” and attorney's fees.



After the trial court files its original findings of fact and conclusions of law, any party may file a request for specified additional or amended findings or conclusions with the clerk of the court. Tex. R. Civ. P. 298;Gentry v. Squires Constr., Inc., 188 S.W.3d 396, 408 (Tex. App.-Dallas 2006, no pet.). The failure of a party to request additional or amended findings or conclusions waives the party's right to complain on appeal about the presumed finding. Gentry, 188 S.W.3d at 408. The Home-Sellers failed to request additional or amended findings and therefore have waived any complaint. We overrule the Home-Sellers' first issue.



In their second issue, the Home-Sellers argue the evidence is factually insufficient to support the trial court's judgment. The Home-Sellers argue the evidence is factually insufficient to show they made false material representations to the Homebuyers or their acts were a substantial factor in bringing about an injury to the Homebuyers.



[section on factual sufficiency challenge omitted]



The trial court found the Home-Sellers committed fraud against the Homebuyers. The elements of a cause of action for fraud are: (1) that a material misrepresentation 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. In re FirstMerit Bank, N.A., 52 S.W.3d 749, 758 (Tex. 2001). Fraud also occurs when a party fails to disclose a material fact within the knowledge of that party; the party knows that the other party is ignorant of the fact and does not have an equal opportunity to discover the truth; the party intends to induce the other party to take some action by failing to disclose the fact; and the other party suffers injury as a result of acting without knowledge of the undisclosed fact. New Process Steel Corp. v. Steel Corp. of Texas, 703 S.W.2d 209, 214 (Tex. App.-Houston [1st Dist.] 1985, writ ref'd n.r.e.). A seller is charged with disclosing such material facts as to put a buyer exercising reasonable diligence on notice of the condition of the house. Cole v. Johnson, 157 S.W.3d 856, 860-61 (Tex. App.-Fort Worth 2005, no pet.).



“The DTPA grants consumers a cause of action for false, misleading, or deceptive acts or practices.”Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 649 (Tex.1996); see Tex. Bus. & Com. Code Ann. § 17.50(a) (West Supp. 2010); see also id. §§ 17.45(5), 17.46(b). The trial court found the Home-Sellers knowingly engaged in a misleading, deceptive act that the Homebuyers relied on to their detriment and which was a producing cause of damages to the Homebuyers. The elements of a DTPA claim are: (1) the plaintiff was a consumer; (2) the defendant either engaged in false, misleading or deceptive acts (i.e., violated a specific laundry-list provision of the DTPA) or engaged in an unconscionable action or course of action; and (3) the DTPA laundry-list violation or unconscionable action was a producing cause of the plaintiff's injury. Amstadt, 919 S.W.2d at 649; see Doe v. Boys Clubs of Greater Dallas, Inc., 907 S.W.2d 472, 478 (Tex.1995). In our review of a DTPA claim, we must liberally construe and apply the statute to promote the underlying goals of the statute, which include protecting consumers against false, misleading, and deceptive business practices and unconscionable actions.See Tex. Bus. & Com. Code Ann. § 17.44(a) (West 2002); Latham v. Castillo, 972 S.W.2d 66, 68 (Tex.1998).



Here, Rick Seller testified that, at the time he filled out the seller's disclosure form, he knew that in 2004 he had found live and dead termites in the garage and the “freezer room,” a room connected to the house. The Home-Sellers called Barry Walker to treat the termites. Walker advised them to treat the entire house for termites. The termites came back in the spring of 2005, and Walker treated them again. In spring 2006, a few months before the sale of the house to the Homebuyers, termites appeared again in the garage and freezer room, and Walker treated them. The Home-Sellers did not disclose any of these treatments in the garage and freezer room attached to the house. Instead, the Seller's disclosure stated that the house had been “sprayed and treated in spring for termite[s]. Outside only.”



Connie Home-Buyer testified Rick Seller said at the time of the inspection that he sprayed for termites “outside, out down around the old storage building.” Connie Home-Buyer “felt a concern” and asked Rick Seller if there were any termites or if there had been any termites at the property. Rick Seller said no. Connie Home-Buyer testified she would not have closed on the house if she had known the Home-Sellers (1) had seen a swarm of termites outside the house in the spring of 2004, (2) had a professional treat the house for termites in 2004, and (3) had a recurrence of termites in 2005 and had a professional come out and treat the house. We conclude this evidence was factually sufficient to support the trial court's determination that the Home-Sellers made false material representations to the Homebuyers, and their acts were a substantial factor in bringing about an injury to the Homebuyers. See Plas-Tex, Inc., 772 S.W.2d at 445. Further, the evidence was factually sufficient to show the Homebuyers acted in reliance on the Home-Sellers' misrepresentations. See In re FirstMerit Bank, N.A., 52 S.W.3d at 758; Amstadt, 919 S.W.2d at 649.



In their third issue, the Home-Sellers argue the trial court erred in failing to grant their “motion for verdict as a matter of law” on the Homebuyers' fraud and DTPA claims. See Footnote . Specifically, they argue “the Homebuyers' reliance on their own professional inspection negates the element of reliance.”



Under certain circumstances, a buyer's independent inspection of the property may conclusively defeat two elements of a fraud claim: causation and reliance. A buyer's independent inspection precludes a showing of causation and reliance if it reveals to the buyer the same information that the seller allegedly failed to disclose. See Lesieur v. Fryar, 325 S.W.3d 242, 246-49 (Tex. App.-San Antonio 2010, no pet.). Relying on Dubow v. Dragon, 746 S.W.2d 857 (Tex. App.-Dallas 1988, no writ), the Home-Sellers argue the Homebuyers' careful inspection of the property in this case negated the element of reliance. Based on the facts presented in Dubow, this Court concluded that “the [buyers'] 'careful' inspection of the house's condition constituted a new and independent basis for the purchase which intervened and superseded the [sellers'] alleged wrongful act.” Id. at 860. But the crucial fact in Dubow was not the buyers' procurement of an independent inspection; it was their express and exclusive reliance on the “professional opinions” they received to renegotiate the sales contract that resulted in the sale of the house. Id.; see Fernandez v. Schultz, 15 S.W.3d 648, 652 (Tex. App.-Dallas 2000, no pet.). In this case, there is no evidence that the Homebuyers relied solely on the opinion of their inspector in making their decision to purchase the house. See Fernandez, 15 S.W.3d at 652. Also, the contract here was never renegotiated in reliance on the inspection. See id. In fact, the testimony shows the Homebuyers' decision to buy the property would have been materially affected if the Home-Sellers had told them on the seller's disclosure form about the prior termites in the home. See id.



Although it may be true that their inspector's failure to discover the termites inside the house was a producing cause of the Home-Buyer's damages, there nevertheless may be more than one producing cause of damages in a case. Fernandez, 15 S.W.3d at 653. Here, the Home-Sellers' failure to disclose their knowledge of the termites was also a producing cause of the Homebuyers' damages. Id. Had the Home-Sellers informed the Homebuyers about the termites, they could have required their inspector to look more deeply for signs of termite damage. Id. Further, the evidence shows the Home-Sellers actively concealed the presence of the termites, thus making it more difficult for the inspector to discover them. Id. Accordingly, we conclude the Homebuyers' procurement of an independent inspection did not supersede the Home-Sellers' actions as a producing cause of damages. See id.We overrule the Home-Sellers' third issue.



In their fourth issue, the Home-Sellers argue the trial court erred in awarding “out-of-pocket” expenses, loss of fair market value, mental anguish damages, and attorney's fees. Specifically, the Home-Sellers argue the Homebuyers failed to present competent evidence to support any damages. In reviewing a contention of no evidence to support a trial court's finding, we must consider only the evidence and inferences tending to support the finding and disregard all evidence and inferences to the contrary. Fernandez, 15 S.W.3d at 651. If there is more than a scintilla of evidence to support the finding, it must be upheld. Id.



A consumer who prevails on a claim under the DTPA may obtain the amount of economic damages found by the trier of fact. Tex. Bus. & Com. Code Ann. § 17.50(b)(1) (West Supp. 2010). If the trier of fact finds that the conduct of the defendant was committed knowingly, the consumer may also recover damages for any mental anguish found by the trier of fact. Id. A prevailing party shall be awarded reasonable and necessary attorney's fees and any other relief which the court deems proper. Id. §§17.50(d); 17.50(b)(4).



A property owner is qualified to testify to the market value of his property. Redman Homes v. Ivy, 920 S.W.2d 664, 669 (Tex. 1996). This evidence is probative if it is based on the owner's estimate of market value and not some intrinsic or other value such as replacement cost. Id. The Home-Sellers argue a property owner has to show some familiarity with market value. Connie Home-Buyer testified she researched the market value of the property through a realtor and determined the property had to be sold in “as-is” condition. Jerry Home-Buyer testified he paid $125,000 for the house and, after the termites were discovered, he was able to sell the house for only $74,000. Connie Home-Buyer testified she had owned six houses in the past as real estate investments and sold the properties after remodeling them. Thus, the record shows the Homebuyers' testimony concerning market value was based on their estimates of market value and not some intrinsic or other value. See id.



As to out-of-pocket expenses, Jerry Home-Buyer testified he and Connie incurred expenses of $13,250 to rent a home because the house they bought from the Home-Sellers was uninhabitable, $652 to maintain insurance on the house, $404 for renters' insurance, $610.96 in moving costs, and $2401.89 in taxes. Connie Home-Buyer testified she had owned six houses “as a home investor.” She got bids to repair the house, but the bids were limited in scope to the damage visible at the time. The bids ranged from $40,000 to $60,000. The Homebuyers decided to sell the house and placed an advertisement in the newspaper. A realtor told the Homebuyers that the house had to be sold “as-is.” In eight months of trying to sell the house, the Homebuyers received only three calls from “interested” parties, and only two people looked at the house. One person made an offer of $74,000, and the Homebuyers accepted the offer.



An award of mental anguish damages will survive a legal sufficiency challenge when the plaintiffs have introduced direct evidence of the nature, duration, and severity of their mental anguish, thus establishing a substantial disruption in the plaintiffs' daily routine. Parkway Co. v. Woodruff, 901 S.W.2d 434, 444 (Tex. 1995). Direct evidence of mental anguish may be in the form of the parties' own testimony, that of third parties, or experts. Id. There must also be some evidence to justify the amount awarded, and the amount awarded must be fair and reasonable. Saenz v. Fid. & Guar. Ins. Underwriters, 925 S.W.2d 607, 614 (Tex. 1996).



The Home-Sellers cite the standard that “the evidence must show a high degree of mental pain and distress that is more than worry, anxiety, vexation, embarrassment or worry,” citing Houston Livestock Show & Rodeo, Inc. v. Hamick, 125 S. W. 3d 555 (Tex. App.-Austin 2003, no pet.). They argue that the evidence from Connie Home-Buyer showed she experienced stress, lost a little weight, felt anxiety because of her husband's drinking, and refused to take any anti-anxiety medicine. The Home-Sellers also cite Jerry Home-Buyer's testimony that some of his wife's anxiety was directly related to his issues with alcohol.



Direct evidence of mental anguish may be in the form of the parties' own testimony, that of third parties, or experts. Parkway, 901 S. W. 2d at 444. Connie Home-Buyer testified she and her husband put their life savings into a home they could neither live in nor afford to repair. She testified that it destroyed them financially. Connie Home-Buyer related how her husband had maintained his sobriety for twelve years but began drinking again because of this stress. She convinced him to go to the doctor, who prescribed medication. Jerry Home-Buyer has continued to take prescription medication for the last two years. Connie Home-Buyer testified she was unable to eat for three months after this occurred, she threw up everything she ate, and she lost fifteen pounds. Under cross examination, she stated her husband's relapse was caused by the loss of the house, and she was under a lot of mental anguish and a lot of mental pain. Jerry Home-Buyer testified how very hard emotionally this had been and that this was his only relapse in his sobriety. Evidence that Jerry Home-Buyer maintained his sobriety for twelve years and then relapsed under the financial stress of losing his home and life savings, together with evidence Connie Home-Buyer shared in this loss and was unable to eat, is evidence of much more than mere worry, anxiety, vexation, embarrassment, or anger. We conclude the evidence was sufficient to establish the nature, duration, and severity of their mental anguish. See Parkway, 901 S. W. 2d at 444.



[section on law governing award of attorney's fees and segregation requirement omitted]



The Homebuyers' attorney stated his attorney's fees were $29,944.75, and he had deleted $5477.50 from his bills relating to the proceedings against Langford. The Homebuyers' attorney testified the remaining bills were for time spent on the Home-Sellers' case involving DTPA and fraud, and he was unable to separate those bills because they were so intertwined. The Homebuyers' attorney testified $24,467.25 would be a reasonable fee for the work he performed in this case. The Homebuyers' attorney was cross examined about both the time spent on the case and the segregation of fees. The Home-Sellers stipulated that the Homebuyers' attorney was qualified when he began his testimony regarding attorney's fees. The trial court heard all the evidence and awarded attorney's fees of $20,000. The record shows the attorney's fees associated with claims against Langford were segregated. Because the record shows the legal services advanced both the fraud and DTPA claims against the Home-Sellers, the fees were so intertwined that segregation was not necessary. See Chapa, 212 S.W.3d at 313.

This record shows the Homebuyers presented competent evidence of out-of-pocket expenses, loss of fair market value, mental anguish damages, and attorney's fees. We therefore uphold the trial court's finding on these damages. See Fernandez, 15 S.W.3d at 651. We overrule the Home-Sellers' fourth issue.

We affirm the trial court's judgment.



DAVID L. BRIDGES

JUSTICE





________________________________________

Footnote:  Although the Home-Sellers also argue the trial court erred in denying their motion for judgment on the Homebuyers' negligent misrepresentation claims, the Homebuyers did not assert a claim for negligent misrepresentation, and the trial court's judgment did not award relief on a negligent misrepresentation claim. While the Homebuyers' original petition alleged certain negligence claims against Langford, all claims against Langford were dismissed prior to trial.

________________________________________

SOURCE: DALLAS COURT OF APPEALS - 05-10-00173-CV - 12/15/11


No comments:

Post a Comment