Wanda Young, Tommie Young, Courtney Young, Ashley Young, and Justin Young v. Pulte Homes of Texas, L.P., Horizon Plumbing, Ltd., and Starn Air, Inc. ( 2016 )

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-14-00224-CV
WANDA YOUNG, TOMMIE YOUNG, APPELLANTS
COURTNEY YOUNG, ASHLEY
YOUNG, AND JUSTIN YOUNG
V.
PULTE HOMES OF TEXAS, L.P., APPELLEES
HORIZON PLUMBING, LTD., AND
STARN AIR, INC.
----------
FROM THE 431ST DISTRICT COURT OF DENTON COUNTY
TRIAL COURT NO. 2011-70500-431
----------
MEMORANDUM OPINION1
----------
This is a suit for damages resulting from mold in a home. Appellants
Wanda Young, Tommie Young,2 and their children, Appellants Courtney Young,
1
See Tex. R. App. P. 47.4.
2
Throughout the record, his name is spelled sometimes as “Tommie” and
sometimes as “Tommy”.
Ashley Young, and Justin Young, sued Appellee Pulte Homes of Texas, L.P.,
Appellee Starn Air, Inc., and Appellee Horizon Plumbing, Ltd., alleging that a leak
from their air conditioning system caused mold throughout their home. They
subsequently added Horizon as a defendant. The trial court dismissed Wanda
and Tommie’s claims for lack of jurisdiction based on their previous filing of
bankruptcy, granted no-evidence summary judgment on Courtney, Ashley, and
Justin’s claims against Pulte and Starn, and granted Starn attorney’s fees against
Courtney, Ashley, and Justin (the Young children).
On appeal, the Youngs argue that the trial court erred by dismissing
Wanda and Tommie’s claims and abused its discretion by awarding attorney’s
fees for Starn against the Young children. Because we hold Wanda and
Tommie’s bankruptcy did not preclude their claims in this suit and that the Young
children’s claims were not groundless under the Deceptive Trade Practices-
Consumer Protection Act3 (DTPA), we reverse the trial court’s judgment.
Background
In July 2005, Wanda and Tommie signed a contract with Pulte for the
purchase of a new construction home to be substantially completed by October
2005. They closed on the home in November 2005 and moved into it with their
children Courtney, Ashley, and Justin. At the time that they closed on the home,
Justin was thirteen years old, Ashley was fifteen, and Courtney was nineteen and
was still living at home.
3
Tex. Bus. & Com. Code Ann. § 17.41–.63 (West 2011 & Supp. 2016).
2
In October 2008, Wanda and Tommie filed for Chapter 13 bankruptcy.
Their plan was confirmed on March 5, 2009.
In June 2010 (while Wanda and Tommie’s bankruptcy was still pending),
Wanda noticed water in their home. The Youngs hired Ohlen-Air, Inc. to inspect
the air conditioning system. The Ohlen-Air technician found that the HVAC unit
was not draining correctly because the condensation line was improperly
connected.
The Youngs hired Stan Parish, a licensed mold assessment consultant,4 to
assess any mold damage and prepare a mold remediation protocol. Parish’s
inspection found “very high elevations of Aspergillus and Penicillium,” which he
described in his report as being “capable of producing mycotoxins which can be
harmful to humans.” Parish concluded from his inspection and information
provided by the Youngs that “[t]he moisture source originated in the attic as a
result of an incorrect connection of the condensation drain line.” Parish
recommended that the Youngs have a qualified contractor perform extensive
remediation of their home and remediation or replacement of their personal
belongings that had been in the affected areas.5
4
See Tex. Occ. Code Ann. §§ 1958.001–.304 (West 2012 & Supp. 2016)
(regulating the profession of mold assessors and remediators and imposing
license requirements).
5
See id. at § 1958.155(a) (West Supp. 2016) (providing that a license
holder may not perform both mold assessment and mold remediation on the
same project).
3
On November 17, 2010, Wanda and Tommie converted their Chapter 13
bankruptcy to Chapter 7. A new trustee, Areya Holder, was appointed.
On May 19, 2011, the Youngs sued Pulte and Starn for negligence and
violations of the DTPA based on the mold damage. They alleged that Starn had
installed the HVAC system and that Pulte and Starn had failed to exercise
ordinary care in the system’s installation. By amended petition, the Youngs
added Horizon Plumbing, alleging that it had been involved in installing the
HVAC system. The DTPA claims alleged that Pulte, Starn, and Horizon had
engaged in false, misleading, or deceptive acts or practices, engaged in an
unconscionable action or course of action, and breached express or implied
warranties.
Starn filed a motion to dismiss Wanda and Tommie’s claims for lack of
subject matter jurisdiction. It argued that they had failed to disclose their claims
to the bankruptcy court, and therefore the claims remained in the bankruptcy
estate, and Wanda and Tommie had no standing to assert them. Horizon
Plumbing filed a motion to dismiss on the same basis.
Starn also filed a motion for no-evidence partial summary judgment on the
Young children’s claims. In Starn’s summary judgment motion, it asserted that
Courtney, Ashley, and Justin had no evidence that they suffered damages or that
the damages were proximately caused by Starn and no evidence of the elements
of their DTPA claims.
4
Courtney, Ashley, and Justin filed a response with evidence attached,
including their own affidavits and Parish’s report. Starn filed a reply that included
objections that some of the evidence was hearsay, that Parish’s report could not
be considered because he had not been disclosed as an expert, and that the
evidence of the Youngs’ affidavits included opinion testimony that could not be
considered because they were not experts. The trial court granted the motion,
sustained the objections, and found that the Young children’s DTPA claims were
groundless.
Horizon also filed a motion for no-evidence partial summary judgment as to
the Young children’s claims on the same grounds as Starn. The Young children
filed no response, and accordingly, the trial court granted the motion.
Pulte also filed a no-evidence motion for summary judgment as to the
Young children’s claims. The Young children filed a response, but Pulte objected
that the response was untimely. The trial court granted Pulte’s summary
judgment motion.
In their response to Starn’s motion to dismiss, Tommie and Wanda relied
on the business records affidavit of Marina Lopez, an employee in the office of
the bankruptcy trustee, and an attached recording of the creditor’s meeting in
their bankruptcy case. The Youngs alleged that this recording showed that they
had disclosed the mold claims to the bankruptcy court, and the trustee had
abandoned the claims. They also attached Wanda’s affidavit in which she stated
5
that they had disclosed to the bankruptcy trustee that their home had mold, and
they intended to file litigation related to the mold.
In the recording, the Youngs told trustee Holder that they had mold
damage in their home and that their attorney had made a demand on their
insurance company. Holder asked if they could sue anyone else, and the
Youngs replied that it was just the insurance company. Holder, however, asked
for their attorney’s information so that she could talk to the attorney about the
Youngs’ claims. Their bankruptcy attorney stated that if there were a suit, he
would probably claim homestead proceeds because the Youngs had lost their
homestead.
Starn filed a reply objecting to Lopez’s affidavit, and it filed a supplement to
its motion to dismiss, arguing that the Youngs had to schedule their claims, and
oral disclosure to the trustee was not sufficient. By supplemental response, the
Youngs argued that because the case did not exist as of the time that they filed
their chapter 13 case, the claims were not part of the bankruptcy estate, and they
did not have a duty to disclose them. The Youngs made the same argument in
response to Horizon’s motion to dismiss. The trial court granted Starn’s motion
to dismiss. It also granted Horizon’s motion to dismiss.
Starn filed a motion for judgment on attorney’s fees against Courtney,
Ashley, and Justin, taking the position that the Young children had “maliciously
prosecuted” a groundless suit against it in order to “extort a settlement.” The
motion stated that, as the trial court had found that Courtney, Ashley, and
6
Justin’s claims were groundless in fact and law, an award of attorney’s fees was
mandatory. After Wanda and Tommie’s pending chapter 13 bankruptcy action
was dismissed and the stay lifted, Starn filed a supplemental motion asking for
fees from Wanda and Tommie.
Pulte then filed a motion to dismiss on the same ground as Starn’s and
Horizon’s motions. Wanda and Tommie filed a response. They then filed a
supplemental response to which they attached Holder’s affidavit. Holder stated
that the claim had been disclosed to her, and she pointed out that the rules of
bankruptcy procedure do not require a person who has converted from a chapter
13 bankruptcy to a chapter 7 bankruptcy to file a schedule of property acquired
after the petition but before conversion if, as with Wanda and Tommie’s case, the
bad faith statute does not apply.6 She also stated that by order entered in their
bankruptcy case, the state court litigation was not property of that bankruptcy
estate. The trial court granted Pulte’s motion.
After a hearing, the trial court ordered Courtney, Ashley, and Justin to pay
attorney’s fees to Starn in the amount of $38,958.00, plus court costs and
conditional appellate fees. The court’s order found that the children’s claims
under the DTPA were groundless.
The trial court filed a final judgment reflecting its prior orders. The Youngs
filed a request for findings of fact and conclusions of law but then withdrew the
request. Starn then moved for attorney’s fees and sanctions against the Youngs
6
See 11 U.S.C.A. § 348(f)(2) (West 2015).
7
for filing the requests. The trial court denied Starn’s motion for the additional
attorney’s fees. The Youngs filed motions for new trial, which the trial court
denied. They then filed this appeal.
Discussion
1. The parents’ claims
In the Youngs’ first issue, they ask whether Wanda and Tommie had
standing to assert their claims, and whether the trial court had jurisdiction over
the claims when they accrued after they filed Chapter 13 bankruptcy but before
the bankruptcy was converted to Chapter 7.
Section 348(f) of the bankruptcy code states unambiguously that, except
when the debtor converts a case in bad faith,
when a case under chapter 13 of this title is converted to a case
under another chapter under this title[,] . . . property of the estate in
the converted case shall consist of property of the estate, as of the
date of filing of the petition, that remains in the possession of or is
under the control of the debtor on the date of conversion.7
Nothing in the record indicates that the bankruptcy court made a finding of bad
faith. Under section 348, then, the property of the converted chapter 7
bankruptcy estate included only property that was property of the chapter 13
estate as of the date of the filing of the chapter 13 petition. No property that the
7
11 U.S.C.A. § 348(f)(1), (2) (West 2015) (emphasis added); see also
Harris v. Viegelahn, 135 S. Ct. 1829, 1836, 191 L. Ed. 2d 783 (2015) (stating that
conversion from chapter 13 to chapter 7 does not start a new bankruptcy case
and does not change the date of the filing of the petition).
8
Youngs acquired between when they filed their chapter 13 petition and when
they converted to chapter 7 was property of the converted case’s estate.
Appellees counter section 348 by pointing to bankruptcy code section 1306
and this court’s opinion in Kilpatrick v. Kilpatrick.8 Under section 1306, property
of the estate includes all property (of the kind specified in the bankruptcy code)
that the debtor acquires after commencement of the case but before the case is
closed, dismissed, or converted.9 This section, however, “simply governs what
property interests are included in an existing Chapter 13 estate, not what is
included once the case converts to a Chapter 7 bankruptcy”10—that is, it applies
to an unconverted chapter 13 case.
Kilpatrick does not help Appellees, either. That case involved a debtor’s
failure to disclose on his bankruptcy schedules property he had acquired before
filing for bankruptcy.11 Appellees focus on the language of Kilpatrick discussing
the importance of the debtor’s duty to disclose assets in the debtor’s bankruptcy
schedules.12 But that case has no application in the context of this case. Here,
8
205 S.W.3d 690 (Tex. App.—Fort Worth 2006, pet. denied).
9
11 U.S.C.A. § 1306(a)(1) (West 2016).
10
In re Hodges, 518 B.R. 445, 451 (E.D. Tenn. 2014).
11
Kilpatrick, 205 S.W.3d at 694–95, 701 (stating that the appellant had
acquired 900 shares of stock in 1993 and filed for bankruptcy in 1995 and
holding that the shares, which were not disclosed to the bankruptcy trustee,
remained with the bankruptcy estate after the bankruptcy was dismissed).
12
See id. at 702.
9
the property at issue was acquired after the filing of a chapter 13 bankruptcy
proceeding and before the conversion to chapter 7 bankruptcy. The bankruptcy
code is unequivocal that, absent bad faith, property acquired after a chapter 13
petition filing and before conversion to a chapter 7 case is not property of the
chapter 7 case.13 Appellees’ jurisdictional argument had no legal basis, and the
trial court therefore erred by granting Appellees’ motions to dismiss. We sustain
the Youngs’ first issue.
2. The children’s claims
The Youngs’ second issue relates to the attorney’s fees assessed against
the Young children. They argue that their tendered evidence demonstrated an
arguable basis in fact and law for the Young children’s DTPA claims, and,
therefore, the trial court should not have assessed attorney’s fees against
Courtney, Ashley, and Justin.
13
See 11 U.S.C.A. § 348; see also Harris, 135 S. Ct. at 1837 (stating that
Congress added section 348 to resolve a split among courts “on the disposition
of a debtor’s undistributed postpetition wages following conversion of a
proceeding from Chapter 13 to Chapter 7” and that under the section, “in a case
converted from Chapter 13, a debtor’s postpetition earnings and acquisitions do
not become part of the new Chapter 7 estate”); In re Stamm, 222 F.3d 216, 218
(5th Cir. 2000) (stating that bankruptcy courts deciding the issue had “uniformly
agreed that Section 348(f)(1)(A) establishes that property acquired after the
Chapter 13 filing and before discharge under Chapter 7 is not part of the
converted estate” and that “[t]here is no authority, from any court, to support the
contrary position” (emphasis added)).
10
Starn requested fees against the Young children under section 17.50 of
the DTPA14 and as sanctions under civil procedure rules 13 and 215.15 Starn’s
attorney argued to the trial court that the Young children filed their claims not
because they believed they had legitimate claims but because they “decide[d] to
get entrepreneurial with the litigation.” He stated that he did not “explore
negligence and the underlying factual basis of these, because it became very
suspicious from the very beginning,” and “there were never any depositions
taken or things like that” because he saw such discovery as a waste of his
client’s resources. Thus, he said, had the children not filed DTPA claims, Starn
would not have any basis on which to seek attorney’s fees against them.
Accordingly, Starn based its request for attorney’s fees on only the assertion of
the DTPA claims. Starn had also requested an award of attorney’s fees against
the Youngs’ attorney on the same grounds.16 The trial court awarded the
requested fees against the Young children under DTPA section 17.50 but
declined to award any fees against their attorney.
14
See Tex. Bus. & Com. Code Ann. § 17.50(c) (West 2011) (providing that
if a court finds than an action under that section was groundless in fact or law or
brought in bad faith, or brought for the purpose of harassment, the court shall
award reasonable and necessary attorney’s fees to the defendant).
15
Tex. R. Civ. P. 13, 215.
16
See Nath v. Texas Children’s Hosp., 446 S.W.3d 355, 367 (Tex. 2014)
(discussing when an attorney shares the blame with the client for sanctionable
conduct).
11
Appellate court review of a trial court’s groundlessness determination “is a
question of law under an abuse of discretion standard.”17 The term “groundless”
for DTPA purposes has the same meaning as it does under civil procedure
rule 13: “[N]o basis in law or fact and not warranted by good faith argument for
the extension, modification, or reversal of existing law.”18
The test for groundlessness under the DTPA is “whether the totality of the
tendered evidence demonstrates an arguable basis in fact and law for the
consumer’s claim.”19 However, “groundless” under the DTPA is not synonymous
with “no evidence.”20 “To equate groundlessness with no evidence would
preclude the award of attorneys’ fees in obviously fraudulent or malicious actions
when some evidence was presented, yet discourage legitimately wronged
consumers from seeking the protections afforded by the Act for fear of failure in
court.”21 Accordingly, in determining whether an arguable basis exists for the
suit, a court may consider “[e]ven evidence that is legally inadmissible or subject
to other defects . . . provided there is some good faith basis for belief that the
17
Donwerth v. Preston II Chrysler-Dodge, Inc., 775 S.W.2d 634, 637 n.3
(Tex. 1989).
18
Id. at 637 (quoting civil procedure rule 13) (quotation marks omitted)
(emphasis added).
19
Splettstosser v. Myer, 779 S.W.2d 806, 808 (Tex. 1989).
20
Donwerth, 775 S.W.2d at 637.
21
Id.
12
tendered evidence might be admissible or that it could reasonably lead to the
discovery of admissible evidence.”22
To prevail on their DTPA claims, the Young children needed to show that
they were consumers and that they suffered damages, the producing cause of
which was one of the following statutory grounds:
(1) the use or employment of a false, misleading or deceptive act or
practice that is a specifically enumerated violation under DTPA
section 17.46(b) and on which they detrimentally relied;
(2) a breach of an express or implied warranty;
(3) any unconscionable action or course of action; or
(4) the use of an act or practice that violates chapter 541 of the
insurance code.23
“Unconscionable action or course of action” is defined in the DTPA to mean “an
act or practice which, to a consumer’s detriment, takes advantage of the lack of
knowledge, ability, experience, or capacity of the consumer to a grossly unfair
degree.”24 “[N]o specific representations need be required in order to maintain a
DTPA suit for unconscionable conduct.”25
22
Id.
23
Tex. Bus. & Com. Code Ann. § 17.50(a).
24
Id. § 17.45(5) (West 2011).
25
Wheeler v. Yettie Kersting Mem’l Hosp., 866 S.W.2d 32, 49 (Tex. App.—
Houston [1st Dist.] 1993, no writ).
13
The totality of the evidence provided an arguable basis for concluding that
Starn’s improper installation caused damages to the Young children
In the trial court, the Youngs provided as summary judgment evidence the
affidavit of Roger Davidson, who holds a Class A Air-Conditioning Contractors
license and has served as a plumbing and mechanical inspector for the City of
Dallas for more than twenty-seven years. Davidson explained that the type of
cooling equipment used in the Youngs’ home must be connected to a trapped
condensate drain pipe, or else “the fan will create a negative pressure inside the
coil cabinet which causes air to be drawn into the inside of the enclosure which
prevents the water from draining into the condensate drain line,” causing water to
spill out.
Davidson stated that in the Youngs’ system, the necessary trap had been
installed with the condensation drain pipe, but “a tee fitting was installed between
the trap and the air handler.” That tee fitting “allowed air to be pulled back into
the inside of the coil cabinet[,] which prevented water from draining out through
the condensate drain pipe.” Davidson stated that this tee “effectively eliminated
the trap.” He further stated that the incorrectly connected drain caused the
condensate to spill into the attic and the home below.
The Youngs also included the invoice from Ohlen-Air on which the service
provider stated that he had “found drain not drain[ing] properly” and “found tee on
drain [illegible] p-trap and switched on Air Handler.” The Youngs further included
pictures of the tee fitting installed on their system.
14
The Youngs also produced the report of Parish in which he stated that he
had found mold in the home. Parish explained the repair work that would have to
be done on the home to remove the mold and that clothing would need to be
properly treated as well. The children stated in affidavits that they had to move
from the home because of the presence of the mold. Regardless of whether this
evidence was ultimately admissible at trial or whether the Young children could
have ultimately met their burden of proof,26 it was evidence that provided an
arguable basis in fact that Starn had improperly installed the air conditioning
system, that this improper installation caused water to drain into the Youngs’
home, that mold developed in their home, and that they suffered damages as a
result.
However, the improper performance of services does not alone give rise to
a DTPA claim. We therefore consider whether, accepting that the Young
children had an arguable basis for claiming that Starn’s performance of services
resulted in damages, they had an arguable basis for asserting DTPA claims.27
The Young children’s claims were not groundless on the basis that they were not
consumers
To be a consumer for purposes of the DTPA, a person must have sought
or acquired goods or services, and those same goods or services must form the
26
See Donwerth, 775 S.W.2d at 637.
27
Id.
15
basis of the complaint.28 Starn argued to the trial court that the Young children
were not consumers because they did not buy the house and were adults when
the suit was filed. The trial court agreed and found that the Young children were
not consumers of Starn’s services.
Wanda and Tommie bought a new-construction home that Starn improved
with an air conditioning system. That service formed the basis of the Youngs’
complaints against Starn. They are therefore consumers under the DTPA.29
At the time the Youngs filed suit, Justin was eighteen years old, Ashley
was twenty, and Courtney was almost twenty-five. At the time that their parents
bought the home, however, Justin and Ashley were minors, and Courtney was
only just nineteen and was still living at home. Wanda and Tommy bought the
home for the benefit of the entire family, to provide a home for themselves and
their children. As Wanda and Tommie are consumers under the DTPA, so are
their children.30
28
Cameron v. Terrell & Garrett, Inc., 618 S.W.2d 535, 539 (Tex. 1981).
29
See Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 650 (Tex. 1996)
(“[T]he homeowners purchased homes equipped with polybutylene plumbing
systems. These systems are goods, and they form the basis of the homeowners’
complaints. The homeowners are therefore consumers under the DTPA.”).
30
See Angeles v. Brownsville Valley Reg’l Med. Ctr., Inc., 960 S.W.2d 854,
859 (Tex. App.—Corpus Christi 1997, pet. denied) (stating that to be a
“consumer” under the DTPA, a person need not be the actual purchaser of the
goods or services, “as long as the consumer is the beneficiary of those goods or
services”).
16
The record does not show a basis for DTPA claims against Starn based on
misrepresentations or unconscionable acts
In Amstadt v. U.S. Brass Corporation, a group of homeowners brought
negligence and DTPA claims against the manufacturers of equipment that had
been installed in their homes.31 The Supreme Court of Texas held that the
homeowners could recover under a negligence theory but not under the DTPA.32
In reaching its holding, the court pointed out that for a consumer to have a valid
DTPA claim based on a misrepresentation, the alleged representation has to be
made in connection with the consumer’s transaction.33 Thus, the court held,
upstream manufacturers and suppliers of goods are not liable to consumers
under the DTPA for misrepresentations they have made to third parties when
those representations have not been communicated to the consumer or have no
connection to the consumer transaction.34
The Amstadt court stated that the purpose of the DTPA is “to protect
consumers in consumer transactions” and that its holding that “the defendant’s
deceptive conduct must occur in connection with a consumer transaction” was
consistent with that intent.35 Likewise, for claims based on an unconscionable
31
Amstadt, 919 S.W.2d at 647.
32
Id.
33
Id. at 650.
34
Id. at 649.
35
Id.
17
act, the defendant’s taking advantage of another’s lack of knowledge, ability,
experience, or capacity must have been done in connection with the consumer
transaction giving rise to the claim.36
The Youngs were not suing the maker of the air conditioning unit or the
maker of other parts of the HVAC system. Instead, the Youngs sued the
company that put that unit in the house they bought to live in. The installation of
a central heating or cooling unit in a home can give rise to a DTPA claim.37 And
reasonable homebuyers in Texas generally will not knowingly purchase a newly-
built home with an improperly-installed air conditioning system, or at least they
will not do so and also knowingly pay the same price for the home as they would
pay for one with a properly-installed unit.38
But for a valid DTPA claim against Starn, the Young children needed more
than the fact that under normal circumstances, a subcontractor should know that
36
Id. at 652 (requiring a connection with the consumer transaction both for
allegations based on misrepresentations and for those based on unconscionable
acts).
37
See Hurst v. Sears, Roebuck & Co., 647 S.W.2d 249, 252–53 (Tex.
1983) (superseded by statute on other grounds) (reviewing a claim brought under
prior version of DTPA for damage to a home from the improper installation of a
central heating and cooling system and holding that the jury’s finding that the
installer’s failure to obtain an inspection and permit were producing causes of the
consumer’s damages was sufficient to satisfy the statute’s then-requirement that
the plaintiff be adversely affected by the defendant’s conduct).
38
See Gen. Motors Corp. v. Sanchez, 997 S.W.2d 584, 594 (Tex. 1999)
(stating in a product defect case that “[p]ublic policy favors reasonable conduct
by consumers” and that consumers have a responsibility to act reasonably).
18
the home buyer expects work to be done properly.39 The Young children had no
DTPA claim against Starn based on misrepresentations or unconscionable acts
unless misrepresentations or unconscionable acts actually occurred and unless
those acts had a connection to the transaction.40 The connection could be
demonstrated by showing that Starn had a contractual relationship with the
Youngs, that Starn made a misrepresentation to them or a misrepresentation to
Pulte that was communicated to them; that Starn did an unconscionable act that
had a connection with the transaction between Pulte and the Youngs, or that
Starn received a benefit from a transaction between Pulte and the Youngs.41
Nothing in the record indicates on what factual basis the Youngs had
concluded that Starn had made misrepresentations or engaged in
unconscionable acts. There is no evidence in the record of misrepresentations
or unconscionable acts by Starn.42 Accordingly, the trial court did not abuse its
discretion in concluding that the Young children had no arguable basis in fact for
39
See Schambacher v. R.E.I. Elec., Inc., No. 2-09-345-CV, 2010 WL
3075703, at *4 (Tex. App.—Fort Worth Aug. 5, 2010, no pet.) (mem. op.)
(discussing when a homeowner may sue a subcontractor).
40
See Amstadt, 919 S.W.2d at 652.
41
See Todd v. Perry Homes, 156 S.W.3d 919, 922 (Tex. App.—Dallas
2005, no pet.) (stating that when there is no contractual privity between an
upstream defendant seller and the consumer, the required connection “can be
demonstrated by a representation that reaches the consumer or by a benefit from
the second transaction to” the defendant (quotation marks and citation omitted)).
42
See Donwerth, 775 S.W.2d at 637.
19
asserting DTPA claims based on either unconscionable acts or representations
by Starn.
The record does not show grounds for DTPA claims against Starn based on
warranties or violations of the insurance code
Chapter 541 of the insurance code has no application to this case,43 and
therefore the Young children could not base a DTPA claim on the violation of that
chapter.44 That leaves only the breach of a warranty as a possible basis for their
asserting DTPA claims.
A consumer may bring a DTPA claim against a defendant for the breach of
either an express or implied warranty.45 There is nothing in the record showing
or even suggesting that Starn had a contract with the Youngs or made an
express agreement with them about how the work was to be performed.46 Thus,
if the Youngs had a DTPA claim against Starn based on the violation of a
warranty, it had to be based on an implied warranty.
In the absence of an express warranty, the implied warranties of
habitability and of good workmanship apply to new home construction, and an
43
See Tex. Ins. Code Ann. § 541.001 (West 2009) (stating that the purpose
of the chapter is to regulate trade practices in the insurance business).
44
See Tex. Bus. & Com. Code Ann. § 17.50(a)(4) (providing for a claim for
the violation of insurance code chapter 541).
45
Id. § 17.50(a)(2); see also La Sara Grain Co. v. First Nat’l Bank of
Mercedes, 673 S.W.2d 558, 565 (Tex. 1984) (stating that because the DTPA
does not create any warranties, any warranty on which a DTPA claim is based
must be established outside of the act).
46
See Tex. Bus. & Com. Code Ann. § 17.50(a)(2).
20
implied warranty of good and workmanlike repair or modification applies to
repairs and modifications of property.47 The Young children alleged that Starn
had breached the warranties of providing services in a good and workmanlike
manner and of fitness for a particular purpose.48
“Implied warranties are created by operation of law and are grounded more
in tort than in contract,”49 and “[a]n implied warranty arises by operation of law
when public policy so mandates.”50 In Humber v. Morton, the Supreme Court of
Texas discussed implied warranties in new home construction, holding that the
doctrine of caveat emptor does not apply.51 It quoted the Idaho Supreme Court,
stating that “[t]he purchase of a home is not an everyday transaction for the
average family, and in many instances is the most important transaction of a
lifetime,” and “[t]o apply the rule of caveat emptor to an inexperienced buyer, and
47
Gonzales v. Sw. Olshan Found. Repair Co., LLC, 400 S.W.3d 52, 56, 59
(Tex. 2013).
48
But see McDonald v. City of the Colony, No. 2-08-00263-CV, 2009 WL
1815648, at *13 (Tex. App.—Fort Worth June 25, 2009, no pet.) (mem. op.)
(stating that “[t]he implied warranty of fitness for a particular purpose is created
under the Texas Business and Commerce Code and applies only to goods” and
that the implied warranty of habitability applies to residential property).
49
Melody Home Mfg. Co. v. Barnes, 741 S.W.2d 349, 352 (Tex. 1987) (op.
on reh’g).
50
Id. at 353.
51
426 S.W.2d 554, 561 (Tex. 1968).
21
in favor of a builder who is daily engaged in the business of building and selling
houses, is manifestly a denial of justice.”52
The Humber court stated, “Obviously, the ordinary purchaser is not in a
position to ascertain when there is a defect in a chimney flue, or vent of a heating
apparatus, or whether the plumbing work covered by a concrete slab foundation
is faulty.”53 The court held that “[t]he caveat emptor rule as applied to new
houses is an anachronism patently out of harmony with modern home buying
practices,” and “[i]t does a disservice not only to the ordinary prudent purchaser
but to the industry itself by lending encouragement to the unscrupulous, fly-by-
night operator and purveyor of shoddy work.”54
In Melody Home Manufacturing Company, the Supreme Court of Texas
considered “whether the protection of Texas consumers requires the utilization of
an implied warranty that repair services of existing tangible goods or property will
be performed in a good and workmanlike manner as a matter of public policy.”55
In that case, Melody Home had delivered a prefabricated home to the plaintiffs,
who subsequently discovered that a sink was not connected to the drain in one of
the interior walls, causing severe damage to the home.56 Melody Home twice
52
Id.
53
Id.
54
Id. at 562.
55
741 S.W.2d at 353.
56
Id. at 351.
22
sent workers to repair the problem, but the workers did not fix the problem and in
fact caused additional damage.57 The plaintiffs then filed a DTPA suit against
Melody Home based on implied warranties.58
In reaching its holding, the court reasoned that “the public interest in
protecting consumers from inferior services is paramount to any monetary
damages imposed upon sellers who breach an implied warranty,” that “a service
provider is in a much better position to prevent loss than is the consumer of the
service,” that “a consumer should be able to rely upon the expertise of the
service provider,” and that “a service provider is better able to absorb the cost of
damages associated with inferior services through insurance and price
manipulation than is the individual consumer.”59 The court concluded that a
caveat emptor rule for services “does a disservice not only to the ordinary
prudent purchaser but to the industry itself by encouraging the purveyor of
shoddy workmanship.”60 For those reasons, the court concluded that “an implied
warranty to repair or modify existing tangible goods or property in a good and
workmanlike manner is available to consumers suing under the DTPA.”61
57
Id.
58
Id.
59
Id. at 353–54.
60
Id.
61
Id.
23
The court made two further holdings in that case. First, the court held that
expert testimony was not required because “the breach of the implied warranty
was plainly within the common knowledge of laymen”; “[t]he jurors had sufficient
knowledge to find that the failure to connect a washing machine drain would not
be considered good and workmanlike by those capable of judging repair work.”62
Second, the court held that the implied warranty may not be waived or
disclaimed.63 That court later modified that second holding, stating that
“[a]lthough the parties cannot disclaim this [implied] warranty outright,” an
express warranty may supersede it.64
From Humber and Melody Home, the public policy in this state is to put the
responsibility of preventing shoddy work on the provider of the work rather than
the consumer and to protect the consumer from bearing that burden.
Accordingly, if Starn failed to install the air conditioning system in a good and
workmanlike manner, the public policy of the state would appear to favor holding
Starn responsible for the damages that resulted to the Youngs’ property.
However, this policy does not exist in a legal vacuum, and other factors ultimately
prevented the Young children’s claims from being viable.
Neither Humber nor Melody Home involved DTPA claims against a
subcontractor, as this case does. The Supreme Court of Texas discussed
62
Id. at 355.
63
Id.
64
Gonzales, 400 S.W.3d at 59.
24
implied warranties in the context of DTPA claims against remote sellers in PPG
Industries.65 PPG cited Amstadt and stated that a downstream buyer can sue a
remote (upstream) seller for a breach of an implied warranty, but not under the
DTPA.66
Starn is a services provider that improved the Youngs’ home with an
HVAC system, not an upstream seller of goods to a contractor building a house.
But PPG is still relevant because it stated that the required connection to a
transaction discussed in Amstadt applies equally to DTPA claims based on a
breach of an implied warranty.67 And the purpose of the DTPA is not simply to
protect plaintiffs from injury from the use of products and services, but to
specifically protect consumers engaging in transactions, as stated in Amstadt.68
Thus, for the same reason that an upstream seller must have a connection to the
transaction to have DTPA liability, so must a subcontractor. And even outside
the DTPA context, Texas law generally does not allow claims against
subcontractors absent a contractual relationship or other special circumstance.69
65
PPG Indus., Inc. v. JMB/Houston Ctrs. Partners Ltd. P’ship, 146 S.W.3d
79, 89 (Tex. 2004).
66
Id.
67
Id.
68
See Amstadt, 919 S.W.2d at 649–50.
69
See Thomson v. Espey Huston & Assoc., Inc., 899 S.W.2d 415, 419
(Tex. App.—Austin 1995, no writ) (“The contract between the property owner and
the general contractor gives the property owner the right to a finished
25
As we have said, there is no evidence in the record, admissible or
otherwise, that Starn had a contract with the Youngs. There is also no evidence
that Starn received a benefit, not only from its subcontract with Pulte, but also
from the transaction between the Youngs and Pulte. There is no evidence of a
connection between Starn and the transaction that would support a DTPA claim
based on an implied warranty.
Nevertheless, the Young children’s claims were not groundless. In the
past, we have suggested that the door was not entirely and firmly shut on claims
against subcontractors. In Thomas v. Atlas Foundation Company, Inc., we
suggested that in some cases, a subcontractor could have an obligation to a
consumer through an implied warranty.70 Specifically, we stated in dicta that
Atlas, the subcontractor, by agreeing to build a porch, “impliedly warranted that
all such work would be done in a good and workmanlike manner.”71 We further
stated, however, that the mere breach of an implied warranty would not give rise
to a DTPA claim; “[w]e deem[ed] more to be required.”72 But, though not
necessary for the disposition in the case, we stated that under some
building . . . . If the subcontractors’ performance falls short of what the owner is
entitled to, it is the general contractor who has to make up the difference.”).
70
609 S.W.2d 302, 303 (Tex. Civ. App.—Fort Worth 1980, writ ref’d n.r.e.).
71
Id.
72
Id. at 304.
26
circumstances, a subcontractor could be liable under the DTPA for the breach of
an implied warranty.73
Then in Rayon,74 a non-DTPA case, this court stated without discussion
that an implied warranty claim against a subcontractor is barred as a matter of
law. Rayon did not mention Thomas. We reiterated Rayon’s holding in Irwin and
Glenn, neither of which mentioned Thomas.75 In Glenn, this court declined to
carve out an exception to the rule as stated in Rayon, holding that such an
exception would have given the plaintiff in that case a double recovery from both
the builder and the subcontractor.76 Thus, Glenn could be read as impliedly
suggesting that in some cases, when double recovery is not an option, an
exception could be had.
In Irwin, we again held that the subcontractor could not be liable under an
implied warranty because the plaintiff had other adequate remedies to redress
the wrongs committed—specifically, a settlement with their insurer—and the
plaintiffs had “no compelling need that justifie[d] imposing an implied warranty in
this case in light of their settlement with [their insurer], an entity with whom
73
See id. at 303–04.
74
Rayon v. Energy Specialties, Inc., 121 S.W.3d 7, 21 (Tex. App.—Fort
Worth 2002, no pet.).
75
Irwin v. Nortex Found. Designs, Inc., No. 2-08-00436-CV, 2009 WL
2462566, at *3 (Tex. App.—Fort Worth Aug. 13, 2009, no pet.) (mem. op.); Glenn
v. Nortex Found. Designs, Inc., No. 2-07-00172-CV, 2008 WL 2078510, at *3
(Tex. App.—Fort Worth May 15, 2008, no pet.) (mem. op).
76
Glenn, 2008 WL 2078510, at *3.
27
Appellants had a contract.”77 Irwin thus also could be read as impliedly
suggested that in some narrow circumstances, when the plaintiff has shown a
“compelling need,” an implied warranty claim could be brought against a
subcontractor. Similarly, in Codner v. Arellano, the Austin Court of Appeals
stated that because the homeowner could sue its general contractor (but instead
chose to settle those claims) and thus “had adequate remedies to redress the
wrongs he allege[d] were committed” by the subcontractor, there was no
compelling public policy reason to impose an implied warranty against a
defendant subcontractor.78 Such language could be read to suggest that in some
cases, public policy would produce a different result.
Starn is correct that this court has held that a plaintiff homebuyer has no
claim against a subcontractor for a breach of an implied warranty, and this
remains the general rule. If there is some other special circumstance under
which public policy would support an implied warranty claim against a
subcontractor, it is not present in a case such as this, nor in any of the cases we
have considered since Thomas, and we decline to speculate what that
circumstance might be.
To be clear, we continue to hold that a subcontractor will generally not be
liable to a homeowner for poor workmanship, under the DTPA or otherwise,
unless the subcontractor has a contractual relationship with the owner. In the
77
Irwin, 2009 WL 2462566, at *3.
78
40 S.W.3d 666, 673–74 (Tex. App.—Austin 2001, no pet.).
28
context of the DTPA, a sufficient connection to the transaction at issue may
support liability.79 Without that connection, however, the plaintiff has no DTPA
claim against the subcontractor.80 A homeowner’s claim for breach of an implied
warranty in the home’s construction will generally be against the contractor, not
the subcontractor.81
But the Young children are correct that this court has included language in
its opinions that could be read to suggest that this rule is not absolute, and in
some cases there could be a public policy reason to impose an implied warranty
against a subcontractor. For DTPA purposes, the fact that a subcontractor
worked on the construction of a new home gives the subcontractor a greater
connection to the purchase of that home than that of the defendants in Amstadt;
Starn’s services went toward completion of the construction of the home that was
the subject of the transaction. Given that there was no evidence that the Youngs
or even Starn knew that Starn would perform services on the house at the time
the contract was made, that connection is not, by itself, the kind of connection
that will support a DTPA claim.
79
See, e.g., Todd, 156 S.W.3d at 922 (reciting the types of connections to
a transaction on which DTPA liability may be based).
80
Cf. Raymond v. Rahme, 78 S.W.3d 552, 563 (Tex. App.—Austin 2002,
no pet.) (holding that the evidence did not support the trial court’s finding of an
implied warranty against the subcontractor when there was no direct contractual
relationship with the owner).
81
See Thomson, 899 S.W.2d at 419.
29
But given our prior suggestion that subcontractors owe homebuyers
implied warranties, our prior suggestion that the need to make a plaintiff whole
could support a subcontractor being held liable under an implied warranty, and
the specific facts and evidence in this case, the Young children’s claims made a
good faith argument for an extension, modification, or reversal of existing law,
and we hold that their claims were not groundless.82 We sustain the Young’s
second issue.
In the Youngs’ third issue, they ask alternatively if conditional appellate
fees were authorized based solely on a finding in the trial court that the claims
were “groundless;” and, if so, whether the award was supported by sufficient
evidence. Because we have held that attorney’s fees should not have been
awarded to Starn, we need not address this issue.
Conclusion
Having sustained the Youngs’ first two issues, which are dispositive, we
reverse the trial court’s judgment dismissing Wanda and Tommie’s claims and
awarding attorney’s fees to Starn for the claims brought by Courtney, Ashley, and
Justin, and we remand Wanda and Tommie’s claims to the trial court.
82
See Donwerth, 775 S.W.2d at 637.
30
/s/ Lee Ann Dauphinot
LEE ANN DAUPHINOT
JUSTICE
PANEL: DAUPHINOT, WALKER, and MEIER, JJ.
MEIER, J., concurs without opinion.
DELIVERED: August 26, 2016
31