Mike Birnbaum and Beverly Birnbaum v. Gena J. Atwell, Phyllis Browning, Phyllis Browning Company and Mimi Weber ( 2015 )

Opinion issued August 20, 2015
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-14-00556-CV
———————————
MIKE BIRNBAUM AND BEVERLY BIRNBAUM, Appellants
V.
GENA J. ATWELL, PHYLLIS BROWNING,
PHYLLIS BROWNING COMPANY, AND MIMI WEBER, Appellees
On Appeal from the 166th District Court
Bexar County, Texas
Trial Court Case No. 2013-CI-151521
MEMORANDUM OPINION
1
On July 1, 2014, the Texas Supreme Court ordered this appeal transferred from the
Court of Appeals for the Fourth District of Texas. See TEX. GOV’T CODE ANN.
§ 73.001 (West 2013) (authorizing transfer of cases). We are unaware of any
conflict between the precedent of the Court of Appeals for the Fourth District and
that of this Court on any relevant issue. See TEX. R. APP. P. 41.3.
Mike and Beverly Birnbaum purchased a penthouse condominium unit in
San Antonio in 2007. They had it remodeled and moved in two years later. Soon
after they moved in, a rainstorm occurred and they discovered numerous water
leaks throughout the unit.
The Birnbaums brought suit against the seller, Gena Atwell, Atwell’s realtor,
Phyllis Browning, Browning’s company, and their own realtor, Mimi Weber, who
also worked with Browning’s company. They alleged that Atwell had
misrepresented the condition of the unit and failed to disclose its persistent water
intrusion problems, asserting claims for breach of contract, common-law and
statutory fraud, fraud by nondisclosure, fraudulent inducement, negligence, gross
negligence, negligent misrepresentation, and violations of the Texas Deceptive
Trade Practices Act (DTPA). 2 See TEX. BUS. & COM. CODE ANN. §§ 17.41–17.63,
27.01 (West 2009). They sued the realtors for breach of contract, negligence, gross
negligence, negligent misrepresentation, and breach of fiduciary duty.
Atwell and the realtors moved for summary judgment on traditional and no-
evidence grounds, contending, among other things, that the Birnbaums had no
evidence of the elements of reliance or causation, at least one of which was an
essential element of each of the Birnbaums’ claims. The trial court granted
2
The Birnbaums also sued their remodelers and the condominium association,
among others. The claims against those parties were severed from the claims
involved in this appeal.
2
summary judgment in favor of Atwell and the realtors without specifying grounds.
The Birnbaums moved for new trial and the trial court denied the motion.
On appeal, the Birnbaums challenge the propriety of the summary judgment.
They also contend that the trial court erred in denying their motion for new trial
and in awarding Atwell and the realtors appellate attorney’s fees without making
them contingent on the success of the appeal. We modify the judgment to make
appellate attorney’s fees contingent on the success of appeal and, as modified,
affirm.
Background
Atwell and her husband bought and moved into the penthouse condominium
unit in 1999. In 2007, a year after her husband died, Atwell retained Browning as
her realtor, who listed the property for sale at a price of $2.4 million. A friend of
the Birnbaums, who lived in the building and knew they were interested in buying
a unit there, contacted them to let them know Atwell’s unit was for sale. The same
day Atwell listed the property, she received an offer from the Birnbaums through
Weber.
The Birnbaums walked through the unit with Weber. They made a verbal
offer of $2.2 million, which Atwell accepted. Using the condominium unit resale
form promulgated by the Texas Real Estate Commission (TREC), Weber prepared
3
an earnest money contract, which Atwell and Birnbaum signed. Section 7 of the
contract, entitled “PROPERTY CONDITION,” recites:
D. ACCEPTANCE OF PROPERTY CONDITION: Buyer accepts
the Property in its present condition; provided Seller, at Seller’s
expense, shall complete the following specific repairs and
treatments: _______[blank]____________________________.
At the same time the parties executed the earnest money contract, Atwell
completed and gave the Birnbaums a four-page Seller’s Disclosure Notice, another
TREC form. The Notice proclaims in bold font at the top of the first page:
THIS NOTICE IS A DISCLOSURE OF SELLER’S KNOWLEDGE
OF THE CONDITION OF THE PROPERTY AS OF THE DATE
SIGNED BY SELLER AND IS NOT A SUBSTITUTE FOR ANY
INSPECTIONS OR WARRANTIES THE BUYER MAY WISH TO
OBTAIN. IT IS NOT A WARRANTY OF ANY KIND BY
SELLER, SELLER’S AGENTS, OR ANY OTHER AGENT.
Section 3 of the four-page form asks: “Are you (Seller) aware of any of the
following conditions: Mark Yes (Y) if you are aware and No (N) if you are not
aware.” A two-column list itemizing 35 conditions follows. Atwell checked “Y”
for the following conditions:
• Previous Flooding into the Structures;
• Previous Flooding onto the Property; and
• Water Penetration.
The next question asked Atwell to explain her “yes” responses. Atwell wrote:
“Unit had some water damage before we bought it. All fixed and no water
problems since.” The Birnbaums’ expert witness, realtor Barbara Tarin, testified at
4
her deposition that Atwell’s disclosures conflicted with each other by saying that
“yes, there is water penetration” while at the same time saying that any water leaks
were “[a]ll fixed.”
After signing the earnest money contract, the Birnbaums hired a property
inspector to inspect the condominium unit. Among other things, the inspector’s
report observed:
• Weathering, wear . . . at interior wood floor at lower floor office at
sliding door.
• Cupping observed at wood floor at kitchen near water heater closet,
ice maker unit. This is typically associated with high humidity or
moisture.
• Water damage, staining at carpet near sliding door at lower bedroom
from leakage.
• Water damage observed on ceiling at lower floor office from past roof
leakage.
• Water staining observed at ceiling rear area of living room near a/c
vent.
• Water staining, cracking observed at ceiling corner at lower bedroom.
• Signs of water leakage from balcony to interior of bedroom, in need
of repairs.
The inspector checked the box denoting “not functioning/needs repair” for the
observations concerning water damage to the ceilings and floors.
Mike Birnbaum, an experienced commercial real estate broker, also
consulted about his prospective purchase with Kenneth Gindy, an attorney
5
experienced in residential real estate transactions. In his letter to the Birnbaums,
Gindy reported that
[a]bout 2 or 3 years ago litigation was instituted over problems of
water leaks in the building. There were questions over whether the
water was coming from the patios and drains and whether it was the
condo association or unit owner’s responsibility to make repairs. The
litigation was settled within the last year and I thought the association
was going to resolve the unit owner vs. association responsibility
issue for such leaks after the suit was settled. I did not see any
clarification of the parties’ responsibilities in the materials I received.
Gindy advised the Birnbaums to make further inquiry and “have the Seller clarify
who is responsible for the repair of such leaks and who has liability from units
below the one [the Birnbaums] are buying for possible leaks that have already
occurred.” The Birnbaums did not approach Atwell, but Mike Birnbaum discussed
the building’s history of water leaks with the manager of the condominium
homeowners association, Roy Johnson. Johnson informed him that the patios had
previously leaked and needed repair.
Gindy also advised the Birnbaums to request an extension of the closing date
so that they could discuss with Atwell the concerns raised by the inspection report.
The Birnbaums made the request and Atwell agreed to the extension. The
Birnbaums determined that it would cost $160,000 to waterproof the unit and
replace the air-conditioning units. As a result, the Birnbaums renegotiated the
sales price down to $2,040,000, a $160,000 decrease from the price accepted in the
earnest money contract and a $360,000 decrease from Atwell’s original asking
6
price. The Birnbaums conducted all negotiations through the agents. They never
questioned Atwell about the water leaks or the conflicting statements in her
Seller’s Disclosure form, which constitutes the only information the Birnbaums
obtained from Atwell. The parties closed on the sale in late August 2007.
Following the closing, the Birnbaums had the waterproofing and other work
done on the patios as well as extensive remodeling work on the interior of the unit,
an endeavor that lasted two years. No evidence shows that any water leakage
occurred during that period. Shortly after the Birnbaums moved into the
remodeled unit in September 2009, the area experienced a heavy rainstorm. The
Birnbaums allege that water leakage occurred at that time and that numerous other
leaks in various locations have occurred since then. An investigation revealed that
the roof of the condominium building had been leaking for years, and another
penthouse unit owner had experienced similar leaks. The Birnbaums also
discovered that water intrusion occurred in their unit as a result of the defective
window system, which was used throughout the building, as well as problems with
the flashing on the stucco columns and the precast concrete used on the building’s
exterior.
Alleging that the seller and realtors did not adequately disclose the water
penetration problems before the sale, the Birnbaums sued Atwell for breach of
contract, common law fraud, fraud in a real estate transaction, fraud by
7
nondisclosure, fraud in the inducement, negligence, gross negligence, negligent
misrepresentation, and deceptive trade practices. They sued the realtors for breach
of contract, negligence, gross negligence, negligent misrepresentation, and breach
of fiduciary duty.
Discussion
I. Status of the Birnbaums’ summary-judgment evidence
The Birnbaums claim that the seller and realtors waived their objections to
the Birnbaums’ expert reports and the Birnbaums’ affidavits, tendered with their
summary-judgment responses, by failing to procure a written order containing the
trial court’s rulings. A party’s failure to secure a ruling on a timely objection
waives the issue on appeal. Essex Crane Rental Corp. v. Carter, 371 S.W.3d 371
S.W.3d 366, 383 (Tex. App.—Houston [1st Dist.] 2012, pet. denied). The
Birnbaums’ claim relies on the Dallas Court of Appeals’ decision in Utilities
Pipeline Co. v. American Petrofina Marketing, which holds that, a ruling on an
objection to summary judgment evidence is preserved only when reduced to
writing, signed by the trial court, and entered of record. 760 S.W.2d 719, 723
(Tex. App.—Dallas 1988, no writ); accord S & I Mgmt., Inc. v. Choi, 331 S.W.3d
849, 855 (Tex. App.—Dallas 2011, no pet.) (relying on Utilities Pipeline).
Utilities Pipeline does not govern our disposition of this issue. That
decision predates the 1997 revision of the appellate rules, which eliminated
8
hypertechnical waiver rules in favor of review on the merits. See Michiana Easy
Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 784 (Tex. 2005) (reiterating that
the appellate rules “are designed to resolve appeals on the merits and we must
interpret and apply them whenever possible to achieve that aim”); Bennett v.
Cochran, 96 S.W.3d 227, 229–30 (Tex. 2002) (same); Verburgt v. Dorner, 959
S.W.2d 615, 616 (Tex. 1997) (noting “policy embodied in our appellate rules that
disfavors disposing of appeals on harmless procedural defects” and holding courts
of appeals must construe rules liberally so that the right to appeal is not lost “by
imposing requirements not absolutely necessary to effect the purpose of a rule”);
Gallagher v. Fire Ins. Exch., 950 S.W.2d 370, 370–71 (Tex. 1997) (reaffirming
“commitment to ensuring that courts do not unfairly apply the rules of appellate
procedure to avoid addressing a party’s meritorious claim”).
The preservation-of-error rule provides that,
[a]s a prerequisite to presenting a complaint for appellate review, the
record must show that the complaint was made to the trial court by a
timely objection that stated the grounds for the ruling sought with
sufficient specificity to make the trial court aware of the complaint,
unless the specific grounds were apparent from the context.
TEX. R. APP. P. 33.1. The record shows that the trial court heard argument and
documented its express rulings on the seller and realtors’ objections to the
Birnbaums’ summary-judgment evidence in the reporter’s record, thereby
satisfying the plain language of the rule. See In re Bill Heard Chevrolet, Ltd., 209
9
S.W.3d 311, 314–15 (Tex. App.—Houston [1st Dist.] 2006, orig. proceeding)
(explaining that orders made in open court transcribed by court reporter comply
with Rule 33.1’s requirements).
Citing our decision in Essex Crane Rental, the Birnbaums also contend that
the trial court erred in reviewing the summary judgment evidence before
considering the seller and realtors’ objections. 371 S.W.3d at 383. Essex Crane
Rental does not support their contention. In that case, we held that the appellee
waived its objections to summary–judgment evidence by not raising them until
after the trial court granted the summary-judgment motion. Id. In this case, the
trial court heard the parties’ evidentiary objections at a hearing that took place
several days before the court informed the parties that summary judgment would
be granted and a month before it signed the order on the motion.
The case of S & I Management, Inc. v. Choi, 331 S.W.3d 849 (Tex. App.—
Dallas 2011, no pet.), also cited by the Birnbaums, is likewise inapposite. There,
Choi filed written objections to his opponent’s summary-judgment evidence, but
did not seek a ruling from the trial court until after it ruled on the summary-
judgment motion. Id. at 855. Here, the record demonstrates that the seller and
realtors timely interposed their objections and the trial court ruled in open court on
the objections before hearing argument and ruling on the motion.
10
As the appellate record demonstrates, the seller and realtors procured timely
and express rulings on their objections to the Birnbaums’ summary-judgment
evidence. The Birnbaums do not challenge any of the evidentiary rulings on their
merits other than to complain that the trial court erroneously excluded their
affidavits on credibility determinations. According to the record, the realtors
objected to the Birnbaums’ opinions concerning whether the realtors acted in good
faith and with candor and honesty as impermissible lay opinion testimony. See
TEX. R. EVID. 701. The Birnbaums do not provide any authority or argument to
support their complaint that their affidavit testimony was improperly excluded on
that basis; as a result, we hold that they waived any complaint about the affidavits’
exclusion. 3 See TEX. R. APP. P. 33.1.
II. Propriety of Summary Judgment
A. Standard of review
We review summary judgments de novo. Valence Operating Co. v. Dorsett,
164 S.W.3d 656, 661 (Tex. 2005). When a summary judgment does not specify
the grounds on which it was granted, we will affirm the judgment if any one of the
3
In their reply brief, the Birnbaums for the first time raise additional complaints
concerning the trial court’s rulings on their summary judgment evidence. We
decline to address these complaints. See Marin Real Estate Partners, L.P. v. Vogt,
373 S.W.3d 57, 72 (Tex. App.—San Antonio 2011, no pet.) (holding issues raised
for first time in reply brief may not be considered, except in exceptional cases);
McAlester Fuel Co. v. Smith Int’l, Inc., 257 S.W.3d 732, 737 (Tex. App.—
Houston [1st Dist.] 2007, pet. denied) (“An issue raised for the first time in a reply
brief is ordinarily waived and need not be considered by this Court.”).
11
theories advanced in the motion is meritorious. Joe v. Two Thirty Nine Joint
Venture, 145 S.W.3d 150, 157 (Tex. 2004).
After adequate time for discovery, a party may move for summary judgment
on the ground that there is no evidence of one or more essential elements of a
claim. TEX. R. CIV. P. 166a(i); Hahn v. Love, 321 S.W.3d 517, 523–24 (Tex.
App.—Houston [1st Dist.] 2009, pet. denied). Once the movant specifies the
elements on which there is no evidence, the burden shifts to the nonmovant to raise
a fact issue on the challenged elements. Id.
In a traditional summary judgment motion, the movant has the burden to
show that no genuine issue of material fact exists and that the trial court should
grant judgment as a matter of law. TEX. R. CIV. P. 166a(c); KPMG Peat Marwick
v. Harrison Cnty. Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999). In
reviewing a traditional summary judgment, we must indulge every reasonable
inference in favor of the nonmovant, take all evidence favorable to the nonmovant
as true, and resolve any doubts in favor of the nonmovant. Valence, 164 S.W.3d at
661. A defendant who moves for traditional summary judgment on the plaintiff’s
claim must conclusively disprove at least one element of the plaintiff’s cause of
action. Little v. Tex. Dep’t of Crim. Justice, 148 S.W.3d 374, 381 (Tex. 2004).
12
B. Analysis
The seller and realtors moved for summary judgment on both traditional and
no-evidence grounds concerning the Birnbaums’ failure to show the causation or
reliance necessary to each of their claims. 4 We consider these grounds in turn,
then consider the propriety of summary judgment on the Birnbaums’ negligence
claims against only the realtors.
1. TREC contract’s “in its present condition” clause
The Birnbaums complain that the trial court erred in construing the TREC
contract’s “in its present condition” clause as an “as is” clause disclaiming
reliance. A TREC contract using the language “in its current condition” has been
construed to be an “as is” agreement. Cherry v. McCall, 138 S.W.3d 35, 39 (Tex.
App.—San Antonio 2004, pet. denied);5 accord Sims v. Century 21 Capital Team,
4
See TEX. BUS. & COM. CODE ANN. §§ 27.01 (West 2009) (fraud in real estate
transaction), 17.50(a)(1) (DTPA); see, e.g., Italian Cowboy Partners, Ltd v.
Prudential Ins. Co. of Am., 341 S.W.3d 323, 337 (Tex. 2011) (fraud); Greater
Houston Transp. Co. v. Phillips, 801 S.W.2d 523, 525 (Tex. 1990) (negligence);
Lundy v. Masson, 260 S.W.3d 482, 501 (Tex. App.—Houston [1st Dist.] 2008,
pet. denied) (breach of fiduciary duty); Winchek v. Am. Express Travel Related
Servs. Co., 232 S.W.3d 197, 201 (Tex. App.—Houston [1st Dist.] 2007, no pet.)
(breach of contract).
5
TREC recently revised the condominium resale earnest money contract, amending
Paragraph 7D, “Property Condition,” to replace “in its present condition” with “As
Is” and to define “As Is” as “the present condition of the Property with any and all
defects and without warranty except for the warranties in this contract.” 24 TREC
Advisor No. 6, at 4 (June 2014).
13
Inc., No. 03-05-00461-CV, 2006 WL 2589358 (Tex. App.—Austin 2005, no pet.)
(declaring that “in its current condition,” as used on TREC form, is equivalent to
“as is”);6 Larsen v. Carlene Langford & Assocs., Inc., 41 S.W.3d 245, 251 (Tex.
App.—Waco 2001, pet. denied) (construing as “as is” clause contract language
stating that “[b]uyer accepts the Property in its present condition. Buyer shall pay
for any repairs designated by a lender”); Fletcher v. Edwards, 26 S.W.3d 66, 75
(Tex. App.—Waco 2000, pet. denied). Our court has not ruled squarely on this
issue, 7 but because this case was transferred from the San Antonio Court of
Appeals, we consider that court’s precedent in our analysis. See TEX. R. APP. P.
41.3.
The Birnbaums dismiss as dicta the San Antonio appellate court’s
interpretation of a TREC earnest money contract’s “in its present condition” clause
as an “as is” agreement in Cherry. They are correct that the Cherry parties did not
dispute the clause’s meaning, but the Birnbaums do not advance any alternative
reasonable interpretation for “in its present condition,” and we do not find the term
ambiguous. See Sage St. Assocs. v. Northdale Constr. Co., 863 S.W.2d 438, 445
6
The Birnbaums also contend that the trial court’s denial of the defendants’ request
for declaratory relief based on the “as is” provision means that summary judgment
cannot be proper on that basis. The declaratory-judgment ruling, however, is not
before us and does not affect our analysis. See TEX. R. APP. P. 47.1.
7
See Williams v. Dardenne, 345 S.W.3d 118, 123 (Tex. App.—Houston [1st Dist.]
2011, pet. denied) (explaining that court would not reach question of whether
TREC “in its present condition” provision is properly construed as “as is” clause
because appellants did not contend otherwise).
14
(Tex. 1993) (explaining that court may conclude that contract is ambiguous even in
absence of pleading by either party); see also DeWitt Cnty. Elec. Coop., Inc. v.
Parks, 1 S.W.3d 96, 100 (Tex. 1999) (observing that simple disagreement between
parties does not render contract term ambiguous). We therefore hold that the
TREC condominium resale contract provision reciting that “[b]uyer accepts the
Property in its present condition” effectively constitutes a promise to purchase the
property “as is.”
We next examine the effect of the clause in light of the parties other
contractual promises and the surrounding circumstances. “A buyer who purchases
property ‘as is’ chooses ‘to rely entirely upon his own determination’ of the
property’s value and condition without any assurances from the seller.” Williams
v. Dardenne, 345 S.W.3d 118, 123 (Tex. App.—Houston [1st Dist.] 2011, pet.
denied) (quoting Prudential Ins. Co. of Am. v. Jefferson Assocs., Ltd., 896 S.W.2d
156, 161 (Tex. 1995)). An “as is” agreement thus may negate the elements of
causation and reliance for DTPA, fraud, or negligence claims relating to the value
or the condition of the property. Id. (citing Prudential, 896 S.W.2d at 161, and
Welwood v. Cypress Creek Estates, Inc., 205 S.W.3d 722, 726 (Tex. App.—Dallas
2006, no pet.)); see also Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of
Am., 341 S.W.3d 323, 335 (Tex. 2011) (holding that merger clause which provided
that “neither Landlord nor Landlord’s agents, employees or contractors have made
15
any representations or promises with respect to the Site, the Shopping Center or
this Lease except as expressly set forth herein,” and that “this lease constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof” did not express clear and unequivocal intent to disclaim reliance or
preclude claim for fraudulent inducement). The Birnbaums contend, however, that
the clause is invalid and unenforceable in this context, where the buyer gave
assurances as to the condition of the property.
When considering the enforceability of an “as is” clause in this context,
courts consider the totality of the circumstances, including: (1) the sophistication
of the parties and whether they were represented by counsel; (2) whether the
contract was an arm’s length transaction; (3) the relative bargaining power of the
parties and whether the contractual language was freely negotiated; and
(4) whether that language was an important part of the parties’ bargain as opposed
to being a “boilerplate” provision. Prudential, 896 S.W.2d at 162.
We have upheld the validity of an “as is” clause where the parties to the
agreement were equally sophisticated, particularly when the buyer had the
opportunity to inspect the premises before purchase. Bynum v. Prudential
Residential Servs., L.P., 129 S.W.3d 781, 789 (Tex. App.—Houston [1st Dist.]
2004, pet. denied); see also Rader v. Danny Darby Real Estate, Inc., No. 05-97-
01927-CV, 2001 WL 1029355, at *4 (Tex. App.—Dallas Sept. 10, 2001, no pet.)
16
(rejecting lack-of-sophistication argument as sole basis for invalidating “as is”
clause where buyers who bought home in poor condition negotiated several repairs
without aid of real estate agent or lawyer). Here, Mike Birnbaum was trained as an
attorney and has had many years of experience in commercial real-estate
transactions. The Birnbaums inspected the property without interference and
consulted with an attorney with residential real-estate experience to review
pertinent documents and to advise them regarding the proposed purchase. They
also successfully negotiated a reduction in the purchase price to account for the
cost of certain repairs. Under these circumstances, lack of sophistication is not a
basis for invalidating the “as is” clause.
The Birnbaums do not dispute that the transaction was at arm’s length, but
they claim that the clause should be rejected as boilerplate because it was not
freely negotiated. We first observe that the seller did not draft her own earnest
money contract; it was executed on a TREC-promulgated form. But for a few
exceptions, none of which applies here, the Texas Administrative Code requires
licensed real estate agents to use the TREC forms that may apply to the proposed
real estate transaction. See 22 TEX. ADMIN. CODE § 537.11; see also TEX. OCC.
CODE ANN. § 1101.155(a). Second, although the Birnbaums contend that the
provision was neither discussed nor negotiated, the record shows that, after
conducting their own investigation and inspection, the Birnbaums returned to
17
Atwell and asked her to lower the price so that effectively, she would assume the
expense of the patio weatherproofing. This negotiation bears directly on the “in its
present condition” clause’s proviso that “Seller, at Seller’s expense,” would
assume the responsibility for any identified specific repairs or treatments. The “as
is” clause is not rendered unenforceable for this reason.
2. Fraudulent inducement
The Birnbaums are not bound by the “as is” clause if either Atwell or the
realtors (1) induced them to enter into the contract by making a fraudulent
representation, either affirmatively or by concealing information, and (2) the
Birnbaums actually relied on the representation in entering into the agreement. See
Prudential, 896 S.W.2d at 162; see also Italian Cowboy Partners, 341 S.W.3d at
335–36 (endorsing view that, even when fraudulent misrepresentation claim
involves contract, claim centers on question whether party asserting fraud would
have entered agreement had it known representation was false). This exception
intertwines with the seller and the realtors’ second ground for summary
judgment—that the Birnbaums’ independent inspection and investigation precludes
a showing of reliance and therefore, there is no evidence of any causal connection
between the seller and realtors’ statements about the property’s condition and the
Birnbaums’ alleged damages.
18
The parties do not dispute that Atwell put the Birnbaums on notice that prior
water leaks had occurred in the unit; the Birnbaums complain that Atwell
misrepresented the recency and frequency of the leaks. Specifically, the
Birnbaums fault Atwell for failing to disclose a number of water leaks that
occurred after she and her husband moved into the unit, including:
• Water penetration in the powder room;
• Leaks in the large living room area;
• Leaks in the upstairs foyer;
• Leaks in the master bedroom on the side of the window walls;
• Water penetration in the lower bedroom; and
• Leaks that occurred in 2002 in the TV room, the sitting room ceiling
the living room ceiling, the ceiling above the master bathroom
chandelier, and the south ceiling of the entry lobby.
Atwell, however, was “charged only with disclosing such material facts as to
put a buyer exercising reasonable diligence on notice of the condition” of the
residence. See Flutobo, Inc. v. Holloway, 419 S.W.3d 622 (Tex. App.—Houston
[14th Dist.] 2013, pet. denied); Lim v. Baker, No. 04-06-00703-CV, 2007 WL
4180153, at *2 (Tex. App.—San Antonio Nov. 28, 2007, no pet.) (mem. op.)
(citing Cole v. Johnson, 157 S.W.3d 856, 860–61 (Tex. App.—Fort Worth 2005,
no pet.)). Atwell admitted that her written disclosure was misleading to the extent
that it could have been taken to mean that all of the leak repairs took place before
she and her husband moved into the unit, when some repairs were not made until
after they were living in the unit. But the Seller’s Disclosure form expressly
19
required Atwell to disclose only her “knowledge of the condition of the property as
of the date signed.” The form asks whether the seller is “aware of any defects or
malfunctions” in different components of the property and of any appliances that
are not in working condition. Atwell disclosed the previous flooding and water
penetration in response to the question of whether or not she was aware of any of
the specifically enumerated prior or existing conditions. Apart from the prior
conditions identified on that list (which include previous flooding, previous fires,
previous foundation repairs, previous roof repairs, previous termite treatment, and
previous repair of damage from termites or other wood-destroying insects), Atwell
was not required to disclose prior repairs unless she was aware that the repairs
were unfinished or did not correct the problem. 8 See Sherman v. Elkowitz, 130
S.W.3d 316, 323 (Tex. App.—Houston [14th Dist.] 2004, no pet.) (holding that,
where seller’s disclosure identified cracks in driveway as known defect needing
repair and prior treatment for termites but failed to disclose other defects in
property that were subject of prior lawsuit and broker’s knowledge of prior lawsuit,
broker did not have duty to disclose prior lawsuit where seller told broker that all
8
The Birnbaums’ brief insinuates that some of the leaks in the unit had not been
repaired, declaring that Atwell “did nothing to stop the water penetration,” and
that the only remedial measure Atwell undertook was to place buckets or trash
cans underneath to collect the water. The Birnbaums’ brief makes no mention of
Atwell’s testimony in which she explained that her husband had all the leaks
repaired, and that the unit had no leaks “since long before” her husband died—
indicating that no water infiltration had occurred for substantially more than a year
before she placed the unit on the market.
20
defects except driveway had been repaired). Knowledge of past repairs does not
establish knowledge of a defective condition. See Pfeiffer v. Ebby Halliday Real
Estate, Inc., 747 S.W.2d 887, 890 (Tex. App.—Dallas 1988, no writ) (“[R]epairs
correct defects, not prove their continued existence.”); accord Sherman, 130
S.W.3d at 322. Under the circumstances, Atwell did not have a duty to make any
disclosure she did not make.
The evidence also fails to raise a genuine issue of material fact concerning
whether the Birnbaums relied on Atwell’s disclosures. Texas courts consistently
have concluded that a buyer’s independent inspection precludes a showing of
causation and reliance if it reveals to the buyer the information that the seller
allegedly failed to disclose. Williams, 345 S.W.3d at 125–26; see Lesieur v. Fryar,
325 S.W.3d 242, 246 (Tex. App.—San Antonio 2010, pet. denied) (holding that
causation and reliance were conclusively defeated when buyer’s independently
obtained inspection report contained same information about foundation issues as
report that sellers failed to disclose). This is particularly true when the buyer relies
on an independent inspection disclosing that information to renegotiate the sales
contract that results in the sale. Fernandez v. Schultz, 15 S.W.3d 648, 652 (Tex.
App.—Dallas 2000, no pet.); Dubow v. Dragon, 746 S.W.2d 857, 860 (Tex.
App.—Dallas 1988, no writ) (affirming summary judgment in favor of seller when
buyer obtained independent inspection of foundation and estimates for foundation
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repair before purchasing house and negotiated modification of contract in light of
same).
The evidence shows that the Birnbaums hired an inspector, retained a real
estate attorney, and consulted with the condominium association manager, all of
whom notified the Birnbaums of water penetration problems in the unit as well as
in other locations in the building. Their attorney reviewed the earnest money
contract and informed the Birnbaums about the building’s problem with water
leaks, which apparently was serious and longstanding enough to lead some of the
unit owners to bring suit against the condominium property owners. The
Birnbaums’ attorney specifically noted that the litigation raised questions
concerning the source of the leaks in the building.9 The Birnbaums claim that they
were led to understand that the patio weatherproofing was the only source of the
water penetration problems, but neither Atwell nor the realtors made any
representation about the origin of the leaks. The information the Birnbaums
gleaned from their inspector, their attorney, and the condominium association
manager about the history of prior leaks in the unit and building spurred them to
9
The Birnbaums claim that, because conveyance of a condominium unit also
conveys an interest in common elements of the condominium as a whole, a
unit seller’s duty to disclose problems extends beyond the walls of the unit
being sold. We do not reach this question because the Birnbaums’ attorney
and the condominium association manager provided the Birnbaums with
information about water infiltration problems throughout the building.
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renegotiate their contract with Atwell and, using estimates provided by another
independent source for repairing locations in the unit that were vulnerable to water
infiltration, the Birnbaums successfully negotiated a substantial reduction in the
unit’s purchase price.
On this record, we hold that the trial court did not err in granting summary
judgment. No evidence shows that either Atwell or the realtors failed to disclose
any knowledge of material facts concerning defective or unrepaired conditions in
the condominium unit beyond those the Birnbaums independently discovered
before they purchased it. See Williams, 345 S.W.3d at 126 (“[A] party who has
actual knowledge of specific facts cannot have [justifiably] relied on a
misrepresentation of the same facts.”); see also Jones v. Zearfoss, 456 S.W.3d 618,
622 (Tex. App.—San Antonio 2015, no pet.) (holding no evidence of reliance
where seller disclosed “water penetration: upstairs toilet leaked and caused water
damage downstairs. Damage was covered by insurance and was professionally
corrected,” because disclosure was sufficient to induce buyers to act on such
information by looking into the extent and severity of water damage); Lim v.
Lomeli, No. 04-06-00389-CV, 2007 WL 2428078, at *4 (Tex. App.—San Antonio
Aug. 29, 2007, no pet.) (mem. op.) (holding that buyers could not prove reliance
on their real estate agent’s alleged misrepresentations and nondisclosures regarding
23
water damage to house when agent and buyer had same information available to
them—visible damage and information disclosed in buyer’s inspection report).
C. Negligence and gross negligence claims against realtors
The Birnbaums further contend that Weber and Browning negligently failed
to obtain a condominium resale certificate for the unit in compliance with Chapter
82 of the Texas Property Code and that the failure to secure it cost them $20,000 in
damages for landscaping assessments. The Birnbaums contend in their brief that
the certificate would have provided information about assessments and pending
litigation against the condominium. In attacking the Birnbaums’ negligence and
gross negligence claims in this regard, the realtors’ summary-judgment motion
asserted, among other things, that the Birnbaums had no evidence of the elements
of (1) duty, (2) breach, or (3) that the realtors’ failure to provide the resale
certificate caused these damages.
Weber expressly acknowledged she was required to ensure the Birnbaums
received the resale certificate, and she admits she failed to do so. This admission,
however, does not extinguish the Birnbaums’ duty to read the contents of the
documents they sign. Atwell and the Birnbaums executed their earnest money
contract on the TREC form for resale of a residential condominium which put the
Birnbaums on express notice that they were entitled to the resale certificate. The
first page of the form used in their transaction declares:
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The Resale Certificate, from the condominium owners association . . .
is called the “Certificate.” The Certificate must be in a form
promulgated by TREC or required by the parties. The Certificate
must have been prepared no more than 3 months before the date it is
delivered to Buyer and must contain at a minimum the information
required by Section 82.157, Property Code.
The seller must provide the resale certificate with the earnest money contract or, if
not,
Seller shall deliver the Certificate to Buyer within 15 days after the
effective date of the contract. Buyer may cancel the contract before
the sixth day after the date the Buyer receives the Certificate by hand-
delivering or mailing written notice of cancellation to Seller . . . .
The TREC form also provides a third option—the parties may agree to waive the
requirement to furnish the Certificate.
Mike Birnbaum signed the condominium resale certificate and initialed each
page. Texas law has long held that a party who signs a contract is presumed to
have read it and understood it unless he was prevented from doing so by fraud.
See, e.g., In re Int’l Profit Assocs., Inc., 286 S.W.3d 921, 923 (Tex. 2009) (holding
that party who signs document is presumed to know its contents); Cantella & Co.
v. Goodwin, 924 S.W.2d 943, 944 (Tex. 1996) (same). Because the Birnbaums are
presumed, as a matter of law, to know that they were entitled to receive a copy of
the resale certificate, Weber’s failure to ensure that the Birnbaums received the
certificate, standing alone, does not provide a causal link to the Birnbaums’
damages.
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In their briefing, the Birnbaums do not raise any other evidence that the
realtors’ failure to obtain a certificate caused their alleged damages. Mike
Birnbaum testified that he and his wife never received the resale certificate and that
the certificate would have informed them as to the amount of maintenance reserve
that the condominium unit had on hand at the time of the sale. He further testified
that the condominium association assessed them $21,000 in landscaping charges
when he and his wife moved into the condominium two years later, after
completion of their renovations. However, no evidence links that landscaping
assessment to the failure to obtain the certificate, nor does it demonstrate that the
assessment for landscaping, which he received two years after buying the
condominium unit, had accrued before the sale.
Because the Birnbaums did not adduce evidence that the lack of the resale
certificate was a cause of their alleged damages, we hold that the trial court
properly granted the realtors’ no-evidence summary judgment on the Birnbaums’
negligence and gross negligence claims.
III. Breach of fiduciary duty claim against realtors
The Birnbaums also challenge the summary judgment on their breach of
fiduciary duty claim against the realtors. A real estate broker owes a fiduciary duty
while acting on behalf of a client. 22 TEX. ADMIN. CODE § 531.1. As grounds for
the alleged breach, the Birnbaums contend that Browning, as principal for Phyllis
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Browning Company, was not in a proper intermediary relationship with buyer’s
agent Weber, giving rise to a conflict of interest, and that Weber and Browning
concealed and failed to adequately disclose the history and extent of water
penetration in the unit, which allegedly caused the Birnbaums to pay over market
price for the unit and incur unanticipated repair costs.
The breach of fiduciary duty claim fails for the same reason that the
Birnbaums’ fraud and fraudulent inducement claims fail—they fail to raise a fact
issue showing that the Birnbaums lacked notice of or access to any of the material
information that the real estate agents had. Moreover, the Birnbaums relied on an
independent inspection and their attorney’s advice in negotiating a lower price to
subsidize the cost of repairing leaks in the unit. As a result, no evidence exists of a
causal link between the real estate agents’ actions and the Birnbaums’ alleged
damages.
The Birnbaums also contend that Weber breached her fiduciary duty by
failing to advise them that the “in its present condition” language in the TREC
condominium unit resale form rendered it an “as is” agreement. This contention
disregards the limits of a real estate agent’s authority. TREC prohibits licensed
real estate agents from (1) practicing law; (2) offering, giving, or attempting to
give legal advice, directly or indirectly; or (3) giving advice or opinions about the
legal effect of any contracts or other such instruments which may affect the title to
27
real estate. 22 TEX. ADMIN. CODE § 537.11(b)(1)–(3). We also observe that the
Birnbaums’ attorney gave them his own advice about the contract’s legal effect
concerning this issue. As a result, no causal link exists between Weber’s
communications with the Birnbaums relating to the resale form and their alleged
damages.
IV. Denial of motion for new trial
The Birnbaums next contend that the trial court erred in denying their
motion for new trial based on new evidence. We review the denial of a motion for
new trial for an abuse of discretion. In re R.R., 209 S.W.3d 112, 114 (Tex. 2006)
(orig. proceeding). The Birnbaums’ motion included additional evidence of the
history and extent of water penetration problems in the condominium building.
This evidence does not raise a fact issue on either reliance or causation. As a
result, we hold that the trial court did not abuse its discretion in denying the
Birnbaums’ motion for new trial.
IV. Appellate Attorney’s Fees
Finally, the Birnbaums challenge the language in the judgment awarding the
seller and realtors their appellate attorney’s fees without conditioning their
recovery on a successful appeal. The seller and realtors agree that the award of
appellate attorney’s fees should be dependent on which party prevails on appeal.
N.&W. Ins. Co. v. Sentinel Inv. Grp., LLC, 419 S.W.3d 534, 541 (Tex. App.—
28
Houston [1st Dist.] 2013, no pet.); Ansell Healthcare Prods., Inc. v. U. Med., 355
S.W.3d 736, 745 (Tex. App.—Houston [1st Dist.] 2011, pet. denied). An
unconditional award of appellate attorney’s fees, however, does not require
reversal; instead, we may modify a trial court’s judgment to make the award of
appellate attorney’s fees contingent upon the receiving party’s success on appeal.
N.&W. Ins., 419 S.W.3d at 541; Ansell Healthcare Prods., 355 S.W.3d at 745. We
therefore modify the trial court’s judgment to condition the awards of appellate
attorney’s fees on a successful appeal.
Conclusion
We hold that the trial court did not err in granting summary judgment or in
denying the Birnbaums’ motion for new trial, but that the trial court’s judgment
erroneously awards appellate attorney’s fees without making them contingent on a
successful appeal. We therefore modify the judgment to replace the current
provisions awarding appellate attorney’s fees to condition them on a successful
appeal. As modified, we affirm the judgment of the trial court.
Jane Bland
Justice
Panel consists of Justices Jennings, Bland, and Brown.
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