brian-edward-vodicka-and-steven-benton-aubrey-v-gregory-h-lahr-aka-greg ( 2012 )

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-10-00126-CV
Brian Edward Vodicka and Steven Benton Aubrey, Appellants
v.
Gregory H. Lahr a/k/a Greg Lahr, both Individually and d/b/a Capital Advantage;
Peter Barlin; Sandra Gunn; CFS Associates, Inc. d/b/a Creative Financial Solutions,
Appellees
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 53RD JUDICIAL DISTRICT
NO. D-1-GN-08-004312, HONORABLE LORA J. LIVINGSTON, JUDGE PRESIDING
MEMORANDUM OPINION
Brian Edward Vodicka and Steven Benton Aubrey appeal from a summary judgment
entered in favor of appellees Gregory H. Lahr a/k/a Greg Lahr, both individually and d/b/a Capital
Advantage; Peter Barlin; Sandra Gunn; CFS Associates, Inc. d/b/a Creative Financial Solutions (the
“brokerage appellees”). We will affirm.
BACKGROUND
This suit arises out of financial losses Vodicka and Aubrey allegedly suffered as a
result of their investments in real-estate-backed loans that they contend were marketed to them as
part of a Ponzi scheme. In 2005, Vodicka contacted his acquaintance, Peter Barlin, and inquired
about where Vodicka and Aubrey, private investors, could invest some of their money. Barlin
referred Vodicka to Gregory Lahr, who lived in a garage apartment on Barlin’s property and
worked as a mortgage broker for CFS Associates, Inc. d/b/a Creative Financial Solutions (“CFS”).
According to Vodicka and Aubrey, Barlin “was very laudatory of Lahr and his program,” but failed
to disclose that Barlin would receive money from Lahr if Vodicka and Aubrey invested with CFS
and that Lahr had a “shady past” in the private mortgage business. On Barlin’s recommendation,
Vodicka and Aubrey met with Barlin and Lahr. Lahr told them that, through CFS, they could invest
in “hard money” loans, which are short-term, high-interest-rate loans to real-estate investors for
which the real estate itself is offered as collateral (i.e., short-term private mortgages). Lahr also told
them that they would be represented by attorney Michael Savrick, who prepared some of the
documents relating to the investments and who may have simultaneously represented both CFS and
some of its investors.
Over the next two years, Vodicka and Aubrey invested their money in multiple loans
with CFS, three of which are at issue here: (1) a $120,000 investment purportedly secured by a
second lien position against an apartment complex in Temple, Texas; (2) a $915,000 investment
secured by junior liens against two tracts of land in Manor, Texas; and (3) a $140,000 investment
secured by a junior lien against rental property in Long Beach, California.1 In 2007, the borrower
of the $120,000 for the apartments in Temple defaulted on that loan. A few months later, Barlin
allegedly left Vodicka a voicemail stating that Lahr was “not necessarily in many ways the person
that I would do business with” because “I’ve decided to run my business life in a different way,
which is in a more simple, sort of more straightforward, honest pattern.” Vodicka and Aubrey assert
1
The three investments that are the subject of this appeal were all documented in Vodicka’s
name, but it is undisputed that Vodicka and Aubrey funded these investments jointly and each own
an undivided one-half interest in them.
2
that, after investing with CFS, they learned that the properties that served as collateral for some of
the three loans were worth only a fraction of the value reflected in Lahr’s appraisals. They further
learned that the borrower of the $915,000 for land in Manor, instead of purchasing the tracts of land
he had specified, had used some of the loan proceeds to purchase a wholly different tract of land, in
which Vodicka and Aubrey had no security interest.
Ultimately, after allegedly losing at least $1,040,961.00 in these three investments,
Vodicka and Aubrey sued Barlin, CFS, and CFS’s alleged principals or agents, Lahr and Gunn, for
gross negligence, breach of fiduciary duty, common-law fraud, civil conspiracy, and violations of
the Texas Securities Act. See Tex. Rev. Civ. Stat. arts. 581-33(A)(1)-(2) & (F), -33-1(A) (West
2010).2 The brokerage appellees moved for partial no-evidence and traditional summary judgment
on Vodicka and Aubrey’s “negligence-based causes of action,” i.e., the gross-negligence claim,
asserting that the brokerage appellees owed no duty to Vodicka and Aubrey and that no duty should
be imposed in light of the “Texas and federal regimes” already in place to regulate securities. The
district court granted the motion.
Vodicka and Aubrey also sued Savrick and his law firm (the attorney defendants) for
the same causes of action as the brokerage defendants, and also added, in two separate allegations,
that the attorney defendants had committed both “legal malpractice in their representation of
[appellants]” and “professional negligence in their representation of [appellants].” The attorney
defendants moved for partial summary judgment, contending that the claims for fraud, breach of
2
Vodicka and Aubrey had initially also sued Lisa Caufmann, Mark E. Schiffgens, and
Creative Lending Concepts, LLC f/k/a Creative Lending Financial Concepts, LLC, but they
nonsuited their claims against these parties.
3
fiduciary duty, violations of the securities act, and civil conspiracy should be dismissed because the
“real claim” against the attorney defendants was for legal malpractice, and allowing these other
claims would result in impermissible fracturing of claims. See Beck v. Law Offices of Edwin J.
(Ted) Terry, Jr., P.C., 284 S.W.3d 416, 426-27 (Tex. App.—Austin 2009, no pet.). The attorney
defendants also filed a plea to the jurisdiction against Aubrey, asserting that he had no attorney-
client relationship with Savrick or Savrick’s firm. The district court granted both of the attorney
defendants’ motions.
In January 2010, roughly one month before the case was set for trial, Vodicka and
Aubrey nonsuited their remaining claims (the claims against the brokerage appellees for breach of
fiduciary duty, common-law fraud, civil conspiracy, and violations of the Texas Securities Act).3
The district court therefore signed a final judgment reflecting that the negligence claims against the
brokerage appellees and the non-negligence claims against the attorney defendants that had been the
subject of the court’s orders on partial summary judgments were dismissed with prejudice, while
all other claims were dismissed without prejudice based on Vodicka and Aubrey’s nonsuits.4 See
Hyundai Motor Co. v. Alvarado, 892 S.W.2d 853, 855 (Tex. 1995) (per curiam) (“A nonsuit sought
after [a partial summary judgment] results in a dismissal with prejudice as to the issues pronounced
in favor of the defendant.”). Vodicka and Aubrey appealed, asserting that the district court (1) erred
in granting partial summary judgment in favor of the attorney defendants, (2) erred in granting the
3
See 2010 Tex. App. LEXIS 6672, at *1-4 (Tex. App.—Austin, Aug. 13, 2010, order) (denying
attorney defendants’ motion to dismiss and discussing the effect of Vodicka and Aubrey’s nonsuit).
4
After nonsuiting their claims in the district court, Vodicka and Aubrey filed suit against Barlin,
Lahr, Gunn, Schiffgens, Savrick, and Savrick Schumann Johnson McGarr Kaminski & Shirey, LLP,
in the United States District Court for the Western District of Texas. See Case No. A-10-CA-076-SS.
4
attorney defendants’ plea to the jurisdiction against Aubrey “to the extent that the order granting the
[plea to the jurisdiction] could have the effect of extending to non-negligence claims against those
defendants,” and (3) “erred in summarily disposing of Appellants’ negligence claims against the
[brokerage appellees] based on a no-duty finding.” After oral argument, Vodicka and Aubrey filed
an unopposed motion to dismiss their appeal as to the attorney defendants, explaining that they have
settled their claims against Savrick and his firm. We granted that motion to dismiss. See 2012 Tex.
App. LEXIS 4029, at *1-2 (Tex. App.—Austin May 17, 2012, order). Therefore, the sole remaining
issue on appeal is whether the district court erred in granting summary judgment in favor of the
brokerage appellees on Vodicka and Aubrey’s negligence claims.
STANDARD OF REVIEW
The brokerage appellees moved for summary judgment on both no-evidence and
traditional grounds under subsections (i) and (c) of rule 166a. When reviewing judgments that
might have been granted under either rule 166a(i) or 166a(c), we first review the district court’s
summary judgment under the no-evidence standards of rule 166a(i). Ford Motor Co. v. Ridgway,
135 S.W.3d 598, 600 (Tex. 2004). A movant’s no-evidence summary-judgment motion must assert
that the nonmovant has produced no evidence of one or more essential elements of its claim.
Duvall v. Texas Dep’t of Human Servs., 82 S.W.3d 474, 477 (Tex. App.—Austin 2002, no pet.);
see Tex. R. Civ. P. 166a(i). Once the movant specifies the elements on which there is no evidence,
the burden shifts to the nonmovant to produce summary-judgment evidence raising a genuine
issue of material fact on the challenged elements. Trilogy Software, Inc. v. Callidus Software, Inc.,
143 S.W.3d 452, 459 (Tex. App.—Austin 2004, pet. denied) (citing Tex. R. Civ. P. 166a(i)). To
5
raise a genuine issue of material fact, the nonmovant must set forth more than a scintilla of probative
evidence as to the essential element of the nonmovant’s claim on which the nonmovant would
have the burden of proof at trial. Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 711
(Tex. 1997). If the evidence supporting a finding rises to a level that would enable reasonable,
fair-minded persons to differ in their conclusions, then more than a scintilla of evidence exists. Id.
Less than a scintilla of evidence exists when the evidence is “so weak as to do no more than create
a mere surmise or suspicion” of fact, and the legal effect is that there is no evidence. Jackson v.
Fiesta Mart, 979 S.W.2d 68, 70 (Tex. App.—Austin 1998, no pet.) (quoting Kindred v. Con/Chem,
Inc., 650 S.W.2d 61, 63 (Tex. 1983)). If the plaintiff fails to produce more than a scintilla of evidence
of the challenged fact, the motion must be granted, and there is no need to analyze whether the
defendant’s proof satisfied the rule 166a(c) burden. Ridgway, 135 S.W.3d at 600.
To prevail on a motion for traditional summary judgment, a party must show that
there are no genuine issues of material fact and that it is entitled to judgment as a matter of law.
Tex. R. Civ. P. 166a(c); Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548 (Tex. 1985). When
reviewing a summary judgment, we take as true all evidence favorable to the nonmovant, indulging
every reasonable inference and resolving any doubts in the nonmovant’s favor. Valence Operating
Co., 164 S.W.3d at 661. A defendant who moves for summary judgment must disprove at least one
essential element of the plaintiff’s causes of action. Duvall, 82 S.W.3d at 477.
The district court did not state the basis on which it granted the brokerage appellees’
summary judgment. Therefore, we must affirm if any of the movants’ theories has merit. Texas
Workers’ Comp. Comm’n v. Patient Advocates, 136 S.W.3d 643, 648 (Tex. 2004). Because the
6
propriety of a summary judgment is a question of law, we review the trial court’s decision de novo.
Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005).
DISCUSSION
Vodicka and Aubrey assert that the district court erred in granting summary judgment
in favor of the brokerage appellees for two reasons. First, they assert that the brokerage appellees’
no-evidence motion was “procedurally inadequate” because it “is wholly conclusory and non-specific,
and fails to adequately challenge a specific element of Vodicka and Aubrey’s negligence claims.”
Second, they assert that the brokerage appellees “cannot establish the absence of a negligence duty
under the traditional summary judgment standard.”
Specificity of no-evidence motion for summary judgment
Under rule 166a(i), a motion for no-evidence summary judgment “must state
the elements [of a claim] as to which there is no evidence.” Tex. R. Civ. P. 166a(i). As the Texas
Supreme Court has explained, the “‘motion must be specific in challenging the evidentiary support
for an element of a claim or defense; paragraph (i) does not authorize conclusory motions or
general no-evidence challenges to an opponent’s case.’” Timpte Indus. v. Gish, 286 S.W.3d 306, 310
(Tex. 2009) (quoting Tex. R. Civ. P. 166a(i) Comment—1997). “The underlying purpose of this
requirement ‘is to provide the opposing party with adequate information for opposing the motion,
and to define the issues for the purpose of summary judgment.’” Id. at 311 (quoting Westchester
Fire Ins. Co. v. Alvarez, 576 S.W.2d 771, 772 (Tex. 1978)). This purpose is analogous to that of
the “fair notice” pleading requirements of Rules 45(b) and 47(a). Id.; see Tex. R. Civ. P. 45(b)
7
(requiring party’s pleadings to give “fair notice” to opponent); Tex. R. Civ. P. 47(a) (requiring
plaintiff’s pleadings to give “fair notice of the claim involved”).
To attack a summary-judgment motion on specificity grounds, the nonmovant must
specially except. McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 342 (Tex. 1993) (“An
exception is required should a non-movant wish to complain on appeal that the grounds relied on
by the movant were unclear or ambiguous.”). The excepting party must obtain a ruling on the special
exception to preserve the issue for appeal. Id. at 343 n.7; see Tex. R. App. P. 33.1(a).
In their response to the brokerage appellees’ motion for summary judgment, Vodicka
and Aubrey included special exceptions challenging the specificity of the no-evidence motion.
However, the record contains no ruling on these special exceptions. Assuming that the trial court
should be considered to have denied the special exceptions when it granted summary judgment, we
conclude that the motion was sufficiently specific to satisfy rule 166a(i).
The brokerage appellees’ motion states, in a section entitled “NO NEGLIGENCE
DUTY”:
This motion for summary judgment is narrowly focused, and addresses only
Plaintiff’s claim for relief against Movants under a negligence theory (in fact,
Plaintiffs’ negligence claims against Movants are all labeled “gross negligence”).
The sole basis for this motion, in turn, is the fact that under the circumstances
of this case, no negligence duties were owed by Movants to Plaintiffs. The
existence of a duty is a question of law for the Court to decide from the facts
surrounding the circumstances in question. Movants contend that when this Court
considers the relevant factors, including the risk, foreseeability, and likelihood
of injury weighed against the social utility of Movants’ conduct, no negligence
duties arise here. Taking into account the comprehensive Texas and federal regimes
regulating securities sales, and the risks inherent in the securities market, negligence
liability is inapplicable to this situation. This motion is asserted both as a traditional
motion for summary judgment (which assumes for purposes hereof that the facts and
8
circumstances alleged in Plaintiffs’ petition are true) and as a no evidence motion for
summary judgment, which asserts that Plaintiffs cannot establish facts which warrant
the extension of a negligence duty to Movants.
(Emphases added). As the brokerage appellees indicate, the negligence theory asserted by Vodicka
and Aubrey is one for “gross negligence,” which “is the breach of duty involving an extreme
degree of risk, considering the probability and magnitude of the potential harm to others (an
objective element) when the actor has actual awareness of the risk involved but nevertheless
proceeds in conscious indifference to the rights, safety, or welfare of others (a subjective
element).” General Motors Corp. v. Sanchez, 997 S.W.2d 584, 595 (Tex. 1999). The assertion that
“no negligence duties were owed” by the brokerage appellees to Vodicka and Aubrey unambiguously
attacks the essential “duty” element of a claim for gross negligence. See City of Waco v. Kirwan,
298 S.W.3d 618, 623 (Tex. 2009) (“As with negligence actions . . . a defendant may be liable
for gross negligence only to the extent that it owed the plaintiff a legal duty”); cf. Timpte Indus.,
286 S.W.3d at 311 (concluding that no-evidence motion for summary judgment gave fair notice that
it challenged elements of “unreasonable danger” and “producing cause” where motion stated
“Plaintiff has presented no evidence of a design defect which was a producing cause of his personal
injury” and “There is no evidence of the product being defective or unreasonably dangerous, and
there is no evidence the trailer was the proximate or producing cause of the Plaintiff’s injuries”);
In re Mohawk Rubber Co., 982 S.W.2d 494, 497-98 (Tex. App.—Texarkana 1998, orig. proceeding)
(holding that motion asserting no-evidence of “causation” satisfied rule 166a(i) because “[c]ausation
is a specific element of tort liability”).
9
Vodicka and Aubrey responded to the no-evidence portion of the motion only by
specially excepting and objecting, asking that the no-evidence motion be stricken as “utterly
conclusory.” On appeal, Vodicka and Aubrey similarly challenge the no-evidence summary
judgment only on the ground that it failed to satisfy rule 166a(i)’s specificity requirement. Because
we have determined that the no-evidence motion satisfied rule 166a(i), we could overrule
appellants’ first issue without further explanation, as they have not challenged the no-evidence
motion’s assertion that there is no evidence of a duty owed by the brokerage defendants. See Patient
Advocates, 136 S.W.3d at 648. However, because Vodicka and Aubrey asserted in response to the
traditional motion for summary judgment that the brokerage appellees owed them duties in
negligence, we will address these assertions on the assumption that the portions of Vodicka and
Aubrey’s summary-judgment response and appellate brief that identify duties owed by the brokerage
defendants can be construed as responding to the no-evidence motion for summary judgment. See
Tex R. Civ. P. 45; Tex. R. App. P. 38.9.
Alleged negligence duties owed by brokerage appellees
Vodicka and Aubrey respond to the brokerage appellees’ traditional motion for
summary judgment5 by contending that the evidence attached to their response “clearly establishes
that the Defendants provided various services to the Plaintiffs and owed the Plaintiffs numerous
duties.” In their brief on appeal, they identify, again in response only to the traditional motion for
5
Like the brokerage appellees’ hybrid motion for summary judgment, the appellants’
response is contained in one document, but the response is divided into discrete sections that respond
separately to the no-evidence and traditional portions of the motion.
10
summary judgment, three duties that they contend the brokerage defendants owed them. Even
assuming that these contentions respond to the no-evidence motion, we nonetheless conclude that
the no-evidence summary judgment should be affirmed because Vodicka and Aubrey have
presented no evidence that the brokerage defendants owed them a duty in ordinary negligence.
“Whether a duty exists is a question of law for the court to decide under the facts
surrounding the occurrence in question.” Lefmark Mgmt. Co. v. Old, 946 S.W.2d 52, 59 (Tex. 1997).
To determine whether a defendant owes a plaintiff a duty, courts balance “several interrelated
factors, including the risk, foreseeability, and likelihood of injury weighed against the social
utility of the actor’s conduct, the magnitude of the burden of guarding against the injury, and the
consequences of placing the burden on the defendant.” Kirwan, 298 S.W.3d at 623-24 (internal
quotation marks omitted).
On appeal, Vodicka and Aubrey assert that three duties in negligence are owed to
them by various brokerage appellees: (1) CFS, Lahr, and Gunn “owed a duty of reasonable care
in their provision of professional services to Vodicka and Aubrey,” (2) all the brokerage appellees
“had a duty to refrain from negligent misrepresentations,” and (3) “Barlin had a duty to exercise
reasonable care in recommending Lahr to Vodicka and Aubrey.”
As to the first alleged duty, Vodicka and Aubrey assert that there was an “implied”
contract between appellants and CFS and that CFS, Lahr, and Gunn were “required, apart from any
express contractual obligation, to exercise a reasonable degree of care and competence in the
performance of professional services.” They then assert that because CFS, Lahr, and Gunn
11
undertook an affirmative course of action for the benefit of Vodicka and Aubrey, they
impliedly promised to perform each of those services in a skilled and acceptable
manner and, thus, had a duty to exercise reasonable care that Vodicka and Aubrey
would not be harmed in the course of those services.
Vodicka and Aubrey cite Anton v. Merrill Lynch, 36 S.W.3d 251, 257-58 (Tex. App.—Austin 2001,
pet. denied), and Hand v. Dean Witter Reynolds Inc., 889 S.W.2d 438, 491 (Tex. App.—Houston
[14th Dist.] 1994, writ denied), for the proposition that a claim for negligence in the provision of
professional services may be brought against securities brokers and agents. The Anton opinion does
not mention negligence; it discusses duties that federal district courts have concluded are owed under
theories of fiduciary duty and concludes that the plaintiff’s alleged breaches of fiduciary duty failed
to survive summary judgment. 36 S.W.3d at 257-58. In Hand, the plaintiff alleged that her stock
broker’s failure to purchase certain commodity option contracts after she requested that he do so
constituted breach of a duty such that the broker’s action constituted negligence. Hand, 889 S.W.2d
at 490-91. The question before the court was whether the broker had a “duty to purchase the options
or take necessary steps to purchase the options,” because that was the only act of negligence alleged
by the appellant. Id. at 490 (internal quotation marks omitted). The court concluded that no such
duty existed. Id. at 495. Neither case directly speaks to whether brokers may be liable for negligently
performing professional services. More importantly, neither of these cases supports appellants’
proposition that CFS, Lahr, and Gunn had a “duty to exercise reasonable care that Vodicka and
Aubrey would not be harmed” in the course of the brokerage appellees’ performance of professional
services. In fact, Vodicka and Aubrey cite no case, nor have we identified one, that stands for the
proposition that brokers owe a duty in common-law negligence to avoid financial harm to their
12
clients. Nonetheless, Vodicka and Aubrey urge that the supreme court has recognized that “a duty
to use reasonable care may arise when a person undertakes to provide services to another.”
Torrington Co. v. Stutzman, 46 S.W.3d 829, 837 (Tex. 2001). Although the supreme court has
acknowledged that such a duty “may arise,” they have done so in the context of claims for negligent
undertaking, a theory under which plaintiffs may recover for “physical harm” resulting from failure
to exercise reasonable care in rendering services to another. Id.; see Restatement (Second) of Torts
§ 323 (1965). As Vodicka and Aubrey have alleged only economic damages, they cannot recover
for a negligent undertaking under Torrington Co. See 46 S.W.3d at 837.
Vodicka and Aubrey further urge that CFS, Lahr, and Gunn owe a duty because
“[a] party contracting to supply services owes a common-law duty to perform the services with
reasonable care, skill, expedience, and faithfulness.” Zidell v. Bird, 692 S.W.2d 550, 553 (Tex.
App.—Austin 1985, no writ) (citing Montgomery Ward & Co. v. Scharrenbeck, 204 S.W.2d 508,
510 (1947)). Vodicka and Aubrey’s live petition did not assert any duty owed by the brokerage
defendants, but their response to the traditional motion for summary judgment essentially asserts that
(1) the brokerage appellees agreed to exercise due diligence in investing appellants’ money, and (2)
the brokerage appellees failed to perform adequate due diligence, resulting in appellants’ financial
losses. Taking as true appellants’ assertions that CFS, Lahr, and Gunn agreed to perform due
diligence regarding appellants’ investments, CFS, Lahr and Gunn could be held liable in negligence
only if any alleged breach of their duty to perform due diligence “would give rise to liability
independent of the fact that a contract exists between the parties.” Southwestern Bell Tel. Co. v.
DeLanney, 809 S.W.2d 493, 494 (Tex. 1991); id. at 495 (“When the injury is only the economic loss
13
to the subject of a contract itself the action sounds in contract alone.”). Conversely, where failure
to perform due diligence gives rise to liability because the failure to perform violates an agreement
between the parties, then the plaintiffs’ action sounds in contract alone unless the breach has resulted
in physical harm to persons and tangible things. Id. at 494-95 & n.2. Because Vodicka and Aubrey
identify no due-diligence duty that CFS, Lahr, and Gunn would have owed to them in the absence
of the alleged “implied contract,” and because the sole harm was economic loss resulting from the
investments that were the subject of that contract, appellants cannot recover in negligence for a
breach of this duty.6
Similarly, the second duty alleged by Vodicka and Aubrey—that all of the brokerage
defendants owed them a “duty to refrain from negligent misrepresentations”—does not fall within
the parameters of an ordinary negligence claim; instead, this alleged duty impermissibly recasts a
possible negligent misrepresentation claim under a different appellation. Vodicka and Aubrey state
on appeal that they “pled the elements of negligent misrepresentation,” and that their alleged facts,
taken as true, establish that those elements were met. See Restatement (Second) of Torts § 552
(1977) (defining negligent misrepresentation).7 They then conclude that they therefore established
6
Appellants’ brief goes on to assert that CFS and Lahr made various false representations
to appellants, such that they should be “held to the higher fiduciary standard,” but, “at the very least”
owed Vodicka and Aubrey “a duty of ordinary care.” The brief provides no authority for the assertion
that these false representations support a claim for ordinary negligence. We determine that appellants
are attempting to recast possible claims for fraud, breach of fiduciary duty, or negligent
misrepresentation as claims for (or duties arising in) ordinary negligence. Because appellants did
not argue at the district court that these claims precluded summary judgment, they have waived these
arguments. See Tex. R. Civ. P. 166a(c).
7
Section 552 states:
14
the existence of a “negligence duty.”
The brokerage appellees respond that Vodicka and Aubrey did not, in fact, assert
a claim for negligent misrepresentation against any defendant in the district court,8 and have
consequently waived this argument. We agree. We acknowledge that the first 48 pages of the
petition allege numerous facts, some of which might support elements of a claim for negligent
misrepresentation. But nowhere in the facts or in the following eleven pages in which appellants list
seven causes of action, their damages, and their prayer for relief, do they assert a claim for negligent
misrepresentation “in plain and concise language” or in a manner that would give “fair notice of
(1) One who, in the course of his business, profession or employment, or in any
other transaction in which he has a pecuniary interest, supplies false
information for the guidance of others in their business transactions, is
subject to liability for pecuniary loss caused to them by their justifiable
reliance upon the information, if he fails to exercise reasonable care or
competence in obtaining or communicating the information.
(2) Except as stated in Subsection (3), the liability stated in Subsection (1) is
limited to loss suffered
(a) by the person or one of a limited group of persons for whose benefit
and guidance he intends to supply the information or knows that the
recipient intends to supply it; and
(b) through reliance upon it in a transaction that he intends the
information to influence or knows that the recipient so intends or in
a substantially similar transaction.
(3) The liability of one who is under a public duty to give the information extends
to loss suffered by any of the class of persons for whose benefit the duty is
created, in any of the transactions in which it is intended to protect them.
8
As noted above, Vodicka and Aubrey asserted an ordinary negligence claim against the
attorney defendants (but not the brokerage appellees), and they asserted a gross negligence claim
against all “Defendants.”
15
the claim involved.” See Tex. R. Civ. P. 45, 47. Nor does Vodicka and Aubrey’s response to the
brokerage appellees’ motion for summary judgment articulate that appellants had intended to plead
negligent misrepresentation. Instead, that response summarizes evidence that is attached to the
motion and concludes that the evidence established “numerous duties,” then appears to assert only
that the brokerage appellees breached a duty to perform “due diligence” to prevent injury to
appellants and that Barlin breached a duty by referring the appellants to Lahr. As far as we can discern
from the record, the first mention of “negligent misrepresentation”—either as a separate cause of
action or as an alleged duty owed in ordinary negligence—occurred on appeal. We therefore decline
to address appellants’ theory that claims for negligent misrepresentation constitute a negligence duty.
See Tex. R. Civ. P. 166a(c) (“Issues not expressly presented to the trial court by written motion,
answer or other response shall not be considered on appeal as grounds for reversal.”).
Finally, Vodicka and Aubrey allege that Barlin had a duty to use reasonable care in
recommending Lahr because Barlin “knew or should have known” that Lahr was likely to commit
intentional misconduct. In asserting the existence of this duty, Vodicka and Aubrey do not address
the balancing test espoused by the supreme court. See Kirwan, 298 S.W.3d at 623-24 . Instead, they
rely on the general argument that the facts of this case “clearly indicate that the Brokerage
Defendants had some duty to prevent the harm that befell Vodicka and Aubrey, whether under the
state and federal securities regimes as the motion alludes, or under the common law governing fraud,
fiduciary duty, or reasonable care.” Vodicka and Aubrey premise all of their arguments regarding
alleged duties on the assertion that the brokerage appellees were “deliberately fraudulent and/or
disloyal” or “at least” negligent, but appellants do not explain why the duties they have alleged
16
should be recognized as duties in negligence with reference to the factors that we consider. Barlin
responds that he owed no duty to Vodicka and Aubrey in negligence and that no duty should be
imposed because the investments at issue in this case are securities that are regulated by “a pervasive
statutory scheme.” See Tex. Rev. Civ. Stat. art. 581-1 et seq. (West 2010 & Supp. 2011); Frank v.
Bear, Stearns & Co., 11 S.W.3d 380, 386 (Tex. App.—Houston [14th Dist.] 2000, pet. denied)
(declining to create negligence cause of action where plaintiffs sued for violations of the Texas
Securities Act because (1) “there is a comprehensive regime regulating the issuance and sale of
securities, which argues against the need to extend tort liability to these situations”; (2) “the
application of tort liability is ill-suited to an arena where downside risk is a feature inherent in the
concept of the securities market”; and (3) “adopting this suggested ‘strict liability’ approach would
be destructive to this area of commerce”); see also Timberwalk Apartments, Partners, Inc. v. Cain,
972 S.W.2d 749, 756 (Tex. 1998) (stating that absent special relationship, there is generally no duty
to protect individual from criminal acts by third party); San Benito Bank & Trust Co. v. Landair
Travels, 31 S.W.3d 312, 318-19 (Tex. App.—Corpus Christi 2000, no pet.) (discussing “general rule
of no duty” and exceptions).
Vodicka and Aubrey cite Golden Spread Council, Inc. v. Akins to support their
assertion that Barlin’s alleged “duty to exercise reasonable care in recommending Lahr to Vodicka
and Aubrey” already exists. 926 S.W.2d 287, 290-91 (Tex. 1996). Rather than adopting a general
rule that there exists a “duty to use reasonable care before recommending a person” who is
particularly likely to commit intentional misconduct, the supreme court in Akins weighed “the
risk, foreseeability, and likelihood of injury against the social utility of the actor’s conduct, the
17
magnitude of the burden of guarding against the injury, and the consequences of placing the burden
on the defendant.” Id. After balancing those factors, the supreme court recognized that a defendant
organization had a limited duty to use ordinary care in referring a person to a Boy Scout troop that
was seeking a new scout master when the referring organization was aware that the person had
allegedly molested boys in the past. Id. Notably, Akins involved potential contact with particularly
vulnerable individuals, and the determination that a duty existed was based, in part, on “a strong
policy to protect children from abuse.” 926 S.W.2d at 291; cf. Read v. Scott Fetzer Co., 990 S.W.2d
732 (Tex. 1998) (imposing duty on vacuum manufacturer to check background of contractor it hired
to demonstrate products in potential customers’ private homes); Porter v. Nemir, 900 S.W.2d 376
(Tex. App.—Austin 1995, no writ) (imposing duty where a psychologically fragile victim was
sexually assaulted by a drug counselor). Vodicka and Aubrey do not explain why courts should
create a duty in ordinary negligence to protect adults who are not members of a vulnerable class from
economic harm.9 And, the sole evidence they presented with their summary-judgment motion as to
how or why Barlin “knew or should have known” that Lahr was likely to commit intentional
misconduct was their counsel’s assertion in a deposition that Barlin left Vodicka a voicemail stating
that Lahr was “not necessarily in many ways the person that I would do business with” because “I’ve
decided to run my business life in a different way, which is in a more simple, sort of more
straightforward, honest pattern.”10 Barlin responded to that assertion by stating “I think I’m saying
9
The summary-judgment evidence reflects that Vodicka was or had been a CPA and attorney.
10
In their brief, Vodicka and Aubrey describe Lahr’s past companies, which, they allege,
were also “Ponzi-esque,” but they introduced no evidence showing that Barlin knew or should have
known about any of Lahr’s former companies or business practices, nor do they even argue that
Barlin was aware of any particular past activities of Lahr. Instead, they argue that Barlin knew of
18
that the hard money lending business is a tough business. . . . when you lend people in the hard
money business, it’s assumed that things are going to go bad, that you’re going to have to take
people’s properties from them, that there’s going to be lawsuits.” In the remainder of his response
to counsel’s assertion and in response to follow-up questions, there was no testimony regarding his
knowledge of any of Lahr’s past acts. Nor is there any mention of Barlin’s knowledge of Lahr’s past
misconduct or any evidence that he should have had such knowledge in the remaining summary-
judgment evidence. Vodicka and Aubrey’s assertions regarding the meaning of Barlin’s alleged
comments in a voicemail do no more than create a mere surmise or suspicion; these assertions do
not constitute “more than a scintilla of probative evidence,” and, as such, they are no evidence.
See Jackson, 979 S.W.2d at 70. Because Vodicka and Aubrey have presented no arguments in the
district court or on appeal as to how the risk, foreseeability, and likelihood of injury to them
outweigh the social utility of obtaining recommendations for brokers, the magnitude of the burden
of guarding against the injury, and the consequences of placing the burden on Barlin, we decline to
create a new common-law duty of reasonable care in recommending brokers to potential investors
where there is no evidence that the recommender knew or should have known of alleged past
Lahr’s “proclivities to swindle investors” and the “imminent risk that Lahr would ply his investment
scams on Vodicka and Aubrey,” without identifying the basis for these assertions. In the statement
of facts contained in their brief, they assert that Barlin began to “warn” Vodicka and Aubrey about
Lahr in 2008, three years after introducing them to Lahr. They base this statement on allegations in
their second amended petition, which was filed after the summary judgment was granted, but before
Vodicka and Aubrey nonsuited their remaining claims. These allegations do not constitute legally
sufficient evidence to survive the brokerage appellees’ no-evidence motion for summary judgment.
We note that these same allegations appear in exhibit 37 to the live petition. However, exhibit 37
is a twelve-page document authored by Vodicka and Aubrey in response to Barlin’s interrogatories.
As such, it cannot be used against Barlin. See Tex. R. Civ. P. 197.3 (“Answers to interrogatories may
be used only against the responding party.”).
19
misconduct. See J.P. Morgan Chase Bank v. Texas Contract Carpet, Inc., 302 S.W.3d 515, 535
(Tex. App.—Austin 2009, no pet.) (stating that intermediate appellate courts should be reluctant
to recognize new common-law duty (citing Lubbock County v. Trammel’s Lubbock Bail Bonds,
80 S.W.3d 580, 585 (Tex. 2002))). “The nonexistence of a duty ends the inquiry into whether
negligence liability may be imposed.” Van Horn v. Chambers, 970 S.W.2d 542, 544 (Tex. 1998).
Accordingly, we overrule appellants’ issue.
CONCLUSION
Having overruled the sole remaining issue on appeal, we affirm the district court’s
summary judgment.
__________________________________________
David Puryear, Justice
Before Justices Puryear, Pemberton and Goodwin
Affirmed
Filed: June 6, 2012
20