Old HH, Ltd.// Mary Henderson v. Mary Henderson// Old HH, Ltd. Christopher Conyers and Yolanda Conyers ( 2011 )

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-10-00129-CV
Appellant, Old HH, Ltd.// Cross-Appellant, Mary Henderson
v.
Appellee, Mary Henderson// Cross-Appellees, Old HH, Ltd.; Christopher Conyers and
Yolanda Conyers
FROM THE DISTRICT COURT OF WILLIAMSON COUNTY, 368TH JUDICIAL DISTRICT
NO. 05-821-C368, HONORABLE BURT CARNES, JUDGE PRESIDING
MEMORANDUM OPINION
Yolanda and Christopher Conyers sold Mary Henderson their house, which had been
built by Old HH, Ltd. After discovering alleged defects in the house, Henderson sued the Conyerses
and Old HH, asserting causes of action against the Conyerses for violations of the Deceptive Trade
Practices-Consumer Protection Act (DTPA), see Tex. Bus. & Com. Code Ann. §§ 17.45, .50 (West
2011), common law fraud, statutory fraud, and negligent misrepresentation, and causes of action
against Old HH for violations of the DTPA, breach of the implied warranty of good workmanship,
and breach of the implied warranty of habitability. The Conyerses filed a counterclaim requesting
their attorneys’ fees under a provision of the sales contract permitting attorneys’ fees to be awarded
to “the prevailing party in any legal proceeding brought under or with respect to the transaction.”
Following a six-day trial, the jury found that Old HH breached the implied warranty of good
workmanship. The jury failed to make any liability findings against the Conyerses. The district
court rendered judgment that Henderson take nothing by way of her claims against the Conyerses
and awarded them their requested attorneys’ fees. The judgment also awarded Henderson $99,700 in
damages against Old HH plus pre-judgment interest. Both Old HH and Henderson appealed the
district court’s judgment. We will affirm the portion of the judgment awarding the Conyerses their
attorneys’ fees; we will reverse the portions of the judgment adjudicating Henderson’s claims against
Old HH and remand those claims to the district court for a new trial.
FACTUAL AND PROCEDURAL BACKGROUND
The Conyerses purchased a single-family residence from the builder, Old HH, in
1996. In January 2002, the Conyerses and Henderson entered into a home sale contract (“the
Contract”) whereby the Conyerses conveyed the residence to Henderson. In her petition, Henderson
alleged that in September 2003 water began leaking into the residence from a “dead valley” located
above the front entry. She claims that subsequent mold testing revealed the presence of pathogenic
mold in the living room, home office, a bedroom, and the chimney area. Henderson hired an
engineer to inspect the house, and the engineer reported that there were numerous other construction
defects, including defects in the foundation and roof framing.
Henderson sued Old HH alleging breaches of the implied warranty of good
workmanship and the implied warranty of habitability, breach of express warranties, negligence, and
DTPA violations. See Tex. Bus. & Com. Code Ann. §§ 17.46, .50 (West 2011). Henderson also
sued the Conyerses, asserting causes of action for negligent misrepresentation, fraud, statutory fraud,
and DTPA violations. Id. Henderson non-suited her claims against Old HH for breach of express
2
warranties, and the trial court granted Old HH’s motion for partial summary judgment on
Henderson’s DTPA and negligence claims.
After a six-day trial, the jury found that Old HH breached the implied warranty of
good workmanship and awarded Henderson $85,000 to compensate her for the “reasonable cost of
repairs necessary to cure any construction defect,” $4,500 as reasonable and necessary engineering
and consulting costs, and $10,200 as the “reasonable expenses of temporary housing reasonably
necessary during the repair period.” The district court refused Henderson’s request to submit a
question to the jury asking whether Old HH violated the implied warranty of habitability. The jury
found in favor of the Conyerses on all issues related to the causes of action asserted against them.
After trial, the district court granted the Conyerses’ motion for judgment and for attorneys’ fees
pursuant to a provision in the Contract. The court rendered judgment that Henderson recover from
Old HH $99,700 in actual damages and $20,213 in pre-judgment interest, that Henderson take
nothing by her claims against the Conyerses, and that the Conyerses recover $83,700 in attorneys’
fees with additional amounts awarded conditioned on Henderson’s unsuccessful appeals to this Court
and the supreme court. This appeal followed.
In its first two issues, Old HH contends that the district court erred by submitting a
question to the jury regarding breach of the implied warranty of good workmanship because (1) it
had disclaimed that warranty when it sold the residence to the Conyerses, and (2) the alleged defects
were discoverable by a reasonably prudent inspection, i.e., they were not latent. In its third and
fourth issues, Old HH challenges the sufficiency of the evidence supporting the jury’s award of
damages to compensate Henderson for the cost of repairs to the residence, engineering and
3
consulting fees, and temporary housing. Henderson, as cross-appellant, challenges the district
court’s award of attorneys’ fees to the Conyerses, the exclusion of testimony from her expert witness
regarding the cost to repair her residence, and the court’s refusal to submit her question regarding
Old HH’s alleged breach of the implied warranty of habitability.
DISCUSSION
We first consider whether the district court erred in awarding the Conyerses their
attorneys’ fees. We will next address Henderson’s contention that the district court erred by refusing
to submit to the jury a question regarding Old HH’s breach of the implied warranty of habitability.
Our disposition of that issue renders consideration of the remaining appellate issues unnecessary.
Award of Attorneys’ Fees to the Conyerses
At trial, the jury answered all liability questions regarding the Conyerses’ conduct
favorably to the Conyerses and against Henderson. Specifically, the jury failed to find that the
Conyerses made any negligent misrepresentation to Henderson and failed to find that they committed
fraud or statutory fraud against Henderson in the transaction. The jury also failed to find that the
Conyerses engaged in any false, misleading, or deceptive act or practice or engaged in any
unconscionable action or course of action that caused damages to Henderson.
After trial, the Conyerses requested an award of their attorneys’ fees based on the
following provision in the Contract:
4
17. ATTORNEYS FEES: The prevailing party in any legal proceeding brought
under or with respect to the transaction described in this contract is entitled to recover
from the non-prevailing party all costs of such proceeding and reasonable
attorney’s fees.
The district court granted the motion and rendered judgment awarding the Conyerses attorneys’ fees
of $84,709.01 for trial, $20,000 in the event of an unsuccessful appeal by Henderson to the court of
appeals, and $20,000 in the event of an unsuccessful appeal by Henderson to the Texas Supreme
Court. In her first issue, Henderson contends that the court erred by awarding the Conyerses their
attorneys’ fees because “they sought no affirmative relief and were awarded none by the [j]udgment”
and therefore were not prevailing parties. We disagree.
The Conyerses may recover attorneys’ fees under the contract if they were the
“prevailing party in any legal proceeding brought under or with respect to the transaction” described
in the contract. Henderson alleged that the Conyerses made misrepresentations or failed to make
proper disclosures with respect to the sale of the home to her. Thus, the suit is plainly “with respect
to” the home sale transaction described in the contract. The central question, then, is whether the
Conyerses were “prevailing parties.”
Because the term “prevailing party” is undefined in the contract, we “presume the
parties intended the term’s ordinary meaning.” International Group P’ship v. KB Home Lone Star
L.P., 295 S.W.3d 650, 653 (Tex. 2009) (citing Valence Operating Co. v. Dorsett, 164 S.W.3d 565,
662 (Tex. 2005)). A prevailing party is the party “who successfully prosecutes the action or
successfully defends against it, prevailing on the main issue, even though not to the extent of its
original contention.” Johns v. Ram Forwarding, Inc. 29 S.W.3d 635, 637-38 (Tex. App.—Houston
5
[1st Dist.] 2000, no pet.) (citing City of Amarillo v. Glick, 991 S.W.2d 14, 17 (Tex. App.—Amarillo
1997, no pet.)). This Court has observed that “‘prevailing party’ status requires obtaining relief from
the court (e.g., ‘enforceable judgments on the merits and court-ordered consent decrees’) that effect
a ‘material alteration of the legal relationship of the parties.’” See Wibbenmeyer v. TechTerra
Commc’ns, Inc., No. 03-09-00122-CV, 2010 WL 1173072, at *10 (Tex. App.—Austin Mar. 26,
2010, pet. denied) (mem. op.) (citing Buckhannon Bd. & Care Home, Inc. v. West Va. Dep’t of
Health & Human Res., 532 U.S. 598, 603-05 (2001)). A prevailing party is one who is “vindicated
by the court’s judgment.” See Robbins v. Capozzi, 100 S.W.3d 18, 27 (Tex. App.—Tyler 2003, no
pet.). A party may be a “prevailing party” even if the party is not awarded damages so long as that
party is successful on the merits of the claim. See Fowler v. Epps, No. 03-08-00055-CV,
2010 WL 521109, at *3 (Tex. App.—Austin Feb. 10, 2010, pet. granted) (mem. op.) (citing Robbins,
100 S.W.3d at 27).
The Conyerses, as defendants, did not seek recovery of any actual damages. Rather,
their sole purpose in the litigation was to defend themselves against Henderson’s causes of action.
The Conyerses prevailed in the trial court when the court rendered a take-nothing judgment in their
favor. That judgment effected a material alteration in the Conyerses’ legal relationship with
Henderson. Consequently, we hold they are entitled, under the “prevailing party” clause of the
Contract, to their attorneys’ fees for their defense of the claims asserted by Henderson related to the
home sale transaction. See Fitzgerald v. Schroeder Ventures II, LLC, No. 04-10-00471-CV,
2011 WL 1303276, at *5 (Tex. App.—San Antonio Apr. 6, 2011, pet. filed) (defendants who
obtained take-nothing judgment in their favor were prevailing parties entitled to recover attorneys’
6
fees under parties’ agreement); Silver Lion, Inc. v. Dolphin Street, Inc., No. 01-07-00370-CV,
2010 WL 2025749, at *18 (Tex. App.—Houston [1st Dist.] May 20, 2010, pet. denied) (mem. op.)
(defendant awarded take-nothing judgment on breach of contract claim was prevailing party entitled,
under parties’ agreement, to recover attorneys’ fees for successfully defending claim against him).
We overrule Henderson’s first appellate issue.
Breach of the Implied Warranty of Habitability
In her third issue, Henderson contends that the district court erred by refusing to
submit to the jury a requested issue regarding Old HH’s breach of the implied warranty of
habitability. Old HH counters that the court correctly refused to submit the question because, as a
subsequent purchaser of the home, the implied warranty of habitability does not extend to
Henderson. The supreme court has held, however, that the implied warranty of habitability, which
is implicit in the contract between the builder/vendor and the original purchaser, is automatically
assigned to a subsequent purchaser. Gupta v. Ritter Homes, Inc., 646 S.W.2d 168, 169 (Tex. 1983).
The supreme court reasoned:
As between the builder and owner, it matters not whether there has been an
intervening owner. The effect of the latent defect on the subsequent owner is just as
great as on the original buyer and the builder is no more able to justify his improper
work as to a subsequent owner than to the original buyer.
Id. Henderson’s status as a subsequent purchaser does not preclude her from recovering damages
under a breach of the implied warranty of habitability theory.
Henderson requested the trial court to submit the following question to the jury:
7
As to the subject house, did [Old HH] violate the implied warranty of habitability?
You are hereby instructed that with regards to the construction of a house, the
violation of the implied warranty of habitability means constructing or selling a house
that was not suitable for human habitation.
Henderson contends that this question was submitted in substantially correct form and that the
question and instruction were supported by the pleadings and the evidence. Rule 278 of the Texas
Rules of Civil Procedure provides that “the court shall submit the questions, instructions and
definitions in the form provided by Rule 277, which are raised by the written pleadings and
evidence.” Tex. R. Civ. P. 278. This rule provides a substantive, non-discretionary directive to trial
courts requiring them to submit requested issues to the jury if the pleadings and any evidence support
them. Elbaor v. Smith, 845 S.W.2d 240, 243 (Tex. 1992). A trial court may refuse to submit a
question only if there is no evidence in the record to warrant its submission. Id. To determine
whether legally sufficient evidence supported Henderson’s implied warranty of habitability
submission, we must examine the record for evidence supporting submission of her question and
ignore all evidence to the contrary. Id.
1. Evidence of latent defects
The extension of the builder’s liability to subsequent purchasers under a breach of
implied warranty of habitability theory is limited to latent defects that manifest themselves after the
purchase and are not discoverable by the subsequent purchaser’s reasonably prudent inspection at
the time of sale. Gupta, 646 S.W.2d at 170 (Spears, J. concurring). Old HH argues that “the
evidence presented at trial, without question, demonstrated that the alleged defects in this case were
not latent.” We disagree.
8
“Latent defects” are those that are not known by or expressly disclosed to the buyer.
See Centex Homes v. Buecher, 95 S.W.3d 266, 274 (Tex. 2002). In order to be covered by the
implied warranty of habitability, the alleged defect must have been unknown to Henderson and
not discoverable by a reasonably prudent inspection of the building at the time of sale. Gupta,
646 S.W.2d at 169. Henderson testified extensively regarding the defects in her home. She
explained that the roof of the house had a “dead valley,” which is a trough where two portions of the
roof meet. The slope of this dead valley was insufficient to permit water to run off the roof.
Rainwater accumulated in this dead valley until it either evaporated or was blown off by wind. The
flashing in the dead valley was also inadequate to prevent water intrusion. Henderson testified that
about one year after she purchased the house, several rooms experienced water intrusion as the result
of this structural defect. Water also came through the skylight and a bay window in the master
bedroom. The water intrusion required removal of the carpet, at which time Henderson noticed
cracks in the foundation. She testified that these cracks were not visible from the home’s exterior.
Henderson hired a forensic engineer to further inspect the house and learned that the shingles were
improperly layered causing the roof to leak; she also learned that the house was not built in
conformance with its plans and specifications. The evidence showing that a number of the defects
were not observable during a visual inspection of the home and that the water intrusion did not occur
until approximately one year after Henderson purchased the home constitutes some evidence that
the defects Henderson complained of were not discoverable by a reasonably prudent inspection. See
7979 Airport Garage, L.L.C. v. Dollar Rent A Car Sys., 245 S.W.3d 488, 503 (Tex. App.—Houston
[14th Dist.] 2007, pet. denied) (structural problems with expansion joints not discoverable at
9
inception of lease were latent defects); Exxon Corp. v. Butler Drilling Co., 508 S.W.2d 901, 904
(Tex. Civ. App.—Houston [1st Dist.] 1974, writ ref’d n.r.e.) (latent defect is one that could not have
been discovered with ordinary care).
Old HH argues, however, that a reasonably prudent inspection means an inspection
by a “reasonably prudent home inspector.” In its view, the buyer herself cannot conduct a
“reasonably prudent inspection” and, to demonstrate that the defects were latent, Henderson must
have established that a reasonably prudent inspection by a home inspector would not have discovered
them. We disagree. In Gupta, the supreme court explained that two of the reasons for extending the
implied warranty to subsequent purchasers are (1) “the buyer cannot, by reasonable inspection or
examination, discern such defects” and (2) “the buyer cannot normally rely on his own judgment in
such matters.” Gupta, 646 S.W.2d at 169 (emphases added). The implied warranty arises to protect
the purchaser from defects that she herself cannot discover by reasonable inspection. There is no
requirement that the defects be undiscoverable by a person with more knowledge or experience than
the buyer, such as a professional home inspector.
Old HH points out that Henderson did hire a home inspector when she purchased the
house and that the inspector prepared a report of his findings, which he provided to Henderson.
Henderson, however, was unable to produce the entire report in discovery, which Old HH contends
gives rise to a rebuttable presumption that the report would be “unfavorable to” Henderson. We
understand Old HH to mean that it was entitled to a rebuttable presumption that the report disclosed
to Henderson the defects about which she now complains. We agree that if the report disclosed the
defects to Henderson, those disclosed defects would not be covered by the implied warranty. See
10
Centex Homes, 95 S.W.3d at 274 (latent defects are those that are not known by or expressly
disclosed to buyer). At trial, Henderson testified about the home inspection. She stated that during
his inspection the home inspector found some “negligible items that needed to be fixed—a total of
under $1,000.00.” Henderson further testified that the home inspector prepared a list of those items,
and that list was admitted into evidence at trial. Henderson stated that she and Christopher Conyers
“agreed to a price reduction to offset the cost of the nominal repairs that needed to be made that were
identified by the home inspection company.” At trial, Henderson asserted claims against the home
inspector alleging that he failed to discover the defects, and her expert witness testified that the home
inspector should have discovered them but did not. Henderson testified that she was not told that
there was any problem with the home’s foundation or roof. She stated that while the home inspector
was inspecting the property, she walked around the house and did not notice any problems with the
roof or foundation, nor any structural problems. Therefore, we conclude that the record contains
some evidence that Henderson did not know of the alleged defects, even after her own reasonably
prudent inspection of the residence, and that the alleged defects were not disclosed to her by her
home inspector at the time of sale.
2. Evidence that premises were uninhabitable.
Breach of the implied warranty of habitability occurs when the defect is of a nature
that will render the premises unsafe, unsanitary, or otherwise unfit for living therein. See Kamarath
v. Bennett, 568 S.W.2d 658, 661 (Tex. 1978). The nature of the deficiency, its effect on habitability,
the length of time for which it persisted, the age of the structure, and the area in which the premises
are located are all factors to be considered in deciding if there has been a breach of the warranty of
11
habitability. Id. The existence of a breach is usually a question of fact to be determined by the
circumstances of each case. Id. (citing Reese v. Diamond Housing Corp., 259 A.2d 112 (D.C. Ct.
App. 1969)). In the present case, the record contains evidence that engineering consultants hired by
Henderson to inspect the house after the alleged defects manifested themselves advised her that she
should move out of the house to protect herself. A report prepared by one of the consultants refers
to the unsafe condition of the house, including unsafe structures. There was also extensive testimony
regarding the presence of mold in the house. We conclude, therefore, that the record contains some
evidence that the house was unfit to live in and that it would have been unsafe for Henderson to
continue to live there.1
Because the pleadings and evidence supported submission of the requested issue
regarding breach of the implied warranty of habitability, the trial court was required to submit the
question and erred in failing to do so. When matters are timely raised and properly requested as part
of a trial court’s charge, a judgment cannot be permitted to stand when a party is denied proper
submission of a valid theory of recovery raised by the pleadings and evidence. Exxon Corp. v. Perez,
842 S.W.2d 629, 631 (Tex. 1992). Consequently, this error requires that we reverse the district
court’s judgment and remand the case for a new trial of Henderson’s claims against Old HH. Id.
Because the court’s error relates only to Henderson’s claims against Old HH, and not to any claims
she asserted against the Conyerses, we reverse only the portions of the judgment adjudicating
Henderson’s claims against Old HH. Having sustained Henderson’s third appellate issue, for which
1
Old HH does not argue that the evidence that the house was uninhabitable was legally
insufficient to support submission of a question regarding breach of the implied warranty
of habitability.
12
she requested a remand to the district court for a new trial, we need not address either Henderson’s
remaining issue or the issues presented on appeal by Old HH.
CONCLUSION
The district court properly awarded the Conyerses attorneys’ fees pursuant to the
home sale contract between them and Henderson. Henderson does not challenge the district court’s
judgment that she take nothing by her claims against the Conyerses. Consequently we affirm those
portions of the judgment that award the Conyerses attorneys’ fees and costs of court. Having
concluded that the court erred by refusing to submit a question regarding Old HH’s breach of the
implied warranty of habitability, we reverse the portions of the district court’s judgment adjudicating
the claims between Henderson and Old HH and remand those claims to the district court for a
new trial.
_____________________________________________
J. Woodfin Jones, Chief Justice
Before Chief Justice Jones, Justices Henson and Goodwin;
Concurring and Dissenting Opinion by Justice Goodwin
Affirmed in Part, Reversed and Remanded in Part
Filed: July 27, 2011
13