Stuart Wilson and Frida Wilson v. Jeremiah Magaro, Individually and Chase Drywall Ltd. ( 2013 )

Opinion issued June 25, 2013
In The
Court of Appeals
For The
First District of Texas
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NO. 01-12-00952-CV
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STUART WILSON AND FRIDA WILSON, Appellants
V.
JEREMIAH MAGARO, INDIVIDUALLY AND CHASE DRYWALL LTD.,
Appellees
On Appeal from the 157th District Court
Harris County, Texas
Trial Court Case No. 2012-07300
MEMORANDUM OPINION
Appellants, Stuart Wilson and Frida Wilson, filed suit against appellees
Jeremiah Magaro and Chase Drywall Ltd. Magaro and Chase Drywall filed a
motion for summary judgment on all claims, asserting the statute of limitations for
each claim. The trial court granted summary judgment. In three issues on appeal,
the Wilsons argue the trial court erred by granting summary judgment because the
statute of limitations had not expired on their breach of contract claim, fraud claim,
and breach of implied warranty claim.
We affirm.
Background
As a part of the construction of their residence in Houston, Texas, the
Wilsons contracted with Chase Drywall 1 for the installation of drywall inside the
house. The date of the contract is not in the record, but it is undisputed that Chase
Drywall completed its main work by early August 2007. By early October 2007,
Chase Drywall completed additional work fixing damage to the sheetrock by other
contractors. Chase Drywall did not do any work on the residence after October
2007.
In his affidavit in his motion for summary judgment Stuart Wilson asserted
that, around February 11, 2008, he “made a periodic walkthrough” of the
residence. He stated it was late in the afternoon “and the lighting conditions were
such that I noticed for the first time that some of the sheetrock/drywall installed by
Chase Drywall, Ltd. did not look correct.” He then contacted an inspector, who
came out on February 18, 2008. The inspector’s report identified a number of
1
Chase Drywall Ltd. is owned by Jeremiah Magaro. All claims asserted against
Chase Drywall are also asserted against Magaro and vice versa. Unless otherwise
indicated, all references to Chase Drywall in this opinion shall refer to Chase
Drywall and Magaro, collectively.
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problems with the drywall, including sheetrock corners around “the majority of the
windows throughout the house” that were improperly cut so that they looked
ragged and were in different angles, “popped out nails,” “high and low spots that
are very visible,” and an entire wall that could not be repaired and needed to be
replaced.
Two days later, the Wilsons sent Chase Drywall a demand letter. They did
not file suit, however, until February 6, 2012. As of the time of the hearing on the
motion for summary judgment, the Wilsons had three live claims: breach of
contract, fraud, and breach of implied warranty. Chase Drywall argued in its
motion for summary judgment that the statute of limitations had expired for each
of the claims. The Wilsons responded, arguing that their breach of contract and
fraud claims were not barred by the statute of limitations because of the discovery
rule, fraudulent concealment, and equitable estoppel. They also argued that their
breach of implied warranty claim was not barred because the statute of limitations
had not yet run. The trial court granted the motion on all claims.
Standard of Review
The summary-judgment movant must conclusively establish its right to
judgment as a matter of law. See MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex.
1986). Because summary judgment is a question of law, we review a trial court’s
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summary judgment decision de novo. Mann Frankfort Stein & Lipp Advisors, Inc.
v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009).
To prevail on a “traditional” summary-judgment motion asserted under rule
166a(c), a movant must prove that there is no genuine issue regarding any material
fact and that it is entitled to judgment as a matter of law. See TEX. R. CIV. P.
166a(c); Little v. Tex. Dep’t of Criminal Justice, 148 S.W.3d 374, 381 (Tex.
2004). A matter is conclusively established if reasonable people could not differ as
to the conclusion to be drawn from the evidence. See City of Keller v. Wilson, 168
S.W.3d 802, 816 (Tex. 2005).
A defendant moving for traditional summary judgment must either
(1) conclusively negate at least one of the essential elements of each of the
plaintiff’s causes of action or (2) conclusively establish each essential element of
an affirmative defense. Cathey v. Booth, 900 S.W.2d 339, 341 (Tex. 1995). If the
movant meets its burden, the burden then shifts to the nonmovant to raise a
genuine issue of material fact precluding summary judgment. See Centeq Realty,
Inc. v. Siegler, 899 S.W.2d 195, 197 (Tex. 1995).
To determine if there is a fact issue, we review the evidence in the light most
favorable to the nonmovant, crediting favorable evidence if reasonable jurors could
do so, and disregarding contrary evidence unless reasonable jurors could not. See
Fielding, 289 S.W.3d at 848 (citing City of Keller, 168 S.W.3d at 827). We
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indulge every reasonable inference and resolve any doubts in the nonmovant’s
favor. Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 2002).
Statute of Limitations
At the time of the motion for summary judgment, the Wilsons had three live
claims: breach of contract, fraud, and breach of implied warranty. Chase
Drywall’s ground for summary judgment on all three claims was that the statute of
limitations barred each claim. On appeal, the Wilsons argue that the statute of
limitations had not expired because of the application of the discovery rule,
fraudulent concealment, and equitable estoppel. They also argue that the statute of
limitations on their breach of implied warranty claim had not expired regardless of
the application of the discovery rule, fraudulent concealment, and equitable
estoppel.
The application of the statute of limitations is an affirmative defense. TEX.
R. CIV. P. 94; KPMG Peat Marwick v. Harris Cnty. Housing Fin. Corp., 988
S.W.2d 746, 748 (Tex. 1999). Accordingly, Chase Drywall bore the burden of
establishing as a matter of law that the statute of limitations applied to the Wilsons’
claims. See KPMG, 988 S.W.2d at 748. When, as here, the plaintiff asserts the
discovery rule, the defendant bears the burden of disproving its application—or
proving the applicability of the statute of limitations in spite of the discovery
rule—in order to prevail on the motion for summary judgment. See id. (holding
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defendant moving for summary judgment on limitations must prove when cause of
action accrued and “negate the discovery rule, if it applies and has been pleaded or
otherwise raised . . .”). In contrast to the burden upon invocation of the discovery
rule, a plaintiff asserting fraudulent concealment bears the burden of proving its
application. See id. at 749–50. That is, after the defendant establishes that the
claim would be barred by the statute of limitations, the burden shifts to the plaintiff
to prove fraudulent concealment. See id.
A. Limitations Periods
It is undisputed that “[t]he statute of limitations on a claim for debt based on
breach of contract is four years from the time the cause of action accrues.”
Williams v. Unifund CCR Partners Assignee of Citibank, 264 S.W.3d 231, 234
(Tex. App.—Houston [1st Dist.] 2008, no pet.); see also TEX. CIV. PRAC. & REM.
CODE ANN. § 16.004(a)(3) (Vernon 2002). It is likewise undisputed that a four-
year statute of limitations applies to a claim for fraud. CIV. PRAC. & REM.
§ 16.004(a)(4). The parties do dispute, however, the length of the limitations
period for breach of an implied warranty.
In part of their third issue, the Wilsons, relying on section 16.009 of the
Texas Civil Practice and Remedies Code, argue that a ten-year statute of
limitations governs their breach of implied warranty claim. See id. § 16.009
(Vernon 2002). This is incorrect. Depending on the type, a breach of implied
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warranty can be governed by a two- or four-year statute of limitations. See, e.g.,
TEX. BUS. & COM. CODE ANN. §§ 17.50(a)(2), .565 (Vernon 2011) (including
breach of implied warranty as actionable claim and setting two-year statute of
limitations on claim); HECI Exploration Co. v. Neel, 982 S.W.2d 881, 885 (Tex.
1998) (applying four-year statute of limitations on claim for breach of “implied
contractual covenants”).
Section 16.009 of the Texas Civil Practice and Remedies Code, however, “is
not a statute of limitation, but rather an ultimate statute of repose that bars all
claims after the prescribed 10-year period.” Tumminello v. U.S. Home Corp., 801
S.W.2d 186, 187 (Tex. App.—Houston [1st Dist.] 1990, writ denied). The statute
expressly provides that it “does not extend or affect a period prescribed for
bringing an action under any other law of this state.” CIV. PRAC. & REM.
§ 16.009(f). Accordingly, this statute does not affect the period for the statute of
limitations for breach of implied warranty as established by other law.
Chase Drywall established, and the Wilsons do not dispute, that all work
Chase Drywall did on the residence was completed by early October 2007. There
is no evidence in the record that any injury occurred after Chase Drywall
completed its work. The Wilsons did not file suit until February 2012.
Accordingly, regardless of whether the Wilsons’ claim for breach of implied
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warranty is governed by a two- or four-year statute of limitations, the limitations
period has expired.
B. The Discovery Rule
“[T]he discovery rule operates to defer accrual of a cause of action until a
plaintiff discovers or, through the exercise of reasonable care and diligence, should
discover the ‘nature of his injury.’” Childs v. Haussecker, 974 S.W.2d 31, 40
(Tex. 1998). It is a very limited exception to the statute of limitations. Shell Oil
Co. v. Ross, 356 S.W.3d 924, 929–30 (Tex. 2011). It applies when the nature of
the injury is (1) inherently undiscoverable and (2) objectively verifiable. Id. at
930. “An injury is inherently undiscoverable if by its nature, it is ‘unlikely to be
discovered within the prescribed limitations period despite due diligence.’” Id.
(quoting S.V. v. R.V., 933 S.W.2d 1, 7 (Tex. 1996)).
The summary judgment evidence in this case establishes that Stuart
discovered problems with the drywall when he “made a periodic walkthrough” of
the residence in the late afternoon. Wilson explained that the lighting conditions at
that time of day allowed him to see for the first time problems with the installation
of the sheetrock. In other words, Stuart was able to discover alleged defects in the
installation of the sheetrock by walking through the residence with the proper
lighting.
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This does not establish that the alleged defects were inherently
undiscoverable. To the contrary, it establishes that the defects were noticeable
upon a basic inspection with proper lighting. Similarly, the inspector’s report
identified problems with the drywall such as sheetrock corners around “the
majority of the windows throughout the house” that were improperly cut so that
they looked ragged and were in different angles, “popped out nails,” “high and low
spots that are very visible,” and an entire wall that could not be repaired and
needed to be replaced. All of this indicates visible and obvious problems with the
drywall, not an “inherently undiscoverable” injury.
The Wilsons argue that they “learned for the first time that the work
performed by [Chase Drywall] did not meet industry standards for workmanship,
that the [drywall] was not properly installed and that major repairs are needed”
after February 18, 2008, when the inspector’s report was prepared. Even when it
applies, “the discovery rule does not linger until a claimant learns of actual causes
and possible cures.” PPG Indus., Inc. v. JMB/Hous. Ctrs. Partners Ltd. P’ship,
146 S.W.3d 79, 93 (Tex. 2004). Instead, it applies “until a plaintiff discovers or,
through the exercise of reasonable care and diligence, should discover” the injury.
Childs, 974 S.W.2d at 40 (emphasis added). Not knowing the cause of, the full
extent of, or the chances of avoiding the injury does not toll limitations once the
plaintiff learns of a wrongful injury. PPG Indus., 146 S.W.3d at 93.
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The evidence establishes that the Wilsons could have learned of their injury
at any time after early October 2007 at the latest. Not knowing the full extent of
their injury until after October 2007 does not toll the statute of limitations. See id.
C. Equitable Estoppel / Fraudulent Concealment
The doctrine of equitable estoppel applies as a toll to a statute of limitations,
“when the tortfeasor fraudulently conceals the existence of a cause of action from
the plaintiff.” Marshall v. First Baptist Church of Hous., 949 S.W.2d 504, 507
(Tex. App.—Houston [14th Dist.] 1997, no writ). The party asserting tolling must
establish “(1) a false representation or concealment of material facts; (2) made with
knowledge, actual or constructive, of those facts; (3) with the intention that it
should be acted on; (4) to a party without knowledge or means of obtaining
knowledge of the facts; (5) who detrimentally relies on the representations.” Doe
v. Roman Catholic Archdiocese of Galveston-Hous., 362 S.W.3d 803, 810 (Tex.
App.—Houston [14th Dist.] 2012, no pet.) (citing Johnson & Higgins of Tex., Inc.
v. Kenneco Energy, Inc., 962 S.W.2d 507, 515–16 (Tex. 1998)).
The Wilsons’ basis for claiming equitable estoppel is their claim that Chase
Drywall made representations at the time the contract was formed concerning the
scope and quality of the work that would be done. At best, however, this is proof
of a fraud in the inducement claim, not proof that Chase Drywall tried to
“conceal[] the existence of a cause of action from the” Wilsons. Marshall, 949
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S.W.2d at 507. Indeed, before the contract had been formed, there was no cause of
action to conceal. See Haase v. Glazner, 62 S.W.3d 795, 798 (Tex. 2001)
(“Without a binding agreement, there is no detrimental reliance, and thus no
fraudulent inducement claim.”).
We overrule the Wilsons’ three issues.
Conclusion
We affirm the judgment of the trial court.
Laura Carter Higley
Justice
Panel consists of Justices Keyes, Higley, and Bland.
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