Sun Development, L.P. v. Larry Hughes and Susan Hughes ( 2014 )

In The
Court of Appeals
Ninth District of Texas at Beaumont
____________________
NO. 09-12-00524-CV
____________________
SUN DEVELOPMENT, L.P., Appellant
V.
LARRY HUGHES AND SUSAN HUGHES, Appellees
_________________________________ ______________________
On Appeal from the 9th District Court
Montgomery County, Texas
Trial Cause No. 09-10-10214 CV
____________________________________________ ____________
MEMORANDUM OPINION
This appeal arises from the trial of a case that relates to Sun Development,
L.P.’s sale of a new home to Larry and Susan Hughes. After they purchased the
home, the Hugheses learned the home needed significant repairs. They then sued
Sun, alleging that Sun had breached the parties’ agreements and had engaged in
deceptive trade practices regarding the sale. At the conclusion of a jury trial, the
jury found that Sun had engaged in a deceptive trade practice, and that Sun had
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breached a Rule 11 1 agreement, which obligated Sun to do several things in return
for the Hugheses decision to exercise an option Sun gave them in return for closing
on the home. After the trial, the Hugheses elected to recover judgment against Sun
under the jury’s DTPA findings, as those findings allowed the Hugheses a greater
recovery.
In eight issues, Sun appeals from the trial court’s judgment. We agree with
Sun’s argument in its first issue, and hold that the trial court’s decision to deny
Sun’s request to identify the entity that installed the stucco on the home as a
responsible third party was error, and we further conclude that the error was
harmful. We reverse the trial court’s judgment, and we remand the cause for a new
trial.
Factual and Procedural Background
After the Hugheses signed a contract to purchase the home, they identified
several items that Sun agreed to complete or repair before the date the parties
selected to close on the sale. Before the closing date arrived, a dispute arose
regarding whether Sun had completed its work. Claiming that all of the items had
been substantially repaired, Sun filed a suit for declaratory judgment against the
1
Rule 11 of the Texas Rules of Civil Procedure requires agreements touching
“any suit pending” to be in writing, signed, and filed with the papers as part of the
record or made in open court to make such agreements enforceable. Tex. R. Civ. P.
11.
2
Hugheses in Galveston. In its suit, Sun asked the court to declare the rights of the
parties under the agreements relating to the home’s sale. To resolve the declaratory
judgment suit, the Hugheses and Sun signed a letter of agreement in 2008 that gave
the Hugheses two alternatives, the right to inspect and close on the home, or the
right to cancel their agreement to buy the home. The Rule 11 agreement gave the
Hugheses several days after they signed the agreement to inspect the home and
decide which of the options they wanted to exercise.
In August 2008, the Hugheses opted under the agreement to close on the
home. Under the Rule 11 agreement, given the Hugheses’ decision to purchase the
home, Sun’s builder and Sun were obligated to perform several future acts. For
instance, Sun’s builder was required to take “care of normal and customary punch
list items.” Sun was obligated to provide the Hugheses with a “2-10 warranty[,]” to
pay the Hugheses $15,000 at closing, and to give them a $12,000 credit for
landscaping and irrigation. Sun also agreed in the Rule 11 agreement that it would
dismiss its declaratory judgment action, and both parties agreed they would
execute mutual releases, which waived “any and all known causes of action that
either party could assert against the other arising from the home purchase
transaction.”
3
Had the Hugheses opted to cancel the sale, the Rule 11 agreement would
have required that Sun return the earnest money the Hugheses had paid on the
home, that Sun pay the Hugheses $45,000 for the expenses the Hugheses incurred
for items they had “purchased and used at the home[,]”and that Sun dismiss its suit
for declaratory judgment. Had the cancellation option been selected, the Rule 11
agreement still required both parties to execute mutual releases.
Approximately three months after closing on the home, the Hugheses hired
Lynn DeGeorge, a general contractor, consultant, and inspector to inspect the
stucco system on their home. DeGeorge holds certifications specific to inspecting
homes that are clad in stucco. Although the Hugheses had benefitted from several
inspections by inspectors who examined the home before they exercised the option
they were given in the Rule 11 to close on the home, none of the inspectors the
Hugheses utilized before they closed held certifications specific to inspecting
stucco. DeGeorge advised the Hugheses that the stucco on the home needed
extensive repair.
In 2009, the Hugheses filed suit against Sun, claiming that Sun had engaged
in deceptive trade practices in selling the home and that Sun had breached several
terms of the parties’ Rule 11 agreement that related to the purchase. The Hugheses’
live pleading at the time of the trial, their fourth amended petition, alleges that Sun
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knowingly failed to disclose information concerning the home’s construction with
the intent to induce them to purchase the home. The Hugheses also alleged that
they would not have purchased the home had Sun fully disclosed information
about the home that Sun knew about before the sale closed.
The case was tried to a jury in April 2012. At the conclusion of the trial, the
jury found that Sun failed to disclose “information concerning construction
services that was known at the time of the transaction with the intention to induce
[the Hugheses] into a transaction they otherwise would not have entered into if the
information had been disclosed.” On appeal, Sun argues that no evidence before
the jury shows that it knew, on the date the sale closed, of any problems that it did
not disclose. Additionally, Sun argues that the Hugheses relied solely on their own
inspections when they closed on the sale, and it argues that the Hugheses did not
rely on any of the information that it gave them when they finally decided they
wanted to close on the home.
During the trial, the respective home inspection reports obtained by the
Hugheses and Sun were admitted into evidence. The reports that each of the parties
received are evidentiary of what the parties knew regarding both the type and
scope of repairs the home needed at various times as the parties negotiated whether
the sale would close. The various reports and bids that Sun received from its
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inspector and from its contractors were also relevant to the jury’s evaluation of
whether Sun fully disclosed all it knew about the scope of repairs needed to the
stucco on the home.
We will first address the reports the Hugheses obtained from the inspectors
they hired. The Hugheses had the benefit of reports from three inspectors who had
looked at the home at various times before the sale closed. In 2007, Gordon Guffin
inspected the home. Guffin gave the Hugheses a written report regarding his
inspection, and his report identified several exterior and interior construction
problems that needed to be addressed. The problems that Guffin reported include
indoor and outdoor water leaks at various specific locations. The types of problems
that Guffin reported, however, were matters the jury could have decided that the
builder addressed through repairs before the date that the sale finally closed.
In March 2008, George Guajardo, the owner of a restoration and cleaning
company, inspected the home for the Hugheses. Guajardo’s thermal image report is
among the evidence the jury considered in determining what the Hugheses learned
regarding the home’s moisture problems before they decided to close on the home.
Guajardo’s report noted the existence of “possible moisture or improper
insulation” in several areas of the home, and he suggested that his company be
hired to further investigate the existence of any possible moisture problems by
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using a moisture meter to probe the walls in seven areas that his report identifies.
There was no testimony at the trial showing that Guajardo’s company did any
further testing at the home or that he ever confirmed that the home had moisture
problems. The jury could have also concluded that the repairs the builder
performed after March 2008 and before closing left the Hugheses with the
impression that the problems Guajardo had identified in his report were resolved.
In June 2008, the Hugheses hired Gene Montgomery of Island Home
Inspections to inspect the home. Montgomery’s report includes a punch list, which
identifies the items he found in his inspection that he felt needed to be repaired.
Montgomery’s report does not indicate that he performed any tests to evaluate the
moisture levels in the home or that he confirmed that moisture problems still
existed at the home. The most significant finding in Montgomery’s report notes
that the concrete finish on the first floor was substandard. However, the Hugheses
never complained at trial that Sun knew and failed to disclose that problem, nor did
they complain that Sun knew and failed to disclose the other cosmetic problems
that are noted in Montgomery’s report. The repairs that Montgomery
recommended in his report are largely cosmetic, and none of the repairs
Montgomery suggested addressed any of the water or moisture problems that were
referred to in Guffin’s or Guajardo’s reports. Montgomery did note that the air
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conditioning system in the attic was condensing at an abnormal rate, and he noted
that he saw water dripping from the plenum of the air conditioner onto the attic
deck. With respect to that issue, Montgomery recommended that the Hugheses
have a licensed air conditioning technician inspect the air system. Nevertheless, the
jury could have reasonably concluded that Montgomery’s report did not disclose
any problems regarding the stucco installation, and that it did not indicate that
Montgomery identified any problems relating to the presence of excessive
moisture in the home’s walls. Although there are stucco-related repairs that are
referenced in Montgomery’s report, the jury could have reasonably viewed the
items Montgomery mentioned as items the Hugheses reasonably believed the
builder had repaired before closing as they were all cosmetic.
Separately, Sun received two reports from its inspector that it did not share
with the Hugheses before the date the sale closed. The jury could have concluded
that the undisclosed reports provided Sun with information indicating that the
problems with the stucco installation were significant and were not just cosmetic.
The two undisclosed reports were authored by Rhondalyn Riley, the president of
Exterior Inspections, Inc., who inspected the home at Sun’s request. Riley has
certifications as a licensed professional real estate inspector through the Texas Real
Estate Commission and as a moisture analyst for inspecting exterior insulation
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finishing systems (stucco) through the Exterior Design Institute, 2 as well as a
certification through the Associated Wall and Ceiling Industry. 3 The record reflects
that Riley was the only certified stucco inspector who provided reports regarding
the stucco on the home prior to closing. After each inspection, she provided Sun
with a report addressing the stucco on the home. Riley’s first two reports, her
March 2008 and her initial June 2008 report, were not disclosed to the Hugheses
before they closed on the home. Riley’s third and last report of June 26, 2008,
which notes that the stucco had undergone repairs and was performing, was the
sole report that Sun provided to the Hugheses. The evidence also showed that Sun
gave Riley’s last report to the Hugheses during the negotiations over the Rule 11
agreement. After receiving Riley’s report, and before deciding to exercise the
option to close on the home, the evidence did not show that the Hugheses obtained
their own certified stucco inspector to inspect the stucco on the home.
Riley’s initial report, dated March 2008, states that the purpose of her report
was to “help determine potential problem areas which may warrant more
investigation.” Riley’s March report notes that Exterior Inspections was “engaged
2
According to Riley, the Exterior Design Institute is a national certifying
body that certifies people to inspect stucco and to test for moisture.
3
Riley explained that the Associated Wall and Ceiling Industry is another
industry organization that provides training and certifications in the inspection of
stucco.
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to conduct a visual survey of the condition of the stucco cladding and [do] a
moisture analysis of the exterior walls[.]” Riley’s March report identified high
moisture readings at levels of 20% or higher in three specified locations in the
home’s walls, medium moisture readings at levels of more than 16% but less than
20% in three other walls, and several additional stucco problems that Riley thought
were in need of repair. Riley recommended that core sampling be done in areas
where moisture levels exceeded 25%, and she also recommended core sampling in
areas where there was no sheathing or soft sheathing on the exterior of the home.
Although the evidence shows that the Hugheses asked Sun on several occasions
before they closed on the home for a copy of Riley’s March 2008 report, the
evidence shows that Sun did not disclose Riley’s March 2008 report before the
Hugheses decided to close on the home.
Riley conducted her second stucco inspection on the home on June 9, 2008.
Riley’s June 9 report notes that some of the deficiencies she found in March had
been repaired, but she also notes in her second report that most of the items
identified in her first report had not yet been fixed. Riley’s June 9 report does not
show that she retested the areas previously tested in March. Riley’s June 9 report
recommends that core sampling be done in those areas where high moisture
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readings were found. Sun never gave the Hugheses a copy of Riley’s June 9 report
before they exercised their option to close on the home.
Riley conducted a third stucco inspection on June 26, 2008, and Sun
provided the Hugheses a copy of Riley’s June 26 report during the negotiations
that led the parties to sign the Rule 11 agreement. Riley’s June 26 report
specifically mentions that moisture testing equipment was not used during her June
26 inspection. Although Riley’s June 26 report mentions that high moisture levels
had been found, her June 26 report did not reflect where the high moisture levels
were found, information contained in both of her earlier reports. Riley’s June 26
report indicates that she was told that core sampling had been done, as it states:
“Stucco core samples made, per builder, to investigate high moisture readings[;]”
however, none of Riley’s reports indicate that Riley personally knew whether core
sampling had been done or that she knew what the builder and Sun had found
based on any core sampling that was done. Although the builder testified at the
trial, he was never asked to address whether he had witnessed any core sampling
being done, nor was he asked if he knew what the results of any core sampling had
shown. Riley’s testimony indicates that during her last June 2009 inspection, she
observed signs on the walls of the home that were consistent with someone having
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done core sampling in the areas where she had reported high moisture levels to be
present.
Sun’s corporate witnesses were also relevant to the jury’s resolving why Sun
might have chosen to provide the Hugheses with only one of Riley’s three reports.
Sun’s President and CEO indicated during his testimony that the purpose of giving
the June 26 report to the Hugheses was to show that the stucco on the home met all
standards. But, Riley’s March report can be viewed as revealing the presence of
possible serious and extensive stucco problems, and given Riley’s lack of personal
knowledge about the repairs, her last report when viewed in isolation, as
potentially misleading. Even Riley agreed during trial that a person purchasing the
home “[p]erhaps” might have liked to have known that there were very high
moisture readings in the locations identified in her March report. Riley testified at
the trial that had she been purchasing the home, she would have wanted to know
about the moisture problems and the repairs that had been done to address those
problems. Also, Riley did not dispute that two of the moisture readings that she
reported in her March report “were off the charts.” Riley’s last report did not
disclose the moisture readings, as these were reported in her earlier reports.
While the Hugheses acknowledged during the trial that they knew of various
problems with the home at closing, they disputed that Sun disclosed the extent of
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the moisture problems related to the installation of the stucco on the home or that
they were told at closing of the extent of the repairs Sun knew were still needed to
fix those problems. Before closing, the Hugheses requested that Stuart Lapp, Sun’s
counsel, provide the March report to them. Lapp advised the Hugheses’ attorney
that although he had not seen the March report, he understood the June 26 report
that he provided did not identify any problems with the stucco on the home. The
evidence shows that Lapp told the Hugheses’ attorney during the negotiations that
led to the signing of the Rule 11 agreement that “[i]f that is true, I question why
you or your clients would feel the need to see a prior report rather than rely on the
report they have that reflects no problems with the stucco.” At trial, Lapp testified:
“In hindsight, I wish that I had found that report and personally given it to them[.]”
Lapp also testified that had he disclosed the March report prior to the sale of the
home, “we wouldn’t be here today.” According to the Hugheses, by choosing to
disclose only Riley’s last report, Sun led them to believe that all of the stucco-
related problems had been fixed.
The jury found in the Hugheses’ favor on their nondisclosure claim, and
found that Sun had knowingly engaged in the conduct at issue. The jury found the
Hugheses had actual damages of $647,713 on their DTPA claim, awarded punitive
damages of $85,000, and found the Hugheses should recover attorneys’ fees from
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Sun for the trial and also gave the Hugheses conditional awards of attorneys’ fees
in the event the case was appealed.
Standard of Review
First, we will address the arguments that Sun has advanced in issues two and
three, as if these were resolved in Sun’s favor, we would be required to render a
judgment in Sun’s favor. See Lone Star Gas Co. v. R.R. Comm’n of Tex., 767
S.W.2d 709, 710 (Tex. 1989) (per curiam). In issue two, Sun argues the evidence is
legally insufficient to support the jury’s DTPA findings. In issue three, Sun argues
the evidence before the jury conclusively established that the Hugheses agreed to
release all of their claims.
Claims challenging the legal sufficiency of the evidence are characterized as
either “‘no evidence’” challenges or “‘matter of law’” challenges, depending on
which party has the burden of proof. Raw Hide Oil & Gas, Inc. v. Maxus
Exploration Co., 766 S.W.2d 264, 275 (Tex. App.—Amarillo 1988, writ denied).
Because Sun did not have the burden of proof on the DTPA issue, Sun must
demonstrate in its appeal that no evidence supports the jury’s DTPA findings to
prevail on the arguments that it advances in issue two. See Croucher v. Croucher,
660 S.W.2d 55, 58 (Tex. 1983); Christus St. Mary Hosp. v. O’Banion, 227 S.W.3d
868, 873 (Tex. App.—Beaumont 2007, pet. denied).
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With respect to the arguments Sun raises in issue three, which concern the
enforcement of the Rule 11 agreement, the law also required the Hugheses to prove
that they were entitled to avoid their obligations under the parties’ Rule 11
agreement. See Williams v. Glash, 789 S.W.2d 261, 264 (Tex. 1990) (explaining
that burden of proving that a claim was unknown, once defense of release of
known claims is shown and there is evidence that the parties agreed to release
known claims, is on the party attempting to avoid the release under a claim of
mutual mistake). Although the jury was not asked to specifically resolve an issue
that included an instruction about all of the elements relevant to a claim of mutual
mistake, we are required to assume the trial court found any of the omitted
elements on the question of mutual mistake in a manner that supports the trial
court’s judgment. See Tex. R. Civ. P. 279 (providing that omitted elements of a
claim “shall be deemed found by the court in such manner as to support the
judgment”); Tri v. J.T.T., 162 S.W.3d 552, 558 (Tex. 2005). In this case, one of the
implied findings is that the Hugheses were unaware at the time they exercised their
option to close on the home that the various repairs which had been done by the
builder were inadequate. See Tex. R. Civ. P. 279. Thus, Sun must also demonstrate
that there is no evidence supporting the trial court’s implied findings to prevail on
15
the arguments it has advanced in issue three. See Croucher, 660 S.W.2d at 58; Raw
Hide Oil & Gas, 766 S.W.2d at 276.
We use an objective standard to evaluate whether the evidence presented to
a jury is legally sufficient to support a verdict. See City of Keller v. Wilson, 168
S.W.3d 802, 827 (Tex. 2005). If the evidence being reviewed allowed reasonable
and fair-minded people to reach the verdict being reviewed, the appeals court is
required to uphold the judgment. Id. In a legal sufficiency review, appellate courts
are to “credit favorable evidence if reasonable jurors could, and disregard contrary
evidence unless reasonable jurors could not.” Id.; see also Kroger Tex. Ltd. P’ship
v. Suberu, 216 S.W.3d 788, 793 (Tex. 2006). A legal sufficiency challenge will be
sustained “when, among other things, the evidence offered to establish a vital fact
does not exceed a scintilla.” Suberu, 216 S.W.3d at 793. “Evidence does not
exceed a scintilla if it is ‘so weak as to do no more than create a mere surmise or
suspicion’ that the fact exists.” Id. (citing Ford Motor Co. v. Ridgway, 135 S.W.3d
598, 601 (Tex. 2004)).
Analysis — Legal Sufficiency Issues
To prevail on a DTPA claim, DTPA plaintiffs are required to show (1) that
they were consumers with respect to the purchase at issue; (2) that the defendant
engaged in false, misleading, or deceptive acts; and (3) that the defendant’s acts
16
were a producing cause of their damages. See Tex. Bus. & Com. Code Ann. §
17.50(a) (West 2011); Doe v. Boys Clubs of Greater Dallas, Inc., 907 S.W.2d 472,
478 (Tex. 1995); Main Place Custom Homes, Inc. v. Honaker, 192 S.W.3d 604,
623 (Tex. App.—Fort Worth 2006, pet. denied). In this case, the trial court defined
a “‘[f]alse, misleading, or deceptive act or practice’” as:
Failing to disclose information concerning construction services that
was known at the time of the transaction with the intention to induce
Plaintiffs into a transaction they otherwise would not have entered
into if the information had been disclosed.
See Tex. Bus. & Com. Code Ann. § 17.46(b)(24) (West 2011).
The Hugheses submitted and prevailed under a failure to disclose claim.
Under the DTPA, an actionable failure to disclose a claim requires the plaintiff to
show that the defendant knew of the information, that the defendant failed to bring
the information to the plaintiff’s attention, and that the information was withheld
with the intent to induce the consumer to engage in a transaction. See Doe, 907
S.W.2d at 479; Willowbrook Foods, Inc. v. Grinnell Corp., 147 S.W.3d 492, 507
(Tex. App.—San Antonio 2004, pet. denied). Information is material if a
reasonable person would attach importance to it and would be induced to act on it
to determine whether to make the transaction in question. See Citizens Nat’l Bank
v. Allen Rae Invs., Inc., 142 S.W.3d 459, 478-79 (Tex. App.—Fort Worth 2004, no
pet.).
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To demonstrate that the nondisclosure of known facts was a producing cause
of a plaintiff’s DTPA damages, the nondisclosure at issue must be shown to have
been a substantial factor that brought about the plaintiff’s injury, without which the
injury would not have occurred. See Doe, 907 S.W.2d at 481. Given the issue
submitted to the jury in this case, the jury was required to find that Sun knowingly
failed to disclose information concerning Sun’s construction services that induced
the Hugheses to purchase a home they would not have purchased had such
information been disclosed. The primary focus of the trial concerned the
Hugheses’ stucco-installation claim. With respect to their nondisclosure recovery
under that claim, the Hugheses were required to prove that before closing, Sun
failed to disclose that it knew the stucco repairs done on the home had not fixed the
problems that it had identified before the Hugheses exercised their option to close
on the home, and that had those problems about which it knew been disclosed, the
Hugheses would not have exercised their option to purchase the home.
The jury in Sun’s case considered a variety of alleged nondisclosure claims
submitted in a broad form charge. The jury found that Sun failed to disclose
information concerning its construction services, that the Hugheses had relied to
their detriment on the nondisclosure, and that the nondisclosure of the information
was a producing cause of the Hugheses’ damages. In issue two, Sun argues that its
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alleged nondisclosures about the stucco could not have been a producing cause of
the Hugheses’ damages because there was no evidence supporting the jury’s
determination that the Hugheses were unaware at closing that the home had stucco
problems. But, Sun’s argument largely ignores the inferences that a jury could
reasonably draw from the evidence, as the evidence, when viewed in the light most
favorable to the jury’s verdict, allowed the jury to conclude that differences existed
in what each of the parties knew regarding what was wrong with the stucco on the
home. Sun’s argument also ignores the reasonable inference from the evidence
tending to show that the parties did not have the same level of knowledge about
what had been done to repair the stucco before the Hugheses exercised their option
to purchase the home. Additionally, Sun’s argument ignores evidence that tends to
show the Hugheses were unaware that Sun had received a bid to repair the stucco
several times larger than what it spent on repairs.
On the evidence before the jury, the jury could have reasonably concluded
that Sun had encouraged the Hugheses to rely on Riley’s third report in deciding
that the stucco had been adequately repaired, as Sun’s representatives presented it
as a report indicating that the stucco problems had been fully repaired. Sun agrees
that it reached that same conclusion from Riley’s third report, and it contends that
the jury could not have rejected its claim as unreasonable. But, Sun’s argument
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ignores the other evidence that allowed the jury to infer that it knew the report did
not mean the repairs that it paid for were adequate to fix the problems with the
stucco on the home, and the repairs that Sun paid to have done to the stucco were
largely cosmetic.
For example, Riley’s June 26 report states the stucco was performing as
intended at that time; the report does not necessarily support Sun’s claim that the
problems that Riley had identified in her earlier reports had been fully repaired.
Essentially, Sun disputes the inferences that reasonable jurors could draw from the
conflicting evidence addressing what Sun knew about the stucco and what repairs
were needed to the stucco before the sale closed. The evidence demonstrates that
both parties learned generally that there had been problems associated with the
stucco installation and that both parties were aware that Sun had its builder do
something to repair problems with the stucco on the home. However, the evidence
also provided the jury with conflicting inferences on whether Sun reasonably
believed all of the problems with the stucco were fully repaired by the repairs that
it authorized. For example, the jury was entitled to conclude on this record that Sun
selectively provided the Hugheses with Riley’s June 26 report and that it did not
provide them with her earlier reports to mislead them about the nature and extent
of the problems with the stucco on the home. The jury could also have reasonably
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inferred from all of the evidence that a full disclosure by Sun of what it knew about
the stucco problems on the home would have revealed to the Hugheses that the
repairs Sun authorized were insufficient to address the scope and extent of the
problems identified by Riley in her two undisclosed reports.
Circumstantial evidence also allowed the jury to infer that Sun was aware
that the repairs it authorized were insufficient to address the scope of the problems
that Riley had identified regarding the installation of the stucco on the home. The
evidence before the jury includes evidence showing that before closing, Sun’s
builder received a bid for repairing the stucco from Robert Territo, the owner of
Allstar Stucco. Territo’s bid to repair the stucco was based on the problems that
Riley noted in her March report, and his bid was substantially more than the
amount Sun proved that it paid to address the problems identified by Riley in her
reports. According to Territo, he submitted a bid of approximately $100,000 to
repair the stucco, a bid that he testified he based on Riley’s initial report. During
the trial, Territo explained that after giving the initial bid, Sun’s builder asked that
he revise his bid because he was told that they wanted to “control some of the costs
themselves[.]” After providing Sun’s builder a revised bid, Territo explained that
he “[n]ever heard back from [Sun’s builder].” There was evidence that Sun
received a copy of Territo’s bid, and nothing showed that the Hugheses were aware
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before they closed on Territo’s bid. Under the circumstances, the jury could have
reasonably inferred that Sun was aware that the costs to repair the items identified
by Riley would be approximately $100,000. Additionally, at trial Territo testified
that during construction, he told Sun’s builder there were major defects and flaws
in the stucco. Territo testified that the entire stucco system on the home, in his
opinion, was flawed from the start. Territo recommended that Sun hire a certified
inspector to inspect the home. According to Territo, the home’s stucco-related
issues at the time of the trial were all due to the original application of stucco.
Sun did not spend anything approaching $100,000 to repair the stucco on the
home. The evidence before the jury indicates that Sun spent approximately
$21,550 before closing in an effort to repair the problems Riley identified with the
stucco on the home. Several months after the Hugheses purchased the property,
Territo saw the home again. According to Territo, the repairs that he saw “[l]ooked
like somebody put a band-aid on a bullet wound[,]” and he described the repairs as
a “patch-and-coverup job of all the existing conditions that were done
improper[ly].” The disparity between the bid that Sun received from Territo and
the amount that it paid to repair the stucco, together with Territo’s description
about the repairs that he saw done to the home, is some of the evidence from which
the jury could reasonably conclude that Sun knew, at closing, that the repairs it
22
authorized were inadequate to fix the problems that it knew existed. Given the
inferences available from the conflicting evidence regarding the parties’ respective
levels of knowledge on the problems and what had been done to remedy them as of
closing, the jury’s conclusion that Sun failed to disclose material information that
was material to the transaction was not unreasonable.
There was also legally sufficient evidence to support the jury’s conclusion
that Sun’s material nondisclosure of what it knew caused the Hugheses’ damages.
Riley, Sun’s inspector, indicated during her testimony at trial that she would have
wanted to have the information found in her reports before deciding to purchase a
home. See Citizens Nat’l Bank, 142 S.W.3d at 478-79 (noting that “‘[m]aterial’
information is that which a reasonable person would attach importance to and
would be induced to act on in determining his choice of actions in the transaction
in question”). Lapp essentially admitted in his testimony that the suit would not
have resulted had Riley’s first report been disclosed.
Also, the conflicting inferences in the evidence cause us to reject Sun’s
argument that the Hugheses relied solely on their own inspectors in deciding to
purchase the home. First, the Hugheses never testified that they relied solely on
their own inspections or their own inspectors in deciding to close on the home.
Additionally, the Hugheses testified that they would not have purchased the home
23
had Sun provided them with the information it had about the problems with the
stucco on the home. While there is evidence that the Hugheses had knowledge
about some of the home’s stucco problems, the jury could have reasonably inferred
that the Hugheses thought Sun had repaired those problems before closing with the
exception of several minor cosmetic items, items they were also led to believe that
Sun would fix in the course of completing a punch list of items that Sun agreed to
repair after the Hugheses exercised their option to close on the home. In this case,
the damage evidence does not indicate that the jury’s damage award was based on
the items on their punch list. Lynn DeGeorge, the certified stucco inspector the
Hugheses hired to inspect their home approximately three months after they closed
on the home, testified at trial that the stucco problems that still needed to be
repaired related to the original stucco installation. According to DeGeorge, Sun’s
repairs were of “very poor quality,” and he explained that when the stucco was
installed, there were a “lot of things that were overlooked or omitted that [he]
considered to be contributing factors to some of the damage[.]”
We conclude that the record contains legally sufficient evidence from which
the jury could reasonably conclude that Sun’s nondisclosures were both material
and a producing cause of the Hugheses’ damages. See Kupchynsky v. Nardiello,
230 S.W.3d 685, 689 (Tex. App.—Dallas 2007, pet. denied) (rejecting seller’s
24
causation argument in a DTPA case where there was no evidence that buyer relied
solely on the opinion of his inspector in purchasing a home where problems related
to leaks were more extensive than the problems identified by the buyer’s
inspector); Kessler v. Fanning, 953 S.W.2d 515, 519 (Tex. App.—Fort Worth
1997, no pet.) (rejecting seller’s argument that buyer’s inspection report was an
intervening factor that broke the causal connection where the evidence showed the
buyer relied on several factors, including the seller’s honesty in presenting the
property). The evidence shows that Sun possessed superior information about the
nature and extent of the stucco problems and the repairs needed to fix them. See
Bernstein v. Thomas, 298 S.W.3d 817, 822-23 (Tex. App.—Dallas, no pet.)
(affirming judgment in favor of buyer based on seller’s failure to disclose report
recommending foundation repair when both parties were aware of floor slope but
only seller was aware of the extent of the repairs needed to remedy the problem).
Considering the entire record, the evidence allowed the jury to reasonably
conclude that a causal connection existed between Sun’s failure to fully disclose
what it knew about the stucco repairs that were still needed at closing, the
Hugheses’ decision to close on the home, and the Hugheses’ damages. See
Honaker, 192 S.W.3d at 619-20. We overrule all of the legal sufficiency arguments
that Sun has advanced in issue two.
25
In issue three, Sun argues the Hugheses agreed in the Rule 11 agreement to
release the claims on which the jury’s DTPA finding is based. Essentially, Sun
contends it is entitled to have the Rule 11 agreement enforced. But, under the Rule
11 agreement, Sun promised to provide the Hugheses with certain repairs and to
provide a homeowner warranty in consideration for the Hugheses’ agreement to
release their claims. And, the jury found that Sun failed to comply with its
obligations under the Rule 11 agreement, a finding that is supported by the record.
The evidence before the jury allowed the jury to conclude that after closing, Sun
failed to fully complete the punch list and to provide the Hugheses the 2-10
warranty referenced in the Rule 11 agreement.
Viewed in the light most favorable to the jury’s verdict, we conclude the
evidence allowed the jury to reasonably conclude that Sun had breached the
parties’ Rule 11 agreement. See Roberts v. Clark, 188 S.W.3d 204, 209 (Tex.
App.—Tyler 2002, pet. denied) (“A breach of contract occurs when a party fails or
refuses to perform an act that it expressly promised to do.”); see also City of
Keller, 168 S.W.3d at 827. Moreover, even had the Hugheses signed a release, the
Rule 11 agreement only required the Hugheses to release their “known claims.”
See D.R. Horton-Texas, Ltd. v. Savannah Properties Assocs., L.P., 416 S.W.3d
217, 226 (Tex. App.—Fort Worth 2013, no pet.) (“Claims not clearly within the
26
subject matter of the release are not discharged, even if those claims exist when the
release is executed.”).
Because the jury found that Sun breached the Rule 11 agreement, the
Hugheses were excused from performing their obligation under the agreement to
sign a release of their known claims. See Mustang Pipeline Co. v. Driver Pipeline
Co., 134 S.W.3d 195, 196 (Tex. 2004) (“It is a fundamental principle of contract
law that when one party to a contract commits a material breach of that contract,
the other party is discharged or excused from further performance.”). Additionally,
the trial court’s judgment creates an implied finding that the stucco problems that
existed at closing were not “known claims” at closing. See Tex. R. Civ. P. 299
(Omitted Findings). Because the record contains evidence that allowed the jury to
reasonably conclude that Sun had breached the Rule 11 agreement, and because the
evidence allowed the factfinder to conclude that the stucco problems at closing
were not known to the Hugheses when the parties closed on the home, we reject
the legal sufficiency arguments advanced by Sun in issue three.
Analysis — Responsible Third Parties
In issue one, Sun argues that it should receive a new trial because the trial
court erred when it denied Sun’s requests to designate several entities and
individuals as responsible third parties: Sonrise Homes, Inc., Shamrock Stucco and
27
Construction, Alpine Air, Inc., Sullivan, Stevens, Henry, Oggero & Associates,
Inc., John Loudermilk, and Iron Access. See Tex. R. Civ. P. 38 (Third-Party
Practice). We review the trial court’s decision denying Sun’s motion to designate
Shamrock Stucco as a responsible third party for abuse of discretion. See MCI
Sales & Serv., Inc. v. Hinton, 272 S.W.3d 17, 35 (Tex. App.—Waco 2008), aff’d,
329 S.W.3d 475 (Tex. 2010); see also In re Unitec Elevator Servs. Co., 178
S.W.3d 53, 58 (Tex. App.—Houston [1st Dist.] 2005, orig. proceeding); In re
Arthur Anderson LLP, 121 S.W.3d 471, 483-85 (Tex. App.—Houston [14th Dist.]
2003, orig. proceeding).
According to Sun, the jury should have been asked to apportion the
responsibility for the damages the Hugheses recovered between it and “the
homebuilder, the designer, the inspector, the stucco contractor, the HVAC
contractor, and the ironworks contractor.” However, no apportionment issue was
submitted to the jury because the trial court denied Sun’s pretrial motions asking
the trial court to designate these various individuals and entities as responsible
third parties.
The Hugheses argue that any error with respect to the trial court’s rulings
regarding these designations was harmless. According to the Hugheses, Sun was
not harmed by the trial court’s ruling because it may still sue these individuals and
28
entities for contribution. They also argue that Sun could have avoided any harm it
suffered had it joined the individuals and entities to the case as third-party
defendants. See Tex. R. App. P. 44.1(a) (Standard for Reversible Error); see
Ingersoll-Rand Co. v. Valero Energy Corp., 997 S.W.2d 203, 210 (Tex. 1999)
(explaining that a claim for indemnity accrues when the defendant’s “liabilities
become fixed and certain by judgment”). Alternatively, the Hugheses contend that
the affirmative finding on the DTPA issue resulted solely from Sun’s
nondisclosures, and not any nondisclosures of the responsible third parties that Sun
sought to designate. The Hugheses conclude that alleged error, if any, from the
trial court’s rulings on Sun’s motions to designate were harmless.
That Sun had a right to seek contribution by joining other defendants,
however, does not mean it cannot show that it was harmed by the trial court’s
rulings on the motions at issue. Contribution is a claim for damages, and generally,
the third-party plaintiff joins the contribution defendant as a party to the suit. See
Tex. R. Civ. P. 38. While the Rules of Civil Procedure allow defendants to seek
contribution, the right to designate responsible third parties is statutory and does
not require the defendant to join the responsible third party to the suit. Tex. Civ.
Prac. & Rem. Code Ann. § 33.004(a) (West Supp. 2014) (“A defendant may seek
29
to designate a person as a responsible third party by filing a motion for leave to
designate that person as a responsible third party.”).
In DTPA cases, by statute, defendants have the right to designate others as
responsible third parties. Id. § 33.002(a)(2) (West 2008). The motion to designate a
responsible third party must be filed “on or before the 60th day before the trial date
unless the court finds good cause to allow the motion to be filed at a later date.” Id.
§ 33.004(a). A “[r]esponsible third party” is defined as follows:
[A]ny person who is alleged to have caused or contributed to causing
in any way the harm for which recovery of damages is sought,
whether by negligent act or omission, by any defective or
unreasonably dangerous product, by other conduct or activity that
violates an applicable legal standard, or by any combination of these.
Id. § 33.011(6) (West 2008). A defendant may designate a responsible third party
even though the third party has defenses to liability, cannot be joined as a third-
party defendant, and is not liable to the parties who are involved in the suit. See
Galbraith Eng’g Consultants, Inc. v. Pochucha, 290 S.W.3d 863, 868-69 (Tex.
2009). We conclude that the statute governing a defendant’s right to identify
responsible third parties creates a right to do so that does not depend on a
defendant’s ability to join others on claims for contribution. We are not persuaded
by the Hugheses argument that Sun was required to join others as parties to
demonstrate harm when the trial court’s ruling deprived Sun of a statutory right it
30
was given to pursue a strategy that did not require that it join others as parties to
the suit. Additionally, the Hugheses could have just as easily avoided any question
of harm by agreeing to Sun’s motions to designate the responsible third parties at
issue. In our opinion, Sun preserved its right to complain of the trial court’s alleged
error by filing timely motions to designate several individuals and entities as
responsible third parties and by obtaining rulings on its requests. See Tex. R. App.
P. 33.1(a).
We are also not persuaded by the Hugheses’ argument that all of their
damages are attributable solely to Sun’s nondisclosures. The Legislature, through
Chapter 33 of the Civil Practice and Remedies Code, enacted legislation that
allows juries to apportion the responsibility for the damages between “each
person’s causing or contributing to cause in any way the harm for which recovery
of damages is sought[.]” Tex. Civ. Prac. & Rem. Code Ann. § 33.003(a) (emphasis
added). With respect to the stucco installer, for example, the evidence before the
jury would have allowed the jury to apportion some of the fault for repairing the
stucco to the entity that installed the stucco on the home. The alleged problems
with the installation, on this record, were clearly caused or contributed in some
way to the damages the jury awarded for the cost of repairing the stucco on the
home.
31
To demonstrate that the trial court erred in its rulings and that Sun was
harmed by the rulings, Sun must show that it filed a timely motion to designate the
others it sought to designate as responsible third parties, and that had a
proportionate responsibility issue been submitted, the jury, in all likelihood, would
have decided to apportion fifty percent or more of the responsibility for the
damages awarded by the jury to the others. See Tex. Civ. Prac. & Rem. Code Ann.
§ 33.013(a), (b)(1) (providing that a defendant is jointly and severally liable for the
claimant’s damages if “the percentage of responsibility attributed to the defendant
with respect to a cause of action is greater than 50 percent”). To assess whether the
trial court’s rulings harmed Sun, we first assess whether Sun was harmed by the
trial court’s decision to deny Sun’s motion to designate the stucco installer,
Shamrock Stucco, as a responsible third party.
The record shows that Sun’s request to designate Shamrock Stucco as a
responsible third party was timely. See Tex. Civ. Prac. & Rem. Code Ann. §
33.004(a). When a defendant files a timely motion, Chapter 33 provides that “[a]
court shall grant leave to designate the named person as a responsible third party
unless another party files an objection to the motion for leave on or before the 15th
day after the date the motion is served.” Id. § 33.004(f) (West Supp. 2014). The
Hugheses did not file a timely objection to Sun’s motion to designate Shamrock
32
Stucco as a responsible third party. We conclude the trial court erred by denying
Sun’s timely request to designate Shamrock Stucco as a responsible third party.
See id.; In re Smith, 366 S.W.3d 282, 287 (Tex. App.—Dallas 2012, orig.
proceeding) (noting that “[u]nder [section 311.016(2)4 of] the Code Construction
Act, the word ‘shall’ ‘imposes a duty’ unless context necessarily requires a
different meaning or express statutory text provides otherwise”).
We are also persuaded that, based on the evidence before the jury, the jury
would likely have found the stucco installer responsible for the majority of the
damages the jury awarded to correct the stucco problems on the Hugheses’ home.
The jury awarded $647,613 in actual damages, but the jury’s award included
expenses for repairing a number of items that are unrelated to the stucco on the
home. Nonetheless, the evidence before the jury indicated that it would cost
$407,232 to replace the stucco on the home. Given the evidence on the amount
needed to repair the stucco, the amount the jury decided to award in actual
damages, and the evidence in the record tending to show that the stucco installer
bore significant responsibility for the problems that required repair, we hold that
the trial court’s error likely resulted in a judgment against Sun that made it pay an
amount for which it would not have been required to pay had the jury been asked
4
Tex. Gov’t Code Ann. § 311.016(2) (West 2013).
33
to answer an issue that apportioned the damages that stemmed from the stucco
installation between Sun and Shamrock Stucco.
We conclude the trial court’s decision to deny Sun’s request to designate
Shamrock Stucco as a responsible third party was harmful. See Tex. R. App. P.
44.1(a)(1). We further conclude that the error prevented Sun from properly
presenting its case on appeal by depriving it of the ability to conclusively show that
the jury would have answered an apportionment issue that would cast it in
judgment for an amount that differs from the amount it must pay under judgment
the trial court rendered. See id. 44.1(a)(2); see also In re Broker Logistics, Ltd.,
320 S.W.3d 402, 408 (Tex. App.—El Paso 2010, orig. proceeding); In re Arthur
Anderson LLP, 121 S.W.3d at 485-86.
Sun argues that it is entitled to a retrial as to all parties and all issues due to
the trial court’s error. Under the circumstances, we agree that the proper remedy is
to remand the case for another trial. On retrial, given that a new trial date is
required, we assume that a new docket control order will be entered, and that the
new docket control order will designate and control the date Sun will be required
to file its motions designating others as responsible third parties. The Hugheses
will then have an opportunity to object to Sun’s motions. Because another trial is
required, evaluating the trial court’s remaining rulings regarding the other
34
responsible third parties is unnecessary, given our conclusion that Sun was harmed
by the trial court’s decision denying Sun’s request as to Shamrock Stucco.
Therefore, we need not reach Sun’s remaining arguments in issue one,5 nor do we
need to reach the other arguments that Sun has advanced in its other issues. See
Tex. R. App. P. 47.1. Because the trial court erred in denying Sun’s request to
designate Shamrock Stucco as a responsible third party and its error was harmful,
the judgment is reversed, and the case is remanded on all issues for a new trial.6
REVERSED AND REMANDED.
________________________________
HOLLIS HORTON
Justice
Submitted on November 21, 2013
Opinion Delivered September 25, 2014
Before McKeithen, C.J., Kreger and Horton, JJ.
5
With respect to Sun’s requests to designate Sonrise Homes, Inc., Alpine
Air, Inc., and Sullivan, Stevens, Henry, Oggero & Associates, Inc., as responsible
third parties, the record shows that Sun’s requests were timely and that the
Hugheses’ objections were untimely.
6
We also need not address the Hugheses’ cross-point challenging the trial
court’s failure to submit a jury question, as the resolution of that issue would not
result in any greater relief. See Tex. R. App. P. 47.1.
35
DISSENTING OPINION
I would sustain issue two in part, and reverse the jury’s decision finding that
Sun’s failure to disclose Rhondalyn Riley’s March 2008 Stucco Report was a
producing cause of the Hugheses’ damages.
A failure to disclose material information requires that the defendant knew
the information, intentionally failed to bring it to the plaintiff’s attention, and
withheld the information with the intent of inducing the consumer to engage in a
transaction. Doe v. Boy Clubs of Greater Dallas, Inc., 907 S.W.2d 472, 479 (Tex.
1995); Willowbrook Foods, Inc. v. Grinnell Corp., 147 S.W.3d 492, 507 (Tex.
App.—San Antonio 2004, pet. denied). Information is material if a reasonable
person would attach importance to the information and would be induced to act on
it when determining his choice of actions. Citizens Nat’l Bank v. Allen Rae Invs.,
Inc., 142 S.W.3d 459, 478-79 (Tex. App.—Fort Worth 2004, no pet.). The plaintiff
must establish that the defendant’s action was a substantial factor that brought
about the plaintiff’s injury and without which the injury would not have occurred.
Doe, 907 S.W.2d at 481.
At trial, Stuart Lapp admitted that the Hugheses did not see Riley’s March
2008 stucco report before closing, but he testified that he did not know the report
existed. However, Pamela Brand, a Sun representative, testified that she had told
36
Lapp about Riley’s March report. According to the record, Lapp subsequently told
the Hugheses that he was unaware of an initial report. Lapp explained that Sun was
not under contract with the Hugheses when Riley authored the March report and
that once the parties reached an agreement, Sun furnished Riley’s more recent June
report. Lapp told the Hugheses that, although he had not seen the June report, it did
not identify problems with the stucco.
Riley testified that the property was not functioning as intended in March
and that, as a buyer, she would want to “know that the stucco or that the property is
functioning as intended.” Lapp and Kirk Harrington testified that the June report
reflected that items on the March report had been cured. John Cook, Sun’s
president, testified that he saw no purpose for furnishing the March report. Larry
and Susan both testified that they never would have closed had they received
Riley’s March report. Lapp also admitted that “we wouldn’t be here[]” had the
report been produced.
Larry admitted that he was aware of moisture issues before closing and had
concerns about moisture penetration during construction. According to the record,
as early as 2007, Guffin Construction issued a report identifying the potential for
future leaks and moisture intrusion, as well as the presence of mold and leaks. In
January 2008, at the Hugheses’ request, the Hugheses’ realtor provided the
37
Hugheses with the name of a moisture detection service. In early March 2008,
Genesis Restoration and Cleaning conducted thermal imaging, which revealed
possible moisture, the potential for moisture damage in the near future, and the
need for probing with a moisture meter to determine the moisture content. After
Sun made repairs, Island Home Inspections identified problems such as water
stains, possible water damage, inadequate insulation, substandard construction,
leaks, excessive condensation, and damaged ductwork. According to the report,
certain areas needed to be sealed to prevent moisture problems, the “A/C systems
in the west attic [were] condensating at an abnormal rate[,]” and “[d]ucts in contact
with each other [were] sweating sufficiently to drip on the flooring.” Before
closing, Island Home Inspections issued a re-inspection report and found that an
ongoing “excessive condensation problem” existed, that attempts to alleviate the
problem did not appear to address the root cause, that the failure to remedy the
problem could prove costly, and that the stucco was an ongoing project.
The record demonstrates that, before closing and even without Riley’s
March report, the Hugheses knew that the home had a history of moisture issues,
that the repairs Sun made had not cured the moisture issues, that the moisture
issues were serious and ongoing, and that failure to remedy the issues could prove
costly. Because the Hugheses received information indicating that Sun’s repairs
38
were inadequate to remedy the moisture issues, we reject the Hugheses’ contention
that Sun’s failure to disclose the report amounts to nondisclosure of the extent and
nature of repairs. Sun could not be held liable for failing to disclose information
about moisture issues when the Hugheses had actual notice of those issues. See
Gill v. Boyd Distrib. Ctr., 64 S.W.3d 601, 604 (Tex. App.—Texarkana 2001, pet.
denied). Viewing the evidence in the light most favorable to the jury’s verdict, the
evidence presented at trial would not enable reasonable and fair-minded people to
find that Sun’s failure to disclose Riley’s March 2008 stucco report was a
producing cause of the Hugheses’ damages. 7 See Doe, 907 S.W.2d at 481; see also
Gill, 64 S.W.3d at 604. For these reasons, I would sustain issue two in part and not
reach Sun’s factual sufficiency challenge. See Tex. R. App. P. 47.1.
____________________________
Steve McKeithen
Chief Justice
Dissent Delivered
September 25, 2014
7
The Hugheses contend that Sun’s actions amount to more than mere non-
disclosure and constitute active concealment. However, the record does not
indicate that the Hugheses pleaded active concealment, or presented that issue to
the jury.
39