Roland Keller and Deborah Keller v. Legend Home Corporation, Legend Classic Homes, LTD and WUIC Insurance Agency, Inc. D/B/A Home of Texas

In The
Court of Appeals
Ninth District of Texas at Beaumont
____________________
NO. 09-17-00199-CV
____________________
ROLAND KELLER AND DEBORAH KELLER, Appellants
V.
LEGEND HOME CORPORATION, LEGEND CLASSIC HOMES, LTD,
AND WUIC INSURANCE AGENCY, INC. D/B/A HOME OF TEXAS,
Appellees
_______________________________________________________ ______________
On Appeal from the 284th District Court
Montgomery County, Texas
Trial Cause No. 15-01-00799-CV
________________________________________________________ _____________
MEMORANDUM OPINION
In five issues, the purchasers of a newly-built home claim the trial court erred
by granting the defendants’ respective motions for summary judgment on the
purchasers’ claims for damages they alleged resulted from defects in the foundation
of their home. In a sixth issue, the homeowners argue the trial court erred by granting
judgment notwithstanding the jury’s verdict on the homebuilder’s counterclaim for
attorney’s fees. For the reasons explained below, we conclude the evidence
1
authorized the trial court to grant the defendants’ motions for summary judgment.
We also conclude the trial court erred, following a trial solely on the issue of
attorney’s fees, in granting the homebuilder’s motion for judgment notwithstanding
the verdict.
Background
Statutes of limitation prevent a party from waiting years after it is on notice
of sufficient facts about its claim before suing even if the party’s claim had merit.
Our resolution of the appeal hinges largely on whether the trial court applied the law
correctly when evaluating the homebuilder’s arguments claiming most of the
purchasers’ claims were barred by limitations.
In August 2004, Roland and Deborah Keller agreed to purchase a new home
from Legend Classic Homes, Ltd. (Classic Homes). In September 2004, the Kellers
closed on the home, which is located in Montgomery County, Texas. For the Kellers’
benefit, Classic Homes purchased a ten-year limited warranty on the home from
Warranty Underwriters Insurance Company (Underwriters). Underwriters’ limited
warranty supplemented the warranties that Classic Homes provided to the Kellers.
2
The limited warranty available under Underwriters’ policy included coverage
against “Major Structural Defects.”1
In October 2005, the Kellers sent a letter to Classic Homes and Underwriters
notifying them of the many defects the Kellers claimed existed in their home. In part,
the 2005 letter states:
In the front corner of the house (where the formal dining room is) there
are cracks in the foundation. We would like to receive a copy of the
foundation report, which certifies that the post-tention [sic] slab was
laid according to specifications. In addition, though we have been
assured by [Classic] Homes that these cracks are not an issue, we would
like [Classic] Homes to send their foundation company’s expert to see
the problem and provide a professional opinion in writing.
The Kellers and Classic Homes failed to resolve the concerns the Kellers had about
the cracks in their foundation. In late-January 2006, Underwriters sent the Kellers a
letter declaring the parties at an impasse. In that letter, Underwriters notified the
Kellers that, under the limited warranty, they could submit their claims to
arbitration.2
1
By definition, the term “Major Structural Defects” includes a home’s
foundation system and footings if the foundation suffered (1) actual physical damage
that (2) caused the failure of the foundation or other load-bearing component of the
home and (3) “affects [the foundation’s] load-bearing function to the degree that it
materially affects the physical safety of the occupants of the home.”
2
The Kellers’ home warranty reflects that arbitration was not a requirement
under the warranty on the home. The Kellers elected not to arbitrate their claims.
3
In May 2010, the Kellers retained an attorney to represent them regarding their
foundation-damage claim. On May 10, 2010, the Kellers’ attorney notified Legend
Home Corporation3 and Classic Homes (collectively, “Legend”) that construction
defects existed in the Kellers’ home, including but “not limited to a failing
foundation, cracked mortar, cracked bricks, cracked ceramic tiles and improper
drainage.” The letter states that Legend and Underwriters each violated the Texas
Residential Construction Liability Act and the Deceptive Trade Practices and
Consumer Act (DTPA) in the manner they handled the Kellers’ claims relating to
both the foundation and the drainage of the Kellers’ lot.4 In late-June 2011,
Underwriters advised the Kellers that it had decided to deny warranty coverage on
the Kellers’ foundation-damage claim.
3
Throughout the trial, the parties treated Legend Home Corporation as the
general partner of Classic Homes, a limited partnership. That said, the purchase
agreement associated with the sale of the home is between the Kellers and Classic
Homes and does not include Legend Home Corporation.
4
In late-May 2011, the Kellers secured a report from a professional engineer
evaluating the foundation and drainage problems the Kellers were experiencing with
their home. The Kellers’ attorney sent the report to Legend and Underwriters. The
report states that the Kellers’ foundation “is suffering from post-construction
differential foundation movements” that “have caused damages to the house and the
foundation . . . that are consistent with the pattern(s) of surveyed movements.”
4
In late-December 2011, Legend and the Kellers entered into an agreement in
which Legend agreed to perform certain work to address the drainage problems that
existed on the Kellers’ property. The letter reflects that the problem the work Legend
agreed to perform work to improve the drainage on the Kellers’ lot to prevent water
from pooling near the foundation of the home. Under the repair agreement, Legend
agreed to install a French drain on the Kellers’ property, pay the Kellers’ attorney’s
fees of $3,347,5 and pay the Kellers’ expert fees of $6,782. The agreement
contemplated that six months after Legend installed the French drain, if the drainage
system was working, and subject to the Kellers’ approval, Legend was to repair
cosmetic defects that had been caused from movement attributable to the foundation
of the home. The repair agreement, however, specifically reserved to the Kellers
their rights to sue Legend on “any claims they may have relating to the need for
foundation work.”6 In the 2011 agreement, Legend represented that it believed the
foundation was performing “within tolerances,” and that any movement the
foundation had suffered could be “remedied by the repair plan and the continued
maintenance proposed herein.”
5
For simplicity, we have rounded all monetary figures to whole numbers.
6
Underwriters is not a party to the repair agreement that Legend reached with
the Kellers.
5
In mid-February 2012, Legend installed the French drain called for by the
repair agreement. By mid-December 2012, after Legend performed the six-month
inspection, Legend’s attorney sent the Kellers and their attorney a letter stating that
Legend’s experts had determined the foundation was performing as intended. The
letter also states that Legend’s expert believed the Kellers had modified the
landscaping on their property, which resulted in problems that their warranties on
the home did not cover. Nonetheless, Legend offered to correct the problems that it
claimed the Kellers created by modifying the landscaping of their lot, but Legend
stated that it would not warrant the quality of the additional work it performed to
correct the drainage problems the Kellers created by altering the landscaping of their
lot. Legend asked the Kellers to provide dates for Legend to do the work and to
complete the cosmetic work that it promised to perform under the repair agreement.
The Kellers never responded to the letter.
In late-September 2014, the Kellers retained another attorney to represent
them on their foundation-damage claim. Their second attorney sent Legend and
Underwriters a letter demanding $189,950 in damages and attorney’s fees, which
the Kellers attributed to defects in the foundation and in the drainage of the lot
associated with their home. The demand letter alleges that when Legend built the
home, it failed to create a landscape that directed water entering the lot away from
6
the foundation of the home. The demand letter also states that “water was regularly
trapped [by the foundation’s southeast exterior wall] for a long period of time before
the Kellers began to notice signs of foundation distress[.]” According to the demand
letter, “by the time the purported fix was proposed by Legend, the damage to the
foundation had occurred.”
On January 26, 2015, the Kellers sued Legend Home Corporation, Classic
Homes, and Underwriters on their foundation-damage and drainage-defect claims.
In an amended petition, the Kellers claimed that Legend breached the warranties that
it extended to them when they purchased their home. The Kellers also claimed that
Legend negligently performed the repairs called for under the repair agreement and
that Legend failed to complete the work it agreed to perform under that agreement.
Finally, the Kellers claimed that Legend violated the DTPA by failing to exercise
reasonable care when it repaired the drainage problems on their lot and by defrauding
them regarding the condition of their foundation. As to Underwriters, the Kellers’
amended petition alleged that Underwriters breached the limited warranty by
refusing their requests to repair the foundation. In addition to their breach of contract
claim, the Kellers alleged that Underwriters violated the DTPA, committed fraud in
connection with the sale of the home, and knowingly misrepresented the facts about
whether the Kellers’ foundation needed to be repaired.
7
In response to the suit, Legend and Underwriters filed general denials with
affirmative defenses including limitations. Classic Homes filed a counterclaim
against the Kellers alleging that should it prevail in defending against the Kellers’
purchase-agreement claims, that the agreement required the Kellers to pay it the
reasonable attorney’s fees it would incur in its defense.
In May 2016, Legend and Underwriters filed traditional motions for summary
judgment. 7 These motions covered all the Kellers claims except for those alleging
7
While we have examined all the summary-judgment evidence in evaluating
the parties’ arguments, we specifically mention these exhibits supporting the
motions as these exhibits are discussed in the opinion: (1) an affidavit signed by
Kathleen Foley, vice president for Underwriters; (2) an affidavit signed by Lauren
Sullivan, general counsel for Classic Homes; (3) the August 2004 purchase
agreement between Classic Homes and the Kellers authorizing Classic Homes to
build the home; (4) the September 2004 Housing and Urban Development loan-
closing statement for the transaction involving the home; (5) the “Home Buyer
Presettlement Orientation and Property Inspection” form on the inspection the
Kellers completed when they purchased the home; (6) the Kellers’ application for
the limited warranty from Underwriters; (7) the limited warranty issued by
Underwriters on the Kellers’ home; (8) the October 2005 demand letter the Kellers
sent to Classic Homes and Underwriters; (9) a January 2006 letter sent by
Underwriters to the Kellers; (10) the May 2010 demand letter sent by the Kellers’
first attorney to Legend and Underwriters; (11) two bids, which the Kellers obtained
in May 2011, from companies to repair the foundation of the Kellers’ home; (12) a
copy of the December 2011 repair agreement between the Kellers and Legend; (13)
a February 2012 letter sent by Legend’s attorney to the Kellers’ attorney transmitting
a check for the Kellers’ attorney’s fees and expert fees; (14) exhibits proving that
the Kellers and their attorney negotiated Legend’s check, tendered in payment for
the attorney’s and expert witness fees Legend agreed to pay under the 2011
agreement; (15) a December 2012 letter from Legend’s attorney to the Kellers and
their attorney regarding the findings of Legend’s six-month inspection; (16) the
8
fraud. Later, both defendants moved for summary judgment on the Kellers’ claims
for fraud. As to the fraud claims, Underwriters argued the Kellers could not prove
fraud. As to the warranty claims, Underwriters alleged the policy did not cover the
Kellers’ claims. In its motion, Legend argued that the Kellers’ claims were barred
by the statute of repose and by the various statutes of limitation that applied to the
claims. As to the repair agreement, Legend argued that it did not breach the
agreement because it performed all work the Kellers allowed it to perform.
In a series of interlocutory orders, the trial court granted Legend’s and
Underwriters’ motions for summary judgment. None of the summary-judgment
orders, however, specify the grounds on which the motions were granted.
In February 2017, the trial court conducted a jury trial on Classic Homes’
counterclaim for attorney’s fees. 8 Three witnesses testified in the trial, Patrick
Sullivan,9 Legend’s lead attorney, Lauren Sullivan, general counsel for Classic
September 2014 demand letter sent to Legend and Underwriters by the Kellers’
second attorney; (17) excerpts from the deposition of Randolph Riddell, an engineer
the Kellers hired in 2014 to evaluate the problems with the foundation of their home;
(18) excerpts from Deborah Keller’s deposition; (19) excerpts from Roland Keller’s
deposition; and (20) the Kellers’ supplemental answers to Legend’s interrogatories.
8
Legend Home Corporation was not a party to the purchase agreement, so it
never filed a counterclaim seeking to recover its attorney’s fees.
9
Patrick served as Legend’s lead attorney throughout the proceedings.
9
Homes, and Deborah Keller, the only witness called by the Kellers. When Patrick
testified, the trial court admitted an itemized accounting for the fees and expenses
his law firm charged Legend for defending the claims the Kellers filed against
Legend Home Corporation and Classic Homes. The firm’s bills show that between
September 2014 and January 2017, the firm charged Legend Home Corporation and
Classic Homes $136,293 for attorney’s fees through trial. Patrick testified of that
total, he attributed $122,663 to Classic Homes. He also testified that in his opinion,
Classic Homes would incur $39,600 in additional attorney’s fees should the Kellers
exhaust their rights to appeal. According to Patrick, the attorney’s fees his firm
charged Classic Homes were reasonable and they were necessary for the work that
his firm did in the case.10 When the trial ended, the jury found Classic Homes should
recover $60,000 in attorney’s fees. In response to a question asking about fees for
the various stages of appeal, the jury found Classic Homes should recover “0.”
After the jury returned its verdict, Classic Homes asked the trial court to
disregard the jury’s findings. In a written motion for judgment notwithstanding the
verdict (JNOV), Classic Homes asked the trial court to award it $122,663 in
attorney’s fees through trial and $36,000 in attorney’s fees. The request for fees
10
Lauren and Deborah’s testimony is not relevant to the reasonableness of
Classic Homes’ fees.
10
broke the appellate fees down into each stage of any possible appeals. After a
hearing, the trial court granted the motion and overturned the jury’s verdict. Later,
the trial court signed a final judgment ordering the Kellers to take nothing from
Legend and from Underwriters. In its final judgment, the trial court awarded
attorney’s fees totaling the amounts Classic Homes requested in its motion for
JNOV, with the appellate fees conditioned at each stage on the Kellers exercising
their rights to appeal. After the trial court signed the final judgment, the Kellers
moved for a new trial. In their motion, they argued the trial court erred by granting
summary judgments and by disregarding the jury’s verdict on Classic Homes’ fees.
The trial court denied the motion for new trial and the Kellers appealed.
Issues
In issue one, the Kellers argue the trial court erred by failing to apply the
discovery rule to their claims. According to the Kellers, the summary-judgment
evidence reveals fact issues as to when they should have discovered the problems
with their foundation. In their second issue, the Kellers contend the trial court’s
ruling on Legend’s motion for summary judgment should be reversed because issues
of material fact exist as to whether Legend acted fraudulently by concealing the
problems with the foundation. In their third, fourth, and fifth issues, the Kellers argue
the summary-judgment record shows that issues of material fact exist on their claims
11
that Legend breached the repair agreement, that Underwriters breached its warranty,
and that Legend and Underwriters misrepresented material facts about the condition
of the foundation. In a sixth and final issue, the Kellers argue the trial court erred by
granting Legend’s motion for JNOV.
Analysis
I. Did the trial court err in granting Legend’s and Underwriters’ motions for
summary judgment?
A. Standard of Review
Appellate courts review a trial court’s decision granting motions for summary
judgment under a de novo standard of review.11 We review a trial court’s ruling
granting a motion for summary judgment “‘in the light most favorable to the
nonmovant, indulging every reasonable inference and resolving any doubts against
the motion.’” 12 To prevail on a motion for summary judgment, a defendant must
conclusively negate at least one element of each of the plaintiff’s claims or
conclusively establish all the elements of an affirmative defense on each of the
plaintiff’s claims. 13 When moving for summary judgment on a traditional motion,
11
Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex.
2003).
12
See Schlumberger Tech. Corp. v. Pasko, 544 S.W.3d 830, 833 (Tex. 2018)
(quoting City of Keller v. Wilson, 168 S.W.3d 802, 824 (Tex. 2005)).
12
and in order to establish that it is entitled to have a judgment rendered in its favor,
the defendant must show that there are no genuine issues of material fact for a trier
of fact to decide.14 If the defendant meets that burden, the burden of proof then shifts
to the party opposing the motion and requires that party to produce evidence showing
that a genuine issue of material fact exists on the claims challenged by the motion
for summary judgment.15
The issues the Kellers raise fall into four general categories: (1) were the
Kellers’ claims against Legend arising under the purchase agreement for damages to
their foundation barred by limitations; (2) did Legend conclusively establish that it
was entitled to summary judgment on the claims the Kellers made under the repair
agreement; (3) did Underwriters conclusively establish that it did not breach the
limited warranty; and (4) did Underwriters conclusively establish that it did not
misrepresent the benefits available to the Kellers under the limited warranty?
Because the orders granting the defendants’ motions for summary judgment do not
13
Tex. R. Civ. P. 166a(c); KCM Fin. LLC v. Bradshaw, 457 S.W.3d 70, 79
(Tex. 2015).
14
Tex. R. Civ. P. 166a(c); Knott, 128 S.W.3d at 215-16.
15
Chavez v. Kan. City S. Ry. Co., 520 S.W.3d 898, 900, 901 (Tex. 2017).
13
specify the grounds on which the motions were granted, we presume the court
granted the motions on all the grounds the respective motions advanced. 16
B. Analysis—Were the Kellers’ claims against Legend arising under the
purchase agreement for damages to their foundation barred by limitations?
In part, Legend’s motion for summary judgment argues that the Kellers failed
to timely sue on their DTPA and common law claims for breach of contract, fraud,
and negligent misrepresentation. Fraud has a four-year statute of limitation, the
longest period of limitations that applies to the claims that were at issue in the case.17
For convenience, we first address whether the summary-judgment evidence
conclusively proves that the Kellers failed to sue Legend within four years of the
date their claims for fraud accrued. 18
In their brief, the Kellers argue their claims for fraud accrued in September
2014, when an engineer informed them that Legend’s work to repair the drainage of
16
See Lightning Oil Co. v. Anadarko E&P Onshore, LLC, 520 S.W.3d 39, 45
(Tex. 2017).
17
The statute of limitations for fraud is four years. See Tex. Civ. Prac. & Rem.
Code Ann. § 16.004(a)(4) (West 2002).
18
See Exxon Corp. v. Emerald Oil & Gas Co., 348 S.W.3d 194, 216 (Tex.
2011) (“The statute of limitations for fraud begins to run from the time the party
knew of the misrepresentation.”); Little v. Smith, 943 S.W.2d 414, 420 (Tex. 1997)
(“Generally, in a case of fraud the statute of limitations does not commence to run
until the fraud is discovered or until it might have been discovered by the exercise
of reasonable diligence.”).
14
their lot “merely masked the already-present foundation problems.” Nonetheless, the
summary-judgment evidence shows the Kellers were on notice of foundation and
drainage problems associated with their home by at least 2010. On May 10, 2010,
the Kellers’ attorney sent Legend and Underwriters a letter threatening suit on the
Kellers’ foundation-defect and drainage-defect claims. The letter states the home has
a “failing foundation, cracked mortar, cracked bricks, cracked ceramic tiles and
improper drainage.” Thus, the letter conclusively establishes that the Kellers fraud
claims, as related to their home, accrued by at least May 2010. Since the Kellers did
not sue Legend until January 26, 2015, more than four years after their attorney
threatened suit, the trial court was authorized to find that the summary-judgment
evidence revealed the four-year statute of limitations barred the claims for fraud as
related to the Kellers’ purchase of the home. 19
The Kellers also claim that Legend made false and fraudulent statements to
them about the condition of the home’s foundation after Legend completed the
drainage work it promised to perform under the repair agreement. According to the
Kellers, they did not learn the drainage work would prove unsuccessful to protect
the foundation from failing until they hired an engineer who informed them that their
foundation had failed. In other words, they were unaware of the extent to which they
19
Id.
15
were damaged until they hired their own engineer. By May 2010, however, if not
before, the Kellers’ relationship with Legend was adversarial. In 2010, the Kellers
were being represented by an attorney on their foundation and drainage claims. Thus,
the nature of the relationship between Legend and the Kellers was adversarial, so
they could not justifiably rely on Legend’s statements about their foundation that
were made after the Kellers hired an attorney. 20 Here, the summary-judgment
evidence also shows that the Kellers were skeptical regarding Legend’s claim that
the foundation had not failed. In the May 2010 letter, the Kellers’ attorney noted that
the Kellers had “significant reservations about [Legend’s] assessment of the
foundation defects.” And generally, attempted repairs by a defendant of existing or
known problems will not interrupt limitations from running on a plaintiff’s claims. 21
We conclude the summary-judgment evidence fails to raise a genuine issue of
material fact on the Kellers’ claim that the discovery rule allowed them to avoid
20
See Valls v. Johanson & Fairless, L.L.P., 314 S.W.3d 624, 635 (Tex.
App.—Houston [14th Dist.] 2010, no pet.) (“Courts have repeatedly held a party
may not justifiably rely on statements made by opposing counsel during settlement
negotiations.”); Ortiz v. Collins, 203 S.W.3d 414, 422 (Tex. App.—Houston [14th
Dist.] 2006, no pet.) (“Generally, reliance on representations made in a business or
commercial transaction is not justified when the representation takes place in an
adversarial context, such as litigation.”).
21
See Am. Air Sys. v. Book, No. 09-15-00538-CV, 2017 Tex. App. LEXIS
2016, at *14-15 (Tex. App.—Beaumont Mar. 9, 2017, pet. denied) (citing Pako
Corp. v. Thomas, 855 S.W.2d 215, 219 (Tex. App.—Tyler 1993, no writ)).
16
Legend’s statute of limitations defense on the claims associated with their purchase
of the home. We hold the trial court did not err in granting Legend’s motion for
summary judgment on the Kellers’ theory that Legend defrauded them when they
purchased the home.
Turning to the DTPA, breach of contract, and negligent misrepresentation
claims, limitations also bars those claims. 22 The summary-judgment evidence
establishes as a matter of law that the Kellers were on notice of sufficient facts
regarding their various foundation-defect and drainage-defect claims by May 2010.
The Kellers presented no evidence raising an issue of fact to show that limitations
commenced on some date later than May 2010 on these claims. Since the Kellers
22
In general, “[a] cause of action accrues when a wrongful act causes a legal
injury, regardless of ‘when the plaintiff learns of that injury or if all resulting
damages have yet to occur.’” Town of Dish v. Atmos Energy Corp., 519 S.W.3d 605,
609 (Tex. 2017) (quoting Knott, 128 S.W.3d at 221). The discovery rule provides an
exception to the general rule and “operates to defer accrual of a cause of action until
the plaintiff knows or, by exercising reasonable diligence, should know of the facts
giving rise to the claim.” Wagner & Brown v. Horwood, 58 S.W.3d 732, 734 (Tex.
2001). The Supreme Court has described the discovery rule as a “‘very limited
exception to statutes of limitations,’ and has condoned its use only when the nature
of the plaintiff’s injury is both inherently undiscoverable and objectively verifiable.”
Id. (quoting Computer Assocs. Int’l, Inc. v. Altai, Inc., 918 S.W.2d 453, 455 (Tex.
1996)). Fraudulent concealment is an equitable doctrine that “extend[s] the statute
of limitations when the defendant has concealed its wrongdoing from the plaintiff.”
G.R. Auto Care v. NCI Grp., Inc., Nos. 01-17-00068-CV, 01-17-00243-CV, 2018
Tex. App. LEXIS 6895, at *12 (Tex. App.—Houston [1st Dist.] Aug. 28, 2018, no
pet.) (citing BP Am. Prod. Co. v. Marshall, 342 S.W.3d 59, 67 (Tex. 2011)).
17
failed to sue until January 2015, their claims under the DTPA, breach of the purchase
agreement, and negligent misrepresentation are also barred by the statutes of
limitation that apply to each of those claims. 23
C. Analysis—Did Legend conclusively establish that it was entitled to
summary judgment on the claims the Kellers made under the repair agreement?
The Kellers’ claims included allegations that Legend breached the 2011 repair
agreement, negligently performed its work, and committed fraud in connection with
the repair agreement. Under the repair agreement, Legend agreed to install a French
drain on the Kellers’ lot, pay the Kellers’ attorney’s fees and expert fees, conduct a
six-month follow-up inspection of the property, and, following that inspection,
repair the cosmetic defects in the home that related to any movement the home
experienced due to problems with the foundation. The Kellers’ petition alleges
Legend breached the repair agreement by failing to (1) complete all work as agreed,
(2) properly complete repairs to prevent foundation damage and failure, and (3)
perform all work under the agreement in a good and workmanlike manner.
23
The statutes of limitation for DTPA and negligent misrepresentation claims
are two years. See Tex. Bus. & Com. Code Ann. § 17.565 (West 2011) (DTPA
claims); Tex. Civ. Prac. & Rem. Code Ann. § 16.003(a) (negligent
misrepresentation). The statute of limitation for breach of contract is four years.
See Tex. Civ. Prac. & Rem. Code § 16.004(a)(1).
18
In its motion for summary judgment, Legend asserted that it did not breach
the repair agreement and instead performed the drainage work that the Kellers
allowed it to complete. Based on our review, the summary-judgment evidence
establishes that Legend installed the French drain and that Legend sent the Kellers a
check to pay for their expert and attorney. In the letter accompanying the check,
Legend advised the Kellers not to cash the check if they were claiming that Legend
had not properly installed the French drain. The summary-judgment evidence is
undisputed that the Kellers cashed the check.
Notably, the repair agreement does not represent the work Legend did under
the agreement would fix the Kellers’ existing foundation problems or prevent any
future damages. Instead, the agreement states that Legend agreed to inspect the
property six months after it completed the drainage work to determine the
foundation’s condition at that time. The summary-judgment evidence shows that
Legend conducted a follow-up inspection after completing the drainage work under
the repair agreement, and that Legend determined during the inspection the
foundation was performing as intended. But when Legend asked the Kellers for
permission to enter the Kellers’ land to complete the cosmetic repairs under the
repair agreement, the Kellers refused. In their brief, the Kellers do not claim that
19
Legend did not perform the work they allowed it to perform under the repair
agreement.24
To prove Legend breached the repair agreement, the Kellers had to prove (1)
they had a valid contract with Legend, (2) they performed or tendered performance,
(3) Legend breached the repair agreement, and (4) they were damaged based on
Legend’s breach.25 A breach of contract occurs “when a party fails to perform an act
that it has contractually promised to perform.” 26 The summary-judgment evidence
conclusively established that Legend performed all the work called for by the repair
agreement except the cosmetic work Legend was not allowed to perform. Since that
obligation required the Kellers to allow Legend to have access to their home, the
summary-judgment evidence conclusively established that Legend was excused
24
The summary-judgment evidence included excerpts from Deborah Keller’s
deposition. In her deposition, Deborah testified that Classic Homes “did execute the
drainage plan[.]” She also agreed that Classic Homes paid the attorney’s fees and
expert fees called for by the agreement and that Legend conducted a follow-up
inspection. Near the end of her deposition, Deborah agreed that the Kellers never
allowed Legend to return to their property to complete the cosmetic work called for
under the repair agreement. She said they did not do so because they “wanted to kind
of take a wait-and-see approach and just see how things panned out.”
25
See Bank of Tex. v. VR Elec., Inc., 276 S.W.3d 671, 677 (Tex. App.—
Houston [1st Dist.] 2008, pet. denied); Sullivan v. Smith, 110 S.W.3d 545, 546 (Tex.
App.—Beaumont 2003, no pet.).
26
Greene v. Farmers Ins. Exch., 446 S.W.3d 761, 765 (Tex. 2014) (citing
Black's Law Dictionary 225 (10th ed. 2014)).
20
from performing that additional work. 27 We conclude the summary-judgment
evidence conclusively established that Legend did not breach its obligations to the
Kellers under the repair agreement.
Once Legend established that it was entitled to summary judgment on the
Kellers’ breach-of-the-repair agreement claim, the burden shifted to the Kellers to
produce evidence raising a genuine issue of material fact to show that Legend
breached the agreement. While the Kellers argue that the French drain did not
function as they had hoped, they presented no evidence that any problems with the
French drain caused their home’s foundation to fail. And even if Legend’s efforts to
correct the drainage problems failed, the summary-judgment evidence established
that the Kellers and Legend were in an adversarial relationship when Legend agreed
to install the French drain. Given the nature of the relationship, the Kellers could not
justifiably rely on Legend’s alleged statements indicating that the work called for by
the repair agreement would solve any drainage or foundation problems the Kellers
claimed they were experiencing with their property. 28 When the Kellers failed to
27
See Dorsett v. Cross, 106 S.W.3d 213, 217 (Tex. App.—Houston [1st Dist.]
2003, pet. denied) (“Prevention of performance by one party excuses performance
by the other party, both of conditions precedent to performance and of promise.
When the obligation of a party to a contract depends upon a certain condition's being
performed, and the fulfillment of the condition is prevented by the act of the other
party, the condition is considered fulfilled.”).
21
meet their burden to show they could produce evidence that genuine issues of fact
remained on their breach-of-repair agreement claims, the trial court was authorized
to grant Legend’s motion for summary judgment on those claims.
The Kellers also claimed that Legend negligently performed the work under
the repair agreement. Negligence claims are governed by a two-year statute of
limitations. 29 The summary-judgment evidence established that Legend installed the
French drain in February 2012, and that Legend requested access to the Kellers’
home after inspecting the French drain in December 2012. Legend, therefore,
conclusively established that the Kellers’ claim for negligence was barred by the
time the Kellers sued in January 2015. 30
D. Analysis—Did Underwriters conclusively establish that it did not breach
the limited warranty?
The Kellers sued Underwriters for breaching its obligations under the limited
warranty. Underwriters prevailed on its motion for summary judgment based on
coverage arguments, and it did not move for summary judgment based on its statute
28
See Ortiz, 203 S.W.3d at 422.
29
Tex. Civ. Prac. & Rem. Code Ann. § 16.003(a); G.T. Leach Builders, LLC
v. Sapphire V.P., LP, 458 S.W.3d 502, 516 n.9 (Tex. 2015) (applying two-year
statute of limitations from section 16.003(a) to plaintiff’s negligence claims).
30
Tex. Civ. Prac. & Rem. Code Ann. § 16.003(a).
22
of limitations defense. On appeal, the Kellers argue that Underwriters’ limited
warranty covers their foundation-damage claims.
The limited warranty issued by Underwriters covers “major structural
defects,” a term that is expressly defined in the policy. Under the policy, a “major
structural defect” exists if “actual physical damage to the designated load-bearing
portions of the home caused by the failure of such load-bearing portions of a home
to the extent that the home becomes unsafe, unsanitary, or otherwise unlivable.” In
its motion for summary judgment, Underwriters relied on excerpts from Deborah
Keller’s and Roland Keller’s depositions to show that the problems the Kellers were
complaining about in their suit never made their home “unsafe, unsanitary, or
otherwise unlivable.” For example, Deborah testified:
Q. Have any of the issues that you’ve talked about with Mr. Sullivan
[counsel for Legend] regarding the performance of the home and the
claims you are here about regarding the home defects, have any of those
issues created a situation where you’ve been prevented from living in
the home?
A. No.
Q. Has anyone ever gotten hurt or sick due to the alleged defects?
A. No.
...
Q. Did you consider the home unsafe?
23
A. No.
Q. Unsanitary?
A. We do have bugs and stuff at times coming through the foundation.
Q. Coming up through the foundation?
A. Yeah, sort of, I think, along the cracks a little bit. It’s minor, but I
wouldn’t clarify it as unfit for living.
Q. Do you consider your home fit for human habitation, in other words?
A. Yes.
Roland Keller’s deposition reveals that he too did not consider the home unsafe,
unsanitary, or unlivable. We find no summary-judgment evidence in the record
raising a fact issue to show that the Kellers’ home was ever unsafe, unsanitary, or
unlivable. For that reason, we hold Underwriters conclusively proved that the
Kellers’ home did not contain a “major structural defect” that fell within the terms
of the limited warranty they received on their home.
E. Analysis—Did Underwriters conclusively establish that it did not
misrepresent the benefits of the limited warranty?
Underwriters also moved for summary judgment on the Kellers’ claims for
fraud and misrepresentation. In its motion for summary judgment, Underwriters
relied on excerpts from the Kellers’ depositions to show that it made no
24
representations to the Kellers outside the statement that are in the policy. For
instance, Deborah testified:
Q. How about any oral or written representations from anybody saying
that they are from [Underwriters], directed to you before you purchased
the home, that are not included in the warranty?
A. No.
Q. No oral or written communications to you?
A. No.
Q. No misrepresentations to you about the warranty, what it covered,
what it provided by somebody from [Underwriters]?
A. Not outside of the warranty itself.
In his deposition, Roland testified that he did not communicate with Underwriters
and that his wife handled all the communications they had with the company.
Based on this evidence, we conclude the burden of proof shifted to the Kellers
to establish that an issue of material fact existed on the fraud and misrepresentations
claims they filed against Underwriters. For example, the Kellers needed to produce
evidence showing that Underwriters made a material misrepresentation to them that
was false.31 The summary-judgement evidence reflects that they failed to meet their
burden.
31
See JPMorgan Chase Bank, N.A. v. Orca Assets G.P., L.L.C., 546 S.W.3d
648, 653 (Tex. 2018) (providing that, to prevail on a fraud claim, the plaintiff must
25
For instance, the policy states that the warranties in it are limited. On
foundation-damage claims, the warranty requires that enough problems exist with
the home’s foundation to make the home “unsafe, unsanitary, or otherwise
unlivable.” The language in the policy does not suggest the limited warranty covered
all problems homeowners might experience with the foundations of their homes. The
Kellers also claim that the limited warranty they received has little value. They
claimed they were unaware, at closing, that the limited warranty cost Classic Homes
only $151. According to the Kellers, had they known the cost of the limited warranty,
they would not have purchased the home given their belief that the limited warranty
covered any problems they might experience with the foundation of their home.
Here, it is undisputed that, before closing, the Kellers received a copy of the
policy. 32 The application the Kellers signed in connection with the limited warranty
show, among other things, the defendant made a material representation that was
false); Woodlands Land Dev. Co., L.P. v. Jenkins, 48 S.W.3d 415, 423 (Tex. App.—
Beaumont 2001, no pet.) (providing that a claim for fraud in a real estate transaction
requires proof that the defendant made “a false representation of a past or existing
material fact in a real estate transaction to another person for the purpose of inducing
the making of a contract”); AKB Hendrick, LP v. Musgrave Enters., Inc., 380 S.W.3d
221, 238 (Tex. App.—Dallas 2012, no pet.) (“A cause of action for fraudulent
misrepresentation requires proof of a false representation, and a negligent
misrepresentation claim requires proof that the defendant has provided false
information.”).
32
In her deposition, Deborah agreed she received a copy of the limited
warranty before closing on the home.
26
they acquired is in the summary-judgment evidence. Under the law, the Kellers had
a duty to read the policy and regardless of whether they did so, the law charged them
with knowledge of the terms of their contract.33 The policy’s plain language makes
it clear that the limited warranty did not cover all problems homeowners might have
with their foundations.
The Kellers also contend the repair agreement they reached with Legend
contains representations, made by Legend’s attorney, relating to the opinion of
Underwriters’ expert about the condition of the foundation—that it had not failed.
Underwriters, however, is not a party to the repair agreement and the summary-
judgment evidence does not show otherwise. Instead, the summary-judgment record
reflects that Underwriters was unaware of the settlement the Kellers made with
Legend until 2014. And even had Underwriters told the Kellers about what its
experts thought concerning their foundation, they failed to establish that they
justifiably relied on Underwriters’ expert given the adversarial nature of the parties’
relationship.34 We conclude the trial court was authorized to grant Underwriters’
motion for summary judgment on the Kellers’ fraud and misrepresentation claims.
33
See Ruiz v. Gov’t Emps. Ins. Co., 4 S.W.3d 838, 841 (Tex. App.—El Paso
1999, no pet.) (“An insured has a duty to read the policy and, failing to do so, is
charged with knowledge of the policy terms and conditions.”).
34
See Valls, 314 S.W.3d at 635; Ortiz, 203 S.W.3d at 422.
27
II. Did the trial court err by granting Legend’s motion for JNOV on Classic
Homes’ claim for attorney’s fees?
The Kellers argue the trial court erred by setting aside the jury’s verdict on
the amounts Classic Homes recovered in attorney’s fees. According to the Kellers,
Classic Homes failed to conclusively establish the amounts the trial court awarded
in trial and appellate fees.
A. Standard of Review
Appellate courts review a trial court’s decision on a motion for JNOV under
a legal-sufficiency standard. 35 Under this standard, appellate courts must view the
evidence admitted during the trial in the light most favorable to the jury’s verdict,
indulging every reasonable inference to support the jury’s verdict.36 In a legal-
sufficiency review, appellate courts must credit evidence that supports the verdict if
reasonable jurors could do so and disregard contrary evidence unless a reasonable
juror could not.37 Under Texas law, “[w]hen a party that bore the burden of proof at
trial seeks a judgment notwithstanding the verdict, it must show that the record
35
Wilson, 168 S.W.3d at 823.
36
Id. at 822.
37
Id. at 827.
28
establishes as a matter of law a proposition that contradicts the jury’s finding.”38
Stated another way, “‘[a] trial court may not properly disregard a jury’s negative
finding and substitute its own affirmative finding unless the evidence conclusively
establishes the issue.’” 39
Classic Homes sued the Kellers for attorney’s fees relying upon the following
provision found in the purchase agreement: “If either party employs an attorney
incident to a Dispute that is resolved through arbitration, litigation or negotiation,
the losing party agrees to reimburse the prevailing party for reasonable attorneys’
fees, arbitration fees, court costs and other related expenses.” Since Classic Homes
prevailed on the Kellers’ purchase-agreement claims, it was the “prevailing party”
as to those claims so it had the right to sue the Kellers seeking to be reimbursed for
the reasonable amount of attorney’s fees it incurred in defending itself in the suit.40
38
Ginn v. NCI Bldg. Sys., 472 S.W.3d 802, 843 (Tex. App.— Houston [1st
Dist.] 2015, no pet) (citing Henry v. Masson, 333 S.W.3d 825, 849 (Tex. App.—
Houston [1st Dist.] 2010, no pet.)).
39
Id. (quoting Masson, 333 S.W.3d at 849).
40
See Severs v. Mira Vista Homeowners Ass’n, Inc., 559 S.W.3d 684, 707
(Tex. App.—Fort Worth 2018) (explaining that the party who successfully defended
a breach of contract claim could recover attorney’s fees under that contract, even
though it recovered no other damages); Silver Lion, Inc. v. Dolphin St., Inc., No. 01-
07-00370-CV, 2010 Tex. App. LEXIS 3873, at *53-54 (Tex. App.—Houston [1st
Dist.] May 20, 2010, pet. denied) (mem. op.) (defendant awarded take-nothing
29
Ordinarily, determining the amount of a reasonable and necessary attorney’s
fee award presents questions of fact, so the trier of fact must resolve disputes over
fees.41 Generally, the testimony of an interested witness, even when uncontradicted,
merely raises an issue of fact, leaving the amount of the fees that should be awarded
up to the jury where the parties elect to have a jury decide the dispute.42 In some
circumstances, however, the testimony of an interested witness, when the testimony
“is not contradicted by any other witness, or attendant circumstances, and the same
is clear, direct and positive, and free from contradiction, inaccuracies, and
circumstances tending to cast suspicion thereon,” the testimony “is taken as true, as
a matter of law.”43
Under Texas law, this is a narrow exception to the general rule that allows
disputed claims to be resolved by juries. The exception applies if it is clear, direct,
positive, free from contradiction or circumstances that make the testimony
suspicious and “when the opposing party has the means and opportunity of
judgment on breach of contract claim was “prevailing party” entitled to recover
attorney’s fees under parties’ agreement).
41
See Garcia v. Gomez, 319 S.W.3d 638, 642 (Tex. 2010), Ragsdale v.
Progressive Voters League, 801 S.W.2d 880, 881 (Tex. 1990).
42
Smith v. Patrick W. Y. Tam Tr., 296 S.W.3d 545, 547 (Tex. 2009).
43
Ragsdale, 801 S.W.2d at 882.
30
disproving the testimony or evidence and fails to do so.”44 Here, the Kellers
presented no testimony to contradict Patrick Sullivan’s testimony about what his
firm charged Classic Homes. Thus, if Patrick’s uncontradicted testimony was
“unreasonable, incredible, or its belief is questionable,” then his testimony raised
only a fact issue leaving the amount Classic Homes was entitled to recover up to the
jury. 45
B. Analysis
The Kellers argue that the amounts the jury awarded Classic Homes for fees
should be reinstated. They suggest that Patrick’s testimony did not conclusively
establish the amount that Classic Homes was entitled to recover in fees. In its brief,
Classic Homes relies on the exception to the general rule, as it argues Patrick
“provided uncontroverted testimony supporting the reasonableness and necessity of
attorney’s fees and costs for [Classic Homes] amounting to $122,663[ ] at trial and
fees of $36,000 on appeal.” According to Classic Homes, given the Kellers’ failure
to call witnesses to dispute Patrick’s testimony about his firm’s fees,46 the jury had
44
Id.
45
Id.
46
The Kellers called Deborah Keller to testify in the trial over fees but her
testimony does not address what constitutes a reasonable fee.
31
no discretion but to award the amounts Patrick testified to as reasonable. The trial
court apparently agreed with Classic Homes and granted its motion for JNOV
substituting its judgment for the jury’s.
For two reasons, we conclude that Patrick’s testimony failed to conclusively
establish the amounts Classic Homes had a right to recover for attorney’s fees. First,
Legend Home Corporation was not a party to the purchase agreement that authorized
Classic Homes to recover fees. Yet, Patrick and his firm billed Classic Homes and
Legend Home Corporation collectively without separating the fees the firm charged
between the two entities. To address that problem, Patrick allocated ten percent of
the firm’s legal fees to Legend Home Corporation. But his allocation was merely an
estimate 47 segregating his firm’s fees, so the jury was free to reject the division he
suggested was reasonable. Second, Patrick testified before the jury that he and
Classic Homes’ general counsel, Lauren Sullivan, were dating and got married after
the Kellers sued. The evidence admitted during the trial revealed that Lauren
approved the invoices that Patrick’s firm sent to Legend. The relationship that
existed between the lead attorney, who was the principal biller on the case, and
Classic Homes is a circumstance the jury could have viewed as casting doubt on the
47
We note that when Patrick testified, he never explained why he allocated
only ten percent of the firm’s fees to Legend Home Corporation.
32
reliability of Patrick’s testimony. We find that the evidence admitted in the trial
revealed material issues of fact on the question of whether the fees Classic Homes
incurred were reasonable.
For that reason, the jury was free to decide the dispute over the recoverable
fees48 and the court erred by setting aside the jury’s award. 49 We note that Classic
Homes did not argue the amounts the jury awarded were against the greater weight
and preponderance of the evidence.50 Because the general rule that an interested
48
E.g., In re Bent, 487 S.W.3d 170, 184 (Tex. 2016) (“[A] jury does not
necessarily err in awarding no attorney’s fees if the party seeking them fails to
establish its requested fees are ‘reasonable and necessary.’”); In re United Servs.
Auto. Ass’n, 446 S.W.3d 162, 178-80 (Tex. App.—Houston [1st Dist.] 2014, orig.
proceeding) (upholding the jury’s verdict awarding the plaintiffs zero appellate
attorney’s fees because the plaintiffs failed to establish the reasonable and necessary
amount of their attorney’s fees for the appellate levels); Rosenblatt v. Freedom Life
Ins. Co. of Am., 240 S.W.3d 315, 320 (Tex. App.—Houston [1st Dist.] 2007, no pet.)
(upholding jury verdict awarding zero attorney’s fees because plaintiff did not
conclusively prove his entitlement to attorney’s fees as a matter of law); Cain v.
Pruett, 938 S.W.2d 152, 160 (Tex. App.—Dallas 1996, no writ) (reversing the trial
court’s judgment notwithstanding verdict and entering judgment on jury’s verdict
where jury awarded trial attorney’s fees but no appellate fees).
49
See Smith, 296 S.W.3d at 547-48.
50
See Tex. R. App. P. 38.2(b) (“When the trial court renders judgment
notwithstanding the verdict on one or more questions, the appellee must bring
forward by cross-point any issue or point that would have vitiated the verdict or that
would have prevented an affirmance of the judgment if the trial court had rendered
judgment on the verdict. Failure to bring forward by cross-point an issue or point
that would vitiate the verdict or prevent an affirmance of the judgment waives the
complaint.”); Dow Chem. Co. v. Francis, 46 S.W.3d 237, 242 (Tex. 2001) (“When
33
witness’s testimony is not conclusive applies here, we reinstate the amounts the jury
awarded Classic Homes in attorney’s fees.
Conclusion
We overrule the first five issues the Kellers raise in their appeal. We sustain
the Kellers’ sixth issue challenging the trial court’s ruling granting Classic Homes’
motion for JNOV. 51 For these reasons, we affirm the take-nothing judgment awarded
to the defendants on the Kellers’ claims. We reverse the trial court’s ruling on Classic
Homes’ motion for JNOV, we set aside the amounts the trial court awarded to
Classic Homes on its counterclaim, and we render judgment in favor of Classic
Homes on its counterclaim by awarding it $60,000 for its fees through trial and
nothing for any appeals.
AFFIRMED IN PART, REVERSED AND RENDERED IN PART.
_________________________
HOLLIS HORTON
Justice
Submitted on December 19, 2018
Opinion Delivered May 30, 2019
Do Not Publish
Before Kreger, Horton and Johnson, JJ.
a party attacks the factual sufficiency of an adverse finding on an issue on which [it]
has the burden of proof, [it] must demonstrate on appeal that the adverse finding is
against the great weight and preponderance of the evidence.”).
51
See Tex. R. App. P. 43.2(c).
34