Wesley Carl Retherford, Jr., D/B/A Whole House Inspection Company v. Frank Castro and Terri Castro

IN THE
TENTH COURT OF APPEALS
No. 10-10-00298-CV
WESLEY CARL RETHERFORD, JR., D/B/A
WHOLE HOUSE INSPECTION COMPANY,
Appellant
v.
FRANK CASTRO AND TERRI CASTRO,
Appellee
From the County Court at Law
Coryell County, Texas
Trial Court No. 09-8860
OPINION
Wesley Retherford, a TREC-licensed professional home inspector, appeals from a
judgment entered against him pursuant to the Deceptive Trade Practices Act. TEX. BUS.
& COM. CODE Ch. 17 (West 2011). Retherford was sued pursuant to the DTPA and for
negligent misrepresentation. After a bench trial, the trial court entered a judgment for
violations of the DTPA only. Retherford complains that the trial court failed to properly
apply the professional services exemption to the DTPA and that the evidence was
legally insufficient for the trial court to find that he had violated the DTPA. Because we
find that the professional services exemption applies and no exceptions to that
exemption were met, we reverse the judgment of the trial court and remand for a new
trial on the issue of negligent misrepresentation.
Factual Background
Retherford, a TREC-licensed professional real estate inspector, was hired by
Frank and Terri Castro to perform a home inspection of a residence that they had
signed a contract to purchase. Retherford completed the inspection in March of 2008
and noted in the “Roof Structure and Attic” section that it was “Not Functioning or in
Need of Repair” because there was water damage in the attic and also observed that
there was water damage in two rooms of the house, but believed that the water damage
was caused by condensation from the metal roof resulting from a lack of ventilation.
Retherford indicated that the water damage was not a serious issue in his inspection
report, although he included photos of the relevant areas. In the report, Retherford also
gave the Castros advice on how to fix the ventilation issues in the attic. Retherford
noted that the roof covering was inspected but stated “No problems were noted.” The
Castros purchased the house “as is.”
In October of 2008, in the first big rain after the Castros’ purchase, approximately
three inches of rain fell and water started running down the wall of Castro’s residence
in the same place where the water damage was noted on the inspection report. The
Castros went up on the roof to look for problems and discovered loose screws on the
roof, some of which were visibly noticeable and could be turned with their fingers. In
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November of 2008, Castro took photographs of the roof from the attic which showed
the same damage Retherford had included in his report.
The Castros repaired the roof in April of 2009 but could not afford to replace the
roof entirely as recommended. Prior to having the roof repaired, in March of 2009, the
Castros had a second TREC-licensed professional home inspector to inspect the roof
and ascertain why the roof was leaking. This inspector determined that many of the
screws on the roof were loose and found black discoloration stains around the screw
shanks in the attic, which he contended showed long-term water damage of more than
twelve months’ age. The inspector observed screws that were sticking up out of the
roof from the ground which he also believed had been in that state for at least a year.
The second inspector explained the proper method to inspect a metal roof and
opined that the leaks would have been discovered if Retherford had the necessary
experience and knowledge to properly inspect the roof, although he did not know
Retherford or anything about his qualifications. Further, pursuant to TREC rules
regarding home inspections the cause of the moisture was not required to be disclosed
but that adequate ventilation would not have solved the problem of the moisture
because it was actually caused by a leaking roof.
The individual who repaired the roof also testified that the black discoloration he
observed in the wooden beams in the attic had to have been there for longer than
twelve months and that he found approximately 200 screws of varying degrees of
looseness on the roof out of approximately 1500 on the entire roof when his company
repaired the roof.
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The Castros ultimately sued Retherford and alleged violations of the DTPA and a
claim for negligent misrepresentation. At the trial before the court, the trial court found
that Retherford represented that his services had characteristics, uses, and benefits
which they did not have and that he represented that his services were of a particular
standard or quality when they were not. The trial court entered judgment for the cost
of the repairs and attorney’s fees.
Professional Services Exemption
The DTPA was designed to “protect consumers against false, misleading, and
deceptive business practices, unconscionable actions, and breaches of warranty and to
provide efficient and economical procedures to secure such protection.” TEX. BUS. &
COM. CODE ANN. § 17.44(a) (West 2011). However, the DTPA provides an exemption
from liability to those who render professional services when the essence of that service
is based on providing advice, judgment, or opinion. TEX. BUS. & COM. CODE ANN. §
17.49(c) (West 2011), amended by Act of May 28, 2011, 82d Leg., R.S., ch. 189, § 17.49, 2011
Tex. Sess. Law Serv. (West). A professional service is one that arises “out of acts
particular to the individual’s specialized vocation.” Nast v. State Farm Fire & Cas. Co., 82
S.W.3d 114, 122 (Tex. App.—San Antonio 2002, no pet.). “An act is not a professional
service merely because it is performed by a professional; rather, it must be necessary for
the professional to use his specialized knowledge or training.” Id.
Once an individual is determined to have provided “professional services,” there
are several exceptions for which the exemption does not apply, such as
misrepresentations of fact, failures to disclose information in violation of section
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17.46(b)(24), unconscionable actions or courses of action; breaches of an express
warranty, or violations of section 17.46(b)(26). TEX. BUS. & COM. CODE ANN. §
17.49(c)(1)-(5) (West 2011).
What professions are included in the professional services exemption was not
statutorily defined. Generally, lawyers, accountants, and doctors have qualified for this
exemption as long as the conduct at issue involves the giving of advice, judgments, or
opinions. See, e.g., Pipkin v. Henry & Peters. P.C. (In re R & C Petroleum, Inc.), 236 B.R.
355, 361 (Bankr. E.D. Tex. 1999) (“[The Exemption] clearly excludes professional service
providers such as attorneys, doctors, and accountants, among other licensed
professionals.”). What other professionals are included or what criteria should be used
to determine who is a professional for purposes of the DTPA has not been established
with any degree of certainty and rarely has been addressed, much less squarely
decided, by the appellate courts.1 When the professional services exemption was
1 See, e.g., Rangel v. Lapin, 177 S.W.3d 17, 2005 Tex. App. LEXIS 318 (Tex. App.—Houston [1st Dist.] 2005)
(exemption applies to legal services); Murphy v. Campbell, 964 S.W.2d 265, 268-69 (Tex. 1997) (applying
exemption to accounting services); Tyler v. F. A. Bartlett Tree Expert Co., 2006 U.S. Dist. LEXIS 60160 (W.D.
Tex. Aug. 11, 2006) (certified arborist qualifies under professional services exemption); Omni Metals, Inc.
v. Poe & Brown of Tex., Inc., No. 14-00-01081-CV, 2002 Tex. App. LEXIS 4334, 2002 WL 1331720, at *8-9
(Tex. App.—Houston [14th Dist.] June 13, 2002, pet. denied) (not designated for publication) (insurance
agent and insurer not providing advice, judgment, opinion, or other similar skill by faxing certificate of
insurance); Nast v. State Farm Fire & Cas. Co., 82 S.W.3d 114, 122 (Tex. App.—San Antonio 2002, no pet.)
(contention that insurance agent made misrepresentation of fact regarding whether a house was in a
flood plain so whether exemption applied was not decided); Shands v. Texas State Bank, No. 04-00-00133-
CV, 2001 Tex. App. LEXIS 109, 2001 WL 21490, at *10 (Tex. App.—San Antonio Jan. 10, 2001, no pet.) (not
designated for publication) (bank provided services as trustee and qualified for the exemption); Trusky v.
Holoway, No. 14-04-00196-CV, 2005 Tex. App. LEXIS 3727, 2005 WL 1150033, at *3 (Tex. App.—Houston
[14th Dist.] May 17, 2005, no pet.) (surveyor did not establish based on the facts provided that he
qualified for the exemption as a matter of law so whether surveyors qualify was not decided); Cole v.
Cent. Valley Chems., Inc., 9 S.W.3d 207, 210 (Tex. App.—San Antonio 1999, pet. denied) (holding that
professional advice from an agronomist-working as a salesman in an agricultural products store-did not
constitute professional services for purposes of the exemption; the court did not rule on whether the
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enacted, the Legislature could not agree on a definition and therefore, did not include
one and left the language vague. See David Skeels, The DTPA Professional Services
Exemption: Let ‘em be Doctors and Lawyers and Such, 55 BAYLOR L. REV. 783, 805 & n.97
(2003) (discussion of the legislative history of the exemption).
There are other causes of action that have addressed what constitutes
“professional services,” such as insurance policy coverage claims and negligent
misrepresentation causes of action. In a case relating to insurance policy exclusions for
professional services, the Eastland Court of Appeals has suggested that a professional:
(1) engages in work involving mental or intellectual rather than physical labor, (2)
requires special education to be used on behalf of others, and (3) earns profits
dependent mainly on these considerations. See Duncanville Diagnostic Ctr., Inc. v.
Atlantic Lloyd's Ins. Co., 875 S.W.2d 788, 790 (Tex. App.—Eastland 1994, writ denied);
Md. Cas. Co. v. Crazy Water Co., 160 S.W.2d 102, 104-05 (Tex. Civ. App.—Eastland 1942,
no writ).
A cause of action against individuals in certain professions for negligent
representation could be compared with those to be considered to be providing
“professional services” for purposes of the exemption. This is because a cause of action
for negligent representation relates to representations made in the course of a
defendant’s business or in a transaction in which he has a pecuniary interest wherein he
salesperson was a professional, but instead found that the consumer’s complaint was based on the
purchase of the product, not the rendering of advice); Serv. Corp. Int’l Mgmt. Corp. v. Galvan, No. 13-99-
468-CV, 2001 Tex. App. LEXIS 747, at 15 (Tex. App.—Corpus Christi Jan. 18, 2001, no pet.) (not
designated for publication) (funeral service provider qualifies for the exemption but little analysis
provided).
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supplies “false information” for the guidance of others in their business, which has been
applied to professionals in various occupations. Fed. Land Bank Ass'n of Tyler v. Sloane,
825 S.W.2d 439, 442 (Tex. 1991); see also RESTATEMENT (SECOND) OF TORTS § 552 (1977);
McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests, 991 S.W.2d 787, 791 (Tex.
1999) (acknowledging the application of section 552 to other professionals, including
auditors, physicians, real-estate brokers, securities placement agents, accountants,
surveyors, and title insurers and extending the application to attorneys).
The Occupations Code defines a real estate inspection as “a written or oral
opinion as to the condition of the improvements to real property, including structural
items, electrical items, mechanical systems, plumbing systems, or equipment.” TEX.
OCC. CODE ANN. § 1102.001(9) (West 2004). These inspections may be performed by a
professional inspector, who is “a person who represents to the public that the person is
trained and qualified to perform a real estate inspection and who accepts employment
to perform a real estate inspection for a buyer or seller of real property.” TEX. OCC.
CODE ANN. § 1102.001(8) (West 2004).
In order to qualify as a professional real estate inspector, a person must have
held a real estate inspector’s license for twelve months, have performed at least 175 real
estate inspections with indirect supervision, completed at least 30 more hours of “core
real estate inspection courses” in addition to those required to qualify as a real estate
inspector, completed 8 classroom hours studying the “standards of practice, legal
issues, or ethics related to the practice of real estate inspecting,” and pass an exam. TEX.
OCC. CODE ANN. § 1102.109 (West 2004).
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To qualify as a real estate inspector, a person must have held an apprentice home
inspector’s license for three months, have completed at least 25 inspections under direct
supervision, completed 90 classroom hours of “core real estate inspection courses,” be
sponsored by a professional real estate inspector, and pass an exam. TEX. OCC. CODE
ANN. § 1102.108 (West 2004). There are no educational or other requirements beyond
age, citizenship, and character in order to qualify as an apprentice inspector. TEX. OCC.
CODE ANN. § 1102.107 (West 2004).
There have been other specific statutes enacted that protect other “professions”
who provide “professional services” enacted by the Legislature since the adoption of
the exemption, such as architects and engineers. See, e.g., TEX. CIV. PRAC. & REM. CODE
ANN. Ch. 150 (West 2011) (architects, engineers, and surveyors). However, the
professions covered by those statutes are specifically defined by statute. See TEX. CIV.
PRAC. & REM. CODE ANN. § 150.001(1) (West 2011) (includes a licensed architect, licensed
professional engineer, registered professional land surveyor, or registered landscape
architect). Section 17.49 of the DTPA was amended recently to specifically exclude
brokers and sellers of real estate included in Chapter 1101 of the Occupations Code
from liability under the DTPA for advice or opinions while acting as a broker or seller,
with exceptions to the exclusion for misrepresentations of fact, failures to disclose, and
unconscionability. TEX. BUS. & COM. CODE ANN. § 17.49(i) (West 2011), amended by Act
of May 28, 2011, 82d Leg., R.S., ch. 189, § 17.49, 2011 Tex. Sess. Law Serv. (West).
Licensed professional home inspectors are not included in Chapter 1101 of the
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Occupations Code, but are addressed in Chapter 1102. See TEX. OCC. CODE ANN. Ch.
1102 (West 2004).
Retherford cites to one case that he contends classifies a home inspector as a
professional under the DTPA. See Head v. U. S. Inspect DFW, Inc., 159 S.W.3d 731 (Tex.
App.—Fort Worth 2005, no pet.) However, in Head the specific issue of whether the
report prepared by the home inspector qualifies as professional services was “assumed”
by the parties and the court specifically did not address whether the home inspection
constituted professional services. Head, 159 S.W.3d at 740 (“Head does not argue that
the inspection and report furnished by Appellees did not constitute professional
services, and we will not address that issue.”).
Before 1981, there were no requirements for real estate inspectors. To address
this, the Legislature enacted legislation to require inspectors to register with the State
and post a surety bond. See Act of 1981, 67th Leg. R.S., ch. 121 (S.B. 478), § 1, effective
August 31, 1981. Then, in 1985, the Legislature created the requirement of licensure for
real estate inspectors. Act of 1985, 69 Leg. R.S., ch. 404 (H.B. 2182), § 1, effective August
31, 1985, formerly TEX. REV. CIV. STAT. ANN. art. 6573a, §23. The creation of the current
three levels of inspectors was established in 1991. See Act of 1991, 72nd Leg. R.S., ch.
553 (S.B. 432), §§ 1.01-1.15, 2.01, 4.01, effective September 1, 1991. However, at that
time, the top level of inspector was entitled “real estate inspector.” In 1993, the
Legislature amended the three levels and renamed them, with the top level becoming
the “professional real estate inspector” and the “real estate inspector” a level beneath
that. See Act of 1993, 73rd Leg., ch. 843 (H.B. 991), §§ 1-15, effective September 1, 1993.
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The real estate inspector was then required to work under the indirect supervision of a
professional real estate inspector.
The professional services exemption was added to the DTPA in 1995. See Act of
1995, 74th Leg., ch. 414 (H.B. 668), § 4, effective September 1, 1995.
The title of “professional real estate inspector” is similar to that of a “licensed
professional engineer” or “registered professional land surveyor” as used in Chapter
150 of the Civil Practice and Remedies Code. We believe that the amendments to
Chapter 1102 of the Occupations Code changing the title of the highest level of real
estate inspector from “real estate inspector” to “professional real estate inspector”
indicates that the Legislature regarded achieving that level to demonstrate a higher
degree of specialization.
We believe that another indicator of professional status to be that the Legislature
has imposed a requirement of carrying liability insurance with a minimum limit of
$100,000 per occurrence to protect against a violation of Subchapter G of Chapter 1102
of the Occupations Code, which refers to prohibited acts, including negligence,
dishonesty, and violating any statutes or rules. Act of 2001, 77th Leg., ch. 1421 (H.B.
2813), § 2, effective June 1, 2003; amended by Act of 2007, 80th Leg., ch. 1411 (S.B. 914), §
38, effective September 1, 2007. Additionally, the Legislature established the Real Estate
Inspection Recovery Fund for the specific purpose of collecting claims against
inspectors for violations of statutes or rules in Subchapter G. See TEX. OCC. CODE ANN.
Ch. 1102, Subch. H (West 2004). Subchapter I includes discipline procedures,
administrative, and criminal penalties for prohibited acts in certain circumstances. See
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TEX. OCC. CODE ANN. Ch. 1102, Subch I (West 2004). These requirements and provisions
indicate that the Legislature has placed significance on the role of the home inspector.
In order to fulfill the broad objectives of the DTPA and yet give full meaning to
the exemption for professional services from its application it is necessary to draw the
line somewhere regarding who is a professional, preferably an objective one. We agree
with the Eastland Court of Appeals’ definition that a professional: (1) engages in work
involving mental or intellectual rather than physical labor, (2) requires special
education to be used on behalf of others, and (3) earns profits dependent mainly on
these considerations. See Duncanville Diagnostic Ctr., Inc. v. Atlantic Lloyd’s Ins. Co., 875
S.W.2d 788, 790 (Tex. App.—Eastland 1994, writ denied); Md. Cas. Co. v. Crazy Water Co.,
160 S.W.2d 102, 104-05 (Tex. Civ. App.—Eastland 1942, no writ). We find that a
professional real estate inspector fits these qualifications.
Upon determining that an individual is a professional, we must next determine
whether the conduct complained of involved services that the essence of which is
providing advice, judgment, or an opinion. Clearly the contents of the real estate
inspection report constituted the inspector’s opinion as to the condition of the house, as
it has been statutorily defined as such. See TEX. OCC. CODE ANN. § 1102.001(9) (West
2004). Further, the essence of an inspector’s service is providing that opinion. We find
that the professional services exemption applies to the report of professional real estate
inspectors.
Our inquiry then shifts to a determination of whether any of the exceptions to the
exemption applies. The trial court found that Retherford’s representations were
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“representations of fact which cannot be characterized as advice, judgment or opinion.”
The representations were that Retherford’s services had characteristics, uses, and
benefits which they did not have and that his services were of a particular standard or
quality when they were not.
No findings of fact or conclusions of law were requested by either party. In the
absence of written findings, we imply that the trial court made all necessary findings
and we will uphold the judgment on any legal theory supported by the evidence.
Worford v. Stamper, 801 S.W.2d 108, 109 (Tex. 1990).
The Castros complained that Retherford was unqualified to inspect a metal roof,
that he did not perform the inspection according to TREC rules, he did not inspect the
screws on the roof, and went beyond the scope of the inspection when he gave his
opinion as to the cause of the water damage in the attic. In determining whether the
Castros’ misrepresentation claim is barred by the professional services exemption or
meets one of the exceptions to the exemption, we look to the underlying nature of the
claim, which ultimately is a breach of contract and negligence in rendering the
inspection services. See Head v. U.S. Inspect DFW, Inc., 159 S.W.3d 731, 742 (Tex. App.—
Fort Worth 2005) (citing Chemd, Inc. v. KPMG Peat Marwick, L.L.P., No. 05-00-00816-CV,
2001 Tex. App. LEXIS 5402, 2001 WL 893989, at *6 (Tex. App.—Dallas Aug. 9, 2001, pet.
denied) (not designated for publication) (holding that to determine whether claim was
barred by professional services exemption, court would look to nature of underlying
claim).
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The facts and claims alleged in Head v. U.S. Inspect DFW, Inc. are similar in nature
to those asserted by the Castros. In Head, the complaints were that the inspection report
did not disclose a leaking roof and that the inspection was completed in part by an
apprentice inspector, neither of which fit an exception to the professional services
exemption. Head, 159 S.W.3d at 741-43. We agree with the analysis in Head that the
findings contained in the inspection report were the opinions of Retherford and were
not representations of fact. Additionally, Retherford’s qualifications and how he
performed the inspection cannot be pursued as a DTPA claim, but are claims for breach
of contract, which is not actionable under the DTPA. We find that the trial court erred
by finding that the professional services exemption did not preclude the Castros’ claims
because they did not constitute misrepresentations of fact. We sustain issue one.
Because of this holding, we do not reach Retherford’s second issue.
Negligent Misrepresentation
The Castros contend that we may affirm the judgment based on a theory of
negligent representation if we sustain Retherford’s DTPA issue because there was
sufficient evidence to support a judgment on that basis. The elements of negligent
misrepresentation are: (1) a defendant provided information in the course of his
business, or in a transaction in which he had a pecuniary interest; (2) the information
supplied was false; (3) the defendant did not exercise reasonable care or competence in
obtaining or communicating the information; (4) the plaintiff justifiably relied on the
information; and (5) the plaintiff suffered damages proximately caused by the reliance.
Larsen v. Carlene Langford & Assocs., 41 S.W.3d 245, 249-50 (Tex. App.—Waco 2001, pet.
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denied); see McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests, 991 S.W.2d 787,
791 (Tex. 1999).
We review the trial court’s conclusions of law de novo. See BMC Software Belg.,
N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). The judgment will be sustained on
any legal theory the evidence supports. See Stable Energy, L.P. v. Newberry, 999 S.W.2d
538, 547 (Tex. App.—Austin 1999, pet. denied); see also Fulgham v. Fischer, No. 05-10-
00097-CV, 2011 Tex. App. LEXIS 5865, at *6 (Tex. App.—Dallas July 29, 2011, no pet. h.).
As such, incorrect conclusions of law do not require reversal if the controlling findings
of fact support the judgment under a correct legal theory. See Westech Eng’g, Inc. v.
Clearwater Constructors, Inc., 835 S.W.2d 190, 196 (Tex. App.—Austin 1992, no writ); see
also Fulgham, 2011 Tex. App. LEXIS 5865, at *6.
However, the trial court’s judgment did not refer to the negligent
misrepresentation cause of action or contain any conclusions of law regarding those
elements. Additionally, because no findings of fact were requested, we are unable to
determine whether or not the trial court would have made the findings to support a
judgment based on negligent misrepresentation. As such, and in the interest of justice,
we find that the appropriate remedy is to reverse the judgment of the trial court and
remand for a new trial on the issue of negligent misrepresentation. See TEX. R. APP. P.
43.3(b); 44.1.
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Conclusion
Because we have found that the professional services exemption applies in this
case, we reverse the judgment of the trial court and remand for a new trial on the issue
of negligent misrepresentation.
TOM GRAY
Chief Justice
Before Chief Justice Gray,
Justice Davis, and
Justice Scoggins
Reversed and Remanded
Opinion delivered and filed January 4, 2012
[CV06]
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