Barzoukas v. Found. Design, Ltd.

• Decision Date: 01 March 2012
• Docket Number: No. 14–10–00505–CV.,14–10–00505–CV.
• Citation: 363 S.W.3d 829
• Parties: Nicolas BARZOUKAS, Appellant, v. FOUNDATION DESIGN, LTD. and Larry Smith, Appellees.
• Court: Texas Court of Appeals

363 S.W.3d 829

Nicolas BARZOUKAS, Appellant,

v.FOUNDATION DESIGN, LTD. and Larry Smith, Appellees.

No. 14–10–00505–CV.

Court of Appeals of Texas, Houston (14th Dist.).

March 1, 2012.Rehearing En Banc Overruled

April 11, 2012.

Kurt B. Arnold, Houston, for appellant.

Anthony A. Petrocchi, Dallas, Erin Elizabeth Jones, James P. McInerny, Houston, for appellees.

Panel consists of Chief Justice HEDGES and Justices SEYMORE and BOYCE.

SUBSTITUTE MAJORITY OPINION

WILLIAM J. BOYCE, Justice.

We overrule the motion for rehearing, withdraw our opinion dated February 2, 2012, and issue the following substitute opinion.

Nicolas Barzoukas sued Foundation Design, Ltd. and engineer Larry Smith for damages in connection with alleged defects in the foundation of Barzoukas's house. The trial court granted a no-evidence summary judgment on all claims asserted against Foundation Design and Smith. We affirm in part and reverse and remand in part.

Background

Heights Development, Ltd. contracted with Barzoukas in September 2005 to build a house for him. Barzoukas sued Heights Development, Foundation Design, Smith, and numerous other defendants who participated in the construction of his house, contending that it is riddled with problems. Smith is the engineer of record for the house's foundation design.

The plans and specifications originally called for 15–foot piers to support the foundation. After construction began, Smith signed a letter addressed to Heights Development changing the plans and specifications to allow for 12–foot piers—supposedly because “hard clay stone was encountered” while drilling holes for the piers. Barzoukas says the given justification for shallower piers was false and Smith knew or should have known it was false. According to Barzoukas, general contractor Heights Development used this letter to persuade the City of Houston to allow continuation of construction after an inspector initially rejected the foundation because the piers were too shallow. Barzoukas asserts that the city has never approved the house's foundation. Barzoukas's expert engineer opines that Smith violated the professional standard of care by approving the pier depth change.

Expert reports indicate that the piers are deficient because they are too shallow; they are not located properly under the house; they are crooked; and they do not make proper contact with the framing I-beams used to support the house. The estimated cost of repairing the foundation by adding ten new piers is $25,000.

Barzoukas eventually settled with all defendants except for Foundation Design, Smith, and another defendant who filed for bankruptcy. As to Foundation Design and Smith, Barzoukas asserted claims for negligence, negligent misrepresentation, fraud, fraudulent inducement, conspiracy, and exemplary damages in connection with the foundation.

Foundation Design and Smith filed a no-evidence motion for summary judgment on all claims asserted against them. The trial court granted the motion without specifying the basis for its ruling. The court later granted Barzoukas's motion to sever his claims against Foundation Design and Smith. Barzoukas now appeals and contends that summary judgment is not warranted.

Standard of Review

In a no-evidence motion for summary judgment, the movant must specifically identify the elements for which there is no evidence. Walker v. Thomasson Lumber Co., 203 S.W.3d 470, 473–74 (Tex.App.-Houston [14th Dist.] 2006, no pet.). The trial court must grant the motion unless the respondent presents evidence raising a genuine issue of material fact. Tex.R. Civ. P. 166 a(i). However, the respondent is “ ‘not required to marshal its proof; its response need only point out evidence that raises a fact issue on the challenged elements.’ ” Hamilton v. Wilson, 249 S.W.3d 425, 426 (Tex.2008) (quoting Tex.R. Civ. P. 166a(i) cmt. (1997)).

We review a summary judgment de novo and must take as true all evidence favorable to the nonmovant and draw every reasonable inference and resolve all doubts in favor of the nonmovant. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex.2005); Mendoza v. Fiesta Mart, Inc., 276 S.W.3d 653, 655 (Tex.App.-Houston [14th Dist.] 2008, pet. denied). When a trial court does not specify the grounds for granting summary judgment, we must affirm the judgment if any summary judgment ground is meritorious. See Star–Telegram, Inc. v. Doe, 915 S.W.2d 471, 473 (Tex.1995).

Analysis

In a single issue, Barzoukas contends that the trial court erred by granting summary judgment in favor of Foundation Design and Smith.

The parties' appellate briefing focuses primarily on whether Barzoukas's negligence and negligent misrepresentation claims are foreclosed under the economic loss rule. In addition to their reliance on the economic loss rule as a bar to recovery, Foundation Design and Smith contend that summary judgment is warranted because Barzoukas failed to proffer competent evidence establishing that their conduct proximately caused damages. Foundation Design and Smith also contend that Smith's letter does not give rise to viable claims for fraud and fraudulent inducement. We address these contentions in turn.¹

I. Economic Loss Rule

A. Overview

Applying the economic loss rule in this case presents two challenges.

The first challenge arises because the economic loss rule's legal boundaries are not entirely settled.

The second challenge arises because the relevant summary judgment pleadings in this record include neither (1) the contract between homeowner Barzoukas and general contractor Heights Development; nor (2) the purported subcontract between Heights Development and engineer Smith—or, possibly, between Heights Development and Foundation Design or some other entity related in some way to Smith. A portion of what appears to be the Barzoukas–Heights Development contract appears elsewhere in the record.² But even if we were to consider evidence outside of the summary judgment pleadings related to Foundation Design and Smith, little is gained because this portion of the contract is incomplete. The purported subcontract is entirely missing. These gaps make it more difficult to evaluate application of the economic loss rule.

The difficulty is compounded by an awkward procedural posture. This case presents as an appeal from an order granting a no-evidence motion for summary judgment. Texas Rule of Civil Procedure 166a(i) authorizes summary judgment when “there is no evidence of one or more essential elements of a claim or defense on which an adverse party would have the burden of proof at trial.” Tex.R. Civ. P. 166a(i). Such a motion “must state the elements as to which there is no evidence” and the trial court must grant the motion “unless the respondent produces summary judgment evidence raising a genuine issue of material fact.” Id.

Significant hammering and bending is required to fit the appellate argument of Foundation Design and Smith—which invokes the economic loss rule in asserting that “as a matter of law no cause of action for negligence or negligent representation runs in favor of appellant with respect to appellees as subcontractors”—within Rule 166a(i). Determining whether “the moving party is entitled to judgment as a matter of law on the issues expressly set out in the motion” is an inquiry under Rule 166a(c)'s traditional summary judgment standard, with its attendant burdens on the movant. See Tex.R. Civ. P. 166a(c); see also KPMG Peat Marwick v. Harrison Cnty. Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex.1999).

Proper placement of the summary judgment burden helps to determine how gaps in evidence regarding the Barzoukas–Heights Development contract and the purported subcontract affect the analysis on appeal. But no argument regarding the operative summary judgment standard has been raised in the trial court or on appeal. Therefore, despite an imperfect fit between the arguments on appeal and the summary judgment mechanism the appellees invoked in the trial court, the economic loss rule's applicability in this case must be analyzed in “no evidence” terms under Rule 166a(i).

Although areas of uncertainty exist under case law addressing the economic loss rule in Texas, at least one thing is clear: Details matter.

It matters who contracted with whom to do what. It matters what the contracts say; what they cover; and what they do not cover. It matters what kind of damages are requested. It matters whether the requested damages are attributed to activities covered by the contracts. It matters whether and how multiple parties in a chain of contracts allocated among themselves the risk that participants in the chain would perform deficiently, along with the obligation to pay for deficient performance. It matters what kinds of claims are asserted and against whom they are asserted.

The details are largely missing here. The parties agree that a contract existed between Barzoukas and Heights Development regarding the construction of Barzoukas's house. They agree that a subcontract existed in relation to the house's foundation. They also agree that Heights Development was a party to the purported subcontract, and Barzoukas was not. Much of the rest is guesswork.

This is the backdrop against which we must analyze the economic loss rule's potential applicability when Barzoukas attempts to sue an engineer for professional negligence and negligent misrepresentation in connection with foundation problems in the house Heights Development contracted to build for him. Barzoukas does not contend that the original plans and specifications calling for 15–foot piers are deficient. Instead, his claims rest on a letter signed by Smith after construction was underway; this letter is characterized as “an addendum to the plans and specifications” by which Smith approved reducing the foundation's pier depth from 15 feet to 12 feet.

Determining whether the economic loss rule applies here to foreclose Barzoukas's negligence and...