Holland Mortg. and Inv. Corp. v. Bone

• Citation: 751 S.W.2d 515
• Decision Date: 30 April 1987
• Docket Number: No. 01-86-00420-CV,01-86-00420-CV
• Parties: HOLLAND MORTGAGE AND INVESTMENT CORPORATION, Appellant, v. Floyd BONE and Rhonda Bone, Appellees. (1st Dist.)
• Court: Texas Court of Appeals

Page 515

751 S.W.2d 515

HOLLAND MORTGAGE AND INVESTMENT CORPORATION, Appellant, v. Floyd BONE and Rhonda Bone, Appellees.

No. 01-86-00420-CV.

Court of Appeals of Texas Houston (1st Dist.).

April 30, 1987.

John L. Carter, Vinson & Elkins, Houston, for appellant.

George Pain, Houston, for appellees.

Before JACK SMITH, DUGGAN and COHEN, JJ.

JACK SMITH, Justice.

This is an appeal from a suit to recover damages from the builder of a home and the mortgage company that financed the purchase. A jury found breaches of warranty, negligence, and violations of the Deceptive Trade Practices Act by Monroe, the builder, and two violations of the Deceptive Trade Practices Act (DTPA) by the appellant (the lender). The trial court entered a $33,000 judgment against Monroe and the appellant, jointly and severally. The appellant alleges six points of error.

In February of 1979, the appellees contracted to purchase a house for $86,900 from Bud Monroe Building Co. Appellant provided the financing for this purchase. In May of 1979, the house flooded. The appellees complained to Monroe and remedial measures were taken to cure the problem. The house flooded again in May of 1980, November of 1981, and October of 1984. In May of 1982, the appellees brought suit against Monroe and Kickerillo Company, the developer of the subdivision, claiming that their home was built too low or that the lot had been improperly contoured, which resulted in flooding of the house during heavy rains. In December of 1982, the appellees joined the appellant as a defendant in the suit after learning that Bud Monroe Building Co. was no longer in business.

In its first point of error, the appellant contends that the appellees' claims against it were barred by the two-year statute of limitations.

Citing Brooks Fashion Stores, Inc. v. Northpark National Bank, 689 S.W.2d 937 (Tex.App.--Dallas 1985, no writ), and Marcotte v. American Motorists Insurance Co., 709 F.2d 378 (5th Cir.1983), the appellant asserts that the two-year statute of limitations is applicable because the appellant was not a party to the written contract of which the appellees complain, and any cause of action regarding the appellant would, therefore, have to be based on oral misrepresentations made by the appellant. The appellees, on the other hand, assert that the four-year statute of limitations is the proper limitations period governing the present facts because their claims against the appellant grow out of transactions in writing.

The DTPA, as amended August 27, 1979, provides for a two-year statute of limitations period for actions brought under the Act. This two-year statute of limitations was to be applied prospectively only. Tex.Bus. & Com.Code Ann. sec. 17.56A (Vernon Supp.1987). The claims in the instant case arose prior to the 1979 amendment; therefore we must look to the statutes governing other claims to determine the applicable limitation period. Since appellees' claims do not arise out of a contract between the parties or a tort, the former Tex.Rev.Civ.Stat.Ann. art. 5529 (Vernon 1958) provides the applicable limitation period. This article prescribes a four-year statute of limitations. Therefore, appellees' cause of action against the appellant was not barred.

Appellant's first point of error is overruled.

Appellant contends in its second point of error that the appellees did not seek or acquire goods and services from the appellant, and therefore were not consumers who could assert a cause of action under the DTPA.

Whether or not a plaintiff is a "consumer" under the DTPA is a question of law to be determined by the trial court from the evidence, and the trial court will not submit issues to the jury as violations of the DTPA if it has determined that the plaintiff is not a consumer. Reed v. Israel Nat'l Oil Co., Ltd., 681 S.W.2d 228 (Tex.App.--Houston [1st Dist.] 1984, no writ). In the instant case, it can be presumed that the trial court determined that the appellees were consumers under the Act because the trial court submitted issues to the jury as to violations of the DTPA by appellant, and denied appellant's j.n.o.v. motion on that basis. The appellant contends that the trial court erred in entering judgment under the DTPA because the appellees were not "consumers."

In order to prevail on an action brought under the DTPA, one must be a "consumer." Kennedy v. Sale, 689 S.W.2d 890 (Tex.1985); Riverside Nat'l Bank v. Lewis, 603 S.W.2d 169 (Tex.1980). A "consumer" is defined in the Act as "an individual, partnership, corporation, this state, or a subdivision or agency of this state who seeks or acquires by purchase or lease, any goods or services ..." Tex.Bus. & Com.Code Ann. § 17.45(4) (Vernon Supp.1987). "Goods" are defined as "tangible chattels or real property purchased or leased for use." Tex.Bus. & Com.Code Ann. § 17.45(1) (Vernon Supp.1987). "Services" include "work, labor, or service purchased or leased for use, including services furnished in connection with the sale or repair of goods." Tex.Bus. & Com.Code Ann. § 17.45(2) (Vernon Supp.1987). The goods or services sought or acquired by the consumer must form the basis of the DTPA complaint. Cameron v. Terrell & Garrett, Inc., 618 S.W.2d 535, 539 (Tex.1981).

The appellees contend that they are consumers because their objective in borrowing the money from the appellant was the purchase of the house. Appellant relies on Riverside National Bank v. Lewis, 603 S.W.2d 169 (Tex.1980), which appeared to exempt lenders from the Act, and held that a person who seeks to borrow money in order to refinance a loan on his car is not a consumer because the transaction does not involve the acquiring of a good or service. However, as explained in La Sara Grain v. First National Bank of Mercedes, 673 S.W.2d 558, 566 (Tex.1984), subsequent decisions by the Supreme Court have limited Riverside to its facts, i.e., the extension of credit unrelated to a specific acquisition. In Knight v. Int'l Harvester Credit Corp., 627 S.W.2d 382, 389 (Tex.1982) and Flenniken v. Longview Bank & Trust Co., 661 S.W.2d 705, 707 (Tex.1983), the Supreme Court concluded that borrowers were consumers because the loans in question were used for the purchase of a truck (Knight ) and a house (Flenniken ), items which are encompassed in the definition of "goods" under the Act.

In summary, if the borrower's "objective" in borrowing the money is the purchase or lease of goods or services, he may be a consumer under the Act. La Sara Grain, 673 S.W.2d at 567; Irizarry v. Amarillo Pantex Fed. Credit Union, 695 S.W.2d 91 (Tex.App.--Amarillo 1985, no writ); Martin v. Lou Poliquin Enterprises, Inc., 696 S.W.2d 180 (Tex.App.--Houston [14th Dist.] 1985, writ refused n.r.e.). This is especially true where the lender and seller "were so inextricably intertwined in the transaction as to be equally responsible for the conduct of the sale." Knight, 627 S.W.2d at 389.

Both Knight and Flenniken were distinguished in Wynn v. Kensington, 697 S.W.2d 47 (Tex.App.--Austin 1985, no writ) because there was no evidence of any "tie-in" relationship between the manufacturer and the lender under the facts of Wynn. Wynn had purchased a mobile home which contained excessive levels of formaldehyde, and she filed suit against the lender, the manufacturer of the mobile home, the retail seller, and others based on product liability and deceptive trade practices. The Austin Court of Appeals held that without evidence of a "tie-in" relationship between the manufacturer and the lender, Wynn could not rely on Knight or Flenniken as a basis for proceeding against the lender.

In the present case, the appellees have established some evidence of a "tie-in" relationship between the builder of the house and the lender. Sales representatives for the builder recommended that the appellees use the appellant mortgage company, and they arranged an appointment for the appellees to file an application for the loan with the appellant. Further, the earnest money contract executed by the builder and the appellees provided for an inspection by the lending agency and also provided that after the final inspection by the lending agency, the builder's obligations would be complete.

We conclude that because there is some evidence of a "tie-in" relationship between the builder and the appellant, the trial court did not err in deciding that the appellees were "consumers" as to all parties who sought to enjoy the benefits of the sale.

We overrule appellant's second point of error.

In its third point of error, appellant claims that Special Issue No. 11 was not supported by the pleadings and should not have been submitted to the jury.

The complained of issue reads as follows:

Do you find from a preponderance of the evidence that Defendant Holland Mortgage Company represented that the Bone residence:

a) had characteristics which it did not have, or

b) was of a particular quality when it was not.

Answer "We do," or "We do not." (The jury answered "we do".)

The record reflects that the plaintiff's sixth amended petition contained the following:

15. By virtue of a written Earnest Money Contract dated February 2, 1979, between Bud Monroe Building Company and Plaintiffs herein, Holland Mortgage Company has the duty to inspect and approve the residence as having been contructed [sic] in accordance with good building practices. Defendant Holland Mortgage Company made representations and warranties that such residence had been constructed in accordance with good building practices which representations were false as said residence had not been constructed in accordance with good building practices, thereby breaching its warranty to plaintiffs. Defendant Holland Mortgage Company was also negligent in making such inspection and approval that the residence was constructed in accordance with good building practices, which negligence was a proximate cause of plaintiffs' damages, hereinafter mentioned.

16. Defen...