HOW Ins. Co. v. Patriot Financial Services of Texas, Inc.

• Citation: 786 S.W.2d 533
• Decision Date: 21 March 1990
• Docket Number: No. 3-89-042-CV,3-89-042-CV
• Parties: HOW INSURANCE COMPANY, et al., Appellants, v. PATRIOT FINANCIAL SERVICES OF TEXAS, INC., et al., Appellees.
• Court: Court of Appeals of Texas

Page 533

786 S.W.2d 533

HOW INSURANCE COMPANY, et al., Appellants, v. PATRIOT FINANCIAL SERVICES OF TEXAS, INC., et al., Appellees.

No. 3-89-042-CV.

Court of Appeals of Texas,

Austin.

March 21, 1990.

Jerry D. Porter, Rash, Laney, Chapman & Schreiber, Bruce Hardesty, Gray & Becker, and Debora McWilliams, Thompson & Knight, Austin, for appellants.

Stephen P. Redgate, Winstead, McGuire, Sechrest & Minick, Dallas, for appellees.

Before SHANNON, C.J., and SMITH ^* and JONES, JJ.

ON MOTION FOR REHEARING

JONES, Justice.

The opinion issued by this Court on January 17, 1990, is withdrawn, and the following is substituted therefor.

This is an appeal from a suit involving misrepresentations in the sale of a condominium unit. The purchaser of the condominium, Jebron Hopper, sued the builders and owners of the condominium complex, Far West Skyline Development Joint Venture ("Far West") and Gary Caywood-Anderson, Inc. ("GCAI"), the providers of the homeowners' warranty and insurance, Home Owners Warranty Corporation and HOW Insurance Company (collectively "HOW"), and other defendants which have now settled with the plaintiff and been dismissed from this appeal. The jury returned a verdict in favor of Hopper based on the Deceptive Trade Practices Act (DTPA), Tex.Bus. & Com.Code Ann. §§ 17.41-17.63 (1987), common law fraud, and statutory fraud involving the sale of real estate, Tex.Bus. & Com.Code Ann. § 27.01 (1987). The trial court rendered judgment on the jury's findings, except that the court disregarded one finding of actual damages and ordered that Hopper take nothing as to those damages. All of the parties named above perfected separate appeals to this Court. Hopper appeals from the take-nothing judgment n.o.v., and the remaining parties appeal from the judgment on the jury's verdict. We will affirm the judgment n.o.v. and the judgment against Far West and GCAI, and we will reverse the judgment against HOW and remand as to those parties.

I. Factual Background

In 1984 Jebron Hopper purchased a condominium unit in the Far West Skyline Condominiums for $97,650. The condominium complex was owned by Far West, which was a joint venture consisting of GCAI and Patriot Financial Services of Texas, Inc. GCAI was also the builder and general contractor for the complex. In connection with her purchase of the condominium, Hopper received a homeowner's warranty and a certificate of insurance from HOW.

During negotiations prior to her purchase of the unit, Hopper was given a brochure that, in part, described the condominium complex as featuring "meticulous construction." Soon after moving into her condominium, Hopper began experiencing numerous problems with the finish out and construction of the unit. She complained to GCAI, which repaired some but not all of these problems. The most serious problem was caused by water intrusion resulting from faulty construction of the complex, which eventually led to wood rot in the exterior wall of Hopper's unit.

Because GCAI was unable to complete the repairs of the water intrusion damage, Hopper filed a claim with HOW. HOW initially denied the claim, asserting that it was not timely filed. Eventually, HOW conceded that the claim was timely. When HOW became aware of the nature and extent of the structural problems, the wood rot and water intrusion, HOW assured Hopper that if GCAI did not repair the problem, HOW would perform the repairs under the warranty.

After numerous attempts to repair the problem, the exterior wall of Hopper's unit was removed and replaced with sheets of plastic. HOW offered an amount to repair the interior of Hopper's unit, but would not pay to replace the exterior wall because, by this time, HOW had become aware that the water intrusion problem affected the entire complex. Eventually, HOW negotiated a settlement with the Far West homeowners association to repair the damage to the common elements of the complex, including Hopper's exterior wall. However, by the time of trial (more than two years after Hopper's exterior wall had been removed) the repair to the common elements had not been performed and the plastic sheeting remained on Hopper's unit.

At trial, the jury found that Far West, GCAI, and HOW had committed violations of the DTPA. In addition, the jury found that Far West and GCAI had committed common law fraud and statutory fraud in connection with the sale of real estate. The jury found $87,650 in compensatory damages and $75,000 in mental anguish damages against Far West, GCAI, and HOW. In addition, the jury awarded Hopper $200,000 in exemplary damages against Far West and GCAI and $100,000 in exemplary damages against HOW. The trial court rendered judgment n.o.v. against Hopper as to the $87,650 compensatory damages, but rendered judgment in Hopper's favor for the remaining actual damages, exemplary damages, other stipulated damages, attorney's fees, and prejudgment interest.

II. HOW's Appeal

HOW complains that the trial court erred in denying its plea in abatement and in rendering judgment on the DTPA cause of action because Hopper failed to provide the required pre-suit notice to the defendants. The operative statutory mandate for notice under the DTPA provided:

As a prerequisite to filing suit ... a consumer shall give written notice to the person at least 30 days before filing the suit advising the person of the consumer's specific complaint and the amount of actual damages and expenses, including attorneys' fees, if any, reasonably incurred by the consumer in asserting the claim against the defendant.

1979 Tex.Gen.Laws, ch. 603, § 5, at 1330 [Tex.Bus. & Com.Code § 17.50A(a), since amended and renumbered as § 17.505(a) ].

In order to comply with this provision, the notice must be in writing and must meet the specific requirements of the statute. Blumenthal v. Ameritex Computer Corp., 646 S.W.2d 283, 287 (Tex.App.1983, no writ). The burden to plead and prove compliance with the notice provision rests on the party seeking recovery. Investors, Inc. v. Hadley, 738 S.W.2d 737 (Tex.App.1987, writ denied). However, the party seeking to deny recovery must point out the failure to plead or prove notice, or the complaint is waived. Id.; Silva v. Porowski, 695 S.W.2d 766 (Tex.App.1985, writ ref'd n.r.e.).

HOW preserved its complaint as to the notice requirements. HOW specifically presented the notice issue to the trial court in its answer, special exceptions to Hopper's pleadings, plea in abatement, objections to the jury charge, and motion for new trial.

The record in the present case fails to show that Hopper satisfied the pleading or proof requirements necessary for proper notice. Hopper argues that her pleadings are sufficient under Tex.R.Civ.P.Ann. 54 (1979). See Investors, Inc., 738 S.W.2d at 742. Hopper's fifth amended petition includes a cause of action for breach of warranty, which alleges that "[a]ll conditions precedent have occurred which are necessary for the performance by the [defendants] of their obligations in the warranty and the insurance policy." At most, this pleading alleges that all conditions precedent to HOW's performance on the warranty have been satisfied; it does not sufficiently allege that the requisite DTPA notice was given. Further, Hopper offered no proof at trial that any notice had actually been given.

Even if Hopper could overcome these pleading and proof deficiencies, she would still be unable to prove compliance with the notice provisions. In her brief, Hopper states that her demand letter was received by the defendants on October 3, 1986, the same day the DTPA suit was filed. Therefore, even if Hopper had pled notice and proved delivery of the notice letter, she would not have complied with the notice requirements because, by her own admission, notice was not given thirty days before filing suit.

On appeal, Hopper argues that she was not required to serve notice of the claim because the limitations period was about to expire. See Russell v. Campbell, 725 S.W.2d 739, 746 (Tex.App.1987, writ ref'd n.r.e.). It is true that the DTPA did not require a consumer to serve the notice "[i]f the giving of 30 days' written notice is rendered impracticable by reason of the necessity of filing suit in order to prevent the expiration of the statute of limitations." 1979 Tex.Gen.Laws, ch. 603, § 5, at 1330 [Tex.Bus. & Com.Code § 17.50A(b), since amended and renumbered as § 17.505(b) ]. However, in order to qualify for this exception when notice has been specifically denied, a plaintiff must plead and offer some proof that the giving of notice was "rendered impracticable" by the impending expiration of the limitations period. Since HOW expressly denied notice, Hopper had the burden of pleading and proving the exception if she wanted to rely on it. Here, Hopper pleaded and proved neither the exception nor compliance with the notice provisions.

We conclude that Hopper's failure to plead and prove the required DTPA notice is reversible error; therefore, the trial court erred in denying HOW's plea in abatement. See Star-Tel, Inc. v. Nacogdoches Telecommunications, Inc., 755 S.W.2d 146, 149 (Tex.App.1988, no writ). After reviewing the relevant authorities, some of which are in conflict, we conclude that the appropriate remedy is to remand the case for a new trial on the DTPA cause of action with instructions to the trial court to abate the suit to allow Hopper to comply with the notice requirement. See Certainteed Corp. v. Cielo Dorado Dev., Inc. 733 S.W.2d 247 (Tex.App.1987), rev'd on other grounds, 744 S.W.2d 10 (Tex.1988); Sunshine Datsun, Inc. v. Ramsey, 680 S.W.2d 652 (Tex.App.1984, no writ); see also Schepps v. Presbyterian Hospital, 652 S.W.2d 934 (Tex.1983). But see Hollingsworth Roofing Co. v. Morrison, 668 S.W.2d 872 (Tex.App.1984, no writ) (holding that where the required notice was not given and the action was not abated prior to trial, the proper remedy was to allow the plaintiff recovery of actual damages,...