Jim Walter Homes, Inc. v. Castillo, 1774

• Citation: 616 S.W.2d 630
• Decision Date: 12 February 1981
• Docket Number: No. 1774,1774
• Parties: JIM WALTER HOMES, INC., Appellant, v. Joe Cruz CASTILLO, Appellee.
• Court: Court of Appeals of Texas. Court of Civil Appeals of Texas

Page 630

616 S.W.2d 630

18 A.L.R.4th 1331

JIM WALTER HOMES, INC., Appellant, v. Joe Cruz CASTILLO, Appellee.

No. 1774.

Court of Civil Appeals of Texas, Corpus Christi.

Feb. 12, 1981.

Rehearing Denied May 21, 1981.

Danny Van Winkle, Vinson & Elkins, Houston, for appellant.

Mills Latham, Law Offices of Latham & Patterson, Corpus Christi, Hector Gonzalez, Law Offices of Hector Gonzalez, Sinton, for appellee.

OPINION

NYE, Chief Justice.

This is an appeal by Jim Walter Homes, Inc., appellant-defendant, from a judgment in favor of Joe Cruz Castillo, appellee-plaintiff, for violations of the Texas Deceptive Trade Practices Consumer Protection Act, Tex.Bus. & Com. Code Ann. § 17.41 et seq. (Supp.1980) (hereinafter "DTPA") and the Texas Consumer Credit Code, Tex.Rev.Civ.Stat.Ann. art. 5069 1.01 et seq. (hereinafter "Credit Code"). Suit was originally brought by plaintiff asserting a cause of action against defendant for alleged violations of the DTPA and Credit Code. The jury found violations under both, and the trial court entered its judgment in accordance with the jury's findings. Jim Walter Homes, Inc., appeals.

On February 8, 1974, plaintiff entered into a contract with a representative of defendant. The contract provided for defendant to construct a new house on plaintiffs' unencumbered property in Fort Bend County, Texas. The cash price of the house was $12,895.00, plus a finance charge of $14,015.00, for a total sale price of $26,810.00. To secure payment of the debt, defendant required plaintiffs to release a first lien on the house.

During construction of the house, plaintiffs noticed several problems in the manner of construction, but were told by defendant's representatives that the problems would be cured. Plaintiffs moved into the house during June or July 1974. Approximately nine months to a year after moving into the house, plaintiff began to notice construction defects such as floors cracking, doors not shutting properly, and warped drawers. Upon noticing these defects, plaintiff began to complain extensively to defendant, and subsequently filed this lawsuit on December 1, 1978. This date is four years and ten months after the original contract was signed, and four years and six months after plaintiff complained about the construction, and three years and six months after the defects began showing up in the house.

Causes of action under the Credit Code are controlled by Article 5069 8.04, Tex.Rev.Civ.Stat.Ann., which provides as follows:

"... Such actions may be brought within four years from the date of the loan or retail installment transaction or within two years from the date of the occurrence of the violation, whichever is later...."

Since this lawsuit was filed almost five years after the date of the loan or retail installment transaction, it does not fall within the permissible time limits provided for in the Credit Code. Plaintiff contends, however, that since defendant had retained a lien on the house, the violation was continuing and the suit was timely filed within two years from the date of the occurrence of the violation.

This same argument was confronted and rejected in Jim Walter Homes, Inc. v. Smith, 592 S.W.2d 670 (Tex.Civ.App. Beaumont 1979, writ ref'd n.r.e.). The Beaumont court was faced with a lawsuit filed under the Credit Code on July 19, 1978. The contract was entered into on July 17, 1973. The suit was certainly not filed within four years of the contract. The court was faced with the 1973 version of Article 5069 8.04, which said "or two years from the date of the final entry made thereon...." instead of "or within two years from the date of the occurrence of the violation...." They rejected the above argument and held that the continuing violation theory is unreasonable which would give the plaintiffs seventeen years to bring their lawsuit. The Credit Code cause of action was held barred.

If we were to agree with plaintiffs' contention that the "occurrence of the violation was continuing as long as the first lien remained on the property, we would find that this lawsuit could be maintainable from May, 1974, when the lien arose, until April, 1991, two years after the final payment was made. This result would be unreasonable, so the continuing violation theory cannot be accepted. Accordingly, we hold that the Credit Code cause of action is barred by limitations.

Next, we turn to the cause of action under the DTPA. The jury found that defendant, through his Mechanic's Lien Contract, represented that the house would be built in a good, substantial, and workmanlike manner. The jury further found that this representation was false and the plaintiff was adversely affected by such representation. The trial court entered judgment in accordance with the jury findings.

Defendant argues that it was error for the trial court to enter judgment for violations under the DTPA, because any claim by plaintiff under this act was barred by the statute of limitations. As decided this same day by this Court in Jim Walter Homes v. Chapa, 614 S.W.2d 838 (Tex.Civ.App. Corpus Christi 1981), the four-year limitations in Article 5527, Tex.Rev.Civ.Stat.Ann. (1958) applies to this type of action. For a full discussion of this question, refer to the above-mentioned opinion.

In determining when the four-year limitation period begins to run, we must determine whether the "discovery rule" applies to this type of action. Both parties agree that the application of the discovery rule to a case under the DTPA is one of first impression; however, the rules governing when the statute of limitations begin are quite settled.

In fraud, the rule is set out in Quinn v. Press, 137 Tex. 60, 140 S.W.2d 438, 440 (1941) as follows:

"... the statute of limitations begins to run from the time the fraud is discovered, or could have been discovered by the defrauded party by the exercise of reasonable diligence."

See also Polk Terrace, Inc. v. Curtis, 422 S.W.2d 603 (Tex.Civ.App. Dallas 1967, writ ref'd n.r.e.).

In a case alleging a breach of implied warranty, the rule is set out in Richman v. Watel, 565 S.W.2d 101, 102 (Tex.Civ.App. Waco 1978, writ ref'd n.r.e.) as follows:

"Limitation (here the four year statute) commences on the breach of implied warranty when the buyer discovers or should discover the injury."

And the often quoted language of Atkins v. Crosland, 417 S.W.2d 150, 158 (Tex.Sup.1967), sets out the following guidelines:

"The test to determine when the statute of limitations begins to run against an action sounding in tort is whether the act causing the damage does or does not of itself constitute a legal injury, that is, an injury giving rise to a cause of action because it is an invasion of some right of plaintiff. If the act is of itself not unlawful in this sense, and plaintiff sues to recover damages subsequently accruing from, and consequent on, the act, the cause of action accrues, and the statute begins to run, when, and only when, the damages are sustained and this is true although at the time the act is done it is apparent that injury will inevitably result."

In the case at bar, we must determine whether the act (here representations) was of itself unlawful or not. If the act was not unlawful, the cause of action accrues when the damages are sustained. Atkins v. Crosland, supra. Here the representation that the construction was to be in a good and workmanlike manner was not unlawful in and of itself. The statement only became unlawful when the damage occurred. Before plaintiff discovered that the house was not built in a good, substantial, and workmanlike manner, he had no cause of action; therefore, we hold that the discovery rule applies to the case at bar.

Our next key question is whether plaintiff Castillo discovered the defects during construction of the house, around June, 1974, or whether the defects were discovered when he noticed cracks in the floor, etc., in March of 1975. In the latter case, the cause of action would not be barred by the limitations.

In Polk...