Woodlands Land Dev. Co. v. Jenkins

• Decision Date: 24 May 2001
• Parties: (Tex.App.-Beaumont 2001) THE WOODLANDS LAND DEVELOPMENT COMPANY, L.P., Appellant v. JIM and LAURA JENKINS, Appellees NO. 09-00-037 CV
• Court: Texas Court of Appeals

Page 415

48 S.W.3d 415 (Tex.App.-Beaumont 2001)

THE WOODLANDS LAND DEVELOPMENT COMPANY, L.P., Appellant v. JIM and LAURA JENKINS, Appellees

NO. 09-00-037 CV

Court of Appeals of Texas, Beaumont

Submitted Feb. 15, 2001

Decided May 24, 2001

On Appeal from the 221st District Court Montgomery County, Texas Trial Cause No. 93-08-02215-CV

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

Before Walker, C.J., Burgess and Gaultney, JJ.

OPINION

DON BURGESS, Justice

The Woodlands Land Development Company, L.P. ("Woodlands") appeals a judgment in favor of Jim and Laura Jenkins ("Jenkins" or "Appellees") for $103,000 in compensatory damages, $35,000 in attorney's fees, and $1,282,500 in exemplary damages. Appellees sued Woodlands, Westbrook Building Company, Inc. ("Westbrook"), and other defendants¹ for property damage and mental anguish in connection with their purchase of a new home. Among Appellees' theories of recovery were statutory fraud, common law fraud, breach of earnest money contract, breach of covenant, and violation of the Texas Deceptive Trade Practices Act (DTPA). The jury found in favor of the Appellees on all of these theories, except breach of the earnest money contract. The jury determined Westbrook and Woodlands were each 45% responsible for the damages and Appellees were 10% responsible. We affirm in part, reform in part, and reverse and render in part.

Background

In late 1991, Appellees began looking for a new home in The Woodlands, Texas. A real estate agent for The Woodlands Custom Homes, Martha McCoin (later known as Martha Pircher), ("McCoin"), showed them several homes. Shortly thereafter, Appellees entered into "The Woodlands Homes New Home Earnest Money Contract" ("Contract") to purchase a new home from defendant Westbrook. In addition to Appellees and Westbrook, the other signatory to the Contract was the Woodlands. Among the attachments to the Contract were two pertinent documents: (1) Addendum A, which was a list of corrections, created by Appellees and Westbrook during their "walk-through" of the home and also initialed as well as signed by the Appellees and Westbrook; and (2) a "Schedule of Specifications, Allowances and Construction Details for Westbrook Building Company, Inc." ("Specifications"), which also was initialed and signed by the Appellees and Westbrook. Woodlands did not initial or sign either Addendum A or the Specifications.

After closing the sale on January 17, 1992, the Appellees discovered various defects in the home. These included roof leaks, carpet stains, incorrectly sealed or stained floors, walls painted with the wrong brand of paint, warped boards, cracks in the walls and mortar, as well as bees in the wall and landscape or grading defects. Appellees also complained their home had less square footage than the Woodlands had represented it to have. When Westbrook did not respond to Appellees' complaints, they contacted Woodlands. However, Appellees found Woodlands to be unresponsive as well.

At the beginning of The Woodlands' development, its real property was encumbered with certain covenants and restrictions, i.e., the "Covenants, Restrictions, Easements, Charges and Liens of The Woodlands" ("Covenants"). The Covenants provide for establishment of The Woodlands Community Association ("Community Association"), and also for the Development Standards Committee ("Standards Committee") to be a function of the Community Association after 1992. At the time of Appellees' purchase, the Standards Committee was a function of Woodlands. The Standards Committee is charged with establishing rules and regulations governing the improvement of lots, including the form and content of plans and specifications. Also, the Covenants authorize the Standards Committee to promulgate building codes, and other codes such as fire and housing, unless and until a state political subdivision regulates such matters in The Woodlands. Further, the Standards Committee is authorized to issue Certificates of Compliance for structures or improvements upon request of a lot's owner.

Woodlands had inspected the Appellees' home on three occasions before the January 17 closing and on three occasions after closing, with the final inspection occurring on June 23, 1992. On June 23, a Woodlands inspector informed the Community Association that an occupancy certificate could be issued for the Appellees' home, with the exceptions of the rear door landing, as well as planting and grading standards. At Appellees' request, the Standards Committee issued a Certificate of Compliance ("Certificate") for the home on July 8, 1992. A little over a year later, Appellees filed their lawsuit.

In their motion for judgment on the verdict, Appellees requested the trial court to enter judgment on the theory of recovery permitting them the largest recovery, and thus elected to recover their statutory fraud claim. "When a party tries a case on alternative theories of recovery and a jury returns favorable findings on two or more theories, the party has a right to a judgment on the theory entitling him to the greatest or most favorable relief." Norwest Mortgage, Inc. v. Salinas, 999 S.W.2d 846, 865 (Tex. App.--Corpus Christi 1999, pet. denied)(citing Boyce Iron Works, Inc. v. Southwestern Bell Tel. Co., 747 S.W.2d 785, 787 (Tex. 1988)). Appellees' statutory fraud claim allowed recovery not only for actual damages, but also for exemplary damages, and attorney's fees.

Causal Connection of Misrepresentations

In its first issue, Woodlands maintains the express language of the Contract precludes Appellees' reliance on any alleged misrepresentations by Woodlands as a matter of law. Woodlands correctly states the necessity for Appellees to show a causal connection between any alleged misrepresentations by Woodlands and Appellees' alleged damages. See Prudential Ins. Co. of America v. Jefferson Assocs., Ltd., 896 S.W.2d 156, 161 (Tex. 1995). Woodlands argues "[t]he only conceivable fraudulent misrepresentations made by The Woodlands were the alleged oral statements by McCoin (which [Appellees] concede they received before signing the earnest money contract), and the Specifications and Addendum A . . ." and further asserts the Appellees "could not have justifiably relied on any alleged representations that McCoin made to them before they entered into the Earnest Money Contract. Pursuant to the plain terms of the Earnest Money Contract, Plaintiffs disclaimed all warranties other than the H.O.W. warranty and manufacturer warranties."²

Woodlands relies on two Texas Supreme Court cases - Prudential Ins. Co., 896 S.W.2d at 156, and Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171 (Tex. 1997) - and two cases from the courts of appeals - C & A Invs., Inc. v. Bonnet Resources Corp., 959 S.W.2d 258, 264-65 (Tex. App.--Dallas 1997, writ denied) and Airborne Freight Corp. v. C.R. Lee Enters., 847 S.W.2d 289, 297 (Tex. App.--El Paso 1992, writ denied). In each case, the courts found a party could not prove causation where it entered into a contract containing cautionary language specifically precluding reliance on contrary verbal representations. Prudential, 896 S.W.2d at 161; Schlumberger, 959 S.W.2d at 181-82; C & A Invs., Inc., 959 S.W.2d at 264-5; Airborne Freight, 847 S.W.2d at 297.

In Prudential, the purchaser of a commercial building alleged the seller misrepresented its condition and failed to disclose the building contained asbestos. 896 S.W.2d at 159. The purchaser was a "knowledgeable real estate investor who owned an interest in at least thirty commercial buildings," was president of a commercial property management firm, and "had bought and sold several large investment properties on an 'as is' basis." Id. In finding the buyer could not recover, the Prudential Court determined that, generally, an "as is" agreement negates the causation essential to recovery for a DTPA violation, fraud, and negligence. Prudential, 896 S.W.2d at 161. However, the Prudential Court set forth several exceptions to the general "as is," or "cautionary language" rule. Agreements containing such language will not bind a buyer who is induced to enter the agreement because of a fraudulent representation. Id. at 162. Nor will a buyer, who is entitled to inspect property, be bound by an "as is" agreement if the seller's conduct obstructs the buyer's inspection. Id. Further, we are to consider the "nature of the transaction and the totality of the circumstances surrounding the agreement." Moreover,

[w]here the 'as is' clause is an important part of the basis of the bargain, not an incidental or 'boiler-plate' provision, and is entered into by parties of relatively equal bargaining position, a buyer's affirmation and agreement that he is not relying on representations by the seller should be given effect . . . . We think it too obvious for argument that an "as is" agreement freely negotiated by similarly sophisticated parties as part of the bargain in an arm's-length transaction has a different effect than a provision in a standard form contract which cannot be negotiated and cannot serve as the basis of the parties' bargain.

Id. at 162.

In Schlumberger, the parties disagreed about the feasibility and value of a joint venture diamond mining project. See 959 S.W.2d at 180-81. To resolve this dispute, the parties negotiated and then signed a release. During the course of the negotiations, "highly competent and able legal counsel represented both parties." Id. at 180. The Schlumberger disclaimer expressly stated that the appellees' counsel had fully explained the legal consequences of the release to them. Id. Also, the Court noted that the parties were "sophisticated business players." Id. Importantly, in Schlumberger, the very purpose of the release was to end the dispute about the value of the joint project. Therefore, specifically limiting its holding to the facts before it, the Court found the parties were bound by the disclaimer of...