Opinion
NO. 14-96-01391-CV
10-29-1998
LONNIE L. JOHNSON and EARTHA JEAN JOHNSON, Appellants v. PERRY HOMES, a Joint Venture, Appellee
On Appeal from the 334th District Court Harris County, Texas
Trial Court Cause No. 94-53854
OPINION
This appeal is from a summary judgment in favor of the defendant homebuilder on all causes of action alleged by the purchasers. Appellants, Lonnie L. Johnson and Eartha Jean Johnson, bring twelve points of error attacking both the summary judgment and the trial court's granting of declaratory relief in favor of appellee, Perry Homes, a Joint Venture ("Perry"). Appellants sought damages based upon two theories of liability: (1) the homebuilder's liability for the decrease in value of the purchaser's home when it represented to potential purchasers that it would build homes on all lots in a subdivision and then discontinued building (the "Perry community" issue); and (2) the builder's liability for later charging for items represented as standard in its model home (the "custom enhancement" issue). Because Perry has not established its entitlement to judgment as a matter of law on all of appellants' causes of action, we affirm in part and reverse and remand in part.
Factual and Procedural Background
In the summer or early fall of 1992, appellants visited Wortham Estates, a subdivision in northwest Houston, while looking for a new home. Appellants assert that Perry's sales personnel represented to customers, including appellants, that Perry owned all of the remaining lots in Wortham Estates and that it planned to build houses in a similar price range on all remaining lots. Signs leading to the subdivision listed Perry as the builder in Wortham Estates. In addition, Perry had a large plat map in its model showing lots that were sold and indicating that all others were available for purchase. Appellants claim they relied on these representations in making their decision to purchase a home to be built in Wortham Estates.
The record reflects that Wortham Estates and Wortham Park are both part of Wortham Villages. Appellants assert Perry was the only builder building homes in Wortham Estates when they visited the subdivision. At that time, Pulte Homes and Brighton Homes were building lower priced homes in Wortham Park.
On October 31, 1992, appellants, who are both attorneys for Exxon, signed the first of three earnest money contracts to buy a Perry home in Wortham Estates. They selected a house plan based on a larger model they had seen in Sutton Park, another subdivision where Perry was building homes. After appellants signed the contract, they learned the price did not include many of the features contained in the Sutton Park model. On January 15 and 21, 1993, appellants sent demand letters to Perry demanding certain enhancements be installed at Perry's expense. Perry's counsel replied, offering two proposed resolutions: (1) Perry would widen the driveway and include some of appellants' requested changes at no charge; or (2) Perry would refund all of appellants' earnest money. Appellants rejected both proposals, but stated in their letter, "[w]e remain willing to work out this matter on an amicable basis. The ball is in your court."
On January 29, 1993, Perry's counsel sent another letter to appellants offering a settlement. Appellants signed and accepted the agreement, referred to as the Compromise Settlement Agreement (CSA), agreeing to pay an additional price for some enhancements with Perry providing some at no cost. The agreement provided that "[a]s a compromise and settlement of your claims and allegations, you have agreed to proceed with the purchase of the above referenced property" based upon several enumerated promises. Perry agreed to widen appellants' driveway, install crown molding in the formal dining room, and reverse the door on the hall linen closet at no charge to appellants. Perry also agreed to credit appellants for the cost of the vinyl floor in the kitchen and morning area and replace it with tile, charging appellants Perry's cost for the tile. Appellants agreed that, except for items they specifically declined to have installed, this work and any signed change orders would make the home contain the expected features, and no other changes would be requested unless they were provided in the construction drawings for the model home in Sutton Park.
Appellants later signed several "Enhancement Change Orders," which were incorporated into the contract and provided in part as follows:
The following upgraded selections and/or non-standard modifications have been requested. All charges shown here are for the change(s) shown. All conditions of the Earnest Money Contract dated October 31, 1992 remain in effect except as modified below.Perry contends these change orders constitute ratifications of the CSA.
Appellants later signed two amended earnest money contracts after the execution of the settlement agreement, which Perry contends also ratify the CSA. All of the contracts appellants signed contained the following provisions:
PLAN. Purchase price includes payment for residence constructed, or to be constructed, on said property substantially according to Plan No. 4532, Elevation No. 50, a copy of which plan is on file at Seller's office and available for examination by Purchaser prior, or subsequent, to execution hereof.
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PLANS. Seller has constructed, or shall construct, upon the Property, a residence in substantial accordance with the plan referred to in this Contract
and the general description contained in said plan, a copy of which is on file at Seller's office which Purchaser hereby acknowledges having inspected and approved. Purchaser acknowledges that this residence is one of a number of residences constructed or to be constructed by Seller in the above subdivision according to a general plan and design already determined therefore. This contract is an agreement to purchase upon completion of a certain type and size residence on a particular lot or plat of ground, and shall not be construed as a contract to build said residence to the order, or at the direction, of Purchaser.
In March of 1993, shortly before closing, appellants signed two Purchaser's Acceptance Agreements, which Perry argues further ratify the settlement. In relevant part, the Acceptance Agreements state:
Further, Purchaser certifies that the house and improvements have been completed in accordance with the agreement between Seller and Purchaser and in full compliance with the representations of Seller.
Appellants closed on the purchase of their home on March 23, 1993. Sometime after closing, Perry discontinued building in Wortham Estates. Appellants later learned that Perry did not own all of the remaining lots in the subdivision and that in June 1993, Perry had defaulted on a purchase agreement to buy the remaining lots. In a demand letter dated July 21, 1994, appellants claimed they would be damaged by Perry's failure to complete the building program on all lots in the subdivision. Appellants did not include any claim concerning the custom enhancements.
Appellants filed suit on November 1, 1994. In their suit, appellants asserted that Perry represented it owned all remaining lots in the subdivision and that it planned to build houses on these lots in a price range of $150,000 to $240,000. They sued to recover the loss in value they contend resulted from Perry's decision to discontinue building in Wortham Estates as promised. They also sought the cost of added features they contend were not shown as upgrades in the model home and the difference between the purchase price and their asserted appraised value. They claimed Perry represented their home would appraise for the sales price, but it actually appraised for $13,000 less. Appellants alleged causes of action for fraud, negligent misrepresentation, negligence, and Texas Deceptive Trade Practices Act (DTPA) violations.
On February 5, 1996, Perry moved for summary judgment alleging numerous grounds, including the following: the CSA amounts to an accord and satisfaction; acceptance under the CSA, agreeing to the enhancement change orders, and acceptance of the home constitute ratification of the settlement agreement; oral representations cannot displace written contract terms; there is no reliance as a matter of law; no consideration was given for Perry to build on other lots; appellants' claims fall outside the DTPA because the use of surrounding property does not fall within the DTPA's definition of "goods;" and appellants allege no cognizable tort claims because appellants' only damages are the subject matter of the contract.
Appellants responded to Perry's summary judgment motion on March 15, 1996. Perry complains that this response was filed seven days before the hearing on March 22. Rule 166a(c) provides: "Except on leave of court, the adverse party, not later than seven days prior to the day of hearing may file and serve opposing affidavits or other written response." TEX. R. CIV. P. 166a(c). Accordingly, the response was timely. Appellants argued in their response that the CSA is unenforceable because: Perry breached the settlement agreement; it is ambiguous; and it was signed under economic duress. They also argued that their claims fall within the DTPA, and in DTPA and fraud cases, oral representations are admissible despite the existence of a written contract They asserted they gave consideration for Perry's promise to build on the remaining lots, and Perry's representation that it would build on other lots was a producing cause of appellants' decision to buy.
Appellants filed their first amended petition on March 21, 1996, within seven days of the summary judgment hearing and without obtaining leave of court. Perry moved to strike the petition because appellants alleged new causes of action. Before a party files an amended pleading within seven days of trial, he must obtain leave of court, which shall be granted absent a showing of surprise. See TEX. R. CIV. P. 63. Rule 63 applies to summary judgment hearings, but we are to construe the rule liberally. See Goswami v. Metropolitan Sav. & Loan Ass'n, 751 S.W.2d 487, 490-91 (Tex. 1988). Unless the record shows the court denied leave to file, we presume the trial court considered the amended pleading. Id. The record does not reflect a ruling on Perry's motion to strike. Rule 166a(c) provides that the trial court should render a summary judgment on the pleadings on file at the time of the hearing. See TEX. R. CIV. P. 166a(c). Perry's counsel conceded at oral argument that the amended petition was before the trial court at the time its summary judgment motion was considered. Accordingly, we will presume the trial court considered appellants' amended petition.
Appellants' amended petition added several DTPA violations arising from the alleged misrepresentations concerning both the custom enhancement and Perry community issues. Appellants also pleaded the affirmative defense of duress as a bar to enforcement of the CSA. In addition, appellants again alleged negligence, negligent misrepresentation, and fraud based on Perry's alleged representations concerning the Perry community issue. They added an allegation that they were fraudulently induced to enter the contract. Appellants also asserted Perry should be estopped from arguing it did not own the remaining lots in Wortham Estates. As an alternative to damages, appellants sought rescission of the contract as a remedy for Perry's alleged misrepresentations.
Perry replied to appellants' response and objected to appellants' proof. There is no ruling on these objections in the record. Appellants again responded to Perry's reply, filing additional summary judgment evidence within seven days of the hearing. Summary judgment evidence will not be considered where it was not timely filed and there is no clear indication in the record that the trial court granted permission for its delayed filing. See Abdel-Fattah v. Pepsico, Inc., 948 S.W.2d 381, 385 (Tex. App.—Houston [14 th Dist.] 1997, no writ). The trial court granted summary judgment that appellants take nothing, and the trial court's order expressly stated it considered only the first response. Accordingly, we will not review appellants' supplemental responsive materials. In its judgment, the court also construed the sales contract and the CSA. In addition, it found appellants' claims were groundless and assessed costs against appellants. Appellants moved for reconsideration or a new trial, which was denied, although the trial court deleted the finding that the suit was groundless. Perry asked to modify the judgment to include attorney's fees, and the trial court also denied that motion. This appeal resulted.
Perry objected that the affidavit of Lonnie Johnson was conclusory. A complaint that an affidavit is conclusory is a defect of substance, and no objection or ruling is required. See Progressive Cty. Mut. Ins. Co. v. Carway, 951 S.W.2d 108, 117 (Tex. App.—Houston [14th Dist.] 1997, pet. denied). After reviewing this affidavit, we determine that it contains many factual statements based on personal knowledge and is not wholly conclusory. Accordingly, we will consider these non-conclusory statements in our review.
Standard of Review
Summary judgment is proper only when a movant establishes that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. TEX. R. CIV. P. 166a(c). In reviewing a summary judgment, we take the evidence favorable to the non-movant as true and indulge every reasonable inference in the non-movant's favor. See Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex. 1985). A defendant who conclusively negates at least one of the essential elements of each of the plaintiff's causes of action or who conclusively establishes all of the elements of an affirmative defense is entitled to summary judgment. See Cathey v. Booth, 900 S.W.2d 339, 341 (Tex. 1995); Gibbs v. General Motors Corp., 450 S.W.2d 827, 828 (Tex. 1970). A summary judgment for the defendant disposing of the entire case is proper only if, as a matter of law, the plaintiff could not succeed upon any theories pleaded. See Delgado v. Burns, 656 S.W.2d 428, 429 (Tex. 1983).
Waiver
In this appeal, appellants bring twelve points of error, but they do not assert a Malooly point attacking the summary judgment generally. See Malooly Bros., Inc. v. Napier, 461 S.W.2d 119, 121 (Tex. 1970) (holding that a point complaining that the trial court erred in granting summary judgment permits argument on all possible grounds upon which the summary judgment should have been denied). While the judgment construes the contract and settlement agreement in the declaratory relief, it does not state that any particular grounds for summary judgment were sustained. Therefore, appellants must attack all grounds raised. It is well established that when a trial court's order granting summary judgment does not specify the ground relied upon for its ruling, judgment will be affirmed on appeal if any of the theories advanced are meritorious. See Carr v. Brasher, 776 S.W.2d 567, 569 (Tex. 1989). Appellants have not assigned error attacking all of the grounds asserted in Perry's motion. We may not reverse a trial court's judgment in the absence of properly assigned error. See Vawter v. Garvey, 786 S.W.2d 263, 264 (Tex. 1990); Evans v. First Nat'l Bank of Bellville, 946 S.W.2d 367, 377 (Tex. App.—Houston [14 th Dist.] 1997, writ denied); see also TEX. R. APP. P. 38.1(e) (former TEX. R. APP. P. 74(d)).
Specifically, appellants have not assigned a point of error to the granting of summary judgment on the ground of accord and satisfaction. An accord and satisfaction constitutes a bar to any action on the original contract. See Ensley v. Spickard, 232 S.W.2d 780, 782 (Tex. Civ. App.—Dallas 1950, writ ref'd). In a summary judgment proceeding, once a release is properly pleaded, the burden shifts to the other party to prove that the release should be set aside. See Sweeney v. Taco Bell, Inc., 824 S.W.2d 289, 291 (Tex. App.—Fort Worth 1992, writ denied); Deer Creek Ltd. v. North Am. Mortgage Co., 792 S.W.2d 198, 201 (Tex. App.—Dallas 1990, no writ). The affirmative defense of accord and satisfaction is available to a defendant in a cause of action brought under the DTPA. See Kuehnhoefer v. Welch, 893 S.W.2d 689, 693 (Tex. App.—Texarkana 1995, writ denied); see also Miranda v. Joe Myers Ford, Inc., 638 S.W.2d 36, 38-39 (Tex. App.—Houston [1st Dist.] 1982, writ dism'd).
Perry acknowledges that accord and satisfaction concerned the settlement of the issue of the custom enhancements, and the Perry community issue was not settled. In the absence of properly assigned error, appellants have waived any challenge to the summary judgment ground that accord and satisfaction bars their claims concerning the settlement of the custom enhancement issue.
Appellants argue several reasons why their claims are not barred by the CSA under point of error eight contesting Perry's entitlement to summary judgment on fraud. Appellants pleaded fraud only as to the Perry community issue, however. Their allegations concerning the custom enhancement issue were all brought as claims under the DTPA. The Perry community issue, the subject of appellants' fraud claim, was not addressed in the CSA. Thus, appellants have not challenged the CSA as a bar to their claims concerning the custom enhancements. Accordingly, we need not reach appellants' assertions that the agreement is ambiguous, Perry breached the agreement, and it was signed under economic duress. Even so, our review reveals appellants failed to produce evidence to raise a fact issue as to each element of these defenses. See Brownlee v. Brownlee, 665 S.W.2d 111, 112 (Tex. 1984); City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678-79 (Tex. 1979) (holding that it is the non-movant's burden to come forward with summary judgment evidence sufficient to raise an issue of fact on each element of affirmative defenses).
Appellants also failed to assert a point of error attacking ratification as a ground for summary judgment. Ratification occurs when a person induced by fraud to enter an agreement continues to accept benefits under that agreement after he becomes aware of the fraud, or if he conducts himself so as to recognize the agreement as binding. See Zieben v. Platt, 786 S.W.2d 797, 802 (Tex. App.—Houston [14th Dist.] 1990, no writ). Appellants accepted the benefits of their contract to purchase the home even after they became aware of alleged fraudulent representations concerning the custom enhancements to be included in the purchase price. Because appellants have not challenged ratification on appeal, these claims are now barred.
Therefore, we hold that Perry established its entitlement to judgment as a matter of law that appellants take nothing on their claims concerning the custom enhancements in the absence of properly assigned error on these summary judgment grounds. Specifically, we overrule point of error three, which concerns a claimed violation of section 17.46(b)(14) of the DTPA only on the enhancement issue. Points of error two, nine, ten, and eleven, all of which concern alleged violations of other sections of the DTPA, are overruled as to the custom enhancement issue.
Perry also moved for summary judgment on the ground that appellants alleged no cognizable tort claims. Appellants did not respond to this ground in the court below and have not assigned error on this ground on appeal.
Perry asserts that appellants cannot recover in tort when their only damages are for economic losses due to the breach of a contract. See Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617, 618 (Tex. 1986). In deciding whether a plaintiff may recover in tort or contract, we must determine whether (1) the claim is for breach of a duty created solely by contract rather than a duty imposed by law, and (2) the injury is only the economic loss to the subject matter of the contract. See Southwestern Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 494 (Tex. 1991). For example, in Jim Walter Homes, the court rejected the plaintiffs' negligence and DTPA claims because their "injury was that the house they were promised and paid for was not the house they received," which could only be characterized as breach of contract. 711 S.W.2d at 618.
The Texas Supreme Court has recently rejected Perry's contention that recovery in tort is precluded for a fraudulent inducement of contract claim in Formosa Plastics Corp. USA v. Presidio Eng'rs & Contractors, Inc., 960 S.W.2d 41, 43 (Tex. 1998). The court held that tort damages are recoverable for a fraudulent inducement claim irrespective of whether the fraudulent representations are later subsumed in a contract or whether the plaintiff only suffers an economic loss related to the subject matter of the contract. See id. at 46. In reaching this conclusion, the court relied upon the well-established principle that the legal duty not to fraudulently procure a contract is separate and independent from the duties established by the contract itself.Id. (citing Dallas Farm Mach. Co. v. Reaves, 307 S.W.2d 233, 239 (Tex. 1957)).
We conclude that appellants' DTPA claims are also excepted from the "Delanney-type analysis." An allegation of a breach of contract, without more, does not constitute a false, misleading or deceptive act in violation of the DTPA. See Ashford Dev., Inc. v. USLife Real Estate Servs. Corp., 661 S.W.2d 933, 935 (Tex. 1983). When the representations are nothing more than that the defendant will fulfill its contractual duty, the breach of that duty sounds only in contract. See Crawford v. Ace Sign, Inc., 917 S.W.2d 12, 13-14 (Tex. 1996) (per curiam). The duty to make certain representations, or not to make misrepresentations, during the contract formation stage is imposed by law independently of a contract, however, and is actionable under the DTPA. See Howell Crude Oil Co. v. Donna Refinery Partners, Ltd., 928 S.W.2d 100, 109 (Tex. App.—Houston [14th Dist.] 1996, writ denied).
Therefore, we hold that appellants may recover in tort only for their claim of fraudulent inducement, as the following discussion more fully illustrates. Point of error seven on negligence and negligent misrepresentation and point eight on fraud are overruled.
Fraudulent Inducement
In appellants' first point of error, they contend the trial court erred in granting summary judgment on their fraudulent inducement claim. As Perry notes, an allegation of fraudulent inducement is merely a form of fraud. The elements of fraud are a material misrepresentation which was false, which was either known to be false when made or was asserted without knowledge of the truth, which was intended to be acted upon, which was relied upon, and which caused injury. See Sears, Roebuck & Co. v. Meadows, 877 S.W.2d 281, 282 (Tex. 1994). A promise of future performance constitutes an actionable misrepresentation if the promise was made with no intention of performing at the time it was made. See Schindler v. Austwell Farmers Co-Op, 841 S.W.2d 853, 854 (Tex. 1992). Appellants contend Perry's representations about its ownership of, and intent to build on, the remaining lots in the subdivision were made with knowledge of their falsity and with the sole purpose of inducing appellants to purchase the home.
Evidence of failure to perform a future promise is not evidence of fraud. Id. "Failure to perform, standing alone, is no evidence of the promisor's intent not to perform when the promise was made. However, that fact is a circumstance to be considered with other facts to establish intent." Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 435 (Tex. 1986). Intent to deceive is a fact question uniquely within the realm of the trier of fact because it so depends upon the credibility of the witnesses and the weight to be given to their testimony. See id. at 434; Benoit v. Wilson, 150 Tex. 273, 281, 239 S.W.2d 792, 796-97 (1951).
Perry produced no evidence to negate as a matter of law that it made a promise to build out the subdivision with no intent to perform the promise at the time it was made. Perry argues appellants produced no evidence to show its fraudulent intent. As the non-movants for summary judgment, however, appellants did not have the burden to produce evidence of fraudulent intent.
The summary judgment evidence on this issue does not establish Perry's entitlement to judgment as a matter of law. John Krugh, Perry's corporate counsel, testified by deposition that "at one point" Perry intended to build on all the remaining lots in Wortham Estates. Janet Whitaker testified that "we were proud to say that Perry was going to build out on the rest of the lots because Weekly [Homes] had gone in there and purchased a few lots and we were, the salespeople, we were upset about that because we didn't want anybody else building on — that was a prime location, too, they had a cul de sac lot location, and we were told by Boris [Matisziw, regional vice-president] that we would have the rest of those lots, that that wouldn't happen to us again." Craig Foresman, Perry's vice-president and general manager, testified that it was "probably" in the middle of 1994 when Perry made the decision to stop building in Wortham Estates, although he later acknowledged it may have been in mid-1993.
Perry's motion for summary judgment was filed before the promulgation of the amended rule permitting a "no-evidence" motion for summary judgment. See TEX. R. CIV. P. 166a(i) (effective Sept. 1, 1997).
Perry did not move for summary judgment on the fraudulent inducement claim, which had been added in appellants' amended petition. Perry raised grounds for summary judgment applicable to all of appellants' claims, however, which may make summary judgment on all claims appropriate. See Weiman v. Addicks-Fairbanks Rd. Sand Co., 846 S.W.2d 414, 416-17 (Tex. App.—Houston [14 th Dist.] 1992, writ denied); see also Farah v. Mafrige & Kormanik, P.C., 927 S.W.2d 663, 671-73 (Tex. App.—Houston [1 st Dist.] 1996, no writ) (affirming summary judgment on those causes of action for which a ground was alleged that clearly attacked the claim and which were contemplated by the summary judgment motion).
Specifically, Perry moved for summary judgment on the ground that it had negated the element of reliance, which is essential to all of appellants' misrepresentation claims. Perry argues that it is not liable for any misrepresentation by its agents because of the express terms of the contract. See Fisher Controls Int'l v. Gibbons, 911 S.W.2d 135, 142 (Tex. App.—Houston [1 st Dist.] 1995, writ denied) (holding that an experienced plaintiff, represented by counsel, who has voluntarily signed a contract may not rely, as a matter of law, on alleged oral misrepresentations in negotiations preceding the written contract which are inconsistent with a specific contract provision); Airborne Freight Corp. v. C.R. Lee Enter., Inc., 847 S.W.2d 289, 297 (Tex. App.—El Paso 1992, writ denied) (holding that plaintiffs cannot reasonably rely upon representations that are directly contrary to the terms of the written contract). In Airborne, upon which the First Court relied in reaching a similar result, the appellate court refused to find liability for oral misrepresentations, finding that "[t]he written contract contained ample cautionary language which would preclude exclusive reliance by a reasonable businessperson on verbal statements contradicting the written agreement." 847 S.W.2d at 297.
Each of the earnest money contracts appellants signed contained the following provision:
Seller has no control over the land which is not owned by Seller that may be located adjacent to or in the vicinity of the Property [appellants' lot]. As such, Seller makes no representations as to what may or may not be built upon the adjacent land or for what such land may be used.Appellants correctly point out, however, that the contract does not contain a disclaimer that Perry did not own all the remaining lots in the subdivision. The contracts also provided as follows:
This contract is the entire contract between the parties hereto and except for those expressly set forth herein there are no other representations or agreements written or oral.Thus, Perry asserts there could have been no reasonable or justifiable reliance on any representation not contained in the contract in the face of the ample cautionary language.
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Seller has not authorized its employees to make any oral promises or oral representations to Purchaser that differ from, or add to, what is contained in this written contract. Seller will not be bound by any unauthorized oral statements of its employees regarding Purchaser's house or the contract, regardless of whether such statements are made before or after closing. Purchaser should rely only on the terms of this written contract in deciding whether to enter into this contract with Seller.
Perry alleged in its motion for summary judgment, without citation to authority, that appellants had record notice of the fact that Perry did not own the remaining lots in Wortham Estates. The Texas Supreme Court held in Ojeda de Toca v. Wise, 748 S.W.2d 449, 451 (Tex. 1988), that imputed or constructive notice under real property recording statutes is no defense to a buyer's action asserting DTPA violations and fraud.
We are to assume the parties intended every contractual provision to have some meaning. See Lenape Resources Corp. v. Tennessee Gas Pipeline Co., 925 S.W.2d 565, 574 (Tex. 1996). It has long been the law in Texas, however, that a merger clause can be avoided based on fraud in the inducement and the parol evidence rule does not bar proof of such fraud. See Dallas Farm Mach., 307 S.W.2d at 239.
In this case, the representation concerning the Perry community issue is not directly contradicted in the contract when it is considered with the alleged misrepresentation that Perry owned the remaining lots in the subdivision. According to appellants, they understood the contract to refer to Perry's lack of control over adjacent property outside the subdivision. As part of their summary judgment proof, they included an excerpt from the deposition of Janet Whitaker, Perry's sales manager for Wortham Estates, who testified she also thought Perry owned all the remaining lots in the subdivision and the contract disclaimed any representations concerning what would be built outside the subdivision.
Nonetheless, we conclude these provisions in the earnest money contracts are unambiguous. Appellants' mistaken understanding that Perry owned all of the remaining lots in the subdivision does not create an ambiguity where the contract language is plain. When the contract language is not fairly susceptible of more than one legal meaning or construction, extrinsic evidence is inadmissible to contradict or vary the meaning of the explicit language of the parties' written agreement. See National Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 521 (Tex. 1995).
To analyze Perry's contention that appellants' claims are barred by the disclaimer and merger or integration clauses quoted above, we turn to two recent Texas Supreme Court cases. See Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171 (Tex. 1997); Prudential Ins. Co. v. Jefferson Assocs., Ltd., 896 S.W.2d 156 (Tex. 1995). First, in Prudential, the court held that an "as is" agreement negated causation (both proximate cause and producing cause) on the plaintiff's fraud, negligence and DTPA claims. However, the court stated that the "as is" agreement would not bar a fraudulent inducement claim if one had been raised. 896 S.W.2d at 161. The court found that a buyer is not bound by an agreement to purchase something "as is" that he is induced to make because of a fraudulent representation or concealment of information by the seller. Id. at 162 (citing Weitzel v. Barnes, 691 S.W.2d 598, 601 (Tex. 1985)). A seller cannot have it both ways: he cannot assure the buyer of the condition of a thing to obtain the buyer's agreement to purchase "as is", and then disavow the assurance which procured the "as is" agreement. Id.
Other aspects of a transaction may make an "as is" agreement unenforceable. The nature of the transaction and the totality of the circumstances surrounding the agreement must be considered. Id. Where 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 agreement that he is not relying on representations by the seller should be given effect. Id.
The Texas Supreme Court has since analyzed a situation where the contractual disclaimer of reliance was sufficient to bar a fraudulent inducement claim. In Schlumberger, the court held that a release that disclaims reliance on representations about specific matters in dispute, negotiated by parties of equal bargaining position, can preclude a claim of fraudulent inducement when the parties' intent is clear and specific. 959 S.W.2d at 179-80. Because the parties in Schlumberger were represented by highly competent and able legal counsel, they were dealing at arm's length and were knowledgeable and sophisticated business players, the court found that the clear and unequivocal language of the disclaimer contained in a release executed in settlement of a dispute about the commercial feasibility of the contemplated project precluded a claim of fraudulent inducement. Id.
Perry argues the circumstances here clearly negate reliance and the contractual disclaimers preclude appellants' claim that they were fraudulently induced to enter the purchase contract. Appellants are both experienced attorneys, they signed three separate contracts, and each contract contained numerous disclaimers. According to Perry, the contracts expressly address the alleged representation about the adjacent property, going well beyond a boiler-plate integration clause.
We disagree. While a disclaimer in a contract may preclude a claim of fraudulent inducement, it will not always do so. The disclaimers of reliance on representations in this case are part of the "boiler-plate" provisions in the contracts, and there is no evidence they were part of the basis of the bargain between appellants and Perry. The contractual provision concerning the adjacent property is also part of the standard form contract. Furthermore, the contract does not disclaim Perry's ownership of the remaining lots in the subdivision. The disclaimers were not part of a release executed in settlement of a dispute. Thus, the contract clauses here may not preclude appellants' claim that they were induced to enter the contract by Perry's alleged misrepresentations about its plans to build out the subdivision. After indulging all inferences in appellants' favor, as we must, we conclude that the contract does not preclude appellants' fraudulent inducement claim and there are genuine issues of material fact as to whether Perry promised to build homes on the remaining lots with no intention of performing that promise when it was made in order to induce appellants to purchase their home.
We sustain appellants' first point of error concerning their fraudulent inducement claim as to the Perry community issue. In addition, appellants may be entitled to the equitable remedy of rescission of the contract if they prevail on their fraudulent inducement claim. In their fourth point of error, appellants challenge the trial court's granting of summary judgment on their rescission claim because Perry did not address rescission in its motion for summary judgment. Instead, Perry challenged appellants' fraud and misrepresentation causes of action. Having found fact questions exist on appellants fraudulent inducement claim, we also sustain point of error four on rescission.
DTPA
Appellants also allege several points of error based on oral representations which they contend support their statutory DTPA "laundry list" claims. See TEX. BUS. & COM. CODE ANN. § 17.46(b) (Vernon Supp. 1998). In point two, appellants attack the summary judgment on their claim under section 17.46(b)(23), which states "false, misleading, or deceptive acts or practices" include "the failure to disclose information concerning goods or services which was known at the time of the transaction if such failure to disclose such information was intended to induce the consumer into a transaction which the consumer would not have entered had the information been disclosed." In point nine, appellants attack the judgment on their claim under section 17.46(b)(5), which concerns "representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities which they do not have." In point of error ten, appellants contest the granting of summary judgment on their claim under section 17.46(b)(7), which concerns "representing that goods or services are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they are of another." In point of error eleven, appellants attack summary judgment on their claim under section 17.46(b)(9), which concerns "advertising goods or services with intent not to sell them as advertised."
Our discussion is limited to the DTPA violations concerning the Perry community issue. We have already determined appellants' DTPA claims on the custom enhancement issue are barred.
Perry moved for summary judgment on appellants' DTPA claims on the ground that their claims "do not fall within the purview of the DTPA." Perry asserted that the use of contiguous or surrounding property does not fall within the DTPA definition of "goods." Rather, it asserted the Johnsons are not "consumers" with regard to the "Perry neighborhood" issue because it involves an incidental intangible.
To recover under the DTPA, one must be a "consumer," which means the claimant must have sought or acquired goods or services by purchase or lease, and the claimant must show that these same goods or services form the basis of the DTPA complaint. See Fisher Controls, 911 S.W.2d at 138. The DTPA defines "goods" as "tangible chattels or real property purchased or leased for use." TEX. BUS. & COM. CODE ANN. § 17.45(1). The DTPA excludes transactions that convey wholly intangible property rights. See Fisher, 911 S.W.2d at 138.
In a factually similar case, the Texas Supreme Court found that purchasers of real estate who were complaining about misrepresentations made in connection with the use of surrounding property had standing to sue under the DTPA. See Chastain v. Koonce, 700 S.W.2d 579, 581-82 (Tex. 1985). In finding that the purchasers satisfied the definition of consumers, the Court stated:
The purchasers here are complaining of conduct occurring during the transaction which resulted in the purchase of those lots. [The sellers] made representations calculated to induce these purchasers to buy the lots and which enhanced the desirability of the property. Thus, the purchasers are complaining about an aspect of the lots purchased and the transaction involved.See id. at 581.
While the "Perry neighborhood" issue may be labeled as an intangible, it was not the purchase of the neighborhood, but the purchase of the home, which formed the basis of DTPA claim. The fact that the alleged misrepresentation concerned the surrounding property, and not the property the Johnson's actually purchased, does not defeat their consumer status. See id.
In support of its argument at the trial level, Perry relied on Parks v. U.S. Home Corp., 652 S.W.2d 479, 484 (Tex. App.—Houston [1st Dist.] 1983, writ dism'd). In Parks, the court rejected the complaints of homeowners who alleged they had been induced to purchase homes by the seller's representations that it intended to perpetuate the quality and price range of homes in the subdivision. The court held that the homeowners' complaints were not within the purview of section 17.46(b)(5), which refers to representations that goods have characteristics, benefits, or qualities they do not have. See id. To be actionable under this section of the statute, the Parks court held that any misrepresentations must refer to attributes of the goods actually purchased and not to the use of surrounding property. However, the Parks court did not hold that a claim under section 17.46(b)(23) is precluded as a matter of law, but instead found that the homeowners did not sustain their burden of proof under section 17.46(b)(23) to establish the seller's motivation for its failure to disclose its change in development plans. 652 S.W.2d at 484-85.
In this regard and as discussed in reference to appellants' fraudulent inducement claim, Perry also moved for summary judgment on the ground that there could be no reliance as a matter of law based on the contracts. Perry contends that in the absence of reliance, there can be no causation to support appellants' DTPA claims. See Prudential, 896 S.W.2d at 161-62 (holding that DTPA claims alleged after a building was found to contain asbestos were barred by a contractual disavowal of reliance upon any representations and "as is" agreement).
Reliance is not an element of a DTPA cause of action, but Prudential holds that a contractual disavowal of reliance on alleged misrepresentations negates the actual causation element of producing cause. See 896 S.W.2d at 161. Proof of producing cause is required to establish liability under the DTPA. See TEX. BUS. & COM. CODE ANN. § 17.50(a).
We have found that fact questions exist as to whether the contracts preclude appellants' reliance under these circumstances. Therefore, Perry did not establish its entitlement to judgment on appellants' DTPA claims concerning the Perry community issue as a matter of law. Accordingly, we must sustain appellants' points of error two, nine, ten and eleven as to the Perry community issue.
Estoppel
In point of error five, appellants assert that the trial court erred in granting summary judgment on estoppel because Perry failed to move for summary judgment on their estoppel claim. Perry did not have the burden to negate estoppel, however, because estoppel is a shield, not a sword; estoppel is a defensive plea in confession and avoidance. See Collins v. Allied Pharmacy Management, Inc., 871 S.W.2d 929, 936 (Tex. App.—Houston [14th Dist.] 1994, no writ). Instead, appellants had the burden of producing evidence to raise a fact issue as to each essential element of their plea of estoppel, and they failed to meet that burden. See Brownlee, 665 S.W.2d at 112.
To establish equitable estoppel, appellants must show: (1) a false representation or concealment of material facts; (2) made with knowledge, actual or constructive, of those facts; (3) with the intention that it should be acted on; (4) to a party without knowledge, or the means of knowledge of those facts; (5) who detrimentally relied upon the misrepresentation. See Schroeder v. Texas Iron Works, Inc., 813 S.W.2d 483, 489 (Tex. 1991).
Appellants have not produced evidence to raise a fact issue that Perry knew at the time of the alleged misrepresentation on the Perry community issue that such a representation was then false or that it was made with the intent to induce appellants to purchase their home. Failure to perform is no evidence of the promisor's intent not to perform when the promise was made. See Spoljaric, 708 S.W.2d at 435. Therefore, we overrule point of error five.
We note the contrasting burdens in summary judgment practice. When defending Perry's motion for summary judgment negating their causes of action, appellants had no burden to produce evidence to raise a fact question unless Perry established its entitlement to judgment as a matter of law. When appellants asserted an affirmative defense, however, they were required to produce evidence of each element of that defense, which in this instance includes Perry's intent.
Discovery
In point of error six, appellants argue the trial court erred in denying appellants' motion to compel and to strike Perry's objections to discovery requests. To challenge a trial court's discovery order, appellants must demonstrate an abuse of discretion. See Transamerican Nat. Gas Corp. v. Powell, 811 S.W.2d 913, 917 (Tex. 1991). A trial court commits an abuse of discretion only when it reaches a result that is so arbitrary and unreasonable as to amount to a clear and prejudicial error of law. See Johnson v. Fourth Court of Appeals, 700 S.W.2d 916, 917 (Tex. 1985). To support reversal, the trial court's refusal to permit discovery must be an error of law that probably caused the rendition of an improper judgment. See TEX. R. APP. P. 44.1(a); Bruner v. Exxon Co., U.S.A., 752 S.W.2d 679, 682 (Tex. App.—Dallas 1988, writ denied).
Rule 166a clearly contemplates that the trial court may allow a reasonable opportunity for discovery before granting a summary judgment. See TEX. R. CIV. P. 166a(g) (stating that the trial court may order a continuance to permit affidavits to be obtained, depositions to be taken, or discovery to be had). The purpose of discovery is to allow a party to garner relevant facts pertaining to its claim or defense, and the rules governing discovery should be liberally construed. See Martinez v. Rutledge, 592 S.W.2d 398, 399 (Tex. Civ. App.—Dallas 1989, writ ref'd n.r.e.). If a party contends it has not had an adequate opportunity for discovery before a summary judgment hearing, it must file either an affidavit explaining the need for further discovery or a verified motion for continuance. See Tenneco, Inc. v. Enterprise Prods. Co., 925 S.W.2d 640, 647 (Tex. 1996).
On February 12, 1996, appellants filed a motion to compel answers to interrogatories and responses to requests for production. These discovery requests had been served on Perry in August 1995. By agreement, the answer date was extended until September 25, 1995. Perry did not mail its answers and objections until September 26, however. Appellants waited over five months after receipt of Perry's objections, and after they had entered into an agreed protective order regarding confidential documents, before filing their motion to compel. Their motion to compel failed to identify any discovery required to respond to Perry's motion for summary judgment, and appellants did not file an affidavit explaining the need for further discovery. Appellants also did not file a verified motion for continuance. A hearing on appellants' motion to compel was set for February 16, 1996, but if a hearing was held, there is no record before this court. The trial court effectively denied appellants' motion when it granted Perry's motion for summary judgment on May 10, 1996.
There is no formal order denying appellants' motion to compel in our record. Under the amended appellate rules, a trial court's implied ruling is sufficient to preserve error. See TEX. R. APP. P. 33.1(a)(2)(A).
On appeal, appellants have failed to argue or demonstrate how the trial court's denial of their motion to compel harmed them. Accordingly, we overrule point of error six.
Declaratory Judgment
Finally, in point of error twelve, appellants argue the trial court erred in granting Perry declaratory relief. In a one-paragraph argument citing no authority, appellants simply argue that the declaratory relief was improper because numerous fact questions remain to be resolved.
Under section 37.004 of the Texas Declaratory Judgments Act, an interested person whose rights, status, or other legal relations are affected by a written contract may have the court determine any question of construction or validity arising under the contract and obtain a declaration of his rights, status, or other legal relations. See TEX. CIV. PRAC. & REM. CODE ANN. § 37.004(a) (Vernon 1997). The trial court construed the three earnest money contracts and the CSA and found:
(1) the purchase price for the home entitled [appellants] to a home built substantially according to Plan No. 4532, Elevation No. 50, on Lot 3, Block 17, Section II, of the Wortham Estates Subdivision;
(2) the Earnest Money Contract did not entitle [appellants] to build the home to their order or at their direction;
(3) [Appellants] compromised and settled their claims regarding "custom enhancements;"
(4) [Appellants] agreed that Perry made no representations as to what may or may not be built on the adjacent property at issue in this suit; and
(5) [Appellants] accepted their home as having been completed in accordance with the agreement between [appellants] and Perry and in full compliance with the representations of Perry.
We review declaratory judgments under the same standards as other judgments and decrees. See TEX. CIV. PRAC. & REM. CODE ANN. § 37.010 (Vernon 1997); City of Galveston v. Giles, 902 S.W.2d 167, 170 (Tex. App.—Houston [1st Dist.] 1995, no writ). We look to the procedure used to resolve the issue at trial to determine the standard of review on appeal. Id. Here, because the case was resolved by a motion for summary judgment, we review the propriety of the declaratory judgment under the standards applied to judgments rendered upon a motion for summary judgment. Id. We will uphold the trial court's decision, being one of law, if it can be sustained on any legal theory supported by the evidence. Truck Ins. Exchange v. Musick, 902 S.W.2d 68, 69 (Tex. App.—Fort Worth 1995, writ denied).
Perry requested declaratory relief in its counterclaim. Generally, the Declaratory Judgments Act is not available to settle disputes already pending before the court. BHP Petroleum Co. v. Millard, 800 S.W.2d 838, 841 (Tex. 1990); Texas Liquor Control Bd. v. Canyon Creek Land Corp., 456 S.W.2d 891, 895 (Tex. 1970). Texas courts apply this rule whether the claim for declaratory relief is asserted in a separate proceeding or as a counterclaim in the same proceeding. HECI Exploration Co. v. Clajon Gas Co., 843 S.W.2d 622, 639 (Tex. App.—Austin 1992, writ denied); see also Staff Indus., Inc. v. HallmarkContracting, Inc., 846 S.W.2d 542, 547-48 (Tex. App.—Corpus Christi 1993, no writ) (holding that the trial court erred in allowing a declaratory judgment counterclaim that presented no issues beyond those raised in the original suit); Hitchcock Properties, Inc. v. Levering, 776 S.W.2d 236, 239 (Tex. App.—Houston [1st Dist.] 1989, writ denied) (stating that a declaratory judgment counterclaim sought on an affirmative defense pleaded in the original suit was improper). A counterclaim that presents no new controversy, but exists solely to pave the way to an award of attorney's fees is improper. Hitchcock Properties, 776 S.W.2d at 239; John Chezik Buick Co. v. Friendly Chevrolet Co., 749 S.W.2d 591, 595 (Tex. App.—Dallas 1988, writ denied).
A court may allow a declaratory judgment counterclaim, however, if it is something more than a mere denial of the plaintiff's claim and has greater ramifications than the original suit. See BHP Petroleum, 800 S.W.2d at 841-42; HECI Exploration Co., 843 S.W.2d at 638. A counterclaim has greater ramifications than the original suit if it seeks affirmative relief. HECI Exploration Co., 843 S.W.2d at 638-39. A counterclaim states a claim for affirmative relief if it alleges that the defendant has a cause of action independent of the plaintiff's claim, on which the defendant could recover benefits, compensation, or relief, even if the plaintiff were to abandon or fail to establish his cause of action. BHP Petroleum, 800 S.W.2d at 841.
Perry merely sought to have the trial court declare its rights under the contracts and CSA. It presented no new controversy and did not state a claim for affirmative relief other than requesting sanctions against appellants for filing a frivolous suit, which is not an "independent" cause of action supporting declaratory relief. The issues in controversy were already before the court by virtue of appellants' tort and DTPA claims.
Appellants' only objection below to the requested declaratory relief was that the contracts lacked the requisite clarity to form the basis of a declaratory judgment. We have determined that the contracts are unambiguous. We have also found, however, that fact questions exist concerning the court's fourth and fifth findings quoted above.
Because disputed fact questions exist, we hold that declaratory relief granted in a summary judgment is improper. We sustain point of error twelve.
Conclusion
In conclusion, we have sustained point of error one on fraudulent inducement and point four on rescission. We have also sustained in part points of error two, nine, ten and eleven on appellants' DTPA claims concerning the Perry community issue. Point of error twelve challenging the declaratory relief is sustained. All other points of error are overruled. We affirm the summary judgment granted on all of appellants' claims concerning the custom enhancement issue. We reverse the summary judgment on appellants' fraudulent inducement and DTPA claims concerning the Perry community issue, and remand those causes of action, along with appellants' rescission claim, to the trial court for further proceedings.
/s/ Leslie Brock Yates
Justice Judgment rendered and Opinion filed October 29, 1998.
Panel consists of Justices Yates, Amidei, and Fowler.
Do Not Publish — TEX. R. APP. P. 47.3(b).