CHARLES AND DIANA MALONE v. CHUCK R. WARD--Appeal from County Court at Law No 2 of Nueces County

NUMBER 13-01-813-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI

___________________________________________________________________

  CHARLES AND DIANA MALONE, Appellants,

v.

  CHUCK R. WARD, Appellee.

___________________________________________________________________

On appeal from the County Court at Law No. 2

of Nueces County, Texas.

__________________________________________________________________

O P I N I O N

Before Chief Justice Valdez and Justices Dorsey and Rodriguez

Opinion by Justice Rodriguez

Appellants, Charles and Diana Malone, bring this appeal following summary judgment in favor of appellee, Charles Ward. By seven issues, appellants generally contend the trial court erred in granting the summary judgment motion. We reverse and remand.

I. Background

In November 1999, appellants and appellee entered into a AContract for Deed@ for the purchase of appellee=s residence. Prior to signing the agreement, appellants met with appellee a few times. At these meetings, appellee did not disclose any facts about the condition of the house, either in writing or orally. Based on appellants= visual inspections, the house appeared to be clean, in good condition, and free of defects.

Appellants moved into the home in December 1999. Within a few months, appellants began to notice defects in the house, including doors and windows that did not open and close properly, and Aproblems with the linoleum floor in the kitchen.@ Discoloration, mold, and cracks began to appear on the ceiling, sheet-rock, and other surfaces. Appellants filed suit against appellee for common-law and statutory fraud, and for violations of the Texas Deceptive Trade Practices Act (DTPA).

Appellee responded by filing a no-evidence summary judgment motion.[1] The trial court granted the motion and ordered that appellants take nothing from the suit. This appeal ensued.

II. No-Evidence Summary Judgment

A. Standard

Rule 166a(i) allows a party, after adequate time for discovery and without presenting summary judgment evidence, to move for summary judgment on the basis that there is no evidence of one or more essential elements of a claim on which the adverse party would have the burden of proof at trial. Tex. R. Civ. P. 166a(i). A no-evidence summary judgment is improperly granted if the respondent brings forth more than a scintilla of probative evidence to raise a genuine issue of material fact. See Larson v. Family Violence & Sexual Assault Prevention Ctr. of S. Tex., 64 S.W.3d 506, 514 (Tex. App.BCorpus Christi 2001, pet. denied). A no-evidence summary judgment is equivalent to a pretrial directed verdict and we apply the same legal sufficiency standard. See Vargas v. K.K.B., Inc., 52 S.W.3d 250, 254 (Tex. App.BCorpus Christi 2001, pet. denied); Zapata v. Children=s Clinic, 997 S.W.2d 745, 747 (Tex. App.BCorpus Christi 1999, pet. denied). That is, we review the evidence in the light most favorable to the respondent against whom the no-evidence summary judgment was rendered, disregarding all contrary evidence and inferences. Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997); Walton v. Phillips Petroleum Co., 65 S.W.3d 262, 268 (Tex. App.BEl Paso 2001, pet. denied).

B. Fraud

By their second point of error, appellants generally contend the trial court erred in granting appellee=s no-evidence summary judgment on their common-law and statutory fraud causes of action.[2]

The elements of a claim for statutory fraud are: (1) a false representation of a material fact; (2) made to induce a person to enter a contract; and (3) reliance. Tex. Bus. & Com. Code Ann. ' 27.01(a)(1) (Vernon 2002). Statutory fraud differs from common-law fraud only in that it does not require proof of knowledge or recklessness as a prerequisite to the recovery of actual damages. Fletcher v. Edwards, 26 S.W.3d 66, 77 (Tex. App.BWaco 2001, pet. denied).

In his motion for summary judgment, citing section 27.01 of the Texas Business and Commerce Code, appellee alleged that appellants could produce no evidence that appellee Aknowingly failed to >disclose defects and malfunctions= and/or either appellant relied upon any alleged misrepresentation.@ However, under section 27.01, knowledge is immaterial to the recovery of actual damages.[3] Fletcher, 26 S.W.3d at 78. Appellants are not required to prove knowledge as part of their claim for statutory fraud. See Tex. Bus. & Com. Code Ann. ' 27.01(a)(1).

Appellee also alleged that appellants could produce no evidence that he Aconcealed defects and malfunctions with the intent to induce [appellants] into signing the Contract for Deed.@ Intent is a fact question uniquely within the realm of the trier of fact and depends upon the credibility of the witnesses and the weight to be given to their testimony. Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 434 (Tex. 1986). Because intent to defraud is generally not susceptible to direct proof, it invariably must be proven by circumstantial evidence. Id. at 435.

In their response to appellee=s summary judgment, appellants produced evidence that prior to their purchase of the property, there were numerous defects with the house which were not fully repaired by appellee. There is evidence that such defects were concealed, for example, a new linoleum floor and carpet were put over cracks on the floor; cracks in the foundation were concealed by mounds of dirt and patches of troweled on concrete; and copious amounts of paint and wall texture were used to cover cracks on walls and deteriorated sheet-rock. See Smith v. Nat=l Resort Cmtys., Inc., 585 S.W.2d 655, 658 (Tex. 1979). No defects were disclosed to appellants prior to their signing the AContract for Deed.@ See id. In their affidavits, appellants stated that at the time they signed the AContract For Deed@ the house looked very nice, fresh and clean, and they would not have purchased the residence if they had known of the defects. Looking at the evidence in the light most favorable to appellants, and disregarding all contrary evidence, Merrell Dow Pharms., Inc., 953 S.W.2d at 711, appellants produced more than a scintilla of evidence to raise a genuine issue of material fact as to their statutory fraud claim. See Tex. Bus. & Com. Code Ann. ' 27.01(a)(1). Appellants= second point of error is sustained.[4]

C. As-Is Clause

By their sixth point of error, appellants contend the trial court erred in granting appellee=s summary judgment on the basis that the Aas-is@ clause in the contract is an enforceable term of the contract which bars the claims as a matter of law.

With an agreement to purchase something Aas-is,@ a buyer agrees to make his own appraisal of the bargain and to accept the risk that he may be wrong. Prudential Ins. Co. of Am. v. Jefferson Assocs., Ltd., 896 S.W.2d 156, 161 (Tex. 1995). However, Aa 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; Oakwood Mobile Homes, Inc. v. Cabler, 73 S.W.3d 363, 371 (Tex. App.BEl Paso 2002, pet. denied).

Based on the evidence set forth in our analysis of point of error two, appellants have produced more than a scintilla of evidence to raise a genuine issue of material fact, see Larson, 64 S.W.3d at 514, as to whether they were induced to purchase the property because of a fraudulent representation or concealment of information by appellee. See Tex. Bus. & Com. Code Ann. ' 27.01(a)(1); see also Smith, 585 S.W.2d at 658. Thus, if the lower court determines that appellants were induced to purchase the property because of a fraudulent representation or concealment by appellee, appellants will not be bound by the Aas-is@ clause found in the AContract for Deed.@ See Prudential Ins. Co. of Am., 896 S.W.2d at 162; Oakwood Mobile Homes, Inc., 73 S.W.3d at 371. Appellants= sixth point of error is sustained.

D. Settlement Offer/ Deceptive Trade Practices

By their fifth and seventh points of error, appellants contend the trial court erred in granting appellee=s summary judgment on the basis that: (1) the settlement offer made by appellee barred appellants= claims; and (2) the DTPA claims are superceded or barred by the provisions of the Texas Residential Construction Act.[5]

Because appellee filed a no-evidence summary judgment, he makes improper arguments regarding these two contentions; neither contention alleges no evidence of one or more essential elements of a claim on which appellants would have the burden of proof at trial. See Tex. R. Civ. P. 166a(i). Moreover, even if these contentions were brought under a traditional summary judgment motion, appellee has failed to show he is entitled to judgment as a matter of law as to these claims.[6] See id. at 166a(c). Thus, the trial court erred in granting appellee=s summary judgment on these contentions. Appellants= fifth and seventh points of error are sustained.

IV. Conclusion

Accordingly, we reverse the judgment of the trial court and remand this case for trial on the merits.

NELDA V. RODRIGUEZ

Justice

Do not publish.

Tex. R. App. P.47.3.

Opinion delivered and filed

this 10th day of October, 2002.

[1]See Tex. R. Civ. P. 166a(i).

[2]Appellee does not challenge appellants=common-law fraud claim in his no-evidence summary judgment motion. See Tex. R. Civ. P. 166(a)(i). Thus, appellee was not entitled to summary judgment on the common-law fraud claim. See Garner v. Corpus Christi Nat=l Bank, 944 S.W.2d 469, 477 (Tex. App.BCorpus Christi 1997, writ denied). The common-law fraud claim remains a viable cause of action for appellants.

[3]If a section 27.01 plaintiff does establish knowledge on the defendant=s part, the plaintiff can receive exemplary damages for the fraudulent conduct. See Tex. Bus. & Com. Code Ann. ' 27.01(c) (Vernon 2002).

[4]Having sustained appellants=second point of error, we need not address points of error one, three, and four. See Tex. R. App. P. 47.1.

[5]See Tex. Prop. Code Ann. '' 27.001-.007 (Vernon 2000).

[6]For instance, appellee failed to attach any evidence showing that he is a contractor for purposes of the residential construction liability act. See Tex. Prop. Code Ann. ' 27.002 (AThis chapter applies to: . . . any subsequent purchaser of a residence who files a claim against a contractor.@).