Carla Campbell v. Abrazo Adoption Associates--Appeal from 37th Judicial District Court of Bexar County

MEMORANDUM OPINION
No. 04-07-00093-CV
Carla CAMPBELL,
Appellant
v.
ABRAZO ADOPTION ASSOCIATES,
Appellee
From the 37th Judicial District Court, Bexar County, Texas
Trial Court No. 2004-CI-19060
Honorable Michael P. Peden, Judge Presiding

Opinion by: Phylis J. Speedlin, Justice

 

Sitting: Alma L. L pez, Chief Justice

Sandee Bryan Marion, Justice

Phylis J. Speedlin, Justice

 

Delivered and Filed: November 7, 2007

 

AFFIRMED IN PART; REVERSED AND REMANDED IN PART

Carla Campbell sued Abrazo Adoption Associates ("Abrazo") for failing to disclose the medical condition of her adopted baby. Abrazo moved for summary judgment on two affirmative defenses--release and ratification. The trial court granted summary judgment and Campbell now appeals. Because Abrazo failed to conclusively establish an affirmative defense as to all of Campbell's claims, we affirm the summary judgment in part, reverse the summary judgment in part, and remand the cause for further proceedings.

Factual and Procedural Background In February 2002, Campbell, a single woman, contacted Abrazo and informed them of her desire to adopt a "healthy female child." On December 26, 2002, Abrazo notified Campbell that a female infant, born on December 10, 2002, was available for adoption. Upon asking why the baby had not been placed before birth, as was Abrazo's policy, Campbell was told that the adoptive parents selected by the birth mother had backed out without an explanation. In addition, Campbell was told that the baby was born five weeks prematurely, where she was born, and general information about the birth parents. She was also informed that the baby, who was currently in the hospital, had experienced difficulty in digesting her food, could not take the "normal" formula, and had been given a new formula. Campbell asked whether there were any health issues or concerns that may occur in the future based on the baby's health and was told there were none that were "scientifically proven." Campbell requested copies of the baby's medical records from Abrazo, and was informed it would take six to eight weeks to receive them. Campbell also asked to see the baby and to speak with the baby's doctor; both requests were denied by Abrazo, although Campbell was permitted to submit a list of questions for the doctor to answer.

On December 30, 2002, Campbell took placement of the child. At that time, Campbell received the baby's hospital discharge summary dated December 30, 2002. The discharge summary stated that the baby had been hospitalized since December 13, 2002, and was initially diagnosed with sepsis and dilated loops of bowel which had since resolved with the continued problem of slow weak feeding.

The same day, Campbell entered into a financial agreement with Abrazo. The agreement stated that Abrazo would place a child with Campbell, and in exchange Campbell would pay Abrazo a fee of $3,500. The agreement stated that Abrazo charges "$3,500 for special needs adoption services." The agreement also stated that the adoptive parent acknowledges liability "for all medical costs [related] to the child's birth, care, well-being and treatment," and "understands and agrees that the child could be born or diagnosed with a serious medical problem or defect . . . ." In addition, the agreement contained a "Release and Discharge" clause, which provided:

In consideration of the above, ADOPTIVE PARENTS agree to RELEASE, ACQUIT and FOREVER DISCHARGE ABRAZO . . . from any and all past, present and future claims, demands, obligations, causes of action, liability of any kind whatsoever, nature of [sic] character under any theory of recovery for any amount of damages or other relief, litigation costs, expenses and attorney's fees, specifically arising out of any [and] all claims which ADOPTIVE PARENTS have, or may have, against ABRAZO . . . .

 

After signing the agreement, Campbell was advised to promptly make an appointment with a pediatrician and a gastroenterologist to follow up on the baby's progress with the new formula and with the acid reflux medication.

On January 3, 2003, Campbell took the baby to her own pediatrician, who stated that the child was in "good health." That night, however, Campbell took her daughter to the emergency room because she had missed two feedings. The baby was admitted to the same hospital where she had previously been treated, and x-rays revealed a blockage of her large and small intestines. The next day, the baby underwent surgery to remove the blockage. Campbell was informed by hospital staff that her daughter potentially had Hirschsprung's disease, a condition which causes severe bowel obstruction. The hospital staff also told Campbell that the baby had exhibited similar symptoms during her earlier admission and had been tested for Hirschsprung's disease; however, a diagnosis of Hirschsprung's was not confirmed, and the baby had made progress. Upon learning this, Campbell called Abrazo on January 5, 2003 and told them that her daughter may have Hirschsprung's disease. The Abrazo representative responded that the diagnosis of Hirschsprung's had "already been ruled out." Approximately one week after the baby's placement, Abrazo invited Campbell to return the baby to the agency; Campbell declined this offer. Subsequently, the baby had three surgeries related to Hirschprung's disease.

In December 2004, Campbell sued Abrazo, alleging negligence, negligent misrepresentation, breach of contract, fraud, and violations of the Texas Deceptive Trade Practices Act ("DTPA"). Abrazo then moved for partial summary judgment based on two affirmative defenses, contending it was entitled to judgment as a matter of law because the financial agreement stated that Campbell released all claims against Abrazo, and because Campbell ratified the financial agreement by continuing to accept benefits from Abrazo after she became aware of the agency's alleged deception.

The trial court granted Abrazo's motion for partial summary judgment without stating a basis for its ruling and ordered that Campbell take nothing by her suit. Abrazo's counterclaim for attorney's fees and expenses was ordered to proceed to trial. The parties waived the right to a jury trial, and the trial court entered a final judgment dismissing Campbell's claims and awarding Abrazo $12,622 in attorney's fees and expenses, and conditional appellate fees. This appeal ensued.

Standard of Review To be entitled to summary judgment on the basis of an affirmative defense, the defendant must conclusively prove each essential element of the affirmative defense. Garza v. Exel Logistics, Inc., 161 S.W.3d 473, 475 n.10 (Tex. 2005); Timothy Patton, Summary Judgments in Texas: Practice, Procedure and Review 3.08[3][b] (2006). Once a defendant produces sufficient evidence to establish the right to summary judgment, the burden shifts to the non-movant to produce controverting evidence raising a fact issue as to the affirmative defense. Centeq Realty, Inc. v. Siegler, 899 S.W.2d 195, 197 (Tex. 1995); Romo v. Tex. Dep't of Transp., 48 S.W.3d 265, 269 (Tex. App.--San Antonio 2001, no pet.).

On appeal, we review a trial court's summary judgment de novo. Tittizer v. Union Gas Corp., 171 S.W.3d 857, 860 (Tex. 2005). We will uphold a traditional summary judgment only if the movant has established that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law on a ground expressly set out in the motion. Tex. R. Civ. P. 166a(c); Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548 (Tex. 1985). In deciding whether the summary judgment record establishes the absence of a genuine issue of material fact, we view as true all evidence favorable to the non-movant, indulging every reasonable inference and resolving all doubts in favor of the non-movant. Nixon, 690 S.W.2d at 548-49.Analysis

Campbell pled five causes of action: negligence; negligent misrepresentation; breach of contract; fraud; and violations of the DTPA. Thus, to be entitled to summary judgment, Abrazo needed to establish that one of its affirmative defenses, either release or ratification, barred each of the claims asserted by Campbell. See Villanueva v. Gonzalez, 123 S.W.3d 461, 464 (Tex. App.--San Antonio 2003, no pet.) (when summary judgment is sought on multiple grounds and the trial court's order does not indicate the basis for its ruling, we will affirm the summary judgment if any theory advanced by the movant is correct). On appeal, Campbell does not complain that summary judgment was improperly granted as to her claims for negligence and breach of contract; therefore, we will not address those claims.

 

Release Pursuant to Financial Agreement

Abrazo moved for summary judgment on the affirmative defense of release, arguing that the financial agreement on which Campbell sued contained a valid release provision in which she clearly and unambiguously agreed to release all of her claims. Campbell argues that the release is avoidable on grounds of fraud, or, alternatively, that the release fails as a matter of law as to her DTPA claims. We will first address the release as it applies to Campbell's common law claims for fraud and negligent misrepresentation, and then as it applies to Campbell's statutory claims under the DTPA.

Fraud and Negligent Misrepresentation

A defendant moving for summary judgment on the affirmative defense of release has the burden to conclusively establish the elements of that defense. Keck, Mahin & Cate v. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., 20 S.W.3d 692, 699 (Tex. 2000). To establish the affirmative defense of release, the movant must prove the elements of a valid contract. Vera v. N. Star Dodge Sales, Inc., 989 S.W.2d 13, 17 (Tex. App.--San Antonio 1998, no pet.) (a release is a contract and thus encompasses the contractual element of mutual intent and whether the minds of the parties have met). A pre-injury release must meet fair notice requirements, must constitute a meeting of the minds, and must be supported by valid consideration. Tamez v. Sw. Motor Transp., Inc., 155 S.W.3d 564, 569-71 (Tex. App.--San Antonio 2004, no pet.). Here, Campbell does not contend that the financial agreement, which contains the release, is not a valid contract, nor challenge that the release covers "any and all past, present and future claims, demands, obligations, causes of action, liability of any kind whatsoever, nature [or] character under any theory of recovery for any amount of damages or other relief, litigation costs, expenses and attorney's fees." A valid release may encompass unknown claims and damages that develop in the future. Keck, Mahin & Cate, 20 S.W.3d at 698. A release agreement, valid on its face, is a complete bar to any action based on matters covered by the release, unless the release is set aside. Tamez, 155 S.W.3d at 569. There being no contention by Campbell that the release is not a valid contract, we conclude that Abrazo met its initial burden to present summary judgment evidence establishing the elements of release, thereby shifting the burden to Campbell to raise an issue of material fact sufficient to defeat the affirmative defense of release. See Lunsford Consulting Group, Inc. v. Crescent Real Estate Funding VIII, L.P., 77 S.W.3d 473, 475-76 (Tex. App.--Houston [1st Dist.] 2002, no pet.).

In her response to Abrazo's motion for summary judgment, Campbell argued that, prior to her signing the financial agreement containing the release, Abrazo had notice of the baby's maladies but failed to disclose them to her. As a contract, a release is subject to avoidance on grounds such as fraud or mistake. Williams v. Glash, 789 S.W.2d 261, 264 (Tex. 1990). Fraud by omission is a subcategory of fraud because an omission or non-disclosure may be as misleading as a positive misrepresentation of fact when a party has a duty to disclose. Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 181 (Tex. 1997). Thus, failure to disclose information does not generally constitute fraud unless there is a duty to disclose the information. Bradford v. Vento, 48 S.W.3d 749, 755 (Tex. 2001) (for purposes of fraud, whether a duty to disclose exists is a question of law). A duty to disclose may arise when: (1) the parties have a confidential or fiduciary relationship; (2) one party voluntarily discloses partial information, which gives rise to the duty to disclose the whole truth; (3) one party makes a representation, which gives rise to the duty to disclose new information the party is aware of that makes the earlier representation misleading or untrue; or (4) one party makes a partial disclosure and conveys a false impression, which gives rise to the duty to speak. Four Bros. Boat Works, Inc. v. Tesoro Petroleum Cos., Inc. 217 S.W.3d 653, 670-71 (Tex. App.--Houston [14th Dist.] 2006, pet. denied). A confidential or fiduciary relationship will not arise simply by virtue of a business transaction; the special relationship must exist prior to, and apart from, the agreement made the basis of the suit. Schlumberger, 959 S.W.2d at 177. Further, one party's subjective trust does not convert an arms-length transaction into a fiduciary relationship. Id.; Ins. Co. of N. Am. v. Morris, 981 S.W.2d 667, 674 (Tex. 1998).

Here, Campbell did not plead facts or present summary judgment evidence tending to establish that she and Abrazo had a confidential or fiduciary relationship outside of the financial agreement, nor could she have established the existence of such a relationship given that the parties had no prior dealings before the adoption transaction. See Schlumberger, 959 S.W.2d at 177. Moreover, Campbell's subjective trust toward Abrazo could not transform their business relationship into a fiduciary relationship. See id. Therefore, the only way that Campbell could establish that Abrazo owed her a duty of disclosure was to prove that Abrazo disclosed information, or made a representation, that created a false impression or that later became misleading or untrue due to new information. See Four Bros., 217 S.W.3d at 670-71. Campbell does not contend that Abrazo made any affirmative statement or representation which created a false impression other than that the child was "healthy." Instead, her summary judgment response focused on Abrazo's failure to disclose any information concerning the baby's bowel obstruction prior to placement. Specifically, Campbell alleged in her response that, "Abrazo . . . knew of the health maladies of the child before the child was placed for adoption, including Hirschprung's disease."

Assuming, without deciding, that an affirmative statement that the baby is "healthy" is enough to raise a fact issue on whether Abrazo owed Campbell a duty of disclosure, Abrazo, however, had no duty to disclose specific health information to Campbell until it became aware of the information. "A party cannot be guilty of fraudulently or intentionally concealing facts of which he is not aware." HTM Restaurants, Inc. v. Goldman, Sachs & Co., 797 S.W.2d 326, 329 (Tex. App.--Houston [14th Dist.] 1990, no writ). While a party's silence can be a type of misrepresentation, a duty to speak does not arise until the party becomes aware of the facts. Id. (citing Storms v. Tuck, 579 S.W.2d 447, 452 (Tex. 1979)). Here, Campbell maintains that she established by summary judgment evidence that Abrazo "failed to disclose material facts about the health of the baby." Campbell points to summary judgment evidence that, prior to the baby's placement, Abrazo told her "nothing had been scientifically proven" regarding the baby's future health. Specifically, Campbell's affidavit states:

In January of 2003, I was advised by physician's [sic] that the child may have Hirschsprung's Disease. After finding out this information, I contacted a representative of ABRAZO ADOPTION ASSOCIATES who told me that Hirschsprung's Disease had already been ruled out. This lead [sic] me to believe that ABRAZO ADOPTION ASSOCIATES knew more about the child's health and illness than had been provided to me prior to signing the Financial Agreement. They had in fact known of the potential of a serious digestive disorder and failed to disclose it to me.

 

Although Campbell's affidavit makes the conclusory statements that Abrazo "knew more about the child's health and illness than had been provided to me," and "in fact [knew] of the potential of a serious digestive disorder and failed to disclose it to me," her conclusions lack a factual basis. See Tex. R. Civ. P. 166a(f) (supporting affidavit must be made on personal knowledge and set forth such facts as would be admissible in evidence); see also Ryland Group, Inc. v. Hood, 924 S.W.2d 120, 122 (Tex. 1996) (per curiam) (conclusory affidavits are not enough to raise fact issues). An interested witness's affidavit which recites a "belief" that certain facts are true is not sufficient summary judgment proof. Ryland Group, 924 S.W.2d at 122. In fact, in the same affidavit Campbell admits that even in January 2003, after the baby's placement, there was no medical confirmation that the baby actually had Hirschprung's disease, stating only that, "I was advised by physician[']s that the child may have Hirschsprung's Disease" (emphasis added). We consider Campbell's affidavit to be conclusory, and conclude that this evidence does not raise a material fact issue as to whether Abrazo knew health information about the baby that it failed to disclose prior to placement.

Other summary judgment evidence demonstrates that Abrazo only knew what the hospital staff had told the agency. The affidavit of Elizabeth Jurenovich, Abrazo's Executive Director, states that, "on December 30, 2002, I believed that [the baby] was healthy based on the information provided to me by Southwest Texas Methodist Children's Hospital." Jurenovich also states that she provided Campbell with a copy of the hospital discharge summary dated December 30, 2002. The summary consisted of one page of handwritten medical notes indicating, among other things, that the baby was admitted to the hospital on December 13, 2002 for sepsis and dilated loops of bowel. The summary further stated that the baby's condition "has since resolved with the continued problem of slow weak [feeding]." Additionally, Campbell's own pediatrician saw the baby on January 3, 2003 and found her to be in "good health." Finally, Campbell admits in her affidavit that Hirschsprung's disease was not mentioned at all when she received the baby's incomplete medical records much later in April of 2003, stating "[n]one of these medical records indicated Hirschsprung's Disease." Even viewing the evidence and inferences in the light most favorable to Campbell, we cannot conclude that Abrazo can be charged with knowing something even the hospital doctors did not know at the time of the baby's placement with Campbell.

Accordingly, because Abrazo established that Campbell executed a valid release and because Campbell failed to raise a material fact issue avoiding the release, we affirm the trial court's order granting summary judgment as to Campbell's common law causes of action.

DTPA Violations

In addition to her common law claims, Campbell's pleadings alleged that Abrazo committed seven violations of the "laundry list" found in section 17.46(b) of the DTPA. Tex. Bus. & Com. Code Ann. 17.46(b) (Vernon Supp. 2006). As previously noted, Abrazo had the burden to conclusively establish its affirmative defense of release as to Campbell's DTPA claim. See Keck,Mahin & Cate, 20 S.W.3d at 699. Section 17.42 of the DTPA states that a "waiver by a consumer of the provisions of [the DTPA] is contrary to public policy and is unenforceable and void" unless certain requirements are met. Tex. Bus. & Com. Code Ann. 17.42(a), (c) (Vernon 2002). Here, Abrazo does not argue that these requirements were met. Instead, Abrazo contends that Campbell has waived the right to complain about the release's validity under the DTPA because she failed to make the argument in her pleadings or in her summary judgment response. See Tex. R. Civ. P. 166a(c) (stating that "[i]ssues not expressly presented to the trial court by written motion, answer or other response shall not be considered on appeal as grounds for reversal"); see also McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 341 (Tex. 1993). We disagree.

Rule 166a(c) does not relieve a movant from meeting his burden of proving that no genuine issue of material fact exists and that he is entitled to judgment as a matter of law. Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 2002). As the movant for summary judgment, Abrazo was required to prove its affirmative defense of release as to all of Campbell's claims, including the DTPA violations. See McConnell, 858 S.W.2d at 343 (holding that even when the non-movant fails to present any issues in its response or answer, the movant's right is not established and the movant must still establish its entitlement to summary judgment). The DTPA provides a statutory cause of action for consumers. See Tex. Bus. & Com. Code Ann. 17.50 (Vernon Supp. 2006). The legislature has determined that waivers under the DTPA are void unless the requirements of section 17.42 are met. See Tex. Bus. & Com. Code Ann. 17.42(a), (c); see also Helena Chem. Co. v. Wilkins, 47 S.W.3d 486, 505 (Tex. 2001). Because Abrazo failed to prove the release was valid under section 17.42 of the DTPA, we hold that Abrazo failed to establish its entitlement to summary judgment as a matter of law with respect to Campbell's DTPA claim. Our opinion should not be read as determining whether or not Campbell has a valid cause of action under the DTPA because on this summary judgment record that issue is not before us. Accordingly, we must now consider whether Abrazo was entitled to summary judgment on Campbell's DTPA claim on its affirmative defense of ratification.

Ratification

In moving for summary judgment on the affirmative defense of ratification, Abrazo contended that Campbell ratified the financial agreement by declining to return the baby after discovering Abrazo's alleged deception. Specifically, Abrazo argues that Campbell ratified the agreement, and thus waived any right to recover on her claims for deception, by utilizing Abrazo's services to finalize the baby's adoption despite Campbell's full and complete knowledge of the baby's medical condition. In response, Campbell maintains that her decision to stand by the agreement does not preclude her suit for damages.

It has long been the general rule that one induced by fraud to enter into a contract may either rescind the contract or sue for damages. See Dallas Farm Mach. Co. v. Reaves, 158 Tex. 1, 307 S.W.2d 233, 238-39 (1957); see also Fortune Prod. Co. v. Conoco, Inc., 52 S.W.3d 671, 676-77 (Tex. 2000). However, as early as 1911, our Texas Supreme Court recognized that the right to sue for damages can, under some circumstances, be waived by the ratification of a fraudulently induced contract. Kennedy v. Bender, 104 Tex. 149, 135 S.W. 524, 525 (1911). "[A]cts done in affirmance of the contract can amount to a waiver of the fraud only where they are done with full knowledge of the fraud and of all material facts, and with the intention, clearly manifested, of abiding by the contract and waiving all right to recover for the deception." Conoco, 52 S.W.3d at 677 (quoting Kennedy, 135 S.W. at 525 (citations omitted)) (emphasis added).

Here, the summary judgment evidence establishes that Campbell kept her baby after becoming aware of the Hirschsprung's diagnosis, even though Abrazo offered to take the baby back. It is also undisputed that Campbell used Abrazo's adoption services to finalize the adoption. These services included the following acts by Abrazo: engaging an attorney and obtaining termination of the parental rights of the baby's birth parents; facilitating the relationship between Campbell and the birth mother; obtaining and forwarding the baby's medical records to Campbell; applying for and obtaining Medicaid for the baby; coordinating with Campbell for a subsidy from the State based on her adoption of a "special needs child;" and receiving and reviewing reports from Campbell's home study worker.

The summary judgment record does not establish, however, that the clear intent of Campbell's actions in keeping her baby and finalizing the adoption with Abrazo's assistance was to waive her right to sue for damages. In fact, the record contains evidence that Campbell had already bonded with the baby by the time she discovered that the baby might have Hirschprung's disease. In Campbell's timeline, she recounts that she was excited to introduce the baby to family members and friends and "marveled at [the baby]." After the baby was admitted to the hospital on January 3, 2003, Campbell was "scared," "prayed and hardly slept," and "quietly cried." She stated that she had "bonded with a baby who needed surgery as soon as it was possible, and . . . [was] worried if she would survive." When Abrazo offered to take the baby back, Campbell was "shocked and angered."

Based on this record, we cannot conclude that Abrazo proved as a matter of law that Campbell ratified the agreement with an intention, clearly manifested, to waive her right to recover for Abrazo's alleged deception. See Conoco, 52 S.W.3d at 677. Therefore, we hold that Abrazo did not establish the affirmative defense of ratification as a matter of law as to her DTPA claim, and we reverse the summary judgment and remand for further proceedings on Campbell's DTPA claim.

Conclusion

Based on the foregoing analysis, we reverse the granting of summary judgment as to Campbell's claim under the DTPA and remand the cause for further proceedings consistent with this opinion. In all other respects, we affirm the trial court's summary judgment. In light of our disposition reversing the summary judgment in part, we reverse the award of attorney's fees to Abrazo, and remand the issue of attorney's fees to the trial court for further consideration.

 

Phylis J. Speedlin, Justice