Bay Colony, Ltd. v. Trendmaker, Inc.

United States Court of Appeals,

Fifth Circuit.

No. 96-20297.

BAY COLONY, LTD., Plaintiff-Appellant,

v.

TRENDMAKER, INC., Midlands Associates, & Weyerhaeuser Real Estate
Company, Defendants-Appellees,

and

Federal Deposit Insurance Corporation, as Receiver for
Commonwealth Federal Savings Association, Intervenor Defendant-
Appellee.

Sept. 17, 1997.

Appeals from the United States District Court for the Southern
District of Texas.

Before KING and PARKER, Circuit Judges, and ROSENTHAL*, District
Judge.

PER CURIAM:

The Appellant, Bay Colony, Ltd. appeals from the district

court's grant of judgment as a matter of law for the Appellees,

Trendmaker, Inc., Midlands Associates, and Weyerhaeuser Real Estate

Company, following the jury's verdict for Bay Colony. Finding no

error, we affirm.

FACTUAL BACKGROUND

Bay Colony, Ltd. ("Bay Colony") was formed in 1985 as a

limited partnership by Robert Brackman ("Brackman") for the purpose

*
District Judge of the Southern District of Texas, sitting by
designation.

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of purchasing certain real estate which forms the basis of this

suit. Brackman is an attorney and an experienced real estate

investor who had organized and served as general partner for

several Texas real estate partnerships.

Trendmaker, Inc. ("Trendmaker") was an entity involved in real

estate development. Weyerhaeuser Real Estate Company ("WRECO") was

the parent company of Trendmaker. In March 1985, Trendmaker and

Commonwealth Realty Development, Inc. ("Commonwealth Realty")

formed Midlands Associates ("Midlands"), a Texas joint venture.

Commonwealth Realty is a wholly-owned subsidiary of Commonwealth

Federal Savings Association ("Commonwealth Savings") which is in

receivership with the Resolution Trust Corporation.

On March 25, 1985, Midlands purchased approximately 883 acres

of property located in Galveston County, Texas. The property,

known as the Bay Colony Property, was purchased for the purpose of

developing a master planned community. The idea was that

Commonwealth Savings would provide the financing and Trendmaker

would contribute its real estate expertise toward development of

the property. Midlands purchased the raw land for a total price of

over $13 million, partially financed by the sellers. Midlands

borrowed another $25.3 million from Commonwealth Savings which

funded the construction obligations undertaken on the residential

areas as well as the commercial reserves.1 These loans were

1
A commercial reserve is land reserved for commercial use.

2
secured by the property and the guarantees of Trendmaker,

Commonwealth Realty, and Midlands.

In the summer of 1985, Brackman was approached by two real

estate brokers about investing in the Bay Colony master-planned

community which was in the initial stages of development. Brackman

met with Trendmaker officials several times during that summer

concerning the project and his interest in purchasing the

commercial reserves of the planned community.

According to Brackman, Trendmaker's representatives stated

that they were a subsidiary of WRECO, a six-billion dollar

corporation, and that Trendmaker was committed to the project and

was going to fully develop the master-planned community. Brackman

also stated that Trendmaker's representatives told him that

Trendmaker would be there from start to finish, "cradle to grave,"

and that if there were any problems in development Trendmaker would

be the builder if necessary, and finally that WRECO was committed

to the deal. There are no written documents corroborating

Brackman's testimony. Although Brackman dealt with representatives

of Trendmaker, he understood that the transaction would be made

through Midlands.

In October, 1985, Bay Colony (acting through Mr. Brackman, its

general partner) and Midlands executed an earnest money contract

for the purchase of thirteen tracts (consisting of 74 acres) of

commercial reserves in the master-planned community. The earnest

money contract gave Brackman a 90-day "Feasibility Study" time

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period in which Brackman could evaluate the deal, terminate the

deal and demand the return of his earnest money. The earnest money

contract also contained an entirety clause, which stated, "This

Contract is the entire Contract between the Seller and Purchaser

... and no modification hereof or subsequent agreement ... shall be

binding on either party unless reduced to writing and signed by

both parties." On December 13, 1985, Bay Colony and Midlands

closed the transaction. Bay Colony made a cash payment of over one

million dollars and executed thirteen separate promissory notes and

Deeds of Trust for the balance of the purchase price which was

slightly over four million dollars.

As part of the transaction, Midlands agreed to perform various

"construction obligations" on the thirteen tracts of land purchased

by Bay Colony. Pursuant to these construction obligations,

Midlands agreed to substantially complete certain streets,

landscaping and irrigation, install pump lines for storm sewer and

surface drainage, and remove any of the thirteen tracts which were

in the flood plain from the flood plain. Three contracts contained

these construction obligations: (1) the earnest money contract;

(2) the escrow agreement; (3) the thirteen Deeds of Trust. Both

the escrow agreement and the earnest money contract afforded Bay

Colony limited options if Midlands failed to perform the

construction obligations.

Brackman testified that he had no quarrel with the efforts

Trendmaker was putting into the master-planned community during

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1986. Trendmaker was performing the construction obligations on

the commercial reserves, it was installing sewer and water lines,

underground utilities, detention ditches, streets, and other

grading and landscaping for the proposed residential tracts. By

the end of 1987, Midlands had an outstanding debt of over $37

million with Commonwealth Savings.

However, during 1986, several disasters occurred. In January

1986, the space shuttle Challenger exploded (the Bay Colony project

was located near NASA's Johnson Space Center). The price of oil

fell by over 50%, and the Tax Reform Act of 1986 severely

restricted the use of real estate tax shelters, thus drying up

investment money. Moreover, with the crash of the real estate

market, financial troubles developed on both sides. Bay Colony

failed to make its first payment on the notes as scheduled, on

December 13, 1986. On December 19, 1986, Bay Colony made a payment

of $379,745.55, and the parties modified the due dates of the 1986

and 1987 payments and certain performance dates of Midlands.

According to the amended agreement, the 1988 payments were to be

made as provided in the original notes. Subsequently, Bay Colony

failed to make its next set of payments due on June 13, 1987.

Trendmaker/Midlands did not give notice of the default because they

were behind schedule on their construction obligations, and they

were waiting to see if Brackman's group would pay the arrears on

the contract before completing additional work pursuant to the

construction obligations.

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 With financial difficulties on both sides, the parties entered

into further negotiations to modify the note and liens. On March

11, 1988, the parties executed the Second Modification of Real

Estate Note and Liens, which was to be effective retroactive to

June 13, 1987, the date the payment was first due. On this date,

Bay Colony also paid $420,465.32 to Midlands for the June 13, 1987

and the December 13, 1987 payments on the Notes. The March 1988

payment was the last payment Bay Colony made on its contractual

obligation.

Brackman testified that soon after making the payment on March

11, 1988 to Midlands, he heard a rumor that Trendmaker might be

withdrawing from the Bay Colony development project. Brackman

stated that he contacted Mr. William Dalton, Jr., Vice President of

Trendmaker, and was told that Trendmaker had not withdrawn from the

project, but if it did withdraw, Trendmaker would be replaced in

the joint venture by a developer which was at least the equal of

Trendmaker.

However, the relationship between the joint venturers of

Midlands was deteriorating. Commonwealth Savings was in severe

financial difficulty, and Trendmaker had become unhappy dealing

with the "decision by committee" management style of its joint

venturer Commonwealth Realty. Thus, on December 29, 1987,

Trendmaker proposed that it and Commonwealth Realty split up the

two joint ventures in which they were involved and go their

separate ways. Commonwealth Realty failed to respond to this

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proposal until March 18, 1988, one week after Brackman had paid the

June and December, 1987 contract installments. Discussions ensued

between Trendmaker and Commonwealth Realty on dividing up their

holdings. Brackman was not involved in, or informed of, these

discussions. On May 18, 1988, Trendmaker transferred all of its

interest in the Bay Colony master-planned community to Commonwealth

Realty in exchange for Commonwealth Realty's interest in another

project. Trendmaker remained on-site at the Bay Colony development

as the contract manager until June, 1989.

Bay Colony failed to make its December 1988 payment. Although

Brackman had not raised the entire amount due under the contract,

he testified that he did not make the payment because he became

aware between March and December 1988, that Commonwealth Realty and

its parent Commonwealth Savings were in a precarious financial

condition, and that Commonwealth Savings could not loan additional

monies to the development. Midlands eventually foreclosed on all

thirteen tracts and Bay Colony was left with nothing to show for

its investment of over two million dollars.

Bay Colony filed suit in state court and the Resolution Trust

Corporation removed to federal court. The district court granted

summary judgment in favor of Trendmaker on Bay Colony's breach of

contract, negligence, breach of good faith and fair dealing, and

statutory and common law fraud claims. Bay Colony proceeded to

trial on its Deceptive Trade Practices Act and fraud by omission

claims against Trendmaker, and its alter ego theory of liability

7
against WRECO.

Following the close of Bay Colony's case-in-chief, the

district court granted WRECO's motion for a directed verdict on Bay

Colony's alter ego theory as a basis to pierce the corporate veil

between WRECO and Trendmaker. Trendmaker and Midlands also moved

for a directed verdict on Bay Colony's fraud by omission and

deceptive trade practices act claims, arguing that Bay Colony

failed to present any evidence necessary to establish its claims.

However, the district court took this motion under advisement.

Thereafter, Trendmaker and Midlands presented their evidence. Bay

Colony presented no rebuttal evidence. Trendmaker and Midlands did

not reurge their motion for directed verdict at the close of all

the evidence, although they did timely object to the proposed jury

charge based on no evidence or insufficient evidence for the case

to proceed to the jury. These objections were overruled.

The jury found for Bay Colony on its fraud and DTPA claims,

and awarded Bay Colony attorneys' fees under the DTPA. Following

the verdict, Trendmaker and Midlands moved for judgment as a matter

of law under Rule 50(b) arguing that there was no evidence or

insufficient evidence to support the jury's verdict. The district

court entered judgment as a matter of law for Trendmaker and

Midlands, concluding that the jury's verdict was based on

speculation and conjecture, and could not be sustained. Bay Colony

timely appealed to this Court.

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 DISCUSSION

On appeal, Bay Colony asserts six issues for this Court's

consideration. However, because we affirm the lower court's

judgment with respect to its granting judgment as a matter of law

on Bay Colony's fraud by omission and DTPA claims against

Trendmaker and Midlands, we conclude that the remaining issues are

moot.

A. Motion for Judgment as a Matter of Law

Bay Colony asserts that the district court erred in granting

judgment as a matter of law in favor of Trendmaker and Midlands

because Trendmaker and Midlands did not satisfy Fed.R.Civ.P. 50(b).

In particular, Bay Colony argues that at the close of all the

evidence in the case, no party made a motion for judgment as a

matter of law under Rule 50(b). Thus, Bay Colony argues that under

Rule 50(b), the proper evidentiary review standard is whether there

was any evidence to support the verdict. Bay Colony also contends

that even a timely motion for directed verdict could not support a

judgment as a matter of law unless the motion specifically pointed

out how the evidence was insufficient on its claims. Trendmaker

and Midlands counter that their motion for directed verdict under

Rule 50(a) and their objections to the jury charge satisfied the

requirements for Rule 50(b).

Generally, a party who fails to renew his motion for directed

verdict at the close of all the evidence waives his right to

9
challenge the sufficiency of the evidence. Scottish Heritable

Trust v. Peat Marwick Main & Co., 81 F.3d 606, 610 (5th Cir.),

cert. denied, --- U.S. ----, 117 S.Ct. 182, 136 L.Ed.2d 121 (1996).

However, "[t]his Court has repeatedly emphasized that the

application of Rule 50(b) should be examined in the light of the

accomplishment of [its] particular purpose[s] as well as in the

general context of securing a fair trial for all concerned in the

quest for truth." McCann v. Texas, 984 F.2d 667, 671 (5th

Cir.1993) (quoting Bohrer v. Hanes Corp., 715 F.2d 213, 217 (5th

Cir.1983)). Thus, this Court has not required strict compliance

with Rule 50(b) and has excused technical noncompliance where the

purposes of the requirements have been satisfied. Scottish

Heritable Trust, 81 F.3d at 610; Adjusters Replace-A-Car, Inc. v.

Agency Rent-A-Car, Inc., 735 F.2d 884 (5th Cir.1984); Villanueva

v. McInnis, 723 F.2d 414 (5th Cir.1984). The two basic purposes of

Rule 50(b) are "to enable the trial court to re-examine the

question of evidentiary insufficiency as a matter of law if the

jury returns a verdict contrary to the movant, and to alert the

opposing party to the insufficiency before the case is submitted to

the jury." MacArthur v. University of Texas Health Ctr. at Tyler,

45 F.3d 890, 896-97 (5th Cir.1995). However, a party may not base

a motion for judgment [as a matter of law] on a ground that was not

included in a prior motion for directed verdict. Jones v. Benefit

Trust Life Ins. Co., 800 F.2d 1397, 1401 (5th Cir.1986); McCann v.

10
Texas City Refining, Inc., 984 F.2d 667, 672 (5th Cir.1993);

Guilbeau v. W.W. Henry Co., 85 F.3d 1149, 1160-61 (5th Cir.1996)

(holding that although defendant's motion under Rule 50 could have

been more specific, it was adequate to preserve the issue of

sufficiency of the evidence).

Where, however, the defendant failed to move at the close of

all the evidence for judgment as a matter of law, this Court has

concluded that if a defendant has made a motion for directed

verdict at the close of the plaintiff's case for no evidence or

insufficient evidence on specified grounds, and objects on those

same grounds to the jury charge, this suffices to support a motion

for judgment as a matter of law under Rule 50(b) on those grounds.

Purcell v. Seguin State Bank & Trust Co., 999 F.2d 950, 956 (5th

Cir.1993) (citing Villanueva, 723 F.2d at 417-18); Scottish

Heritable Trust v. Peat Marwick Main & Co., 81 F.3d 606 (5th

Cir.1996) (a defendant's objections to proposed jury charge on

grounds pertaining to the sufficiency of evidence issues satisfies

the requirements for a Rule 50(b) motion); Hinojosa v. City of

Terrell, 834 F.2d 1223, 1228 (5th Cir.1988) (court may grant

judgment as a matter of law where defendant made motion for

directed verdict and objected to the court's jury instructions on

grounds that there was no evidence to support a claim). Based on

Trendmaker's motion for directed verdict at the close of Bay

Colony's case-in-chief and Trendmaker's objections to the proposed

11
jury charge, we are convinced that the purposes of Rule 50(b) have

been satisfied. Trendmaker's motion for directed verdict on Bay

Colony's DTPA and fraud claims asserted that there was no evidence

or insufficient evidence for the issue to go to the jury.

Likewise, Trendmaker's objections to the jury charge contended that

there was not any evidence to support submitting any part of Bay

Colony's DTPA or fraud claim to the jury. Accordingly, we

concluded that Trendmaker's objections to the jury charge were a

sufficient approximation of its motion for directed verdict to

support its later motion for judgment as a matter of law following

the jury's verdict. See, e.g., Villanueva v. McInnis, 723 F.2d

414, 418 (5th Cir.1984).

B. The Fraud by Nondisclosure & Deceptive Trade Practices Claims

1. Fraud by Nondisclosure

The district court concluded that, as a matter of law,

Trendmaker did not have a duty to disclose the negotiations between

it and Commonwealth Realty prior to the time Bay Colony made its

payment of $420,465.32 on March 11, 1988 to Trendmaker. On appeal,

Bay Colony contends that Trendmaker had a duty to disclose its

current intention to withdraw from the joint venture and that if

Bay Colony knew of this intention, it would not have made the

payment. Bay Colony asserts that the parties' past business

conduct required the disclosure of such negotiations. We disagree.

Under Texas law, to assert a claim of fraud by nondisclosure,

12
the complaining party must prove, inter alia, a duty to disclose.

Chemetron Corp. v. Business Funds, Inc., 682 F.2d 1149, 1171-72

(5th Cir.1982), judgment vacated on other grounds, 460 U.S. 1007,

103 S.Ct. 1245, 75 L.Ed.2d 476 (1983).

Texas law recognizes a duty to disclose only where a

fiduciary or confidential relationship exists. Bernstein v.

Portland Sav. & Loan Assn., 850 S.W.2d 694, 701 (Tex.App.—Corpus

Christi 1993, writ denied) (citing Tempo Tamers, Inc. v. Crow-

Houston Four, Ltd., 715 S.W.2d 658, 669 (Tex.App.—Dallas 1986, writ

ref'd n.r.e.)); Southwest E & T Suppliers, Inc. v. American Enka

Corp., 463 F.2d 1165, 1166 (5th Cir.1972) ("Texas law is clear that

if there is no confidential or fiduciary relation between the

parties [creating a duty to disclose], mere silence does not amount

to fraud or misrepresentation.") There was no confidential or

fiduciary relationship between the parties. Bay Colony did not act

on behalf of Trendmaker or Midlands, nor did it have the authority

to do so. Instead, Trendmaker and Bay Colony entered into an

arms-length transaction for the sale of the commercial reserves and

the later modifications of the real estate notes. The fact that

parties have entered into a contract does not create a confidential

relationship. Crim Truck & Tractor Co. v. Navistar Int'l Transp.

Corp., 823 S.W.2d 591, 594 (Tex.1992). We conclude that under

Texas law the contract between Bay Colony and Trendmaker does not

constitute the type of special relationship necessary to create a

13
duty to disclose. See, e.g., Lee v. Wal-Mart Stores, Inc., 34 F.3d

285, 290 n. 5 (5th Cir.1994) (the fact that people have had prior

dealing with each other ... does not establish a confidential

relationship).

2. Deceptive Trade Practices Violation

At trial, Bay Colony asserted three theories of liability

under the Deceptive Trade Practices Act ("DTPA"), specifically,

unconscionability, breach of warranty, and laundry list violations.

In granting the judgment as a matter of law, the district court

found that Bay Colony presented nothing more than possible breaches

of contract or non-actionable puffing. We agree.

Bay Colony first contends that Trendmaker violated the DTPA

by engaging in an unconscionable action or course of conduct. See

Tex. Bus. & Com.Code § 17.45(5). Unconscionability can be premised

on either of two types of conduct: (1) taking advantage of the

lack of knowledge, ability, experience, or capacity of a person to

a grossly unfair degree; or (2) an act or practice resulting in a

gross disparity between the value received and consideration paid

in a transaction involving transfer of consideration. Id. Bay

Colony's claim is based on the second ground. According to Bay

Colony's expert testimony, the value of the commercial reserves was

only $750,000 compared to the $5 million Bay Colony paid. Thus,

there was a gross disparity in the consideration paid and the value

received. However, Bay Colony ignores a basic tenet it must prove

14
in order to recover under the "gross disparity" unconscionability

provision. Specifically, "the time for evaluating the disparity in

value is the time of sale. Diminution in value caused by later

events cannot support a claim of unconscionability." Parkway Co.

v. Woodruff, 901 S.W.2d 434, 441 (Tex.1995) (emphasis added). The

record before us discloses that in January of 1986, Bay Colony

obtained an appraisal of the property it had purchased the previous

month. The appraisal estimated the value of the property at $9

million, over $4 million more than the purchase price. The fact

that the appraisal was based in part on the assumption that the

construction obligations would be fulfilled does not render the

price paid unconscionable. Thus, we conclude that Bay Colony's

purchase price was at market value in December 1985, and that there

was no gross disparity in the consideration paid and value

received.

Bay Colony next contends that Trendmaker is liable under the

DTPA based on breach of warranty. In particular, Bay Colony

asserts that the alleged statements made by Trendmaker and Midlands

about their future conduct, i.e., Trendmaker would be the developer

from start to finish; that the project would be developed in a

timely fashion; that Trendmaker would complete the construction

obligations; and that Trendmaker would remain involved in the

project through completion, gave rise to an express warranty. We

disagree.

15
 Under the DTPA, a consumer may maintain an action for breach

of an express warranty. See TEX. BUS. & COM.CODE § 17.50(a)(2).

However, the DTPA does not create warranties; instead, to be

actionable under the DTPA, warranties must be recognized by the

common law or created by statute. See La Sara Grain Co. v. First

Nat'l Bank, 673 S.W.2d 558, 565 (Tex.1984). Thus, in order for Bay

Colony to prevail on its breach of warranty claim, it must show

that during the course of its dealings with Trendmaker, Trendmaker

represented express warranties and breached them.

First, the statements relied on by Bay Colony are not specific

enough to allow judicial enforcement. Vague representations that

a seller will help solve any problems that arise in the future have

been held not actionable under the DTPA. Charles E. Beard, Inc. v.

McDonnell Douglas Corp., 939 F.2d 280 (5th Cir.1991). Second, Bay

Colony expressly waived any warranties and representations not in

the contract itself. The evidence of statements made during

negotiations but not embodied in the contract cannot serve as the

basis of a DTPA warranty claim, given that disavowal.

Finally, Bay Colony contends that Appellees committed "false

misleading or deceptive" acts or practices, referred to as the

"laundry list violations" under the DTPA. See Tex. Bus. & Com.Code

§ 17.46(b). The trial court submitted six of the twenty-five

possible statutory bases for DTPA laundry list violations to the

jury:

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 a. Causing confusion or misunderstanding as to the
sponsorship, affiliation, connection or association of the
real estate purchased; [§ 17.46(b)(2) ]

b. Causing confusion or misleading as to the affiliation,
connection or association with another; [§ 17.46(b)(3) ]

c. Representing that the real property or related development
services had the sponsorship, approval, characteristics, uses
or benefits which it did not have; [§ 17.46(b)(5)]

d. Representing that the real estate or related development
services were of a particular standard or quality when they
were of another; [§ 17.46(b)(7) ]

e. Advertising real property with an intent not to sell it as
advertised; [§ 17.46(b)(9) ]

f. Failing to disclose information concerning real property
which was known at the time of a transaction, if such failure
to disclose was intended to induce the purchaser into a
transaction which the purchaser would not have entered had the
information been disclosed. [§ 17.46(b)(23) ]

Bay Colony relies on essentially the same evidence as above,

that is, Trendmaker's representations to Brackman during

negotiations that Trendmaker would be the developer of the project

from start to finish, that, with the backing of WRECO, it was

committed to solving any problems that arose and that it would stay

with the deal through the ups and downs of the market. Bay Colony

argues that the evidence showed that Trendmaker never intended to

put its own money into the project and that its commitment was

conditioned on a minimum level of market stability, which

reservations were never communicated to Bay Colony in violation of

its obligations created under the DTPA. The evidence does not

support Bay Colony's theory of DTPA laundry list liability. In

fact, Appellees incurred obligations on notes totaling $37 million

17
in connection with the development before they were forced by the

depressed economy to sacrifice the project. Even assuming that the

jury could have inferred that the defendants should have put even

more money into the project, the evidence would still not support

a DTPA laundry list violation. The mere failure to perform a

promise does not constitute a misrepresentation actionable under

the DTPA unless it can be shown that at the time the promise was

made, the promisor had no intentions of fulfilling the promise.

Kuehnhoefer v. Welch, 893 S.W.2d 689, 693 (Tex.App.—Texarkana 1995,

writ denied). The $37 million investment over three years

forecloses a finding that Appellees misled Bay Colony as to their

commitment to the project during negotiations.

CONCLUSION

Based on the foregoing, the judgment of the district court is

AFFIRMED.

AFFIRMED.

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