TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-97-00747-CV
Starlight, L.P./Xarin Austin I, Ltd., Loren Baxter, George Ablin
and Hayden Property Management, Inc., Appellants
v.
Xarin Austin I, Ltd., Loren Baxter, George Ablin and Hayden Property
Management, Inc./Starlight, L.P., Appellees
NO. 94-01269, HONORABLE JOSEPH HART, JUDGE PRESIDING
FACTUAL AND PROCEDURAL BACKGROUND
On August 31, 1992, Starlight's assignor signed an earnest money contract to purchase Fountain Park Plaza I (the "Plaza") from Xarin for $1,896,000. The closing occurred on June 10, 1993, at which time Starlight executed a real estate lien note and deed of trust. The Plaza is located on IH-35 in Austin, south of Town Lake. It consists of two office buildings, one being four stories tall and the other being one story.
Xarin is a California limited partnership, of which Loren Baxter is a general partner and George Ablin is a limited partner. HPM, operated by Eddie Hayden, was the property manager for the Plaza before Xarin sold it to Starlight. Starlight is a Texas limited partnership controlled by Richard Hardin.
In July 1993, a month after the closing on the sale of the Plaza, Starlight was contacted by the Texas Department of Health regarding an investigation of air quality at the Plaza. On August 31, 1993, Hardin wrote to Baxter requesting information regarding any air quality problems and stating that Starlight would exercise its right of set-off to cover any repairs needed. Xarin denied prior knowledge of any air quality problems, but offered to undo the contract and take back the building. Declining to rescind the transaction, Starlight filed suit for defects in the heating, ventilation, and air-conditioning system (HVAC) in February 1994. Starlight apparently first learned of roof leakage problems in March 1994; it subsequently amended its petition to add a request for damages for roof repairs. Starlight sold the Plaza in 1994, allegedly because it could not afford to pay the repair costs of the roof and HVAC.
In March 1994, the trial court signed an agreed order requiring Starlight to make note payments into the registry of the court and prohibiting Xarin from taking any action to accelerate the balance due on the note. In May 1994, Xarin filed a counterclaim asserting that Starlight was in default on the real estate lien note. The parties agreed to try the counterclaim to the trial court without a jury. After a trial on the counterclaim, the court rendered judgment favoring Starlight, concluding that there had been no defaults in any payments under the note and that Starlight had made all payments due under the note in compliance with the agreed order.
The remainder of the lawsuit was tried to a jury in May and June 1996. The jury found that all Defendants except Ablin were liable for common-law fraud, and that all Defendants were liable for statutory fraud and deceptive trade practices. The jury found the cost of repair to be $54,677.12 for the roof and $103,500 for the HVAC. The jury found exemplary damages against Xarin and Ablin, and found additional DTPA damages against Xarin and Baxter. Defendants filed a motion for judgment notwithstanding the verdict, which the trial court granted. The trial court filed findings of fact and conclusions of law. Both sides appeal.
I. APPEAL BY XARIN AND THE OTHER DEFENDANTS
Defendants raise six issues on appeal: (1) There is conclusive evidence that Starlight defaulted in its payments under the real estate lien note; (2) the trial court's failure to find that Starlight defaulted in its payments under the real estate lien note is against the great weight and preponderance of the evidence; (3) there is legally insufficient or (4) factually insufficient evidence to support the trial court's finding that Starlight timely and properly made all payments due under the note; (5) the trial court erred in failing to render judgment against Starlight for the amount due under the note and for judicial foreclosure of Xarin's lien because Starlight was in default on the note, was given notice of the default, and failed to timely cure the default; and (6) the trial court erred in failing to award Xarin its attorney's fees.
In deciding a legal-sufficiency point of error that attempts to overcome an adverse fact finding as a matter of law, we must first consider only the evidence and inferences tending to support the finding of the trier of fact and disregard all evidence and inferences to the contrary. If there is no evidence to support the finding, we must then examine the entire record to see if the contrary proposition is established as a matter of law. Sterner v. Marathon Oil Co., 767 S.W.2d 686, 690 (Tex. 1989); Holley v. Watts, 629 S.W.2d 694, 696 (Tex. 1982); Texas & N.O.R.R., v. Burden, 203 S.W.2d 522, 528-31 (Tex. 1947). See generally William Powers, Jr. & Jack Ratliff, Another Look at "No Evidence" and "Insufficient Evidence", 69 Tex. L. Rev. 515, 523 (1991); Michol O'Connor, Appealing Jury Findings, 12 Hous. L. Rev. 65, 78-80 (1974). A factual-sufficiency review required the court to consider and weigh all of the evidence and set aside the verdict and remand for a new trial if the court concludes that the verdict is so against the great weight and preponderance of the evidence as to be manifestly unjust. In re King's Estate, 244 S.W.2d 660, 661 (Tex. 1951); First State Bank v. Keilman, 851 S.W.2d 914, 930 (Tex. App.--Austin 1993, writ denied).
In issues one through four, Xarin challenges the following conclusions of law made by the trial court:
13. There have been no defaults in any payment under the Real Estate Lien Note at any time by Starlight, L.P. because the payments made by it into the registry of the Court satisfied its obligation under the Real Estate Lien Note to make monthly payments to Xarin Austin I, Ltd. in the amount of $4,658.91.
14. Starlight, L.P. timely and properly made all payments due under the Real Estate Lien Note into the registry of the Court in compliance with, and pursuant to, the Agreed Order and Order on Temporary Injunction entered by the Court in this case.
Xarin first argues that between March 25, 1994 and April 19, 1995, there was no court order shielding Starlight from its obligation to pay Xarin. Xarin points out that the agreed order required Starlight to make its February 1994 and March 1994 payments into the registry of the court and that if successful at a temporary injunction hearing, Starlight would be required to continue making its monthly payments into the registry of the court. The temporary injunction hearing was apparently never held. However, on September 7, 1994, Xarin agreed to Starlight's motion requesting that the deposited funds be placed into an interest-bearing account, which recited that the agreed order required Starlight to make monthly deposits into the registry of the court. The trial court granted the agreed motion.
In October 1994, having sold the Plaza, Starlight filed a motion to deposit the sale proceeds into the registry of the court. Xarin objected to this motion, asserting that Starlight was already in default. Beginning in December 1994, Starlight ceased making the monthly payments into the court's registry. On March 2, 1995, the trial court granted Xarin's motion that the agreed order be set aside. On March 21, 1995, the trial court signed a temporary injunction order that again required Starlight to make monthly payments into the court's registry, including the payments from December 1994 through March 1995, and likewise to deposit the sale proceeds into the court's registry.
Xarin argues that conclusion of law thirteen conflicts with finding of fact ten, which states that Starlight did not make payments from December 1994 through March 1995. During this period, however, Starlight had offered to deposit the entire balance due on the Note into the registry, but that action was objected to by Xarin. As soon as the trial court resolved the dispute and ordered Starlight to deposit the payments for December 1994 through March 1995 and the sale proceeds into the registry, Starlight did so.
Considering the evidence pertaining to the trial court's conclusions, especially evidence that all parties operated as if the agreed order continued past March 1995 for several months and reaffirmed it in the agreed motion to deposit the funds into an interest-bearing account, we conclude that the record and the trial court's findings support conclusions of law thirteen and fourteen. We overrule points one through four.
In its fifth issue, Xarin asserts that the trial court erred in failing to render judgment against Starlight for the amount due under the promissory note, and for a judicial foreclosure of Xarin's lien, because Starlight was in default on the note, was given notice of the default, and failed to timely cure the default. Xarin argues that it was entitled to accelerate the entire debt if a default occurred and that it gave Starlight the required proper notice of default in January 1995. Under the real estate lien note, however, Xarin was not allowed to accelerate or enforce its right to foreclose on the property in the event of a dispute until a final judicial determination of Starlight's right to set off the amount in controversy. The agreed order also prohibited such action. We conclude that Starlight adequately raised the issue of its right to a setoff and that the trial court did not err in failing to render judgment against Starlight on this issue.
In its sixth issue raised, Xarin complains that it was not awarded its attorney's fees. Having concluded that the court did not err in denying Xarin's counterclaim, we also conclude it did not err in failing to award Xarin its attorney's fees.
II. STARLIGHT'S APPEAL
Starlight's appeal from the trial court's JNOV raises six issues: (1) whether there was any evidence to support the jury's award of remedial or "cost of repair" damages, (2) whether Starlight was legally entitled to recover remedial "economic loss" damages for its common-law fraud, statutory fraud, and DTPA claims, (3) whether the evidence was legally and factually sufficient to support the trial court's holding that Starlight had waived its claims by failing to give written notice as provided in the inspection provision of the earnest money contract, (4) whether the trial court erred in denying Starlight's recovery of exemplary damages awarded by the jury, (5) whether the trial court erred in denying Starlight's claim for attorney's fees and expert witness fees, and (6) whether the trial court erred in failing to award Starlight a recovery of its costs.
A trial court may disregard a jury's findings and grant a motion for JNOV only when there is no evidence on which the jury could have made its findings. Tex. R. Civ. P. 301; Mancorp, Inc. v. Culpepper, 802 S.W.2d 226, 227 (Tex. 1990). In reviewing the grant of the motion, we review the record in the light most favorable to the jury findings, considering only the evidence and inferences that support the findings and rejecting all contrary evidence and inferences. Johnson & Johnson Medical, Inc. v. Sanchez, 924 S.W.2d 925, 929 (Tex. 1996). If more than a scintilla of competent evidence supports the jury's findings, the JNOV must be reversed. Mancorp, 802 S.W.2d at 228.
The first issue concerns cost-of-repair damages. The Texas Supreme Court recently reiterated that Texas recognizes two measures of damages for common-law fraud: the out-of-pocket measure and the benefit-of-the-bargain measure. Formosa Plastics Corp. v. Presidio Eng'rs & Contractors, Inc., 960 S.W.2d 41, 49 (Tex. 1998). Texas courts have held that when property has sustained damage that diminishes its value but does not impair the structure as a whole, the cost of repairing or restoring the property is an appropriate element of damages. See Greene v. Bearden Enters., Inc., 598 S.W.2d 649, 653 (Tex. Civ. App.--Fort Worth 1980, writ ref'd n.r.e.); Wright v. Carpenter, 579 S.W.2d 575, 578 (Tex. Civ. App.--Corpus Christi 1979, writ ref'd n.r.e.); Drury v. Reeves, 539 S.W.2d 390, 394 (Tex. Civ. App.--Austin 1976, no writ); Hughes v. Halliday, 471 S.W.2d 88, 90 (Tex. Civ. App.--Waco 1971, no writ).
In Wright, the court approached the cost to repair as consequential damages. 579 S.W.2d at 578 (cost of repair was suffered as a consequence of appellee's reliance on appellant's representation). The supreme court has recognized the possibility of recovery for consequential damages. Formosa Plastics, 960 S.W.2d at 49 n.1. In the present case, Starlight alleges that the cost of repairing the roof and HVAC stemmed from Xarin's representation in the contract that it knew of no material problems. Assuming the sufficiency of the evidence to demonstrate fraud, we conclude Starlight may recover for the costs to repair the roof and HVAC.
Starlight next asserts that the evidence was legally sufficient to demonstrate the cost of repairs. In the earnest money contract, dated August 31, 1992, Xarin represented, among other things, that there were no material defects in the property or improvements. On the date of closing, June 10, 1993, Xarin signed a "closing agreement" in which it agreed that "[a]ll representations and warranties contained in the Earnest Money Contract . . . are hereby renewed and restated to Purchaser and shall survive closing." The cost to repair the roof was determined as of May 25, 1994. The cost to repair the HVAC was determined as of March 4, 1994, with a supplemental determination made on November 4, 1994. The trial court found that Xarin had no continuing duty to repair building defects after June 10, 1993. The trial court concluded that the cost to repair should be measured from the date of the sale of the property and that the evidence of cost to repair was, as a matter of law, too remote in time from the date of sale to constitute any evidence of such damages.
Xarin cites several cases to support the trial court's conclusion that cost-of-repair damages must be measured from the date of the deceptive act. Odom v. Meraz, 810 S.W.2d 241, 245 (Tex. App.--El Paso 1991), writ denied, 835 S.W.2d 626 (Tex. 1992); HOW Ins. Co. v. Patriot Fin. Servs. of Tex., Inc., 786 S.W.2d 533, 546-47 (Tex. App.--Austin 1990, writ denied); Building Concepts, Inc. v. Duncan, 667 S.W.2d 897, 901 (Tex. App.--Houston [14th Dist.] 1984, writ ref'd n.r.e.); Fidelity & Deposit Co. of Maryland v. Stool, 607 S.W.2d 17, 24-25 (Tex. Civ. App.--Tyler 1980, no writ). We believe these cases are distinguishable from the present one.
In Duncan, the court stated that "[w]hile it is established that actual damages may extend beyond the immediate time of a deceptive act, we believe the damages alleged must bear some reasonable relation in time and circumstances to the producing cause of such damages." 667 S.W.2d at 901 (emphasis added). The court found nothing in the record to support the Duncans' contention that deceptive acts by the builders in 1976 and 1977 caused a delay in completion continuing until the trial in 1982. The Duncans had purchased another home in 1977 when their promised home was not finished at that time. Thus, the issue was not the date from which the cost of damages should have been measured, but whether the earlier deception caused damage that extended for five years.
In HOW, this Court described two allowable measures of damages: difference in value and the "remedial" cost of repair. 786 S.W.2d at 546. We held that to prove the difference-in-value measure, one needed to provide evidence of the difference at the time of the sale. We did not address at what time the cost-of-repair damages should be measured.
In Odom, the purchasers of a house brought a DTPA action against the seller for damages arising from the encroachment of one of their walls onto adjoining property. 810 S.W.2d at 245. The purchasers asserted that the encroachment clouded title on the property. The only evidence in the record concerned the loss of a proposed sale of the house, after improvements had been made, approximately two years after the date of the purchase. The court concluded that this was no evidence of either benefit-of-the-bargain or out-of-pocket damages at the time of sale.
In Stool, the court decided that the parties contracted for a cost-of-repair measure of damages if the contractor failed to conform to the building plans. 607 S.W.2d at 24. The contractor completed the residence in 1973. In March 1978, after five years of negotiations, the contractor refused an oral and written request to correct the defects in the house. The court ruled that the breach occurred in March 1978. Appellants argued that evidence of cost to repair in the fall of 1978 was insufficient since the breach occurred in March and especially since repair costs were rising at the time. The court dismissed this argument, concluding that the contractor, as the party charged with the breach, had the burden to demonstrate any failure to mitigate damages, but that the contractor had offered no evidence of a failure to mitigate damages.
In the present case, Starlight obtained cost-of-repair estimates within a reasonable time of learning of the defects. Accordingly, these estimates provide more than a scintilla of evidence of the actual damages. No one suggests there was any improper delay in obtaining these estimates, and there is no evidence of a failure to mitigate damages. We conclude that the evidence of costs of repair presented in this case was not so remote in time from the date of sale as to constitute no evidence of such costs. See Jim Walter Homes, Inc. v. Gonzalez, 686 S.W.2d 715, 717-18 (Tex. App.--San Antonio 1985, writ dismissed) (allowing evidence of estimates of what it would cost to restore home to represented quality rather than what it would have cost on date of deceptive act). (2)
The second issue concerns whether Starlight could recover remedial "economic loss" damages for its common-law fraud, statutory fraud, or DTPA claims. Since the rendition of the trial court's judgment, the Texas Supreme Court has 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." Formosa Plastics, 960 S.W.2d at 47. We conclude that Starlight can recover economic damages for its fraud and DTPA actions.
Xarin asserts that because the representation about which Starlight complains was made only within the contract, Starlight is limited to a breach of contract action. We disagree. Although a contractual relationship could create duties under both contract law and tort law, the nature of the injury most often determines which duty is breached. Id. at 45, 47. The injury here flows from Xarin's representation that the property contained no material defects when, as found by the jury, Xarin knew of such defects. In addition, liability could have been found by the jury based on a failure to disclose as well as affirmative representations within the contract. We conclude that, under these circumstances, Starlight was not limited to an action in contract.
The third issue concerns the trial court's conclusion that Starlight waived any objections to the condition of the property by failing to give written notice as provided in the inspection provision of the earnest money contract. The contract contained an "as is" clause by which Starlight agreed to accept the property with any defects it may have, subject to an initial 45-day window during which Starlight could inspect the property and terminate the transaction if it discovered unacceptable defects. By purchasing property "as is," a buyer agrees to make its own evaluation of the bargain and accept the risk that it could be wrong. Prudential Ins. Co. of Am. v. Jefferson Assocs., Ltd., 896 S.W.2d 156, 161 (Tex. 1995). However, a buyer is not bound by an "as is" clause if proof of fraudulent misrepresentation is shown. Id. at 162; Pairett v. Gutierrez 969 S.W.2d 512, 516 (Tex. App.--Austin 1998, pet. denied). Because fraudulent inducement was found here, Starlight did not waive its right to recover for damages caused by that fraud.
In its fourth issue on appeal, Starlight asserts that if this Court reverses the JNOV as to actual damages, Starlight nevertheless may recover the exemplary damages awarded by the jury. A party is not entitled to recover exemplary damages unless it recovers actual damages. See Nabours v. Longview Savs. & Loan Ass'n, 700 S.W.2d 901, 903 (Tex. 1985). The trial court based its denial of exemplary damages on its conclusion that Starlight could not recover actual damages. Because we have concluded that Starlight is entitled to recover actual damages, we agree that Starlight may also recover exemplary damages.
The fifth issue involves attorney's and expert witness fees. To avoid the possibility of remand on this issue, the trial court made findings of fact as to the reasonable and necessary fees of Starlight's attorneys and experts. Because we have concluded that Starlight is entitled to recover for its damages, it is entitled to recover the attorney's and expert witness fees as determined by the trial court. See Tex. Bus. & Com. Code Ann. §§ 17.50(d), 27.01(e) (West 1987 & Supp. 1998).
The sixth issue involves costs. The successful party to a suit is generally entitled to recover the court costs incurred therein. See Tex. R. Civ. P. 131. In granting the motion for JNOV, the trial court did not allow Starlight to recover costs from defendants. Because we have concluded that Starlight is entitled to recover the damages as found by the jury, it should also recover costs of court.
III. DEFENDANTS' CROSS-ISSUES
In their first cross-issue, Defendants assert that the trial court correctly disregarded the jury's answers to the damages question regarding the cost of repair because Starlight failed to obtain a jury finding that the defects could not be repaired; therefore, there was no predicate for the jury's answers, which were based on the cost to replace the roof and HVAC system. See Turner, Collie & Braden, Inc. v. Brookhollow, Inc., 642 S.W.2d 160, 165 (Tex. 1982) (special issue would have been proper as submitted had it been predicated on jury finding that line could not be repaired for less than cost of replacement). Although Defendants assert that Starlight based its estimates on replacing rather than repairing the roof and HVAC, we are not similarly persuaded. The evidence to which Defendants point indicates only that certain parts would need to be replaced in restoring the roof and HVAC. Nonetheless, even though some parts would need replacing, we do not believe that the result of the process can be characterized as replacement rather than repair. The jury found the estimates of work to be done to the roof and HVAC to be reasonable and necessary. Thus, there was no need for a finding that the defects could not be repaired.
In their second cross-issue, Defendants assert that the trial court correctly granted the JNOV as to Defendants Baxter, Ablin, and HPM because Starlight acknowledged that it was not relying on representations outside the earnest money contract between Xarin and Starlight. In the contract, Starlight agreed that:
This Contract constitutes the entire agreement of the parties hereto and, unless specified otherwise herein, no representation, inducement, promises or prior agreements, oral or written, between the parties or made by any agent on behalf of the parties or otherwise shall be of any force and effect.
Defendants assert that this agreement negates a fraudulent inducement claim based on any representations other than those made in the earnest money contract itself, which were made only by Xarin.
In Schlumberger Technology Corp. v. Swanson, 959 S.W.2d 171, 174 (Tex. 1997), the parties entered into a release agreement following months of dispute over a venture involving an offshore diamond mining project. In the agreement, Schlumberger agreed to buy the Swansons' interest in a joint venture for more than $800,000, while the Swansons agreed to relinquish all rights in the venture and to release all causes of action against Schlumberger. Id. The Swansons later filed suit against Schlumberger, contending that they agreed to Schlumberger's low-price buyout only after being induced by misrepresentations about the value and feasibility of the venture. Id. at 179. The supreme court found the release agreement dispositive of whether the Swansons could prevail on a fraud claim because the agreement contained the following language:
[E]ach of us [the Swansons] expressly warrants and represents and does hereby state . . . and represent . . . that no promise or agreement which is not herein expressed has been made to him or her in executing this release, and that none of us is relying upon any statement or representation of any agent of the parties being released hereby. Each of us is relying on his or her own judgment and each of us has been represented by Hubert Johnson as legal counsel in this matter. The aforesaid legal counsel has read and explained to each of us the entire contents of this Release in Full, as well as the legal consequences of this Release . . . .
Id. at 180 (emphasis added by supreme court). The court found that, by this language, the Swansons had unequivocally disclaimed reliance on representations by Schlumberger about the project's feasibility and value. Id. Consequently, the court concluded that the Swansons were precluded as a matter of law from claiming that they were fraudulently induced to sell their interest in the project. Id.
In the present case, the no-reliance clause in the contract is not as emphatic as the clause in Schlumberger, but it is nonetheless clear and straightforward in establishing that Starlight agreed it was relying only on representations made in the contract itself in purchasing the Plaza. Therefore, there can be no liability here based on the affirmative representations of Baxter, Ablin, and HPM. However, this does not negate the possibility that those parties may be liable based on their failure to disclose material information.
Having examined which jury answers established liability based on affirmative representations as opposed to a failure to disclose material facts, we conclude that, as a matter of law, Baxter and HPM could not have been found liable for common-law fraud or statutory fraud. (3) Because the question pertaining to Ablin was expressly based on failure to disclose, however, Ablin could have been, and was, found liable for statutory fraud. (4) In addition, the jury was allowed, under the questions presented, to find Baxter, Blin, and HPM liable for DTPA violations due to a failure to disclose information. Therefore, neither Starlight's DTPA claims nor its statutory-fraud claim against Ablin are negated by the no-reliance clause. These remaining claims support the damages awarded by the jury against those defendants.
In their third cross-issue, Defendants assert that the trial court correctly granted the JNOV as to Ablin because he was only a limited partner, had no contact with Starlight before closing, and had no knowledge about the roof or the HVAC system that Starlight did not also have. The key to this issue is whether there is more than a scintilla of evidence that Blin had knowledge of the defects; to the degree he failed to disclose what he knew, his status as a limited partner is relevant only to the issue of his benefitting from Xarin's representation.
Defendants cite three cases in support of their argument that Ablin is protected by his status as a limited partner. See Leitch v. Hornsby, 935 S.W.2d 114, 117 (Tex. 1996); Stephanz v. Laird, 846 S.W.2d 895, 904 (Tex. App.--Houston [1st Dist.] 1993, writ denied); Richard Gill Co. v. Jackson's Landing Owners' Ass'n, 758 S.W.2d 921, 926 (Tex. App.--Corpus Christi 1988, writ denied). These cases do not support Defendants' conclusion. In Leitch, the court states that corporate officials are not liable for the corporation's tortious conduct; the court notes, however, that officials may be liable for their own negligence. 935 S.W.2d at 117. In Stephanz, the court found that the appellant had no duty to disclose the information in question. 846 S.W.2d at 904. However, unlike the statutory fraud claim against Ablin in the present case, the fraud claim against Stephanz was not based on Tex. Bus. & Com. Code Ann. § 27.01(d) (West 1987), which effectively creates a duty to disclose where a person has actual awareness of the falsity of a representation made by another person and benefits from that false representation. In Richard Gill Co., the court stated that a limited partner does not become liable as a general partner merely by acting as an agent of the partnership, but the court did not address a limited partner's potential liability as a separate entity for its own conduct. 758 S.W.2d at 926.
Starlight presented evidence showing that, despite Blin's limited-partner status, he was involved in the partnership's business activity and decisions. Ablin testified that in October 1992 he was considering whether to sell the Plaza and that his own notes from the time indicate that in deciding whether to sell or retain the Plaza, he spoke to Baxter to get information about the roof, HVAC, and asbestos, among other things. Ablin testified that he received little, if any, information about the roof or HVAC from Baxter. Blin acknowledged that he was aware of an asbestos problem at the building but did not disclose it to the buyers. He testified that HVAC operating expenses were higher than he had projected. In September 1992, he was expecting to spend $9,500 on HVAC repairs. There was also testimony that Ablin was aware of a Department of Health investigation of air quality in the building and of persistent roof leaks. We conclude that this is more than a scintilla of evidence that Ablin was aware of the problems with the roof and HVAC.
In their fourth cross-issue, Defendants assert that the trial court abused its discretion in admitting a tape recording of a telephone conversation between Baxter and Hardin because any probative value of the evidence was substantially outweighed by the danger of unfair prejudice. In order to obtain a reversal of a judgment based on an erroneous admission or exclusion of evidence, an appellant must show: (1) that the trial court did in fact commit error, and (2) that the error probably caused the rendition of an improper judgment. See Tex. R. App. P. 44.1(a); Gee v. Liberty Mut. Fire Ins. Co., 765 S.W.2d 394, 396 (Tex. 1989).
The admission or exclusion of evidence rests within the sound discretion of the trial court. New Braunfels Factory Outlet v. IHOP, 872 S.W.2d 303, 310 (Tex. App.--Austin 1994, no writ). A trial court abuses its discretion when it acts in an unreasonable and arbitrary manner, or when it acts without reference to any guiding principles. Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223, 226 (Tex. 1991). This Court may not reverse for abuse of discretion merely because we disagree with a decision of the trial court. Id.
Defendants point out that although the tape recording was admitted as evidence of Blin's lack of truthfulness, see Texas Rules of Evidence 608(a), Blin had not yet testified and therefore was not, at that point in the trial, a witness whose credibility could be impeached. However, even assuming it was error to admit impeaching evidence before the target of the impeaching evidence had testified, because Blin did in fact later testify, we cannot say that such error probably caused the rendition of an improper judgment.
In their fifth cross-issue, Defendants assert that the trial court correctly granted HPM's motion for JNOV because there was legally and factually insufficient evidence to support the jury's answers to the liability and damages questions concerning HPM. Defendants argue that HPM cannot be liable for DTPA claims by Starlight because Starlight was not a "consumer" as to HPM. See Tex. Bus. & Com. Code Ann. § 17.45(4) (West 1987) (defining "consumer" under the DTPA as one who "seeks or acquires by purchase or lease, any goods or services"); Qantel Business Sys., Inc. v. Custom Controls Co., 761 S.W.2d 302, 305 (Tex. 1988). (5) In this regard, Defendants contend Starlight cannot assert a DTPA claim against HPM because Starlight did not purchase the Plaza from HPM. The DTPA does not attach derivative liability to defendants who are innocently involved in a consumer transaction. Id. However, a consumer suing under the DTPA need not establish contractual privity with the defendant as long as he shows that the defendant has committed a deceptive act which is the producing cause of the consumer's damages. Id. The key to liability under the DTPA is whether the defendant's deceptive act occurred in connection with the consumer transaction. See Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 649 (Tex. 1996). Therefore, the fact that Starlight purchased the Plaza from Xarin rather than HPM does not of itself mean that HPM cannot be liable under the DTPA.
In their sixth cross-issue, Defendants assert that the evidence was factually insufficient to support the jury's findings on cost of repairs because the amounts found were far in excess of what actually was reasonable and necessary to repair any defects for which there could be liability. Defendants assert that Starlight's roof-repair expert, David Lawrence, testified that the roof repair could be accomplished for around $12,000. However, Lawrence also testified that such a repair would not stop the roof from leaking.
Defendants argue that Starlight's HVAC-repair expert, Thomas Alexander, testified that the HVAC could be adequately repaired for $3,000 to $5,000. Defendants assert that the HVAC repairs presented by Starlight would constitute a significant upgrade rather than a mere repair of the existing system. Alexander testified he was brought in by Starlight's property manager to make recommendations on dealing with the numerous temperature complaints within the Plaza and to look into indoor air-quality problems. When asked if he thought $193,500 would be the reasonable and necessary cost to make those repairs, Alexander responded "yes." The jury awarded $103,500 for the HVAC. Defendants point to no evidence contradicting Alexander's testimony. Considering all the evidence presented at trial, we conclude that the amount of damages awarded by the jury is not so against the great weight and preponderance of the evidence as to be clearly wrong or manifestly unjust.
In their seventh cross-issue, Defendants assert that Starlight knew there were material defects in the property before closing and, therefore, any representation Xarin made that there were no material defects, or any failure to disclose the existence of material defects, could not have been a producing or proximate cause of damages to Starlight. Defendants point to evidence of a variety of problems of which Starlight was aware. It is true that one's knowledge or investigation revealing a representation to be false may preclude claims of reliance or causation of damages from the representation. See Chitsey v. National Lloyd's Ins. Co., 698 S.W.2d 766, 769 (Tex. App.--Austin 1985), aff'd, 738 S.W.2d 641 (Tex. 1987). However, we reject the argument that when a broad or multi-part representation is made, knowledge of the falsity of any part of the representation necessarily precludes detrimental reliance on other parts of the representation.
Defendants point out that, before closing, Starlight had a copy of a report that disclosed the existence of problems with the roof and the HVAC. However, Starlight's owner, Hardin, testified at trial that, while he knew there were some problems with the roof and HVAC, he did not know the extent of the problems or that the problems constituted "material defects." We conclude that Hardin's knowledge of some problems with the roof and HVAC does not preclude, as a matter of law, either reliance on or causation of damages by the no-material-defect representation and failure to disclose by Defendants.
In their eighth cross-issue, Defendants assert that the trial court erred in overruling Xarin's objection to the form of the damages question dealing with HDR Engineering because the question failed to segregate the amount of HDR's claim that was caused by Xarin from the amount of the claim that was caused by Starlight. Defendants assert that a settlement agreement between HDR and Starlight deals with disputed claims between HDR and Xarin as well as between HDR and Starlight.
HDR was a tenant at the Plaza under both Xarin and Starlight. Starlight claimed that HDR's lease expired on August 31, 1994, but that HDR did not leave the space until October 15, 1994. Starlight and HDR disputed the amount due for the holdover period. In addition, Starlight asserted claims against HDR for expense adjustments owed under the terms of its lease, including amounts which accrued while Xarin owned the Plaza. HDR had claims against Starlight for damages incurred while a tenant at the Plaza due to the lack of repair and maintenance to the roof. The parties agreed that HDR would pay Starlight $15,000 in satisfaction of debts claimed by Starlight and HDR would release Starlight for any claims by HDR.
The jury was asked what sum of money would fairly and reasonably compensate Starlight for the claim HDR made against it. The jury answered $47,262.83. Xarin asserts that the amount of expense adjustments that occurred when Xarin owned the Plaza should have been segregated out of the calculation. However, pursuant to the real estate lien note, Starlight owned the right to all accounts receivable such as the expense adjustments that accrued while Xarin owned the Plaza. We conclude that the court did not err in overruling Xarin's objection to the form of this question. The amount of expense adjustment claims that occurred when Xarin owned the Plaza did not need to be segregated out of the calculation.
In their ninth cross-issue, Defendants assert that the trial court abused its discretion in admitting evidence concerning asbestos because the evidence had no probative value and it was inflammatory and highly prejudicial. See Tex. R. Evid. 403, 404(b). Although Starlight did not seek damages from the alleged failure of Defendants to inform Starlight of the presence of asbestos in the Plaza, the trial court stated that it was admitting evidence of asbestos because it was relevant to questions of knowledge of material defects and of failing to disclose matters that should have been disclosed. We conclude the trial court did not abuse its discretion in admitting the evidence concerning asbestos.
In their tenth cross-issue, Defendants assert that the evidence was legally and factually insufficient to support the jury's answers to the questions pertaining to liability for common-law fraud, statutory fraud, DTPA, breach of contract, breach of warranty and unconscionability because Starlight failed to prove that Xarin, Baxter, or Ablin knew about any material defects in the roof or HVAC. A business organization becomes aware of information through the knowledge of its agents and officers. See Wellington Oil Co. v. Maffi, 150 S.W.2d 60, 63 (Tex. 1941); Hirsch v. Texas Lawyers' Ins. Exch., 808 S.W.2d 561, 563 (Tex. App.--El Paso 1991, writ denied). There appears to be no dispute that in managing the Plaza for Xarin, HPM was acting as Xarin's agent and that it was aware of the roof and HVAC problems. To the degree that there is evidence that Baxter was aware of the problems as well, such knowledge may be imputed to Xarin.
Defendants do not argue that HPM had no knowledge of any material defects in the roof or HVAC. Indeed, there was evidence that HPM received numerous complaints about both items. Eddie Hayden of HPM testified that he had discussions with Baxter about the roof problems and that he probably told Baxter about the complaints regarding the HVAC. Baxter testified that, although he did not remember if he was told of the complaints about the HVAC, Hayden may have told him. Baxter testified that he had been told of roof problems. Hayden wrote letters to Baxter about the roof leaks. Blin testified that he communicated with Baxter frequently and that he had discussed the roof and HVAC to some degree with Baxter when considering whether to sell the Plaza. Hayden testified that he told Baxter about the Health Department's investigation of the air quality, in that the Department's air quality surveys were being circulated among the tenants. Ablin testified that, before closing, he was aware of the Department of Health investigation. We conclude that the record contains more than a scintilla of evidence that Xarin, Baxter, and Ablin knew of material defects in the roof and HVAC.
Defendants argue that all they knew about the roof leaks was that the roof would leak, would be patched, would not leak for a while, but then later would begin to leak again. Defendants assert that the roof did not leak in the six months prior to closing. Defendants also assert that the only air-quality problem in the building involved the presence of a smoking area on the second floor of the building, which was closed after complaints. Having reviewed all the evidence, however, we conclude that the evidence supporting the jury's findings is not so weak, nor so against the great weight and preponderance of the evidence, as to be manifestly unjust.
Defendants also assert that there is no evidence that they acted unconscionably in their dealings with Starlight. (6) They argue that to demonstrate unconscionability, there must be evidence that Defendants took advantage of Starlight's lack of knowledge or experience, and that their behavior was glaringly flagrant. See Tex. Bus. & Com. Code Ann. § 17.45(5) (West 1987 & Supp. 1998); State Farm Lloyds v. Nicolau, 951 S.W.2d 444, 451 (Tex. 1997). Defendants point out that Starlight was a sophisticated party that knew about problems with the building. Even assuming Defendants did not act unconscionably here, however, the damages granted by the jury for the DTPA claims are nonetheless supported by another jury finding: that Defendants engaged in a false, misleading, or deceptive act or practice that was a producing cause of damages to Starlight. See Tex. Bus. & Com. Code Ann. § 17.50(a) (West Supp. 1998) (listing four alternative ways of demonstrating violation of DTPA).
CONCLUSION
We affirm the portion of the trial court's judgment denying Xarin recovery on its counterclaim; we also affirm the portion of the trial court's judgment pertaining to Starlight's settlement agreement with HDR Engineering.
We reverse the portion of the judgment ordering that Starlight take nothing on its claim for damages to the roof and HVAC, and we render judgment that Starlight recover from Defendants Xarin, Baxter, Ablin, and HPM $54,677.12 in actual damages to the roof and $103,500 in actual damages to the HVAC as found by the jury. We also render judgment that Starlight recover the exemplary damages found by the jury as follows: $22,500 from Xarin and $200,000 from Ablin. We also render judgment that Starlight recover additional damages for the DTPA violations as follows: $5,000 from Baxter and $2,420 from Xarin.
We further render judgment that Starlight recover from Defendants its attorney's fees consistent with these trial-court findings of fact: $160,294 for attorney's fees through trial, $20,000 for this appeal, and $7,500 for making or responding to a petition for review by the Texas Supreme Court and $3,000 if the petition is granted. The attorney's fees are contingent on Starlight's success. We also render judgment that Starlight recover the following expert-witness fees as found by the trial court in its findings of fact: $8,644.57 for Thomas Alexander and $1,358.75 for David Lawrence.
We affirm the trial-court judgment in all other respects.
J. Woodfin Jones, Justice
Before Chief Justice Yeakel, Justices Aboussie and Jones
Affirmed in Part; Reversed and Rendered in Part
Filed: September 24, 1998
Do Not Publish
1. See Tex. Bus. & Com. Code Ann. §§ 17.01-17.854 (West 1987 & Supp. 1998).
2. Starlight also argued that Xarin waived any objection concerning the time at which damages
were measured in the jury questions because Xarin did not object to the question submitted and
tender a proposed instruction in substantially correct form. The test for determining whether a
party has preserved error in the jury charge is whether the party has made the trial court aware
of the complaint, timely and plainly, and obtained a ruling. State Dep't of Highways & Pub.
Transp. v. Payne, 838 S.W.2d 235, 241 (Tex. 1992). Even assuming proper objection, however,
we have concluded that the court erred in granting the motion for JNOV.
3. Starlight did not pursue a common-law fraud claim against Ablin.
4. Jury question five asked: "Did George Ablin commit statutory fraud against Starlight, L.P. relating to the roof
or the HVAC system? In answering this question, you are instructed that statutory
fraud occurs when: 1. a person has actual awareness of the falsity of a representation made by
another person, and 2. fails to disclose the falsity of the representation to the person defrauded,
and 3. benefits from the false representation.
5. Defendants also argue that any affirmative representations by HPM were mere "puffing" that
is not actionable as a deceptive trade practice. See Prudential, 896 S.W.2d at 163. We need not
address this second argument because we have already concluded under Defendants second cross-issue that HPM's DTPA liability may be based only on its failure to disclose material facts.
6. Jury question twelve asked if any of the defendants (Baxter, Xarin, HPM, or Ablin) engaged
in "any unconscionable action or course of action that was a producing cause of damages to
Starlight, L.P." The jury answered "yes" as to each.
; Supp. 1998); State Farm Lloyds v. Nicolau, 951 S.W.2d 444, 451 (Tex. 1997). Defendants point out that Starlight was a sophisticated party that knew about problems with the building. Even assuming Defendants did not act unconscionably here, however, the damages granted by the jury for the DTPA claims are nonetheless supported by another jury finding: that Defendants engaged in a false, misleading, or deceptive act or practice that was a producing cause of damages to Starlight. See Tex. Bus. & Com. Code Ann. § 17.50(a) (West Supp. 1998) (listing four alternative ways of demonstrating violation of DTPA).
CONCLUSION
We affirm the portion of the trial court's judgment denying Xarin recovery on its counterclaim; we also affirm the portion of the trial court's judgment pertaining to Starlight's settlement agreement with HDR Engineering.
We reverse the portion of the judgment ordering that Starlight take nothing on its claim for damages to the roof and HVAC, and we render judgment that Starlight recover from Defendants Xarin, Baxter, Ablin, and HPM $54,677.12 in actual damages to the roof and $103,500 in actual damages to the HVAC as found b