J. Anthony Referente and Elizabeth A. Referente v. City View Courtyard, L.P. and JAAV Investments, LLC

Opinion issued October 13, 2015

In The

Court of Appeals
For The

First District of Texas
————————————
NO. 01-14-00602-CV
———————————
J. ANTHONY REFERENTE AND ELIZABETH A. REFERENTE,
Appellants
V.
CITY VIEW COURTYARD, L.P. AND JAAV INVESTMENTS, LLC,
Appellees

On Appeal from the 281st District Court
Harris County, Texas
Trial Court Case No. 2013-00767

OPINION

Appellant Elizabeth Referente bought a townhome pursuant to the terms of a

Texas Real Estate Commission standard form contract, which provided that the

prevailing party in any legal proceeding related to the contract is entitled to recover
reasonable attorney’s fees and costs. After Elizabeth and her husband discovered a

leak in the kitchen ceiling, they sued Appellees City View Courtyard, LP (“City

View”), which was the seller, and its general partner, JAAV Investments, LLC

(“JAAV”), for negligence, breach of warranty, and violations of the Texas

Deceptive Trade Practices Act.

Appellees moved for summary judgment on multiple grounds, and the

Referentes nonsuited without prejudice six days before the motion’s submission

date. The trial court found that the Referentes nonsuited to avoid an unfavorable

ruling on the merits and concluded that Appellees were prevailing parties under the

contract’s attorney’s fees provision. It entered judgment awarding Appellees

$9,447.00 in attorney’s fees, plus post-judgment interest and court costs. On

appeal, the Referentes challenge (1) the trial court’s finding that the Referentes

nonsuited to avoid an unfavorable ruling on the merits and (2) the trial court’s

conclusion that the Referentes’ recovery was barred by the as-is provision of the

contract. We affirm.

Background

In 2010, Elizabeth Referente purchased a townhome in Houston from City

View pursuant to the terms of the Texas Real Estate Commission’s standard form

for a One to Four Family Residence Contract (Resale). In Section 7B of the

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contract, Elizabeth acknowledged receipt of the Seller’s Disclosure Notice, in

which City View indicated that it was not aware of any defects or malfunctions,

previous flooding or water penetration, or of “any item, equipment, or system in or

on the Property that is in need of repair.”

Pre-closing, the Referentes performed an inspection of the townhome, as

permitted by Section 7A of the contract. The Referentes then provided City View

with a list of anticipated expenses and costs for electrical, HVAC, plumbing,

interior, exterior, and roof repairs totaling over $100,000. In light of these

anticipated repair expenses, the parties negotiated a $15,000 reduction in the

purchase price. The parties closed the transaction on September 14, 2010.

Notably, Section 7D of the contract provided that Elizabeth “accepts the Property

in its present condition.”

In early 2011, the Referentes discovered a leak in the kitchen ceiling. Their

plumber cut a hole in the ceiling and discovered paint pans and fast food containers

overflowing with water. In December 2011, Elizabeth found a printed e-mail left

in a phone book in the townhome. The January 2010 e-mail indicated that

someone named Phuong Nguyen had instructed a repairman to make several

repairs to the townhome, including “retextur[ing] and paint[ing] the defects in the

kitchen ceiling.”

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 On January 7, 2013, the Referentes sued, asserting claims for negligence,

breach of warranty, and violations of the Texas Deceptive Trade Practices Act.

Appellees counterclaimed for attorney fees, courts costs, and pre- and post-

judgment interest pursuant to Paragraph 17 of the contract. On May 15, 2013,

Appellees filed a Traditional and No Evidence Motion for Summary Judgment on

all of the Referentes claims and their own counterclaim for attorney’s fees. The

motion included multiple grounds for summary judgment and was originally set for

submission on June 17, 2013.

A ruling on the motion for summary judgment was delayed for nearly a year.

In June 2013, the Referentes’ counsel filed a request for an oral hearing and a

motion seeking leave to withdraw. Later, the Referentes, both attorneys who were

by then representing themselves, moved to continue the hearing. The trial court

granted the continuance, and the motion for summary judgment was again set to be

submitted on May 5, 2014. Six days before the submission date, the Referentes

nonsuited their claims, without prejudice. The notice of nonsuit said nothing about

what motivated the Referentes to file it. On the same day, the Referentes filed a

Response to Defendants’ Motion for Summary Judgment asserting that their

nonsuit disposed of all of their affirmative claims and mooted the counterclaim for

attorney’s fees. In their reply in support of their motion for summary judgment,

Appellees argued that the Referentes’ nonsuit had no effect on the counterclaim for

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attorney’s fees, which they argued they were entitled to recover as a matter of law.

Citing Epps v. Fowler, 351 S.W.3d 862 (Tex. 2011), the trial court denied the

motion for summary judgment without prejudice to Defendants seeking additional

findings.

The following month, the parties proceeded to trial on the attorney’s fees

issue. Elizabeth Referente testified that the Referentes elected to take a nonsuit

because they were unable to absorb both the cost of repairing the townhome and

the cost of continuing the litigation. In particular, the Referentes were unable to

pay the upfront retainer fees required by counsel. The trial court made the

following findings:

a. Elizabeth was sophisticated in matters of the law and was
represented by an agent in the transaction;

b. The contract was an arm’s length transaction and the relative
bargaining power of the parties indicates that the language was
freely negotiated and not mere boilerplate;

c. The Referentes nonsuited to avoid an unfavorable ruling on the
merits; and

d. City View and JAAV Investments are the prevailing party. 1

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The trial court’s findings were recited in its judgment, but, because the record
contains no other findings of fact, the findings may be accorded probative value.
James J. Flanagan Shipping Corp. v. Del Monte Fresh Produce N.A., Inc., 403
S.W.3d 360, 364 (Tex. App.—Houston [1st Dist.] 2013, no pet.); In re C.A.B., 289
S.W.3d 874, 881 (Tex. App.—Houston [14th Dist.] 2009, no pet.).

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The trial court’s judgment awarded City View and JAAV Investments attorney’s

fees in the amount of $9,447.00, which amount the parties stipulated was

reasonable and necessary, plus post-judgment interest and court costs. 2

Discussion

The Referentes raise two issues on appeal. First, they challenge the legal

sufficiency of the evidence to support the trial court’s finding that the Referentes

nonsuited to avoid an unfavorable ruling on the merits. Second, they contend that

the trial court erred in concluding that the as-is or “present condition” provision of

the contract was binding in light of their contention that Appellees fraudulently

concealed the leak in the kitchen ceiling.

I. Standard of Review

Epps does not expressly state the applicable standard of review. The

Referentes frame their first issue as one of legal sufficiency: they assert that the

judgment must be reversed because no evidence supports the trial court’s finding

that they nonsuited to avoid an unfavorable judgment. We agree that whether a

party nonsuited to avoid an unfavorable ruling is a question of fact, and that the

trial court’s finding on that issue may be challenged on the ground that it is not

supported by sufficient evidence. See HTS Servs., Inc. v. Hallwood Realty

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Because Anthony Referente did not sign the contract, the judgment states that City
View and JAAV Investments shall recover exclusively from Elizabeth Referente
and take nothing against Anthony Referente.

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Partners, L.P., 190 S.W.3d 108, 111 (Tex. App.—Houston [1st Dist.] 2005, no

pet.) (when trial court’s findings are challenged, appellate courts review

sufficiency of evidence supporting the findings by applying the same standards

used in reviewing legal or factual sufficiency of evidence supporting jury

findings).

But an analysis under Epps may also involve legal determinations subject to

de novo review. See Epps, 351 S.W.3d at 871 (noting trial judge may consider

evidence “that the suit was not without merit when filed”); Moreland v. Johnson,

95 S.W.3d 392, 394 (Tex. App.—Houston [1st Dist.] 2002, no pet.) (appellate

court reviews de novo the legal question of whether suit had arguable basis in law).

Accordingly, we will review the trial court’s determination under Epps for an

abuse of discretion, deferring to factual findings that are supported by some

evidence, but reviewing legal questions de novo. See El Paso Nat. Gas Co. v.

Minco Oil & Gas Co., 964 S.W.2d 54, 60–63 (Tex. App.—Amarillo 1997) (noting

that trial court’s findings involving mixed questions of law and fact are reviewed

for abuse of discretion in which appellate court reviews de novo that part of the

decision involving the law and its application while recognizing the trial court’s

authority to weigh and interpret evidence), rev’d on other grounds, 8 S.W.3d 309

(Tex. 1999).

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 A. Applicable Law

Texas Rule of Civil Procedure 162 provides that a plaintiff may nonsuit any

time before introducing all of her evidence other than rebuttal evidence. TEX. R.

CIV. P. 162. While a nonsuit has the effect of terminating a case from “the moment

the motion is filed,” see Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex.

2010) (noting nonsuit renders the merits of the nonsuited case moot), it does not

affect the right of an adverse party to be heard on a pending claim for affirmative

relief, and it has no effect on any motion for attorney’s fees or other costs pending

at the time of dismissal. TEX. R. CIV. P. 162.

In Epps, the Texas Supreme Court held that “a defendant may be a

prevailing party when a plaintiff nonsuits without prejudice if the trial court

determines, on the defendant’s motion, that the nonsuit was taken to avoid an

unfavorable ruling on the merits.” 351 S.W.3d at 870. The Supreme Court

enumerated factors that may support an inference that a plaintiff nonsuited to avoid

an unfavorable ruling: (1) a plaintiff filed a nonsuit only after a defendant filed a

motion for summary judgment, (2) a plaintiff failed to respond to requests for

admission or other discovery that could support an adverse judgment, (3) a plaintiff

failed to timely identify experts or other critical witnesses, and (4) the existence of

other procedural obstacles that could defeat the plaintiff’s claim (e.g., an inability

to join necessary parties). Id. at 870–71. On the other hand, the Epps court noted

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that evidence that a plaintiff’s suit was not without merit when filed may indicate

that the defendant has not prevailed and therefore is not entitled to attorney’s fees.

Id. (suggesting that a defendant would not be a prevailing party if suit was not

without merit when filed and was non-suited after discovery revealed previously

unknown flaws in plaintiff’s claims).

B. Analysis

Here, the trial court found that the Referentes nonsuited in order to avoid an

unfavorable ruling on the merits. The Referentes argue that legally insufficient

evidence supports that finding and, in particular, that Appellees failed to show that

the Referentes’ claims were meritless when they were initially filed.

Applying Epps, we conclude that sufficient evidence supports the trial

court’s finding that the Referentes nonsuited to avoid an unfavorable ruling on the

mertis. First, the Referentes nonsuited after Appellees’ motion for summary

judgment had been pending for nearly a year and, tellingly, a mere six days before

the motion was to be submitted. And the Referentes did not proffer in their notice

of nonsuit their reason for filing it. Second, the Referentes’ response to the motion

for summary judgment, filed on the same day as their nonsuit, did not address the

merits of the motion. Rather, the response merely stated that, based on the nonsuit,

“there are no longer any justiciable claims” and “Defendants cannot recover any

attorney fees relating to this lawsuit.” Elizabeth testified that she and her husband

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nonsuited to avoid incurring litigation costs—in particular, a retainer fee—that

they could not afford. But the trial court could have discredited this testimony and

reasonably concluded that they nonsuited to avoid an unfavorable ruling on the

merits, particularly because the Referentes were both attorneys who could have

continued representing themselves. See Epps, 351 S.W.3d at 871 (evidence that a

plaintiff nonsuited after a motion for summary judgment was filed “may support an

inference that a plaintiff has nonsuited in order to avoid an unfavorable ruling”).

The Referentes next contend that the trial court’s fee award must be reversed

because Appellees failed to carry their burden to show that the Referentes’ suit was

meritless when filed. See id. (“evidence that the suit was not without merit when

filed may indicate that the defendant has not prevailed and is therefore not entitled

to attorney’s fees”). In support, they cite Miramar Dev. Corp. v. Sisk, No. 04-13-

00777-CV, 2014 WL 1614290 (Tex. App.—San Antonio Apr. 23, 2014, pet.

denied). In Miramar, Sisk and the sellers executed a standard contract

promulgated by the Texas Real Estate Commission for the sale of residential

property. Id. at *1. Sisk later sued the sellers, their broker, and the home inspector

for damages Sisk contended were caused by foundation defects that the sellers

concealed. Id. After settling with all other parties, Sisk nonsuited his claims

against the sellers five days after the sellers moved for summary judgment on the

basis of a recently-issued authority that made a favorable outcome less likely for

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Sisk. Id. at *8. Sisk’s nonsuit noted that he was ending the litigation against the

sellers “[b]ecause of the increasing expense of litigation, and in light of [the newly-

issued authority].” Id. at *2.

On the parties’ cross-motions for summary judgment, the trial court

determined that the sellers were not prevailing parties and declined to award the

sellers attorney’s fees under the contract. Id. The sellers appealed, and the San

Antonio court of appeals concluded that “[a]lthough the temporal proximity of a

plaintiff’s nonsuit may, in some situations, suggest that the nonsuit was filed to

avoid an unfavorable judgment, that cannot be said when a plaintiff pursues a

claim that is not without merit and nonsuits only after discovering previously

unknown legal or factual impediments to success.” Id. at *7. Accordingly, the San

Antonio Court of Appeals held that the trial court did not err in determining, as a

matter of law, that Sisk did not nonsuit to avoid an unfavorable ruling on the

merits. Id. at *8.

This case is different from Miramar. Here, the Referentes did not identify

any post-filing change in the law that diminished the viability of their claims. Nor

is there evidence that the nonsuit followed the discovery of previously unknown

flaws in the Referentes’ claims, or that the Referentes had obtained settlements

from other parties and reassessed the likelihood of further recovery. In Miramar,

the trial court concluded that these factors negated the premise that the nonsuit was

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filed to avoid an unfavorable ruling. None of these factors is present in this case,

in which the nonsuit was filed only after a motion for summary judgment with no

discernable intervening events from the time the motion was filed and the date of

the nonsuit. Accordingly, the facts in Miramar are inapposite.

Here, the Referentes adduced evidence arguably demonstrating that their suit

had merit when it was filed, but they offered no evidence of any post-filing

occurrence (such as a change in the applicable law or a revelation of a bad fact

through discovery) that caused them to non-suit. Instead, they adduced evidence

that they nonsuited to avoid incurring further litigation costs. The trial court was

free to discredit this testimony, however, and find that the Referentes nonsuited

their claims to avoid an unfavorable ruling on the merits.

In their second issue, the Referentes assert that the trial court erred in

concluding that the Referentes were bound by the as-is provision of the contract.

In essence, the Referentes seek review of the summary judgment that the trial

court’s findings indicate it would have granted had the Referentes not nonsuited

their claims. Epps did not require that a party seeking fees establish that the

nonsuit was filed to avoid an unfavorable and a correct ruling on the merits, thus

subjecting the hypothetical ruling to appellate review. Even were Epps to require

it, the Referentes have failed to establish that summary judgment, had it been

granted, would have been incorrect. The Appellants moved for a no-evidence

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summary judgment on the grounds that, among other things, the Referentes could

not adduce evidence of causation, which was an element of all of the Referentes’

claims. The Referentes filed no response on the merits, and thus cannot show on

appeal that they would have defeated summary judgment had they not nonsuited.

Conclusion

We conclude that the record supports the trial court’s finding that the

Referentes nonsuited to avoid an unfavorable ruling on the merits. Accordingly,

Appellees were prevailing parties entitled to an award of attorney’s fees under the

terms of the contract. We therefore affirm the judgment of the trial court.

Rebeca Huddle
Justice

Panel consists of Chief Justice Radack and Justices Bland and Huddle.

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