NUMBER 13-11-00500-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
CHARLES E. SMITH AND BETTY
M. SMITH, INDIVIDUALLY, AND AS
TRUSTEES FOR THE SMITH
FAMILY TRUST, Appellants,
v.
ARAMARK CORPORATION, Appellee.
On appeal from the 445th District Court
of Cameron County, Texas.
NUMBER 13-11-00708-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
CHARLES E. SMITH AND BETTY
M. SMITH, INDIVIDUALLY, AND AS
TRUSTEES FOR THE SMITH
FAMILY TRUST, Appellants,
v.
LONG ISLAND VILLAGE OWNERS
ASSOCIATION, INC. F/K/A OUTDOOR
RESORTS/SOUTH PADRE OWNER’S
ASSOCIATION, INC. AND PAST AND
PRESENT BOARD OF DIRECTORS OF
LONG ISLAND OWNERS ASSOCIATION
INC. F/K/A OUTDOOR RESORTS/SOUTH
PADRE OWNER’S ASSOCIATION, INC., Appellees.
On appeal from the 445th District Court
of Cameron County, Texas.
MEMORANDUM OPINION
Before Chief Justice Valdez and Justices Garza and Perkes
Memorandum Opinion by Chief Justice Valdez
By one issue, appellants, Charles E. Smith and Betty M. Smith, individually and as
trustees for the Smith Family Trust (Smiths), challenge the trial court’s orders granting
summary judgment in favor of appellees, Aramark Corporation (Aramark) (appellate
cause number 13-11-00500-CV), and appellees, Long Island Village Owners Association,
Inc. F/K/A Outdoor Resorts/South Padre Owner’s Association, Inc. and Past and Present
Board of Directors of Long Island Owners Association, Inc. F/K/A Outdoor Resorts/South
Padre Owner’s Association, Inc. (LIVOA) (appellate cause number 13-11-00708-CV).
We affirm.
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I. BACKGROUND
In February 2003, the Smiths purchased a property located in the Long Island
Village from the property’s previous owner, Janet Kennedy. Homeowners of Long Island
Village are members of LIVOA. Prior to the sale of the property, in accordance with Texas
Property Code section 207.003, LIVOA provided the Smiths with a “Resale Certificate for
Property Subject to Mandatory Membership in an Owners’ Association” (resale
certificate), which was completed by LIVOA’s agent, Aramark. See TEX. PROP. CODE ANN.
§ 207.003 (West, Westlaw through 2013 3d C.S.). On the certificate, LIVOA indicated
that it had “no actual knowledge of conditions on the Property in violation of the restrictions
applying to the subdivision or the bylaws or rules of the Owners’ Association.”
On March 12, 2008, The Smiths filed suit against multiple defendants, including
LIVOA and Aramark. Their pleadings included causes of action for negligence, negligent
misrepresentation, common law fraud, civil conspiracy, fraud by nondisclosure, unlawful
taking and diminished value of the subject property, violations of the Texas Deceptive
Trade Practices Act, and breach of fiduciary duty. In their pleadings, the Smiths asserted
that LIVOA and Aramark, acting as LIVOA’s agent by completing the resale certificate,
failed to disclose the existence of an equalizer channel located underneath the property.
The Smiths claimed that LIVOA and Aramark “intentionally, willfully and fraudulently
stated” on the resale certificate that they had no knowledge or information about any
conditions of the property that were in violation of the owners’ association’s rules and
bylaws. LIVOA’s building rules prohibited building structures on common elements. The
Smiths argued that the equalizer channel was a common element and that because a
home had previously been built on the subject property above a common element, the
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property was in violation of LIVOA’s rules. The Smiths contended that LIVOA and
Aramark therefore had a duty to notify the Smiths of the violation.
The Smiths claimed damages resulting from the diminished value of the property
based on the possibility of sinkholes caused by the equalizer channel. They also claimed
damages based on a 2008 building handbook stating that maintenance or repair of the
equalizer channels “may require the temporary removal of any building or improvement.
This cost will be at the owner’s expense entirely.” The Smiths argued that this new policy,
in conjunction with the equalizer channel located beneath their property, further
diminished the value of the property.
LIVOA and Aramark both filed dual traditional and no-evidence motions for
summary judgment asserting, among other arguments, that the Smiths had provided no
evidence that LIVOA or Aramark had a duty to notify appellant of the existence of the
equalizer channel. LIVOA filed a supplemental summary judgment motion to incorporate
two additional causes of action asserted by the Smith’s in an amended pleading. On
January 20, 2011, the trial court entered an order granting LIVOA’s motion for summary
judgment and Aramark’s motion for summary judgment “as to any any and all of the
Plaintiff’s causes of action and allegations related to or arising from the Resale certificate
. . . .” and on October 21, 2011, the trial court granted LIVOA’s supplemental motion for
summary judgment, which incorporated by reference the earlier motion. On November
2, 2011, the trial court issued a take-nothing-judgment.1 This appeal followed.
II. STANDARD OF REVIEW & APPLICABLE LAW
1 The trial court severed the causes of action against both Aramark and LIVOA; therefore, the
orders granting summary judgment are final, appealable orders. See G & H Towing Co. v. Magee, 347
S.W.3d 293, 295 (Tex. 2011).
4
In a traditional motion for summary judgment, the movant has the burden to
establish that no genuine issue of material fact exists and that it is entitled to judgment as
a matter of law. TEX. R. CIV. P. 166a(c). If the movant meets its burden, the burden shifts
to the non-movant to produce summary judgment evidence that raises a fact issue.
Rhone–Poulenc, Inc. v. Steel, 997 S.W.2d 217, 222 (Tex.1999). We review the granting
of a traditional motion for summary judgment de novo. Mann Frankfort Stein & Lipp
Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). We review the evidence
presented in the motion and response in the light most favorable to the party against
whom the summary judgment was rendered, crediting evidence favorable to that party if
reasonable jurors could, and disregarding contrary evidence unless reasonable jurors
could not. Id.
Under the no-evidence summary judgment rule, a party may move for summary
judgment if, after adequate time for discovery, there is no evidence of one or more
essential elements of a claim or a defense on which the nonmovant would have the
burden of proof at trial. TEX. R. CIV. P. 166a(i). The respondent has the initial burden to
present sufficient evidence to defeat the no-evidence summary judgment motion. See
Wal–Mart Stores, Inc. v. Rodriguez, 92 S.W.3d 502, 506 (Tex. 2002). A no-evidence
summary judgment motion should be granted if there is no evidence of at least one
essential element of the non-movant’s claim. See Hamilton v. Wilson, 249 S.W.3d 425,
426 (Tex. 2008) (per curiam). All that is required of the non-movant is to produce a
scintilla of probative evidence to raise a genuine issue of material fact on the challenged
element. Forbes, Inc. v. Granada Biosciences, Inc., 124 S.W.3d 167, 172 (Tex. 2003).
The burden of producing evidence is entirely on the non-movant; if the non-movant
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produces evidence to raise a genuine issue of material fact, summary judgment is
improper. TEX. R. CIV. P. 166a(i).
Texas Property Code section 207.003 requires an owners’ association, on the
written request of a purchaser of property in its subdivision, to provide (1) a current copy
of the restrictions applying to the subdivision; (2) a current copy of the bylaws and rules
of the owners’ association; and (3) a resale certificate. TEX. PROP. CODE ANN. § 207.003.
The resale certificate must include, among other things, “a description of any conditions
on the owner’s property that the property owners’ association board has actual knowledge
are in violation of the restrictions applying to the subdivision or the bylaws or rules of the
property owners’ association . . . .” Id. § 207.003(b)(11).
III. DISCUSSION
Notably, at the summary judgment hearing and in their pleadings, the Smiths
asserted that appellees had committed various torts by misrepresenting, on the resale
certificate, that LIVOA had no knowledge of any condition on the property in violation of
rules or bylaws of the owners association, when in fact the property was in violation of the
rules because it was built on a “common element.” However, on appeal, the Smiths do
not argue that appellees misrepresented their knowledge of the existence of violations of
the owners association’s bylaws, but instead contend only that appellees breached their
fiduciary duty to disclose latent defects in the property to prospective purchasers.2 The
Smiths argue that appellees’ fiduciary duty arose out of their status as third party
beneficiaries of the sale of the property from Kennedy to the Smiths and because they
“actively participated” in the sale.
2 We assume without deciding that this argument was preserved in the trial court by the Smiths’
pleadings that appellees breached a fiduciary duty.
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The Smiths concede that no Texas statute or case law confers a duty on a
homeowners’ association to disclose latent defects in property being sold by a member
of the association to a prospective purchaser. See id. at § 207.003. However, in their
appellate brief, they refer us to and extensively discuss a California case, Kovich v. Paseo
Del Mar Homeowners’ Association, which they argue stands for the proposition that when
a homeowners’ association is a third-party beneficiary to, and actively participates in, a
sale of property in its subdivision, it could have a duty to disclose latent defects to
prospective purchasers. 48 Cal. Rptr. 2d 758, 763 (Cal. Ct. App. 1996). However, the
Kovich court specifically held that “a homeowner’s association has no duty to tell a
prospective purchaser about construction defects or the existence of a civil action against
the developer to repair the defects.” Id. at 759. While the Kovich court, in part, based
its reasoning on the fact that the homeowners’ association did not participate in or benefit
from the sale, it did not hold that a homeowners’ association has a fiduciary duty to a
prospective purchaser in any circumstance. Id. at 762.
Nonetheless, the Smiths contend that appellees had a fiduciary duty in the present
case because, unlike in Kovich, appellees were third party beneficiaries of the contract
for the sale of the property between the Smiths and Kennedy. See id. The Smiths
however cite no law regarding third party beneficiaries, much less indicating that a party
has a fiduciary duty because of its third party beneficiary status or that an owners’
association that actively participates in a sale owes a fiduciary duty to a prospective
purchaser. See TEX. R. APP. P. 38.1. Moreover, the Smiths, in their pleadings, did not
allege that appellees were third party beneficiaries and therefore provided no evidence to
overcome the “presumption against conferring third party beneficiary status on non-
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contracting parties.” See South Tex. Water Author. v. Lomas, 223 S.W.3d 304, 306 (Tex.
2007); see MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 652 (Tex.
1999) (expressing that absent clear indication in written contract that parties intended to
confer direct benefit to a third party, a third party cannot maintain breach of contract
action).
When a member of an owners’ association is selling property to a prospective
purchaser, Texas law only imposes a duty on a homeowners’ association to disclose
information listed in Texas Property Code section 207.003(b), which does not include
latent defects. See TEX. PROP. CODE ANN. § 207.003. In the present case, we find no
reason to require appellees to disclose any information that was not required by existing
Texas law. See id. Accordingly, we find that appellees did not have a duty to disclose
the existence of the alleged latent defect, and the trial court therefore did not err in
granting the motions for summary judgment.3 See TEX. R. CIV. P. 166a(c); Hamilton, 249
S.W.3d at 426.
Moreover, Aramark, in its motion for summary judgment, also asserted that the
Smiths provided no evidence to show that Aramark had actual knowledge of the alleged
building defects. Because, on appeal, the Smiths have not challenged this ground
supporting summary judgment, we must affirm the granting of Aramark’s motion for
summary judgment on this basis as well.4 See Bever Props., L.L.C. v. Jerry Huffman
3Because we find that the appellees had no duty to disclose latent defects, we need not determine
whether the existence of the equalizer channel was a latent defect.
4 Specifically, in their appellate brief, the Smiths argue, “So if it were true that the Association did
know of the latent defect, and that the Association would be a third party beneficiary, etc., then a duty would
arise . . . .” The Smiths appellate issue is based solely on its argument that appellees had a duty disclose
latent defects if they had actual knowledge of them. However, the Smiths do not address Aramark’s basis
for summary judgment contending that the Smiths provided no evidence that Aramark had actual
knowledge of any alleged defect.
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Custom Builder, L.L.C., 355 S.W.3d 878, 888 (Tex. App.—Dallas 2011, no pet.) (“If an
appellant does not challenge each possible ground for summary judgment, we must
uphold the summary judgment on the unchallenged ground.”); see also Blue Wave
Capital, LLC v. Brownsville Reg’l Hosp., LLC, No. 13-12-00416-CV, 2013 WL 4769446,
at *6 (Tex. App.—Corpus Christi Sept. 5, 2013, no pet.) (mem. op.) (“If an appellant does
not challenge each possible ground on which summary judgment could have been
granted, we must uphold the summary judgment on the unchallenged ground.”).
For the foregoing reasons, we overrule the Smiths’ sole point of error.
IV. CONCLUSION
We affirm the trial court’s orders granting summary judgment and the take nothing
judgment in favor of appellees in appellate cause numbers 13-11-00500-CV and 13-11-
00708-CV.
/s/ Rogelio Valdez _
ROGELIO VALDEZ
Chief Justice
Delivered and filed the
31st day of July, 2014.
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