Gilad Lutfak and Oren Lutfak v. Jeff Gainsborough

Opinion issued May 18, 2017

In The

Court of Appeals
For The

First District of Texas
————————————
NO. 01-15-01068-CV
———————————
GILAD LUTFAK AND OREN LUTFAK, Appellants
V.
JEFF GAINSBOROUGH, Appellee

On Appeal from the 127th District Court
Harris County, Texas
Trial Court Case No. 2012-73748

MEMORANDUM OPINION

Appellants Gilad and Oren Lutfak appeal from a judgment in favor of appellee

Jeff Gainsborough. Gainsborough sued Gilad and Oren based on claims arising out

of his purchase of a townhome. A jury found that Gilad, the seller, committed fraud,

breached implied warranties, violated the Deceptive Trade Practices Act, and made
negligent misrepresentations. The jury also found that Oren conspired with Gilad

during the sale of the home. Based on these findings and the damages awarded by

the jury, the trial court rendered judgment in favor of Gainsborough, against both

Oren and Gilad.

Because Gainsborough executed an “as is” earnest money sales contract when

he purchased the home, he cannot satisfy the reliance or causation elements of his

fraud, DTPA, and negligent-misrepresentation claims. Further, the evidence was

legally insufficient to support the jury’s affirmative findings on breach of implied

warranties. We therefore reverse the trial court’s judgment against Gilad and render

judgment that Gainsborough take nothing on his claims against him. Additionally,

because of our disposition of Gainsborough’s claims against Gilad, there was no

unlawful conduct to support a judgment based on the jury’s conspiracy finding.

Thus, we also reverse the trial court’s judgment with respect to Oren and render

judgment that Gainsborough take nothing on those claims as well.

Background

The homes at 514 and 516 West Polk Street in Houston, Texas are connected

townhomes. Gilad Luftak owned 514 West Polk and his brother, Oren Luftak, owned

516 West Polk. Gilad purchased his home in 2009 from Hampton Development

Corporation. This sale was evidenced by a “New Home Contract” and a special

warranty deed between Hampton Development and Gilad. In 2010, Gilad put his

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home up for sale, and Jeff Gainsborough became interested in leasing it from him.

After entering into a lease, Gainsborough decided to try to buy the home.

There were several meetings between Gainsborough, Gilad, and their real

estate agents prior to their agreement on the sale of the townhome. During those

meetings, Gilad represented to Gainsborough that he and his brother Oren were the

“builders” of the townhomes, that the townhomes were “brand new,” and that he

was the only person who had lived in the 514 West Polk townhome. In addition,

during one of the meetings before the execution of the contract, Gainsborough

noticed water damage around one of the windows. Gilad represented to

Gainsborough that the damage was the result of a burst pipe that had been “taken

care of.” Gilad allegedly stated that the water stain “could easily be painted over”

and that “it was cosmetic.”

In December 2010, Gainsborough and Gilad entered into a standard Texas

Real Estate Commission One to Four Residential Resale Contract. Gainsborough

agreed to pay $484,000 to buy the home in “its present condition.” The contract

provided for the buyer to deposit $4,200 as earnest money which would be paid to

seller as liquidated damages in the event of a default by the buyer. The contract stated

that Gilad had provided a “Seller’s Disclosure Notice Pursuant to §5.008, Texas

Property Code,” and it gave Gainsborough the right to inspect the home prior to

closing. The contract further provided that, for nominal consideration of $100,

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Gainsborough retained “the unrestricted right to terminate this contract” during a

ten-day “termination option” period. The contract listed Korloch, Inc. as the builder

of the home, not Gilad or his brother.

The day after execution of the contract, Gainsborough had the home

inspected, which resulted in the identification of numerous problems. The very next

day—two days after the execution of the sales contract, and within the termination

option period—Gainsborough and Gilad formally amended their contract on a TREC

form, which appended the home inspection report and required “[a]ll items . . . to be

addressed and repaired as required.” Gainsborough and Gilad later supplemented the

terms of the amended sales contract by entering into a written escrow agreement.

Under the terms of the escrow agreement, Gainsborough placed $2,500 of the

purchase price in escrow and Gilad agreed to make certain repairs identified in the

inspection report. If Gilad made the repairs within 30 days of the escrow, he would

be entitled to demand release of the escrowed $2,500. If he did not make the repairs,

then Gainsborough could demand the $2,500 from escrow and make the repairs

himself. The amendment and escrow agreement did not alter the term that

Gainsborough was purchasing the home in “its present condition.”

At closing, Gainsborough accepted and signed a special warranty deed.

According to this deed, Gainsborough purchased the property:

. . . AS IS, WHERE IS, AND WITH ALL FAULTS, AND
WITHOUT ANY REPRESENTATIONS OR WARRANTIES
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 WHATSOEVER, EXPRESS OR IMPLIED, WRITTEN OR
ORAL, IT BEING THE INTENTION OF GRANTOR AND
GRANTEE TO EXPRESSLY REVOKE, RELEASE, NEGATE,
AND EXCLUDE ALL REPRESENTATIONS AND
WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY
AND ALL EXPRESS OR IMPLIED REPRESENTATIONS AND
WARRANTIES . . . .

After closing, Gilad did not make the repairs, and Gainsborough demanded

and received the $2,500 from escrow. Gainsborough moved into the home and began

noticing that it leaked when it rained. In addition to the leaks, Gainsborough

discovered several other problems with the home, including that the air conditioning

was insufficient to cool it.

Gainsborough hired two contractors to make repairs. He eventually sued

Gilad, Oren, and their real estate agent and agency claiming fraud, breaches of

warranty, violations of the Deceptive Trade Practices Act, and negligent

misrepresentation arising out of the sale of the home. Gilad and Oren’s real estate

agent and agency settled with Gainsborough prior to trial.

At trial, Gainsborough testified about his interactions with Gilad before and

after purchasing the home. He also testified about extensive repairs and the amount

of money he paid to make them. In addition, Gainsborough testified about his

interaction with Oren, which included a fenceline dispute that occurred after

Gainsborough purchased the home.

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 Gainsborough also offered into evidence a letter from an attorney who

represented Gilad with respect to claims he brought against Korloch regarding a

burst pipe in 2009. Gilad disclosed the burst pipe in the Seller’s Disclosure Notice

he provided to Gainsborough. The letter, along with photographs taken by Gilad’s

insurer, indicated that the damage caused by the burst pipe may have been more

severe than Gilad had suggested on his seller’s disclosure or during discussions with

Gainsborough.

Gainsborough’s witnesses at trial included his real estate agent, one of the

contractors who made repairs, and a construction-defect expert. They testified to the

extensive problems they discovered in the construction of the home. With respect to

Oren’s involvement in the sale, there was evidence that he may have been the builder

of the home, that he had engaged the same real estate agent as Gilad to sell his home

at 516 West Polk at the same time as the sale to Gainsborough took place, and that

he occupied all of the officer positions at Korloch, the company listed as the builder

of the 514 West Polk home.

The jury found that Gilad had committed fraud, violations of the DTPA,

breaches of implied warranties, and negligent misrepresentation when he sold the

home to Gainsborough. In addition, the jury found that Oren had engaged in a

conspiracy with Gilad that caused injury to Gainsborough.

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 Gilad and Oren both moved for judgment notwithstanding the verdict, arguing

that the earnest money contract and other agreements precluded a judgment in

Gainsborough’s favor. The court denied their motions and rendered judgment in

favor of Gainsborough against both Gilad and Oren, awarding damages, attorney’s

fees, and prejudgment interest. The court’s judgment found Gilad and Oren jointly

and severally liable for the damages awarded.

Gilad and Oren both appealed.

Analysis

Gilad and Oren have raised numerous issues on appeal. Among other things,

they challenge the sufficiency of the evidence supporting different portions of the

judgment. In addition, they argue that the sales contract precluded Gainsborough’s

claims as a matter of law.

I. Fraud, DTPA, and negligent-misrepresentation claims against Gilad

A. Effect of buyer’s acceptance of property “in its present condition”

Gilad and Oren contend that the “Acceptance of Property Condition”

provision in the TREC contract used by the parties constitutes an “as is” clause. That

provision stated that Gainsborough accepted the property “in its present condition.”

Gilad and Oren argue that Gainsborough conducted his own inspection of the home

after entering into the agreement. They contend that the “as is” agreement and

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inspection negate the reliance elements necessary to establish fraud, a violation of

the DTPA, or negligent misrepresentation.

Numerous courts have held that the TREC contract’s use of the words “in its

present condition” constitutes an “as is” provision. See, e.g., Ritchey v. Pinnell, 324

S.W.3d 815, 820 (Tex. App.—Texarkana 2010, no pet.). Gainsborough does not

contend otherwise. Instead, he makes several different arguments why the “as is”

provision does not bar his claims in this case. Therefore, we will treat the clause as

the equivalent of an “as is” clause. See Williams v. Dardenne, 345 S.W.3d 118, 123

(Tex. App.—Houston [1st Dist.] 2011, pet. denied).

A buyer who purchases property “as is” chooses “to rely entirely upon his

own determination” of the property’s value and condition without any assurances

from the seller. Id. (citing Prudential Ins. Co. of Am. v. Jefferson Assocs., Ltd., 896

S.W.2d 156, 161 (Tex. 1995), and TEX. BUS. & COM. CODE § 2.316(c)(1)). Thus, the

buyer assumes the responsibility of assessing the property’s value and condition as

well as the resulting risk that the property is worth less than the price paid. Id. at 124.

This evaluation on the part of the buyer constitutes a new and independent basis for

the purchase, one that disavows any reliance on representations made by the seller.

Id. Thus, a valid “as is” clause negates the elements of producing cause and reliance

for DTPA, fraud, or negligence claims relating to the value or condition of the

property. Id.

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 Gainsborough contends that the “as is” provision in this case does not negate

the elements of reliance necessary for fraud, DTPA, and negligent misrepresentation

because the parties agreed to an amendment of the contract and entered into an

escrow agreement. Thus, he argues that the amendment and escrow agreement

“superseded” the “as is” agreement. We disagree.

When a contract and its amendments are not ambiguous, we construe them

according to the plain meaning of their express wording and enforce them as written.

Chapman v. Abbot, 251 S.W.3d 612, 616–17 (Tex. App.—Houston [1st Dist.] 2007,

no pet.). “Our primary concern when interpreting a contract is to ascertain and give

effect to the intent of the parties as that intent is expressed in the contract.” Seagull

Energy E & P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 345 (Tex. 2006). “To

achieve this objective, courts should examine and consider the entire writing in an

effort to harmonize and give effect to all the provisions of the contract so that none

will be rendered meaningless.” Valence Operating Co. v. Dorsett, 164 S.W.3d 656,

662 (Tex. 2005).

In this contract, under the “Acceptance of Property Condition” section, the

parties checked a box indicating that “buyer accepts the property in its present

condition.” After Gainsborough had the house inspected, the parties supplemented

their contract. The amendment contained a provision that read:

In addition to any repairs and treatments otherwise required by the
contract, Seller, at Seller’s expense, shall complete the following
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 repairs and treatments: All items per email and home inspection report
(exhibit A) to be addressed and repaired as required.

“Exhibit A” attached to the amendment consisted of emails from Gainsborough’s

real estate agent and the inspection report listing items that needed to be repaired.

Gilad and Gainsborough later entered into an escrow agreement that required Gilad

to make the repairs specified in the contract amendment. The escrow agreement

provided that Gainsborough would place $2,500 into escrow. Once Gilad delivered

a sworn statement to the title company stating that all work had been completed and

demanded release of the escrow, the title company would deliver the escrow to him.

If, after 30 days, Gilad had not delivered a sworn statement, Gainsborough could

deliver a sworn statement saying that all work had not been completed, and demand

release of the escrow to him.

The plain language of the contract amendment and escrow agreement did not

“supersede” the original contract terms to the extent they incorporated an “as is”

provision. Instead, the amendment and escrow agreement imposed a new, additional

requirement that Gilad make certain repairs to receive the $2,500 being held in

escrow. Neither the amendment nor the escrow agreement conditioned

Gainsborough’s acceptance of the property on Gilad making the repairs. After the

parties entered into the escrow agreement and executed the amendment,

Gainsborough still accepted the property “in its present condition,” but he effectively

would receive a $2,500 discount on the sales price if Gilad did not make the repairs
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as agreed. Thus, the “as is” condition of the contract remained in effect. See

Williams, 345 S.W.3d at 123–24.

B. Fraudulent inducement of “as is” acceptance of property

Gainsborough further contends that the “as is” agreement was ineffective and

should not preclude a judgment based on fraud, violations of the DTPA, or negligent

misrepresentation because it was fraudulently induced. An “as is” clause that is

induced by specific misrepresentations about the condition of property will not

shield the seller from liability. Id. at 124 (citing Prudential, 896 S.W.2d at 162).

“Fraudulent inducement . . . is a particular species of fraud that arises only in

the context of a contract and requires the existence of a contract as part of its proof.

That is, with a fraudulent inducement claim, the elements of fraud must be

established as they relate to an agreement between the parties.” Haase v. Glazner,

62 S.W.3d 795, 798–99 (Tex. 2001); Williams, 345 S.W.3d at 124–25. The elements

of fraud are that a material representation was made, the representation was false,

the speaker knew the statement was false when made, the statement was made to

induce reliance, it did induce reliance, the reliance was justifiable, and the relying

party suffered injury as a result. See Williams, 345 S.W.3d at 125. In the context of

a fraudulent-inducement claim, the reliance element requires evidence that the

claimant would not have entered into the contract but for the alleged

misrepresentation or fraudulent nondisclosure. See id. at 126.

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 In support of his argument that he was fraudulently induced into signing the

“as is” agreement, Gainsborough contends that Gilad concealed known defects from

him. Specifically, Gainsborough argues that Gilad falsely represented that he did not

know of any water penetration or wood rot, falsely claimed the water stains

Gainsborough saw were merely cosmetic remnants of the burst pipe, and

fraudulently concealed his knowledge that the sale of the house violated the

Residential Construction Liability Act and the DTPA.

With respect to Gainsborough’s claims that Gilad falsely represented that he

did not know of any water penetration or wood rot and that he fraudulently concealed

knowledge that the sale of the house violated the RCLA and the DTPA, the only

evidence presented at trial to support these arguments was a Seller’s Disclosure

Notice and a letter and photographs related to a previous pipe break in the townhome.

Gilad provided the Seller’s Disclosure Notice to Gainsborough prior to the

execution of the earnest money contract. Gilad disclosed that an “unwrapped pipe in

attic broke in winter of 2009,” and that the pipe “was repaired and wrapped, replaced

sheetrock and insulation.” Gilad also checked a box on the disclosure stating that he

was not aware of any wood rot in the house. At trial, Gainsborough offered into

evidence a letter from Yaron Lutfak, Gilad’s attorney. In the letter, Yaron indicated

that he was representing Gilad regarding the construction of the townhome. The

letter was sent to Korloch, the builder of the townhome, and stated that it was to

12
provide notice of Gilad’s “claim under the Texas Residential Construction Liability

Act, the DTPA, and under Chapter 38.002 of the Texas Civil Practice and Remedies

Code.” These claims were based on a 2009 burst pipe which “flooded” the home

with water and cost Gilad $150,000 in repairs. In addition to the letter, Gainsborough

offered and the court admitted photographs taken of the home by Gilad’s insurer as

a result of the pipe burst. According to Gainsborough’s expert and a contractor who

worked on the home for Gainsborough, the photos showed evidence of wood rot in

2010, prior to Gilad completing and giving Gainsborough the Seller’s Disclosure

Notice that indicated he knew of no wood rot.

In addition to the letter and photographs, Gainsborough argues that Gilad

made false statements to him regarding water stains. He contends that these

statements induced him into purchasing the house. These statements allegedly

occurred while Gainsborough and Gilad were walking through the home prior to

entering into the earnest money contract. Gilad allegedly told Gainsborough that the

water stains around a window were merely cosmetic issues.

To the extent this evidence indicates that Gilad concealed material

information from Gainsborough or made false material statements to him, in this

context Texas courts consistently have concluded that a buyer’s independent

inspection precludes a showing of causation and reliance if the buyer continued to

complete the purchase after the inspection revealed the same information that the

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seller allegedly failed to disclose. Williams, 345 S.W.3d at 125–26; see also Lesieur

v. Fryar, 325 S.W.3d 242, 246 (Tex. App.—San Antonio 2010, pet. denied);

Birnbaum v. Atwell, No. 01-14-00556-CV, 2015 WL 4967057, at *7–8 (Tex. App.—

Houston [1st Dist.] Aug. 20, 2015, pet. denied) (mem. op.). This is particularly true

when the buyer relies on an independent inspection disclosing the information to

renegotiate the sales contract. Williams, 345 S.W.3d at 122, 125–26 (after

independent inspection, option period was extended and contract was amended to

require additional repairs and treatments); Dubow v. Dragon, 746 S.W.2d 857, 858–

61 (Tex. App.—Dallas 1988, no writ) (after an inspection which was a “condition

precedent to closing,” buyers negotiated a $17,500 reduction in sales price).

In this case, after entering into the contract, Gainsborough had an inspection

performed on the home. This inspection revealed several areas of concern that

Gainsborough argued Gilad had concealed from him. The inspection reported:

. . . roof top balcony drains and gutter were not installed adequately.
Water from the balcony drains appears to be overflowing or running
past the gutter below down the rear wall of the house. Water also
appeared to be running into the east window at the third floor guest
bedroom, as indicated by water stains on the sheet rock.

Thus, the inspection revealed the cause of the water stains around the window.

Further, the inspector also indicated that metal drip flashing was installed improperly

and required repair to ensure “adequate water shed.” The inspector also noted that

“vulnerability to water penetration was observed where the roof intersects the

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dividing wall at the roof top balcony,” and he recommended further investigation

with the builder.

Ultimately, the inspector concluded that there was evidence of water

penetration and water damage, but the causes of the penetration and damage could

not be determined. The inspector recommended that Gainsborough obtain a cost

estimate to determine how much it would cost to stop the penetration and repair the

damage. Based on these and other findings in the inspection report, during the

termination option period Gainsborough renegotiated the earnest money contract to

add the amendment requiring Gilad to perform repairs of the property. He also

obtained an agreement that Gilad would forfeit a portion of the purchase price if he

failed to perform the repairs. The inspection, however, did not cause Gainsborough

to renegotiate the contract in such a way as to remove the “as is” provision.

Gainsborough relies upon Nelson v. Najm, 127 S.W.3d 170 (Tex. App.—

Houston [1st Dist.] 2003, pet. denied), to support his contention that he was

fraudulently induced into signing the “as is” agreement. Nelson is distinguishable.

In that case, Najm purchased a gas station from the Nelsons. Id. at 172. The Nelsons

failed to disclose the existence of an underground waste oil tank to Najm, and they

affirmatively told him that no inspection was necessary. Id. at 172–73. No inspection

was conducted, yet the deed included a provision noting that Najm had inspected the

property and was relying solely on his own investigation. Id. at 173. In addition, the

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earnest money contract contained an “as is” provision. Id. After closing, Najm

discovered the underground waste oil tank and that the property was not in

compliance with environmental standards. Id. Najm sued the Nelsons for fraud and

wrongful foreclosure, and the trial court awarded him damages. Id. at 173–74. On

appeal, the trial court record reflected the Nelsons’ affirmative misrepresentations

that an inspection was not necessary and failure to disclose a material fact about the

existence of the waste oil tank. Id. at 174–75. The Nelsons argued that the “as is”

clause in the contract and the independent inspection provision in the deed precluded

a finding in Najm’s favor. Id. This court relied upon Prudential Insurance v.

Jefferson Associates, 896 S.W.2d 156 (Tex. 1995), for the proposition that a

fraudulently induced “as is” provision does not negate the causation element

essential to fraud. Id. at 175–76. As a result, this court held that the “as is” provision

at issue in the case did not preclude a finding of fraud. Id. at 176. The court stated:

“Given the circumstances here, we conclude that the ‘as-is’ clause was not valid

because Nelson concealed a known fact, and we hold that this clause did not preclude

Najm’s recovery on his fraud claims.” Id.

Unlike the facts in Nelson, Gainsborough actually conducted an inspection of

the property prior to closing, and this inspection revealed several areas of concern.

Because Gainsborough conducted his own inspection of the property which

uncovered potential defects in the home causing him to renegotiate the earnest

16
money contract, we find that Gainsborough has not produced legally sufficient

evidence to demonstrate that he was fraudulently induced into signing the “as is”

earnest money contract. See Williams, 345 S.W.3d at 128; Birnbaum, 2015 WL

4967057, at *8.

Because the “as is” clause in the parties’ contract was not fraudulently

induced, the clause precludes Gainsborough from establishing the elements of

causation and reliance with respect to his fraud, DTPA, and negligent

misrepresentation claims against Gilad. See Prudential, 896 S.W.2d at 161–62;

Welwood v. Cypress Creek Estates, Inc., 205 S.W.3d 722, 726–27 (Tex. App.—

Dallas 2006, no pet.); Larsen v. Carlene Langford & Assocs., Inc., 41 S.W.3d 245,

253 (Tex. App.—Waco 2001, pet. denied).

II. Breaches of implied warranties

The Luftaks also challenge the judgment against them for breaching the

warranties of habitability and construction in a good and workmanlike manner

implied in the sale of a new home.

A builder of a new home impliedly warrants that the residence is suitable for

human habitation and is constructed in a good and workmanlike manner. Centex

Homes v. Buecher, 95 S.W.3d 266, 269 (Tex. 2002); Humber v. Morton, 426 S.W.2d

554, 555 (Tex. 1968). The implied warranty of habitability ensures that a new home

buyer receives a house that is structurally sound, habitable, and free of hidden

17
defects. See Centex Homes, 95 S.W.2d at 274. It extends only to defects that render

the property so defective that it is unsuitable for its intended use as a home. Id. at

275. The implied warranty of good workmanship defines the level of performance

expected when the parties fail to make express provision in the contract. Id. at 274.

Among other arguments, Gilad and Oren argue that the evidence was

insufficient to support the jury’s affirmative finding on these issues. We will sustain

a legal sufficiency or “no-evidence” challenge if the record shows: (1) a complete

absence of evidence of a vital fact, (2) rules of law or evidence bar the court from

giving weight to the only evidence offered to prove a vital fact, (3) the evidence

offered to prove a vital fact is no more than a scintilla, or (4) the evidence

conclusively establishes the opposite of the vital fact. City of Keller v. Wilson, 168

S.W.3d 802, 810 (Tex. 2005). In conducting a legal sufficiency review, a court must

consider the evidence in the light most favorable to the verdict and indulge every

reasonable inference that would support it. Id. at 822. If the evidence allows only

one inference, neither jurors nor the reviewing court may disregard it. Id.

When the parties have not objected at trial to the substance of the law set forth

in the jury charge, we review sufficiency of the evidence in light of legal standards

contained in the unobjected-to charge. See, e.g., Osterberg v. Peca, 12 S.W.3d 31,

55 (Tex. 2000) (“[I]t is the court’s charge, not some other unidentified law, that

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measures the sufficiency of the evidence when the opposing party fails to object to

the charge.”).

The implied warranties of habitability and construction in good and

workmanlike manner extend from the builder to subsequent purchasers of the

property. See Gupta v. Ritter Homes, Inc., 646 S.W.2d 168, 169 (Tex. 1983);

Wiggins v. Overstreet, 962 S.W.2d 198, 200 (Tex. App.—Houston [14th Dist.] 1998,

pet. denied). But a nonbuilder owner selling a used home does not impliedly warrant

the habitability of the home, nor that the construction of the home was performed in

a good and workmanlike manner. See Gupta, 646 S.W.2d at 169; Wiggins, 962

S.W.2d at 200; Podder v. Funding Partners L.P., No. 03-09-00458-CV, 2010 WL

850175, at *3–4 (Tex. App.—Austin Mar. 12, 2010, pet. denied) (mem. op.).

In this case, jury questions 5 and 6 asked whether the house at 514 West Polk

failed to fulfill the warranty requirements of habitability and construction in a good

and workmanlike manner. The questions defined each implied warranty and then

included the instruction that “the warranty of habitability” and “the warranty of

construction in a good and workmanlike manner” only apply in a sale from a

“builder” to the “original purchaser.” Thus, although the builder’s implied

warranties of habitability and construction in a good and workmanlike manner can

apply to a subsequent purchaser, the court’s charge required the jury to find that

Gainsborough was the “original purchaser” of the property. Because Gainsborough

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did not object to the charge question as given, we review the sufficiency of the

evidence to support the jury’s finding that Gilad or Oren was the “builder” of the

property and that Gainsborough was the “original purchaser.” See Osterberg, 12

S.W.3d at 55.

While there was conflicting evidence regarding whether Gilad or Oren were

the builders of the property, the evidence regarding the “original purchaser” of the

home was undisputed. The evidence at trial included a “New Home Contract” in

which Gilad agreed to purchase the home at 514 West Polk from Hampton

Development. The evidence also included a special warranty deed in which

Hampton Development conveyed the property to Gilad in November 2009. The sale

between Gilad and Gainsborough occurred in December 2010. Thus, the evidence

showed that Gilad purchased the property from a developer before Gainsborough’s

purchase. Gilad also signed a promissory note in 2009 when he purchased the home

from the developer. Further, the sales contract between Gilad and Gainsborough was

entitled a “Resale” contract. This evidence allows for only one inference, that Gilad

was a purchaser of the property prior to Gainsborough becoming a purchaser.

Therefore, Gainsborough could not be the “original purchaser” of the home.

Because the evidence only allows for the inference that Gainsborough was a

subsequent purchaser of the property, we conclude that the evidence was legally

insufficient to support the jury’s affirmative finding that Gilad or Oren breached the

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implied warranties of habitability and construction in a good and workmanlike

manner as defined in the jury charge. See City of Keller, 168 S.W.3d at 810.

III. Conspiracy claim

The Lutfaks raise several issues in support of their contention that the trial

court erred by rendering judgment against Oren based on the jury’s conspiracy

finding. We need not address these issues, however, because our disposition of the

foregoing issues require reversal of the trial court’s judgment against Oren. See TEX.

R. APP. P. 47.1.

A civil conspiracy is a combination by two or more persons to accomplish an

unlawful purpose or to accomplish a lawful purpose by unlawful means. Massey v.

Armco Steel Co., 652 S.W.2d 932, 934 (Tex. 1983). The essential elements of a civil

conspiracy are (1) two or more persons; (2) an object to be accomplished; (3) a

meeting of the minds on the object or course of action; (4) one or more unlawful,

overt acts; and (5) damages as the proximate result. Triplex Commc’ns, Inc. v. Riley,

900 S.W.2d 716, 719 (Tex. 1995); Massey, 652 S.W.2d at 934.

Because a defendant’s liability depends on participation in an underlying tort

for which the plaintiff seeks to hold the defendant liable, conspiracy is a derivative

tort. Tilton v. Marshall, 925 S.W.2d 672, 681 (Tex. 1996). “The ‘gist’ of a civil

conspiracy is the injury that is intended to be caused.” Triplex Commc’ns, 900

S.W.2d at 720. Proof of a joint intent to engage in the conduct that resulted in the

21
injury, without more, does not establish a cause of action for civil conspiracy. Juhl

v. Airington, 936 S.W.2d 640, 644 (Tex. 1996). Civil conspiracy instead requires the

specific intent to agree to accomplish an unlawful purpose or to accomplish a lawful

purpose by unlawful means. Id.; A.H. Belo Corp. v. Corcoran, 52 S.W.3d 375, 384

(Tex. App.—Houston [1st Dist.] 2001, pet. denied). “[T]he parties must be aware of

the harm or wrongful conduct at the inception of the combination or agreement.”

Triplex Commc’ns, 900 S.W.2d at 719.

In this case, the jury found that Oren entered into a conspiracy with Gilad, and

the trial court entered judgment against him based on this finding. Because

conspiracy is a derivative tort, to support the trial court’s judgment there had to be

an underlying tort or statutory violation that Gilad and Oren had conspired to

accomplish. See Juhl, 936 S.W.2d at 644. Because we have concluded that the “as

is” agreement between Gilad and Gainsborough precludes a judgment based on

fraud, violations of the DTPA, or negligent misrepresentation, there was no

actionable claim based on alleged breach of an implied warranty by either Gilad or

Oren, and the jury found that Oren did not independently commit fraud, violations

of the DTPA, or negligent misrepresentation, there was no underlying tort or

unlawful conduct to support the trial court’s judgment against Oren. Id. Thus, the

trial court erred by entering judgment against Oren.

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 Conclusion

We hold that the “as is” provision in the parties’ sales contract precludes a

judgment in Gainsborough’s favor on his fraud, DTPA, and negligent

misrepresentation claims. Further, we conclude that the evidence was legally

insufficient to support the jury’s affirmative finding that Gilad or Oren breached the

implied warranties of habitability and construction in a good and workmanlike

manner as defined in the jury charge. Finally, based on our disposition of those

issues, there was no underlying tort or unlawful conduct to support the trial court’s

judgment on the jury’s conspiracy findings against Oren. Because of our resolution

of these issues, we need not address the remaining issues. See TEX. R. APP. P. 47.1.

We reverse the trial court’s judgment with respect to both Gilad and Oren Lutfak

and render judgment that Gainsborough take nothing on his claims against both of

them.

Michael Massengale
Justice

Panel consists of Justices Massengale, Brown, and Huddle.

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