Terry G. Whitton v. Edward M. Loescher and April Loescher

Opinion issued April 15, 2010 In The Court of Appeals For The First District of Texas NO. 01-08-00497-CV Terry G. Whitton, Appellant V. Edward M. and April Loescher, Appellees On Appeal from the 11th District Court Harris County, Texas Trial Court Cause No. 2006-00753 MEMORANDUM OPINION Following a bench trial, the trial court found that the appellees, Edward and April Loescher, did not have actual or constructive knowledge of the defects in the house that appellant, Terry Whitton, purchased from them. The Loeschers then filed a motion requesting that final judgment be entered in their favor. The trial court’s Final Judgment ordered that Whitton take nothing by his suit and that the Loeschers recover attorney’s fees and court costs from Whitton. On appeal, Whitton argues that the trial court erred: (1) in awarding the Loeschers attorney’s fees; (2) in finding that the Loeschers made no misrepresentations; (3) in finding that Whitton was “barred” from relying on the Loeschers’ disclosures as a producing cause of his damages; and (4) in failing to find that Whitton was entitled to recover his damages and attorney’s fees. We affirm. Background On May 16, 2004, Whitton entered into an earnest money contract with the Loeschers for the purchase of his current residence in Harris County, Texas. Section 17 of the earnest money contract states, “The prevailing party in any legal proceeding related to this contract is entitled to recover reasonable attorney’s fees and all costs of such proceeding incurred by the prevailing party.” The earnest money contract also provides, “This contract contains the entire agreement of the parties and cannot be changed except by their written agreement. Addenda which are a part of this contract [include] . . . Sellers [sic] Disclosure.” Before completing the sale, Whitton hired an inspector to assess the condition of the house. The inspection report indicated some areas of concern that were subsequently investigated by Whitton, and it contained a note regarding the presence of a mark or stain of unknown origin on the dining room ceiling. Whitton claims that after reading the report about the stain, he consulted the Seller’s Disclosure Notice filled out by the Loeschers to ascertain whether they had experienced any leaks in the house. The disclosure statement did not mention any leak problems, nor did the Loeschers indicate that they were aware of any defects in the ceiling. However, the disclosure statement did not inquire about previous repairs in these sections—the form only inquired into previous repairs involving flooding, structural repairs like roof repairs, and termite damage. The Loeschers indicated that the house had undergone roof repairs, that both the front and back roofs had been replaced, and that there had been previous termite damage that had been repaired. Within months of moving into the house, Whitton began to experience various problems. In December 2004, the dining room ceiling collapsed due to a leak in the part of the ceiling located underneath the attached second story balcony. Whitton commissioned Brad Blakeway, a general contractor, to replace the sheetrock and repair the balcony; however, in July 2005, the same leak returned and a second leak opened up. It was at this point that Whitton began to believe that the “Loeschers had more knowledge of the property’s condition than they had disclosed.” Whitton filed suit against the Loeschers, alleging causes of action for non-disclosure and false disclosure, statutory fraud in a real estate transaction, common law fraud, and deceptive trade practices and seeking actual damages, exemplary damages under the fraud claims, treble damages for the deceptive trade practices claim, and attorney’s fees for the deceptive trade practices claim and under Texas Civil Practice and Remedies Code section 38.001. The Loeschers denied Whitton’s allegations, and alleged affirmative defenses and a counterclaim for attorney’s fees. Their counterclaim stated: [Whitton’s] suit is groundless in fact and has been brought in bad faith and for the purpose of harassment. Section 17 of the [earnest money contract] provides, “The prevailing party in any legal proceeding related to this contract is entitled to recover reasonable attorney’s fees and all costs of such proceeding incurred by the prevailing party.” Pursuant to Section 17 of the Contract and [Business and Commerce Code] Section 17.50(c) and [Texas Civil Practice and Remedies] Code Section 38.001, Counter-Plaintiffs are entitled to their costs and such reasonable and necessary attorney’s fees as are equitable and just for the prosecution of this Counterclaim. During the bench trial, Whitton testified that his examination of the disclosure statement led him to assume that the reason for the stain noted in the inspector’s report was no longer an issue and that he relied on the statement to his detriment. He also presented the testimony of several experts. Blakeway, the general contractor who completed the repairs on the home, testified that the flashing area, where the concrete meets the wall, in the attached balcony had been heavily caulked with silicon sealer in a manner that suggested it was done to stop a leak. While in the process of repairing the balcony, Blakeway observed that the galvanized steel joist hangers located underneath the concrete and above the dining room ceiling were heavily rusted. He testified that the most likely scenario, judging by the extent of the rust, was that a persistent leak problem over the years caused the joist hangers to reach that level of deterioration. Blakeway further testified that the presence of various types of sheetrock in the dining room ceiling and the lack of insulation between the balcony floor and the dining room ceiling, where it normally should be, were both indicators of prior repairs. He testified that he could not determine how long it would take for the leak to manifest in the ceiling of the dining room, stating, [Blakeway]: This was a seeping leak. The plywood soaked up some of the water. The joists were soaking wet. Finally they get full of water like a sponge and then they start leaking getting the sheetrock wet and start spreading. It takes a while for it. It is not a flood. It is just a seeping leak in there. [counsel]: So do you know from these stain pictures how long water would accumulate in there before it would break the sheetrock? [Blakeway]: Before it would stain the sheetrock? [counsel]: Yes. [Blakeway]: No. It just depends on—how the volume of water coming in, I really couldn’t state how long it would take not knowing the volume of water. How much rain [did] you get. Which way did the wind blow? It only leaks at certain times. . . . . [counsel]: This sheetrock obviously was compromised in December of ‘04. Can you form an opinion from what you have seen in water stains from this stain here as to how long before December ‘04 it could have gone without the sheetrock being compromised again? [Blakeway]: No. Whitton’s other expert witness, a leak specialist, Brian Beach, testified that the leak in the dining room was coming from the base of the double doors in the balcony due to faulty, damaged weather stripping and the upstairs sidelights, where the wood had rotted away. Beach testified that he could not tell how long it had taken for the wood around the sidelight to rot, but that “[i]t doesn’t happen over a month or two” and would have taken a year or more. The water would enter the house through the double doors and the sidelights and would either run down the joists or just run straight down, falling into the dining room. He then described the damage he had observed in the dining room ceiling, and, when asked how long it would take for the kind of damage he described to occur, he replied, “That would have to be residual. It could be as short as three months to five or ten years. Depends on how well it was maintained.” He testified that a “sizeable leak” could have caused the damage in a short amount of time, but that it was also possible that the damage occurred over a period of years. He stated, “There is no way I could ever judge the specific date a leak starts or to what date the deterioration had started. I couldn’t tell you that,” and he agreed that damage from a condition that arose in one year could be identical to damage that arose over seven years. When asked, “Do you have any basis for an opinion to say, well, there had to have been water manifestation [in the dining room ceiling] prior to June 2004?,” he responded, “No.” The Loeschers’ testimony indicates that they filled out the Seller’s Disclosure Notice to the best of their knowledge of the condition of the property as of the date they signed it, as required by the form. Although the Loeschers encountered a leak problem in the dining room, their testimony indicates that it was confined to the area surrounding the bay window, rather than in the area of Whitton’s leak. Ed Loescher testified that the caulking in the balcony was in preparation for a paint job and the repairs to the balcony were done in hopes that it would prevent further leaks in the soffit area above the bay window. He further testified that it was impossible to see the area where Whitton had had problems while working to repair the bay window soffit where they had experienced a leak. His testimony also indicated that, after the corrective measures were taken, they did not encounter any further leaks, which prompted him to believe that the problem had been fixed and therefore did not need to be disclosed in the notice. Regarding the roof repairs that were disclosed, Ed Loescher testified that both roof replacements were prompted by leaks. The Loeschers’ expert witness, Michael Gray, a registered professional structural engineer, testified that when someone purchases a house with an attached balcony, periodic leaks should be expected but that there is no possible method from which to predict the frequency of the leaks. He further testified that it is not uncommon for a leak to occur without becoming visible and that when physical damage does develop there is no means by which to date the damage. According to Gray, the same is true for both galvanized steel damage and rotted wood; it is not possible merely to look at the damage and to know how long it look to reach that level of deterioration. Gray also testified that if a home owner had repaired a roof leak two years prior to filling out the disclosure form he or she would not mark that as “water penetration” on the form if no leaks had occurred since the repair because the form referred to conditions that currently existed in the home. Whitton also introduced a 2001 invoice from the Loeschers’ contractor, Bob Jackson, which indicated that the Loeschers were billed for a ceiling repair in the dining room, in addition to repair work done on the “window wall,” in the soffit. Whitton alleges that the invoice is proof that the Loeschers experienced a leak in the dining room similar to the current leak and that they failed to disclose that information in the notice, knowing that the leak had not been fixed. The Loeschers testified that they did not recall the specific work done by Jackson but that the ceiling repair work mentioned on the invoice must have been in reference to the soffit. After two days of testimony, the trial court ruled in the Loeschers’ favor, stating on the record: I find that there were certainly serious defects in the property. . . . The issue, however, is not whether there were problems. It is whether those problems were known by the defendants at the time they sold the house. I cannot conclude that the evidence is so lacking on this point that it is groundless or that this suit was brought for harrassment, but I am unable to find that the defendants had actual or constructive knowledge of all of the defects in the house. It is clear that the plaintiff had or is charged with some knowledge of the defects in the residence he was purchasing, and had that knowledge prior to the time that he closed on the property. He got that from engineers that he hired that he had a professional relationship with. Frankly, the engineers were on notice of the signs of the defects and chose not to look further into the causes of those defects or of the staining or of other things, the dry rot or the rotting in a portion of the house. That the plaintiff being aware of the symptoms didn’t instruct the engineers to look further is no sign certainly of negligence on him, but in my view bars him from claiming that the defendants had greater knowledge of defects, which I was unable to find that they did. I will therefore enter a take nothing judgment on the plaintiff’s cause of action. Regarding attorney’s fees, the trial court pointed out that the Loeschers brought two grounds for recovering their attorney’s fees: one “under the Civil Practice and Remedies Code [on] the claim that this is a groundless and frivolous lawsuit” and another claim as “the prevailing party in a legal proceeding relating to the contract.” The trial court stated that he was “unable to find that [the suit was groundless and frivolous] and I therefore rule for [Whitton] on that point.” The trial court deferred ruling on the Loeschers’ second ground for obtaining attorney’s fees until he received briefing from the parties on whether this was a lawsuit brought under the earnest money contract. The Loeschers subsequently filed a motion for rendition of judgment and award of attorney’s fees in their favor under Texas Civil Practice and Remedies Code chapter 38, which Whitton contested. The trial court signed the judgment on March 19, 2008, ordering that Whitton “take nothing by his suit and that [the Loeschers] recover court costs from [Whitton].” Regarding attorney’s fees, the final judgment stated that the Loeschers “requested attorney’s fees based on Texas Civil Practice & Remedies Code Chapter 38. [The Loeschers] offered evidence at trial, to which [Whitton] stipulated, proving reasonable and necessary attorney’s fees in the amount of $30,400.00, and judgment is entered in that amount.” This appeal followed. Sufficiency of Trial Court’s Findings In his second issue on appeal, Whitton argues that the trial court erred in finding that the Loeschers made no misrepresentations. In his third issue, he challenges the trial court’s finding that he was “barred” from relying on the Loeschers’ seller’s disclosure form. In his fourth issue, Whitton argues that the trial court erred in not finding in his favor on his causes of action. We construe these arguments as challenges to the factual sufficiency of the evidence supporting the trial court’s judgment. In a case tried to the bench, an appellant may challenge the legal and factual sufficiency of the evidence without preserving error in the trial court. Tex. R. App. P. 33.1(d). “When a trial court does not issue findings of fact and conclusions of law with its judgment, all facts necessary to support the judgment and supported by the evidence are implied.” BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002) (citing Worford v. Stamper, 801 S.W.2d 108, 109 (Tex. 1990)). “When the appellate record includes the reporter’s and clerk’s records, these implied findings are not conclusive and may be challenged for legal and factual sufficiency.” Id. We apply the same standard of review as that applied in the review of jury findings. Roberson v. Roberson, 768 S.W.2d 280, 281 (Tex. 1989). In a factual sufficiency challenge, we examine the entire record and consider the evidence both in favor of and contrary to the challenged finding. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986). After considering and weighing all the evidence, we set aside the fact finding only if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 406–07 (Tex. 1998). We may not pass upon the witnesses’ credibility or substitute our judgment for that of the fact-finder, even if the evidence would clearly support a different result. Id. at 407. “The amount of evidence necessary to affirm a judgment is far less than that necessary to reverse a judgment.” GTE Mobilnet of S. Tex. v. Pascouet, 61 S.W.3d 599, 615–16 (Tex. App.—Houston [14th Dist.] 2001, pet. denied). A. Finding of No Misrepresentation The court impliedly had to find that the Loeschers did not make a misrepresentation regarding the condition of the dining room ceiling and the leaks in that area in order to enter a take-nothing judgment in their favor. See BMC Software, 83 S.W.3d at 795. In his second issue, Whitton argues that the trial court erred in finding that the Loeschers made no misrepresentations. Whitton argues that the testimony of his expert witnesses regarding the nature of the leak in the dining room ceiling and the invoice from Bob Jackson for repairs to the dining room window and ceiling indicate that the Loeschers should have reported the leak on their disclosure form addressing roof repairs and water penetration. He also argues that the Loeschers’ testimony lacked credibility because their testimony showed that other leaks had occurred in the home that the Loeschers did not report on the disclosure notice. However, the expert testimony at trial indicated that the Loeschers were only asked to report current conditions of water penetration, not past conditions that had been repaired. All three experts testified that they could not determine how long the particular leak Whitton is complaining of had been occurring or whether the Loeschers would have been aware of it. The Loeschers themselves testified that they were not aware of any problems in the dining room other than the soffit area leak that was repaired by Jackson. The trial court was the sole judge of the credibility of the witnesses and the weight to be given their testimony. See Maritime Overseas Corp., 971 S.W.2d at 407. Considering all of the evidence, we conclude that the trial court’s implied finding that the Loeschers did not make a misrepresentation was not so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. See id. at 406–07. We overrule Whitton’s second issue. B. Finding That Whitton Was “Barred” From Relying on Loescher’s Statements In his third issue, Whitton argues that the trial court erred in finding that he was “barred” from relying on the Loeschers’ statements as a producing cause of his damages. In his fourth issue, Whitton argues that the trial court erred “in not finding in [his favor] on his causes of action.” Specifically, Whitton argues that the trial court should have found in his favor on his causes of action for “failure to disclose material facts, false disclosures, statutory fraud, common law fraud, and violation of the Texas [D]eceptive [T]rade [P]ractices [A]ct section 17.46(b)(5), (23).” However, our holding that the evidence was factually sufficient to support the trial court’s implied finding that the Loeschers made no misrepresentation renders these issues moot. If the Loeschers did not make a misrepresentation, Whitton could not, as a matter of law, have relied on it, nor could he have prevailed on any of the causes of action alleged, all of which required some form of misrepresentation. See, e.g., Tex. Bus. & Com. Code Ann. § 27.01 (Vernon 2009) (providing that false representation is required to establish cause of action for statutory fraud), id. § 17.46 (requiring that defendant engaged in false, misleading, or deceptive act or practice to recover under Deceptive Trade Practices Act); Formosa Plastics Corp. v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 47 (Tex. 1998) (holding that material, false representation by defendant is element of fraud); see also Wells v. Wells, 251 S.W.3d 834, 842–43 (Tex. App.—Eastland 2008, no pet.) (“[T]he trial court’s statements at the end of trial do not constitute findings of fact . . . [and do not] excuse us from our obligation to affirm the trial court on any basis supported by the record.”). We overrule Whitton’s third and fourth issues. Attorney’s Fees In his first issue, Whitton complains that the trial court erred in awarding attorney’s fees to the Loeschers. Specifically, Whitton argues that the trial court’s award of attorney’s fees under Chapter 38 of the Texas Civil Practice and Remedies Code was improper. The Loeschers sought attorney’s fees under Civil Practice and Remedies Code section 38.001. Section 38.001 provides, “A person may recover reasonable attorney’s fees from an individual or corporation, in addition to the amount of a valid claim and costs, if the claim is for . . . an oral or written contract.” Tex. Civ. Prac. & Rem. Code Ann. § 38.001(8) (Vernon 2008). “To recover attorney’s fees under Section 38.001, a party must (1) prevail on a cause of action for which attorney’s fees are recoverable, and (2) recover damages.” Green Int’l, Inc. v. Solis, 951 S.W.2d 384, 390 (Tex. 1997). The Civil Practice and Remedies Code “does not provide for the recovery of attorney’s fees by a defendant who only defends against a plaintiff’s claim and presents no claim of his own.” Thottumkal v. McDougal, 251 S.W.3d 715, 719 (Tex. App.—Houston [14th Dist.] 2008, pet. denied) (citing Am. Airlines, Inc. v. Swest, Inc., 707 S.W.2d 545, 547 (Tex. 1986) (holding defendant could not recover attorney’s fees under predecessor to Section 38.001 when defendant presents no valid contract claim of its own)). Although the trial court found in favor of the Loeschers in awarding a take-nothing judgment, the Loeschers did not counterclaim for a breach of contract, nor did they recover any damages. Therefore, they are not entitled to recover attorney’s fees under section 38.001. See id. However, the Loeschers also sought attorney’s fees under the provisions of the earnest money contract. That contract provided, “The prevailing party in any legal proceeding related to this contract is entitled to recover reasonable attorney’s fees and all costs of such proceeding incurred by the prevailing party.” Here, Whitton’s suit is “related to” the earnest money contract because his claims focused on misrepresentations in the seller’s disclosure, which had been expressly incorporated as part of the earnest money contract. Thus, the Loeschers were entitled to recover their “reasonable attorney’s fees and all costs” incurred in defending against Whitton’s suit under the provisions of the earnest money contract. See Dickerson v. Trinity-Western Title Co., 985 S.W.2d 687, 692 (Tex. App.—Fort Worth 1999, pet. denied) (awarding attorney’s fees to prevailing party for suit filed after closing when earnest money contract provided for award of attorney’s fees to “‘a prevailing party in any legal proceeding brought under or with relation to’ the contract”). When no findings of fact or conclusions of law are properly requested or provided by the trial court, the trial court’s judgment will be upheld on any legal theory supported by the facts and the pleadings. See In re W.E.R., 669 S.W.2d 716, 717 (Tex. 1984); Love v. State Bar of Texas, 982 S.W.2d 939, 944 (Tex. App.—Houston [1st Dist.] 1998, no pet.); First Trust Corp. TTEE FBO v. Edwards, 172 S.W.3d 230, 241 (Tex. App.—Dallas 2005, pet. denied). We hold that the award of attorney’s fees was proper. We overrule Whitton’s first issue. CONCLUSION We affirm the judgment of the trial court. Evelyn V. Keyes Justice Panel consists of Justices Keyes, Sharp, and Massengale.