George Lesieur v. Timothy and Sandra Fryar Cynthia Morales D/B/A Morales Realty Cynthia Gonzalez ( 2010 )

i i i i i i
OPINION
No. 04-09-00397-CV
George LESIEUR,
Appellant
v.
Timothy FRYAR, Sandra Fryar, Cynthia Morales d/b/a Morales Realty, and Cynthia Gonzales,
Appellees
From the 38th Judicial District Court, Medina County, Texas
Trial Court No. 07-07-18515-CV
Honorable Mickey R. Pennington, Judge Presiding1
Opinion by: Marialyn Barnard, Justice
Dissenting opinion by: Phylis J. Speedlin, Justice
Sitting: Sandee Bryan Marion, Justice
Phylis J. Speedlin, Justice
Marialyn Barnard, Justice
Delivered and Filed: July 14, 2010
AFFIRMED IN PART, REVERSED AND RENDERED IN PART
This appeal arises out of a real estate sale in Medina County, Texas. Appellant George
Lesieur, the buyer, brought suit against the sellers, Timothy and Sandra Fryar, and the Fryars’ real
estate agents, Cynthia Morales d/b/a Morales Realty and Cynthia Gonzalez, alleging claims for fraud,
1
… The summary judgment order on the substantive claims brought by George Lesieur was signed by the
Honorable Mickey R. Pennington, former presiding judge of the 38th Judicial District Court, Medina County. The
summary judgment order on the counterclaim for attorney’s fees brought by Cynthia Morales d/b/a Morales Realty and
Cynthia Gonzales was signed by the Honorable Camille Glasscock Dubose, who became the presiding judge of the 38th
Judicial District Court of Medina County following Judge Pennington’s retirement.
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violations of the DTPA, negligence, negligent misrepresentation, and civil conspiracy. In essence,
Lesieur claimed the sellers and the real estate agents misrepresented and concealed defects in the
home prior to Lesieur’s purchase. The trial court granted the traditional and no evidence motions
for summary judgment filed by the Fryars, Morales, and Gonzales, thereby ruling that Lesieur take
nothing on his claims. Thereafter, the trial court granted summary judgment in favor of Morales and
Gonzales on their counterclaim for attorney’s fees. The trial court also granted a motion for
severance, making the judgment final for purposes of appeal.2 On appeal, Lesieur raises four issues,
challenging all of the orders in this case. We affirm the trial court’s order granting summary
judgment in favor of the Fryars, Morales, and Gonzales on Lesieur’s substantive claims, but reverse
and render judgment in favor of Lesieur on the issue of attorney’s fees.
BACKGROUND
In 2002, Timothy and Sandra Fryar purchased a house and surrounding property in Medina
County, Texas. Cynthia Morales d/b/a Morales Realty and Cynthia Gonzales (collectively “Morales
Realty”) had listed the property on behalf of Jerry and Gloria Kane. Before the purchase, the Fryars
hired Adams Home Inspection Company to inspect the house. According to the report generated as
a result of the inspection (“the Adams Report”), the foundation of the house showed “[s]igns of
structural movement,” but was supporting the house. As evidence of structural movement, the
inspector noted “[c]racks in walls and/or ceilings,” “[d]oor frames out of square,” and “[c]racks in
brick/stone veneers.” However, the inspector did not check the box that would have advised the
2
… Lesieur brought suit against others as well; however, they are not parties to this appeal because they have
either settled with Lesieur or have otherwise been dismissed.
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foundation was “Not Functioning or In Need of Repair.” The Fryars purchased the home, and
admittedly made no repairs.
In 2005, the Fryars decided to sell the house and property, and hired Morales Realty to list
it. Lesieur was interested in purchasing the house and property, and the parties began to take steps
to conclude a sale. On June 28, 2005, Lesieur and his wife3 entered into a “Farm and Ranch
Contract” (“the contract”) with the Fryars for the sale of the property. The contract set the closing
date for July 28, 2005.
The contract noted that a “Seller’s Disclosure Notice” (“the disclosure”) had been provided
to Lesieur. Within the disclosure, the Fryars were required to note defects, malfunctions, or
conditions of which they were aware. They noted no problems with the foundation, walls, floors,
or ceilings. The Fryars also disclaimed receiving any written inspection reports from any licensed
inspector within the last four years. This was despite the Adams Report the Fryars admittedly
received in 2002, which was maintained in their real estate file by Morales Realty.
The contract allowed Lesieur to have the property inspected by a licensed inspector of his
choice. In accordance with this contract provision, Lesieur hired National Property Inspection to
conduct an inspection of the house. As a result of the inspection, the inspector generated a report
(“the NPI Report”). The NPI Report lists the client as the Lesieurs, and described numerous
problems in the section of the report applicable to “Structural Systems,” which included the
foundation, floors, walls, ceilings, doors, windows, the roof, and carport. The report specifically
noted “[s]tress cracks” in the floor tile in the carport and inside the house. The inspector noted these
3
… Diana Lesieur signed the documents evidencing the purchase of the property. However, the suit was filed
by Lesieur individually.
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cracks were “observed both through the tile as well as in the grout joints.” The inspector opined that
“[t]hese types of cracks usually reflect what is occurring on the slab itself.” “Stress/settlement
cracks” or “[s]ettlement cracks” were also observed in the interior and exterior walls, and the ceiling.
Just as the inspector who prepared the Adams Report, the NPI inspector did not check the box that
would have advised the foundation was “Not Functioning or In Need of Repair.”
Lesieur, who was represented by his own real estate agent and attorney, was advised by his
realtor to review the inspection report, concentrating on safety and structural issues. The realtor also
reminded Lesieur that pursuant to the contract he had a ten-day option to terminate the contract, and
noted the expiration date. Lesieur testified in his deposition that he reviewed the report, and decided
on the repairs he wanted the Fryars to complete. Lesieur never contacted the inspector or spoke to
him about the report. As a result of the inspection, an amendment to the contract was signed,
requiring numerous repairs or treatments. However, there was no mention of repairs to the
foundation, or to any cracks observed during the inspection, despite the advice from Lesieur’s realtor
to focus on structural problems. Lesieur admitted he saw the inspector’s comments regarding the
foundation and the various cracks throughout the house, but did not talk to the inspector about these
issues, and felt comfortable proceeding with the closing. Lesieur stated he believed the problems
noted were “cosmetic.”
In addition to hiring his own inspector, Lesieur and his wife completed a walk-through of the
house before the closing. They signed a “Buyer’s Walk-Through and Acceptance Form” on the day
of, but prior to, the closing. At the closing, the Fryars and the Lesieurs met for the first time. Both
were represented at the closing by their own realtors and attorneys.
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Lesieur moved into the house approximately two months after the closing. Shortly after he
moved in, he began to notice signs of possible foundation problems. Lesieur hired Olshan
Foundation Repair Company (“Olshan”) to conduct another inspection. The Olshan inspector
claimed the foundation needed repair, and “there was an attempt to conceal signs of damage to the
foundation of the home” by taping and floating cracks in the drywall of interior walls, and covering
up exterior cracks with mortar. The inspector did not say who concealed the alleged evidence of
foundation damage, or when it might have occurred.
After receiving the report from Olshan, Lesieur filed suit against the Fryars and Morales
Realty, among others, alleging violations of the DTPA, common law fraud, statutory fraud pursuant
to section 27.01 of the Texas Business and Commerce Code, civil conspiracy, negligence, and
negligent misrepresentation. His claims were based, for the most part, on the alleged concealment
of the Adams Report and the foundation problems he contends were noted therein. Lesieur claimed
he was fraudulently induced into the contract in at least three particulars. First, the Fryars knowingly
misrepresented on the Seller’s Disclosure that they knew of no defective conditions with regard to
the property. This representation was made despite the fact that the Fryars had the Adams Report,
which noted conditions that could potentially affect the foundation, which they admittedly never
repaired. Second, both the Fryars and Morales Realty knew about the Adams Report, yet concealed
its existence, with the Fryars going so far as to deny any inspection had been conducted in the last
four years. According to Lesieur, Morales Realty knew about the Adams Report, had a copy in their
files, and knowingly passed the Fryars’ false disclosure statement onto him without revealing the
existence of the Adams Report and the foundation problems noted therein. And finally, apart from
the false representations in the disclosure statement and the concealment of the Adams inspection
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report, Lesieur claims the Fryars took steps to conceal the damage to the house so it would not be
discovered by a buyer or during a visual inspection.4 The Fryars and Morales Realty responded with
general denials, defenses, and claims for attorney’s fees.
Ultimately, both the Fryars and Morales Realty moved for summary judgment on both
traditional and no evidence grounds as to Lesieur’s claims. Morales Realty also filed a motion for
summary judgment seeking attorney’s fees. The trial court rendered judgment granting the Fryars’
and Morales Realty’s traditional and no evidence motions for summary judgment without stating the
grounds therefor. The court thereafter granted Morales Realty’s motion for summary judgment as
to attorney’s fees, and awarded Morales Realty trial attorney’s fees and contingent appellate
attorney’s fees. Lesieur perfected this appeal.
ANALYSIS
Standard of Review
The Fryars and Morales Realty filed both traditional and no evidence motions for summary
judgment as to Lesieur’s claims, and the trial court, according to the language in its order, granted
both. However, because we find the ruling on the traditional motions dispositive, we only recite the
standard of review applicable to traditional motions for summary judgment. Courts review a
traditional motion for summary judgment de novo. Valence Operating Co. v. Dorsett, 164 S.W.3d
656, 661 (Tex. 2005). A traditional motion for summary judgment is granted only when the movant
establishes there are no genuine issues of material fact and it is entitled to judgment as a matter of
law on the grounds expressly set forth in the motion. Browning v. Prostok, 165 S.W.3d 336, 344
4
… Lesieur also asserted claims based on an alleged landfill and hazardous materials on the property, but on
appeal, has limited his arguments to the claims based on the concealment of foundation defects.
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(Tex. 2005). When reviewing an order granting a traditional motion for summary judgment, courts
take evidence favorable to the nonmovant as true and indulge every reasonable inference from the
evidence in favor of the nonmovant. Am. Tobacco Co. v. Grinnell, 951 S.W.2d 420, 425 (Tex.
1997).
Lesieur’s Pre-Purchase Inspection
The Fryars and Morales Realty moved for traditional summary judgment on two grounds.
First, they asserted Lesieur could not recover on any of his claims because he purchased the property
“as is,” thereby negating the elements of causation and reliance in all of his claims as a matter of law.
Second, they asserted they were entitled to judgment as to all of Lesieur’s causes of action because
Lesieur’s pre-purchase inspection negated the elements of causation and reliance as a matter of law.
We express no opinion as to whether the “as is” clause precludes Lesieur’s recovery. However, we
hold Lesieur’s pre-purchase inspection, and the information he obtained as a result, negates the
elements of causation and reliance as a matter of law, thereby precluding recovery on any of his
claims.
This court recently addressed this issue in Lim v. Lomeli, No. 04-06-00389-CV, 2007 WL
2428078, at *1 (Tex. App.—San Antonio Nov. 28, 2007, no pet.) (mem. op.). In Lim, this court was
asked to decide whether a buyer’s pre-purchase professional inspection negated the elements of
reliance and causation as a matter of law. Id. at *3. The facts in Lim show the Lims, as buyers, and
the Bakers, as sellers, executed a contract, which included a ten-day termination option. Id. at *1.
During the option period, the Lims hired a licensed inspector to inspect the house. Id. The
inspector’s report listed several findings relating to water damage throughout the house. Id. Lomeli,
the Lim’s realtor, met with the inspector to discuss the findings, and then met with Mrs. Lim. Id.
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According to Mrs. Lim, Lomeli told her “‘not to worry’” about the wood rot and possible water
penetration noted in the inspector’s report because these were “‘minor’” issues. Id. Lomeli’s only
concern was a large picture window, which he suggested should be repaired. Id. The Bakers agreed
to pay the Lims for the window in lieu of repairing it. Id. Lomeli then advised the Lims to close on
the sales contract. Id. The Lims claimed they relied on Lomeli’s representations and purchased the
home. Id.
Two weeks after closing, there was a heavy downpour, and the Lims claimed nearly every
window leaked and “vast amounts of water ran down the walls, puddled on the window sills, and
stained the carpet.” Id. The Lims brought suit against everyone involved in the transaction,
including Lomeli. Id. As to Lomeli, they alleged negligent misrepresentation, fraudulent
inducement, fraud, DTPA violations, breach of the duty of good faith and fair dealing, breach of
fiduciary duty, negligence, and negligence per se. Id. Lomeli filed traditional and no evidence
motions for summary judgment, which the trial court granted. Id.
On appeal, the Lims argued the trial court erred in granting summary judgment based on
Lomeli’s assertion that the Lims’ professional inspection negated the elements of reliance and
causation as a matter of law. Id. at *3. On review, this court noted the summary judgment record
showed the Lims’ inspector left dots of paper in the home to notify the Lims of where he saw
problems with possible water penetration, and issued a report to the Lims, noting water penetration
issues among other things. Id. at *3-*4. The Lims also received an inspection report from the
Bakers, which indicated prior water penetration problems. Id. at *4.
This court held that because the information from the inspection report was equally available
to the Lims, causation and reliance were negated as a matter of law. Id. The Lims failed to present
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more than a scintilla of evidence that Lomeli “knew anything more or different than [they] did about
the condition of the home.” Id. (emphasis added). Accordingly, we affirmed the summary judgment.
Id.
Based on Lim, the issue in this case is whether the Fryars and Morales Realty knew “anything
more or different” about the foundation based on the Adams Report, which was withheld from
Lesieur, than Lesieur did based on his own inspection report. See id. To make this determination,
we conducted a side-by-side comparison of the information contained in the Adams Report and the
NPI Report, as it related to the foundation and potential evidence of defects5:
5
… The initials in the first columns denote whether the listed item was “Inspected” (“I”), “Not Inspected (“NI”),
“Not Present” (“NP”), and/or “Not Functioning or in Need of Repair” (“R”). All of the written descriptions contained
in this table were included under the “Structural Systems” heading in both reports.
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ADAM S REPORT NPI REPORT
(Report Prepared for the Fryars) (Report Prepared for Lesieur)
1.0 FOUNDATIONS 1.0 FOUNDATIONS
Performance Opinion: Stress cracks were observed in the floor tile at Carport
Signs of structural movement noted, however, the area and inside house in spots. these cracks were
foundation is supporting the structure at this time. observed both through the tile as well as in the grout
joints. These types of cracks usually reflect what is
Evidence of Structural M ovement Noted: occurring on the slab itself. No structural cracks were
Cracks in walls and/or ceilings. observed around the perimeter of the structure in those
Door frames out of square. areas that were clearly visible. Recommend active
Cracks in brick/stone veneers. monitoring of foundation and structure along with soil
moisture maintenance. Visibility was limited due to
plant growth in spots.
W alls (Interior and Exterior) W ALLS (interior and Exterior)
Comments: Interior - Stress/settlement cracks were observed on
Interior W alls: walls in various spot[s] throughout the house, example
W alls have been recently painted. This tends to hinder inside corners of Bedroom, over Bedroom window,
the inspection findings. Signs of previous repairs to Family room.
the wall (Left front bedroom) Exterior - Settlement cracks were observed in mortar
Exterior W alls: joints of stonework in spots around the house.
The brick/stone siding/veneer and/or mortar is cracked.
(Right side, front)
Ceilings and Floors CEILING AND FLOORS
Comments: Comments:
Interior Ceilings: Ceiling - Stress/settlement cracks were observed in
Cracks noted in the ceiling(s). (Front center bedroom) spots, example Hallway, Bedrooms. Corner beads
Noted evidence of previous repairs to the ceiling(s) were crack in spots of trey ceilings.
(Hallway) Floors - Stress cracks were observed in the floor tile
Floors: inside house in spots. These cracks were observed
The floors are visibly unlevel. (Left front bedroom) both through the tile as well as in the grout joints.
Doors (Interior and Exterior) DOORS (Interior and Exterior)
Comments: Comments: Interior - Bedroom closet door sticks at
The door is rubbing on the door frame and is hard to top.
close. (Left front bedroom)
Based on our review of the pertinent portions of the reports, it is evident that the differences
between the reports are merely a matter of word usage, not substance. Obviously, some of the words
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used by the inspector in the Adams Report are slightly different than those in the NPI Report. The
most notable example of this is the reference in the Adams Report to “structural movement,” a
phrase not used in the NPI Report. However, the inspector who prepared the Adams Report
specifically described the evidence of structural movement as cracking in the walls, ceilings, and in
the brick/stone veneers, as well as the fact that a door frame was “out of square.” In the NPI Report,
the inspector noted this same cracking, but specifically referred to it as “stress” or “settlement”
cracking. He also noted that a door in a bedroom “sticks at the top,” another way of saying “out of
square.” Accordingly, the same evidence of structural movement noted in the Adams Report was
provided to Lesieur in the NPI Report. Moreover, the inspectors who prepared the reports, with
regard to the sections entitled “Foundation,” checked the boxes denoting that the foundation had
been “Inspected,” but neither checked the box suggesting the foundation was “Not Functioning or
In Need of Repair.” Thus, neither inspector believed the home’s foundation was currently unsound
or in a state of disrepair.
We are aware that under the applicable standard of review, we must indulge every reasonable
inference in favor of Lesieur. This indulgence, however, does not require that we parse individual
words, nor does it require that we ignore that cracking in the interior of a home is, axiomatically, the
result of movement. Thus, an assertion of structural movement–as evidenced by cracking in walls,
ceilings, and floors–is no different than an assertion of stress or settlement cracking, particularly
when that cracking is described as indicative of “what is occurring on the [foundation] itself.”
We agree with Lesieur that the Adams Report referred to a visibly unlevel floor in one of the
bedrooms, but no such reference was made in the NPI Report. We hold this does not raise a fact
issue as to Lesieur’s knowledge versus that of the Fryars and Morales Realty. It is undisputed that
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Lesieur conducted a personal walk-through of the house before closing. If a floor was “visibly
unlevel,” he would have had personal knowledge of it based on his walk-through.
Accordingly, we hold that even when every reasonable inference is indulged in his favor,
Lesieur failed to present more than a scintilla of evidence that either the Fryars or Morales Realty
“knew anything more or different than [he] did about the condition of the home[,]” specifically the
foundation. See id. (emphasis added). The differences in the reports upon which Lesieur relies are
insufficient to create a fact issue as to whether the Fryars and Morales Realty knew something more
or different about the house than did Lesieur. In other words, despite the slight variations in the
technical terminology used by the two inspectors in the reports, the information provided to Lesieur
by the NPI report afforded him the same level of warning with regard to the structural condition of
the house that the Adams report would have provided if it had been disclosed. This is all that is
required under Lim to defeat the elements of causation and reliance. See id. Because the information
concerning the foundation of the house was equally available to all parties, the Fryars and Morales
Realty negated the elements of causation and reliance as a matter of law, and therefore the trial court
properly granted summary judgment in their favor.
Lesieur argues Lim actually supports his position, arguing that in Lim we relied on a case
from the Dallas Court of Appeals, Dubow v. Dragon, 746 S.W.2d 857 (Tex. App.—Dallas 1988, no
writ), to reach our conclusion. Lesieur contends that Dubow, as interpreted by several subsequent
cases, holds that causation and reliance are not negated as a matter of law unless the evidence
establishes: (1) the buyer relied solely on a pre-purchase inspection, which revealed the defect that
subsequently forms the basis of the buyer’s suit, and (2) there is a renegotiation of the sales contract
based on the defect, establishing the buyer’s knowledge that this was part of the basis of the parties’
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bargain. See Bernstein v. Thomas, 298 S.W.3d 817, 822-23 (Tex. App.—Dallas 2009, no pet.);
Kupchynsky v. Nardiello, 230 S.W.3d 685, 688-89 (Tex. App.—Dallas 2007, pet. denied);
Fernandez v. Schultz, 15 S.W.3d 648, 652 (Tex. App.—Dallas 2000, no pet.). According to Lesieur,
because there was no evidence he relied exclusively on the NPI report, there was no renegotiation
based on foundation defects, and no reduction in sales price or inclusion in the contract of terms
relating to the foundation, causation and reliance were not negated as a matter of law pursuant to
Dubow and its progeny.
We agree with Lesieur’s interpretation of Dubow, as construed by Bernstein, Kupchynsky,
and Fernandez. Clearly, the Dallas Court of Appeals requires a party attempting to negate causation
and reliance based on a buyer’s pre-purchase inspection to prove (1) the buyer relied solely on the
pre-purchase inspection, which revealed the defect that ultimately forms the basis of the buyer’s suit,
and (2) there was a renegotiation of the contract based on the existence of the defect, thereby
establishing the buyer’s knowledge of the defect. See id. However, we disagree that this court’s
opinion in Lim is based on Dubow, or that this court has adopted its more stringent requirements.
In reaching our conclusion that the Lims could not recover because the evidence showed the
parties had the same information concerning the defect that formed the basis of the suit, we did not
cite Dubow for support. Lim, 2007 WL 2428078, at *4. If we had intended to rely on Dubow, as
interpreted in Fernandez and Kupchynsky (cases decided before Lim) and adopted its requirements,
we certainly would have cited it, and would have required proof as a matter of law of the
requirements stated therein. If we had intended to adopt the requirements of Dubow and its progeny,
we would not have reached the conclusion we did, because there was no evidence of a renegotiation
based on the defect for which the Lims brought suit. Id. at *1. Contrary to Lesieur’s interpretation,
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the renegotiation was based on replacing a single panoramic window, not repairs to prevent
extensive water penetration. Id.
This court’s holding in Lim in favor of the realtor was based simply on the fact that the same
information available to the realtor was available to the buyer–there was no evidence the realtor
knew anything more than the buyer. Id. at *4. Unlike our sister court, we did not hold that a pre-
purchase inspection negates causation and reliance only when there is evidence the buyer relies
solely on his inspector’s report, the buyer knows about the defect because of his inspection and
renegotiates the contract based on that awareness. Accordingly, we rely on Lim, and respectfully
disagree with the approach of our sister court.
Because the trial court’s summary judgment in favor of the Fryars and Morales Realty was
proper based on Lesieur’s pre-purchase inspection, we need not address his issues challenging the
summary judgment on any other grounds. See, e.g., Dow v. Chemical Co. v. Francis, 46 S.W.3d
237, 242 (Tex. 2001) (quoting Carr v. Brasher, 776 S.W.2d 567, 569 (Tex. 1989) (holding that when
trial court’s order granting summary judgment does not specify ground or grounds relied upon for
its ruling, summary judgment will be affirmed on appeal if any of theories advanced are
meritorious)); O’Donnell v. Smith, 234 S.W.3d 135, 140 (Tex. App.—San Antonio 2007), aff’d, 288
S.W.3d 417 (Tex. 2009).
Attorney’s Fees
Morales Realty counterclaimed for attorney’s fees and moved for summary judgment on the
counterclaim. The trial court granted the motion for summary judgment, and in its order the trial
court specifically stated it was granting the motion based on the Farm and Ranch Contract between
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Lesieur and the Fryars.6 Lesieur contends the trial court erred in granting Morales Realty’s motion
for summary judgment based on their counterclaim for attorney’s fees. We agree.
In support of its motion for summary judgment, Morales Realty relied upon paragraph
seventeen of the Farm and Ranch Contract:
ATTORNEY’S FEES: The prevailing party in any legal proceeding related to this
contract is entitled to recover reasonable attorney’s fees and all cost of such
proceeding incurred by the prevailing party.
Lesieur argues this provision will not support an award of attorney’s fees to Morales Realty
because Morales Realty was not a party to the contract; rather, Morales Realty had a separate
agreement with the Fryars for fees. Morales Realty contends it was a party to the contract, either
directly or as a third-party beneficiary, but even if it were not, the contractual provision regarding
recovery of attorney’s fees is not conditioned upon being a party to the contract. Rather, the
provision entitles any prevailing party in a legal proceeding related to the contract to attorney’s fees.
As the prevailing party in this matter, which was a legal proceeding related to the contract, Morales
Realty contends the trial court correctly granted its motion for summary judgment.
6
… M orales Realty also moved for summary judgment on the ground it was entitled to attorney’s fees under the
DTPA because Lesieur’s suit was groundless, brought in bad faith, or brought for purposes of harassment. See T EX . B U S .
& C O M . C O D E A N N . § 17.50(c) (Vernon Supp. 2009) (stating that if trial court finds DTPA action was “groundless in
fact or law or brought in bad faith, or brought for the purpose of harassment,” the court shall award defendant reasonable
and necessary attorney’s fees and costs). However, Lesieur moved for summary judgment on this issue, and the trial
court granted his motion. Morales Realty did not perfect an appeal nor has it raised a cross-point related to its request
for fees under section 17.50(c). Therefore, we need only consider whether the trial court erred in granting attorney’s fees
to Morales Realty based on the contract between Lesieur and the Fryars.
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Generally, to enforce a contract, the person or entity seeking to enforce it must be either a
party to the contract or a third-party beneficiary to it.7 See, e.g., In re El Paso Refinery, L.P., 302
F.3d 343, 353-54 (5th Cir. 2002) (applying Texas law and holding nonparty to contract could not
defend against contribution claims for environmental cleanup by relying on contract provision
governing allocation of same between parties to contract); Basic Capital Mgmt. v. Dynex
Commercial, Inc., 254 S.W.3d 508, 515 (Tex. App.—Dallas 2008, pet. granted) (holding third-party
stranger to contract may enforce its terms only if he was third-party beneficiary); El Paso Community
Partners v. B&G/Sunrise Joint Venture, 24 S.W.3d 620, 626 (Tex. App.—Austin 2000, no pet.)
(holding that generally someone who is not party to agreement has no interest in terms of
agreement). Accordingly, before a court construes a provision in the contract to determine whether
it entitles the person or entity to relief, it must first determine whether the person or entity seeking
to enforce the contract provision it is in fact a party or third-party beneficiary to the contract.
Accordingly, before we determine whether Morales Realty is entitled to recover pursuant to the
attorney’s fees provision in the Farm and Ranch Contract, we must first find they are parties or third-
party beneficiaries to it.
As to whether Morales Realty is an actual party to the contract, we hold the contract, by its
terms, defines the parties to the contract as only the buyer and seller. See Williamson v. Guynes, No.
7
… There are, of course, exceptions to this rule. See, e.g., In re Merrill Lunch Trust Co. FSB, 235 S.W .3d 185,
194 (Tex. 2007) (noting, in context of arbitration, Texas has long recognized nonparties may be bound to contract under
traditional contract rules like agency or alter ego); In re Weekley Homes, 180 S.W .3d 127, 131-35 (Tex. 2005) (holding
that principles of equitable estoppel and agency may bind nonsignatories to arbitration agreement); In re Kellogg Brown
& Root, 166 S.W .3d 732, 739 (Tex. 2005) (holding nonsignatories may be bound to arbitration agreement under “direct
benefits estoppel”). These exceptions, however, generally occur in the arbitration context, which is not applicable here.
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10-03-00047-CV, 2005 WL 675512, at *1 (Tex. App.—Waco Mar. 23, 2005, no pet.) (mem. op.).
On the first page of the contract, the first paragraph provides:
1. PARTIES: Timothy Fryar and Sandra Fryar (Seller) agrees to sell and convey to
GEORGE LESIEUR AND DIANA LESIEUR (Buyer) and Buyer agrees to buy from
Seller the Property described below.
We interpret this provision of the contract as a definitional rather than merely a descriptive provision.
Accordingly, the contract defines the parties as including only the Fryars as sellers and the Lesieurs
as buyers. There is nothing else in the contract discussing or defining the parties.
Morales Realty points out that Gonzalez signed the contract. However, she did so only as
the listing broker in a very specific portion of the contract. She did not sign the page where the buyer
and the seller signed, nor did she initial any specific provision or page in the contract; rather,
Gonzalez, as the listing broker, signed only that provision regarding the ratification of the broker’s
fee, thereby obligating her to pay Lesieur’s broker three percent of the total sales price at closing.
With regard to third-party beneficiary status, there are two types of third-party beneficiaries
who can enforce the terms of a contract, a donee or creditor beneficiary. MCI Telecomms. Corp. v.
Tex. Utils. Elec. Co., 995 S.W.2d 647, 651 (Tex. 1999). “One is a donee beneficiary if the
performance promised will, when rendered, come to him as a pure donation.” Id. If the promised
performance will come to him “in satisfaction of a legal duty owed to him,” he is a creditor
beneficiary. Id. There is a presumption against conferring third-party beneficiary status on
noncontracting parties. S. Tex. Water Auth. v. Lomas, 223 S.W.3d 304, 306 (Tex. 2007) (citing MCI
Telecomms. Corp., 995 S.W.2d at 652; see Energy Serv. Co. of Bowie, Inc. v. Superior Snubbing
Servs., Inc., 236 S.W.3d 190, 199 (Tex. 2007) (citing Corpus Christi Bank & Trust v. Smith, 525
S.W.2d 501, 503-04 (Tex. 1975) (noting there is presumption that parties contract for themselves
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and not for third-party beneficiaries)). Therefore, any doubts as to whether a party is a third-party
beneficiary are resolved against the existence of a third-party beneficiary. Esquivel v. Murray
Guard, Inc., 992 S.W.2d 536, 543 (Tex. App.—Houston [14th Dist.] 1999, pet. denied). In deciding
whether a third party may enforce a contract between others, the contracting parties’ intent controls.
Lomas, 223 S.W.3d at 306 (citing Corpus Christi Bank & Trust, 525 S.W.2d at 503-04). The parties
to the contract must intend to confer a direct benefit upon the alleged third-party beneficiary, and that
intent “must be clearly and fully spelled out or enforcement by the thirty party must be denied.”
Lomas, 223 S.W.3d at 306 (quoting MCI Telecomms. Corp., 995 S.W.2d at 651). The fact that
incidental benefits may flow from a contract to a third party does not confer third-party beneficiary
status on that party that would allow him to enforce the contract. Lomas, 223 S.W.3d at 306 (citing
MCI Telecomms. Corp., 995 S.W.2d at 652). A third party may only enforce a contract when the
parties to the contract “intend to secure some benefit for the third party and entered into the contract
directly for the third party’s benefit.” Lomas, 223 S.W.3d at 306 (citing MCI Telecomms. Corp., 995
S.W.2d at 651; Stine v. Stewart, 80 S.W.3d 586, 589 (Tex. 2002)).
In this case, there is no evidence to establish the Lesieurs and the Fryars intended to confer
a direct benefit upon Cynthia Morales, doing business as Morales Realty, or Gonzalez. They clearly
did not enter into the contract for the sale of the property directly for the benefit of the realtors. In
fact, paragraph eight of the contract affirmatively belies the possibility that the Lesieurs and the
Fryars intended to confer a direct benefit upon Cynthia Morales, doing business as Morales Realty,
or Gonzalez. That paragraph is entitled “BROKERS’ FEES” and states, “All obligations of the
parties for payment of brokers’ fees are contained in a separate written agreement.” Accordingly,
there was no intent the realtors directly benefit from the contract; rather, there was a separate
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agreement for their benefit. That the contract authorized the escrow agent to pay the brokers’ fees
directly from the closing proceeds does not establish a specific intent to secure a direct benefit;
rather, that was merely an incidental benefit flowing from the contract, which Lomas held was
insufficient to confer third-party beneficiary status.
Accordingly, we hold that because Morales Realty did not establish it was a party or third-
party beneficiary to the contract, it was not entitled to rely on or enforce the attorney’s fees provision.
The trial court erred in granting summary judgment in favor of Morales Realty on its counterclaim
for attorney’s fees.
CONCLUSION
Based on the foregoing we hold: (1) the trial court properly granted summary judgment in
favor of the Fryars and Morales Realty on Lesieur’s substantive claims; and (2) the trial court erred
in granting summary judgment in favor of Morales Realty on its counterclaim for attorney’s fees.
Accordingly, we affirm the portion of the judgment granting summary judgment in favor of the
Fryars and Morales Realty on Lesieur’s substantive claims, and ordering that he take nothing, but
reverse and render judgment that Cynthia Morales d/b/a Morales Realty and Cynthia Gonzales take
nothing on their counterclaim for attorney’s fees.
Marialyn Barnard, Justice
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