Gilad Lutfak and Oren Lutfak v. Jeff Gainsborough ( 2017 )

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
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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
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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
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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
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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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