Zbranek Custom Homes, Ltd. v. Joe Allbaugh, Diane Allbaugh, and Rutilio Albarran Construction, Inc. D/B/A El Paso Framing ( 2015 )

ACCEPTED
03-14-00131-CV
7874643
THIRD COURT OF APPEALS
AUSTIN, TEXAS
11/17/2015 5:18:59 PM
JEFFREY D. KYLE
CLERK
NO. 03-14-00131-CV
THIRD COURT OF APPEALS FILED IN
3rd COURT OF APPEALS
AUSTIN, TEXAS AUSTIN, TEXAS
11/17/2015 5:18:59 PM
ZBRANEK CUSTOM HOMES, LTD. JEFFREY D. KYLE
Clerk
Appellant
v.
JOE ALLBAUGH AND DIANE ALLBAUGH
Appellees
Appealed from the 419th Judicial District Court of
Travis County, Texas
__________________________________________________________________
APPELLANT ZBRANEK CUSTOM HOMES, LTD.’S
MOTION FOR REHEARING
__________________________________________________________________
David E. Chamberlain
Tim Poteet
Erin Westendorf-Boyd
CHAMBERLAIN ♦ McHANEY
301 Congress Avenue, 21st Floor
Austin, Texas 78701
(512) 474-9124
(512) 474-8582 (Facsimile)
dchamberlain@chmc-law.com
tpoteet@chmc-law.com
ewestendorf@chmc-law.com
ATTORNEYS FOR APPELLANT
1
TABLE OF CONTENTS
Index of Authorities .................................................................................................3
Causation Evidence Was Insufficient to Support Finding ......................................6
Damages Evidence Was Insufficient to Support Award .......................................10
Contractual Waiver of Rights Should Apply to Bar Recovery ............................15
The “As Is” Clause Should Apply to Bar Recovery ..............................................20
Prayer ....................................................................................................................22
2
INDEX OF AUTHORITIES
Cases
Ace Prop. & Cas. Ins. Co. v. Prime Tempus, Inc.
No. 03-06-00236-CV, 2009 WL 2902713 (Tex. App.
—Austin 2009, no pet.) ......................................................................................... 20
Atl. Mut. Ins. Co. v. Crow Design Centers
148 S.W.3d 743 (Tex. App.—Dallas 2004, no pet.) ............................................ 18
City of Keller v. Wilson
168 S.W.3d 802 (Tex. 2005) ................................................................. 9, 10, 13, 14
Cooper Tire & Rubber Co. v. Mendez
204 S.W.3d 797 (Tex. 2006)................................................................................. 13
Crisp v. Security Nat’l Ins. Co.
369 S.W.2d 326 (Tex. 1963) ........................................................................... 10, 11
Daubert v. Merrell Dow Pharms., Inc.
509 U.S. 579 (1993) ................................................................................................ 6
Edgar v. Stanolind Oil & Gas Co.
90 S.W.2d 656 (Tex. Civ. App.—Austin 1935, writ ref’d) .................................. 16
E.I. du Pont de Nemours & Co. v. Robinson
923 S.W.2d 549 (Tex. 1995)................................................................................... 6
Gharda USA, Inc. v. Control Solutions, Inc.
464 S.W.3d 338 (Tex. 2015) ................................................................. 6, 7, 8, 9, 10
Gulf States Utilities Co. v. Low
79 S.W.3d 561 (Tex. 2002) ................................................................................... 11
Helena Chem. Co. v. Wilkins
47 S.W.3d 486 (Tex. 2001) ................................................................................... 12
Highland v. City of Galveston
54 Tex. 527 (1881) ................................................................................................ 16
3
Income Apartment Investors, L.P. v. Bldg. Diagnostics, Ltd.
No. 03-97-00656-CV, 1998 WL 476777 (Tex. App.—Austin 1998,
no pet.)................................................................................................................... 21
Liberty Sign Co. v. Newsom
426 S.W.2d 210 (Tex. 1968) ................................................................................. 20
MAN Engines & Components, Inc. v. Shows
434 S.W.3d 132 (Tex. 2014) ........................................................................... 19, 22
New Texas Auto Auction Services, L.P. v. De Hernandez
249 S.W.3d 400 (Tex. 2008) ................................................................................. 19
Prudential Ins. Co. of Amer. v. Jefferson Assocs., Ltd.
896 S.W.2d 156 (Tex. 1995)........................................................................... 18, 21
Redman Homes v. Ivy
920 S.W.2d 664 (Tex. 1996) ................................................................................. 11
State v. Vaughan
319 S.W.2d 349 (Tex. Civ. App.—Austin 1958, no writ) .................................... 16
Trinity Universal Ins. Co. v. Bill Cox Constr. Inc.
75 S.W.3d 6 (Tex. App.—San Antonio 2001, no pet.)......................................... 17
TX. C.C., Inc. v. Wilson/Barnes Gen. Contractors, Inc.
233 S.W.3d 562 (Tex. App.—Dallas 2007, pet. denied) ...................................... 17
TXI Transp. Co. v. Hughes
306 S.W.3d 230 (Tex. 2010) ................................................................................... 6
Walker Eng’g, Inc. v. Bracebridge Corp.
102 S.W.3d 837 (Tex. App.—Dallas 2003, pet. denied) ...................................... 17
Wal-Mart Stores, Inc. v. Merrell
313 S.W.3d 837 (Tex. 2010) ................................................................................... 6
Welwood v. Cypress Creek Estates, Inc.
205 S.W.3d 722 (Tex. App.—Dallas 2006, no pet.) ...................................... 18, 20
4
Whirlpool Corp. v. Camacho
298 S.W.3d 631 (Tex. 2009) ................................................................................... 6
Rules
Tex. R. App. P. 9.4(e) ........................................................................................... 24
Tex. R. App. P. 9.4(i)(1) ....................................................................................... 24
Tex. R. App. P. 9.4(i)(2)(D) ................................................................................. 24
Tex. R. App. P. 49 ................................................................................................... 6
Tex. R. Evid. 702 .................................................................................................. 12
5
TO THE HONORABLE COURT OF APPEALS:
Appellant Zbranek Custom Homes, Ltd., respectfully asks the Court to
withdraw its opinion and decision of November 3, 2015, and to reconsider
Zbranek’s appeal, pursuant to Tex. R. App. P. 49. Zbranek relies on the following
points for rehearing:
Causation Evidence Was Insufficient to Support Finding
1. Zbranek contends that the evidence was legally, or, in the alternative,
factually, insufficient to prove its acts or omissions relating to the subject fireplace
caused the fire. The Court rejects this contention, holding that causation in general
is a fact question. Slip op. at 11. However, the opinion does not cite or analyze the
Allbaughs’ expert evidence under the rules and reasoning in Daubert v. Merrell
Dow Pharms., Inc., 509 U.S. 579 (1993), E.I. du Pont de Nemours & Co. v.
Robinson, 923 S.W.2d 549 (Tex. 1995), and their progeny, that set out current
standards for evaluating expert testimony and its relation to sufficiency of evidence
review.1
Moreover, the Court’s opinion does not fairly state Zbranek’s arguments in
its analysis. The Court states that “While Zbranek correctly notes that the
Allbaughs’ experts did not testify about what the actual temperatures were at the
specific locations where the fire started, there was nonetheless sufficient evidence
1
Zbranek cited, e.g., Whirlpool Corp. v. Camacho, 298 S.W.3d 631 (Tex. 2009); TXI Transp.
Co. v. Hughes, 306 S.W.3d 230 (Tex. 2010); Wal-Mart Stores, Inc. v. Merrell, 313 S.W.3d 837
(Tex. 2010); and Gharda USA, Inc. v. Control Solutions, Inc., 464 S.W.3d 338 (Tex. 2015).
6
from which a reasonable fact finder could infer that faulty construction of the
fireplace caused the home fire.” Id. at 12. Respectfully, it is Zbranek’s specific
contention that the Allbaughs offered no facts to prove that the temperatures were
sufficient to cause the fire at the locations where the Allbaughs contend the fire
started.
Instead the Allbaughs’ experts offered only conclusory assertions that the
temperatures at those locations were sufficient. Their opinion testimony was based
on no testing or calculations or other reliable basis, and amounted to only
speculation based on generic information that left an analytical gap between the
conclusions offered and the facts purporting to support them. The Texas Supreme
Court has consistently reversed judgments based on similarly insufficient expert
evidence, most recently in Gharda USA, Inc. v. Control Solutions, Inc., 464
S.W.3d 338 (Tex. 2015), a fire loss case having issues very similar to those here.
In Gharda USA, the court considered whether interdependent opinion
testimony of four experts was reliable, and held that the testimony of all four
experts was unreliable because the individual opinion testimony of at least two
experts was unreliable and the remaining two experts based their opinions on the
first two experts' unreliable opinions. 464 S.W.3d at 342. Because all of the
plaintiffs' expert testimony was unreliable, there was no evidence of an essential
element of the plaintiffs' claims, and the court rendered judgment that the claimant
7
take nothing. Id. Zbranek believes the same reasoning should apply here and have
the same result.
Zbranek agrees that the Allbaughs’ experts did not connect the dots, but
respectfully disagrees that the jury was entitled to infer causation from their
testimony. See Gharda, 464 S.W.3d at 353 (jury prohibited from inferring
causation based on circumstantial evidence and unreliable expert opinion
testimony). The Allbaughs offered only theories and assumptions, and presented
no calculations, research, or tests to determine whether there was sufficient heat to
start a fire in the way they conjectured. The testimony has analytical gaps and “is
connected to existing data only by the ipse dixit of the expert.” See id. at 351. Their
conclusory testimony was unsupported, unreliable and constituted no evidence,
like that of the experts in Gharda USA. See id. at 350-52.
Further, the Allbaughs’ experts did not provide competent and sufficient
testimony ruling out all other possible causes. In particular, Zbranek quoted
testimony from the Allbaughs’ expert electrical engineer Mark Goodson that he
could not rule out an electrical cause for the fire. RR 4:58, lines 17-25; RR 4:59,
lines 1-3; 4:60, lines 21-25; 4:61, lines 1-4; 4:63, lines 1-10; 4:67, lines 21-24; 4:
74, lines 21-25; 4:76, lines 4-6. The Allbaughs’ causation expert, Michael Chaney
is not an electrical engineer or even an electrician, and he deferred to Goodson’s
opinion on all electrical issues. RR 6:217, lines 7-25; 6:218, lines 1-6. The
8
Allbaughs did not offer competent testimony of any other qualified witness to rule
out electrical causes. “No evidence” review cannot disregard evidence that a
witness is unqualified to give an opinion. See City of Keller v. Wilson, 168 S.W.3d
802, 813 (Tex. 2005).
Expert evidence that fails to meet reliability standards is not only
inadmissible but also incompetent. Id. An appellate court conducting a no-evidence
review cannot consider only an expert's bare opinion, but must also consider
contrary evidence showing it has no scientific basis. Id. Such is the case here, as
Goodson’s specific testimony negated any conclusory assertions of any other
expert of the Allbaughs. Evidence that might be “some evidence” when considered
in isolation is nevertheless rendered “no evidence” when contrary evidence shows
it to be incompetent. Id. The Court appears to have disregarded Goodson’s
testimony that he could not rule out an electrical cause for the fire.
In addition, testimony that there “may have been a ‘false chimney’” into
which hot flue gases “may have escaped,” is equivocal, conclusory and
unsupported testimony, and as such is legally insufficient.2 See Gharda USA, 464
S.W.3d at 350 (stating “reliable expert testimony must be based on a probability
standard, rather than on mere possibility” and holding “possibility” testimony
legally insufficient).
2
Emphasis added.
9
Applying the controlling principles in Gharda USA and City of Keller, the
Allbaughs’ experts’ causation opinions were incompetent and conclusory.
Consequently, they were legally (or factually) insufficient. Zbranek respectfully
requests the Court to reconsider the evaluation of the Allbaughs’ experts’
testimony, particularly in light of the Texas Supreme Court’s analysis of the
testimony of four experts in Gharda USA, which that court found legally
insufficient. For the same essential reasons, the Allbaughs’ expert evidence was
legally or, in the alternative, factually, insufficient to support the causation finding
and judgment.
Damages Evidence Was Insufficient to Support Award
2. Zbranek respectfully asks the Court to reconsider Zbranek’s
contention that the evidence of the replacement cost of the property damaged in the
subject fire was legally or, in the alternative, factually, insufficient to support the
damages awarded to the Allbaughs. There was no other competent or sufficient
evidence. The Court’s opinion holds that evidence of replacement cost is sufficient,
stating that “replacement cost is one of the factors that fact-finders may consider in
making the determination of actual value,” citing Crisp v. Security Nat’l Ins. Co.,
369 S.W.2d 326, 329 (Tex. 1963). Slip op. at 13. The Court also stated “Zbranek
has cited no authority for the proposition that the plaintiff must present evidence on
all of these factors or on any more than one of them, and we decline to broaden the
10
holding of Crisp to so require.” Id. Respectfully, Zbranek believes it did submit
authority that the Allbaughs were required to present evidence of value beyond
replacement cost and that no extension of Crisp is required to hold that the
Allbaughs’ evidence was legally or factually insufficient.
Specifically, Zbranek cited the statement in Crisp that, for recovery of actual
value, “replacement costs do not afford a fair test.” 369 S.W.2d at 328. Zbranek
also cited Gulf States Utilities Co. v. Low, 79 S.W.3d 561, 566 (Tex. 2002) (stating
“replacement cost is rarely, if ever, the appropriate measure for such personal
property”) and Redman Homes v. Ivy, 920 S.W.2d 664, 669 (Tex. 1996), where the
court noted that the owner’s estimate of lost property’s value is probative if based
on the owner’s estimate of market value and not some intrinsic value or other value
such as replacement cost. Id. at 669. These authorities show that replacement costs
alone do not afford a basis from which a fact-finder may determine actual value of
damaged personal property, and an award of damages for replacement cost results
in a windfall recovery. See Appellant’s Brief at 43-44.
In fact, the Gulf States court cited Crisp as support for the statement “[i]n
some situations, replacement value does not properly measure damages because it
may represent an economic gain to the plaintiff (citations omitted). This may be
true for household goods, clothing, and personal effects.” 79 S.W.3d at 566 (citing
Crisp, 369 S.W.2d at 328). That is Zbranek’s contention. Crisp held that fact
11
finders may consider original cost; cost of replacement; opinions of qualified
witnesses, including owner; and use to which property was put in making actual-
value determination. See Crisp, 369 S.W.2d at 329, 330-31. Crisp and the other
authorities cited indicate that evidence of replacement cost should be presented in
conjunction with other evidence that provides a basis for the fact-finder to decide
the actual value of the property to the owner at the time of the damage. Zbranek
respectfully submits based on the foregoing authorities that no extension of Texas
law is necessary to hold that evidence of replacement cost alone for lost personal
property having no market value is, legally or factually, insufficient.
In addition to its contention that even proper replacement cost evidence
alone could not be sufficient, Zbranek contends the Allbaughs’ evidence did not
constitute proper evidence of replacement cost or of any other value. The
Allbaughs’ retained witness, Sandra Garber was not competent to testify as an
expert under Tex. R. Evid. 702. That she has a library degree and looks up
“replacement cost” prices on the internet for her employer, as the record indicates,
is insufficient to render her a qualified and competent witness under Texas law. In
deciding if an expert is qualified, trial courts “must ensure that those who purport
to be experts truly have expertise concerning the actual subject about which they
are offering an opinion.” Helena Chem. Co. v. Wilkins, 47 S.W.3d 486, 499 (Tex.
2001). Admission of expert testimony that does not meet the reliability
12
requirement is an abuse of discretion. Cooper Tire & Rubber Co. v. Mendez, 204
S.W.3d 797, 800 (Tex. 2006). Looking up information on the internet and putting
it in a report may be what Ms. Garber’s job entails, but merely doing that should
not be sufficient to make anyone an expert on the actual value of property to the
Allbaughs. Without the internet, Ms. Garber would have had no opinion at all.
Information consisting of prices found on the internet for purportedly similar
property should not be competent or sufficient expert evidence of replacement
costs for the property. Finally, the Allbaughs’ own testimony, which the Court
charitably describes as “cursory,” was legally (or factually) insufficient to assist
the jury in finding a dollar value for the lost property and to support the finding the
jury did make. See slip op. at 13. When the evidence offered to prove a vital fact is
no more than a mere scintilla, there is no evidence. City of Keller, 168 S.W.3d at
810.
That the jury entered dollar values in the verdict form does not change the
fact that they were provided only improper, incompetent and insufficient
replacement cost information, which information permitted to them to do nothing
other than speculate about the actual value of the property to the Allbaughs.
Zbranek acknowledges, as the Court states, that a jury has discretion to determine
damages within the range of evidence presented at trial, but there was no range of
evidence in this case. The Court states that the difference between the damages the
13
Allbaughs requested and the amount the jury awarded may be explained by the
jury’s taking into account factors such as depreciation of the property, but the
Court also notes that the Allbaughs’ damages expert testified that replacement-
value estimates do not take into account depreciation, age, or condition. Slip op. at
13-14. There was no actual evidence to enable the jury to assess depreciation. The
Allbaughs only testified that the items were in “great condition” and they planned
use the item “for a long time,” which testimony gave the jury no basis to determine
depreciation or any other component of “actual value” as defined by the charge and
Texas law. The Allbaughs’ own testimony was legally (or factually) insufficient to
constitute an opinion about the property’s value. See City of Keller, 168 S.W.3d at
810.
In summary, Zbranek did cite authority to support its argument that evidence
of replacement cost alone was not sufficient to establish “actual damages” under
Texas law; the only evidence of replacement value was offered by an unqualified
witness and was unreliable and legally or factually insufficient; and the Allbaughs’
testimony was legally or factually insufficient. The evidence allowed the jury to
consider only improper information of replacement value and otherwise to
speculate on the actual value of the property to the Allbaughs. The jury’s damage
award is based on legally insufficient evidence, or alternatively factually
insufficient evidence.
14
Contractual Waiver of Rights Should Apply to Bar Recovery
3. Zbranek contends that the waiver of rights in the construction contract
between property owner Bella Cima Development and Zbranek applies to the
Allbaughs because, among other reasons, (1) there is no dispute that the waiver
would have applied to a similar claim for insured losses by Bella Cima arising
from the subject fire, and (2) the Allbaughs as lessees of the house built by
Zbranek and owned by Bella Cima should not have greater rights against Zbranek
relating to insured loss involving the house than Bella Cima could have.3 The
Court declined to address Zbranek’s argument that the Allbaughs as lessees of
Bella Cima “could not have better rights than their lessor” against Zbranek,
referring to this as a “bare assertion (unsupported by any relevant legal authority).”
Slip op. at 8, n. 4. The Court’s opinion further states “[w]e will not address this
argument because we have already determined that a builder may owe a duty to
non-parties to a construction contract, and Zbranek has cited no authority
supporting its contention that this general duty should not apply to lessees.” Id.
Zbranek believes it did present relevant authority that warrants the Court’s
consideration as explained below. Zbranek respectfully disagrees with the Court’s
separate determination that Zbranek owed a duty to the Allbaughs, but this
determination alone should not be dispositive, because, regardless of any duty, the
3
Of course, Bella Cima Development did not assert a claim.
15
Allbaughs should be bound by Bella Cima’s waiver of rights to the extent of
claims for losses covered by insurance relating to the subject house. Moreover,
Zbranek has not argued that a common law duty of care generally cannot apply to
a lessee as the Court’s footnote indicates; instead Zbranek argues that these lessees,
the Allbaughs, cannot recover for insured losses due to the waiver of rights in the
construction contract between the Allbaughs’ lessor, Bella Cima and Zbranek.
Zbranek respectfully requests that the Court reconsider the authorities it
submitted and its argument that the waiver of rights applies to the Allbaughs as
lessees of Bella Cima. First, Zbranek cited authority to support the argument that
the Allbaughs as lessees cannot have greater rights than would their lessor Bella
Cima. Zbranek cited cases involving rights of lessees, including (1) Highland v.
City of Galveston, 54 Tex. 527, 533 (1881), which states “Had the plaintiff
occupying the premises as tenant or lessee of the owner any other or greater right
to recover damages than the lot owner would have had, had he himself been the
occupant? In our opinion this question must be answered in the negative;” (2) State
v. Vaughan, 319 S.W.2d 349, 354 (Tex. Civ. App.—Austin 1958, no writ), which
states “All individuals hold property subject to the right of the State (and other
entities) to condemn the same and of course tenants who occupy the property have
no greater right than the owners” (emphasis added);4 and (3) Edgar v. Stanolind
4
See Appellant’s Brief at 23.
16
Oil & Gas Co., 90 S.W.2d 656, 657 (Tex. Civ. App.—Austin 1935, writ refused)
(holding “Edgar could secure no greater right under the law than that vested in his
lessors.”)5
Second, though the Court determined that “a builder may owe a duty to non-
parties to a construction contract,” the waiver of rights should encompass rights
arising from such a duty, including tort claims. Texas courts routinely enforce
contractual pre-loss waivers of rights that preclude insurance subrogation claims
based on alleged torts. See, e.g., TX. C.C., Inc. v. Wilson/Barnes Gen. Contractors,
Inc., 233 S.W.3d 562, 567-568 (Tex. App.—Dallas 2007, pet. denied) (applying
waiver provision in contract to bar subrogation claim for negligence, breach of
contract, and warranty arising from fire loss); Walker Eng’g, Inc. v. Bracebridge
Corp., 102 S.W.3d 837, 841 (Tex. App.—Dallas 2003, pet. denied) (holding
contractual waiver of claims for insured losses barred negligence claims arising
from electrical work that caused water pipe leak and flooding in building); Trinity
Universal Ins. Co. v. Bill Cox Constr. Inc., 75 S.W.3d 6, 8 (Tex. App.—San
Antonio 2001, no pet.) (holding contractual waiver barred subrogating insurer’s
negligence claim arising from fire loss). Under these authorities, a waiver of rights
would apply to any tort claim for fire loss covered by insurance that hypothetically
5
Appellants’ Reply Brief at 16.
17
would be asserted by Bella Cima or its subrogee insurer, so the existence of a tort
claim for property damage does not of itself preclude application of the waiver.
Third, Bella Cima’s waiver of rights for insured loss should apply to its
lessee, the Allbaughs. It is undisputed that the only damages awarded were paid by
the Allbaughs’ insurer. Zbranek cited authorities supporting its contention that
Bella Cima’s waiver may apply to the Allbaughs who by means of the lease were
in vertical privity with Bella Cima as to the house. In addition to the cases cited
above relating to rights of lessees, Zbranek cited Prudential Ins. Co. of Amer. v.
Jefferson Assocs., Ltd., 896 S.W.2d 156 (Tex. 1995) and Welwood v. Cypress
Creek Estates, Inc., 205 S.W.3d 722 (Tex. App.—Dallas 2006, no pet.). In
Welwood, the court observed that in according to the Jefferson court’s holding a
secondary purchaser of the property at issue acquired no better rights than the
primary purchaser and was bound by an “as is” clause in the agreement between
primary purchaser and seller. See Welwood, 205 S.W.3d at 727-28 (enforcing “as
is” clause against subsequent purchaser aligned with original purchaser). Zbranek
believes the reasoning in those cases supports Zbranek’s contentions and warrants
the Court’s consideration.6
6
The court cites Atl. Mut. Ins. Co. v. Crow Design Centers, 148 S.W.3d 743, 744-45 (Tex.
App.—Dallas 2004, no pet.), in which the court reversed a summary judgment based on a waiver
of rights in a lease because there was no evidence for purposes of summary judgment of any
contractual relationship between the appellee and the parties to the lease. The record in this case
establishes the privity relationship between Zbranek and Bella Cima, and Bella Cima and the
Allbaughs.
18
Mid-Continent also cited MAN Engines & Components, Inc. v. Shows, 434
S.W.3d 132 (Tex. 2014), which involves an analogous principle. There the court
observed, in the context of an implied warranty claim arising out of a sale of used
yacht engines, that as a matter of Texas common law “[w]hen a manufacturer
disclaims implied warranties, such express language necessarily applies
downstream to subsequent purchasers, as Buyer # 2 cannot tenably boast a greater
warranty than that given to Buyer # 1.” Id. at 133-34. The court reiterated:
. . . [A] downstream purchaser cannot obtain a greater warranty than
that given to the original purchaser, so if the manufacturer at the point
of original sale makes a valid disclaimer of implied warranties, that
disclaimer extends to subsequent purchasers.
Id. at 140. While the warranty at issue in MAN Engines arises from the UCC,
issues of privity were left to the courts to determine under the common law. Id. at
137. Therefore the Texas Supreme Court’s privity analysis in MAN Engines
regarding warranty disclaimers, and its holding that a disclaimer made to the initial
buyer is binding on any subsequent buyer, are relevant by analogy to the question
whether contractual waivers of rights are binding on parties in vertical privity with
one of the original contracting parties. Similarly, the court in New Texas Auto
Auction Services, L.P. v. De Hernandez, 249 S.W.3d 400 (Tex. 2008), held that an
auctioneer could not be liable to downstream purchasers for negligence in the sale
of a product because the auctioneer had no duty to downstream purchasers, and
additionally because the vehicle was sold “as is.” Id. at 407. In each of these
19
instances, terms of agreement were held to apply to downstream parties. These
authorities also support Zbranek’s arguments.
Because the Allbaughs’ rights in the property as lessees derived directly
from Bella Cima as lessor, and Bella Cima could not recover from Zbranek for
insured losses due to its waiver of rights, Bella Cima’s lessees the Allbaughs
likewise should not be able to recover from Zbranek for insured losses. See, e.g.,
Welwood, 205 S.W.3d at 726-27.7 Zbranek believes the “successors and assigns”
terms in the construction contract are sufficient to express the parties’ intent that
the waiver of subrogation apply to the Allbaughs as lessees of Bella Cima,
according to the reasoning in Liberty Sign Co. v. Newsom, 426 S.W.2d 210, 214
(Tex. 1968) (holding the term “lessee” included “anyone holding through or under
[lessee].”) Zbranek respectfully submits that these authorities are relevant to the
issues and its argument warrants the Court’s consideration.
The “As Is” Clause Should Apply to Bar Recovery
4. The Court holds that Zbranek may not rely on the “as is” clause in the
Allbaughs’ lease with Bella Cima because it is not a party to the lease and, as a
general rule, may not enforce its terms. Slip op. at 10. The Court also states that
Zbranek did not cite any applicable authority that an “as is” clause in a lease
7
The Allbaughs’ rights in the property as lessees of Bella Cima derive from Bella Cima’s rights.
This fact, among others, materially distinguishes this case from Ace Prop. & Cas. Ins. Co. v.
Prime Tempus, Inc., No. 03-06-00236-CV, 2009 WL 2902713, at *4 (Tex. App.—Austin 2009,
no pet.) (mem. op.).
20
precludes a lessee’s causes of action against the manufacturer or builder of the
thing leased. Id. Zbranek respectfully submits that it cited authority to support its
contention that the “as is” clause in the Bella Cima-Allbaugh lease precludes the
Allbaughs’ claims against Zbranek because it removes the element of causation for
any loss. See Jefferson, 896 S.W.2d at 161. The court in Jefferson enforced an “as
is” term in a contract for sale of real property in favor of the seller and against both
the purchaser and the separate entity to which the purchaser subsequently sold the
property. Id. Under Jefferson, an “as is” clause negates the element of causation
because, by agreeing to purchase something “as is,” a buyer agrees to make his
own appraisal of the bargain and to accept the risk that he may be wrong. Id.
This Court, referring to Jefferson as “the leading case on the protection of
‘as is’ clauses,” enforced an “as is” clause in the sale of an apartment building in
favor of a non-party. See Income Apartment Investors, L.P. v. Bldg. Diagnostics,
Ltd., No. 03-97-00656-CV, 1998 WL 476777 (Tex. App.—Austin 1998, no pet.).
The Court expressly rejected the argument that the defendant could not benefit
from the “as is” clause in the sale contract because it was not a party to the
contract. Id. at *3. Though Zbranek cited Jefferson and Income Apartment
Investors, the Court’s opinion does not refer to either case. The Allbaugh’s claims
arose from a condition of property that they expressly accepted “as is” in the lease
with Bella Cima. Zbranek argues under those authorities that the “as is” clause
21
would have defeated the element of causation if the Allbaughs had sued Bella
Cima, the lessor of the house, and there is no reason for a different result in a claim
against the builder of the house with which Bella Cima contracted. In addition,
Zbranek pointed out the Texas Supreme Court’s opinion which asked the question
whether an upstream manufacturer could benefit from an “as is” clause in a
downstream sale to which it was not a party. See MAN Engines & Components,
434 S.W.3d at 140. The court did not answer the question for procedural reasons,
id. at 141, but Zbranek believes that this Court should address it, and hold that the
purchaser or lessor or claimant who takes under a contract with an “as is” clause
cannot “leap frog” over the immediate seller or lessor and sue a party in vertical
privity.
WHEREFORE, PREMISES CONSIDERED, Appellant Zbranek Custom
Homes, Ltd., respectfully prays that the Court reconsider its appeal for the reasons
set out above, and those in the previously filed briefs, reverse the judgment of the
trial court, and render judgment that the Allbaughs and Chubb Insurance Company
take nothing. In the alternative, Appellant Zbranek Custom Homes, Ltd., asks the
Court to reverse the judgment of the trial court and remand this case for a new trial
on all issues. Appellant Zbranek Custom Homes, Ltd., respectfully prays for all
other and further relief to which it may be entitled at law or in equity.
22
Respectfully submitted,
CHAMBERLAIN ♦ McHANEY
301 Congress Avenue, 21st Floor
Austin, Texas 78701
(512) 474-9124
(512) 474-8582 (fax)
tpoteet@chamberlainmchaney.com
dchamberlain@chamberlainmchaney.com
ewestendorf@chamberlainmchaney.com
By: /s/ Tim Poteet
Tim Poteet
State Bar No. 16170300
David E. Chamberlain
State Bar No. 04059800
Erin Westendorf-Boyd
State Bar No. 24042142
ATTORNEYS FOR APPELLANT
23
CERTIFICATE OF COMPLIANCE
This document complies with the typeface requirements of Tex. R. App. P. 9.4(e)
because it has been prepared in a conventional typeface no smaller than 14-point
for text and 12-point for footnotes. This document also complies with the word-
count limitations of Tex. R. App. P. 9.4(i)(2)(D) and contains 4,453 words,
excepting the portions listed in Tex. R. App. P. 9.4(i)(1).
By: /s/ Tim Poteet
TIM POTEET
State Bar No. 16170300
24
CERTIFICATE OF SERVICE
I hereby certify by my signature below that a true and correct copy of the
foregoing has been forwarded to counsel of record as indicated via Electronic
Court Filing, this 17th day of November, 2015:
Suzanne Radcliff
Cozen O’Connor
1717 Main Street, Suite 3400
Dallas, Texas 75201-7335
214/462-3011 Telephone
214/462-3299 Facsimile
(972) 803-1753
(972) 803-3531
By: /s/ Tim Poteet
TIM POTEET
State Bar No. 16170300
25