Rebecca Potter, Individually and as Next Friend of Austyn Vasquez, a Minor, and Richard Potter v. HP Texas 1 LLC D/B/A HPA TX LLC ( 2020 )

Affirm and Opinion Filed April 6, 2020
In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-18-01513-CV
REBECCA POTTER, INDIVIDUALLY AND AS NEXT FRIEND OF
AUSTYN VASQUEZ, A MINOR, AND RICHARD POTTER, Appellants
V.
HP TEXAS 1 LLC D/B/A HPA TX LLC, ET AL., Appellees
On Appeal from the 382nd Judicial District Court
Rockwall County, Texas
Trial Court Cause No. 1-18-1376
MEMORANDUM OPINION
Before Justices Schenck, Molberg, and Reichek
Opinion by Justice Molberg
Rebecca Potter, individually and as next friend of Austyn Vasquez,1 and
Richard Potter challenge the trial court’s rendition of a take-nothing summary
judgment on their fraudulent concealment, fraud, Deceptive Trade Practices Act
(DTPA), negligent misrepresentation, negligence, negligence per se, and breach of
contract claims against HP Texas 1 LLC d/b/a HPA TX LLC (HPA), SER Texas
LLC d/b/a Hyperion Homes Texas LLC, Home Partners of America, Inc., and
1
Austyn is Rebecca’s son from a prior marriage.
OPVHHJV LLC d/b/a Pathlight Property Management (Pathlight) (collectively,
HPA parties), and on their negligence and negligent misrepresentation claims
against Coats Group Real Estate Co. d/b/a/ CGC Construction (Coats). While the
Potters assert five issues on appeal, the central issue before us is whether an
unambiguous “as is” provision in a residential lease with an option to purchase
precludes the Potters’ claims. We conclude the “as is” provision is enforceable and
negates the essential element of causation of their claims. We affirm the trial court’s
judgment.
BACKGROUND
The Potters’ suit arises out of illness and injuries allegedly caused by toxic
mold in a house they leased from HPA, with an option to purchase. In 2015, the
Potters began looking for a home to purchase in the Rockwall, Texas area. Richard
had credit issues from his prior divorce. While researching their options, Rebecca
found a real estate agent, Lori Aguirre, who introduced the Potters to a program
offered by HPA which provides a pathway to home ownership for consumers unable
to secure a traditional home loan. Under this program, after the consumer’s
application is approved, HPA purchases a house selected by the applicant and leases
it to the applicant with the option to purchase the house at a later date. Pathlight, a
property management company owned by HPA, manages HPA’s leased properties.
HPA provides the details of the house selected by the applicant to Pathlight and to
US Inspect, a third-party inspection company. Pathlight coordinates US Inspect and
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an HPA-approved contractor to conduct an inspection and make the repairs deemed
necessary by the inspection report. In this case, Coats was the contractor selected
by Pathlight to walk through the house with the inspector and to make repairs.
After their application to HPA was approved for a certain sum, Aguirre’s
assistant, James Mudd, took the Potters to see properties, including the house that is
the subject of this lawsuit (Kings Pass house). Before requesting HPA to purchase
the Kings Pass house, the Potters walked through it. Rebecca’s deposition testimony
reflected that because the house did not have electricity on their first visit, they could
not see it well. After Mudd took Rebecca to see the house again “[in] the daylight,”
the Potters informed Aguirre and Mudd they wanted to proceed with the Kings Pass
house. The Potters did not hire their own inspector and no one prevented them from
doing so. According to Rebecca, “We were told that the inspection was done on
[HPA’s] end and that . . . we do not do an inspection on the home until the time of
purchase.” Rebecca testified:
We were instructed that there was going to be an inspection and
so forth. And that if the inspection [had] issues, it would be
addressed, whatnot, was our understanding. So then we were
continuously told that we were not allowed to see the inspection
report. But assuming—my husband and I assumed, that if there
was something wrong, of course, they would tell us. And at least
without seeing the report, they would notify us. . . . So we did not
hear that there was [sic] any issues, so at that point we went ahead
and said we’d like to proceed on with the home.
On May 13, 2015, Rebecca and Richard, as tenants, and HPA, as landlord,
entered into a lease agreement with a right to purchase clause which, if exercised,
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allowed the Potters to buy the Kings Pass house with a specified credit applied to
the purchase price. Under the lease agreement, Pathlight was HPA’s property
manager and agent. The Potters signed four documents agreeing to accept the house
“AS-IS, WHERE-IS, WITH ALL FAULTS”: the Residential Lease Agreement
(Lease), a Residential Right to Purchase Agreement (Right to Purchase Agreement),
a Repair, Maintenance & Improvement Addendum To Residential Lease & Right
To Purchase, and a Real Estate Sale Contract. Paragraph nine of the seventeen-page
Lease (not including attachments) stated:
9. MOVE-IN CONDITION OF PREMISES. Tenant represents,
agrees and warrants that Tenant has inspected the Premises and
acknowledges that the Premises are in good order, repair and in a
safe, clean and habitable condition. No representations as to the
condition or repair of the Premises have been made by Landlord
prior to or at the execution of this Lease that are not contained in
this Lease. Tenant will be provided with a Move-In Condition
form (“Condition Form”) for the Premises on or before the
Commencement Date and, within 3 Business Days after the
Commencement Date, Tenant must sign and return to Landlord or
Landlord’s Agent (as requested) the Condition Form on which
Tenant must note all defects or damage relating to the Premises
(except to the extent caused by or on behalf [sic] Tenant or an
Occupant). . . . Except for the covenants of Landlord expressly
contained in this Lease, and the other written documents among
the parties pertaining to the Premises, and as otherwise specified
by Applicable Laws, (a) Tenant hereby represents, warrants and
acknowledges that it is leasing the Premises in its “AS-IS,
WHERE-IS, WITH ALL FAULTS” condition as of the date of
this Lease and specifically and expressly without any warranties,
representations or guarantees, either express or implied, as to its
condition, fitness for any particular purpose, merchantability,
habitability or any other warranty of any kind, nature, or type
whatsoever from or on behalf of Landlord . . . .
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Paragraph forty of the Lease reiterated the Potters were taking the house with no
warranties of any kind, including the warranty of habitability:
40. ENTIRE AGREEMENT; MODIFICATION. . . . Landlord
and Tenant expressly agree that . . . there are and shall be no
implied warranties of merchantability, habitability, suitability,
fitness for a particular purpose or of any other kinds arising out of
the Lease or the Premises, all of which are hereby waivd by Tenant
....
Attachment D to the Lease, also signed by Rebecca and Richard, included “State
(Texas) and Federal Disclosures” which addressed, among other things, asbestos,
lead-based paint, and mold. The mold clause stated:
Mold is naturally occurring and may cause health risks or damage
to property. If Tenant is concerned or desires additional
information regarding mold, Tenant should contact an appropriate
professional.
The Right to Purchase Agreement included a “Condition of Premises” clause
containing the same “AS-IS, WHERE-IS, WITH ALL FAULTS” language as the
Lease:
2. CONDITION OF PREMISES. EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES OF SELLER
EXPRESSLY SET FORTH IN THIS AGREEMENT OR IN ANY
OTHER DOCUMENT EXECUTED BY SELLER PURSUANT
TO THIS AGREEMENT OR THE EXECUTED PURCHASE
CONTRACT AND TO THE GREATEST EXTENT ALLOWED
BY APPLICABLE LAW, (A) PURCHASE RIGHT HOLDER,
FOR ITSELF AND ON BEHALF OF PURCHASER, HEREBY
REPRESENTS, WARRANTS AND ACKNOWLEDGES THAT
PURCHASER IS PURCHASING THE PREMISES IN ITS “AS-
IS, WHERE-IS, WITH ALL FAULTS” CONDITION AS OF
THE DATE OF EXECUTION OF THE EXECUTED
PURCHASE CONTRACT AND THE CLOSING DATE AND
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SPECIFICALLY AND EXPRESSLY WITHOUT ANY
WARRANTIES, REPRESENTATIONS OR GUARANTEES,
EITHER EXPRESS OR IMPLIED, AS TO ITS CONDITION,
FITNESS FOR ANY PARTICULAR PURPOSE,
MERCHANTABILITY, HABITABILITY OR ANY OTHER
WARRANTY OF ANY KIND, NATURE, OR TYPE
WHATSOEVER FROM OR ON BEHALF OF SELLER; (B)
SELLER SPECIFICALLY DISCLAIMS ANY WARRANTY,
GUARANTY OR REPRESENTATION, ORAL OR WRITTEN,
PAST OR PRESENT, EXPRESS OR IMPLIED, CONCERNING
THE PREMISES . . . . PURCHASE RIGHT HOLDER
ACKNOWLEDGES AND AGREES THAT: (I) THE
PURCHASE PRICE WAS NEGOTIATED WITH THE
EXPRESS UNDERSTANDING THAT PURCHASE RIGHT
HOLDER IS RESPONSIBLE FOR ALL PROPERTY
MAINTENANCE NEEDS OF THE PREMISES PURSUANT
TO THE LEASE (EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED IN THE LEASE TO THE CONTRARY), THIS
AGREEMENT AND THE EXECUTED PURCHASE
CONTRACT . . . .
The first paragraph of the Repair, Maintenance & Improvement Addendum To
Residential Lease & Right To Purchase stated:
1. Tenant has agreed to accept possession of the Premises in its
current AS-IS, WHERE-IS, WITH ALL FAULTS condition, and
except as expressly set forth in the Agreements or as provided by
Applicable Laws, Landlord has no obligation to repair, improve,
alter or remodel the Premises.
Finally, the Real Estate Sale Contract stated:
7. PROPERTY CONDITION: . . . B. ACCEPTANCE OF
PROPERTY CONDITION: This Contract is for the sale of the
real estate and property (including fixtures, equipment and
personal property) in its “AS IS, WHERE IS, WITH ALL
FAULTS” condition, and Purchaser acknowledges and agrees that
. . . (b) the sale of the Property is without any representations or
warranties by Seller, including, without limitation, habitability or
fitness for a particular purpose . . . .
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After signing the Lease and related agreements, but prior to moving in,
Rebecca and Richard went into the house when they “drove by [and] saw that there
were workers there” making repairs. Rebecca testified:
So my husband and I went in. And that is when we spoke to the
head contractor. They were walking through the house and then
he told us that we were not supposed to be there. . . . And we
asked, why wouldn’t we be able to be there if we’re purchasing
the home? And he said that it’s just policy, we’re not to be there.
And when he had told us that, I had just opened the downstairs
bedroom, slash, office door, and noticed [that] room had not been
touched whatsoever. And I asked him, well, are you going to paint
this room? And then my husband and I saw bubbling [on] and
. . . deformity of a wall. And then on the opposite wall, there was
a lot of black coming out of a cable socket. And we asked him
about that. He said that was dirt due to no one living there for
quite a while. And that the wall issue was due to clogged gutters,
so that he would have that cleaned.
A couple of days before the Potters moved in, they inspected the house again and
saw “the dirt was removed from the wall socket” and the wall had been “stuccoed”
and painted. Richard was present when “the carpet gentleman [was] pulling the
carpet up in the master bedroom, and there was like, black underneath the carpet.”
When Richard asked what the black substance was, “the carpet gentleman said that
was [the] previous owner’s dog feces.” Richard offered to personally pay for a new
carpet pad when the carpet repairman said “all new padding . . . was not in the
[repair] allowance.”
The Potters moved into the house on May 25, 2015, and almost immediately
started having problems, including a broken air conditioning system and
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malfunctioning appliances. In June, Sam Jang from Pathlight conducted a
walkthrough inspection of the house with the Potters and documented their concerns,
including more black substance coming out of the cable receptacle in the wall and a
leak within a wall. Jang contacted Coats and requested further repairs but Coats did
not return to the house or make any further repairs.
Rebecca testified that after living in the house for several months, she became
ill and suffered flu-like symptoms, blurry vision, skin blisters and inflammation,
itchiness, fatigue, memory loss, migraine headaches, bone and joint pain, loss of
mobility, sinus problems, nail fungus, depression, and stuttering. Shortly after
Rebecca’s symptom began, Austyn became ill, suffering flu-like symptoms, bone
and joint pain, body aches, migraine headaches, and depression. Rebecca and
Austyn visited physicians, who were unable to diagnose the cause of their symptoms.
Richard lost business and wages during Rebecca’s illness, as he cared for her and
took her to doctor appointments.2 Ultimately, Richard had to close his business and
seek new employment to support his family.
In January 2016, the Potters confirmed the presence of toxic mold in the house
after hiring a mold specialist and an inspector at the suggestion of a neighbor. The
Potters moved out of the house, staying at a hotel before they moved in with friends.
2
Richard also sustained skin blisters after moving into the house. At his deposition, Richard testified
he traveled for work and the blistering cleared up when he was traveling.
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On March 17, 2017, the Potters executed a Lease Termination Agreement effective
as of that date, terminating the Lease and Right to Purchase Agreement.
On June 1, 2016, the Potters filed suit against the HPA parties and
subsequently added Coats as a defendant. Their live petition asserted claims for
fraudulent concealment, fraud, DTPA violations, negligent misrepresentation,
negligence, negligence per se, and breach of contract against the HPA parties, and
claims for negligence and negligent misrepresentation against Coats. The HPA
parties and Coats moved for traditional and no-evidence summary judgment on
several grounds, including: the “as is” clause defeated the causation element of the
Potters’ claims; the Potters had actual knowledge of the defects subject of their
lawsuit; the Potters contractually waived all claims against HPA and its agents for
their alleged injuries; the Potters contractually agreed to “obtain insurance and look
solely to that insurance for any recovery” on their claims; and the Potters had no
evidence of one or more of the essential elements of their claims. Coats additionally
moved for summary judgment based on the economic loss doctrine because the
Potters did not have a contract with Coats.3 In a letter opinion dated July 5, 2018,
the trial court granted summary judgment in favor of appellees expressly based on
3
Coats was not party to the Lease or related agreements and he was not hired by the Potters to make
repairs to the house. Nor did the Potters assert claims against Coats based on third-party beneficiary status.
The US Inspect report did not indicate the Kings Pass house had mold, and the Potters do not claim Coats
had either a duty to inspect the house for mold or “direct knowledge” of the existence of mold before they
signed the Lease and related agreements.
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its findings that the “as is” clause defeated the causation element of the Potters’
claims and there was no evidence appellees had actual knowledge of—or attempted
to conceal—the presence of mold; the inspection report prepared by US Inspect at
HPA’s request did not show the presence of mold so it would not have alerted the
Potters to the presence of mold if they had received a copy; and there was no
evidence the Potters were prevented from inspecting the house on their own. The
trial court entered its order granting summary judgment on September 21, 2018. The
Potters’ motion for new trial, filed on October 16, 2018, was denied by operation of
law. This appeal followed.
APPLICABLE LAW
Standard of Review
A party may move for a no-evidence summary judgment if there is no
evidence of one or more essential elements of a claim or defense on which an adverse
party would have the burden of proof at trial. TEX. R. CIV. P. 166a(i); Fort Worth
Osteopathic Hosp., Inc. v. Reese, 148 S.W.3d 94, 99 (Tex. 2004); Randall’s Food
Mkts., Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex. 1995). No-evidence summary
judgment is proper when:
(a) there is a complete absence of evidence of a vital fact, (b) the
court is barred by rules of law or of evidence from giving weight
to the only evidence offered to prove a vital fact, (c) the evidence
offered to prove a vital fact is no more than a mere scintilla, or (d)
the evidence conclusively establishes the opposite of the vital fact.
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Merriman v. XTO Energy, Inc., 407 S.W.3d 244, 248 (Tex. 2013). To defeat a no-
evidence motion, the nonmovant must produce more than a scintilla of probative
evidence raising a genuine issue of material fact as to each challenged element of its
cause of action. Id. If the nonmovant fails to do so, the trial court must grant a no-
evidence summary judgment motion. See TEX. R. CIV. P. 166a(i). “Less than a
scintilla of evidence exists when it is ‘so weak as to do no more than create a mere
surmise or suspicion’ of a fact.” King Ranch, Inc. v. Chapman, 118 S.W.3d 742,
751 (Tex. 2003) (quoting Kindred v. Con/Chem., Inc., 650 S.W.2d 61, 63 (Tex.
1983)).
To prevail on a traditional motion for summary judgment, a movant must
conclusively establish there is no genuine issue of material fact and, therefore, the
movant is entitled to judgment as a matter of law. TEX. R. CIV. P. 166a(c). A matter
is conclusively established if ordinary minds cannot differ as to the conclusion to be
drawn from the evidence. Triton Oil & Gas Corp. v. Marine Contractors & Supply,
Inc., 644 S.W.2d 443, 446 (Tex. 1982). If the movant establishes its right to
judgment as a matter of law, then the burden shifts to the nonmovant to either present
evidence raising a genuine issue of material fact by producing more than a scintilla
of evidence regarding the challenged element, or conclusively prove all elements of
an affirmative defense. Neely v. Wilson, 418 S.W.3d 52, 59 (Tex. 2013); M.D.
Anderson Hosp. & Tumor Inst. v. Willrich, 28 S.W.3d 22, 23 (Tex. 2000). More
than a scintilla of evidence exists when reasonable and fair-minded jurors could
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differ in their conclusions in light of all of the summary judgment evidence.
Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 755 (Tex. 2007).
If both traditional and no-evidence summary judgments are before us, we
generally first look at the no-evidence motion. First United Pentecostal Church of
Beaumont, d/b/a the Anchor of Beaumont v. Parker, 514 S.W.3d 214, 219 (Tex.
2017) (when party moves for both traditional and no-evidence summary judgments,
reviewing court first considers no-evidence motion); Ford Motor Co. v. Ridgeway,
135 S.W.3d 598, 600 (Tex. 2004). In our de novo review, we consider all the
evidence in the light most favorable to the nonmovant, crediting evidence favorable
to the nonmovant if reasonable jurors could, and disregarding contrary evidence
unless reasonable jurors could not. Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572,
582 (Tex. 2006). If the nonmovant fails to meet its burden under the no-evidence
standard, there is no need to address the traditional motion. Merriman, 407 S.W.3d
at 248. Any claims that survive the no-evidence review then undergo review under
the traditional standard. Parker, 514 S.W.3d at 219–20. When the trial court does
not specify the grounds upon which it granted summary judgment, we must affirm
if any of the independent summary judgment grounds is meritorious. FM Props.
Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000). However, when,
as in this case, the trial court explicitly specifies the ground upon which it granted
summary judgment, we affirm only if the theory relied upon is meritorious;
otherwise the case must be remanded to allow the trial court to rule on the remaining
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asserted grounds. State Farm Fire & Casualty Co. v. S.S., 858 S.W.2d 374, 381
(Tex. 1993).
The Enforceability of “As Is” Provisions
Generally, an “as is” clause negates the causation and reliance elements in
DTPA, fraud, negligence, and breach of contract claims, as a matter of law.
Prudential Ins. Co. of Am. v. Jefferson Assocs., Ltd., 896 S.W.2d 156, 160 (Tex.
1995); CAS, Ltd. v. TM Aviation Partners, LP, No. 05-15-00779-CV, 2016 WL
4151455, at *6 (Tex. App.—Dallas Aug. 4, 2016, no pet.) (mem. op.); Williams v.
Dardenne, 345 S.W.3d 118, 123–24 (Tex. App.—Houston [1st Dist.] 2011, pet.
denied). Prudential involved the enforceability of the following “as is” provision in
a commercial real estate contract for the purchase of an office building:
As a material part of the consideration for the Agreement, Seller
and purchaser agree that Purchaser is taking the Property “AS IS”
with any and all latent and patent defects and that there is no
warranty by Seller that the Property is fit for a particular purpose.
Purchaser acknowledges that it is not relying on any
representation, statement or other assertion with respect to the
Property condition, but is relying upon it examination of the
Property . . . .
Prudential Ins. Co. of Am., 896 S.W.2d at 160. Two years after purchasing the
building, the buyer learned it contained asbestos and sued the seller alleging DTPA
violations, fraud, negligence, and breach of the duty of good faith and fair dealing.
The trial court entered judgment on a jury verdict in favor of the buyer and the court
of appeals affirmed. Concluding the buyer’s agreement to purchase the property “as
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is” precluded him from proving the causation element of his claims, the supreme
court reversed the judgment of the court of appeals and rendered judgment that the
buyer take nothing on his claims. The court explained, “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. at 161; see also Williams, 345 S.W.3d 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.”). In such case, the seller gives no assurances, express or implied,
concerning the value or condition of the thing sold, and the buyer chooses to rely
completely on his own determination of the condition and value of the purchase,
removing the possibility that the seller’s conduct will cause him damage.4
Prudential Ins. Co. of Am., 896 S.W.2d at 161. The “sole cause” of a buyer’s injury
in this circumstance “is the buyer himself”:
[The buyer] has agreed to take the full risk of determining the
value of the purchase. He is not obliged to do so; he could insist
instead that the seller assume part or all of that risk by obtaining
warranties to the desired effect. If the seller is willing to give such
assurances, however, he will ordinarily insist upon additional
compensation. Rather than pay more, a buyer may choose to rely
entirely upon his own determination of the condition and value of
his purchase. In making this choice, he removes the possibility
that the seller’s conduct will cause him damage.
4
As in the case before us, the terms of a typical “as is” agreement also disclaim the existence of any
express or implied warranties. See Prudential Ins. Co. of Am., 896 S.W.2d at 161 (citing TEX. BUS. &
COM. CODE § 2.316(c)(1)).
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Id.
However, there are exceptions to the general rule. A buyer is not bound by
an “as is” provision that is the product of fraudulent representation or concealment
by the seller. Id. at 162. Nor is a buyer bound by an “as is” provision if he is entitled
to inspect the condition of what is being sold but is prevented from doing so by the
seller’s conduct. Id. (“In circumstances such as these[,] an ‘as is’ agreement does
not bar recovery against the seller.”). In determining the enforceability of an “as is”
provision, we also consider the totality of the circumstances surrounding the
agreement, such as whether the “as is” clause is an important part of the basis of the
bargain, rather than an incidental or boilerplate provision, and whether the parties
have relatively equal bargaining positions. Id.
ANALYSIS
Causation is an essential element of each of the Potters’ theories of liability.
Negligence, negligence per se, negligent misrepresentation, and fraud require proof
of proximate cause. Prudential Ins. Co. of Am., 896 S.W.2d at 160–61 (negligence);
Aranda v. Willie Ltd. P’ship, No. 03-15-00670-CV, 2016 WL 3136884, at *1 (Tex.
App.—Austin June 1, 2016, no pet.) (mem. op.) (negligence per se); Affordable
Power, L.P. v. Buckeye Ventures, 347 S.W.3d 825, 830 (Tex. App.—Dallas 2011,
no pet.) (negligent misrepresentation); S & I Mgmt., Inc. v. Choi, 331 S.W.3d 849,
856 (Tex. App.—Dallas 2011, no pet.) (fraud). Claims brought under the DTPA
require a showing of “producing cause.” TEX. BUS. & COM. CODE § 17.50(a);
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Prudential Ins. Co. of Am., 896 S.W.2d at 161. Causation also is an essential element
for breach of contract and fraud by nondisclosure claims. CAS, Ltd., 2016 WL
4151455, at *6 (breach of contract); Mead v. Gray, No. 02-16-00177-CV, 2017 WL
1738066, at *4 (Tex. App.—Fort Worth May 4, 2017, pet. denied) (mem. op.) (fraud
by nondisclosure). Accordingly, all of the Potters’ claims require proof the
complained-of conduct was a substantial factor giving rise to the injury which
otherwise would not have occurred. See Mack Trucks, Inc., 206 S.W.3d at 582
(proximate and producing causation requires showing defendant’s conduct was
substantial factor in causing injury); City of Austin v. Houston Lighting & Power,
844 S.W.2d 773, 795 (Tex. App.—Dallas 1992, writ denied) (breach of contract
claim requires showing breach was substantial factor in causing the injury); Frost
Nat’l Bank v Heafner, 12 S.W.3d 104, 110 n.4 (Tex. App.—Houston [1st Dist.]
1999, pet. denied) (same); see also Schlumberger Tech. Corp. v. Swanson, 959
S.W.2d 171, 181 (Tex. 1997) (“Fraud by nondisclosure is simply a subcategory of
fraud because, where a party has a duty to disclose, the non-disclosure may be as
misleading as a positive misrepresentation of facts.”).
On appeal, the Potters do not dispute the Lease and related agreements contain
an “as is” clause that ordinarily would preclude them from recovering on their
claims. Instead, they maintain the trial court erred in granting summary judgment
because the summary judgment evidence raised fact issues regarding the
enforceability of the “as is” provision. In issues one through four, the Potters
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challenge the trial court’s traditional summary judgment against them; their fifth
issue challenges the trial court’s no-evidence summary judgment.
In their first issue, the Potters argue the “as is” clause is not binding on them
because: (1) the HPA parties “were more sophisticated in real estate” than they
were; (2) the “as is” clause was “buried in lengthy agreements full of boilerplate
provisions”; (3) “the agreements did not expressly disclaim reliance upon any
representations”5; and (4) the HPA parties “knowingly concealed material facts.” In
their second issue, the Potters contend the “as is” clause is not binding on them
because they did not have actual knowledge of mold in the house and the HPA
parties concealed or failed to disclose the existence of mold. In their fifth issue, the
Potters contend the summary judgment evidence established all of the challenged
elements of their claims. To raise a fact issue on the enforceability of the Lease’s
“as is” clause, the Potters were required to adduce more than a scintilla of evidence
to support their arguments in response to the HPA parties’ and Coats’ motions for
summary judgment. We conclude the summary judgment evidence did not raise a
5
Because a valid “as is” clause negates the causation and reliance elements of DTPA, fraud, negligence,
and breach of contract claims relating to the condition of the property, and we conclude the “as is” clause
in the Lease is enforceable, we do not separately address the Potters’ argument with respect to reliance. See
Prudential Ins. Co. of Am., 896 S.W.2d at 161; CAS, Ltd., 2016 WL 4151455, at *6; Williams, 345 S.W.3d
at 124.
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fact issue pertaining to the enforceability of the “as is” clause, and the causation
element of their claims was defeated as a matter of law.6
The Conditions the Subject of the Potters’ Claims Were
Visible or Discoverable by Inspection
As a preliminary matter, we note the summary judgment record shows the
presence of mold in the house was not confirmed until January 2016, approximately
seven months after the Potters moved in. The inspection report generated by US
Inspect and provided to Coats did not indicate the presence of mold, and there is no
evidence in the record the HPA parties otherwise were aware there was mold in the
house. Before they entered into the Lease and related agreements, Rebecca walked
through the house twice and Richard walked through the house once. After signing
the Lease but prior to moving in, the Potters visited the house again and saw “black
substance” on the wall and coming out of a wall socket. Rebecca testified she saw
“bubbling” and “deforming” of a wall that, according to a workman, was caused by
“clogged gutters.” In a subsequent visit prior to moving in, Richard saw “black
underneath the carpet” being removed by a carpet repairman. When they were told
by workmen the black substance was dirt and dog feces, the Potters did not further
investigate. There is no indication in the record they took a closer look at the black
6
Because we conclude the “as is” provision is binding on the Potters, we need not address their third
and fourth issues, in which they argue, respectively, the trial court erred because they “had the required
insurance in place,” and because the economic loss rule does not bar their claims against Coats for damages
that are not the subject of a contract.
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substance to verify it was dirt or dog feces. Nor is there evidence they alerted or
questioned their real estate agent, Pathlight, or HPA about the black substance, the
clogged gutters, or the wall deformity. The Potters did not hire an inspector to
conduct an independent inspection, and the HPA parties did not prevent them from
doing so. Although the Potters were not provided a copy of the US Inspect report,
there is no evidence they asked to see it until long after they moved in, even after
personally observing black substance on the wall, coming out of a wall socket, and
underneath a carpet, as well as “bubbling” and “deformity” of a wall purportedly
caused by clogged gutters and, therefore by implication, water damage.
Rather, knowing they were taking the property “as is,” the Potters moved into
the house. By taking the house “as is,” the Potters agreed to make their own
appraisal of the property and accept the risk they may be wrong; and their
independent examination of the house and the visibility of the black substance and
wall deformity precludes a showing of causation. See Lim v. Lomeli, No. 04-06-
00389-CV, 2007 WL 2428078, at *4 (Tex. App.— San Antonio Aug. 29, 2007, no
pet.) (mem. op.) (holding buyers could not prove causation or reliance on their real
estate agent’s alleged misrepresentations and nondisclosures regarding water
damage to house when agent and buyers had same information available to them:
visible damage and information disclosed in buyer's inspection report). Based upon
the evidence before us, we conclude the conditions subject of the Potters’ claims
were visible or discoverable by inspection, and the Potters did not present more than
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a scintilla of evidence the HPA parties knew anything more or different than they
did about the condition of the house.
We now turn to the question of whether the “as is” clause in the Lease should
not be enforced due to the surrounding circumstances, the imbalance in the parties’
sophistication in real estate contracts, and/or because the HPA parties and Coats
fraudulently misrepresented and concealed material facts.
Surrounding Circumstances and Sophistication of the Parties
The Potters contend the “as is” clause in the Lease is not binding on them
because the HPA parties were “more sophisticated in real estate” than they were,
and because the “as is” clause was “buried in lengthy agreements full of boiler plate
[sic] provisions.”
We will not dispute the “as is” clause in the Lease and related agreements
were boilerplate provisions, and there is no indication in the record that the terms of
the Lease were negotiated. However, we are not convinced the Potters were so
unsophisticated that enforcing the provision would be inequitable. HPA is a large,
national company that specializes in rent-to-own residential real estate transactions
and undoubtedly has a great deal of sophistication vis-à-vis many buyers in those
transactions. The Potters, however, did not face the HPA parties alone. During their
dealings with the HPA parties, they were represented by Aguirre, who owned her
own real estate agency. Also, Richard was no stranger to contracts. His deposition
testimony reflected that at the time he moved into the Kings Pass house, he owned a
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business that contracted with manufacturers in various industries to build and
“automate facilities” and he owned another business that specialized in “robotics.”
Far from being inconspicuous, the “AS-IS, WHERE-IS, WITH ALL
FAULTS” provision was prominent and set in all capital letters for emphasis in the
Lease (in paragraph nine), Right to Purchase Agreement (in paragraph two), Real
Estate Sale Contract (in paragraph seven), and Repair, Maintenance & Improvement
Addendum (in paragraph one)—all four of which were signed on the same day by
both Rebecca and Richard. Moreover, under paragraphs nine and forty of the Lease,
the Potters expressly leased the house with no warranties of any kind, including
merchantability, habitability, suitability, or fitness for a particular purpose. The
Lease included an “Attorney Review” clause acknowledging the Lease had been
“freely negotiated by both parties” and the Potters had the opportunity to consult
with an attorney regarding its terms. On April 21, 2015, the Potters signed a
“Document Review Acknowledgement” (Acknowledgement) representing they
“completely read and voluntarily accept[ed] the terms and conditions of” the Lease,
Right to Purchase Agreement, and Acknowledgement. The Potters do not claim they
were not aware of the “as is” provision, and their acknowledgement they read the
provision is significant because “every person [with legal] capacity . . . is held to
know what words were used in the contract, to know their meaning, and to
understand their legal effect.” Amouri v. Sw. Toyota, Inc., 20 S.W.3d 165, 169 (Tex.
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App.—Texarkana 2000, pet. denied). For the same reasons, we do not believe the
“as is” provisions was not an important basis of the bargain.
Under these circumstances, we conclude the Potters are not entitled to have
the “as is” clause set aside on the grounds they were unsophisticated purchasers
agreeing to boilerplate provisions.
Fraudulent Representation and Concealment
The Potters also contend the “as is” clause is not enforceable because the HPA
parties and Coats fraudulently misrepresented and concealed material facts,
including a statement in the HPA “Standards Acknowledgment Form” that “every
effort will be made to address known life-safety, mechanical and critical
maintenance issues”; a statement on HPA’s website that “they inspect the homes to
guarantee a happy, healthy and safe family dwelling”; and a number of
“deficiencies” identified in the US Inspect report “including with the roof, ceilings
and floors, walls and windows” and “indications of past water leaks” on specified
ceilings. The Potters also claim they understood they would be “contact[ed] if there
were any issues regarding the inspection” but, instead, the HPA parties
“intentionally denied [them] a copy of the US Inspect report” and “told [the Potters
they] were not to have the house inspected until the time of their actual purchase” in
order to conceal these defects. They further complain that although the US Inspect
report recommended a roofer be consulted for further evaluation of necessary roof
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repairs, the HPA parties and Coats “never hired or consulted with a professional
roofer.”
In order to set aside the “as is” clause on the basis of fraudulent
misrepresentation, the Potters must show appellees had actual knowledge the
representation was false or fraudulent at the time it was made. Prudential Ins. Co.
of Am., 896 S.W.2d at 162 (refusing to set aside “as is” clause because “[w]hile there
may be evidence Prudential should have suspected the presence of asbestos[,] there
is no evidence [Prudential] actually knew of the asbestos” and “[a] seller has no duty
to disclose facts he does not know”). On appeal, the Potters concede they “never
claimed Appellees had direct knowledge of the existence of mold prior to Appellants
entering into the Agreements.” And under Prudential, the HPA parties had no duty
to investigate the presence of mold in the house. Id. at 162–63 (“Absent any specific
knowledge of asbestos in the [building], Prudential was not obligated to raise the
subject.”). The US Inspect report did not indicate there was mold in the house; and
any knowledge by appellees that there may have been water leaks in the house at
some point in time does not equate to knowledge of the presence of mold.
Moreover, while Rebecca testified it was her “understanding” that she and
Richard would be told if there were “issues” with the inspection and they were told
they “do not do an inspection on the home until the time of purchase,” the Lease and
related addendums signed by the Potters explicitly stated: the Potters “inspected the
Premises and acknowledg[e] that the premises are in good order, repair and in a safe,
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clean and habitable condition”; HPA has made “[n]o representations as to the
condition or repair of the Premises . . . prior to or at the execution of th[e] Lease”;
the Potters were leasing the house in its “AS-IS, WHERE-IS, WITH ALL FAULTS”
condition and “specifically and expressly without any warranties, representations or
guarantees, either express or implied, as to its condition . . . habitability or any other
warranty of any kind”; and the Potters should “contact an appropriate professional”
if they were “concerned or desire[d] additional information regarding mold.” The
Lease further stated that the Lease and Lease addendums, Right to Purchase
Agreement, and Document Review Acknowledgement constituted the “complete
and entire agreement” between the parties and “no representations or oral statements
of either party [were] binding unless contained” therein.
Even when every reasonable inference is indulged in their favor, the Potters
failed to present more than a scintilla of evidence the HPA parties knew anything
more or different than the Potters did about the presence of mold in the house or
fraudulently concealed or made fraudulent misrepresentations regarding the
conditions of the house the subject of the Potters’ claims. To the contrary, record
evidence shows the Potters had ample opportunity to inspect the house; and they, in
fact, observed a black substance that may have been mold on the wall and deformity
of a wall while the HPA parties did not. That is all that is required to defeat the
elements of causation.
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We are not unsympathetic to the Potters’ case. The summary judgment
evidence indicates Rebecca became seriously ill while living in the Kings Pass
house, and she and Richard went to great lengths to diagnose the cause of symptoms
so debilitating that she, at times, was unable to care for her child. Austyn, too,
suffered serious symptoms that rendered him unable to attend school—symptoms
that were alleviated when he left the Kings Pass house to visit his father. The
summary judgment evidence also indicates the possibility that while appellees did
not know or conceal that the Kings Pass house had toxic mold, a mold inspection
might have revealed the presence of mold. But under Prudential and the terms of
the Lease, the HPA parties had no duty to investigate the presence of mold in the
house. Prudential Ins. Co. of Am., 896 S.W.2d at 162–63. Moreover, Addendum D
to the Lease included a mold clause that expressly advised the Potters to “contact an
appropriate professional” if they were “concerned or desire[d] additional
information regarding mold.” Because there is no evidence of intentional
misrepresentation or fraudulent concealment by the HPA parties, the Potters are not
entitled to have the “as is” clause set aside on either of those bases.
We conclude the Potters failed to raise a fact issue as to the enforceability of
the “as is” clause, and the trial court properly determined the “as is” clause negated
the causation element of the Potters’ claims against appellees as a matter of law. We
resolve the Potters’ first, second, and fifth issues against them.
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Having resolved the Potters’ first, second, and fifth issues against them, we
need not address their third and fourth issues. We affirm the trial court’s judgment.
/Ken Molberg//
KEN MOLBERG
JUSTICE
181513f.p05
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Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
REBECCA POTTER, INDIVIDUALLY On Appeal from the 382nd Judicial District
AND AS NEXT FRIEND OF AUSTYN Court, Rockwall County, Texas
VASQUEZ, A MINOR, AND RICHARD Trial Court Cause No. 1-18-1376.
POTTER, Appellants Opinion delivered by Justice Molberg.
Justices Schenck and Reichek participating.
No. 05-18-01513-CV V.
HP TEXAS 1 LLC D/B/A HPA TX LLC,
ET AL., Appellees
In accordance with this Court’s opinion of this date, the judgment of the trial court is
AFFIRMED.
It is ORDERED that each party bear its own costs of this appeal.
Judgment entered this 6th day of April, 2020.
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