CONSUMER LAW

WINTER 2009-2010

Robertson v. Odom, W.L. 2370980; LEXIS 5960 (Tex. App.—Houston [14^th Dist.] 2009)

“Previous Structural or Roof Repair” as Used in Texas Association of Realtors’ Seller’s Disclosure Notice Means Work Performed on Load-Bearing Portions of Residence: Prior to the sale to the plaintiffs, the defendant’s town home was “reclad” with a “hard-coat” stucco exterior. Rain water entered the town home during the recladding process, causing damage to the kitchen sink, cabinets, sheetrock, and bathroom fixtures. The defendant made repairs to these items, continued with the recladding process (which later failed) and, a year later, listed the town home for sale. In completing the Texas Association of Realtors standard Seller’s Disclosure Notice (required by Texas Property Code § 5.008), the defendant checked the box stating he was “Not Aware” of “Other Structural Repairs.” In this suit for real estate fraud and DTPA misrepresentations, the plaintiff asserted that the rain storm repairs to the sink, cabinets, bathroom fixtures and drywall were misrepresented on the Seller’s Disclosure and should have been disclosed as “structural repairs.” Held: Since the repairs were not done to the load-bearing portions of the town house, they did not meet the definition of “structural repairs” as a matter of law and were not misrepresented.

Okland v. Travelocity.com, Inc., W.L. 1740076; LEXIS 4646 (Tex. App.—Ft. Worth 2009) (mem. op.)

Consumer Status: Business Owner’s Wife Was Not a Consumer When She Used the Corporation’s Credit Card to Purchase Hotel Rooms on Internet: In this class action, the plaintiffs alleged that Travelocity.com misrepresented it was collecting amounts for “taxes” on internet hotel reservations which were not the true taxes paid and collected by taxing entities in violation of the DTPA. In a plea to the jurisdiction, Travelocity.com challenged the plaintiff Carolee Okland’s status as a “consumer” under the DTPA because she did not use her own funds to purchase the hotel rooms. The evidence developed reflected that Ms. Okland stayed in the hotel rooms with her family but used her husband’s corporate credit card to pay for them. Her husband’s corporation, Okland Construction, paid the credit card bill. The hotel reservations were also made using an office computer. Okland rationalized that her husband was the owner of Okland Construction, so it “came out of the same pocket.” The trial court dismissed the case for lack of subject matter jurisdiction. Held: In affirming, the Court rejected the Plaintiff’s claims that she was a “consumer” under the DTPA because she “acquired” the hotel reservation services by making the reservations and using the hotel rooms she booked. In denying consumer status, the Court held that the Plaintiff was merely an “incidental beneficiary” and not a true “intended beneficiary” of the transaction. The Court likewise rejected the “same pocket” argument, noting that its acceptance would require the Court to disregard the corporate entity, Okland Construction, contrary to basic principles of corporate law.

Whitecotton v. Silver Lake Homes, L.L.C., W.L. 2045224; LEXIS 5428 (Tex. App.—Beaumont 2009) (mem. op.)

Homeowner’s Refusal to Accept Contractor’s Tardy Offer to Make Repairs of Construction Defects Nevertheless Negated Homeowner’s Breach of Warranty Claim: In this home construction dispute under the Texas Residential Construction Commission Act (“TRCCA”) and Texas Residential Construction Liability Act (“TRCLA”), the homeowners refused to pay their builder after discovering multiple warranty defects in the construction. The homeowners pursued relief through the Texas Residential Construction Commission, and the state inspector appointed by the Commission confirmed 21 warranty defects. After the state inspector’s report was received, the builder offered to make the repairs and correct the defects found. However, the builder did not make that offer within the 45-day time limit of the TRCLA’s notice and offer of settlement provisions (Texas Property Code § 27.004). The homeowners then refused to let the builder make the repairs. Held: The Court affirmed the trial court’s judgment in favor of the builder on the breach of warranty claims brought under the DTPA, implicitly finding that the homeowners did not give the builder a reasonable opportunity to “cure” the warranty defects as required by common law warranty law. In so doing, the Court held that the notice and settlement offer provisions of the TRCLA did not establish, as a matter of law, a time limit for a “reasonable opportunity to cure” for common law warranties, and an offer to cure made after those time limits had expired may still be found to be timely for a “reasonable opportunity to cure.” (Note: The TRCCA and the Texas Residential Construction Commission expired effective September 1, 2009 pursuant to the Texas Sunset Act. Consult the TRCC website and legislative history to determine applicability of TRCCA to ongoing residential construction defect claims.

Featherston v. Weller, W.L. 1896072; LEXIS 5110 (Tex. App.—Austin 2009) (mem. op.)

DTPA §17.506 Affirmative Defense (Based Upon Reliance on Third Party Information) Was Established Despite Affirmative Misrepresentations From Seller: In this case against an auctioneer, the plaintiff purchased an historical pistol at an auction in reliance on written and oral claims that it had belonged to William F. “Buffalo Bill” Cody. The pre-auction catalog contained a description of the pistol and a “provenance,” the collection of documents that described the pistol’s lineage and authenticity. These documents were later shown to be false and possibly even forged. However, the bid card provided to buyers included ,among other disclaimers, a statement that “all descriptions of items are believed to be correct as described by owner.” The catalog and bid agreement signed by the buyer also disclaimed any warranties or guarantees. During the auction, the auctioneer paused to allow an antique firearms expert to describe the pistol. The expert made several oral statements about the pistol’s heritage which also turned out to be false. The plaintiff paid $22,000.00 for the pistol, but later determined that it was not authentic and was worth only $2,000.00. The jury found that the pistol was misrepresented but without any distinction as to whether the misrepresentations were oral or written. In response to a jury question submitted by the defendant, they also found that the auctioneer had notified the plaintiff buyer in writing of his reliance on written representations by third parties, thus raising the rarely-used affirmative defense of DTPA §17.506. Held: In affirming a defense verdict on the plaintiff’s DTPA claims, the Court of Appeals observed that §17.506 would not have been a bar to the plaintiff’s DTPA claims based upon the oral misrepresentations made during the auction if the jury had separately found those oral misrepresentations to be a producing cause of the plaintiff’s damages. However, it was the plaintiff’s burden to submit and obtain a jury finding to that effect. Because the plaintiff did not submit a jury question establishing that the oral misrepresentations were a producing cause of his damages, his DTPA claim was barred by the positive jury finding on the “reliance on third party information” affirmative defense. The written disclaimer was found to be sufficient to support the jury’s finding under §17.506 even though it did not track the exact language of that section.

Fogal v. Stature Construction, Inc., W.L. 1688894; LEXIS 4497 (Tex. App.—Houston [1^st Dist.] 2009)

Arbitration Agreement: Arbitrator’s Finding of Fraudulent Inducement as to the Contract as a Whole Does Not Vitiate the Arbitration Clause Contained Within That Agreement: The plaintiffs were home buyers who contracted with the defendant builder to purchase a newly-constructed town home. The earnest money contract they signed contained a binding arbitration clause. After moving into the home and discovering a roof leak, the plaintiffs sued, asserting DTPA violations and statutory and common law fraud claims. On the defendant’s motion, the trial court compelled the parties to submit their dispute to binding arbitration through the American Arbitration Association. In the arbitration, the plaintiffs prevailed and obtained a finding from the arbitrator “granting” their common law fraud claim. Presumably because they did not obtain all of the relief they had sought, the plaintiffs then asked the trial court to vacate the arbitration award and vacate its order compelling arbitration so that they could proceed to trial by jury. They claimed that, among other things, the arbitrator’s finding of fraud in the inducement into the earnest money contract rendered the arbitration clause contained in the earnest money contract void and unenforceable. Held: In affirming the trial court’s judgment on the arbitration award, the Court of Appeals held that the arbitrator’s finding of common law fraud did not establish that the arbitration clause itself was obtained by fraud as required by Texas law in order to defeat an arbitration agreement. The court observed that the proper procedure for challenging an arbitration agreement on the basis of fraud was to present evidence of fraud specific to the arbitration agreement in the trial court in response to the motion to compel arbitration.