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Grove v. Franke

Court of Appeals of Texas, Ninth District, Beaumont

October 17, 2019

BOW GROVE, Appellant
v.
MARION GINE FRANKE AND BRENDA KAY LYNCH, Appellees

          Submitted on March 6, 2019

          On Appeal from the 410th District Court Montgomery County, Texas, Trial Cause No.15-05-05374-CV

          Before McKeithen, C.J., Kreger and Johnson, JJ.

          MEMORANDUM OPINION

          CHARLES KREGER JUSTICE.

         The underlying litigation arose from the sale of a log home in Montgomery County, Texas. Bow Grove purchased the property from Henric Ekehed, [1] and Marion Gine Franke and Brenda Kay Lynch acted as Henric's real estate agents (the Agents).[2] Dissatisfied with the condition of the home after purchase, Grove initially sued Henric. In his third amended petition, Grove added Henric's wife and the Agents as defendants. Grove's sole cause of action against the Agents is statutory fraud in a real estate transaction.[3] Grove appeals the trial court's order granting summary judgment in favor of the Agents, as well as the trial court's order awarding the Agents their attorney's fees. In two issues, Grove contends: (1) the trial court erred in granting the Agents' summary judgment on his statutory fraud claim because the contract language did not operate as an "as-is" clause; and (2) the trial court erred in awarding attorney's fees to the Agents when the contractual clause merged with the deed.[4] We affirm the trial court's judgment.

         I. Background

         In January 2013, Henric listed his 1930's log home and acreage for sale. Henric completed a Texas Association of Realtors Seller's Disclosure Notice dated January 10, 2013. The Seller's Disclosure Notice did not note any issues with wood rot or wood destroying insects (WDI). In February 2014, Henric entered into a contract with potential buyers. During that process, the potential buyers had the property inspected. According to Grove, that inspection uncovered extensive wood rot and damage from WDI. Grove alleged that Henric offered the potential buyers a $50, 000.00 price reduction because of the wood rot and WDI damage, and the Agents were "fully informed and aware of the extensive wood rot damage and WDI damage discovered[.]" Ultimately, the potential buyers terminated the contract. Following this unsuccessful sale of the property, Henric hired a contractor to replace a number of logs on the home totaling 196 linear feet. The quote from the contractor noted that additional logs would need to be replaced "in due time." Henric, though, did not amend his Seller's Disclosure Notice after these events.

         On May 9, 2014, Grove and Henric executed a TREC earnest money contract for the purchase of the property with a sales price of $461, 000.00. Grove purchased a $100.00 option allowing him to terminate the contract within a set time period. Grove hired his own inspector to inspect the log cabin and prepare a report. The inspector admittedly had never examined a log home prior to this property and was unaware that to properly inspect a log home, he needed to tap each individual log with a hammer to check for wood rot. The inspector identified several other significant problems with the property, including electrical issues, potential roofing issues, and issues with the foundation. The inspector noted in his report that the exterior walls included logs with some areas of wood shingles, and the wood shingles had reached the end of their useful life. He also noted areas of rotten wood fascia under the window near one of the air conditioning units. The inspector did not specifically identify any rotten logs during his inspection. The inspector testified in his deposition that he did not recall reviewing the Seller's Disclosure Notice before inspecting the property and that he typically does not rely on those disclosures as they are commonly inaccurate. Grove had a separate termite inspection performed on the property and the inspector did not identify any active WDI.

         Based on the inspection report, Grove and his real estate agent sought monetary concessions from Henric against the purchase price. Henric agreed to reduce the purchase price by $13, 000.00. The standard Texas Real Estate Commission (TREC) contract form the parties signed contained two options under "Acceptance of Property Condition." The options were "(1) Buyer accepts the Property in its present condition[, or] (2) Buyer accepts the Property in its present condition provided Seller, at Seller's expense, shall complete the following specific repairs and treatments[.]" The parties chose the first option and closed on the property on May 23, 2014. The Agents included the sales contract as summary judgment evidence.

         After occupying the property, Grove experienced multiple problems, many of which his inspector identified and listed in the report prior to purchase. Grove denied performing any repairs on the property after taking possession. Grove testified that he could not recall if he reviewed the Seller's Disclosure Notice prior to purchasing the property, yet he also testified that he relied on it when he decided to purchase the property because no major issues were identified in the disclosure to draw his attention to the notice.

         On appeal, Grove only complains of the wood rot and WDI damage to the home.[5] He sued Henric for common law fraud, breach of contract, statutory fraud in a real estate transaction, Texas DTPA violations, and negligent misrepresentation. The only claim he asserted against the Agents was for statutory fraud in a real estate transaction. The Agents' first amended answer asserted a counter-claim for attorney's fees based on a provision in the TREC earnest money contract.

         After conducting discovery, the Agents moved for traditional and no-evidence summary judgment. The Agents asserted that there was no evidence of the following elements in a statutory fraud in a real estate transaction cause of action, specifically: (1) that during the transaction the Agents made a false representation of fact, made a false promise, or benefitted by not disclosing that a third party's representation was false; (2) that the false representation was made for the purpose of inducing Grove to enter into the contract; (3) that Grove relied on the false representation by entering into the contract; and (4) that the reliance caused Grove's injury. In their traditional motion for summary judgment, the Agents argued that the "as-is" provision in the contract coupled with the plaintiff's own inspections of the property negated the reliance element of the cause of action. Grove responded to the Agents' no-evidence motion arguing evidence existed on every element of the cause of action. He further argued in response to the Agents' traditional motion for summary judgment that any "as-is" language in the contract merged into the deed at closing and that fraudulent inducement precluded enforcement of the "as-is" provision; therefore, the "as-is" language failed to negate the element of reliance. The trial court granted the Agents' motion without specifying the grounds. The Agents then moved for an award of attorney's fees, which the trial court granted in a final judgment. Grove timely appealed.

         II. Issue One: Summary Judgment

         A. Standard of Review

         We review a trial court's decision to grant summary judgment de novo. See Shell Oil Co. v. Writt, 464 S.W.3d 650, 654 (Tex. 2015) (citation omitted). We view the evidence in the light most favorable to the nonmovant. Id. (citing City of Keller v. Wilson, 168 S.W.3d 802, 824 (Tex. 2005)). In doing so, we indulge every reasonable inference and resolve any doubts against the motion. See City of Keller, 168 S.W.3d at 824. "Undisputed evidence may be conclusive of the absence of a material fact issue, but only if reasonable people could not differ in their conclusions as to that evidence." Buck v. Palmer, 381 S.W.3d 525, 527 (Tex. 2012) (citation omitted).

         When a no-evidence motion has been filed, it "is essentially a pretrial directed verdict, and we apply the same legal sufficiency standard in reviewing a no-evidence summary judgment as we apply in reviewing a directed verdict." See King Ranch,Inc. v. ...


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