In the

Court of Appeals

Second Appellate District of Texas

at Fort Worth

___________________________

No. 02-18-00105-CV

___________________________

On Appeal from County Court at Law No. 2

Tarrant County, Texas

Trial Court No. 2015-005563-2

Before Kerr and Birdwell, JJ.; and Gonzalez, J.1

Memorandum Opinion by Visiting Judge Ruben Gonzalez, Sitting by Assignment 

1The Honorable Ruben Gonzalez, Judge of the 432nd District Court of Tarrant County, 

sitting by assignment of the Chief Justice of the Texas Supreme Court pursuant to Section 

74.003(h) of the Government Code. See Tex. Gov’t Code Ann. § 74.003(h).

GARY MILLHOLLON AND CAROLE MILLHOLLON, Appellants

V.

ALAN D. DOUGLAS AND PEGGY J. DOUGLAS, Appellees
2

MEMORANDUM OPINION

I. Introduction

In three issues, Appellants Gary and Carole Millhollon, sellers of a home,

appeal the trial court’s judgment on a jury’s verdict for Appellees Alan and Peggy 

Douglas, the home’s buyers.2 We affirm as modified.

II. Factual and Procedural Background

On January 17, 2012, Gary, a retired banker,3and his wife Carole, a former 

executive secretary and teacher, moved to Texas and bought a home from real estate 

developer Lee Hughes’s company, Maverick Homes. Since its construction in 2006, 

the home had been used as a sales center and model home office, so prior to its sale 

to the Millhollons no one had taken showers in the house, run a washing machine, or 

used the house over the weekend. Maverick Homes had had the home inspected for 

a structural home warranty on December 9, 2011. The inspector noted that the lot’s

drainage functioned properly, and Hughes checked “no” on the seller’s disclosure

with regard to awareness of any known defects or malfunctions in the plumbing or

the aerobic septic system4 or of any improper drainage conditions. 

 

2Because all four of the parties testified at trial, we will refer to them by their 

first names to eliminate any confusion.

3Gary worked in commercial lending from 1974 until his retirement in late 2011 

or early 2012. 

4An aerobic septic system flows material in a 2,000-gallon tank through several 

500-gallon compartments. The first compartment is the septic tank and uses
3

Gary had ordered five inspections of the home before closing on the sale. He

noted in a December 5, 2011 email to Paula Kelly, a Maverick Homes employee, “As 

you have probably guessed, I’m pretty thorough and have spent over $1500 on 

inspections.” One of the inspections was of the home’s septic system. 

Gary’s November 29, 2011 septic system report by Scott Lewis, a certified 

septic inspector for A-Action Home Inspection Group, noted that the system was 

functioning adequately but had suffered from poor maintenance. The report further 

recommended, “Due to the lack of maintenance records, apparent servicing and 

apparent recent excavation of the septic system, we recommend that the septic tank 

be pumped out and the interior of the septic tank be inspected for any possible 

deficiencies that cannot otherwise be detected.”

The report also contained a disclaimer that stated, in pertinent part, 

Septic systems are a “buried” component which are hidden from 

normal general visual surveys and many possible problems may not 

show themselves at the time of a visual survey and thus we cannot make 

accurate predictions of the future performance of the system or 

associated components. Accurate determination of location, condition, 

or life expectancy of the system components is not possible from any 

survey.

 

anaerobic bacteria, the middle compartment uses aerobic bacteria, and the last 

compartment contains chlorine for last-chance disinfection “because some yards have 

play sets and things.” That is, after the aerobic stage, the system’s contents “should 

be near drinking water state” and are then gravity-fed into the chlorinator and 

discharged as effluent.
4

And the report noted, under “How to Prevent Problems,” that “[m]any septic systems 

are doomed from the start because they are put in poor locations or constructed 

improperly.”

In his December 5, 2011 email to Kelly, Gary attached the septic system 

inspection report and a report on the sprinkler system and told her,

We should probably discuss these two items as well -- especially 

the septic system. Although it is shown as “apparently” working on the 

report, it has not been serviced since the house was built. While I 

understand that no one was living there, the bathrooms and sinks were 

used and according to the State of Texas website---

In compliance with the Texas Commission on 

Environmental Quality (TCEQ), the owner of an aerobic septic 

system shall continuously maintain a signed, written maintenance 

contract with a valid maintenance company.

When I asked for the name of this company that had the contract, 

I was told there had not been one since the house had never been sold. 

We probably just need to have one of the septic companies go out, do a 

pump out and inspect the interior for any deficiencies. No service 

means that it’s likely that no chlorine has been input in 5 years.

Kelly Millikan, another Maverick Homes employee, responded to Gary’s email 

on December 7, 2011, stating that she had performed some research and that the 

Tarrant County Health Department required that a maintenance agreement be in 

place with a certified septic company for any occupied property, providing three 

annual inspections to make sure the system is functioning properly, “i.e., sprinklers are 

properly disbursing, wiring in place, caps properly placed, etc.” Millikan told Gary 

that because the maintenance agreement did not include items like chlorine tablets or
5

replacing parts like lines or compressors, Maverick Homes had been performing that 

maintenance on the house since it was built and had had items inspected, repaired, or 

replaced, including replacing the compressor the previous December. Millikan told 

Gary that she had had ANS Wastewater, Maverick Homes’s septic contractor, inspect 

the system on December 6 to see if it needed to be pumped and was advised that it 

had only eight inches of solid waste, so pumping was not recommended at that time. 

Millikan told Gary, “Based on the information from your inspector that the system is 

working and from the inspection from ANS Wastewater, we don’t think pumping the 

system at this time would be in the best interest of the system.” She provided him

with a contact number at ANS Wastewater and recommended that he get his 

maintenance agreement paperwork started. On January 8, 2012, Gary signed a 

contract for three inspections per year with ANS Wastewater to cover January 20, 

2013 to January 20, 2014.

When Gary and Carole moved in, they installed a wrought-iron fence on 

concrete footing to protect their two small dogs from the backyard neighbors’ four 

Rottweilers. Gary hired a contractor who told him he needed a four-inch footing:

two inches underground and two inches above ground. He secured approval, and the 

contractor built the fence. 
6

According to Carole, Texas had been in a drought when they moved in, but on 

January 25, 2012, 2.15 inches of rain fell,5and an additional .46 of an inch fell the next 

day. Carole described this rain event as a “gully washer,” and Gary said that after the

rain, water flowed over the new fence’s concrete footing and covered the fence with 

dirt, grass, dead leaves, and trash “because that water was just going through there so 

hard,” on its flow from east to west, and south to north. 

After the gully washer, the neighbors told Gary that there had been flooding 

problems at the house before then, and one of the septic system servicing company’s 

employees told Gary that he had seen the backyard flood “a bunch of times.” Five 

days later, Gary sent an email to Todd Hamilton, who worked for the subdivision’s 

management company, to inform him that his backyard had been flooded by the rain 

and that the house had almost been flooded. In his email, Gary explained his plan to 

install a French drain on the southwest hill above the house to the “natural valley 

between [the] house and the house to the south[,] into the street and rock bed below 

[the] driveway.”6 Hamilton approved the request on February 1, 2012. Gary hired 

 

5Before trial began, the Millhollons stipulated to the admissibility of many of 

the Douglases’ exhibits, including a chart listing rainfall in inches at Lake Benbrook, 

near the property, from January 1, 2012 to December 10, 2015. 

6Hughes gave the following testimony about the drainage plan Gary had 

proposed to Hamilton:

Q. And so if Mr. Millhollon told the homeowner’s association 

that he is going to install a drain that’s going to take water behind this 

wall and take it to this natural valley, how is that possible given this 
7

Romeo Martinez to do the work: building a French drain and removing a berm near 

the driveway that channeled water into the backyard to direct the water down the 

driveway. 

On February 6, Gary contacted Maverick Homes, and Hughes went out to the 

house three days later.7 When Hughes arrived, four or five men were working on 

removing the berm. Hughes said that he told Gary that “the berm was there to help 

with the drainage and take some of the water to the south side of the lot down the 

driveway side and also[] help the drainage going from the south to the north,” while 

minimizing the amount of water that went down the driveway. Hughes also told Gary 

 

picture? How is any engineer . . . going to install a drain that’s going to 

take water from back here up to the top of that hill? I mean, assuming 

the laws of gravity have not been suspended in this part of Tarrant

County.

A. Well, obviously, you couldn’t take it from where the four-inch 

curb existed as I saw it built to -- it would make no sense to take it to the 

top of that hill if that was your question.

Q. And you couldn’t take it from the top of this wall that was 

never built either, could you? Near the back, the edge of the property, 

you can’t take it from there to this natural valley?

A. Not to the location you’re pointing to sir, no.

7Gary said that after leaving several unreturned voicemails for Hughes, he sent 

Hughes an email stating that three of the neighbors and one of Hughes’s vendors had 

told him that there was frequently standing water in the backyard and because Hughes 

had not divulged this, if Hughes did not meet with him, he would “go to the board of 

realtors and anybody else, including the attorney general.” He said that Hughes 

appeared the next day. 
8

that he thought the concrete footing on the wrought-iron fence “substantially blocked 

the flow of water from the south to the north and was the cause of the water backing

up at that point” and that it was very much like putting a softball in a toilet, flushing it

multiple times, and “expecting it not to overflow.” Gary denied having ever heard 

Hughes say anything about a softball in a toilet and said that Hughes had just told him

to be careful with the concrete footing because the county and the Army Corps of 

Engineers did not want anything to impede water flowing downhill. 

Gary acknowledged that what he had initially proposed to Hamilton was not 

what he actually did, but he said that Hughes had total control over any and all 

approvals and that Hughes told him that it looked fine when he came out and saw 

what Gary was doing. Gary had no documentation showing the changes that he had 

made from his approved proposal. Hughes testified that making the driveway on a 

sloped lot the main drainage for a property would not be a prudent idea because over 

time, water could cause substantial damage if it seeped underneath the concrete.

Hughes said that he and Gary also talked about the aerobic septic system and 

that Gary told him that he thought it was placed too low, that water had gotten into 

the system, that the system’s alarm had gone off a couple of times, and that 

sometimes the toilet in the guest bathroom would not flush. Gary testified that one 

of the septic system maintenance men told him that when the alarm activated, it was 
9

because the sprinklers or tanks were stopped up, but he denied that the alarm had 

ever gone off when he owned the house, even when the tanks were filling up.

8

On February 21, 2012, Martinez charged Gary $4,425 for the work he did on 

the property; Maverick Homes paid the Millhollons $2,000 to settle their complaints 

about the septic system and the property’s drainage. Carole testified that Martinez’s 

work on the backyard seemed to solve the problem and that after Martinez changed 

the drainage in the backyard, most of the backyard water went down the driveway. 

Carole said that they had had parties in the driveway with up to 100 people with no 

problems with the bathrooms or septic system. Gary likewise testified that after the 

French drain was installed and the shrubbery removed, they did not have any other 

problems with drainage. 

However, it rained .15 inches on March 29, 2013, and .2 inches the next day; on 

March 31, a Service Company Plumbing, LLC plumber went to the property “for 

commode bubbling and not flushing properly.”

9 The plumber noted that he “pulled 

commode, checked stack (offset), reset commode, roto-root[ed] main sewer line for 

master shower, and flushed commode several times; no bubbling.”

10 The plumber 

 

8Peggy, in contrast, said that before the Douglases replaced the system, the 

alarm went off “a lot” and had burned up more than one motor.

9Carole said that she had noticed tiny bubbles and asked Gary to call a plumber 

but that she did not hear any gurgling because she “always had the T.V. on.”

10Alan said that when he saw the March 31, 2013 receipt from the plumber, he

knew that it was inaccurate “because when [he] bought the house, it had a bubbling 
10

returned a few months later, on August 16, 2013, for a clogged line and determined 

that the “water level in the tank and sewer line [were] near to the same level[,] 

resulting in [a] static sewer line from [the] house.”

Gary testified that when the plumber came out on August 16, the plumber told 

him that the water was not moving very well, that he thought the septic system’s first 

tank might be clogged, and that Gary needed to get someone to check the septic 

system. Gary said that the plumber told him that the line was not static but that it 

sloped. 

Gary called Garrett Aerobic Septic Systems, which came out to the property on 

August 23, 2013. Gary said that Garrett’s employees “dug a hole” and told him that 

“the top had been destroyed or deteriorated or whatever, and the tank was full of 

trash and grass and all kinds of things.”

11 Garrett’s employees told him to hire 

someone to “suck everything out, and then they told [him] they needed to put a riser

on that one tank, and they needed to build a new top for it, and then they needed to 

 

toilet a week after [he] moved in.” Carole said that the plumber told her that he had 

repositioned the toilet because it was not “over the hole enough” and that she 

thought this had fixed the problem. 

11Garrett’s August 23, 2013 invoice reflects that the Millhollons were charged 

$75 for “Service Call for toilet not flushing properly,” and $50 for “Dug up trash tank 

concrete plug in tank and flushed out 3-inch line going into trash tank,” for a total of 

$125.
11

replace the sod around it and all that.”

12 So Gary told them to do it, and they did it. 

Gary said that after taking these actions, he and Carole had no other problems with 

the system. Gary took no action to change the slope of the sewer line from the house 

to the aerobic system “because the aerobic people told [him] that wasn’t needed” and 

water was flowing through fine. 

It rained 2.5 inches on September 20, 2013,13 1.1 inches on October 14, and .82 

inches on October 16. 

On October 19, 2013, the Millhollons decided to sell the house and signed a 

“Seller’s Disclosure Notice” form in which they indicated that they were not aware of 

any defects or malfunctions in the plumbing system or septic/on-site sewer facility 

and that they were not aware of any improper drainage as of that date. And although 

the disclosures asked whether the Millhollons had received any written inspection 

reports from persons who regularly provide inspections and who are either licensed as 

inspectors or otherwise permitted by law to perform inspections, they only disclosed 

two: a December 2011 home inspection by Lonestar Inspection Service and a 

 

12Garrett’s August 27, 2013 invoice reflects that the Millhollons were charged 

$125 for “Enlarged hole over trash tank plug, installed [two] 20[-inch] x 12[-inch] tufftite riser & 20[-inch] tuff-tite lid,” $6 for a bag of concrete, $35 for the Tuff Tite lid, 

$25 for the 20-inch x 6-inch Tuff Tite riser, and $40 for the 20-inch x 12-inch Tuff 

Tite riser. With tax, the total for this work was $244.56.

13Carole testified that she had a hip replacement in September 2013, and then a

fall at her grandson’s house that required extensive surgery, necessitating a move to a 

house that was not on a hill. 
12

December 2011 radon inspection by Madove/DFW Radon. They did not disclose 

the November 29, 2011 septic system report by Lewis, A-Action Home Inspection 

Group’s certified septic inspector, or the other two reports Gary had referenced when 

dealing with Maverick Homes prior to the Millhollons’ purchase of the home.

The disclosure also asked the seller to list the home’s service providers, and the 

Millhollons listed Atmos for electric, AT&T for cable and phone, and Bob’s Cans for 

trash, but they wrote “N/A” next to sewer and did not mention that they had a 

contract with ANS Wastewater through January 20, 2014.

Carole testified in her deposition that “[a]s far as [she and Gary] knew at this

time [October 19, 2013], this [the seller’s disclosure notice was] exactly the truth.”

She said that she did not provide any of the information because her “husband 

handles these things,” and he filled it out, but that she read it, “and it was correct, and 

[she] signed it.”

14 Gary said that he had filled out the disclosures truthfully and that 

he did not understand them to require a whole history but rather the house’s 

condition as it was when they put it up for sale. 

 

14Carole testified that she and Gary had owned eight houses over the course of 

their thirty-five-year marriage. After she retired, they would buy a house out of 

foreclosure, fix it up, live in it for three or four years, and then sell it, working their 

way up to having a “really nice home.” She knew how to paint, lay tile, and refinish

cabinets, but they hired handymen to handle the complex work, like the installation of 

toilets. Carole said that they did not have to do much to the home at issue other than 

replace the carpet because of wear caused by pedestrian traffic and business use

during its time as a model home and sales office. 
13

The Millhollons provided the seller’s disclosure notice to Alan, who was also a

banker,15 and his wife Peggy, a realtor,16 around four months later, in February 2014, a 

month during which virtually no rain fell. 

The real estate contract with the Millhollons was the first one Peggy had done 

since reactivating her license, and she used the standard contract form for “One to 

Four Family Residential,” promulgated by the Texas Real Estate Commission 

(TREC), to prepare their offer, filling in the blanks, including the one next to 

“Acceptance of Property Condition,” where the Douglases checked, “Buyer accepts 

the Property in its present condition.” Because a real estate agent would have made 

three percent of the sales price on the transaction, using Peggy’s real estate license on 

the sale saved the Millhollons $12,420 in the buyer’s commission. Carole said that

they had discounted the house’s price because Peggy was not going to charge a 

commission. Neither party was represented by counsel, and Peggy testified that she 

and Alan could not have negotiated an “as-is” contract with the Millhollons without

 

15Alan worked in financing commercial and residential real estate. 

16Peggy had been a realtor for over twenty years but had not been active for 

most of that time. She had a GED and some college education and had worked as a 

real estate agent in Texas from 1983 to 1995. A year before she went inactive in 

Texas (1994), seller disclosures came out, changing Texas from a “buyer beware”

state. Peggy became licensed in Florida in 2006 but was only active for six weeks in 

2013 before they moved. She reactivated her Texas license in January 2014 after 

taking 30 hours of online courses. 
14

legal counsel because the state would not let her, as a real estate agent, do that without 

representation for both parties. 

The Douglases’ home inspector visited the home for five hours on February 

22, 2014, noting in his report that the day was “Clear/Sunny,” and he listed a number 

of defects in his twenty-page property inspection report but noted that inspection of 

the septic system was “limited to what is easily accessible/observable,” and 

recommended that a reputable septic company be consulted. Carole was at home 

when the Douglases’ home inspector visited the house. Gary was not at the house for 

the inspection, although he acknowledged that he had said in his affidavit in an earlier 

court filing that he had been there. 

On February 25, 2014, Aerobi-Tech, an aerobic septic specialist, inspected the 

home’s septic system for the Douglases and reported that the “system [was] working 

fine.” Alan said that when Aerobi-Tech inspected the system, it had not rained for a 

while and that he did not know to tell either the home inspector or the septic 

specialist to look for specific issues such as drainage or to check the slope of the

sewer line or the risers’ water-tightness. Alan testified that if he had known about the 

plumber’s August 2013 comment about the static sewer line, he could have directed 

the home inspector to look for the cause and to find a solution to it. 

The parties executed a repair addendum on March 3, 2014, providing that the 

Millhollons would address nine items identified in the home inspector’s report, which 

included “Structural Systems” and “Plumbing System” categories. The structural 
15

systems that the home inspector had identified in his report and that the Millhollons

agreed to correct pertained to some cosmetic issues with the home’s foundation and 

the home’s gutters: the “[d]ownspout extension at the front of the home [was] 

crushed/collapsed,” the gutter downspout at the home’s rear was not connected to

the drainage system, and the gutter system over the garage area had a small amount of 

debris “suggest[ing that] the slope may not [have been] adequate to discharge the 

water effectively.” The home inspector recommended repairing the former,

connecting the rear downspout to the drainage system, and resloping the garage gutter 

to ensure water discharged properly.

The plumbing system issues identified by the home inspector pertained only to

“[m]ultiple exterior hose bibs . . . missing the back-flow/anti-siphon device,” which 

he recommended replacing “to eliminate the potential for contaminated water to be 

siphoned into the home[’]s fresh water system,” and a lack of an access point for 

repairs to the pump and mechanical equipment for the master bathroom hydromassage therapy tub.

17 In response to these items, Gary purchased and installed backflow devices on all three outdoor faucets (hose bibs) and checked with the builder, 

who explained how a repairman would access the tub for motor repairs. 

 

17Other items that the inspector identified and recommended repairing and 

which the Millhollons agreed in the addendum to have fixed included some roof 

damage, some minor door problems, and some minor electrical and HVAC issues. 
16

On April 24, 2014, the Millhollons sold the home to the Douglases. Alan said 

that before closing, their only discussions with the Millhollons about the septic system 

had been about routine maintenance and that the Millhollons never mentioned 

anything about the alterations they had made to the property’s drainage or any of the 

problems they had experienced. Alan said that the Douglases relied on their home 

inspection report to make the addendum to the sales contract but that they “100%

relied on” the Millhollons’ disclosures. 

Carole said that the Millhollons’ disclosures were true, adding, “I don’t know if 

it was because the torrential rains or anything [experienced by the Douglases after the

purchase], but we did not lie on that disclosure.” Gary said that he did not tell the 

Douglases prior to closing about the history of what he had fixed on the property

“because it was working properly.” Gary said that the difference between Hughes’s 

disclosures and the Millhollons’ disclosures, which were identical to Hughes’s, was 

that the Millhollons had corrected the septic and drainage problems such that on the

date of their disclosures, there were no problems. 

Not long after the purchase, however, the Douglases began to experience 

issues with the home’s plumbing, septic system, and drainage. Alan said that five days 

after moving in, they noticed a toilet start bubbling and, sporadically, a little bit of 

“odor” and slow flushing.18 Alan said that when there was no rain, the plumbing

 

18There was no rainfall reported until May 9, 2014, when 1.06 inches of rain

fell. 
17

would work fine during the week when he and Peggy were not at home, but on the 

weekends, showering, doing laundry, and using the bathroom would cause the system 

to back up. Peggy said that the problems did not occur every day. The Douglases 

signed an annual maintenance agreement for the septic system with Lone Star Aerobic 

Service Company with a start date of June 1, 2014, and an end date of May 31, 2015. 

The record does not reflect whether any maintenance company inspections were 

conducted between the end of the January 20, 2014 contract that the Millhollons had 

with ANS Wastewater and the start of the Douglases’ contract with Lone Star.

On June 13, 2014, Lone Star made a service call. Lone Star’s inspector 

indicated that the various components tested had an “operative” status and stated, 

“Only found one septic spray head. Office will get design from county to see where 

other spray heads should be.”

Alan called Gary seventy-seven days after the Douglases moved in, on July 10, 

2014, to ask about what they were seeing and experiencing with the house. At that 

point, in addition to the 1.06 inches of rainfall on May 9, there had also been the 

following rainfall amounts in inches: 1.5 on May 13, .3 on May 14, .38 on May 25, .32 

on May 26, .41 on May 27, 1.38 on June 9, 1.4 on June 22, .63 on June 23, and .8 on 

June 25, in addition to some lesser amounts on June 8 (.09), June 10 (.23), June 13 

(.11), June 24 (.18), and July 3 (.13). Alan said that within an hour or two of even a 

slight rain—a quarter to a half an inch—the septic system’s alarm would go off and 

the system would not function properly. He “often had to get a sump pump and 
18

pump from the chlorinated tank just so [they] could use the house when it was 

raining.” Alan said that without the sump pump, the system’s alarm went off “about 

every hour” when significant rainfall occurred.

Gary replied by email on July 11, 2014. In his email, he told Alan about his 

experience with the house, including that in December 2011, his home inspector had 

told him to get the aerobic septic system checked out, and Hughes had told him to 

call ANS Systems and had told him that Maverick Homes had not maintained the 

system because the house was not being lived in. Gary told Alan that he had called 

ANS, who told him that the company that had built the septic system had “gone 

broke” but that they would inspect it, told him that “all was fine and working 

properly,”

19 and offered to maintain it for $175/year.

Gary further told Alan in his July 11, 2014 email,

During the first year, we had a huge rain and water was flooding the 

backyard. It was only inches from the patio and I had to squeegee it off 

the patio until the rain stopped. . . . I hired a landscape engineer[20] who

 

19Gary did not mention anything about what Lewis, the certified septic

inspector who conducted the November 29, 2011 inspection, said about how the 

system had suffered from poor maintenance. 

20Gary testified that he did not remember the name of the landscape engineer 

or architect that he contacted because he had called three or four others first. One 

came out to the property, and he made a sketch while they were talking. Carole said 

that the landscape engineer who came to the house “just drew a little funny drawing, 

and it was going to be, like, $17,000, and we couldn’t afford it, and we checked 

around, and we got a referral.” When asked if they had kept the drawing, Carole said 

she did not know because she trusted her husband to take care of it.
19

came out and told me that there were two problems. 1) the natural 

drainage from the land was the driveway and 2) it would be adequate to 

allow most of the water to flow down the driveway to the street and 

gully but that the dense, 7 foot shrubs that were all along the top of the 

driveway was acting as a dam and diverting the water to the backyard. 

He also said that I should install a French drain through the low part of 

the back yard so that any excess water would go down on the north side. 

I did all of this and had to re-sod the back yard at a cost of around 

$8500. I went after Hughes hard and he coughed up $5,000 of the 

cost.[21](I only bring this part in to show you how I had to threaten 

Hughes to fix this problem after he misrepresented on the disclosure

and checked that no drainage problems were ever experienced.)

We kept having problems with the toilet in the small bathroom near the

office. It would not flush. I had a plumber come out who scoped 

everything and said that the problem was the septic. That [there was] no 

riser built on the first tank and there was no cover on it. He said that it 

was 100% full and that with each rain, water and trash would flow into it 

making the situation worse. I had to hire two companies—one to clean 

out the tanks and a second to put in concrete, a riser[,] and a top. After 

that, the toilet worked fine and the system was working well. The cost 

for all of that was around $750. I did not pursue Hughes for that—

didn’t have the time.

 

When asked who designed the drain that he built for the Millhollons, Martinez 

testified that he and Gary did it. Martinez testified that he had no formal education as 

a landscaper, architect, or engineer but had been installing drains for the last nine 

years. The fence with the concrete footing was already in the yard when he installed 

the drain. Carole stated, “I realized that [Martinez] is not an expert, but we’re just 

kind of normal people, and we hire people with experience,” since all they wanted was 

a French drain so that the flat part of the backyard would not hold standing water. 

Alan said that in the three years that he had been living with the lawsuit, he had

never seen the name of the landscape engineer or architect that the Millhollons had 

hired to design the house’s drainage. 

21During his testimony, Gary said that it was only $2,000 that he had gotten 

from Hughes. 
20

In his email, Gary also told Alan that he had capped one of the septic system’s 

two sprinkler heads to keep effluent from running down the driveway where his

grandson played and that a contractor had told him that if the sprinkler ever stopped 

up, the alarm would sound before the last tank got full. Gary told Alan how to uncap 

the second sprinkler head and said that he had no idea what Hughes had submitted to 

the county about the system because he had not checked “into that aspect of the 

deal,”

22 but he opined that Hughes had probably used a subpar contractor. Gary 

stated in his email, “I do know that the septic system worked fine ever since we had 

the work done and we had no problems after that time.”

Three days later, on July 14, 2014, Dee Scarbro of Lone Star Aerobic inspected 

the septic system and concluded that the system was causing an unsafe environment

for the Douglases and their neighbors because the original design, marked “used for 

inspection,” required three spray heads, the original plan required a night-timed 

sprayer control but the control panel had no timer mechanism installed, the riser 

joints were sealed with spray foam that was not designed to be used in wet application 

areas or in connection with electrical wiring, the wire connections inside the tank were 

 

22In an April 6, 2015 email to Alan, Gary said, “There is nothing recorded with 

the county on where the aerobic sprinkler heads are located. I checked all of that out 

when I bought the house.” During trial, Gary admitted that he had not checked with 

the county on anything before he sold the house to the Douglases and that he never 

went to the county to try to find the aerobic system’s design. He admitted that he 

nonetheless told Alan in an email that there was nothing on file with the county about 

where the sprinkler heads were supposed to be. 
21

exposed, and the original plan required “landscape and terrace as need[ed] to 

minimize runoff” but “this was apparently never performed and the slope allows for 

runoff.”

Communications between the parties broke down between 2014 and 2015, 

with Gary testifying that they had different opinions and that he was “tired of hearing 

about the drainage.” And then Carole was in a serious accident on January 3, 2015, 

when a truck ran a red light.

23

On April 10, 2015, an employee of Helton-Ingram Environmental Services 

inspected the septic system; there was still only one sprinkler head operating. William 

Ingram, Helton-Ingram’s CEO and a state-certified installer II24 of aerobic septic 

systems, testified that while the system could be operated that way, it was illegal to do 

so because it was inconsistent with the county-approved design.

On June 2, 2015, Ingram went to the house to complete the installation of a 

new control panel on the system. He returned on June 11, when Alan asked him to 

figure out why there were still issues with the system. Ingram said that the system 

 

23Gary testified that he was very distracted during this time because Carole had 

to have multiple surgeries to repair fourteen pelvic fractures, three breaks in her arm, 

and some back injuries. 

24Ingram explained that an installer II license was a step above installer I and 

the highest level in the industry for installing, repairing, and maintaining aerobic septic 

systems. 
22

“was full of water and wasn’t ejecting the water properly.”

25 He cleared the effluent 

pump’s clogged filters and then dug to try to identify the problem with the inlet pipe 

portion from the house. 

Ingram determined that the height difference in pipe level was going in the 

wrong direction from the house, stating, “We should have [a minimum] fall at eightinch per foot from the house to the tank . . . [but instead] [h]e had four inches of up[-

]grade, going uphill from the home to the tank, which is also placing that inlet pipe 

partially under water at normal operating level. About half the pipe was under water.” 

He concluded that the whole system was buried around 6 inches too shallow in the 

ground, that the system’s risers needed to be replaced because they were loose and 

not sealed well to each other, and that the system had been infiltrated “at some 

point,” based on the grass and other items that he found in the tank. He 

recommended installing a new system, at a cost of $12,260. 

Ingram also concluded that any significant rainfall would cause the system to 

malfunction and that the alarm would sound every time that happened, stating, 

It would have backup issues. You would have cross-tank contamination, 

materials leaving one compartment to the other. Some materials would 

probably even return back to the home, trying to flush. Microorganisms 

would probably be getting pumped out on to[p] of the yard, being that 

they’re in the pump tank. They’re not supposed to be in there, but 

 

25While there was no rainfall during the first two weeks of June 2015, May 2015 

had been fairly damp, with twenty out of thirty-one days reporting some rainfall. 

Nine of those twenty days had at least half an inch of rainfall, and five of those days 

had at least one inch of rainfall. 
23

they’ve moved between compartments because they’re flooded. The 

stuff all gets pushed out on top of the yard. Eventually, with the slope, it 

would probably run right back to his septic system and get pumped out 

and the process repeated again, over and over.

Ingram stated that he would not have been surprised that the Aerobi-Tech inspector 

found that the system was working properly in April 2014 if it had not rained in a 

month. 

Harrington Environmental Services, LLC d/b/a Harrington Septic & 

Environmental Services came out on July 3, 2015, and confirmed Ingram’s diagnosis, 

noting, “It appears that the tank was not installed deep enough, causing the inlet pipe 

to stay full of water.” 

On September 23, 2015, the Douglases sued the Millhollons for fraud in a real 

estate transaction under Business and Commerce Code Section 27.01 and for 

violations of the Deceptive Trade Practices Act (DTPA). See Tex. Bus. & Com. Code 

Ann. §§ 17.46(a), (b)(24), 17.50(a)(1)(B), 27.01(a)(1).

In July 2016, Circle G Landscape Services designed a drainage system for the

property. Clay McCook, Circle G’s operations manager, testified that the main issue 

addressed was handling water that had been moving across and down the driveway, 

leading to cracking in the concrete. Circle G installed a six-inch curb around the 

driveway to create a backstop, tied the house’s down spouts into the drainage system, 

and added a French drain system to connect into a pipe to the street; the work that 

pertained strictly to the drainage installation and work around the new septic system 
24

cost $9,885. In August 2016, Martinez extended the drain that went from south to 

north on the property for $2,000. Alan said that before the septic system was 

replaced and the drainage system corrected, water would pool around the septic 

system tanks seventy percent of the time.

Chris Mitchell, who had an installer II certification, installed the Douglases’

new septic system on July 15, 2016, after measuring the slope of the septic line from 

the house to the existing system. Mitchell described the system’s problem, stating,

“Starting at the house and going to the trash tank, it was going uphill to the trash 

tank,” by 2.5 inches—essentially, everything coming out of the house was having to 

go uphill. The cost of removing the old system, permitting for the new system, and 

installing the new system was $9,860. Ingram opined that the $9,860 bid was an 

“underbid” job. 

On October 12, 2016, the Douglases had $5,870 worth of work done on the 

driveway to replace the concrete that had cracked because of water draining over and 

under it. 

The Douglases sought recovery for all of the post-suit work as well as the 

testing and inspections ($85 for Harrington Services, $175 for Helton-Ingram) and for 

a septic system compressor that had burned up in the interim ($495).

Alan gave the following answers when asked by his attorney about whether he 

would have purchased the property if he had known about all of its problems:
25

Q. Would you have purchased this property from Mr. and Mrs. 

Millhollon had any of the following been disclosed? That the inlet pipe 

from the house was level or went uphill to the aerobic system?

A. No.

Q. That the tanks weren’t sealed from water?

A. No.

Q. That the tanks took on water during significant rain?

A. No.

Q. That the aerobic system became basically inoperable with 

significant rain?

A. No.

Q. That the tanks and the structure was buried too shallow in the 

ground?

A. No.

Q. Or was not set at the right depth?

A. No.

Q. That there was often a bad smell in the bathroom right off the 

kitchen and that the shower backed up and toilet didn’t flush sometimes 

in that bathroom?

A. No.

Q. That the water levels in the tanks were level or near to the 

same level?

A. No.

Q. You simply wouldn’t have bought the house?
26

A. Correct.

Q. Why is that?

A. Too many problems.[26] Can’t live in it.

Q. As far as the drainage situation, would you have purchased the 

property had you known that the drainage had been altered to change 

most of the flow of the water from the natural flow of south to north to 

east to west?

A. No.

Q. Would you have bought the property had you known that the 

drainage system had been altered to the point that the drainage had been 

changed from south to north to the use of the driveway for most of the 

water in the backyard?

A. No.

Q. Now, are you asking that the jury find that Mr. and Mrs. 

Millhollon in their disclosures misrepresented this house in terms of the 

drainage and aerobic system?

A. Yes.

Q. And are you asking that they find that their actions were 

committed knowingly?

A. Yes.

Q. And what do you base that on, please?

A. Gary’s e-mail and other information we’ve gained through the 

discovery process. The invoice that he provided of a plumber that did 

work on the house that found the static line. It’s just one thing after the 

 

26Alan said that all of the documentation showed that the Millhollons had a 

history of problems with the house of the same type that the Douglases did. 
27

other that he either told me after we closed or we found out through 

depositions and discovery.

Peggy agreed with Alan’s answers and said that they had had no discussions with the 

Millhollons prior to the April 24, 2014 closing regarding the drainage or aerobic septic 

system or any of the changes the Millhollons had made. Peggy said that it would have 

been impossible for the Millhollons to have lived in the house without experiencing 

the same problems. 

Alan opined that the Millhollons had breached the contract as of the date of

closing because they could have amended their October 19, 2013 disclosures but did 

not and the contract specifically stated that all “representations . . . in this contract 

survive closing” and that “if any representation of Seller in this contract is untrue on 

the Closing Date, Seller will be in default.” He said that none of the superficial, 

cosmetic-type deficiencies revealed by the home inspection caused him to question 

the credibility of the Millhollons’ disclosures, which he and Peggy had relied on.

Gary acknowledged that if he had known at the time of the closing that the

septic system needed to be replaced or that there was improper drainage, he should 

have disclosed it. But he stated that there was nothing wrong with the septic system 

when they sold the house and that “[i]t was working perfectly.” He said that he did 

not give the Douglases the plumbing invoices because the Douglases did not ask for 

them. He said that the Douglases had asked for inspection reports on the house, and 

he did not consider the plumbing invoices to be inspection reports. 
28

A little over two years after the Douglases sued the Millhollons,

27 a six-member 

jury found in the Douglases’ favor after four days of hearing evidence, answering the

following questions unanimously.

Questions 1 and 4 asked the jury whether the Millhollons had engaged in any 

false, misleading, or deceptive act or practice that the Douglases relied on to their 

detriment and that was a producing cause of damages to the Douglases and defined 

“producing cause” and “false, misleading, or deceptive act or practice.” “Producing 

cause” was defined as “a cause that was a substantial factor in bringing about the 

damages, if any, and without which the damages would not have occurred,” and 

“False, misleading, or deceptive act or practice” was defined as

1. Failing to disclose information about the Property that was 

known at the time of the sale of the Property if such failure to 

disclose such information was intended to induce the Douglases 

to enter into the transaction that they would not have entered into 

if the information had been disclosed.

2. Representing that the Property had characteristics that it did not 

have or was of a particular quality which it did not have.

3. Representing that an agreement confers or involves rights, 

remedies or obligations which it did not have or involve, or which 

are prohibited by law.

4. Representing that work or services had been performed on the

Property when such work or services had not been performed.

 

27Peggy said that they sued Carole because she had signed off on the disclosures 

after living in the home for two years, stating, “They had all the knowledge, both of 

them, equally.”
29

The jury answered “yes” to Questions 1 and 4. 

Questions 2 and 5 asked the jury whether the Millhollons had engaged in any 

unconscionable action or course of action that was a producing cause of damages to

the Douglases, reciting the same definition of “producing cause” as in Questions 1

and 4 and explaining that an unconscionable action or course of action “is an act or 

practice that, to a consumer’s detriment, takes advantage of the lack of knowledge, 

ability, experience, or capacity of the consumer to a grossly unfair degree.” The jury 

answered “yes” to Questions 2 and 5.

Because the jurors responded affirmatively to Questions 1, 2, 4, and 5, they 

were also instructed to answer Questions 3 and 6, which asked whether the 

Millhollons engaged in any such conduct “knowingly,” which was defined as “actual 

awareness, at the time of the conduct, of the falsity, deception, or unfairness of the 

conduct in question or actual awareness of the conduct constituting a failure to 

comply with a warranty,” and which the instruction explained could be inferred 

“where objective manifestations indicate that a person acted with actual awareness.”

28

The jurors were further instructed in Questions 3 and 6 to consider only the conduct 

they had found was a producing cause of damages to the Douglases. The jury 

answered “yes” to Questions 3 and 6. 

 

28See Tex. Bus. & Com. Code Ann. § 17.45(9) (defining “knowingly” under the 

DTPA).
30

Questions 7 and 9 asked the jury whether the Millhollons had committed 

statutory fraud against the Douglases and defined statutory fraud as occurring when 

(1) there is a false representation of a past or existing material fact, (2) the false

representation is made to a person for the purpose of inducing that person to enter 

into a contract, and (3) the false representation is relied on by that person in entering 

the contract. The jury answered “yes” to Questions 7 and 9. 

Because the jurors answered Questions 7 and 9 affirmatively, they were also 

instructed to answer Questions 8 and 10, which asked whether they found by clear 

and convincing evidence that the Millhollons were actually aware of the falsity of the 

representation found to be fraud in Questions 7 and 9. “Clear and Convincing 

Evidence” was defined as “the measure or degree of proof that produces a firm belief 

or conviction of the truth of the allegations sought to be established.” The jury 

answered “yes” to Questions 8 and 10. 

Questions 11, 12, 13, 14, and 15 pertained to damages. In Question 11, the 

jury was instructed to consider only the loss of the benefit of the bargain and out-ofpocket expenses in determining compensatory damages resulting from the conduct 

inquired about in Questions 1, 2, 4, 5, 7, or 9. The jury found $29,320 for loss-ofbenefit-of-the-bargain damages and the same amount for out-of-pocket expenses. In 

Questions 12 and 13, the jury found $40,000 from each Millhollon as the amount, in 

addition to actual damages, that should be awarded to the Douglases because the

Millhollons’ conduct was committed knowingly. In Question 14 (as to Gary) and
31

Question 15 (as to Carole), the jury was asked about exemplary damages to be 

assessed against the Millhollons and found $50,000 as to Gary and $1,000 as to 

Carole. Questions 16 and 18 asked about attorney’s fees.29

Question 17 asked whether the Millhollons were in default in any of the 

material contractual obligations to the Douglases at the time of the closing between 

the parties. The jury answered “yes” to Question 17. 

The Millhollons filed a motion for judgment notwithstanding the verdict 

(JNOV) in which they argued that the jury’s answers to Questions 1 through 16 

should be disregarded because the Douglases had failed to allege and prove fraud in 

the inducement to negate the “as is/in its present condition” provision in the

contract, which they argued superseded the alleged misrepresentations and negated 

causation for the DTPA and statutory fraud claims, and because there was no 

evidence of reliance or producing cause when the Douglases testified that they had 

relied on their chosen inspectors to close on the home.

30 The Millhollons also argued 

 

29In response to Question 16, the jury awarded $110,000 to the Douglases for 

representation up until the time of trial, $15,000 in attorney’s fees through appeal to 

this court, $5,000 in attorney’s fees for representation at the petition for review stage 

in the supreme court, and $10,000 in attorney’s fees for representation through oral

argument and completion of a proceeding in the supreme court. In response to 

Question 18, the jury indicated that a reasonable fee for the Millhollons’ attorney for 

preparation and trial was $35,000, for an appeal to this court was $15,000, and for an 

appeal to the supreme court was $10,000. 

30Before the trial began, the Millhollons’ attorney complained that fraudulent 

inducement had not been pleaded, seeking to avoid trying the issue by consent. 

During the charge conference, he again raised his fraudulent inducement argument,
32

that there was no evidence that they knew there was “improper drainage” or a defect 

with the septic system on October 19, 2013, the day that they signed the disclosures, 

or on the date of closing; no evidence of a problem occurring with regard to these 

items that would have put them on notice of a defect; and no evidence of the cause of 

the damages to the driveway, no evidence that the French drain was not performing

as expected, no evidence of why it was necessary to continue the drain to the ditch, 

and no evidence of proximate or producing cause of the damages to the driveway.

They complained that there was no evidence that any of the above damages were 

foreseeable or that they caused, proximately caused, or were the producing cause of 

any of the Douglases’ damages. And they contended that the jury’s response to 

Question 17 should be disregarded because there was no evidence that they had 

breached the contract. 

In their motion to modify the judgment, the Millhollons renewed their “as is”

and fraud-in-the-inducement arguments and incorporated by reference their motion 

for JNOV.

The trial court rendered a judgment in accordance with the jury’s verdict, 

awarding to the Douglases $29,320 in actual damages, $50,000 in additional damages 

against Gary, $40,000 in additional damages against Carole, and $110,000 in attorney’s 

 

argued that there was no evidence of any false, misleading, or deceptive act or practice 

by the Millhollons or of the Douglases’ reliance, and argued that there was no 

evidence to support the submission of Questions 2, 3, 4, 5, 6, 8, 9, 10, 11, 12, 13, 14, 

15, and 17. The trial court overruled these objections. 
33

fees, in addition to conditional appellate attorney’s fees. The trial court denied the 

Millhollons’ motion for JNOV and motion to modify the judgment. 

III. Discussion

In their first and second issues, the Millhollons argue that the trial court erred 

by denying their motion for JNOV and motion to modify the judgment because (1) 

there was no evidence that they made any misrepresentations of fact, (2) the property 

was purchased “in its present condition,” or “as is,” which they claim was not negated 

by a pleading and proof of fraud in the inducement, (3) the Douglases had retained 

experts to inspect the property so that there was no reliance and no producing cause, 

and (4) they did not breach the contract and are therefore due their attorney’s fees. In 

their third issue, the Millhollons argue that the trial court erred by rendering judgment 

for the Douglases because there was no evidence to support the jury’s findings to 

Questions 1–15 and 17.31 We will consider the three issues together.

A. Legal Sufficiency Standard of Review

We may sustain a legal sufficiency challenge—that is, a no-evidence 

challenge—only when (1) the record discloses a complete absence of evidence of a 

 

31As set out above, the Millhollons’ arguments about the lack of evidence to 

support finding misrepresentations of fact, reliance, and producing cause correspond 

to Questions 1, 4, 7, and 9. Their complaint about no proof of fraud in the 

inducement also corresponds to Questions 7 and 9, and their complaint about the lack 

of evidence to support the jury’s finding that they breached the contract corresponds 

to Question 17. Their complaints about sufficiency of the evidence to support 

damages correspond to Questions 11, 12, 13, 14, and 15.
34

vital fact, (2) the rules of law or of evidence bar the court from giving weight to the 

only evidence offered to prove a vital fact, (3) the evidence offered to prove a vital 

fact is no more than a mere scintilla, or (4) the evidence establishes conclusively the

opposite of a vital fact. Ford Motor Co. v. Castillo, 444 S.W.3d 616, 620 (Tex. 2014) (op. 

on reh’g); Uniroyal Goodrich Tire Co. v. Martinez, 977 S.W.2d 328, 334 (Tex. 1998) (op. 

on reh’g). In determining whether legally sufficient evidence supports the finding 

under review, we must consider evidence favorable to the finding if a reasonable 

factfinder could and must disregard contrary evidence unless a reasonable factfinder 

could not. Cent. Ready Mix Concrete Co. v. Islas, 228 S.W.3d 649, 651 (Tex. 2007); City of 

Keller v. Wilson, 168 S.W.3d 802, 807, 827 (Tex. 2005).32

Scintilla means a spark or trace. Scintilla, Black’s Law Dictionary (10th ed. 

2014). Anything more than a scintilla of evidence is legally sufficient to support a

finding. Cont’l Coffee Prods. Co. v. Cazarez, 937 S.W.2d 444, 450 (Tex. 1996). More than 

a scintilla exists if the evidence rises to a level that would enable reasonable and fairminded people to differ in their conclusions. Rocor Int’l, Inc. v. Nat’l Union Fire Ins., 77 

 

32A trial court may disregard a jury verdict and render a JNOV if no evidence 

supports the jury findings on issues necessary to liability or if a directed verdict would 

have been proper. See Tex. R. Civ. P. 301; Tiller v. McLure, 121 S.W.3d 709, 713 (Tex.

2003); Fort Bend Cty. Drainage Dist. v. Sbrusch, 818 S.W.2d 392, 394 (Tex. 1991). A

directed verdict is proper only under limited circumstances: (1) when the evidence 

conclusively establishes the right of the movant to judgment or negates the right of 

the opponent; or (2) when the evidence is insufficient to raise a material fact issue. 

Prudential Ins. Co. of Am. v. Fin. Review Servs., Inc., 29 S.W.3d 74, 77 (Tex. 2000); Playoff 

Corp. v. Blackwell, 300 S.W.3d 451, 454 (Tex. App.—Fort Worth 2009, pet. denied) 

(op. on reh’g).
35

S.W.3d 253, 262 (Tex. 2002); Merrell Dow Pharm., Inc. v. Havner, 953 S.W.2d 706, 711

(Tex. 1997). On the other hand, when the evidence offered to prove a vital fact is so

weak that it creates no more than a mere surmise or suspicion of its existence, the 

evidence is no more than a scintilla and, in legal effect, is no evidence. Kindred v. 

Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex. 1983); see King Ranch, Inc. v. Chapman, 118 

S.W.3d 742, 751 (Tex. 2003).

Both direct and circumstantial evidence may be used to establish any material 

fact. Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 601 (Tex. 2004). A fact is established 

by circumstantial evidence when it can be fairly and reasonably inferred from other 

facts proved in the case. Russell v. Russell, 865 S.W.2d 929, 933 (Tex. 1993). But to 

withstand a legal sufficiency challenge, circumstantial evidence still must consist of 

more than a scintilla. Blount v. Bordens, Inc., 910 S.W.2d 931, 933 (Tex. 1995).

Jurors are the sole judges of the credibility of the witnesses and the weight to 

give their testimony, and reviewing courts cannot impose their own opinions to the

contrary. City of Keller, 168 S.W.3d at 819. Jurors may choose to believe one witness 

and disbelieve another. Id. (explaining, for example, that if both parties in a traffic 

accident testify they had the green light, an appellate court must presume that the 

prevailing party did and that the losing party did not). They may disregard even 

uncontradicted and unimpeached testimony from disinterested witnesses, although 

they may not ignore undisputed testimony that is clear, positive, direct, otherwise 

credible, free from contradictions and inconsistencies, and could have been readily 
36

controverted, and they are not free to believe testimony that is conclusively negated 

by undisputed facts. Id. at 820. 

B. Applicable Law

“[A] seller of real estate is under a duty of disclosing material facts which would 

not be discoverable by the exercise of ordinary care and diligence on the part of the 

purchaser, or which a reasonable investigation and inquiry would not uncover.” Smith

v. Nat’l Resort Cmties., Inc., 585 S.W.2d 655, 658 (Tex. 1979). However, a seller has no 

duty to disclose facts he does not know and is not liable for failing to disclose what he 

only should have known. Prudential Ins. Co. of Am. v. Jefferson Assocs., Ltd., 896 S.W.2d 

156, 162 (Tex. 1995) (stating that absent any specific knowledge of asbestos in the 

building, seller was not obliged to raise the subject).

Property Code Section 5.008, “Seller’s Disclosure of Property Condition,”

requires a seller of residential real property to give the purchaser a written notice that 

“contains, at a minimum, all of the items in the notice prescribed by [that] section.” 

Tex. Prop. Code Ann. § 5.008(a). At the top of the form, the seller’s disclosure must 

include a statement in capital letters that the notice “is a disclosure of seller’s

knowledge of the condition of the property as of the date signed by seller and is not a 

substitute for any inspections or warranties the purchaser may wish to obtain. It is 

not a warranty of any kind by seller or seller’s agents.” Id. § 5.008(b).

33

 Subsection (d) 

 

33Property Code Section 5.008(b) has been amended several times since the

inception of this case. See Act of May 22, 2013, 83rd Leg., R.S., ch. 695, § 6, 2013 
37

further provides that the notice “shall be completed to the best of the seller’s belief 

and knowledge as of the date the notice is completed and signed by the seller.” Id.

§ 5.008(d); see Bynum v. Prudential Residential Servs., Ltd. P’ship, 129 S.W.3d 781, 792, 795

(Tex. App.—Houston [1st Dist.] 2004, pet. denied) (op. on reh’g) (noting that section

5.008’s plain language “requires only that the form be completed to the best of the 

seller’s belief at the time the notice is completed and signed,” and holding, on appeal 

of no-evidence summary judgment, that because there was no evidence that the 

defendant-sellers actually knew that the bathroom had been remodeled without the 

necessary permits, there was no evidence that they had intentionally made a 

misrepresentation in their section 5.008 disclosure).

The statutory seller’s disclosure notice contains a list of items on the property, 

including “plumbing system” and “septic system,” the presence of which the seller is 

to identify. Tex. Prop. Code Ann. § 5.008(b). The seller is then to indicate whether 

he or she is aware of any of the identified items that are not in working condition, that 

have known defects, or that are in need of repair, and a “yes” answer requires a 

description. Id. The seller must also disclose if he or she is “aware of any known 

defects/malfunctions in,” among other things, the “Plumbing/Sewers/Septics” and 

the driveway, and a “yes” answer requires a description. Id. The seller is also asked if 

 

Tex. Sess. Law. Serv. (amended 2015, 2017, 2019) (current version at Tex. Prop. Code 

Ann. § 5.008). None of the amendments have affected the provisions pertinent to 

this case, so we cite the current code for the convenience of the parties and public.
38

he or she is aware of conditions such as improper drainage, and a “yes” answer 

requires an explanation. Id. And the seller must indicate whether he or she is aware

of any item, equipment, or system in or on the property that is in need of repair, and a 

“yes” answer requires an explanation. Id.; see Birnbaum v. Atwell, No. 01-14-00556-CV, 

2015 WL 4967057, at *7 (Tex. App.—Houston [1st Dist.] Aug. 20, 2015, pet. denied)

(mem. op.) (“Knowledge of past repairs does not establish knowledge of a defective 

condition.”).

In the TREC form contract signed by the parties, section 7, “Property 

Condition,” lists subsections A through H.34 Subsection A, “Access, Inspections and 

Utilities,” provides that the seller will permit the buyer and his agents access to the 

property for inspections. Subsection B, “Seller’s Disclosure Notice Pursuant to 

§5.008, Texas Property Code (Notice),” instructs the parties to check one box only 

and lists the following options: 

(1) Buyer has received the Notice.

(2) Buyer has not received the Notice. Within _______ days after the 

effective date of this contract, Seller shall deliver the Notice to Buyer. If 

Buyer does not receive the Notice, Buyer may terminate this contract at 

any time prior to the closing and the earnest money will be refunded to 

Buyer. If Seller delivers the Notice, Buyer may terminate this contract 

 

34Only subsections A, B, and D are pertinent to the issues before us. 

Subsection C states that a seller’s disclosure about lead-based paint is required by 

federal law. Subsection E pertains to lender-required repairs and treatments. 

Subsection F pertains to the completion of all agreed repairs and treatments prior to 

the closing date. Subsection G addresses environmental matters such as the presence 

of wetlands or toxic substances, and Subsection H mentions residential service 

contracts. 
39

for any reason within 7 days after Buyer receives the Notice or prior to 

the closing, whichever first occurs, and the earnest money will be 

refunded to Buyer. 

(3) The Seller is not required to furnish the notice under the Texas 

Property Code. 

The parties checked option (1), and the record reflects that the Millhollons provided a 

notice to the Douglases. 

Subsection D, “Acceptance of Property Condition,” once more instructs the 

parties to check one box only and lists the following options:

(1) Buyer accepts the Property in its present condition.

(2) Buyer accepts the Property in its present condition provided Seller, at 

Seller’s expense, shall complete the following specific repairs and 

treatments: _______________. (Do not insert general phrases, such as 

‘subject to inspections’ that do not identify specific repairs.)

NOTICE TO BUYER AND SELLER: Buyer’s agreement to accept the 

Property in its present condition under Paragraph 7D(1) or (2) does not 

preclude Buyer from inspecting the Property under Paragraph 7A, from 

negotiating repairs or treatments in a subsequent amendment, or from 

terminating this contract during the Option Period, if any.

The Douglases checked the first option under subsection D.

In Volmich v. Neiman, No. 02-12-00050-CV, 2013 WL 978770, at *3 (Tex. 

App.—Fort Worth Mar. 14, 2013, no pet.) (mem. op.), and again in Naquin v. Cellio, 

No. 02-16-00117-CV, 2017 WL 2178873, at *2 (Tex. App.—Fort Worth May 18, 

2017, no pet.) (mem. op.), we acknowledged that we, and other Texas courts, have 

interpreted the contract language, “in its present condition,” to be an agreement to 

purchase the property “as is,” and that a valid “as is” agreement, with some 
40

exceptions, will prevent a buyer from holding a seller liable if the item sold turns out 

to be worth less than the price paid.

However, an “as is” clause may not be enforced when the buyer is induced to 

enter into the contract by a seller’s fraudulent representation or concealment of 

information. Prudential, 896 S.W.2d at 162 (holding that a buyer who agrees, freely 

and without fraudulent inducement, to purchase commercial real estate “as is” cannot 

recover damages from the seller when the property is later discovered not to be in as 

good a condition as he believed it was when he inspected it before the sale);

35 see

Warehouse Assocs. Corp. Ctr. II, Inc. v. Celotex Corp., 192 S.W.3d 225, 230–31 (Tex. 

App.—Houston [14th Dist.] 2006, pets. denied) (concluding that the Prudential

exceptions “still stand, subject to a small exception to the fraudulent-inducement 

exception carved out by Schlumberger [Technology Corp. v. Swanson, 959 S.W.2d 171 (Tex. 

 

35In Prudential, the buyer, a knowledgeable real estate investor who owned an 

interest in at least 30 commercial buildings and who was president of a Dallas 

commercial property management firm that had developed, built, rehabilitated, 

owned, or managed properties valued altogether at around $100 million, discovered

that the four-story office building that he bought “as is” contained asbestos two years 

after the purchase. 896 S.W.2d at 159. Under the terms of the parties’ sales 

agreement, the buyer had acknowledged that he was not “relying upon any 

representation, statement or other assertion with respect to the Property condition”

and was instead relying on his own “examination of the Property.” Id. at 160. The 

court noted that “[w]hile it should not be necessary in every ‘as is’ provision to go into

this much detail, [the] contract leaves no doubt exactly what [the buyer] agreed to,”

which negated the causation element of his DTPA and fraud claims. Id. at 161 

(observing that the buyer did not assert fraud in the inducement of the “as is”

agreement). The court also observed that there was no evidence that the seller 

actually knew about the asbestos. Id. at 162.
41

1997)]”); see also Volmich, 2013 WL 978770, at *4. That is, a seller cannot assure a 

buyer of the property’s condition in order to obtain the buyer’s agreement to buy it 

“as is” and then disavow the assurance that procured the “as is” agreement. Prudential, 

896 S.W.2d at 162.

And even absent fraudulent inducement, an “as is” clause still may not be 

enforceable depending on the nature of the transaction and totality of the 

circumstances surrounding the agreement, including the parties’ sophistication and 

whether they were represented by counsel, whether the contract was made at arm’s 

length, the parties’ relative bargaining power and whether the contractual language

was freely negotiated, and whether the clause was an important part of the parties’ 

bargain and not simply “boilerplate.” Id. at 162; see Schlumberger, 959 S.W.2d at 180–81

(emphasizing, with reference to Prudential, that a disclaimer of reliance will not always 

bar a fraudulent inducement claim and discussing sophisticated businesspersons’ 

representation by “highly competent and able legal counsel” in arm’s length 

transaction); see also Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 

323, 332 (Tex. 2011) (explaining that while fraudulent inducement is almost always 

grounds to set aside a contract despite a merger clause, in certain circumstances, it 

may be possible for a contract’s terms to preclude a fraudulent inducement claim by a 

clear and specific disclaimer-of-reliance clause, i.e., when sophisticated parties 

represented by counsel disclaim reliance on representations about a specific matter in 

dispute); Volmich, 2013 WL 978770, at *3 (citing Prudential, 896 S.W.2d at 161).
42

 Regardless of the presence of an “as is” clause, however, when false and 

fraudulent representations are made about a contract’s subject matter but the person 

to whom they are made conducts an independent investigation into the same matters 

covered by the representations before closing and discovers the representations’

falsity, the causation and reliance elements of DTPA and fraud claims are negated.

Volmich, 2013 WL 978770, at *5–6;36 see Mead v. Gray, No. 02-16-00177-CV, 2017 WL 

1738066, at *3 (Tex. App.—Fort Worth May 4, 2017, pet. denied) (mem. op.) (“In 

determining whether a buyer’s independent inspection conclusively negates reliance 

and causation in a buyer’s claim based on a seller’s failure to disclose information, 

courts look to whether the buyer ultimately possessed the same information and 

knowledge as the seller.”);

37 see also Cellio, 2017 WL 2178873, at *5 (“[T]he 

 

36In Volmich, we held that even if the plaintiffs had shown evidence of the 

defendants’ misrepresentations about, or their failure to disclose, a roof leak, summary 

judgment in the defendants’ favor was not erroneous when the independent 

inspection commissioned and reviewed by the plaintiffs before purchasing the home 

“revealed numerous existing or past problems with the home, including previous roof 

repairs, leaks, and moisture damage and moisture-related deterioration throughout the 

house.” 2013 WL 978770, at *7. We made clear, however, that we were not holding 

that an independent inspection would always bar DTPA and fraudulent inducement

claims. Id. at *8.

37In Mead, we affirmed the trial court’s summary judgment for the sellers when 

the buyers, one of whom was a licensed realtor, retained their own property inspector 

who performed an independent inspection of the home and noted “signs of minimal 

foundation settlement” in two areas of the home, as well as “deficiencies” such as 

hairline cracks and patching on interior walls, cracks in the exterior brick veneer, open 

caulk joints around the exterior sides of windows, a cracked floor tile, open grout 

joints and caulk separation in the kitchen’s backsplash, and deficiencies in five interior
43

independent inspection that Naquin commissioned and reviewed before deciding to 

purchase the home supersedes any alleged misrepresentation or failure to disclose by 

the Cellios.”);

38 Williams v. Dardenne, 345 S.W.3d 118, 125 & n.4 (Tex. App.—Houston 

[1st Dist.] 2011, pet. denied) (stating that a buyer’s independent inspection precludes a 

showing of causation and reliance if it reveals to the buyer the same information that 

the seller allegedly failed to disclose and observing that some of the courts have 

articulated different tests to reach the same general rule).

 

and three exterior doors—the same problems that the buyers claimed they only 

discovered after moving into the home. 2017 WL 1738066, at *1, *3–4.

38In Cellio, the inspection report prepared by the plaintiff’s inspector “revealed 

numerous existing or past problems with the home, including problems with the 

home’s structural systems, its grading and drainage systems, and its sprinkler system,”

and “that the pool side commode needed further evaluation and possible correction”

because it “appeared to be ‘excessively loose at the floor mount.’” 2017 WL 2178873,

at *1, *5. The plaintiff purchased the house “in its [then] present condition” after she 

received the report. Id. at *1. Accordingly, two years later, when the plaintiff sued, 

alleging that the defendants had made misrepresentations in their disclosures about 

the plumbing and septic systems, the pool house, an unpermitted sprinkler system, 

and improper drainage, we upheld the trial court’s summary judgment for the

defendants despite the plaintiff’s allegations that the pool house commode “flushed 

untreated sewage onto the lawn.” Id. at *1–3, *5. But cf. id. at *5–6 (Sudderth, J., 

concurring) (stating that “[i]t was only when Naquin discovered toilet paper and 

human feces in her back yard behind the pool house that she realized something was 

amiss” and that a toilet with a loose base would not put a buyer on notice that the 

sewage pipes would dump raw sewage into the backyard). The concurrence noted 

that because Naquin did not produce evidence in response to the Cellios’ no-evidence 

summary judgment motion to explain why it was reasonable for her to rely on the 

Cellios’ misrepresentations rather than the inspection report and why the Cellios’

concealment of the defect rather than the inspector’s failure to discover it caused her 

damages, the trial court did not err by granting summary judgment. Id. at *7–8 

(Sudderth, J., concurring).
44

C. Application

As set out by the parties, we must consider whether the Millhollons made 

misrepresentations and whether the Douglases could have relied on those 

misrepresentations, as well as whether the Douglases’ failure to plead a common law 

fraudulent inducement claim can defeat their recovery and whether the Millhollons 

breached the contract.

1. Misrepresentations

The Millhollons argue that no evidence was introduced to prove that their real 

estate disclosures were false when made and that the only evidence is that they made 

repairs to the drainage and septic system but that there were no problems after the 

repairs and no known defects or improper drainage on October 19, 2013, when they 

signed the disclosures. And they contend that the circumstantial evidence of what 

occurred at the home after the April 24, 2014 closing is insufficient to support the 

jury’s answers because the Douglases were required to prove that the Millhollons 

knew on October 19, 2013, that their representations were false39 and that the

Millhollons knew that water going across the driveway would damage it and create 

improper drainage.

 

39The Millhollons argue that the Douglases presented no evidence that the 

Millhollons had used the facilities during a significant rain and that the Douglases only 

called repair companies in 2015 when the rainfall increased significantly. 
45

Over the course of four days of evidence, the jury learned that Gary had 

ordered five inspections before he purchased the home but only disclosed two and 

that one of the inspections he did not subsequently disclose to the Douglases was a 

November 29, 2011 inspection of the home’s septic system by a certified septic 

inspector, who recommended further inspection of the system. Gary also did not 

reveal until after closing that in February 2012, he opted not to hire a landscape

engineer or architect to remedy backyard flooding, some of which might have been 

caused by his installation of a wrought-iron fence on a concrete footer, because it 

would have cost $17,000.

40 Instead, he paid $4,425 to Martinez, who had no formal 

education as a landscaper, architect, or engineer, to remove a berm that blocked the 

flow of water from the driveway and to install a drain that was supposed to keep 

water from pooling in the backyard. While both Carole and Gary testified that they 

had no other problems with the property’s drainage after these repairs, their changes 

sent more water down the driveway,

41 which ultimately led to the cracking of the 

driveway’s concrete. Gary also chose to rely on Maverick Homes’s representations 

that it had been properly maintaining the septic system when he purchased the home 

 

40The Douglases ultimately paid almost $12,000 to correct the drainage system.

41At some point, Gary also capped one of the septic system’s two sprinkler 

heads to keep effluent from running down the driveway, which was inconsistent with 

the design approved by the county, and thus illegal, but Gary would not have known 

that because he never looked into the system’s design.
46

and then subsequently settled his dispute with Maverick Homes about both the 

drainage and the septic system problems for $2,000. 

Although Gary denied having heard Hughes’s statement about the wroughtiron fence’s concrete footing causing water to back up into the backyard, the jury 

could have chosen to recall Hughes’s statement that it was “like putting a softball in a

toilet” and flushing, leading to an overflow (flooding), and Alan’s testimony that 

before he and Peggy replaced the septic system and corrected the drainage system, 

water would pool around the septic system tanks seventy percent of the time, to 

conclude that the Millhollons had been less than candid about the continuing drainage 

problems on the property when they signed the disclosures in October 2013.

42

Further, in March 2013, the Millhollons called a plumber because their toilet 

was “bubbling and not flushing properly,” and when the plumber returned to their 

home in August 2013 on another service call, he determined that there was a static 

sewer line. Gary said that after he hired people to make repairs to the septic system, 

they had no other problems, even though he took no action to change the slope of 

the sewer line. It rained 2.5 inches one day at the end of September 2013, 1.1 inches 

on October 14, and .82 inches on October 16, just a few days before the Millhollons

 

42The record reflects that there was also significant rain on October 27 (.62

inches), November 5 (.45 inches), November 6 (.46 inches), November 22 (1.22 

inches), November 25 (.58 inches), December 6 (.6 inches), December 7 (.63 inches), 

and December 21 (1.97 inches) but very little rain in January 2014 (.08 for the entire 

month), and virtually no rain at all in February 2014 (.13, .01, and .02 respectively, on 

February 4, 9, and 15). 
47

signed the disclosures on October 19, 2013. While Carole testified that their decision 

to sell the house had been motivated by her hip replacement, the jury could have 

found the timing of the Millhollons’ decision to sell was also triggered by the septic

system’s tendency to stop functioning properly during a heavy rainfall. The jury 

likewise was entitled to find from the evidence in this record that the Millhollons’

failure to make accurate disclosures, reveal unflattering inspections, or mention their 

history with the house’s drainage and septic systems at the time that the Douglases 

had the house and septic system inspected was done knowingly to induce them into 

entering into the contract and took advantage of the Douglases’ lack of knowledge to 

a grossly unfair degree. See City of Keller, 168 S.W.3d at 819. Accordingly, we overrule 

this portion of the Millhollons’ three issues.

2. Reliance

The Millhollons argue that no evidence was introduced to prove that the 

Douglases relied on the disclosures rather than the experts they hired to inspect the 

home. The Douglases respond that because their inspections did not reveal the 

defects that were not disclosed or that were misrepresented, their reliance on the 

disclosures, and thus the chain of causation, was not defeated, arguing that the cases 

cited by the Millhollons “all involved situations where pre-closing inspections or 

reports turned up the exact problems which were the subject of later DTPA claims, or 

at least the conditions that were the subject of the buyers’ claims.”
48

“[W]hen a person makes his own investigation of the facts, and knows the 

representations are false, he cannot, as a matter of law, be said to have relied upon the 

misrepresentations of another.” Camden Mach. & Tool, Inc. v. Cascade Co., 870 S.W.2d 

304, 311–13 (Tex. App.—Fort Worth 1993, no writ) (emphasis added) (holding that 

seller’s failure to disclose prior foundation repair could not support recovery when 

buyer was aware, before sale, that foundation had significant problems); see also Cole v. 

Johnson, 157 S.W.3d 856, 857–59, 861 (Tex. App.—Fort Worth 2005, no pet.) (holding 

trial court did not err by granting summary judgment for sellers when sellers provided 

ample disclosure of foundation repair history).

We addressed a similar set of facts, including a seller’s making disclosures, in 

Kessler v. Fanning, 953 S.W.2d 515 (Tex. App.—Fort Worth 1997, no pet.). The 

Fannings bought the Kesslers’ home after visiting the house on several occasions and 

having the house inspected by a professional inspector. Id. at 517. The Kesslers 

checked “no” on the disclosures with regard to whether they were aware of improper 

drainage or previous structure repairs on the property. Id. at 518. It rained during the 

inspection, but the Fannings were not made aware of, and did not see, any drainage

problems on the property before they moved in, and the inspection did not include 

the yard or its drainage “because that was not a concern at that time.” Id. at 517. 

However, the Fannings saw standing water or “ponding” almost immediately after 

moving in and called the Kesslers, who acknowledged that they were aware of it. Id.

at 517. 
49

The Fannings sued the Kesslers for violating the DTPA, claiming that they had 

made misrepresentations and omissions about the drainage and condition of the

home to induce the Fannings to buy it. Id. at 518. A jury found that the Kesslers had 

violated the DTPA by engaging in a “false, misleading, or deceptive act or practice 

that was a producing cause of damages” to the buyers. Id. at 520. On appeal, the 

Kesslers argued, among other things, that any producing causal connection had been 

broken by the Fannings’ reliance on the inspection. Id. at 519. However, we stated, 

“The possibility of an independent investigation that might have uncovered fraud does 

not preclude recovery of damages for fraudulent representations,” and held that the 

Fannings’ inspection was not a defense to the misrepresentation claim. Id. (emphasis 

added) (citing Koral Indus. v. Security-Connecticut Life Ins., 802 S.W.2d 650, 651 (Tex. 

1990) (per curiam)).43 In a later portion of the opinion, we noted, “The record shows 

that standing water would not drain from the yard after periods of heavy rains, a 

 

43In Koral, the insurance company refused to pay benefits based on fraudulent 

inducement and misrepresentations after the company’s insured, who had failed to 

disclose damaging medical history, died within what the insurer claimed was the 

contestable period of the policy. 802 S.W.2d at 650–51. The court noted that failure 

to use due diligence to suspect or discover someone else’s fraud does not bar the

defense of fraud to the contract because—in the absence of knowledge to the 

contrary—the injured party would have a right to rely and act upon the false 

statements; “the wrongdoer in such a case cannot be heard to complain that the other 

should have disbelieved his solemn statements.” Id. at 651 (quoting W. Cottage Piano 

& Organ Co. v. Anderson, 101 S.W. 1061, 1064 (Tex. App.—Fort Worth 1907, writ 

denied)).
50

condition that a one-time inspection may not reveal without notice of the problem.” 

Id. at 520.

The Millhollons direct us to Bartlett v. Schmidt, 33 S.W.3d 35, 38–40 (Tex. 

App.—Corpus Christi–Edinburg 2000, pet. denied), to support their argument that a 

buyer’s decision to undertake any independent investigation indicates that he is not 

relying on the seller’s representations about the property. Bartlett was an appeal of a 

judgment on a jury verdict for the buyer-plaintiff, a German citizen, who had 

purchased property intending to use it for commercial purposes. Id. at 36–37 & n.1. 

The seller had orally advised the buyer that there were no use restrictions on the 

property; the title company likewise represented that there were no use restrictions on 

the property, as did the buyer’s attorney. Id. at 36–37. There were, in fact, restrictions 

limiting the property to residential use only, and a jury found the seller liable for 

negligent misrepresentation, fraud, and DTPA violations. Id. at 37. 

Because the buyer had his own counsel review the conveyancing documents 

“specifically to assure that no restrictions would interfere with his development of the 

property for his intended purpose,” the court held that he did not rely on the seller’s 

representations, defeating his fraud and negligent misrepresentation claims. Id. at 38. 

And because the buyer undertook his own investigation after the seller’s 

representations and expressed his reliance upon the title commitment rather than the 

seller’s representations, his DTPA claim was likewise defeated because he could not 

show the producing cause element. Id. at 40–41. Notwithstanding Bartlett’s broad 
51

language, however, the Corpus Christi–Edinburg court’s legal analysis is merely a 

repeat of the general rule that a buyer’s independent inspection precludes a showing 

of causation and reliance if it reveals to the buyer the same information that the seller 

allegedly failed to disclose. See Williams, 345 S.W.3d at 125; see also Pleasant v. Bradford, 

260 S.W.3d 546, 553 n.3 (Tex. App.—Austin 2008, pet. denied) (explaining, with 

regard to Bartlett, that the Corpus Christi–Edinburg court “was not stating that any

evidence of an investigation defeats an allegation of reliance, but rather that there was 

legally sufficient evidence of an unimpaired investigation by the buyer sufficient to 

show a lack of reliance on the seller’s representations” (emphasis added)); Celotex, 192 

S.W.3d at 244–45 (pointing out that Bartlett did not involve as-is or waiver-of-reliance 

language and did not cite Prudential or Schlumberger and holding that to the extent 

Bartlett held that a buyer’s independent investigation, without more, is sufficient as a 

matter of law to defeat a fraudulent inducement assertion, it was contrary to Prudential, 

Schlumberger, and cases cited therein).

The Millhollons also direct us to the portions of the Cellio and Volmich opinions

in which we quoted Bartlett, stating, “The common thread of the decisions reaching 

this conclusion is that, regardless of the result of his investigation, the buyer’s decision to 

undertake such an investigation indicates that he or she is not relying on the seller’s 

representations about the property.” Cellio, 2017 WL 2178873, at *4 (quoting Bartlett, 

33 S.W.3d at 38 (emphasis added)); Volmich, 2013 WL 978770, at *5 (quoting Bartlett, 

33 S.W.3d at 38 (emphasis added)). However, in the immediately preceding sentence
52

in both opinions, we made clear that the independent investigation must be “into the 

matters covered by the [allegedly false and fraudulent] representations.” Cellio, 2017 

WL 2178873, at *4; Volmich, 2013 WL 978770, at *5. That is, it is the investigation 

into the same matters covered by the false or fraudulent representations that breaks the 

chain of causation and reliance on those representations. See Cellio, 2017 WL 

2178873, at *4; Volmich, 2013 WL 978770, at *5. 

Here, the Douglases’ home inspector visited the home on a clear and sunny day 

towards the end of a month when virtually no rain fell, and three days later, an aerobic 

septic specialist inspected the septic system and reported that it was “working fine.” 

Because the Douglases did not know the property’s history of drainage and septic

system problems, they did not know to direct their home inspector or septic system 

specialist to look for specific issues with the property’s drainage, to check the sewer 

line’s slope, or to check any other problems specific to the inner workings of the 

septic system—a problematic “black box” according to the septic system report that 

the Millhollons did not disclose. While the home inspector did note some minor 

issues with the home’s gutters, the Douglases did not know to ask him to determine 

how water drained from the backyard, and the lack of rainfall precluded the

subsequent drainage and septic issues from arising for either of their inspectors or 

from their firsthand discovery prior to closing. See Kessler, 953 S.W.2d at 517–20.

Further, the only plumbing issues identified by the inspector pertained to hose 

bibs missing their back-flow/anti-siphon devices and a problem with the master 
53

bathroom’s hydro-massage therapy tub, i.e., nothing to do with the toilet that had a 

history of bubbling or the sewer connection to the septic tank. And Alan testified 

that while he and Peggy had relied on the home inspection report for the repair 

addendum, they otherwise relied “100%” on the Millhollons’ disclosures, and the jury 

was entitled to believe this testimony. Accordingly, we overrule this portion of the 

Millhollons’ three issues.

3. Fraudulent Inducement

The Millhollons argue that the Douglases’ failure to plead and submit to the 

jury an issue on fraud in the inducement precluded them from defeating the “as is”

clause and obtaining a judgment against them.

Fraudulent inducement is a species of common law fraud that shares the same 

basic elements as fraud but that arises only in the context of a contract. Anderson v. 

Durant, 550 S.W.3d 605, 614 (Tex. 2018) (explaining that Texas law has long imposed 

a duty to abstain from inducing another to enter into a contract through the use of 

fraudulent misrepresentations). Thus, in a traditional (common law) fraudulent

inducement claim, the plaintiff must prove both the existence of a contract, see id., and 

that (1) the defendant made a representation to the plaintiff; (2) the representation 

was material; (3) the representation was false; (4) when the defendant made the 

representation, he knew it was false or made it recklessly, as a positive assertion; (5) 

the defendant made the representation with the intent that the plaintiff act on it; (6) 

the plaintiff relied on the representation; and (7) the representation caused the 
54

plaintiff injury. Volmich, 2013 WL 978770, at *4 (citing Exxon Corp. v. Emerald Oil & 

Gas Co., 348 S.W.3d 194, 217 (Tex. 2011) (op. on reh’g)); see also Archer v. Griffith, 390 

S.W.2d 735, 740 (Tex. 1964) (explaining that “[a]ctual fraud usually involves 

dishonesty of purpose or intent to deceive”).

The Douglases did not plead a traditional fraudulent inducement claim, and a

question on traditional fraudulent inducement was not submitted to the jury.44 

However, the Douglases also did not plead a breach-of-contract or warranty claim.

Instead, they pleaded a statutory fraud claim, which requires that the buyer be induced 

into entering into the contract by relying on a false representation of a past or existing 

material fact, and they pleaded a DTPA claim, one basis for which—as set out in the 

jury charge—required a finding that the seller’s failure to disclose information the 

seller knew about the property was intended to induce the buyer into the transaction.

See Tex. Bus. & Com. Code Ann. §§ 17.46(a), (b)(24), 17.50(a)(1)(B), 27.01(a)(1); Payne 

v. Highland Homes, Ltd., No. 02-14-00067-CV, 2016 WL 3569533, at *8 (Tex. App.—

Fort Worth June 30, 2016, no pet.) (mem. op.); see also Lindley v. McKnight, 349 S.W.3d 

113, 128 (Tex. App.—Fort Worth 2011, no pet.) (observing that the elements of 

statutory fraud are essentially identical to those of common law fraud except that 

section 27.01 does not require proof of knowledge or recklessness as a prerequisite to 

 

44In their reply brief, the Millhollons clarify that, pursuant to the pattern jury 

charges, a jury question for fraud in the inducement is submitted after a defense like 

the “as-is” clause is raised.
55

the recovery of actual damages); Pierre v. Tilley, No. 02-06-00308-CV, 2007 WL 

2067757, at *3 (Tex. App.—Fort Worth July 19, 2007, pet. denied) (mem. op.) (same);

see generally Cellio, 2017 WL 2178873, at *1–4 (observing that the plaintiff raised only 

DTPA and statutory fraud claims but addressing elements of common law fraud-inthe-inducement claim in discussion of “as is” clause and reliance).

In their reply brief, the Millhollons complain that unlike common law 

fraudulent inducement, “knowledge of the falsity” and “intent” to induce action are 

not elements of statutory fraud under Business and Commerce Code Section 27.01.

But the legislature has specified that in the statutory fraud cause of action, there must 

be a false representation of a past or existing material fact that is made “for the

purpose of inducing” another to enter into a contract, i.e., made with the intent to 

induce the other party into entering into the contract. See Tex. Bus. & Com. Code 

Ann. § 27.01(a)(1)(A). And if the actor makes the false representation with “actual 

awareness” of the falsity, he is liable to the defrauded person for exemplary damages. 

Id. § 27.01(c). Likewise, a third person who has actual awareness of the falsity of the

actor’s representation, who fails to disclose it to the defrauded person, and who 

benefits from the false representation also commits fraud and is liable to the 

defrauded person for exemplary damages. Id. § 27.01(d). And under the DTPA, 

failing to disclose information about the property that was known at the time of the 

sale—if such failure to disclose was intended to induce the plaintiffs to enter into the 
56

transaction that they would not have otherwise if the information had been 

disclosed—raises both the intent to induce and knowledge of the false representation.

The jury was so charged and thus found both “knowledge of the falsity,” i.e., 

“actual awareness,” and intent with regard to the fraudulent-inducement elements in 

these statutory causes of action. Accordingly, we overrule this portion of the 

Millhollons’ three issues. Based on our resolution of this portion of their three issues, 

we need not address their argument about the “as-is” clause’s viability based on the 

parties’ sophistication or the Douglases’ response that the “as-is” clause was

contradicted and superseded by the contract’s repair addendum. See Tex. R. App. P. 

47.1.

4. Breach of Contract

The jury found that the Millhollons were in default with regard to “any of the 

material contractual obligations to the Douglases at the time of the closing between 

the parties.” The Millhollons argue that this jury response should be disregarded 

because there was no evidence that they breached the contract when the disclosures

were not part of the contract or incorporated therein and lacked mutual promissory 

obligations; therefore, they should have been awarded their attorney’s fees. The 

Douglases respond that all parties understood and agreed that the disclosures were an 

integral part of the contract under paragraph 7(B). Specifically, they refer us to Gary’s 

testimony that he understood that the disclosures were part of the contract and to 

Alan’s testimony reflecting the same. The Douglases argue that the Millhollons’
57

“patently false disclosures” were a breach of the parties’ contract on the date of 

closing. 

The jury clearly agreed with the Douglases. The contract required that the

Douglases “receive[ ] the [section 5.008] notice,” which was supposed to disclose to 

them the Millhollons’ knowledge of the condition of the property as of the date they 

signed it on October 19, 2013. The Millhollons claimed that their disclosures were 

true. The Douglases argued that the disclosures were false in light of the property’s

septic system and drainage conditions when it rained—which the Millhollons were

aware of as the property’s residents and as the owners who had made various repair 

decisions and which the Douglases discovered only after closing—and they put on 

evidence about rain before and after the disclosure-signing date, which was less than 

two years after the Millhollons moved in on January 17, 2012. Because the jury had 

sufficient evidence before it to determine the Millhollons’ credibility, we overrule this 

portion of the Millhollons’ third issue. See City of Keller, 168 S.W.3d at 819.

5. Damages

In the remainder of their third issue, the Millhollons challenge the sufficiency

of the evidence to support the jury’s findings to Questions 11, 12, 13, 14, and 15, 

arguing that their conduct was not the proximate cause or producing cause of any 

damages. 

In response to Question 11, the jury identified $29,320 as the “benefit of the 

bargain” damages sustained by the Douglases and the same amount as their out-of-
58

pocket expenses. The trial court rendered a judgment for the Douglases for $29,320 

in actual damages. 

The Millhollons argue that the evidence shows that it was the Douglases’ failure

to maintain the septic system pursuant to Lone Star Aerobic Services’ July 2014 

recommendations that led to their replacement of the system and that there was no 

evidence that the repairs to the driveway or drainage systems were necessary as a 

result of the Millhollons’ conduct. 

Gary’s undisclosed November 29, 2011 septic system report indicated that the 

septic system was functioning adequately but had suffered from poor maintenance,

and the jury could have chosen to disbelieve that Maverick Homes had properly 

maintained the system and to believe that the Millhollons’ repairs to the system had 

been merely band-aids to nurse the faulty system until the next rain, rendering their

disclosures false and fraudulent, and thus the proximate or producing cause of the 

Douglases’ damages. See id. The Douglases obtained more than one bid to replace 

the system—one of the bids was $12,260, while they opted to go with the lower, 

$9,860 bid—after they solicited input from more than one company about what to 

do. The Douglases also sought recovery for the septic system testing and inspections 

($85 for Harrington Services, $175 for Helton-Ingram) and for a septic system 

compressor that had burned up in the interim ($495). 

The Millhollons did not dispute having changed the house’s drainage, and the 

Douglases presented evidence that these changes—rather than fixing the problem—
59

made it worse. They also presented evidence that they spent $5,870 to replace the

concrete that had cracked as a result of water draining over it and that they spent 

$9,885 for a new drainage installation and $2,000 for Martinez to complete the 

connection of the originally installed French drain to the street. In addition to 

testimony, the jury had photographic evidence to consider with regard to the 

extension of the drain to the street and of the geography of the house and backyard. 

Based on all of the evidence, the jury could have reasonably concluded that the 

Millhollons’ conduct required the Douglases’ corrective actions and that the

Millhollons’ failures to disclose evidenced an unconscionable course of action.

Based on all of these figures supported by the record, we conclude that the 

Douglases showed $28,370 in out-of-pocket damages.

45

 See Anderson, 550 S.W.3d at 

614 (explaining that out-of-pocket damages are measured by the difference between 

the value expended and the value received, while benefit-of-the-bargain damages are 

measured by the difference between the value as represented and the value received).

We therefore sustain this portion of the Millhollons’ third issue in part and reform the 

judgment to reflect $28,370 in lieu of $29,320.

The charge predicated Questions 12 and 13 on the jury’s affirmative answers to 

Questions 3 and 6 with regard to whether the Millhollons knowingly engaged in 

 

45Our review of this portion of the Millhollons’ sufficiency challenge is 

complicated by the fact that neither party has directed us to evidence to support or 

challenge the full amount of actual damages awarded by the jury.
60

violating the DTPA. See Tex. Bus. & Com. Code Ann. § 17.45(9). Under the DTPA, 

if the jury finds that the defendant committed his conduct knowingly, the plaintiff 

may recover—in addition to the amount of economic damages found by the trier of 

fact—damages for mental anguish as found by the jury and up to three times the 

amount of economic damages. Id. § 17.50(b)(1). The jury identified $40,000 each as 

the sum of money that should be awarded to the Douglases from Gary and from

Carole because their conduct was committed knowingly. Having found that the 

Millhollons acted knowingly, the jury could have awarded up to three times the 

amount of actual damages, but although the jury assessed $40,000 against Gary in

response to Question 12, the trial court did not include this amount in the judgment; 

accordingly, we will not consider the sufficiency of the evidence to support the jury’s 

answer to Question 12. 

The trial court included in the judgment the $40,000 assessment against Carole

in response to Question 13, and the Millhollons do not challenge the amount itself;

the record reflects that Carole signed the disclosures, and based on the record before 

us, the jury could have found that she did so while knowing that they were false. 

Accordingly, we overrule this portion of the Millhollons’ third issue.

Questions 14 and 15 were predicated on the jury’s affirmative answers to 

Questions 8 and 10, with regard to whether the jury found by clear and convincing 

evidence that Gary and Carole had actual awareness of the falsity of the

representation in Questions 7 and 9 (statutory fraud). The jury identified $50,000 as 
61

the sum of money to be assessed against Gary as exemplary damages in response to 

Question 14, and the trial court included this amount in the judgment. In response to 

Question 15, the jury identified $1,000 as the sum of money to be assessed against 

Carole as exemplary damages, but the trial court did not include this amount in the 

judgment, accordingly, we will not consider the evidentiary sufficiency to support the 

jury’s answer to Question 15.

The jury charge listed the following factors for the jury to consider in 

calculating their exemplary damages award: the nature of the wrong, the character of 

the conduct involved, Gary’s degree of culpability, the situation and sensibilities of the 

parties concerned, the extent to which Gary’s conduct offends a public sense of 

justice and propriety, and Gary’s net worth. No evidence was presented about Gary’s 

net worth, but otherwise, the jury had ample evidence to consider with regard to 

Gary’s actions in failing to disclose his superior knowledge of the home’s situation 

prior to its sale. Based on our resolution of the issues above, we conclude that the 

evidence is sufficient to support the jury’s award, and we overrule this final portion of 

the Millhollons’ third issue.

IV. Conclusion

Having overruled all but a portion of the Millhollons’ third issue, we modify 

the trial court’s judgment to reflect $28,370 in lieu of $29,320 in actual damages and 

affirm the trial court’s judgment as modified.
62

/s/ Ruben Gonzalez

Ruben Gonzalez

Visiting Judge

Delivered: November 27, 2019