Opinion ID: 2454480
Heading Depth: 1
Heading Rank: 2

Heading: DTPA Violations

Text: The Woodruffs allege that Parkway violated the DTPA by breaching an implied warranty to perform future development services in a good and workmanlike manner, or alternatively, by committing an unconscionable act. Assuming that the Woodruffs are consumers under the DTPA, [1] we analyze each basis for DTPA recovery.
The DTPA prohibits the breach of an express or implied warranty, see TEX.BUS. & COM.CODE § 17.50(a)(2), but it does not create warranties. The warranties, both express and implied, actionable under the DTPA must be recognized by the common law or created by statute. See La Sara Grain Co. v. First Nat'l Bank, 673 S.W.2d 558, 565 (Tex.1984). Unlike the implied warranties imposed on certain sales transactions under the Uniform Commercial Code, [2] the implied service warranty is a common law creation. See Melody Home Mfg. Co. v. Barnes, 741 S.W.2d 349, 353 (Tex.1987) (An implied warranty arises by operation of law when public policy so mandates.). Before it was adopted by the court of appeals, the implied warranty to perform future development services was unknown to Texas jurisprudence. The question presented for our decision, then, is whether such an implied warranty [3] should be recognized under the facts of this case. The judicial recognition of implied warranties in service transactions in Texas has had a short and somewhat uneven history. [4] Until 1987 this Court had never recognized a cause of action for breach of an implied warranty relating to services. In Dennis v. Allison, 698 S.W.2d 94 (Tex.1985), we declined to recognize an implied warranty in connection with medical services when a patient was sexually assaulted and beaten by her psychiatrist. The Court considered whether judicial recognition of an implied warranty was justified in light of existing remedies available to the patient. In denying recovery under an implied warranty theory, the Court concluded: It is not necessary to impose an implied warranty theory as a matter of public policy because the plaintiff patient has adequate remedies to redress wrongs committed during treatment. Id. at 96. Two years later, in Melody Home, this Court first recognized a limited implied warranty relating to services. Without retreating from its holding in Dennis v. Allison , the Court recognized an implied warranty to repair or modify existing tangible goods or property in a good and workmanlike manner. 741 S.W.2d at 354. At least two principles from Dennis and Melody Home apply in this case. First, an implied warranty will not be judicially imposed unless there is a demonstrated need for it. Second, the Melody Home implied warranty extends only to services provided to remedy defects existing at the time of the relevant consumer transaction. [5] These preliminary issues aside, we view the issue presented here to be whether consumers who are injured by substandard services can recover under an implied warranty theory when they neither sought nor acquired the services about which they complain. The requirement that a consumer urging an implied warranty for services seek or acquire that specific service flows from the historical definition of a warranty: A warranty is an express or implied statement of something with respect to the article sold, which the seller undertakes shall be part of a contract of sale; and though part of the contract, yet collateral to the express object of it. ARTHUR BIDDLE, A TREATISE ON THE LAW OF WARRANTIES IN THE SALE OF CHATTELS 1 (Philadelphia, Kay & Brother 1884) (emphasis added). [6] Therefore, to determine whether an implied warranty to provide future development services should be extended to the Woodruffs, we must first identify an underlying transaction upon which an implied warranty might be imposed. The parties identify three possible underlying transactions: the sale of the lot from Parkway to the homebuilder, the purchase of the home by the Woodruffs, and the regrading and drainage work performed by Parkway in 1983. Of these three options, we find the last one the least persuasive. In the 1983 negotiations, no contract was formed, and no goods or services were sold. The second alternative, the Woodruffs' purchase of the home in 1981, is also problematic. Parkway was not involved at all in this transaction and did not sell any goods or offer or agree to perform any particular services in connection with the sale. That leaves the initial sale of the lot by Parkway to the homebuilder as the only remaining transaction upon which a service-related implied warranty could be imposed. The Woodruffs' claim hinges on whether any services were conveyed or promised as a part of this transaction. The sale clearly conveyed goods, [7] but our focus is on whether the sale had a service element as well. We find no reasonable basis under these facts for concluding that Parkway impliedly agreed to perform future development services for the Woodruffs' benefit. The court of appeals pointed to Parkway's claim that Sugar Creek was a master planned community as evidence of an implied promise to provide these services. The court reasoned that this term certainly suggests to a potential purchaser that each aspect of the development would be undertaken with concern for the rest of the development, that the subdivision would not be built piecemeal, and that the construction of one section would not, as happened here, be allowed to adversely affect another section. The concept of master planning also implies provision of continued competent development including flood control, drainage, management, and maintenance services. 857 S.W.2d at 911. In reaching this conclusion, the court of appeals equated the use of the term master planned community with an implied promise to never adversely affect any homeowner in the community. We do not believe that these terms should be given such an expansive meaning. Master planned community and planned community are terms of art, specifying a particular form of common ownership. [8] In the Sugar Creek development, Parkway established a homeowners' association to maintain common area improvements, imposed similar deed restrictions on all homes within the development, and created the formal development plan required for a planned unit development. These features distinguished Sugar Creek as a planned community, as the term is used in the real estate industry. Parkway's use of the term to describe its development can be fairly construed as a representation about the form of common interest ownership, not an implied promise to provide future development services of the type at issue here. The only other evidence relied on by the Woodruffs to support their implied warranty claim is a scale model of the development displayed in Parkway's information center. We recognize that models can create express warranties about the qualities of goods sold: when a model is displayed prior to sale, the goods delivered must conform to the model. TEX.BUS. & COM.CODE § 2.313(a)(3). But the Woodruffs' argument confuses a statutorily created express warranty with a judicially-created implied warranty. The testimony about Parkway's model was to the effect that it was intended to show where everything was eventually going to be within the community. Neither our past holdings nor sound logic support the conclusion that such a model represents an implied promise to never adversely affect the Woodruffs' property. Accordingly, we hold that no implied warranty to perform future development services should be imposed in this case. Because no services were included in the transaction, no service-related warranty was breached. Moreover, the Woodruffs have not met their burden under Dennis v. Allison to show why damages for negligence do not provide an adequate remed[y] to redress wrongs committed, see 698 S.W.2d at 96, and thus have not demonstrated a compelling case for recognition of an implied warranty under these circumstances. To the extent the judgment relied on this breach of warranty theory, it cannot stand.
The Woodruffs also contend that Parkway violated the DTPA by acting unconscionably. The DTPA defines an unconscionable action or course of action as one which: A. takes advantage of the lack of knowledge, ability, experience, or capacity of a person to a grossly unfair degree; or B. results in a gross disparity between the value received and consideration paid, in a transaction involving transfer of consideration. TEX.BUS. & COM.CODE § 17.45(5). The Woodruffs did not specify whether they sought to show unconscionability under Part A or B of this definition, and both parts were included in the jury charge. Although the jury found that Parkway committed an unconscionable act, the court of appeals did not address unconscionability because it affirmed the trial court's DTPA judgment on the theory of implied warranty, which we have rejected. Because unconscionability is an alternative theory of DTPA liability upon which the court of appeals judgment might be affirmed, we must address it. Parkway challenges the legal sufficiency of the evidence under both definitions. Under Part A, the Woodruffs argue that Parkway's exclusive control over the drainage on the adjacent lots deprived them of the ability or capacity to protect their own interests. The Woodruffs overlook the fact that unconscionability requires that the seller take advantage of special skills and training at the time of the sale. See Chastain v. Koonce, 700 S.W.2d 579, 584 (Tex. 1985) (rejecting allegations of unfairness based on events occurring one year after the sale). The Woodruffs advance no theory as to how this advantage was exploited at the time of the sale of the property from Parkway to the homebuilder, and there is no evidence that would support such a finding. Under Part B, the Woodruffs argue that the flooding created a gross disparity between the value of their home and what they paid for it. Again, the time for evaluating the disparity in value is the time of sale. Diminution in value caused by later events cannot support a claim of unconscionability. As there is no evidence that Parkway did anything to cause a gross disparity in value at the time of sale, the Woodruffs' claim under this definition of unconscionability also fails.
Because we conclude that the Woodruffs cannot recover under the DTPA, we reform the judgment to delete any remedy predicated on the DTPA. This includes the discretionary award of damages for a knowing violation of the DTPA and the award of attorney's fees. In the absence of recovery under the DTPA, there is no basis for the recovery of attorney's fees in this case. [9] See First City Bank v. Guex, 677 S.W.2d 25, 30 (Tex.1984).