Court Opinion

ID: 2873634
Source: CourtListenerOpinion
Date Created: 2015-09-06 04:59:30.949561+00
Date Added: 2024-06-11T12:46:08.102271
License: Public Domain

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

                                      NO. 03-06-00240-CV

                   Robert Langguth and Claudia L. Langguth, Appellants

                                                v.

                    JAT Enterprises, Ltd. and William K. Neils, Appellees

     FROM THE DISTRICT COURT OF TRAVIS COUNTY, 53RD JUDICIAL DISTRICT
       NO. D-1-GN-03-000093, HONORABLE DARLENE BYRNE, JUDGE PRESIDING

                            MEMORANDUM OPINION

               After purchasing the McNeil Car Wash and Lube from appellees JAT Enterprises,

Ltd. and William K. Neils, appellants Robert and Claudia L. Langguth sued appellees for

common law and statutory fraud, see Tex. Bus. & Com. Code Ann. § 27.01 (West 2002), and

violations of the Texas Deceptive Trade Practices-Consumer Protection Act. See id. §§ 17.41-.63

(West 2002 & Supp. 2006). The trial court granted summary judgment in favor of appellees. On

appeal, the Langguths argue that the trial court improperly granted summary judgment because: (1)

there was sufficient evidence to create a material fact issue on whether the Langguths relied on

financial statements provided by appellees; and (2) the Langguths produced more than a scintilla of

evidence to support each of the elements of their fraudulent inducement claim. For the reasons

discussed below, we affirm the trial court’s judgment.
                        FACTS AND PROCEDURAL BACKGROUND

               William K. Neils is the president of the corporate general partner of JAT Enterprises,

Ltd. JAT operated the McNeil Car Wash and Lube located in Austin. In March 2001, real estate

broker Jim Krebs contacted Neils regarding a potential sale of the business. Krebs informed Neils

that he knew of several people who might be interested in purchasing the car wash and lube and

asked for permission to try and sell it. Neils agreed.

               Thereafter, Krebs encountered Robert Langguth at a commercial real estate brokers

meeting. Krebs told Langguth about the McNeil Car Wash and Lube, and Langguth requested

financial information so that he could analyze the business for the possibility of purchasing it. Krebs

sent nine pages of information about McNeil Car Wash and Lube to Langguth’s real estate agent,

Barry S. Winkle. Included in this information were three income statements: one for the year

ending December 31, 2000; one for the three-month period ending March 31, 2001; and one for the

three-month period ending June 30, 2001. Also included was information regarding another car

wash that was offered for sale through Krebs and a summary page from an internet marketing

service regarding McNeil Car Wash and Lube. Printed at the bottom of the summary page was the

following statement:

       This information has been secured from sources we believe to be reliable, but we
       make no representation or warranties, express or implied, as to the accuracy of the
       information. All references to age, sq. footage, income, and expenses are
       approximate. Buyers should conduct their own independent investigations and rely
       only on those results.

                                                  2
In November 2001, Krebs faxed the Langguths another income statement provided by appellees for

the three-month period ending September 30, 2001.

                 The parties entered into a real estate contract for the Langguths to purchase the

McNeil Car Wash and Lube for $1.4 million in December 2001.1 Section 11 of the contract states:

       11.     PROPERTY CONDITION. Other than provided herein, seller hereby
       disclaims, and purchaser hereby waives, any and all warranties of any nature
       regarding the property. Seller has not made and does not make any representations,
       warranties or covenants of any kind or character whatsoever, whether express or
       implied, with respect to: the income, expenses, profit, losses or other aspects of the
       operation of the property; the square footage of the property; the quality or condition
       of the property; the suitability or safety of the property for any activities and uses
       which purchaser may conduct thereon; compliance by seller and/or the property with
       any laws, rules, ordinances, or regulations of any applicable governmental authority,
       including subdivision and zoning ordinances and building codes; or the habitability,
       merchantability, or fitness of the property for a particular purpose. . . . [T]he
       provisions contained in this paragraph shall survive delivery of the deed. Purchaser
       shall accept the property “as is”, “where is”, and with all faults. Purchaser shall make
       its own independent inspection of all aspects of the property and shall have no
       recourse whatsoever against seller in the event of discovery of any defects of any
       kind, latent or patent.2

Section 11 continues:

              The Warranty Deed by which Seller conveys title to the Purchaser shall
       contain appropriate “as is” language, similar to the language above. The Warranty
       Deed will also provide that Seller’s limitation of warranties and Purchaser’s waiver
       of warranties shall survive closing.

       1
            The record reflects that only Robert Langguth, and not Claudia, signed the purchase
contract.
       2
            In the original contract, this paragraph of section 11 was typed in all capitalized letters.

                                                    3
               The contract also provided Langguth with a 45-day period in which to conduct his

investigation and inspection of the property. In relevant part, section 6 of the contract states:

       6.      FEASIBILITY PERIOD. For a period of forty five (45) days after the
       Effective Date (the “Feasibility Period”), Purchaser shall have the right of
       investigation and inspection of the Property to determine whether or not Purchaser
       desires to proceed with the purchase of the Property. . . . If Purchaser determines, in
       Purchaser’s sole judgment and discretion, that the Property is not suitable for
       Purchaser’s intended use, Purchaser shall give Seller written notice of such fact on
       or before the end of the Feasibility Period. Within five days of receipt of such
       written notice, Seller shall instruct the Escrow Agent to refund the Escrow Deposit
       to Purchaser, and both parties shall be released from all further obligations under this
       Contract.

After the 45-day due diligence period expired, the parties agreed to extend the closing to allow

Langguth more time to obtain financing.

               The record reflects that, prior to signing this contract, Langguth had extensive

experience buying and selling real estate and businesses. Langguth had acquired other real property

under terms similar to those provided in the contract at issue here. He had previously purchased

ongoing businesses, including a book store and a homebuilding company. The record also reflects

that Langguth had experience assessing the value of business operations and analyzing business

financial statements. Langguth further represented to Krebs that he was a businessman who had

bought and sold many companies.

               It is undisputed that Langguth was represented by competent and able counsel

throughout the transaction. After appellees proposed the initial form of the contract, Langguth and

his attorney reviewed the draft and requested several changes, all of which were incorporated into

                                                  4
the final contract. Langguth agreed that the final executed contract “contained everything in it” that

Langguth and his attorney wanted.

                Eight months after closing, the Langguths sued appellees asserting claims of

common law and statutory fraud and DTPA violations. Appellees moved for summary judgment

on the ground that the Langguths failed to establish a genuine issue of material fact because they

were barred as a matter of law from relying on any representations made by appellees prior to

December 14, 2001, based on the express disclaimer of reliance in the contract. See Tex. R. Civ. P.

166a(c). Appellees also moved for a no-evidence summary judgment on the ground that the

Langguths provided no evidence to support three elements of their fraudulent inducement claim. See

Tex. R. Civ. P. 166a(i). The trial court granted both of appellees’ motions for summary judgment.

                                             ANALYSIS

                In two issues, the Langguths appeal the trial court’s grant of summary judgment in

favor of appellees.3 First, the Langguths assert that the trial court erred in granting appellees’ motion

for summary judgment because there was a material issue of fact on whether the Langguths relied

on appellees’ representations. Second, the Langguths assert that the trial court erred in granting

appellees’ no-evidence motion for summary judgment because the Langguths produced sufficient

evidence to create a genuine issue of material fact on the challenged elements of their fraudulent

inducement claim.

        3
         The Langguths appeal only from the trial court’s grant of summary judgment on their fraud
claims. They do not appeal the grant of summary judgment on their claim alleging DTPA violations.

                                                   5
Standard of Review

               We review the trial court’s decision to grant summary judgment de novo. Valence

Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). Appellees moved for summary

judgment on both no-evidence and rule 166a(c) summary judgment grounds; however, because we

conclude that appellees satisfied the burden for summary judgment under rule 166a(c), we discuss

only that standard of review. To prevail on a summary judgment motion, the movant must

demonstrate that there are no genuine issues of material fact and that it is entitled to judgment as a

matter of law. Tex. R. Civ. P. 166a(c); American Tobacco Co. v. Grinnell, 951 S.W.2d 420, 425

(Tex. 1997).     In deciding whether there is a disputed material fact issue precluding

summary judgment, we must take evidence favorable to the nonmovant as true, indulge every

reasonable inference in favor of the nonmovant, and resolve any doubts in the nonmovant’s favor.

Cathey v. Booth, 900 S.W.2d 339, 341 (Tex. 1995); Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d
546, 548-49 (Tex. 1985).

Reliance

               In their first issue, the Langguths contend that the trial court erred in granting

summary judgment because there was a genuine issue of material fact regarding whether the

Langguths relied on appellees’ representations made prior to entering the contract. Appellees

counter that the Langguths agreed to purchase the car wash and lube “as is” and expressly

disclaimed reliance on any representations made by appellees prior to signing the contract on

December 14, 2001.

                                                  6
               As a general rule, Texas law provides that an “as is” agreement negates the causation

essential to recovery on claims of DTPA violations, fraud, and negligence. See Prudential Ins. Co.

of Am. v. Jefferson Assocs., 896 S.W.2d 156, 161-62 (Tex. 1995). However, “[a] buyer is not bound

by an agreement to purchase something ‘as is’ that he is induced to make because of a fraudulent

representation or concealment of information by the seller.” Id. at 162. To determine whether an

“as is” agreement is enforceable, a reviewing court must consider “the nature of the transaction and

the totality of the circumstances surrounding the agreement.” Id. Where an “as is” clause is included

as an important part of the basis of the bargain and not as an incidental or “boiler-plate” provision,

and the contract is entered into by parties of relatively equal bargaining power, a buyer’s declaration

and agreement that he is not relying on representations of the seller should be upheld. Id.

               An important principle of Texas contract law allows a party to disclaim reliance on

representations. Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 179 (Tex. 1997).

Moreover, even in the face of a fraudulent inducement claim, courts will uphold such a disclaimer

where the party’s intent is clear and specific. Id.

               In this case, the Langguths contend that they agreed to purchase the McNeil Car Wash

and Lube only after they were induced by misrepresentations about the average monthly revenue and

income of the business. As part of the contract, however, the Langguths expressly disclaimed

reliance on any representations made by appellees prior to signing the contract. We must examine

the contract and the circumstances surrounding its formation to determine whether this disclaimer

is binding. See id. at 180. We conclude that the well-established rules of contract interpretation

                                                  7
govern whether the Langguths “gave the requisite clear and unequivocal expression of intent

necessary to disclaim reliance on these specific representations” by the appellees. See id. at 179.

               Here, as in Schlumberger, both parties to the agreement were sophisticated business

persons and possessed relatively equal bargaining power. The record reflects that Mr. Langguth had

extensive experience buying and selling real estate. He had previously purchased commercial real

estate as well as ongoing commercial businesses. Mr. Langguth had experience evaluating business

financial statements and assessing the value of business operations, and the summary judgment

evidence shows that he had purchased real estate under terms similar to those at issue here. The

Langguths were represented by counsel throughout the transaction, and all of the Langguths’

requested changes were incorporated into the final contract.

               Section 6 of the contract provided the Langguths with an opportunity to conduct

their own due diligence investigation before becoming bound to complete the purchase. Had the

Langguths been dissatisfied within the due diligence period, the contract allowed them to walk

away without any obligation to appellees. The record reflects that, although they requested an

extension of the due diligence period, the Langguths ultimately agreed to complete the purchase

without the extension.

               In section 11 of the contract, the Langguths expressly acknowledged and agreed that

“seller has not made and does not make any representations, warranties or covenants of any kind or

character whatsoever, whether express or implied, with respect to: the income, expenses,

profit, losses or other aspects of the operation of the property.” The Langguths further agreed in

section 11 that they would rely exclusively on their own investigation and assessment of the

                                                 8
purchase: “Purchaser shall make its own independent inspection of all aspects of the property and

shall have no recourse whatsoever against seller in the event of discovery of any defects of any

kind, latent or patent.”4

                By the inclusion of the clear language of this section in the final contract, we conclude

the Langguths unequivocally disclaimed reliance upon any representations by appellees regarding

the income and revenue of the car wash and lube. The record reflects that the Langguths could have

requested appellees to modify this contract provision. Although the Langguths did request changes

to the contract, they did not request modification of this provision.

                Because courts are to assume that the parties intended every contractual provision to

have some meaning, we must presume that, by their inclusion of section 11, the parties contemplated

that the Langguths would not rely upon any representations made by appellees regarding the

income and revenue of the car wash and lube. See id. at 180. Although we recognize that such a

disclaimer will not always bar a claim of fraudulent inducement with respect to the disclaimer

itself, we conclude that, on this record, the disclaimer of reliance in section 11 conclusively

negates as a matter of law the element of reliance on representations about the income and revenue

of the car wash and lube needed to support the Langguths’ claim of fraudulent inducement. See id.

at 181. Accordingly, we overrule the Langguths’ first issue, and we conclude that the trial court

        4
          In the original contract, these two quoted provisions of section 11 were typed in all
capitalized letters.

                                                   9
properly granted appellees’ motion for summary judgment under rule 166a(c). Because we conclude

the trial court properly granted summary judgment under rule 166a(c), we do not reach the

Langguths’ second issue.

                                       CONCLUSION

               Having overruled the Langguths’ issue on appeal, we affirm the judgment of the

trial court.

                                            __________________________________________

                                            Jan P. Patterson, Justice

Before Chief Justice Law, Justices Patterson and Puryear

Affirmed

Filed: February 6, 2007

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