668 S.W.3d 956
Tex. App.2023Background
- Nooner Holdings bought a multi-tenant commercial property in Abilene; post-closing it discovered extensive parking-lot defects. A Terracon geotechnical report estimated repairs at about $1,000,000.
- During negotiations Seller disclosed localized surface "alligatoring" and the parties included a negotiated Parking Lot Work clause stating Seller acknowledges defects and will perform repairs during the Feasibility Period "as and to the extent determined necessary by Seller in its sole and absolute discretion." Buyer could terminate during the Feasibility Period if dissatisfied.
- The Purchase and Sale Agreement also contained an expansive negotiated "AS-IS/WHERE-IS/WITH ALL FAULTS" clause, and detailed Due Diligence / Investigation provisions by which Buyer agreed to perform inspections and not rely on Seller outside the contract.
- Nooner (Buyer) did not perform a parking-lot survey or further investigation before closing; it later sued Seller and others for breach of contract, common-law/statutory fraud, and fraudulent inducement based on Seller’s partial disclosure and nondisclosure of the full defect scope.
- The trial court granted Seller’s traditional summary judgment motion; Nooner appealed. The court of appeals affirmed, holding Nooner failed to show a duty to disclose or justifiable reliance and that Seller did not breach the contract’s risk-of-loss/"major damage" notice provision.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1) Fraud / duty to disclose from a partial disclosure | Seller’s limited disclosure of surface alligatoring created a duty to disclose the full extent of latent parking-lot defects; nondisclosure equals a false representation | No fiduciary or special duty; buyer had contractual duty to investigate and the facts were discoverable with ordinary diligence | Nooner failed as a matter of law: no duty shown because buyer made no due diligence efforts and the contract allocated inspection risk; summary judgment affirmed |
| 2) Justifiable reliance (fraud element) | Buyer relied on Seller’s statements and omissions about the lot when signing the contract | Contract’s explicit as‑is, parking‑lot, and due‑diligence clauses plus factual "red flags" negate any justifiable reliance by a sophisticated buyer | Reliance unreasonable as a matter of law given the negotiated as‑is/disclaimer and the buyer’s failure to investigate; summary judgment affirmed |
| 3) Breach of contract — notice of "major loss" under §13.2(b) | Seller breached risk‑of‑loss clause by not giving written notice of a major loss (costly repairs) | §13.2(b) applies only to an "event of damage" occurring before closing; the parking‑lot defects were preexisting construction defects, not a post‑contract event | No breach: defects were preexisting (not an "event of damage") and the contract’s plain language does not impose the alleged notice duty for those preexisting conditions |
| 4) Derivative liability and release of individual defendant | Derivative claims and release contentions preserved buyer's recovery against individuals | Those claims depend on viable fraud or breach claims; without them derivative and release issues fail | Not reached on the merits because underlying fraud and breach claims fail; judgment for defendants stands |
Key Cases Cited
- Mercedes-Benz USA, LLC v. Carduco, Inc., 583 S.W.3d 553 (Tex. 2019) (sophisticated buyer must exercise diligence; lack of diligence can negate fraud claims)
- Orca Assets G.P., L.L.C. v. J.P. Morgan Chase Bank, N.A., 546 S.W.3d 648 (Tex. 2018) ("red flags" and direct contradiction rules can defeat justifiable reliance)
- Prudential Ins. Co. of Am. v. Jefferson Assocs., Ltd., 896 S.W.2d 156 (Tex. 1995) (as‑is clauses can disclaim reliance)
- Smith v. National Resort Communities, Inc., 585 S.W.2d 655 (Tex. 1979) (seller’s duty to disclose material facts that are not discoverable by ordinary diligence)
- Bombardier Aerospace Corp. v. SPEP Aircraft Holdings, LLC, 572 S.W.3d 213 (Tex. 2019) (discussion of limits on adopting Restatement duty‑to‑disclose principles)
- Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323 (Tex. 2011) (elements of common‑law fraud)