Peter Fazio, Shari Fazio, and Eric Fazio v. Cypress/GR Houston I, L. P. Cypress/GR Houston, Inc. And Cypress Equities, Inc.
403 S.W.3d 390
Tex. App.2013Background
- Fraud suit arising from the Fazios’ Oct. 2003 land purchase; Cypress allegedly concealed Garden Ridge’s worsening finances before sale.
- Fazio LOI required disclosure of information; Purchase Agreement merged terms and waived reliance on non-disclosed facts.
- Garden Ridge rent issues surfaced: tenant in financial distress, seeking rent relief, and later bankruptcy; sale price was $7.667M, later land sold for $3.75M in 2007.
- Trial court gave take-nothing judgment after jury found fraud but awarded no damages at sale time; panel originally reversed but en banc vacated that ruling.
- Jury had two direct-damages measures (2(1) and 2(2)) and multiple incidental/consequential-damages questions; 2(1) was improper to measure direct damages and 2(2) showed zero damages; exemplary damages awarded were moot due to lack of actual damages.
- The en banc majority affirmed the take-nothing judgment and denial of Cypress’s attorney’s fees; concurring and dissenting opinions address reliance disclaimer and its enforceability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether damages must be measured at time of sale for fraud | Fazio: restitution-based measure (2(1)) valid; time-of-sale measure supports recovery | Cypress: only time-of-sale/benefit-of-the-bargain measures permissible; 2(1) improper | Proper damages measure is at sale time; 2(1) invalid; 2(2) zero supports take-nothing |
| Whether rescission/restitution is available and supported here | Restitution/rescission available where fraud induced contract and caused loss | Rescission not appropriate where value equals consideration or limitations apply | Restitution/rescission available where appropriate; jury awarded restitution; not precluded by sale results |
| Whether the disclaimer of reliance bars fraud claim | Disclaimer of reliance cannot bar pre-contract fraud; LOI disclosures create duty | Purchase Agreement disclaimer forecloses reliance; merger clause controlling | Disclaimer does not bar fraud as to pre-contract disclosures; en banc view contested but majority upholds |
| Whether the as-is and merger clauses preclude fraud claim | As-is/merger clauses do not extinguish pre-contract duties to disclose material facts | Clauses license defense; limit liability for disclosures | As-is and merger clauses do not automatically defeat fraud claims when pre-contract concealment occurred |
| Attorney’s fees under contract provision | Prevailing party fee provision may apply if claims arise from contract | Claims arise from tort/fraud; contract provision not broad enough | Trial court proper in denying attorney’s fees under the contract; claims did not arise from the contract’s operation |
Key Cases Cited
- Arthur Andersen & Co. v. Perry Equipment Corp., 945 S.W.2d 812 (Tex. 1997) (direct damages measured at sale; consequential damages limited to foreseeability)
- Forest Oil Corp. v. McAllen, 268 S.W.3d 51 (Tex. 2008) (clear/unequivocal reliance disclaimer factors; arm’s-length negotiation; counsel involved)
- Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171 (Tex. 1997) (clear and unequivocal disclaimer of reliance required to bar fraud claim)
- Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323 (Tex. 2011) (commercial tenants may rely on landlord not to conceal material information; merger/disclaimer evaluated)
- Cruz v. Andrews Restoration, Inc., 364 S.W.3d 817 (Tex. 2012) (rescission requires mutual restoration; restitution in fraud context)
- Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41 (Tex. 1998) (two proper damages measures; consequential damages recoverable if foreseeability/causation)
- Henry S. Miller Co. v. Bynum, 836 S.W.2d 160 (Tex. 1992) (detailed fraud damages principles for investment losses)
- Wintz v. Morrison, 17 Tex. 372 (Tex. 1856) (early restitution principles in fraud)