NO. IN THE SUPREM E COURT OF TEXAS M AC HAIK CHEVROLET, LTD., AND WELLS FARGO AUTO FINANCE, INC., Petitioners, vs. ALYSHA B. DIAZ AND M IGUEL DIAZ, Respondents. ON REVIEW FROM THE COURT OF APPEALS FIRST DISTRICT AT HOUSTON, TEXAS CAUSE NO. 01-09-00708-CV PETITION FOR REVIEW Henry L. Robertson Law Office of Henry L. Robertson 8323 Southwest Freeway, Suite 605 Houston, Texas 77074 (713) 271-5656 (telephone) (713) 271-5522 (telecopier) Attorney for Mac Haik Chevrolet, Ltd., and Wells Fargo Auto Finance, Inc. IDENTITY OF PARTIES AND COUNSEL Parties to the Trial Court’s Final Judgment: Alysha B. Diaz and Miguel Diaz Plaintiffs/Appellees/Respondents Mac Haik Chevrolet, Ltd, and Wells Fargo Auto Finance, Inc. Defendants/Appellants/Petitioners Trial and Appellate Counsel: Richard Tomlinson Law Office of Richard Tomlinson 1415 Fannin, 3rd Floor Houston, Texas 77002 T.B.N. 20123500 (713) 652-0077 (telephone) Trial and appellate counsel for Alysha B. Diaz and Miguel Diaz Henry L. Robertson Law Office of Henry L. Robertson 8323 Southwest Freeway, Suite 605 Houston, Texas 77074 T.B.N. 17058700 (713) 271-5656 (telephone) (713) 271-5522 (telecopier) Trial and appellate counsel for Mac Haik Chevrolet, Ltd., and Wells Fargo Auto Finance, Inc. ii TABLE OF CONTENTS IDENTITY OF PARTIES & COUNSEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii INDEX OF AUTHORITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv RECORD REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii STATEMENT OF THE CASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viii STATEMENT OF JURISDICTION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix ISSUES PRESENTED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi STATEMENT OF FACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SUMMARY OR ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 PRAYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 CERTIFICATION OF SERVICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 APPENDIX Tab 1: Trial Final Court’s Judgment (CR 110-112) Tab 2: Jury Charge and Verdict (CR 38-49) Tab 3: Court of Appeals’ Opinion and Judgment Tab 4: “AS IS” - NO WARRANTY Contract (RR 6: P. Ex 47; D. Ex. 2) Tab 5: Vehicle Purchase Order and Invoice (RR 6: P. Ex 3; D. Ex.1) iii INDEX OF AUTHORITIES CASES Page Bank of Tex. v. VR Elec., Inc., 276 S.W.3d 671(Tex.App.– Houston [1st Dist.] 2008, pet. denied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Brown v. Zimmerman, 160 S.W.3d 695 (Tex.App.- Dallas 2005, no pet) . . . . . . . . . . . 10 Bynum v. Prudential Residential Servs., Ltd, P’ship, 129 S.W.3d 781 (Tex.App.– Houston [1st Dist.] 2004, pet. denied) .. . . . . . . . . . . . . . . . . . . . . . . . . 7, 8 Camden Machine & Tool, Inc. v. Cascade Co., 870 S.W.2d 304 (Tex.App.— Fort Worth 1993, no writ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Cherry v. McCall, 138 S.W.3d 35, 39-40 (Tex.App.— San Antonio 2004, pet. denied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix, 6 Compass Bank v. MFP Fin. Servs. Inc., 152 S.W.3d 844 (Tex.App.-Dallas 2005, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Doe v. Boys Club of Greater Dallas, Inc., 907 S.W.2d 472 (Tex.1995). . . . . . . . . ix, 4 Four Bros. Boat Works, Inc. v. Tesoro Pet. Cos., 217 S.W.3d 653 (Tex.App.– Houston [14th Dist.] 2006, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Kane v. Nxcess Motorcars, Inc., No. 01-04-00547-CV (TXCA1) . . . . . . . . . . . . . . . . . x Kupchynsky v. Nardiello, 230 S.W.3d 685, (Tex.App.– Dallas 2007). . . . . . . ix, 7, 9, 10 Larsen v. Carlene Langford & Assocs., 41 S.W.3d 245 (Tex.App.Waco, 2001, pet. denied) .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix La Sara Grain Co. v. First Nat’l Bank, 673 S.W.2d 558 (Tex.1984) . . . . . . . . . . . . . . 7 Laurence v. CDB Servs. Inc., 44 S.W.3d 544 (Tex.2001) . . . . . . . . . . . . . . . . . . . . . . . x McClure v. Allied Stores of Texas, Inc., 608 S.W.2d 901 (Tex.1980) .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 iv Mid Continent Aircraft Corp. v. Curry County Spraying Serv. Inc., 572 S.W.2d 308 (Tex.1978) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Nelson v. Najm, 127 S.W.3d 170 (Tex.App.– Houston [1st Dist] 2003) . . . . . . . . . . . . ix Parkway Co. v. Woodruff, 901 S.W.2d 434 (Tex.1995) . . . . . . . . . . . . . . . . . . . . . . . . . 7 Prudential Ins. Co. v. Jefferson Assocs., 896 S.W.2d 156 (Tex.1995) . . . . . . . . Passim In re: Prudential Ins. Of America, 148 S.W.3d 124 (Tex.2004) . . . . . . . . . . . . . . . . x, 8 Robinson v. Preston Chrysler-Plymouth, Inc., 633 S.W.2d 500 (Tex.1982) . . . . . . . ix Sony Arnold, Inc., v. Sentry Sav. Ass’n, 633 S.W.2d 811 (Tex.1982) . . . . . . . . . . . x, 8 T. O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218 (Tex.1992) .. . . . . . . . . 10 Talford v. Columbia Med. Ctr. at Lancester Subsidiary, L.P., 198 S.W.3d 462 (Tex.App.-Dallas 2006, no pet.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Triton Oil & Gas Corp., v. Marine Contractors & Supply, Inc., 644 S.W.2d 443 (Tex.1982) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Weitzel v. Barnes, 691 S.W.2d 598, 601 (Tex.1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Welwood v. Cypress Creek Estates, Inc., 205 S.W.3d 722 (Tex.App.– Dallas 2006, no pet.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 8 v STATUTES Page TEX. BUS. & COM. CODE ANN. §2.316(c)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 TEX. BUS. & COM. CODE ANN. §17.46(b)(24) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x, 5 TEX. BUS. & COM. CODE ANN. §17.50 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 TEX. GOV’T CODE §22.001 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix, x TEX. R. CIV. P. 94 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 11 TEX. R. CIV. P. 279 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 11 vi RECORD REFERENCES “CR” refers to the clerk’s record on appeal. A citation to the clerk’s record is preceded by the volume number, followed by the page number on which the information appears. “RR” refers to the reporter’s record on appeal. A citation to the reporter’s record is preceded by the volume number, followed by the page number on which the information appears. “App. tab” refers to the appropriate tabbed portion of the Appendix filed with this Petition. “P. Ex.” refers to an exhibit offered by Plaintiffs/Respondents. “D. Ex.” refers to an exhibit offered by Defendants/Petitioners. vii S TATEM ENT OF THE C ASE Nature of the Case: The Diazes 1 brought suit against Mac Haik Chevrolet, Ltd., and Wells Fargo Auto Finance, Inc. for violations of the Texas Deceptive Trade Practices and Consumer Protection Act (“DTPA”), by representing in advertising that the used Tahoe had low mileage when, in fact, there was no way of determining the mileage.2 (CR 23). Trial Court: Honorable Larry Weiman, 80th Judicial District Court, Harris County, Texas. Trial Court’s Disposition: After a jury trial in which the jury answered all issues favorable to the Diazes, the trial court signed a $42,245.38 judgment for the Diazes. (CR 110). Parties on Appeal: Mac Haik Chevrolet, Ltd. and Wells Fargo Auto Finance, Inc., took an appeal from the trial court’s judgment. The Appellees were the Diazes. Court of Appeals: First District of Texas, Houston, Texas. Case No. 0109-00708-CV. Opinion by Justices Terry Jennings, Elsa Alcala and Jim Sharp. Court of Appeals Disposition: Affirmed. Mac Haik Chevrolet, Ltd. and Wells Fargo Auto Finance, Inc. v. Diaz, 01-09-00708-CV (TXCA1). (App. tab 1) Requested Disposition: Petitioners seek a reversal of the trial court’s and court of appeals’ judgment and rendition of judgement in its favor that the Diazes take nothing. Alternatively, Petitioners seek a reversal of the trial court’s and the court of appeals’ judgment and remand for a new trial. 1 The Plaintiffs Alysha B. Diaz and Miguel Diaz will be collectively referred to as the “Diazes.” 2 It is undisputed that the Diazes nonsuited their claims against Mac Haik Chevrolet GP LLC (“Mac Haik GP”) prior to trial. viii S TATEM ENT OF J URISDICTION The Court has jurisdiction under TEX. GOV’T CODE §§22.001(a)(2) and (6). Conflict. This court has jurisdiction over this appeal because the court of appeals erred regarding the legal standards for determining the efficacy of an “as is” agreement in a sales contract; and this error is of such importance to the jurisprudence of the state that it requires correction. TEX. GOV’T CODE §§22.001(a)(6). This court also has jurisdiction over this appeal because the opinion of the court of appeals conflicts with prior decisions of this Court and of other courts of appeals on material questions of law. TEX. GOV’T CODE §§22.001(a)(2). The opinion of the court of appeals regarding the proper method of analyzing the validity of an “as is” agreement conflicts with Prudential Ins. Co. of Am. v. Jefferson Assoc., Ltd., 896 S.W.2d 156 (Tex.1996); Weitzel v. Barnes, 691 S.W.2d 598 (Tex.1985); Kupchynsky v. Nardiello, 230 S.W.3d 685 (Tex.App.– Dallas 2007); Cherry v. McCall, 138 S.W.3d 35 (Tex.App.– San Antonio 2004, pet. denied); Kane v. Nxcess Motorcars, Inc., No. 01-04-00547-CV (TXCA1); Nelson v. Najm, 127 S.W.3d 170 (Tex.App.- Houston [1st Dist] - 2003); and Larsen v. Carlene Langford & Assoc, Inc., 41 S.W.3d 245 (Tex.App.- Waco 2001, pet.denied). The opinion of the court of appeals imposing a duty on Seller to disclose, warn, or remedy defects, even if the seller has no knowledge of the defect, conflicts with Doe v. Boys Club of Greater Dallas, Inc., 907 S.W.2d 472 (Tex.1995); Robinson v. Preston ChryslerPlymouth, Inc., 633 S.W.2d 500 (Tex.1982); Nelson v. Najm, 127 S.W.3d 170 (Tex.App.- ix Houston [1st Dist] - 2003); and TEX. BUS. & COM. CODE ANN. §17.46(b)(24). Importance. The court of appeals’ opinion affords this Court the opportunity to clarify which party bears the burdens of pleading and proof to set aside an “as is” agreement in a sales contract. The courts of appeals’ (soon to be ) published opinion dispenses with the general rule that parties have the right to contract as they see fit as long as their agreement does not violate the law or public policy and conflicts with In re: Prudential Ins. Co. Of America, 148 S.W.3d 124 (Tex.2004); Lawrence v. CDB Servs. Inc., 44 S.W.3d 544, 553 (Tex.2001); and Sonny Arnold, Inc. v. Sentry Sav. Ass’n, 633 S.W.2d 811, 815 (Tex.1982). These doctrinal missteps have potentially far-reaching implications as they not only affect every automobile dealer in the State of Texas who sells automobiles “as is”, but also every individual who sells his or her vehicle “as is.” Therefore, the case is sufficiently important to the jurisprudence of this state to merit this Court’s review. TEX. GOV’T CODE ANN. §22.001(a)(6). x ISSUES PRESENTED I. Which party bears the burdens of pleading and proof with respect to the efficacy of an “as is” agreement? II. Whether Mac Haik’s conduct was a producing cause of damages to the Diazes, if: A. Mac Haik inspected and test drove the vehicle but gained no knowledge of or information from which to infer the defect; and B. The Diazes inspected, test drove, and renegotiated a lower purchase price for the vehicle. (Not briefed in this Petition). xi STATEM ENT OF FACTS The court of appeals correctly stated the nature of the case, except as described below. After purchasing the 2003 Tahoe from its sole prior owner, Mac Haik inspected, test drove, and appraised the vehicle’s fair market value at $15,750. (RR 6: P. Ex. 51). Between May 17, 2007 and July 28, 2007, the 2003 Tahoe was offered for sale to the general public, and was inspected and test driven by several potential buyers. (RR 5:41-42). One particular prior customer signed a written contract to purchase the 2003 Tahoe, and had driven the vehicle home in anticipation of his loan being approved, but had to return the vehicle to Mac Haik when he was not able to obtain financing. (RR 5:41-43). On Saturday, July 28, 2007, the Diazes drove from Palacios, Texas to the Mac Haik dealership to inspect and test drive the 2003 Tahoe made the basis of this lawsuit. (CR 4, 25; RR 3:75-77, 123-124; RR 4:25, 50; RR 5:41). Initially, the Diazes were not able to obtain the price they wanted for the 2003 Tahoe, so they left the dealership without purchasing it. (RR 3:78-79, 123; RR 4:25; RR 5:44-47). Later that same day, the Diazes returned to the dealership, negotiated a lower price, and purchased the 2003 Tahoe. (CR 4, 25; RR 3:79-80, 125-126; RR 4:50-51; P. Ex. 3- DIAZ0071; D. Ex.1 ). The Diazes purchased the 2003 Tahoe “as is” for the total negotiated cash price of $16,550.00. (App. tab 3); (CR 5, 26; RR 3:81; P. Ex. 3- DIAZ 0071; P. Ex. 47; D. Ex. 1; D. Ex. 2)). Because the vehicle passed Mac Haik’s 106 point inspection, qualifying as a 1 GM Certified Vehicle, the Diazes were offered, and did in fact, purchase a General Motors Protection Plan (GMPP) 24 months/24,000 miles extended service contract for $1,995.00. (App. tab 4); (RR 3:82; RR 4:53; RR 6:P. Ex. 4 -DIAZ0074, D. Ex. 4). The Diazes refer to the GMPP 24 months/24,000 miles extended service contract as both a mechanical breakdown insurance policy, as well as an extended service contract. ( CR 26); (See Appellees’ Brief at pp.6-7). The Diazes admit they were never denied any repair work under their extended service contract or mechanical breakdown insurance policy. (RR 3:144, 147-148; RR 4:87-88). On December 5, 2007, the Diazes, for the first time, returned the vehicle to Mac Haik complaining that the 2003 Tahoe had a nonconforming device (switch) that caused the vehicle to have incorrect mileage, and requested that Mac Haik remove the switch. (CR 6, 27; RR3:101, 104-105; RR5:52). Later, the Diazes returned to Mac Haik and picked up their 2003 Tahoe and continued to own, possess, and drive it throughout the trial of this case. (RR 3:107; RR 4:12). On December 6, 2008, the Diazes’ retained odometer expert witness, Robert Leo Eppes, (“Eppes”) traveled from Lenexa, Kansas (RR 4:117) and inspected the vehicle for the first time. (RR 4:139). As a result of his inspection, Eppes then opined: (1) that a reasonable inspection by the dealer of the 2003 Tahoe would have disclosed that the switch was on the vehicle at the time it was received on May 14, 2007; (RR 4:158-161, 249-251); (2) that the switch on the vehicle would lead to an inaccurate disclosure of the 2 mileage on the odometer; (RR 4:157, 163, 232-233 ); (3) that the nonconforming device was on the vehicle at the time of sale on July 28, 2007; (RR 4:164); and (4) that the fair market value of the vehicle at the time of sale was $9,000.00. (RR 4:171). Appellants’ Motion to Exclude the testimony of Eppes was denied. (CR 31-37). No issues were submitted against Wells Fargo and none were returned against them. (CR 38-49). The jury found in favor of the Diazes based on their claims of violations of the DTPA based on the Jury’s implied findings that Mac Haik engaged in false, misleading, or deceptive acts or practices by representing that the Tahoe had characteristics that it did not have and that it was a particular quality when it was not. (App. tab 2) (CR 38-49). Appellants appealed and the court of appeals affirmed. This petition for review followed. SUM M ARY OF THE ARGUM ENT This case presents the Court with the unique opportunity to clarify and resolve one central and important question that is outcome-determinative here; and that is: Who has the burdens of pleading and proof with respect to the efficacy of an “as is” agreement? The existence of the “as is” agreement here is undisputed 3 , and both the Diazes and Mac Haik introduced copies of the “as is” agreement into evidence. (App. tab 4); (RR 6: P. Ex. 3; P. Ex. 47; D. Ex. 1, D. Ex. 2). Neither the Diazes, or Mac Haik, pled the existence of the “as is” agreement or any of the Prudential exceptions to the efficacy of the “as is” 3 Appellees do not allege in either their Brief or Supplemental Brief that they did not purchase the vehicle “as is”, but instead, argue that “neither Mac Haik or Wells Fargo raised the “as is” argument during trial. (Appellees’ Brief, pp. 12-14). 3 agreement.( CR 2-9; 23-30; 15-16; 17-20). Neither side submitted issues referable to the “as is” agreement or the Prudential exceptions that would render it ineffective to negate causation. (CR 38-49). Thus, if the Diazes were required to plead and obtain findings as to the existence of one or more of the Prudential exceptions, the judgment on their Claims should not stand on appeal. However, if Mac Haik was required to specially plead the existence of the “as is” agreement, or if they were required to obtain findings that the “as is” agreement was effective, then Mac Haik cannot rely on the “as is” agreement to avoid liability on those claims. The court of appeals’ findings that: (1) had Mac Haik performed an inspection of the Tahoe, as represented to the Diazes, it would have discovered the wire, the switch, and the malfunctioning odometer; and (2) it’s endorsement of the jury’s implied finding that the wire and illegal switch device existed at the time Mac Haik marketed and sold the Tahoe as a GM certified vehicle,4 has staggering implications. Under this court of appeals’ holding automobile dealers and individuals, who sell or inspect a vehicle “as is”, now have a duty to exercise reasonable care to inspect the vehicle for defects, to warn buyer of defects in the vehicle, or to remedy any defects, even if the seller does not gain any knowledge of or information from which to infer the alleged defect. Because Mac Haik had no knowledge of the defect, it had no duty to made disclosures to the Diazes.5 4 See App. Tab 3. 5 See Prudential, 896 S.W.2d at 162 (There is no duty if a defendant fails to disclose material facts it should have known); Doe v. Boys Club of Greater Dallas, Inc., 4 ARGUM ENT I. The burden of pleading and proving the elements of an affirmative defense is on the party seeking to rely on that defense. A. DTPA For DTPA violations, only producing cause must be shown. Prudential, 896 S.W.2d at 161; TEX. BUS. & COM. CODE §17.50(a). This requires proof that an act or omission was a substantial factor in bringing about injury which would not otherwise have occurred. McClure v. Allied Stores of Texas, Inc., 608 S.W.2d 901 (Tex. 1980). Unless there is some evidence that Mac Haik caused the Diazes damages, and this evidence satisfies the requirement of actual causation in fact, the Diazes are not entitled to recover on any of their claims. Prudential, 869 S.W. 2d at 161. To be actionable under the DTPA, a failure to disclose material information necessarily requires that the defendant have known the information and have failed to bring it to the plaintiffs attention. See TEX. BUS. & COM. CODE §17.46(b)(24) (stating that it is unlawful to fail to “disclose information concerning ... services which was known at the time of the transaction”). By agreeing to purchase the 2003 Tahoe “as is”, (App. tab 4) ( RR 6: P. Ex. 3; D. Ex. 1, D. Ex. 2), the Diazes agreed to make their own appraisal of the bargain and to accept the risk that they may be wrong. Id at 162; Mid Continent Aircraft Corp. v. Curry 907 S.W.2d 472, 479 (Tex.1995) (A seller has no duty to disclose to a buyer defects of which the seller is unaware); Robinson v. Preston Chrysler-Plymouth, Inc., 633. S.W.2d 500, 502 (Tex.1982) (holding that a car dealer had no duty to disclose material facts it did not know). 5 County Spraying Serv. Inc., 572 S.W.2d 308, 313 (Tex.1978); Mac Haik gave no assurances, express or implied, concerning the value or condition of the thing sold. TEX. BUS. & COM. CODE ANN. §2.316(c)(1) (“as is” agreement excludes implied warranties in contract covered by UCC). The Diazes agreed to purchase the vehicle “with any and all latent and patent defects” “under the express understanding that there are no express or implied warranties: (except those related to title), including specifically, “that there is not warranty by Seller that the property is fit for a particular purpose.” Prudential, 896 S.W.2d at 161. The Diazes inspected and test drove the vehicle (CR 4:25; RR 3:79-80; 125-126; RR 4:50-51); left the dealership without purchasing the 2003 Tahoe (CR 4:25; RR 3:75-77, 123-124; RR 4:25, 41, 50); returned to the dealership and negotiated a lower price before purchasing the 2003 Tahoe, (RR 6: P. Ex. 2, P. Ex. 3, D. Ex. 1, D. Ex. 3). The Diazes’ careful inspection of the 2003 Tahoe; leaving the dealership and returning later; constituted a new and independent basis for their purchase which intervened and superseded [seller’] wrongful act. Prudential, at 161; Camden Machine & Tool, Inc. v. Cascade Co., 870 S.W.2d 304, 312 (Tex.App.— Fort Worth 1993, no writ). The Diazes made their own independent appraisal of the bargain, decided to purchase the vehicle, and accept the risk that they may be wrong. Prudential, at 161; Cherry v. McCall, 138 S.W.3d 35, 39-40 (Tex.App.— San Antonio 2004, pet. denied). The Vehicle Purchase Order and Invoice, (Purchase Order ), signed by both the Diazes, states: ALL USED CARS SOLD “AS IS” UNLESS OTHERWISE INDICATED 6 HERE. (App. tab 5) (P. Ex. 3; D. Ex. 1). The Vehicle Purchase Order and Invoice further states: “It is agreed that there are no other warranties, either express or including any implied warranty of merchantability or fitness. In the event the car sold hereunder is a used car, it is agreed that dealer assumes only such warranty obligations to Buyer as are set forth on the face of this order or in a separate written, instrument, if any.” Both the Diazes signatures appear following these disclosures. On the face of this Purchase Order is a reference to an “accessories warranty”, synonymous with “service contract” or “mechanical breakdown insurance policy” that the Diazes purchase for $1,995.00. (App. tab 5, at p. 4) (RR 6: P. Ex. 3, D. Ex. 1). The second written document where any warranty information appears is in the Buyers Guide, again signed by both Alysha and Miguel Diaz, and contains the following disclosure: WARRANTIES FOR THIS VEHICLE: “AS IS - NO WARRANTY”. (App. tab 4); (RR 6: P. Ex. 47; D. Ex. 2). The DTPA does not create any warranties. Parkway Co. v. Woodruff, 901 S.W.2d 434, 438 (Tex.1995); La Sara Grain Co. v. First Nat’l Bank, 673 S.W.2d 558, 565 (Tex.1984); Four Bros. Boat Works, Inc. v. Tesoro Pet. Cos., 217 S.W.3d 653, 666 (Tex.App.– Houston [14th Dist.] 2006, pet. denied). A valid “as is” provision negates the buyer’s ability to prove the seller’s actions are an “actual [cause] in fact” of the buyer’s injury. See Prudential, 896 S.W.2d at 161-62; Kupchynsky v. Nardiello, 230 S.W.3d 685, (Tex.2007); Welwood v. Cypress Creek Estates, Inc., 205 S.W.3d 722, 726 (Tex.App.– Dallas 2006, no pet.); Bynum v. 7 Prudential Residential Servs., Ltd, P’ship, 129 S.W.3d 781, 788 (Tex.App.– Houston [1st Dist.] 2004, pet. denied). A. Prudential, Causation, and “As is” Clauses As a rule, parties have the right to contract as they see fit as long as their agreement does not violate the law or public policy.6 A valid “as is” agreement in a sales contract negates the buyer’s ability to prove the seller’s actions are an “actual [cause] in fact” of the buyer’s injury. See Prudential, at 161-62; Welwood, 205 S.W.3d at 726, (same); Bynum, 129 S.W.3d at 788; (“as is” clause in sales agreement for remodeled home bars claims relating to remodeling work). Prudential treats the existence of a valid “as is” clause-not as an affirmative defense to the buyer’s claims-but as a matter of proof conclusively negating an element of those claims. Prudential, 896 S.W.2d at 164. By agreeing to purchase the property “as is,” the buyer agrees to make his own assessment of the bargain and accepts the risk that he may be wrong. Id. at 161. The seller gives no assurances, express or implied, concerning the value or condition of the thing sold, and the buyer chooses to rely on his own determination of the value and condition of the purchase, thus eliminating the possibility that the seller’s conduct will cause him damage. Id. 6 In re Prudential Ins. Co. Of America, 148 S.W.3d 124 (Tex.2004); Lawrence V. CDB Servs., Inc., 44 S.W.3d 544, 553 (Tex. 2001) (“[W]e have long recognized a strong public policy in favor of preserving the freedom of contract.”), Sonny Arnold, Inc. v. Sentry Sav. Ass’n, 633 S.W.2d 811, 815 (Tex. 1982) (recognizing “the parties’ rights to contract with regard to their property as they see fit, so long as the contract does not offend public policy and is not illegal”). 8 As a result, a valid “as is” agreement “prevents a buyer from holding a seller liable if the thing sold turns out to be worth less than the price paid because it is impossible for the buyer’s injury on account of this disparity to have been caused by the seller.” Id. B. The Prudential Exceptions However, the presence of an “as is” provision is not determinative in every circumstance. Id. at 162. Prudential itself describes three situations when a buyer will not be bound by as “as is” clause: (1) when the “as is” agreement was “induced by fraudulent representation or concealment of information” by the seller; (2) when the buyer has a right to inspect the property sold but that right is “impaired” or “obstructed” by the seller; or (3) when “other aspects” of the transaction ... make an “as is” agreement unenforceable.” Id. 1. Nature of the Exceptions– Affirmative Defenses A party must affirmatively plead certain matters, including duress, estoppel, illegality, waiver, and “any other matter constituting an avoidance or affirmative defense.” TEX. R. CIV. P. 94. It cannot be disputed that the Prudential exceptions constitute “matter[s] of avoidance or affirmative defense. Prudential, at 162; Kupchynsky, 230 S.W.3d at 696. If proved, they would render the “as is” clause unenforceable and thus ineffective to preclude the Diazes from proving that the actions of Mac Haik were a cause in fact of the Diazes’ damages. Id. The burden of pleading and proving the elements of an affirmative defense is on 9 the party seeking to rely on that defense. Compass Bank v. MFP Fin. Servs., Inc., 152 S.W.3d 844, 851 (Tex.App.- Dallas 2005, pet. denied). If not pleaded or tried by consent, an affirmative defense is waived. Id. (non-jury trial). Further, on an appeal from a jury trial, “all independent grounds of recovery or of defense not conclusively established under the evidence and no element of which is submitted or requested are waived.” TEX R. CIV. P. 279; T. O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218, 222-23 (Tex.1992); See also Bank of Texas v. VR Elec., Inc., 276 S.W.3d 671, 676-77 (Tex.App.Houston [1st Dist.] 2008, pet. denied). Here the Diazes failed to plead or prove any grounds–specified by Prudential or otherwise– for disregarding the “as is” agreement. (CR 23-30). The Diazes also failed to request (and the trial court failed to submit to the jury) any element of any such matter in avoidance of the “as is” agreement. (CR 38-49). Therefore, unless an affirmative defense to the “as is” clause was conclusively established by the evidence, it was waived. TEX R. CIV. P. 279; Kupchynsky, 230 S.W.3d at 700. To conclusively prove an affirmative defense to the “as is” agreement, the Diazes had to “so conclusively prove each element of that affirmative defense ... that there was no fact question to submit to the jury on any of its elements.” See Brown v. Zimmerman, 160 S.W.3d 695, 702 (Tex.App.- Dallas 2005, no pet). A matter is conclusively established if ordinary minds could not differ as to the conclusion to be drawn from the evidence. Talford v. Columbia Med. Ctr. at Lancaster Subsidiary, L.P., 198 S.W.3d 462, 464 10 (Tex.App.- Dallas 2006, no pet.) (citing Triton Oil & Gas Corp. v. Marine Contractors & Supply, Inc., 644 S.W.2d 443, 446 (Tex. 1982). 2. Waiver of the Prudential Exceptions The court of appeals’ opinion failed to discuss any of the exceptions mentioned in Prudential, to determine the validity of the “as is” agreement. (App. tab 3). Likewise, none of the Prudential exceptions were pleaded by the Diazes, asked of or found by the Jury, or proved conclusively so as to obviate the need for submitting them to the Jury. (App. tab 2) (CR 23-30) (Entire appellate record). None of the Prudential exceptions were conclusively proved by the evidence, and are therefore waived. TEX. R. CIV. P. 94, 279. CONCLUSION AND PRAYER This case presents an opportunity to clarify which party bears the burdens of proof and pleading as to the efficacy of an “as is” agreement. The legal principles espoused by the court of appeals extend liability and impose a duty on sellers who have no knowledge of the alleged defect. The lower court’s reasoning is at odds with or ignores prior controlling Texas case law. Petitioners request this Court to grant this petition for review, reverse the judgment of the Court of Appeals and trial court and either render judgment in Petitioners’ favor or remand this case to the Court of Appeals for consideration of the legal sufficiency of the evidence consistent with this Court’s opinion in Prudential Ins. Co. Of Am. v. Jefferson Assocs. Ltd. 11 Respectfully submitted, LAW OFFICE OF HENRY L. ROBERTSON By: /S/ Henry L. Robertson State Bar No. 17058700 8323 Southwest Freeway, 605 Houston, Texas 77074 (713) 271-5656 (telephone) (713) 271-5522 (telecopier) ATTORNEY FOR PETITIONERS MAC HAIK CHEVROLET, LTD., AND WELLS FARGO AUTO FINANCE, INC., CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the foregoing Appellants’ Brief was sent via Certified Mail, Return Receipt Requested to the following on this day of March, 2010: Richard Tomlinson Law Office of Richard Tomlinson 1415 Fannin, 3rd Floor Houston, Texas 77002 T.B.N. 20123500 (713) 652-0077 (telephone) /S/ Henry L. Robertson 12
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