NO. IN THE SUPREM E COURT OF TEXAS

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.
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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.
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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”).
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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
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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
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(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.
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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
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