Benard John Horak v. Warren Newman and Ruth Newman

Citation: Not availableDocket: 03-05-00170-CV

Court: Court of Appeals of Texas; July 21, 2009; Texas; State Appellate Court

Original Court Document: View Document

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Bernard John Horak, operating as Horak Construction, appeals a judgment from the Burnet County District Court favoring Warren and Ruth Newman regarding construction issues related to their residence. Horak raises thirteen points of error, questioning the evidence supporting the Newmans' claims of breach of contract, breach of warranty, violations of the Texas Deceptive Trade Practices-Consumer Protection Act (DTPA), and the awarded damages. He also argues that the statute of limitations should bar the Newmans' breach of contract and DTPA claims. The appeal stems from a contract initiated in October 1993, wherein Horak was to construct the Newmans' home for $217,700, ensuring materials and labor met specified standards.

Following the Newmans' occupancy in October 1994, significant issues arose, including flooding from an unattached water line and moisture problems, described as the residence 'sweating.' Horak repaired the initial flood damage, but subsequent issues persisted, particularly involving the HVAC duct system. After further incidents, including water intrusion during heavy rain in January 1995, Horak made additional repairs, including replacing plexiglass roofing with tempered glass. 

The construction was ultimately completed in 1995, with the Newmans reporting no further leaks at that time. However, in May 1999, an HVAC technician discovered mold and mildew in the previously repaired ducts, leading to further repairs costing $2,765. Additionally, a contractor found rotting in the tub room walls, requiring repairs costing $5,901.71. The court affirmed the trial court's judgment, upholding the Newmans' claims against Horak.

In 1999, the Newmans notified Horak of defects related to construction and repairs affecting ducts and the tub room, which led to a lawsuit filed in April 2000. The Newmans alleged breach of contract, breach of warranty, and violations of the Deceptive Trade Practices Act (DTPA), seeking damages, statutory additional damages, and attorney’s fees. The case was tried in March 2003, with testimony from the Newmans, repair contractors, and their attorney. Mrs. Newman recounted issues with water intrusion and subsequent damage, while Mr. Newman described communications with Horak regarding repairs. Horak, along with a fellow builder, testified about the construction and repairs made in 1995, but did not make any settlement offers in response to the Newmans' demands. The trial court ruled in favor of the Newmans on December 21, 2004, awarding a total of $37,916.71, including damages, statutory additional damages, and attorney’s fees. Horak appealed, raising thirteen points of error, primarily arguing that the Newmans’ claims were barred by statutes of limitations and contesting the sufficiency of evidence supporting the judgment. The review focused on the breach of warranty claims and damages, with the court implying necessary supporting facts favoring the trial court's judgment due to the absence of explicit findings of fact and conclusions of law.

The standard of review for legal and factual sufficiency challenges to a trial court’s implied findings is the same as that applied to jury findings. A legal sufficiency challenge can succeed in four specific situations: (a) absence of evidence for a vital fact; (b) legal or evidentiary barriers to giving weight to the only evidence for a vital fact; (c) evidence that is merely a scintilla; or (d) evidence conclusively establishing the opposite of a vital fact. Horak argues that the Newmans’ breach of warranty claims under the DTPA are barred by the two-year statute of limitations, asserting that the claims stem from events before February 1995, with no evidence of water intrusion after January 1995, and that the Newmans did not file suit until 2000 without showing that the defects were undiscoverable or that they exercised reasonable diligence in discovering them. The Newmans counter that Horak must demonstrate when the mold or rot began to prove their claims are time-barred and invoke the discovery rule exception under section 17.565 of the DTPA, which allows deferral of the cause of action’s accrual until the plaintiff is aware or should be aware of the facts underlying the claim. The court implies that the Newmans discovered, or should have discovered, the facts for their claims in 1999, and reviews the evidence supporting this finding. Favorable evidence includes testimonies from the Newmans and Roark, indicating that mold was not discovered until 1999 despite inspections since 1995, and that it was not visible without close inspection. Additionally, evidence concerning water damage in the tub room revealed that damage was not visible until siding was removed in 1999, corroborating the Newmans' claims of unawareness of further leaks after repairs in 1995. Photographic evidence was also presented to support their argument.

Horak argues that the Newmans did not demonstrate 'reasonable diligence' in discovering issues with their property, citing accessible areas beneath the residence, visible mold on HVAC systems, and the absence of personal inspections since 1995. He questions the credibility of witnesses who reported water damage, but the trial court has the exclusive authority to evaluate witness credibility. The evidence supports the trial court's implied finding that the Newmans should have discovered the breach of warranty facts by 1999, allowing their 2000 claims to proceed without being barred by limitations. Horak's claims challenging the sufficiency of the evidence for the Newmans’ breach of warranty under the DTPA are overruled. He asserts that the claims are governed by the Residential Construction Liability Act (RCLA), which modifies causes of action related to construction defects. However, because Horak did not make a reasonable settlement offer following the Newmans’ demands, RCLA limitations on damages do not apply. The analysis of Horak's evidentiary challenges is based on common law and DTPA. Horak acknowledges that he warranted his construction work but disputes the Newmans' claims of inadequate workmanship and the causal link to observed damages, arguing that the issues stemmed from the architect's plans rather than his construction practices. He contends that expert testimony was necessary to establish causation, emphasizing the need for proof that his actions were a substantial factor in causing the damages.

Evidence supporting the implied finding regarding the mold claim includes clear facts: (i) a defectively installed, unattached water line caused flooding in the kitchen, living area, and guest room in October 1994; (ii) in 1995, Horak performed repairs to remove standing water from ducts but did not replace them; and (iii) after these repairs, no further flooding occurred, and the HVAC systems functioned properly. Roark, a subcontractor for Horak, provided testimony about the 1995 duct repair, stating he drained multiple ducts, with one in the living area being most affected. He indicated that failure to drain all water could lead to mold and mildew growth. Horak disputed any causal link between the 1995 incident and subsequent mold findings in 1999, suggesting that such growth can occur independently of flooding. However, Roark confirmed finding mildew and some mold in the other HVAC systems in 1999, with the most significant mold linked to the water-affected system. The trial court could reasonably conclude that moisture remained in the ducts post-repair, that Horak's repairs were inadequate, and that this inadequacy significantly contributed to the mold issue, supporting a finding of breach of warranty by Horak.

Regarding the tub room claim, Mrs. Newman testified about water intrusion during a significant rain event and noted no leaks after the 1995 repairs. Horak claimed he repaired the tub room by replacing sections of roofing panels and contended there was no substantial evidence of construction standard violations or a causal relationship between any alleged deviations and damage. He argued that he adhered to architect specifications and addressed issues independently. However, testimonies from Solsbery and Cleveland highlighted a builder’s responsibilities in zero overhang designs, with Cleveland mentioning that moisture exposure leads to wood decay. Horak acknowledged that the architect's plans did not provide explicit guidance on flashing details and confirmed he did not install a vapor barrier, which could have prevented water intrusion.

Horak provided testimony regarding his construction and repairs of the zero overhang feature in 1995, specifically addressing water intrusion issues in the tub room. The trial court could infer that Horak's work was not performed in a good and workmanlike manner, significantly contributing to the resulting rot and decay from water intrusion. Evidence supported a finding that Horak breached a warranty that was a substantial factor in causing water damage. Horak argued that the Newmans lacked expert testimony to prove causation. The necessity of such testimony is a legal question reviewed de novo, with expert testimony required only for matters beyond common juror understanding. Although no construction experts were designated, the Newmans presented skilled witnesses with personal observations that sufficiently established causation. The court determined that issues related to water removal and its impact on mold and water damage fell within common understanding, allowing the Newmans to prove causation without expert testimony.

The court addressed Horak's challenges to the sufficiency of evidence supporting the damage awards, including $8,666.71 awarded to the Newmans for repair costs. This amount comprised $2,765 paid for mold repairs and $5,901.71 for water damage repairs in the tub room. Horak contested the reasonableness of these repair costs. To recover such costs, plaintiffs must demonstrate that the expenses were reasonable and necessary. The trial court implied a finding that the repair costs were reasonable, supported by evidence from witnesses Roark and Solsbery, who detailed their companies' charges and repair work performed in 1999, including itemized labor and parts costs, indicating efforts to keep expenses low while addressing necessary repairs.

The evidence presented included an estimate and a final invoice detailing repair costs. The final invoice totaled $5,901.71 and included charges for tearing out, re-framing, window replacement, and disposal, among others. The estimate, totaling $6,630.00, outlined similar tasks with different price allocations. Horak argued that the Newmans did not provide evidence of the reasonableness of the repair costs, referencing the Perry Homes case, which concluded that a lack of evidence led to an unsupported jury finding. However, the current case differed as the owners of the repair companies testified and provided itemized charges, which supported the implied finding that the Newmans' repair costs were reasonable. The court stated that it is not necessary for witnesses to explicitly label costs as "reasonable" for recovery, as sufficient evidence can justify this finding. 

Additionally, the trial court awarded the Newmans $10,000 in statutory additional damages, within the allowable limit, despite Horak's claims of insufficient evidence regarding the "knowingly" element of the Deceptive Trade Practices Act (DTPA). The DTPA defines "knowingly" as actual awareness of the deceptive act or condition at the time it occurred, with awareness inferred from objective indicators. The court referenced prior cases to support the notion that actual awareness can be established without explicit acknowledgment of wrongdoing.

Economic damages awarded by the trier of fact can be increased if the defendant's conduct is found to be either knowing or intentional. If found knowingly, the consumer may recover for mental anguish and receive up to three times the economic damages. If intentional, the consumer may recover for both mental anguish and economic damages, with the same cap on damages. Evidence indicated that Horak, the builder, was aware of defects during construction, particularly concerning moisture issues and zero overhang designs, which could lead to water intrusion. Testimonies suggested Horak's awareness of these issues and his failure to implement adequate repairs, supporting a finding of "actual awareness" of the defects constituting a breach of warranty under the Texas Business and Commerce Code. The trial court awarded attorney’s fees of $9,250, which Horak contested on the grounds that the Newmans had not prevailed on any claims. However, since the court found sufficient evidence supporting the Newmans' claims under the Deceptive Trade Practices Act (DTPA), the award of attorney’s fees was upheld. The court affirmed the trial court’s judgment, concluding that the Newmans' warranty claims were not barred by limitations and that the damages awarded were justified.