Parkway Co. v. Woodruff
901 S.W.2d 434, 1995 WL 358858 (1995)
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Rule of Law:
The Texas Deceptive Trade Practices Act (DTPA) does not create an implied warranty for a real estate developer's future development services that adversely affect a property years after the developer sold the vacant lot to a third party. A claim of unconscionability under the DTPA must be based on circumstances existing at the time of the original transaction, not on subsequent events.
Facts:
- The Parkway Company developed a master-planned community known as Sugar Creek.
- In 1977, Parkway sold a vacant lot within Sugar Creek to Harrington Homes, which then constructed a house on the property.
- After the house was sold to two previous owners, Ray and Constance Woodruff purchased it in April 1981.
- In early 1983, Parkway began developing an adjacent section of land, which involved regrading and constructing a wall.
- Ray Woodruff, an engineer, notified Parkway by letter that he believed their construction activities would alter drainage patterns and potentially flood his property.
- Shortly thereafter, runoff from the new development area flowed onto the Woodruffs' land during a heavy rain.
- On August 18, 1983, during Hurricane Alicia, the Woodruffs' home flooded due to runoff from an adjacent commercial tract. The house subsequently flooded three more times between 1986 and 1989, causing a cracked foundation and other structural damage.
Procedural Posture:
- The Woodruffs sued Parkway Company in district court for negligence, DTPA violations, and other claims.
- At trial, the district court granted a directed verdict in favor of Parkway's engineers.
- A jury found Parkway liable for negligence and for DTPA violations based on breach of an implied warranty and unconscionable conduct.
- The trial court rendered judgment for the Woodruffs, awarding actual damages, additional damages under the DTPA, attorney's fees, and mental anguish damages.
- Parkway, as appellant, appealed to the court of appeals.
- The court of appeals affirmed most of the judgment but deleted the mental anguish award due to insufficient evidence and added an award for out-of-pocket expenses.
- Parkway sought review of the court of appeals' decision from the Supreme Court of Texas.
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Issue:
Does a real estate developer's subsequent, negligent development work that causes flooding to a homeowner's property breach a common-law implied warranty for future services or constitute an unconscionable act under the Texas Deceptive Trade Practices Act (DTPA)?
Opinions:
Majority - Justice Cornyn
No. A developer's subsequent development activities do not breach an implied warranty for future services or constitute an unconscionable act under the DTPA. The court reasoned that the DTPA does not create warranties; it only provides a cause of action for warranties recognized by common law or statute. The court declined to judicially create an 'implied warranty to perform future development services' because no such services were sought or acquired by the Woodruffs in any transaction with Parkway. The initial sale of the vacant lot to the homebuilder did not include any promise of future development services. The court also rejected the unconscionability claim, holding that unconscionability under the DTPA must be evaluated at the time of the consumer transaction, not based on later events like the flooding.
Dissenting - Justice Gammage
Yes. The developer's actions did breach an implied service warranty under the DTPA. The dissent argued that when purchasing a home in a master-planned community, a buyer reasonably relies on the developer's expertise to complete the development in a manner that is not detrimental to existing homeowners. Equity demands an implied warranty that the developer will not act in a way that interferes with the purchaser's use and enjoyment of their property. Because the developer is in a superior position to prevent such loss, its negligent actions that caused the flooding constituted a breach of its implied warranty to perform services in a good and workmanlike manner.
Analysis:
This case significantly clarifies and limits the scope of implied service warranties under the Texas DTPA, establishing that such warranties must be tethered to a specific transaction where services were actually rendered or promised. By refusing to create a new common-law warranty for future development, the court channels claims based on post-sale conduct toward traditional tort theories like negligence, thereby preventing plaintiffs from accessing the DTPA's enhanced remedies like attorney's fees and additional damages for such claims. The decision also reinforces a strict temporal requirement for unconscionability, confirming that the conduct is judged at the time of the sale, which protects sellers from DTPA liability for unforeseen future events.
