      TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN


                                      NO. 03-04-00453-CV



                       Charles E. Willis d/b/a Willis Inspection Service


                                                 v.


                           Bay North Homeowners Association, Inc.




     FROM THE DISTRICT COURT OF BURNET COUNTY, 33RD JUDICIAL DISTRICT
        NO. 21444A, HONORABLE GUILFORD L. JONES, III, JUDGE PRESIDING



                            MEMORANDUM OPINION


               Charles E. Willis d/b/a Willis Inspection Service appeals a summary judgment

granted in favor of Bay North Homeowners Association on Willis’s third-party action. Jim and

Sandra Breashears sued Willis for an allegedly faulty pre-purchase inspection of their condominium.

Willis sued the Association for contribution and indemnity. See Tex. Civ. Prac. & Rem. Code Ann.

§ 33.016(a) (West 1997); Tex. R. Civ. P. 38(a). The Association’s summary judgment claimed that

Willis could not prevail on his third party action because the Association did not owe a duty to the

Breashearses and because there was no evidence that it breached any alleged duty owed to them.

               Willis asserts that the district court erred in granting summary judgment for the

Association on his derivative claims because the Association owed a duty to the Breashearses as a
matter of law and because there are genuine issues of material fact concerning its breach of that duty.

We conclude that the Association should not have prevailed on its motion for summary judgment

under rule 166a(c) because it did not negate the issue of its duty to the Breashearses as a matter of

law. We also conclude that the Association should not have prevailed on its motion for summary

judgment under rule 166a(i) because Willis produced more than a scintilla of evidence raising a

genuine issue of material fact on the issue of the Association’s breach of its duty. Accordingly, we

reverse the summary judgment order and remand to the district court.


                                         BACKGROUND

               Charles Willis is a licensed real estate inspector. In July 2001, Jim and Sandra

Breashears hired Willis to conduct a pre-purchase inspection of a condominium located in Horseshoe

Bay North, a subdivision in Burnet County. Willis’s inspection report identified signs of water

penetration in the garage and on the ceiling by the front door, as well as rotted wood on the exterior

of the condominium. The report emphasized that “in any area where there is rot/deterioration, there

is always the possibility of concealed damage.”

               In August 2001, the Breashearses purchased the condominium at issue from Michael

and Sandra Taylor. The condominium was subject to the covenants in the Horseshoe Bay North

Development Supplementary Declaration of Covenants and Restrictions recorded in the deed records

of Burnet County. Reservations in the Breashearses’ warranty deed from the Taylors made the

condominium’s conveyance subject to the covenants that were in effect and shown of record in

Burnet County.




                                                  2
                The Covenant for Maintenance Assessments in Article IV, section 2 of the

Declaration authorized the Association to collect assessments for the “improvement and

maintenance” of the condominium’s “building exteriors, including but not limited to repair and

replacements thereto.” “Building exterior” is defined in the Declaration as “the exterior sides and

roof of any permanent structure on any Lot, exclusive of exterior glass surfaces.”

                The General Provisions in Article VII, section 1 of the Declaration demonstrate that

the covenants and restrictions were intended to “run with and bind the land” and


       inure to the benefit of and be enforceable by Bay North Homeowners Association,
       or the Owner of any land subject to this Declaration, their respective legal
       representatives, heirs, successors and assigns, for a term of thirty (30) years from the
       date that this Declaration is recorded,1 after which time said covenants shall
       automatically be extended for successive periods of ten (10) years unless an
       instrument signed by eighty (80%) percent of the then Owners of the Lots has been
       recorded agreeing to change said covenants and restrictions in whole or in part.


The covenants and restrictions were also intended to be enforceable at law or equity against any

person “violating or attempting to violate any covenant or restriction” to restrain the violation,

recover damages, or enforce any lien created by the covenants against the land.

                Within a month of taking possession, the Breashearses discovered “extensive roof

leaks and mold infestation in parts of the house2 and ventilation system, requiring the house to be

almost completely gutted and rebuilt.” They sued Willis for negligence, fraud, misrepresentation




       1
           The Declaration was recorded on June 19, 1981, and is still in its initial thirty-year period.
       2
         Although the Breashearses called their property a “house,” the pleadings show that their
reference is to the condominium unit at issue in this appeal.

                                                    3
and violation of the Deceptive Trade Practices Act. See Tex. Bus. & Com. Code Ann. §§ 17.01-.885

(West 2002 & Supp. 2004-05).3

               Willis filed a third-party action against the Association for contribution and

indemnity. The Association answered and sought leave to file a third-party suit against the

Breashearses’ real estate agents. At the hearing on the motion for leave, counsel for the Breashearses

informed the court that he would have to disqualify himself if the court allowed the Breashearses’

agents into the suit because of his long-standing representation of the agents’ employer. The court

sua sponte suggested to the Association’s counsel,“[I]t seems to me that before we complicate this

thing further and possibly conflict out the [Breashearses’ counsel] and so forth, perhaps you ought

to examine your summary judgment potential.”

               The Association then sought judgment under Texas Rules of Civil Procedure 166a(c)

and 166a(i), denying the existence of a duty to the Breashearses and denying the breach of any

alleged duty. They also objected to the affidavits Willis offered to refute their motion. After a

hearing, the district court struck the challenged portions of the affidavits and signed an interlocutory

order granting the Association’s motion without stating the basis for its ruling. The court

subsequently severed Willis’s claims against the Association. Willis’s appeal presents two issues,

structured in his brief as a “primary issue” with three “sub-issues,” asserting that the district court

erred in granting judgment for the Association because the Association owed the Breashearses a duty




       3
           The Breashearses also sued Michael and Sandra Taylor, who were the condominium
sellers, and Kent Lesley, the Taylors’ real estate agent. The Breashearses did not sue the
Association.

                                                   4
as a matter of law and because genuine issues of material fact exist concerning the Association’s

breach of that duty.


                                            ANALYSIS

Standard of Review

               We review the district court’s grant of summary judgment de novo. Joe v. Two Thirty

Nine Joint Venture, 145 S.W.3d 150, 156 (Tex. 2004). To prevail on a motion for summary

judgment under rule 166a(c), the movant must conclusively negate at least one essential element of

the nonmovant’s cause of action or conclusively prove each element of its affirmative defense,

thereby showing that it is entitled to judgment as a matter of law and that no genuine issues of

material fact remain. Tex. R. Civ. P. 166a(c); Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 222-23

(Tex. 1999).

               By advancing a motion for judgment under rule 166a(i), the movant asserts that there

is no evidence of one or more essential elements of a claim or defense that the nonmovant would

have the burden to prove at trial. See Tex. R. Civ. P. 166a(i). Unless the nonmovant produces

summary judgment evidence raising a genuine issue of material fact on the challenged elements, the

court must grant the motion. Tex. R. Civ. P. 166a(i) & cmt. 1997; Western Invs., Inc. v. Urena, 162

S.W.3d 547, 550 (Tex. 2005).

               In reviewing a no-evidence claim, we view the evidence in a light that tends to

support the finding of the disputed fact and disregard all evidence and inferences to the contrary.

Minyard Food Stores, Inc. v. Goodman, 80 S.W.3d 573, 577 (Tex. 2002). A genuine issue of

material fact exists if more than a scintilla of evidence establishing the existence of the challenged

                                                  5
element is produced. Ford Motor Co. v. Ridgeway, 135 S.W.3d 598, 600 (Tex. 2004). More than

a scintilla of evidence exists if the evidence rises to a level that would enable reasonable and

fair-minded people to differ in their conclusions. Id. Conversely, when evidence offered to prove

a vital fact is so weak as to do no more than create a mere surmise or suspicion of its existence, it

is no more than a scintilla and, in legal effect, is no evidence. Id.

               Because the trial court’s order granting summary judgment does not specify the basis

for the ruling, we must affirm the summary judgment if any of the theories presented to the trial court

and preserved for appellate review are meritorious. See Provident Life & Accident Ins. Co. v. Knott,

128 S.W.3d 211, 217 (Tex. 2004).


Willis’s Third-Party Claim

               Willis argues that summary judgment was inappropriate because the Association

owed the Breashearses a contractual duty to “maintain and/or repair” the building exteriors of their

condominium, including the exterior sides and roof. The existence of a legal duty is a question of

law for the court to decide, and that determination is made from the facts surrounding the occurrence

in question. Tri v. J.T.T., 162 S.W.3d 552, 563 (Tex. 2005).

               Under rule 38(a), a defendant may bring a third-party action to join a party who may

be liable to the defendant or to the plaintiff for all or part of the plaintiff’s claims against the

defendant. Tex. R. Civ. P. 38(a). A third-party action is not an independent cause of action, but is

derivative of the plaintiff’s claim against the responsible third party. Eslon Thermoplastics v.

Dynamic Sys., Inc., 49 S.W.3d 891, 902 (Tex. App.—Austin 2001, no pet.) (citing Shoemake v.

Fogel, Ltd., 826 S.W.2d 933, 935 (Tex. 1992)). The civil practice and remedies code allows suits

                                                   6
against a “contribution defendant” defined as “any defendant, counterdefendant, or third-party

defendant from whom any party seeks contribution with respect to any portion of damages for which

that party may be liable, but from whom the claimant seeks no relief at the time of submission.”

Tex. Civ. Prac. & Rem. Code Ann. § 33.016(a).

              Willis’s pleadings allege that the Association


       owed a duty to the Plaintiffs [Breashearses] to repair, replace and maintain the
       building exteriors of Plaintiffs’ condominium, which include the exterior sides and
       roof of any permanent structure on any lot. . . . [The Association] breached its duty
       to maintain and repair the building exteriors of Plaintiffs’ home by failing to make
       repairs and/or by failing to adequately complete all repairs needed.


Because Willis’s third-party claims are derivative of the Breashearses’ right to recover from the

Association, Willis cannot pursue a third-party claim against the Association if the Breashearses

cannot bring a direct claim against it. See Eslon Thermoplastics, 49 S.W.3d at 902.


The Association’s Duty to the Breashearses as a Matter of Law

              Relying on the Covenant for Maintenance Assessments in the Declaration, Willis

contends that the Association had a contractual duty to “maintain and/or repair” the building

exteriors of the condominium:


       The Declarant4 for each Lot owned by it hereby covenants and each Owner of any Lot
       by acceptance of a deed therefor, whether or not it shall be so expressed in any such
       deed or other conveyance, shall be deemed to covenant and agree to pay to the


       4
         The Declaration states that the Declarant, Horseshoe Bay North Development, delegates
and assigns to the Association the powers of “maintaining and administering the community” and
“administering and enforcing the covenants and restrictions.”

                                                7
        Association: (1) annual assessments or charges. . . . Said assessments shall . . . be
        used for the improvement and maintenance of the common properties and the
        building exteriors, including but not limited to repair and replacements thereto and
        for the cost of labor, equipment, materials, management, and supervision thereon. . . .


                The Association agrees that “the Declaration sets forth a duty by which it must

maintain the exteriors of all buildings.” It further agrees that the covenant at issue runs with the land

and is a contract—but not with the Breashearses. The Association’s motion under rule 166a(c)

argues that it did not owe a duty to the Breashearses as a matter of law because the repairs, or lack

thereof, occurred before the Breashearses owned the condominium. In support of its assertion, the

Association pointed to “the sales contract signed by the Breashearses,” but it erroneously attached

the sales contract for the Taylors’ purchase of the condominium. Because the sales contract from

the Taylors to the Breashearses is not in the record and was not presented to the district court, it

cannot support the Association’s summary judgment. See Tex. R. Civ. P. 166a(c); Gandara v.

Novasad, 752 S.W.2d 740, 743 (Tex. App.—Corpus Christi 1988, no writ).

                The Association also relies on two cases stating that “one in whose time a covenant

running with the land is broken is the proper person to bring an action for the breach thereof, and the

conveyance of the fee after such breach does not operate as an assignment of the right of action to

the grantee.” Fudge v. Hogge, 323 S.W.2d 663, 667 (Tex. Civ. App.—Dallas 1959, no writ);

Compton v. Trico Oil Co., 120 S.W.2d 534, 538 (Tex. Civ. App.—Dallas 1938, writ ref’d).

                The above cases are distinguishable from this one. Fudge involved a conflict over

a lakesite’s dedication to public use and a determination that the statute of limitations began to run

when appellees filled the lakesite with dirt, which was an “open and notorious” violation of deed



                                                   8
restrictions. 323 S.W.2d at 667. Compton involved a title dispute that arose after the assignment

of an oil and gas lease to a grantee who took his interest with actual knowledge of the title warranty’s

breach and with the grantor’s promise to “clear up the title.” 120 S.W.2d at 538.

               A case cited in Compton is more parallel to the facts of this case. See Shannon v.

Childers, 202 S.W. 1030 (Tex. Civ. App.—El Paso 1918, writ ref’d). In Shannon, the Shannons

conveyed several tracts of land by general warranty deed to Fischer, who later conveyed the same

tracts by general warranty deed to Childers. Id. at 1030. After a re-survey of the land, Childers

learned that the property Fischer had purportedly sold to her had been erroneously surveyed and was

nonexistent. Id. at 1031. The State voided the erroneous survey. Id. Childers sued the Shannons

on the covenant of warranty in their deed to Fischer. Id. at 1031. The Shannons argued that they had

no title to the tract in question at the time they conveyed to Fischer, and because their covenant of

warranty was broken when made to Fischer, it ceased to run with the land, leaving no right of action

upon the covenant to pass to Fischer’s purchaser, Childers. Id.

               Ruling for Childers, the court noted that the forfeit of the erroneous survey constituted

a breach of the covenant of warranty:


       It [the survey’s forfeit] was the final act in the complete failure of any shadow of title
       to the survey, and was a constructive eviction. And since it occurred after the
       conveyance to Mrs. Childers, the breach of the covenant was finally consummated
       while she was the owner, and the cause of action arising from the breach then accrued
       to her. Upon this view of the case, she was not an assignee subsequent to the breach.


Id. at 1031-32; see also Siebert v. Bergman, 44 S.W. 63, 63-64 (Tex. 1898) (quoting Post v.

Campau, 3 N.W. 272, 274 (Mich. 1879) (technical breach of covenant may have taken place at time



                                                   9
deed was delivered; but as no damage followed from breach until claimant’s purchase over ten years

later, rule that claimant’s right of action is deemed to have arisen at delivery of deed involves this

“manifest absurdity: that claimant’s remedy was barred before he was damnified; a result that can

scarcely be consistent with any just or proper rule of law”)).

               This case concerns the “extensive” concealed5 damage resulting from the

Association’s alleged breach of a covenant to “maintain and/or repair”6 that went undiscovered and

undisclosed, according to the Breashearses, until after they moved into their condominium. Because

of this alleged breach, the Breashearses became responsible for exterior condominium maintenance

that the Association may not have performed. The Taylors’ deed to the Breashearses for the sale of

the condominium incorporated the Declaration’s covenants by reservation. The Association agrees

that the covenant at issue runs with the land, and that “the Declaration sets forth a duty by which it

must maintain the exteriors of all buildings.” “Improvement and maintenance” of the building

exteriors, according to the Declaration, “includ[es] but [is] not limited to repair and replacements”

of the “exterior sides and roof of any permanent structure on any Lot, exclusive of exterior glass

surfaces.” The Association agrees that the Declaration is a contract. Neither party claimed that the

Declaration was ambiguous.




       5
        Willis’s report cautioned that a visual inspection of the condominium might not detect the
“concealed damage” that was possible in any area with “rot/deterioration.”
       6
          “Repair” is mentioned as a specific subset of “maintenance” in Article IV, section 2 of the
Declaration. The Covenant for Maintenance Assessments states that “improvement and
maintenance” of the building exteriors includes but is not limited to “repair and replacement.” We
will refer to the obligations in this section of the Declaration as the covenant or duty to “maintain.”

                                                  10
               We may determine the parties’ rights and obligations under an unambiguous contract

as a matter of law. ACS Investors, Inc. v. McLaughlin, 943 S.W.2d 426, 430 (Tex. 1997). The

Association asserts that after the Taylors conveyed to the Breashearses, the Declaration’s covenant

to maintain the building exteriors of the condominium ceased running with the land, and without an

assignment, the Taylors did not pass any right of action against the Association on that covenant to

the Breashearses. But similar to the original covenantors in Shannon, the Association’s alleged

breach of the covenant was “finally consummated” while the Breashearses were the owners of the

condominium, and the cause of action arising from the alleged breach then accrued to them. Thus,

contrary to the Association’s contention, the Breashearses do not require an assignment from the

Taylors to sue the Association because the Breashearses’ ownership was not subsequent to the

alleged breach.

               We conclude, as a matter of law, that the Association failed to negate the issue of its

duty to the Breashearses. It had an ongoing, contractual duty to maintain the building exteriors of

the condominium under its covenant in the Declaration, which ran with the land from the Taylors

to the Breashearses. See Shannon, 202 S.W. at 1031-32; see also Siebert, 44 S.W. at 63-64. Willis’s

third-party action against the Association is not legally barred because the Breashearses could have

brought a direct claim against the Association. See Eslon Thermoplastics, 49 S.W.3d at 902.

Accordingly, we sustain Willis’s first issue.


Evidence of the Association’s Breach of Duty Owed to the Breashearses

               Having established that the Association had a duty to maintain the building exteriors

of the Breashearses’ condominium, we must decide whether Willis produced more than a scintilla


                                                 11
of evidence raising a genuine issue of material fact about the Association’s breach of its duty. The

Association’s motion under rule 166a(i) argues that there is no evidence that it breached a duty to

the Breashearses. To refute the Association’s motion, Willis produced his inspection report, the

affidavit of Francisco Gonzales, and the affidavit of Sandra Breashears. The court struck one

statement in Gonzales’s affidavit as hearsay.7

                Willis’s July 2001 report stated that the “roof covering” of the condominium was

observed from “either ground and/or eave levels,” with the use of binoculars. He noted that the

concrete/clay roofing tiles showed “normal wear for age,” but he found that the “potential for water

entry [wa]s present” and recommended “securing the flashing at the fire wall between the two units,

above the left overhang area at the left of the house.” He also noted that the ceiling in the garage had

been repaired “from a roof leak” and that the ceiling by the front door had water stains. He observed

multiple locations of rot: on the bottom right side of the overhead garage door trim, on the high soffit

at the left front side of the house, on the soffit to the left side of the structure, and on the high soffit

at the rear of the house. His report concludes with the following statement, in all capital letters: “In

any area where there is rot/deterioration, there is always the possibility of concealed damage.”

                The affidavit of Francisco Gonzales offers evidence of the condominium’s condition

before Willis’s inspection. Although the court sustained a hearsay objection to one sentence in

Gonzales’s affidavit, it did not rule on any other objection. In the remaining portion, Gonzales

averred that he owns a home improvement company specializing in roofing repair and that he has

been in the roofing business for over 30 years. He testified that he has repaired condominiums in


        7
         The court also struck the hearsay portions of Sandra Breashears’s affidavit, but Willis
waived any complaint about this ruling by failing to brief this issue. Tex. R. App. P. 38.1(h).

                                                    12
the Bay North development in Horseshoe Bay since 1990. He also testified that in the fall of 2000,

Charlie Tenbush, an agent for the Association, asked him to meet with an insurance adjuster to

inspect the roof of the condominium unit at issue, as well as the adjoining unit.

               Gonzales recalled


       [a]t that time, I told Mr. Tenbush and the insurance adjuster that the siding and trim
       on [the condominium] needed additional repairs. In my opinion, the work needed at
       that time was routine maintenance and repair due to aging of the structure, and was
       not due to storm damage. I gave the insurance adjuster an estimate to repair the tile[]
       damage caused by a storm, at his request. I was paid by Bay North Homeowners
       Association to replace the broken or loose tiles, only. I turned in a proposal to repair
       the broken tiles and to change out the rotten siding and trim boards to prevent water
       penetration.


               Gonzales’s affidavit, even without the struck sentence, shows that the siding and trim

boards, as well as the tiles on the roof of the condominium in question, needed “maintenance and

repair” in 2000. The Association paid him “to replace the broken or loose tiles, only” despite the

fact that he had proposed completion of the tile repair and “chang[ing] out the rotten siding and trim

boards to prevent water penetration.”

               The Association dismisses this evidence by stating that it “does not show that the

repairs were in fact not completed” and that Willis did not “establish” a breach of duty. But Willis

did not have to prove that the Association failed to “complete” repairs to defeat the rule 166a(i)

motion; he only had to point out evidence raising a fact issue on the Association’s breach of its duty

to maintain. See Tex. R. Civ. P. 166a(i) & cmt. 1997; Johnson v. Brewer & Pritchard, P.C., 73

S.W.3d 193, 207 (Tex. 2002).




                                                 13
               Willis’s evidence shows that the Association only paid for roof tile replacement in

2000, even though Gonzales, their long-time professional roofer, recommended changing the rotten

siding and trim boards to prevent water penetration. In 2001, Willis reported that the roofing tiles

showed normal wear but the potential for water entry was present. He also noted the rot visible at

multiple locations, including the overhead garage door trim and the soffits on the side and rear of

the house; he cautioned that concealed damage was possible in any area with rot. Two months after

Willis’s inspection, the Breashearses discovered their condominium’s “extensive leaks.”

               We find that the chronology of events documented by Willis’s report and Gonzales’s

affidavit would cause reasonable and fair-minded people to differ in their conclusions about whether

the Association performed the “improvement and maintenance” of the condominium’s “building

exteriors” as required by the Declaration. Therefore, we conclude that Willis produced more than

a scintilla of evidence raising a genuine issue of material fact concerning the Association’s breach

of its ongoing, contractual duty to maintain the condominium’s building exteriors that was imposed

by the Declaration and owed to the Breashearses. Willis’s second issue is sustained.


                                         CONCLUSION

               Because the Association did not negate the issue of its duty to the Breashearses as a

matter of law, it should not have prevailed on its motion for summary judgment under rule 166a(c).

Furthermore, because Willis produced more than a scintilla of evidence raising a genuine issue of

material fact on the issue of the Association’s breach of its duty, the Association should not have

prevailed on its motion for summary judgment under rule 166a(i). Having concluded that the




                                                14
Association was not entitled to judgment under either rule, we reverse the summary judgment order

and remand to the district court for further proceedings.




                                              __________________________________________

                                              Jan P. Patterson, Justice

Before Chief Justice Law, Justices Patterson and Puryear

Reversed and Remanded

Filed: August 3, 2005




                                                15
