Judge Marialyn Barnard
The Business Court has granted partial summary judgment to defendants in a dispute with the purchaser of an apartment complex that the purchaser later discovered had alleged construction defects allowing water to penetrate the walls.
Passco Companies, LLC; Passco Management Services, LP; Passco Tribute DST; and Passco Tribute MT, LLC v. Rim WP Apts, LLC; Rim WP Holdings, LP; Kairoi Management, LLC; Kairoi Development, LLC d/b/a Kairoi Residential d/b/a Lynd Development LLC a/k/a Lynd Development Partners; Daniel Zunker; and Michael Lynd, Jr (2026 Tex. Bus. 75; October 26, 2026) arose from a dispute over an apartment complex in San Antonio. Zunker and Lynd hired architects to design the complex. This contract was assigned to Rim WP Apts, which contracted with a construction company to build the complex. Rim contracted with Kairoi Management to manage the property in 2017. Construction was completed in 2018.
The following year, Passco contracted with Rim LLC to buy the property. The Purchase Sale Agreement contained a provision disclaiming reliance on all warranties and representations made by Rim and its agents, with some exceptions. It also included a due diligence period for Passco to investigate the property. Passco did that, and the deal closed on June 5, 2019. Two years down the road, Plaintiffs found out about “severe water penetration to the Property,” allegedly stemming from construction defects relating to the building envelope. Specifically, the defects “involved the building’s water-resistive barriers, perimeter sealing, and roofing membranes.” In May 2022 Plaintiffs sued, alleging statutory fraud, common-law fraud, fraud by nondisclosure, fraudulent inducement, breach of contract, and civil conspiracy. Plaintiffs also sought declaratory relief. Five of the six Defendants moved for partial summary judgment. The motion did not include Plaintiffs’ claims against Rim for breach of the PSA or their claims against Kairoi Management for breach of a post-sale management agreement.
In an opinion by Judge Barnard, the court granted the MSJ. Plaintiffs alleged a raft of fraud claims, all of which boiled down to Defendants’ intentional withholding of their knowledge of the defective condition of the building prior to the sale. Defendants countered that Plaintiffs statutory and common-law claims based on the pre-sale questionnaire, fraudulent inducement claims, and fraud by nondisclosure claim were “conclusively negated by the disclaimer of reliance and ‘as is’ clause contained in the PSA.” Was the disclaimer of reliance enforceable? Looking to the PSA, the court found that the clause, “which appears in predominantly bold and capital type, contains emphatic disclaimer language, plainly stating that the sale of the Property ‘is made and will be made without representation, covenant, or warranty of any kind … by seller.” It clearly stated that Plaintiffs accepted the property “as is” “with all faults and without representation or warranty,” as well as that Plaintiffs didn’t rely on any representations or warranties other than those specifically provided by the agreement.
On this basis, the court concluded that the agreement’s “language is clear and specific and supports the enforcement of the disclaimer of reliance clause in this case” (citations omitted). Moreover, the evidence showed that Passco “is an experienced and sophisticated purchaser of commercial real estate projects,” the parties entered into an arm’s-length transaction in which Passco was represented by counsel, and the agreement stated that the parties and their counsel reviewed and revised the agreement (indicating a negotiation process). Having determined that the disclaimer langage was enforceable, the court quickly concluded that it negated Plaintiffs’ justifiable reliance on the representations made in the pre-sale questionnaire. Consequently, Plaintiffs’ statutory and common-law fraud claims fell by the wayside.
Plaintiffs also asserted that Rim allegedly made a false representation that it had not received written notice of a building code violation in contravention of the PSA. The disclaimer of reliance clause made an exception for that, so the court turned to Defendants’ argument that Plaintiffs’ fraud claims premised on the agreement failed as a matter of law because Rim’s alleged representation wasn’t false. So what did the PSA actually say? It provided that the “Seller has not received written notice from any governmental entity of a violation by Seller of any law, rule, or regulation affecting the Property . . . nor any written notice that the Property is in violation of any applicable building or zoning code or ordinance ….” The record contained no evidence “that Rim received a written notice stating that the Property was in violation of a building code.” Consequently, Defendants established as a matter of law that Rim’s representation was not false. Any of Plaintiffs’ fraud claims premised on that particular representation also fell by the wayside.
Next, the court took up Plaintiffs’ civil conspiracy and alter ego allegations. As Defendants argued and the court affirmed, Plaintiffs’ claims “fail as a matter of law because both are dependent on establishing a claim of fraud.” Since Plaintiffs couldn’t do that, the court granted summary judgment on the civil conspiracy claim. The same goes for Plaintiffs’ alter ego claim, which also derives from establishing fraud.
Plaintiffs alleged that Kairoi breached the management agreements “by failing to adequately manage or maintain the Property and by failing to address existing, known conditions, namely, the water penetration defects.” But Kairoi didn’t have an agreement with Plaintiffs. Kairoi’s contract was with Rim. Plaintiffs tried to get around this problem by arguing that a fact issue existed as to “what rights the closing documents conveyed and whether accrued rights were included …” They also argued that the PSA assigned contract rights to them. The court didn’t read the agreement that way. While the PSA assigned intangible personal property, that didn’t cover the management contract. It also didn’t mean that the PSA assigned causes of action or claims. In short, Rim never assigned its management agreement with Kairoi to Plaintiffs. In fact, Rim terminated that contract on the day of closing the sale. The court granted Kairoi’s MSJ.
Finally, the court reached Plaintiffs’ request for declaratory relief. As the court observed, “[a] declaratory claim is permissible only if it has greater ramifications than the issues already before the court, such as when the claim seeks affirmative relief independent of the existing claims.” Here Plaintiffs asked for a declaration that they didn’t breach the PSA. Since their breach of contract claim was already before the court, Plaintiffs’ request added “no independent remedy or separate benefit beyond the resolution” of that claim. Plaintiffs further sought a declaration that service of process was effective as to all defendants, particularly Rim, and those defendants waived objections to service or jurisdiction. Again, since the jurisdictional issue is always the court, a declaration wouldn’t add anything. That claim, too, failed. The court granted Defendants’ partial MSJ.
