The Prudential Insurance Company of America v. Jefferson Associates, Ltd. and F.B. Goldman

Summary

The Supreme Court of Texas held that a sophisticated buyer's freely negotiated "as is" agreement, which disclaimed reliance on the seller's representations and warranties, conclusively negated causation for the buyer's claims arising from the property's undisclosed asbestos fireproofing. The court concluded that the agreement barred recovery under the DTPA, fraud, negligence, and breach-of-duty theories because the buyer accepted the risk of the property's condition. The court reversed the court of appeals and rendered judgment that the buyer take nothing.

Holdings

1. A valid, freely negotiated "as is" agreement by a sophisticated buyer in an arm's-length commercial real estate transaction, when not induced by fraud or otherwise made unenforceable, conclusively establishes that the buyer accepted the risk of the property's condition and negates causation for injury based on the property's undisclosed defects or reduced value.
2. An "as is" agreement does not bar recovery when the buyer was fraudulently induced to make the agreement, when the seller concealed information that induced the agreement, when the seller impaired an inspection that the buyer was entitled to conduct, or when the totality of the circumstances makes the agreement unenforceable.
3. The contract's express waiver of any action under the Texas Deceptive Trade Practices Act was void under Texas Business and Commerce Code section 17.42, but the separate "as is" and nonreliance provisions were not a waiver of DTPA rights; they established that the seller's conduct was not a producing cause of injury.
4. A seller has no duty to disclose facts the seller does not know and is not liable for failing to disclose information the seller only should have known; the evidence did not establish that Prudential actually knew the building contained asbestos.
5. Statements that the building was "superb" or one of the finest properties in Austin were puffing or opinion rather than actionable misrepresentations of material fact, and the statement that the building had no defects other than a mechanical-room foundation problem was not shown to be fraudulent.

Questions Presented

1. Whether a freely negotiated "as is" agreement in an arm's-length commercial real estate transaction conclusively negates causation and bars the buyer's claims for DTPA violations, fraud, negligence, and breach of the duty of good faith and fair dealing.
2. Whether the contractual provision expressly waiving any action under the DTPA was enforceable under Texas Business and Commerce Code section 17.42.
3. Whether Prudential's alleged failure to disclose possible asbestos, withholding of plans and specifications, or statements by its property manager supplied a basis to avoid the "as is" agreement.
4. Whether the evidence established that Prudential's conduct was a producing cause or actual cause of Goldman's damages.

Disposition

reversed