Rivas v. Lake Shore Harbour Cmty. Ass'n

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RICK RIVAS, Appellant v. LAKE SHORE HARBOUR COMMUNITY ASSOCIATION, Appellee

No. 01-22-00121-CV

Court of Appeals of Texas, First District

April 25, 2023

On Appeal from the 458th District Court Fort Bend County, Texas Trial Court Case No. 21-DCV-288460

Panel consists of Chief Justice Adams and Justices Countiss and Rivas-Molloy.

MEMORANDUM OPINION

Veronica Rivas-Molloy Justice

Appellee Lake Shore Harbour Community Association filed suit against several defendants, including Appellant Rick Rivas ("Rivas"), concerning the design and condition of the bulkhead system surrounding three man-made lakes at the Lake Shore Harbour subdivision in Missouri City, Texas. Rivas appeals from an interlocutory order denying his motion to dismiss filed under Chapter 27 of the Texas Civil Practice and Remedies Code, also known as the Texas Citizens' Participation Act, in which he sought to dismiss Appellee's claims against him .

In two issues, Rivas argues the trial court erred in denying his motion to dismiss and in denying his request for attorney's fees because Appellee's legal action against him is based on or in response to his right of free speech and his right of association. We affirm the trial court's order.

Background

The underlying lawsuit stems from the alleged "deterioration and misconstruction and post failure of the bulkhead[] system" surrounding three man-made lakes at the Lake Shore Harbour subdivision in Missouri City, Texas. Appellee the Lake Shore Harbour Community Association ("Lake Shore" or "Lake Shore Association"), filed suit against Rivas and several other defendants,^[1]claiming they failed to disclose significant problems with the bulkhead system and took no corrective action to remedy the problems. As it concerns Rivas, Lake Shore filed claims against him for negligent misrepresentation, fraud and fraudulent misrepresentation constructive fraud, and breach of fiduciary duty.

A. The Lake Shore Subdivision

The Lake Shore Harbour subdivision ("Subdivision") is a 270-acre planned community in Missouri City, Texas. It has more than 900 single-family homes, most of which are waterfront lots. Greatmark International, Inc., Vicksburg Estates Ltd., Skymark Development Co., Amvest Properties, and Clinton Wong (collectively, "Developer") were the developers of the Subdivision.

Construction of the Subdivision began in 2003. According to Lake Shore, the "plan was to construct three large man-made lakes which would serve as the centerpiece of the development and would entice prospective homeowners to buy into this community because this community would have 65 acres of lake front property." The lakes were to be enclosed with 45,150 feet of 12-inch concrete bulkheads "to buttress the concrete separating the [l]akes from the shoreline."

The Lake Shore Association was created in 2004. At the time of its incorporation, the Lake Shore Association was controlled by a five-member Board of Directors ("HOA Board"), including Clinton Wong ("Wong"), one of the Subdivision's developers.^[2] According to Lake Shore, what "transpired during the next approximately 10 years was a concerted effort" by the Developer and its "affiliated entities, agents, and employees to conceal the significance of the construction defects" of the bulkhead system "as well as the forecast provided by engineers to the Developer-controlled Board that there would be continued deterioration of the bulkhead system." Lake Shore alleges that "neither Wong nor any of his agents . . . told the Lake Shore Harbour Community about any significant problems with the bulkead[] system" until 2019, when the HOA Board announced for the first time that there were significant problems with the bulkhead system and the community would have to bear the costs of repairs.

According to Lake Shore, the Developer controlled the HOA from 2004 to 2021, until, when after much concerted effort, the "Developer finally allowed an election in January of 2021" enabling the homeowners "to take control of the [HOA] Board."

B. Problems with the Bulkhead System

In 2016, the HOA Board commissioned Professional Engineering Inspections, Inc. ("PEI") to inspect and evaluate the performance of the bulkhead system at the Subdivision. PEI performed the inspection and prepared a comprehensive report "detailing the severity of the problems with the bulkhead systems." Lake Shore alleges that the PEI report described "significant deterioration of the bulkhead systems and evidence of soil erosion across all phases of the lake construction project." The PEI report stated that "more invasive engineering and soil testing would be necessary to determine the feasibility of repairs or the possible need for complete replacement." In response, Lake Shore alleges that the "Developer-controlled Board" did nothing. The HOA Board took no "action to remedy the problems or implement PEI's recommendations." According to Lake Shore, the HOA Board "concealed the PEI report from the Lake Shore Harbour Community for more than three and a half years."

In 2017, Reserve Advisors, Inc. prepared another report ("Reserve Report") concerning the bulkhead system at the Subdivision. According to Lake Shore, the "Reserve Report relied upon the 2016 PEI report in confirming that extensive bulkhead repairs would be necessary" and further "recommended [that] an invasive engineering investigation be performed." Once again, Lake Shore claims the HOA Board did nothing. Lake Shore alleges that the HOA Board "took no action to remedy the problems detailed in the Reserve Report" and failed to disclose this subsequent report to the Lake Shore Harbour Community. "Instead, the Reserve Report, like the PEI report, was concealed by the Developer-controlled Board."

According to Lake Shore, "[o]nly when the Developer-controlled Board sought to assess the Subdivision" in 2019, "did the homeowners first learn that the Developer-controlled Board had known that there was something terribly wrong with the bulkheads and that these issues had not yet been addressed." At that time, the HOA Board informed the Lake Shore Harbour community that it would be assessed for fixing "significant problems" with the bulkhead system. This apparently was the HOA Board's first effort to fix the bulkhead system and the first time the Subdivision's homeowners learned of any bulkhead issues.

Lake Shore alleges that when individual homeowners raised questions about their own properties prior to 2019, the HOA Board "concealed their knowledge of the significant construction defects" and "intentionally misrepresented material facts in an effort to conceal the true nature of the bulkhead defects," subsequently giving "homeowners the impression that the Board was actively working to remedy such issues." "In response to continued pressure from homeowners," Lake Shore alleges that the "Developer-controlled Board finally made the PEI Report available through the HOA website on August 5, 2019."

Given the "alarming information contained in the PEI Report," Lake Shore alleges that the homeowners formed a "Bulkhead Committee" and retained Tolunay Engineering Group ("TEG") "to assess the bulkhead issues and provide and engineering proposal." In September 2020, TEG submitted its report to the HOA Board concluding, among other things, that "the problems with the bulkheads arose from deficiencies related to their design and construction." In July 2021, based on the findings in the TEG report, Mason Construction, LLC issued a quote to the HOA Board estimating that the cost of replacing the bulkheads would be "approximately $23,000,000.00."

C. Rivas and the Special Meeting of the Board

Saratoga Homes is the real estate development company and homebuilder for the Subdivision. Rivas is an Area Manager for the South Division of Saratoga Homes. Lake Shore alleges that in April 2017, "Rivas was elected to serve as a Director on the Developer-controlled Board."^[3] According to Lake Shore, Rivas "also served as the Vice President of the Board in 2019."

On March 2, 2020, the HOA board held a special meeting to "discuss the TEG Report" ("Special Meeting"), at which Rivas was present. Lake Shore alleges that when asked at that meeting if he knew about the problems with the bulkhead system, Rivas responded that "he and his company Saratoga Homes, had been aware of the issues but stated that this information was not being disclosed to new or prospective homeowners." Lake Shore's pleadings identify no other statement made by Rivas at the Special Meeting.

D. The Lake Shore Lawsuit

In 2021, Lake Shore sued several individual and corporate entities asserting claims for negligence, negligent misrepresentation, fraud and fraudulent misrepresentation, breach of fiduciary duty, constructive fraud, breach of contract, and breach of restrictive covenant.^[4] Lake Shore asserted claims against Rivas for negligent misrepresentation, fraud, fraudulent misrepresentation, and constructive fraud.

Lake Shore alleged that Rivas negligently and falsely represented to the homeowners that the Subdivision "was built in a good and workmanlike manner, free of any substantial defects." It alleged that as "a Director of the HOA Board, Rivas was aware of the bulkhead issues but failed to use reasonable care in communicating such information to homeowners." Lake Shore further alleged that "homeowners justifiably relied on these representations when making the decision to purchase a home within the Subdivision."

Lake Shore also alleged that several of the named defendants committed fraud by failing "to disclose the information contained in the PEI Report as well as the information subsequently acquired." It claimed they committed constructive fraud "through the prolonged nondisclosure,...