Texas Business Court Decision – October 26, 2026

No. 26-BC04A-0002   Passco Companies, LLC, et al. v. Rim WP Apts, LLC, et al. (Fourth Div., Judge Barnard)  2026 Tex. Bus. 75

Fraud and Contracts.

Background. Passco bought Tribute at the Rim, a San Antonio apartment complex, from Rim WP Apts, LLC (Rim) under a 2019 purchase and sale agreement (PSA). The PSA contained a disclaimer of reliance and an “as is” clause, and a due diligence period. Passco discovered severe water penetration from building-envelope defects in March 2021. It sued in 2022, alleging statutory fraud, common law fraud, fraud by nondisclosure, fraudulent inducement, civil conspiracy, alter ego liability, breach of the PSA, breach of two management agreements and declaratory relief. The case was removed to the Business Court in March 2026, and five of the six named defendants (the Kairoi Defendants) moved for partial summary judgment. The motion did not address the PSA claim against Rim LLC or the claims against Karori Management on the May 31, 2019, post-sale management agreement.

Issues:

1. Whether the PSA’s disclaimer of reliance is enforceable and negates justifiable reliance on the fraud, fraudulent inducement, and nondisclosure claims.
2. Whether Rim LLC’s PSA  representation concerning no prior written notice of building code violations was false.
3. Whether the civil conspiracy and alter ego theories survive without an underlying tort
4. Whether Passco can sue Kairoi Management on the pre-acquisition sub-management agreement,
5. Whether Passco’s declaratory judgment claims impermissibly duplicate issues already before the court.

Discussion.

1. Disclaimer of Reliance. Justifiable reliance is an element of each fraud claim. The enforceability of a disclaimer is a question of law that turns on the contract and the surrounding circumstances. The factors to be considered include whether the language of the disclaimer is clear and specific, whether the terms were negotiated, whether the party had counsel, whether the deal was at arm’s length, and whether the parties were sophisticated. Here, the clause was in bold capitals and disclaimed reliance on any representation outside the agreement, with exceptions only for RIM’s no written notice of code violations and two other paragraphs of the agreement. The PSA recited that Passco was sophisticated and was represented by counsel, and that the parties negotiated the terms at arm’s length. The disclaimer is enforced, and it negates reliance on the pre-sale questionnaire, which sat outside the PSA, and the fraud-by-nondisclosure claim based on the the PSA’s clause concerning due diligence documents.  The due diligence paragraph itself disclaimed any representations about the accuracy or completeness of the due diligence documents. Thus the disclaimer of reliance clause negates Passco’s statutory and common law fraud claims based on the pre-sale questionnaire, Passco’s fraudulent inducement claim to the extent it is based on the pre-sale questionnaire, and Passco’s fraud by nondisclosure claim.
2. Falsity of Paragraph 7.1(e) regarding written notice of code violations. Because this paragraph was carved out of the disclaimer, the fraud and inducement claims based on it a turn on whether the representation was false. The paragraph is unambiguous. It covers written notices stating that the property violates a building code, not the documents from which a violation may be inferred. There was no evidence of such a notice, so the representation was not false, and the Kairoi Defendants are entitled to summary judgment on the remaining fraud and fraudulent inducement claims.
3. Civil conspiracy and alter ego claims. Civil conspiracy is a derivative tort, and alter ego is a means of imposing liability rather than a separate cause of action. Both depend on the existence of a fraud claim, which failed, so they both fail.
4. Pre-acquisition sub-management agreement. Passco alleged that Kairoi Management breached the pre-acquisition sub-management agreement by failing to adequately manage and maintain the property and by failing to address existing known conditions – the water penetration. The claim is based on a management agreement signed by Rim and Kairoi Management, but Rim never assigned this agreement to Passco because it was terminated on the date of closing. This negates an essential element of the claim – a valid enforceable contract.
5. Declaratory judgment. A declaratory judgment claim must have “greater ramifications” than the issues already pending. The requested declarations about Passco’s contractual performance, effective service, waiver of jurisdictional objections, and capacity to be sued only duplicated the pending issues and offered no independent remedy. The Kairoi Defendants are granted summary judgment on this claim.
6. In sum, the court dismissed with prejudice the  fraud, fraudulent inducement, nondisclosure, conspiracy and alter ego, and declaratory judgment claims against defendants Rim WP Holdings, Kairoi Development, Zunker, and Lynd. The pre-acquisition management agreement claim against Kairoi Management is also dismissed. Still pending are the PSA and fraud claims against Rim LLC, and the May 31, 2019 management agreement claim against Kairoi Management.