Opinion
No. 05-16-01472-CV
05-23-2018
SAMUEL ADAM AFLALO, Appellant v. DEVIN LAMAR HARRIS AND MEGHAN THERESA HARRIS, Appellees
On Appeal from the 95th Judicial District Court Dallas County, Texas
Trial Court Cause No. DC-16-00247
DISSENTING OPINION
Before Justices Francis, Evans, and Boatright
Dissenting Opinion by Justice Evans
Samuel Adam Aflalo contracted to sell his home to Devin Lamar Harris and Meghan Theresa Harris. Before the purchase closed, a dispute erupted at the center of which is paragraph 7.B of the contract which provided, "SELLER'S DISCLOSURE NOTICE PURSUANT TO 5.008, TEXAS PROPERTY CODE (Notice)." Under that provision, the parties skipped subparagraph (1) that provided, "Buyer has received the Notice," and they checked off paragraph (2) which stated:
v Buyer has not received the Notice. Within 3 days after the effective date of this contract, Seller shall deliver the Notice to Buyer. If Buyer does not receive the Notice, Buyer may terminate this contract at any time prior to the closing and the earnest money will be refunded to Buyer. If Seller delivers the Notice, Buyer may terminate this contract for any reason within 7 days after Buyer receives the Notice or prior to the closing, whichever first occurs, and the earnest money will be refunded to Buyer.(Emphasis added). This is the only provision of the contract the parties argued pertains to the resolution of their dispute—whether the contract required Aflalo to make only the disclosures required by section 5.008 of the property code, or whether he was also required to make the disclosures called for on Texas Association of Realtors' (TAR) form TAR-1414. According to the trial court's judgment and the majority opinion, the contract required Aflalo to include disclosures on form TAR-1414; the undisputed summary judgment evidence is that he did not do so, therefore he breached the parties' agreement. I conclude the text of the contract and section 5.008 required Aflalo to disclose only the information required in section 5.008 of the property code and not the information on form TAR-1414. Because the summary judgment evidence is that Aflalo made all the disclosures required by section 5.008 of the property code, I conclude Aflalo did not breach the contract. Accordingly, I would reverse the judgment of the trial court in favor of the Harrises and remand the case for further proceedings.
The contract provided a place for making other documents part of the contract by reference in the merger clause provision. Paragraph 22 provides, together with the first and only box the parties checked, as follows:
AGREEMENT OF THE PARTIES: This contract contains the entire agreement of the parties and cannot be changed except by their written agreement. Addenda which are a part of this contract are (Check all applicable boxes):(Emphasis added). No party argued in the trial court or their appellate briefs about the legal significance of the merger clause, so I do not consider its legal significance in my decision. I only point out there was a specific place in the form contract to reference other documents that were part of the parties' bargain and form TAR-1414 was not listed.
v Third Party Financing Addendum for Credit Approval
I. BACKGROUND
The parties agree the following facts pertinent to the core issue are undisputed. Within the contractually allotted time for Aflalo to make the disclosures required by the contract, Aflalo delivered to the Harrises a disclosure notice using form TAR-1406. The day after the contractual deadline for Aflalo to deliver a disclosure notice, the Harrises requested Aflalo to complete and deliver form TAR-1414 because it was referred to in form TAR-1406 that Aflalo had used to make his disclosures. Aflalo did not do so. The Harrises did not terminate the contract within the contractually allotted time, if calculated from the disclosure notice Aflalo delivered. The day before the scheduled closing, the Harrises delivered a letter terminating the contract. After the Harrises failed to pay and close, Aflalo sued to recover the money in escrow claiming the Harrises breached the contract by failing to pay and close. The Harrises counterclaimed that Aflalo breached the contract by failing to complete and deliver form TAR-1414 within the contractually allotted time, which was a condition precedent that excused their failure to close and entitled them to return of the money in escrow. Both parties moved for summary judgment, and the trial court granted summary judgment for the Harrises that Aflalo breached and the Harrises were entitled to return of the money in escrow. A trial on attorney's fees was held, judgment entered, and this appeal ensued.
II. ANALYSIS
Aflalo asserts in his first issue that the trial court erred in granting the Harrises' motion for summary judgment and denying his motion for partial summary judgment on the breach issue when the trial court granted final judgment awarding the Harrises return of the money in escrow. To resolve Aflalo's issue we have to construe the parties' unambiguous contract and interpret section 5.008 of the property code.
A. Applicable Law
"We review a summary judgment de novo." Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). "When both sides move for summary judgment and the trial court grants one motion and denies the other, we review the summary judgment evidence presented by both sides and determine all questions presented." Id. "In such a situation, we render the judgment as the trial court should have rendered." Id. But where a cross-motion for summary judgment is only a motion for partial summary judgment and does not seek final disposition of the claims in the trial court, the issue is not properly before us. Pac. Mut. Life Ins. Co. v. Ernst & Young & Co., 10 S.W.3d 798, 810 (Tex. App.—Dallas 2000), rev'd on other grounds, 51 S.W.3d 573 (Tex. 2001); Montgomery v. Blue Cross & Blue Shield of Tex., Inc., 923 S.W.2d 147, 152 (Tex. App.—Austin 1996, writ denied) (en banc).
We review questions of statutory interpretation and contract construction de novo. See Molinet v. Kimbrell, 356 S.W.3d 407, 411 (Tex. 2011) (statutory interpretation reviewed de novo); Kachina Pipeline Co. v. Lillis, 471 S.W.3d 445, 449 (Tex. 2015) (construction of unambiguous contract is reviewed de novo).
When parties dispute their contract's meaning, "the primary concern of the court is to ascertain the true intentions of the parties as expressed in the instrument." Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex. 2005). "In the usual case, the instrument alone will be deemed to express the intention of the parties for it is objective, not subjective, intent that controls." Matagorda Cty. Hosp. Dist. v. Burwell, 189 S.W.3d 738, 740 (Tex. 2006) (quoting City of Pinehurst v. Spooner Addition Water Co., 432 S.W.2d 515, 518 (Tex. 1968)); see also URI, Inc. v. Kleberg Cty, No. 16-0336, 2018 WL 1440148, at *1 (Tex. Mar. 23, 2018) ("[O]bjective, not subjective, intent controls, so the focus is on the words the parties chose to memorialize their agreement.") (internal quotation marks and footnote omitted); Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd's London, 327 S.W.3d 118, 127 (Tex. 2010) (objective manifestation of intent is required, not "what one side or the other alleges they intended to say but did not."); Fiess v. State Farm Lloyds, 202 S.W.3d 744, 746 (Tex. 2006) ("[T]he parties' intent is governed by what they said, not by what they intended to say but did not."). For these reasons, we "presume parties intend what the words of their contract say," Gilbert Tex. Constr., 327 S.W.3d at 126, and interpret contract language according to its "plain, ordinary, and generally accepted meaning" unless the instrument directs otherwise. Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). "When examining an unambiguous contract, courts must construe the meaning of the language used in the contract. When the language is plain, it must be enforced as written." Phillips v. Union Bankers Ins. Co., 812 S.W.2d 616, 618 (Tex. App.—Dallas 1991, no writ) (citing Republic Nat'l Life Ins. Co. v. Spillars, 368 S.W.2d 92, 94 (Tex. 1963)).
The existence of a valid contract is one of the essential elements of a breach of contract claim. See Kay v. N. Tex. Rod & Custom, 109 S.W.3d 924, 927 (Tex. App.—Dallas 2003, no pet.) (setting out elements of breach of contract claim). Parties form a binding contract when the following elements are present: (1) an offer, (2) an acceptance in strict compliance with the terms of the offer, (3) a meeting of the minds, (4) each party's consent to the terms, and (5) execution and delivery of the contract with the intent that it be mutual and binding. Levetz v. Sutton, 404 S.W.3d 798, 803 (Tex. App.—Dallas 2013, pet. denied).
We interpret statutes in context giving effect to every word, clause, and sentence, because every word or phrase is presumed to have been intentionally used with a meaning and a purpose. Melden & Hunt, Inc. v. E. Rio Hondo Water Supply Corp., 520 S.W.3d 887, 893 (Tex. 2017); ExxonMobil Pipeline Co. v. Coleman, 512 S.W.3d 895, 899 (Tex. 2017); Morton v. Nguyen, 412 S.W.3d 506, 516 (Tex. 2013). When we must decide the meaning of a term not defined by the statute, we use the term's common, ordinary meaning, typically looking first to dictionary definitions, unless a contrary meaning is apparent from the statute's language. Tex. State Bd. of Examiners of Marriage & Family Therapists v. Tex. Med. Ass'n, 511 S.W.3d 28, 34-35 (Tex. 2017).
B. Harrises' Motion for Partial Summary Judgment
In his brief, Aflalo argues form TAR-1414 is nowhere referred to or incorporated into the contract. He is correct according to the text of the contract, including paragraph 22, that listed documents incorporated by reference and omitted form TAR-1414. See supra n.1. Aflalo further argues form TAR-1414 is not required by section 5.008 of the property code. Again, he is correct that nowhere in the text of section 5.008 is there a stated requirement for a seller to make the disclosures using the form TAR-1414 or that disclosure must be made regarding the substance of what form TAR-1414 requires. See infra n.5.
Aflalo points out that the relevant part of section 5.008 required him to disclose whether the property was "Located in 100-Year Floodplain" and whether he had "Present Flood Insurance." TEX. PROP. CODE ANN. § 5.008(b) (West Supp. 2017) (statutory form at ¶ 4). If he checked 'yes' to either disclosure, section 5.008 instructed, "If the answer to any of the above is yes, explain (Attach additional sheets if necessary)." Id. Section 5.008 then provided three blank lines for explanation. Id. Aflalo asserts the disclosures he made on form TAR-1406 completely satisfied the requirements of section 5.008. He inserted in his brief a picture of the disclosure he made showing he checked 'no' to "Located in 100-Year Floodplain," he checked 'yes' to "Located in Floodway," and he checked 'yes' to "Present Flood Ins. Coverage." Then he explained on the four blank lines provided on form TAR-1406, "I have flood insurance. My lender told me that it was recently added to a flood area." So in addition to the minimum disclosures required by section 5 .008, Aflalo disclosed the property was in a floodway (presumably a flood plain that flooded less frequently than 100 years because he checked 'no' to that question) and his lender had informed him the property had recently been added to a flood area. Aflalo contends these disclosures "completely satisfied the provisions of [section 5.008 of] the [Property] Code—and by extension, the Contract." He appears to be correct.
Aflalo also checked 'yes' that he had roof repairs, so his explanation also stated, "I made roof repairs several monts [sic] ago."
Aflalo argues the only mention of form TAR-1414 is in the disclosure notice form he chose to use and that it is not part of the contract. On form TAR-1406 underneath the words, "Present Flood Ins. Coverage," was the statement, "(If yes, attach TAR-1414)." As mentioned above, Aflalo had checked 'yes' and made his explanation, but he did not attach form TAR-1414. Further, Aflalo argues section 7.B(2) specifically addresses the fact that the Harrises had not received Aflalo's disclosure notice at the time the contract was executed, so it was not a document or shared information between the parties at the time of the contract so it was not a part of the contract when the parties signed the contract. Indeed, nowhere in the summary judgment record is there any document signed by both parties providing that Aflalo agreed to make disclosures required by, or use, form TAR-1414. Aflalo summarizes his argument, "The summary judgment record does not contain any evidence, let alone explanation, as to how a reference to TAR-1414 on a Notice form delivered after execution of the Contract became a part of, or modified, the Contract."
The Harrises' arguments at times border on arguing for modification. But there is no mention of contractual modification in the trial court record, and the Harrises never argued in the trial court or in their appellate brief that the reference in form TAR-1406 to form TAR-1414 resulted in modification of the contract. The formation of contract requirement—see supra n.2—of consideration is required for an alleged modification to be effective:
Parties having the power to make a contract may modify their contract in any manner they choose. Hathaway v. Gen. Mills, Inc., 711 S.W.2d 227, 228 (Tex. 1986). The modification must be supported by new consideration. Rhoads Drilling Co. v. Allred, 70 S.W.2d 576, 583 (Tex. 1934). Consideration is either a benefit that accrues to one party or a detriment incurred by the other party. Roark v. Stallworth Oil & Gas, Inc., 813 S.W.2d 492, 496 (Tex. 1991).Grace Creek Dev., LP v. REM-K Builders, Ltd., No. 12-16-00184-CV, 2017 WL 2351523, at *4 (Tex. App.—Tyler May 31, 2017, pet. denied) (mem. op.) (emphasis added). Because the trial court granted the Harrises' motion for partial summary judgment and nowhere in the Harrises' motion do they raise modification as a ground for summary judgment, the trial court's judgment cannot be affirmed by treating form TAR-1406's reference to form TAR-1414 as a modification of the real estate contract between the parties.
In their brief, the Harrises attempt to meet Aflalo's challenge. They do not dispute the accuracy of the contractual provision that before signing the contract they had not received Aflalo's disclosure. But the Harrises emphasize the content of the form Aflalo chose to use to make his disclosure, form TAR-1406, provided "Present Flood Ins. Coverage ( If yes , attach TAR-1414 )." (The Harrises' emphasis with bold italics). From this the Harrises argue "Aflalo's self-selected Seller's Disclosure Notice required that he attach the TAR-1414 form" and "as such, attaching the TAR-1414 form was required by the Contract." The Harrises make several arguments to support that conclusion.
First, the Harrises seek to elevate form TAR-1406's statement, "If yes, attach TAR-1414," to create an obligation on Aflalo's part by arguing, "In short, Aflalo assumed an additional obligation by choosing this Seller's Disclosure Notice form, and he must fully comply with the form he chose." (Emphasis added). Their argument, however, admits form TAR-1414 was an additional obligation to Aflalo's contractual disclosure obligation. In other words, the issue before the trial court was whether Aflalo failed to comply with the contract, not whether he failed to comply with the additional disclosure form TAR-1406 directed Aflalo to make in form TAR-1414. The cause of action is breach of contract, not breach of form.
Next, the Harrises make a contract formation argument that form TAR-1414 was indeed required by the contract. They argue:
In his Appellant's Brief, Aflalo makes the argument that there is nothing to indicate that the "reference to the TAR-1414 on a Notice form delivered after execution of the Contract became part of, or modified, the Contract." What Aflalo fails to mention is that he executed the Seller's Disclosure Notice (which required the TAR-1414 form to be attached) on September 16, 2015. That is, Aflalo executed the Seller's Disclosure Notice more than two (2) months before he entered into the Contract with the Harrises. This fact, and the fact that no other form of seller's disclosure notice has ever been produced by Aflalo, shows that the Seller's Disclosure Notice provided by Aflalo was the exact notice that Aflalo promised to supply by November 23, 2015, under the Contract. Aflalo cannot argue that this was not the notice he contemplated in the Contract when he prepared this Seller's Disclosure Notice for the express purpose of listing the Property for sale.(Footnote citations to record omitted). This argument is seriously flawed, because at its core it asserts one party's unexpressed thoughts and intentions are evidence of the mutual agreement of the parties. To the contrary, "[i]n the usual case, the instrument alone will be deemed to express the intention of the parties for it is objective, not subjective, intent that controls." Burwell, 189 S.W.3d at 740; Gilbert Tex. Constr., 327 S.W.3d at 127; Fiess, 202 S.W.3d at 746. So, we construe contract language according to its "plain, ordinary, and generally accepted meaning" unless the instrument directs otherwise. Heritage Res., 939 S.W.2d at 121. "When the language is plain, it must be enforced as written." Phillips, 812 S.W.2d at 618. The plain meaning of "SELLER'S DISCLOSURE NOTICE PURSUANT TO 5.008, TEXAS PROPERTY CODE (Notice)" is that section 5.008 of the property code, and not section 5.008 plus form TAR-1414, is what Aflalo and the Harrises agreed Aflalo was obligated to disclose.
Finally, the Harrises argue section 5.008 of the property code required Aflalo to make additional disclosures on form TAR-1414; that is, that Aflalo's failure to complete and deliver form TAR-1414 violated section 5.008 of the property code. The Harrises point out section 5.008 provides for minimum disclosures and permits disclosure to be made on "a written notice as prescribed by this section or a written notice substantially similar to the notice prescribed by this section." TEX. PROP. CODE ANN. § 5.008(a) (West Supp. 2017). Next, the Harrises point out that in the notice form provided in section 5.008(b) after a place to check "Present Flood Insurance Coverage," the disclosure notice states, "If the answer to any of the above is yes, explain. (Attach additional sheets if necessary)." Id. at § 5.008(b) (¶ 4 of statutory form). The Harrises argue that form TAR-1406's statement, "If yes, attach TAR-1414," is substantially similar to section 5.008(b)'s, "If . . . yes, explain. (Attach additional sheets if necessary)." The Harrises conclude that when Aflalo selected form TAR-1406 to make his disclosures, Aflalo was thereby obligated to complete and deliver form TAR-1414 as a requirement of the section 5.008 and thereby a requirement of the contract.
The Harrises' argument is incorrect both generally as to the substantial similarity argument and specifically when Aflalo's disclosures are considered. First, normal statutory interpretation using dictionary meanings for undefined terms and the context of the statute require the conclusion that form TAR-1406's statement, "If yes, attach TAR-1414," is not substantially similar to section 5.008(b)'s, "If . . . yes, explain. (Attach additional sheets if necessary)." See Tex. State Bd. of Examiners of Marriage & Family Therapists, 511 S.W.3d at 34-35; Melden & Hunt, Inc., 520 S.W.3d at 893; Coleman, 512 S.W.3d at 899. The imperative mood of the verb "attach" is used in both the statute and the form indicating a command. But the text of the statute conditions that command by the phrase, "if necessary." The conjunctive, "if," functions to "introduc[e] a conditional clause; on the condition or supposition that; in the event that." If, NEW OXFORD AMERICAN DICTIONARY 865 (3d ed. 2010). The adjective, "necessary," means "required to be done, achieved, or present; needed; essential." Necessary, id. at 1171. So the statute commands "additional sheets" be attached only "in the event that they are needed." In addition, the immediate context of the statutory form provides three blank lines for explanation, further indicating the Legislature provided space for explanation thereby intending the condition, "if necessary," might not occur if an owner's disclosure explanation required fewer than three full lines. Finally, if the condition is met because the explanation will not fit in the allotted space, the statutory language directs attachment of "additional sheets" and does not specify any particular form. Because "additional sheets" is in the immediate context of three blank lines, the text means the owner should continue the explanation on additional blank sheets. So the clear and unambiguous text of the statute does not support the conclusion that the statute required Aflalo to complete and deliver form TAR-1414.
The Harrises, using a novel method of statutory interpretation, argue the unconditional, mandatory language of form TAR-1406 removes the condition the Legislature inserted into section 5.008(b), "if necessary." Specifically, they contend the two are substantially similar and therefore the unconditional mandate of form TAR-1414 should be used to measure whether Aflalo complied with the statute. This argument is not a proper way to interpret an unambiguous statute and should be rejected. There is not a substantial similarity between section 5.008 and form TAR-1406 to the extent form TAR-1406 requires attachment of form TAR-1414; the statute does not.
The difference between form TAR-1406 and section 5.008(b) is crucial. As a matter of law, Aflalo disclosed everything the text of section 5.008 required and, in addition, disclosed the property was "Located in Floodway" and explained, "I have flood insurance. My lender told me that it was recently added to a flood area." This critically important information took Aflalo only two and one-half lines (he included explanation about his roof; see supra n.3). So "additional sheets" were not necessary for Aflalo's explanation. And Aflalo's explanation was delivered within the contractually allotted time, providing the Harrises seven days to terminate the contract when they learned the home was in a flood plain and had flood insurance coverage required by a lender. Although the Harrises argue Aflalo's disclosures and explanation were inadequate, the only support they cite for their position is the additional information form TAR-1414 would have required Aflalo to disclose. Merely because form TAR-1414 requires additional, important information be disclosed does not make Aflalo's disclosures insufficient to comply with the requirements of section 5.008. If the Legislature wanted to require disclosure of the information in form TAR-1414, it could have stated those requirements in the statutory form. Likewise, if the parties wanted to agree to require disclosure of whatever the realtors' association required, the parties could have agreed doing so was mandatory for performance of their contract. But the Harrises' post-contract, unilateral desire for the information in form TAR-1414 does not make it part of the contract or Aflalo's non-delivery of form TAR-1414 a breach of their contract. See Burwell, 189 S.W.3d at 740; Gilbert Tex. Constr., 327 S.W.3d at 127; Fiess, 202 S.W.3d at 746; Heritage Res., 939 S.W.2d at 121; Phillips, 812 S.W.2d at 618. Upon learning the home was in a flood plain and had flood insurance because a lender required it, the Harrises had all they bargained for: the contractually allotted period to terminate the contract and obtain return of their escrow money. The Harrises' arguments that section 5.008 required Aflalo to make disclosures on form TAR-1414 are unavailing.
The Harrises state in their brief the following information required by form TAR-1414 is what makes Aflalo's compliance with section 5.08 insufficient:
(i) the flood area in which the Property is located; (ii) the availability of flood insurance; (iii) the requirements that the ground floor of the Property must meet (iv) whether the Property is in compliance with such requirements; and (v) the availability of an elevation certificate.And in addition, the following:
(i) the insurance carrier; (ii) how long the property has been insured; (iii) if any insurance claims have been made on the insurance policy; and (iv) the level of insurance carried on the Property.
Having considered all of the parties' arguments, I conclude that Aflalo established as a matter of law the contract did not require him to make the disclosures in form TAR-1414 or use form TAR-1414 to make his disclosures. He further demonstrated the disclosures he made did not breach the contract because they were in accordance with section 5.008(b) of the property code as required by the contract. Because that alleged failure was the Harrises' premise for their motion for summary judgment, the trial court erred when it granted summary judgment in the Harrises' favor.
The Harrises' first section of their brief cites only to their appendix to what the Harrises claim is an inconsistent judicial admission in a new and different lawsuit filed by Aflalo against his real estate agent. Apparently, after losing judgment to the Harrises because the trial court decided form TAR-1414 became part of the parties' contract and Aflalo failed to make the form TAR-1414 disclosure, Aflalo sued his real estate agent for not making the formTAR-1414 disclosures. There are several problems with the Harrises' attempt to use Aflalo's new lawsuit. First, they treat the summary judgment record as though it is still open and they can supplement it. That is incorrect; it was closed at the time of the district court's ruling. Second, they treat the appellate record as though it, too, is open and they can supplement it with their appendix of material not in the appellate record. "'An appendix is not a substitute for a clerk's record nor are citations to the appendix a substitute for citations to the record.'" Jackson v. Citibank (S. Dakota), N.A., 345 S.W.3d 214 (Tex. App.—Dallas 2011, no pet.) (quoting Willms v. Wilson, No. 05-08-01718-CV, 2009 WL 4283109, at *1 (Tex. App.—Dallas Dec. 2, 2009, no pet.) (mem. op.)). Accordingly, the Harrises' judicial admission argument presents nothing for our review. See TEX. R. APP. P. 38.1.
C. Aflalo's Motion for Partial Summary Judgment
Aflalo further argues in his first issue that the trial court erred when it denied his motion for partial summary judgment. But Aflalo's cross-motion for summary judgment is not properly before us because it is only a motion for partial summary judgment and does not seek final disposition of the claims in the trial court. See Pac. Mut. Life Ins., 10 S.W.3d at 810; Montgomery, 923 S.W.2d at 152. Accordingly, I would not reach the second part of Aflalo's first issue treating it as presenting nothing to review.
D. Attorney's Fees
In his second issue, Aflalo contends if he prevails on his first issue then we should reverse the trial court's judgment award of $140,000 in attorney's fees plus appellate attorney's fees that resulted from the trial subsequent to the summary judgment. I agree. See Probus Props. v. Kirby, 200 S.W.3d 258, 265 (Tex. App.—Dallas 2006, pet. denied). The Harrises do not dispute this argument in their brief except to argue they should prevail on the first issue so they would still have a basis in law to recover attorney's fees. Because I would reverse the trial court's judgment and summary judgment in favor of the Harrises, I also would reverse the judgment awarding attorney's fees to the Harrises.
III. CONCLUSION
Because on this record there is no basis in the law of contract, tort, or any statute that obligated Alflalo to make the disclosures in form TAR-1414, I conclude the judgment and summary judgment in favor of the Harrises should be reversed and the case remanded for further proceedings consistent with this opinion. Because the majority concludes otherwise, I dissent. 161472DF.P05
/David Evans/
DAVID EVANS
JUSTICE