Opinion
NO. 03-16-00762-CV
02-01-2018
Fernando Orozco, Appellant v. Eugene Hoskins, Appellee
FROM THE DISTRICT COURT OF BASTROP COUNTY, 335TH JUDICIAL DISTRICT
NO. 28,783, HONORABLE REVA TOWSLEE-CORBETT, JUDGE PRESIDING MEMORANDUM OPINION
Fernando Orozco appeals from the trial court's judgment denying Orozco relief under chapter 5 of the Texas Property Code, which governs executory contracts for conveyance of real property. See Tex. Prop. Code §§ 5.061-.085. Orozco sued Eugene Hoskins alleging that Hoskins violated section 5.077(a) of the Property Code and seeking liquidated damages and attorney's fees. See id. § 5.077(a), (c), (d). Hoskins filed a counterclaim alleging that Orozco had breached the parties' contract for deed by defaulting on the contract payments. The trial court rendered judgment against Orozco and in favor of Hoskins. For the reasons that follow, we affirm the trial court's judgment.
APPLICABLE LAW AND STANDARD OF REVIEW
Subchapter D of chapter 5 of the Texas Property Code regulates executory contracts for conveyance of real property, also known as contracts for deed. See id. §§ 5.061-.085. In contracts for deed, the seller retains legal title to the property until the purchaser has paid for the property in full, unlike a traditional mortgage in which legal title transfers when the transaction closes. Flores v. Millennium Interests, Ltd., 185 S.W.3d 427, 429 (Tex. 2005); see id. at 435 (Wainwright, J., concurring) (citing majority). In 1995, the Legislature amended chapter 5 "to address serious abuses in the acquisition of homes in the colonias," which are "substandard, generally impoverished, rural subdivisions . . . [c]oncentrated on the Texas border with Mexico." Id. at 434 (Wainwright, J., concurring); see also De La Cruz v. Brown, 109 S.W.3d 73, 76 (Tex. App.—El Paso 2003), rev'd on other grounds, 156 S.W.3d 560, 48 (Tex. 2004). Although the Legislature considered prohibiting conveyances by contract for deed altogether to end the abuses, it determined that many residents in these areas are without access to traditional mortgage financing and need this method of financing. Flores, 185 S.W.3d at 435 (Wainwright, J., concurring); Brown, 109 S.W.3d at 76. Therefore, instead of an outright prohibition, the Legislature enacted further protections, including provisions requiring the seller to provide annual accounting statements containing specified information to the buyer and allowing the buyer to deduct a percentage of his monthly payment during the time the seller fails to provide the required information. See Act of May 27, 1995, 74th Leg., R.S., ch. 994, § 3, 1995 Tex. Gen. Laws 4983, 4987 (formerly Tex. Prop. Code § 5.100), amended by Act of May 18, 2001, 77th Leg., R.S., ch. 693, § 1, 2001 Tex. Gen. Laws 1319, 1326-27 (current version at Tex. Prop. Code § 5.077). These provisions were applicable only in certain areas with a below average per capita income and an above average unemployment rate. Id. at 4983; see Flores, 185 S.W.3d at 429 n.1 (explaining 2001 amendments).
In 2001, the Legislature amended the statute "substantially increasing the monetary penalties and applying the protections statewide." Flores, 185 S.W.3d at 435 (Wainwright, J., concurring). The revisions provided for a purchaser's recovery of liquidated damages in the amount of $250 a day for a seller's failure to provide the annual accounting statement and attorney's fees. See 2001 Tex. Gen. Laws 1319, 1326-27 (current version at Tex. Prop. Code § 5.077). In 2005, the Legislature further amended section 5.077 to differentiate between sellers who conduct fewer than two transactions and those who conduct two or more transactions in a 12-month period—imposing greater liquidated damage penalties against those who conduct two or more transactions. See Act of May 26, 2005, 79th Leg. R.S., ch. 978, § 5, 2005 Tex. Gen. Laws 3280, 3282. The amendments also capped the liquidated damages for a seller who conducts two or more transactions in a 12-month period at the market value of the property. See id. As amended, section 5.077 provides, in relevant part:
(a) The seller shall provide the purchaser with an annual statement in January of each year for the term of the executory contract. If the seller mails the statement to the purchaser, the statement must be postmarked not later than January 31.
. . .
(c) A seller who conducts less than two transactions in a 12-month period under this section who fails to comply with Subsection (a) is liable to the purchaser for:
(1) liquidated damages in the amount of $100 for each annual statement the seller fails to provide to the purchaser within the time required by Subsection (a); and
(2) reasonable attorney's fees.
(d) A seller who conducts two or more transactions in a 12-month period under this section who fails to comply with Subsection (a) is liable to the purchaser for:
(1) liquidated damages in the amount of $250 a day for each day after January 31 that the seller fails to provide the purchaser with the statement, but not to exceed the fair market value of the property; andId. § 5.077(a), (c), (d).
(2) reasonable attorney's fees.
Also relevant to this appeal is section 5.064, entitled Seller's Remedies on Default, which provides that a seller may enforce the remedy of rescission or of forfeiture and acceleration against a purchaser in default under an executory contract for conveyance of real property if the seller notifies the purchaser of the seller's intent to enforce a remedy under section 5.064 and the purchaser's right to cure the default within 30 days after the date of notice, and the purchaser fails to cure the default. Id. § 5.064.
Orozco's issues require us to construe sections 5.064 and 5.077. Statutory construction is a question of law that we review de novo. Melden & Hunt, Inc. v. E. Rio Hondo Water Supply Corp., 520 S.W.3d 887, 893 (Tex. 2017). Our primary concern is the express statutory language. See Galbraith Eng'g Consultants, Inc. v. Pochucha, 290 S.W.3d 863, 867 (Tex. 2009). We apply the plain meaning of the text unless a different meaning is supplied by legislative definition or is apparent from the context or the plain meaning leads to absurd results. Janvey v. Golf Channel, Inc., 487 S.W.3d 560, 572 (Tex. 2016). "We generally avoid construing individual provisions of a statute in isolation from the statute as a whole," Railroad Comm'n v. Texas Citizens for a Safe Future & Clean Water, 336 S.W.3d 619, 628 (Tex. 2011), and we must consider a provision's role in the broader statutory scheme, see Fredericksburg Care Co., L.P. v. Perez, 461 S.W.3d 513, 520 (Tex. 2015).
BACKGROUND
Orozco and Hoskins entered into a contract for deed dated July 30, 2009, whereby Orozco agreed to purchase from Hoskins real property located in Bastrop County. Under the contract, Orozco was to pay $12,000 down, and the principal note obligation of $32,611 was to be paid in monthly installments of $395.66 beginning on August 30, 2009. According to Hoskins, Orozco never made a payment under the contract. In June 2012, Orozco filed for bankruptcy, and Hoskins filed a proof of claim as a secured creditor, listing the Bastrop County property as the collateral securing the indebtedness and attaching the contract for deed. While the bankruptcy proceeding was pending, Orozco filed this suit in district court in Bastrop County, alleging that Hoskins had failed to provide any of the annual accounting statements required by section 5.077, see Tex. Prop. Code § 5.077(a), and seeking liquidated damages, see id. § 5.077(c)(1), (d)(1). Orozco alleged that Hoskins was a seller who conducted two or more transactions in a 12-month period and was therefore liable to Orozco for $250 a day for each day after the statutory deadline for providing the statements, up to the value of the property. See id. § 5.077(d)(1). Orozco sought damages in an amount to be determined by the trier of fact and attorney's fees. See id. § 5.077(c)(1) (providing for liquidated damages in amount of $100 for each annual statement seller fails to timely provide where seller conducts fewer than two transactions in 12-month period), (2) (providing for attorney's fees for recovery of liquidated damages under section(c)), (d)(1) (providing for liquidated damages in amount of $250 per day for each day after deadline seller fails to provide annual statement where seller conducts two or more transactions in 12-month period), (2) (providing for attorney's fees for recovery of liquidated damages under section (d)). The bankruptcy proceeding was dismissed in December 2012. In March 2013, Orozco filed for bankruptcy a second time, and Hoskins filed another proof of claim. The second bankruptcy proceeding was dismissed in July 14, 2013.
Within a few days of execution of the contract, the parties executed a promissory note, warranty deed, and deed of trust. Neither party ever filed these documents or the contract for deed in the deed records of Bastrop County. The parties dispute whose responsibility it was to pay the filing fees, but that dispute is not relevant to our disposition of Orozco's issues.
Orozco testified that the first bankruptcy proceeding was dismissed because his attorney "made a mistake." The record contains no evidence as to the reason for dismissal of the second proceeding. Orozco testified that no action was ever taken in bankruptcy court with regard to payments to Hoskins. The trial court entered conclusion of law No. 3 that both bankruptcy petitions had been dismissed, "leaving the adjudication of this case to this court."
In June 2016, Hoskins filed a counterclaim against Orozco in this case seeking unpaid principal in the amount of $14,973.00, unpaid interest in the amount of $18,262.44, property taxes in the amount of $2,904.61, possession of the property, and attorney's fees in the amount of $7,500. A bench trial was held in August 2016, at which Orozco and Hoskins were the only witnesses. Orozco testified that prior to the contract at issue, in 2004, Orozco had assumed the obligation under a prior contract for deed between Hoskins and another party. He stated that in 2009, he and Hoskins entered into the contract for deed at issue that replaced the 2004 contract and that he made a cash down payment of $12,000 and subsequently "made some payments, but mostly [he] did not." He further stated that he thought he had made "five, six payments" but had no receipts because he had lost all of his records in a house fire. He testified that he stopped making payments because he met with his attorney, who explained the law to him. Orozco stated, "I told [Hoskins] that if he was violating the law, I was just going to get my money back. So I didn't think I should just pay him anything and then get the money back again. Because it was $250 per day." Orozco also testified that he did not receive any annual accounting statements or amortization schedules from Hoskins and did not know how much he owed and that he had told that to Hoskins during the bankruptcy proceeding. Orozco was shown three envelopes addressed to him dated June 2006, November 2007, and March-April 2011, indicating attempted service by certified mail and marked "unclaimed." He testified that he had not seen the envelopes but agreed that they had been mailed to his address and appeared to be attempts by the U. S. Postal Service to deliver certified letters to him.
Hoskins testified that after receiving only partial payment from Orozco for the first few years after Orozco assumed the debt under the prior contract, he initiated eviction proceedings. He stated that Orozco "begged [him] to rewrite the contract" and "give him another chance," so in 2009 Hoskins "rewrote the contract to make him current." Hoskins testified that Orozco had never made a payment since the 2009 contract for deed was executed. Hoskins also testified that in March 2011, he mailed a notice of intent to repossess the property to Orozco by certified mail and subsequently sent a notice of eviction stating that "the property had been repossessed." He further testified that he did not file the notice of intent to repossess in the county property records, nor did he file any other document to indicate that the contract had been terminated. He testified that he prepares amortization schedules for "every one of [his] property owners" and offered into evidence an amortization schedule for the Orozco contract for deed.
Hoskins testified that he mailed the required annual accounting statements "[e]ach year [Orozco] owned the property, until [Hoskins] repossessed it." Specifically, he stated that he mailed statements to Orozco on January 15, 2010 (for 2009) and on January 31, 2011 (for 2010), was "not sure" if he had mailed an accounting statement in 2012 (for 2011), and did not mail statements in 2013 (for 2012), 2014 (for 2013), 2015 (for 2014), or 2016 (for 2015). Hoskins later clarified that he had not sent a statement in 2012 (for 2011), saying that "the reason [Orozco] didn't get [an annual accounting statement for] '11 would have been because [Hoskins] repossessed the property at that time." He explained his accounting system, stating that he included with each accounting 12 envelopes for monthly payments the coming year and that his records showed that he had received envelopes back from other property owners but did not receive any back from Orozco. Hoskins offered into evidence his file copies of the two annual accounting statements that he testified he mailed in January 2010 and January 2011 and stated that he mailed them by regular U. S. mail, that they were not returned, and that Orozco had never complained to him that he had not received the required notices. He also stated that he had mailed other notices to Orozco by both regular and certified mail and that the certified mailings were returned unclaimed but the regular mailings were not returned. Hoskins further testified that when he filed his proof of claim in Orozco's bankruptcy proceeding in 2012, he was asserting a claim under the contract for deed that he had terminated a year earlier.
At the close of evidence, the trial court instructed the parties to file briefs presenting their closing arguments and requests for attorney's fees. After the parties filed briefs, the trial court rendered judgment in favor of Hoskins and awarded him unpaid principal, unpaid interest, recovery of property taxes paid, and attorney's fees, as prayed for in Hoskins's counterclaim. Both parties requested, and the trial court entered, findings of fact and conclusions of law. The trial court concluded that Hoskins conducted only one sale in a 12-month period before or after the date of the parties' contract for deed and that "Hoskins' liability for liquidated damages would be limited to $100.00 for each annual statement that he failed to provide plus attorney fees." The court further concluded that Hoskins mailed annual statements in January 2010 and January 2011 and had complied with section 5.077(a), that Hoskins had complied with section 5.064 when he sent notice of repossession to Orozco, and that Orozco did not prove his claim against Hoskins and was not entitled to damages under his cause of action under the Property Code. Orozco filed a motion for new trial, which was overruled by operation of law. This appeal followed.
DISCUSSION
Annual Statements
We begin with Orozco's second issue because it is dispositive. In his second issue, Orozco argues that the trial court erred in concluding that Hoskins had no obligation to provide annual accounting statements after January 2011. He contends that Hoskins's notice of intent to terminate the contract was not sufficient under section 5.064 to actually terminate or foreclose on the contract and that Hoskins did not file any notice in the Bastrop County property records to indicate that the contract had been terminated, as required by Property Code section 5.076(c). See Tex. Prop. Code §§ 5.064 (requiring seller to notify purchaser of seller's intent to enforce remedy), .076(c) (providing that seller shall record instrument terminating contract). Orozco also argues that Hoskins's action in filing proofs of claim in Orozco's bankruptcy proceedings indicates that Hoskins believed the contract was still in effect.
Although Orozco testified that he did not receive any annual statements, on appeal he complains only that Hoskins failed to provide accounting statements for the years 2011 through 2015.
The evidence showed that Hoskins sent annual statements in January 2010 and January 2011, that Hoskins sent a Notice of Repossession on or about March 24, 2011, and that Hoskins sent a notice to vacate in 2011, after which Orozco did not vacate the premises. Hoskins testified that he mailed accounting statements to Orozco each year until he repossessed the property—specifically on January 15, 2010 (for 2009) and on January 31, 2011 (for 2010)—and he offered the statements into evidence. Hoskins also testified that in March 2011, he mailed a notice of intent to repossess the property. The record reflects that the notice complied with section 5.064 by notifying Orozco that Orozco was in default, that Hoskins intended to enforce the remedy of forfeiture, and that Orozco had 30 days to cure the default. See Tex. Prop. Code § 5.064. Hoskins also testified that he subsequently sent a notice of eviction to Orozco informing him that he was exercising his option to evict and instructing him to vacate the property. Hoskins produced copies of both notices. Although Orozco testified that he did not receive the notices, Hoskins testified that he mailed them by both regular and certified mail and that the certified mailings were returned but those sent by regular mail were not returned, and he presented the returned certified mailings. The trial court, as the sole judge of the evidence and the credibility of the witnesses, found that Orozco offered no credible evidence to dispute Hoskins's notices. See Arellano v. Arellano, No. 01-16-00854-CV, 2018 Tex. App. LEXIS 108, at *6 (Tex. App.—Houston [1st Dist.] Jan. 4, 2018, no pet h.) (mem. op.) (stating that when sitting as factfinder, trial court is in best position to judge, weigh and resolve conflicts in evidence).
In addition, while Hoskins testified that he did not file in the county property records the notice of intent to repossess or any other document to indicate that the contract had been terminated, the statutory requirement to file an instrument terminating the contract appears in the context of the preceding obligation that the contract itself be filed. See Tex. Prop. Code § 5.076(a) (providing that seller shall record executory contract within 30 days of execution), (c) (providing that seller shall record instrument that terminates contract). Here, although the parties disputed whose responsibility it was under their agreement to pay the filing fee, the record reflects that neither party filed the contract itself, raising the question of whether the requirement to record a terminating instrument was even triggered. Compare id. § 5.076(a) with id. § 5.076(c); see also id. § 5.079 (providing for title transfer within 30 days after purchaser's final payment if executory contract has not been filed). More significantly, Orozco has not shown how any noncompliance by Hoskins regarding the requirement to file a terminating instrument would serve to continue in effect a contract that was otherwise terminated. Finally, although Hoskins filed proofs of claim in Orozco's bankruptcy proceedings, Hoskins testified that he did so on a contract he had already terminated and on which he had received no payment. On this record, we conclude that the trial court did not err in finding that Hoskins terminated the contract in 2011 and had no obligation to provide annual accounting statements after January 2011. See Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 406-07 (Tex. 1998); Duffey v. Duffey, No. 14-16-00144-CV, 2017 Tex. App. LEXIS 11398, at *12 (Tex. App.—Houston [14th Dist.] Dec. 7, 2017, no pet. h.) (mem. op.) (stating that reviewing court may not pass on credibility of witnesses or substitute its judgment for that of trier of fact even if it would reach different result on evidence presented).
In addition, in 2015, the Legislature added a provision for penalties against a seller who fails to comply with section 5.076. See Act of May 30, 2015, 84th Leg., R.S., ch. 996, § 5, 2015 Tex. Gen. Laws 3529, 3529 (codified at Tex. Prop. Code § 5.076(e)). Although not applicable to this case, the addition of subsection (e) tends to confirm that an otherwise terminated contract would not continue in effect merely because the terminating instrument was not filed of record.
Having concluded that the trial court did not err in finding that Hoskins terminated the contract in 2011 and thus correctly determined that Hoskins complied with section 5.077(a) by sending statements in January 2010 and January 2011, we further conclude that the trial court did not err in determining that Orozco was not entitled to liquidated damages under section 5.077 and in failing to award liquidated damages under section 5.077(c)(1) or (d)(1). See Tex. Prop. Code §§ 5.077(c)(1) (providing for liquidated damages in amount of $100 for each annual statement seller fails to provide within time required where seller conducts less than two transactions in 12-month period),(d)(1) (providing for liquidated damages in amount of $250 a day for each day after January 31 that seller fails to provide statement where seller conducts two or more transaction in 12-month period). We overrule Orozco's second issue.
Having overrule Orozco's second issue, which is dispositive, we need not reach his first issue in which he argues that the trial court erred in concluding that Hoskins conducted only one sale in a 12-month period before or after July 30, 2009, the date of the parties' contract.
Attorney's Fees
In his third issue, Orozco argues that under either section 5.077(c) or section 5.077(d), a seller who fails to provide required annual accounting statements is obligated to pay the purchaser attorney's fees. See id. § 5.077(c), (d). Therefore, he contends, regardless of the number of sales Hoskins made in the relevant 12-month period, if this Court finds that Hoskins failed to provide annual accounting statements for "each year for the term of the executory contract," Orozco is entitled to attorney's fees. Having concluded that the trial court did not err in determining that Hoskins terminated the contract in 2011 and complied with section 5.077(a)'s requirement to provide annual statements by sending statements in January 2010 and January 2011, and in consequently declining to award liquidated damages under section 5.077, we conclude that the trial court did not err in declining to award Orozco attorney's fees under either section 5.077(c)(2) or section 5.077(d)(2). We overrule Orozco's third issue.
CONCLUSION
Having overruled Orozco's dispositive issues, we affirm the trial court's judgment.
/s/_________
Melissa Goodwin, Justice Before Chief Justice Rose, Justices Pemberton and Goodwin Affirmed Filed: February 1, 2018