Boatright v. Texas American Title Co.
| Decision Date | 18 April 1990 |
| Docket Number | No. 08-89-00246-CV,08-89-00246-CV |
| Citation | 790 S.W.2d 722 |
| Parties | Philip and Linda BOATRIGHT, Appellants, v. TEXAS AMERICAN TITLE COMPANY, Harold F. Harris, and Southern Title Guaranty Company, Appellees. |
| Court | Texas Court of Appeals |
Douglas M. McIntyre, Houston, for appellants.
Eugene H. Pitman, DeLange, Hudspeth and Pitman and J. Preston Wrotenberry, Hirsch, Glover, Robinson & Sheiness, Houston, for appellees.
Before OSBORN, C.J., and FULLER and WOODARD, JJ.
After the jury awarded Appellants' damages, the trial court set aside the award and instead entered judgment against the Appellants for approximately $45,000.00. We reverse.
For simplicity sake, we shorten the name of the parties and entities:
(1) Philip and Linda Boatright--(Boatrights);
(2) Texas American Title Company--(Texas American);
(3) Southern Title Guaranty Company--(Southern);
(4) Akro-Tex, Inc.--(Akro-Tex);
(5) Meadowbrook, Ltd.--(Meadowbrook);
(6) Attorney Harold F. Harris--(Attorney Harris).
The Boatrights negotiated for the purchase of 2.013 acres of land from Meadowbrook, Ltd. In addition to cash, the Boatrights executed a note payable to Meadowbrook for $63,200.00. A deed of trust secured the payment of that note. Meadowbrook, Ltd. in turn executed a general warranty deed to the Boatrights retaining a vendor's lien. This transaction was handled through Texas American, as escrow agent.
The Boatrights entered into almost immediately what has been referred to as a "FLIP TRANSACTION", meaning that they found an immediate buyer for the property. An earnest money contract was entered into by the Boatrights providing for the sale of the acreage to Akro-Tex, Inc. Texas American was again the designated escrow agent and handled the closing of this sale. As consideration for the purchase, Akro-Tex paid approximately $33,000.00 cash and executed two promissory notes: (1) one for $63,200.00 and (2) one for $36,025.00. The agreement provided that the notes would be secured by deeds of trust. At time of closing, the Boatrights executed a general warranty deed with a vendor's lien to Akro-Tex. However, the warranty deed failed to mention the prior lien of Meadowbrook. This was only the beginning of the problems. A deed of trust was executed and filed as to the $63,200.00 note indebtedness from Akro-Tex to the Boatrights. The deed of trust that was to be prepared and filed to cover the $36,025.00 note indebtedness was never filed of record, unknown to the Boatrights.
Texas American was the agent of Southern Title Guaranty Company which issued the owner's policy of title insurance thereby guaranteeing to Akro-Tex a good and indefeasible title. This title insurance policy was paid for by the Boatrights.
Akro-Tex made only three payments on the $36,025.00 note resulting in the Boatrights hiring an attorney, Harold F. Harris, to pursue collection. Attorney Harris, by letter dated February 5 or 6 1985, gave notice to Akro-Tex of its default in the $36,025.00 note. The letter further stated that the note was secured by a recorded deed of trust which:
(1) Was untrue because there was not a recorded deed of trust on that particular note given by Akro-Tex to the Boatrights;
(2) In addition Attorney Harris had never seen, was never furnished, nor did he attempt to check to see if such deed of trust was in existence.
After receipt of the demand letter, Akro-Tex attempted to tender the delinquent payments that were due on the $36,025.00 note. In the meantime, Attorney Harris executed a "Substitute Trustee's Deed." This instrument asserted that the $36,025.00 note by Akro-Tex to the Boatrights was secured by a deed of trust referring to the Harris County recording number for the deed of trust.
This was a blatantly untrue statement since the evidence at trial indicated that Attorney Harris had never seen the deed of trust and certainly had no knowledge of its recording date. In truth and in fact, the Harris County file number referred to by Attorney Harris on the substitute trustee's deed as being the deed of trust file number was actually the file number for the general warranty deed. The effect of this substitute trustee's deed was to attempt to convey the property sold to Akro-Tex back to the Boatrights by authority of a power of sale contained in a nonexistent or at least a non-recorded deed of trust.
Attorney Harris then wrote Akro-Tex informing it that since the note had been in default, the balance was accelerated and notice of sale of the property had been posted at the Harris County Courthouse. The letter then stated that pursuant to the notice of sale, the property was sold on March 5, 1985 at public auction. Akro-Tex was told that therefore it had been divested of its interest in the property.
Attorney Harris then wrote his clients (the Boatrights) a letter dated April 3, 1985, enclosing the original substitute trustee's deed telling them the effect of which was to divest Akro-Tex of title and reconvey the property to them.
There is no escape from these conclusions as shown by evidence and exhibits introduced at trial:
(1) That the Boatrights transferred the property to Akro-Tex with documents and instruments that contained no mention that the property already was encumbered with the Meadowbrook lien; and (2) that the foreclosure thereafter on the Akro-Tex property by the Boatrights by virtue of the power of sale provided in a nonexistent or unrecorded deed of trust was improper; (3) that Texas American was the escrow agent on the Meadowbrook and Akro-Tex transactions. Further, in regard to such transactions, Texas American was acting in a fiduciary capacity and charged with the duty to properly see that the necessary title documents were executed and recorded; (4) that Southern was the underwriter of the title insurance policies issued through its retail agent, Texas American; (5) that the Boatrights paid Texas American the fee charged for the issuance of the owner's title insurance policy to Akro-Tex. Such policy as issued contained no mention of the prior lien of Meadowbrook; (6) that Harold Harris was hired by the Boatrights to pursue whatever legal course was available to them in collecting the indebtedness due them from Akro-Tex. Harris later represented to the Boatrights that the divestiture of the property from Akro-Tex was completed and ownership was vested in them; (7) that thereafter, the Boatrights, believing they owned the property without any problems found a buyer and proceeded to use Texas American as the escrow agent. They then found out for the first time that Texas American in a title commitment report noted that the foreclosure on Akro-Tex's interest by Attorney Harold Harris had been "INVALID." This resulted in the lost sale of the property; (8) that as a result of the lost sale, the Boatrights were unable to meet the indebtedness they owed to Meadowbrook; (9) that Meadowbrook foreclosed on the property due to nonpayment by the Boatrights of the promissory note executed by them in favor of Meadowbrook. Foreclosure was by virtue of the power of sale granted in the deed of trust executed by the Boatrights to secure the promissory note given to Meadowbrook.
Akro-Tex filed suit against Harold Harris as trustee, the Boatrights and Southern detailing the invalid foreclosure conducted by the Boatrights through their attorney, Harold Harris. The pleadings set out the conveyance of the property by the Boatrights to Akro-Tex by a general warranty deed without any mention of the existence of the prior lien given to Meadowbrook. Akro-Tex sought actual and exemplary damages alleging breach of warranty of title, violations of the Texas Deceptive Trade Practices Act, fraud and misrepresentation.
Southern settled with Akro-Tex, taking an assignment of Akro-Tex's cause of action against the Boatrights alleging that the Boatrights breached their warranty of title by executing a general warranty deed when there was in existence the prior lien of Meadowbrook. Since Southern settled with Akro-Tex and took an assignment of its cause of action, it claimed it was entitled to be compensated from the Boatrights for their breach of warranty of title.
The Boatrights pleadings (by way of answer and cross-action) sought damages resulting from the negligence of Attorney Harold Harris, Texas American, Attorney Joel M. Scott and Southern. Allegations were that Joel M. Scott actually prepared the legal papers for Texas American; that Texas American was the agent of Southern and failed not only to properly record all the instruments but failed to note on the title insurance policy issued to Akro-Tex the valid first lien of Meadowbrook that existed on the property. Besides asserting actions of negligence, resulting in the lost sale after the invalid foreclosure, the Boatrights pled violations by Southern of the Tex.Bus. & Com.Code Ann. sec. 17.41 et seq. (The Consumer Protection Act), violations of Article 21.21, sec. 4 of the Texas Insurance Code (Vernon 1981) as well as violations of the Texas Deceptive Trade Practices Act.
Breaches of fiduciary duty were asserted against Attorney Harold Harris and Texas American. Indemnity was sought against Attorney Harold Harris, Texas American and Attorney Scott in the event of any damages being awarded to Southern. In addition, the Boatrights sought attorney's fees, prejudgment interest and the trebling of any actual damages recovered.
Trial to a jury commenced and after all parties had concluded their evidence, the trial court granted an instructed verdict for Joel M. Scott. The motions for instructed verdict filed by Texas American and Harold Harris were not granted.
The trial court submitted to the jury eight questions and the effect of their answers were a finding that:
(1) Texas American Title Company did breach their...
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