Claflin v. Hillock Homes, Inc.

• Decision Date: 12 January 1983
• Docket Number: No. 13760,13760
• Citation: 645 S.W.2d 629
• Parties: Janis A. CLAFLIN, Appellant, v. HILLOCK HOMES, INC., Appellee.
• Court: Texas Court of Appeals

Page 629

645 S.W.2d 629

Janis A. CLAFLIN, Appellant, v. HILLOCK HOMES, INC., Appellee.

No. 13760.

Court of Appeals of Texas Austin.

Jan. 12, 1983.

Rehearing Denied Feb. 9, 1983.

John F. Morehead, Daugherty, Kuperman, Golden, Carlisle & Morehead, Austin, for appellant.

John H. Akin, Pearce, Smith & Akin, Austin, for appellee.

Before PHILLIPS, C.J., and EARL W. SMITH and BRADY, JJ.

PHILLIPS, Chief Justice.

This is an appeal from the trial court's judgment, based upon the jury's verdict, which granted appellee, as builder and seller of a residence, specific performance of a real estate contract. The judgment also awarded appellee attorney's fees and recovery for money spent in paying interest on its interim building loan.

Appellant, by numerous points of error, challenges the trial court's (1) granting of specific performance, (2) refusal to rule that appellee's continued efforts to market the property after appellant's default constituted a waiver of the contractual remedy of specific performance, and (3) granting the appellee consequential damages by way of an accounting.

We overrule all the points of error and affirm the judgment of the trial court. ¹

Appellant, approximately forty years of age, is a highly educated person who holds several advanced degrees and who earns more than $7,000 per month from her professional practice as a psycho-therapist. She is married to an attorney, who has a civil practice in Austin and who advised her and actively participated in drafting the real estate contract which is the focal point of this appeal. Appellee is a Texas corporation which custom builds homes in the Austin area.

On April 11, 1981, the parties executed a contract for the conveyance of a home in which appellant promised to pay appellee $189,500 and to pay a four-percent sales commission. ² The contract was contingent upon appellant selling her townhouse in Houston, owned as her separate property, and obtaining a conventional loan for part of the purchase price--$114,500--at 13.5% per annum interest. By the terms of the contract, in the event appellee received an offer to purchase the residence from a third party, appellant, as buyer, was given three days to waive the precondition of selling her home in Houston. If she chose not to waive the contingency, the terms of the contract would lapse and appellee could sell the home to the third party offeror.

Nine days later, April 20, 1981, Hyzak, a third party, offered appellee $192,000 with a five-percent sales commission for the residence. After being contacted by her real-estate agent and told of the third-party offer to purchase the residence, appellant contacted her real-estate broker in Houston and was told that her townhouse would probably sell, but not for three to six months. She then decided to arrange for a "swing loan" of $75,000. She expected to use this money as the down payment to appellee for the residence. When she applied for this loan she was informed that the interest rate for such a loan would approach 21% per annum.

On April 23, 1981, appellant elected to remove the contingency, that she sell her Houston townhouse, from the terms of the contract. She did this to insure that the residence was not sold to the third-party offeror, Hyzak. The contingency was removed and she initialled the deletion in the contract.

On April 29, 1981, appellant, accompanied by her attorney husband, went to Franklin's Savings to apply for a permanent loan with which to purchase the residence. She was told that the interest rate for such a loan had increased to 15 1/2% or 16% per annum. The contingency--that appellant obtain 13.5% per annum financing--remained in the contract, despite the deletion of the prior condition, the sale of her Houston townhouse.

On this same day, appellant had her secretary inform appellee that she "could not afford the monthly payments at 16% interest, and that [she] did not choose, therefore, to go forward with the purchase of the Hillock home." After this all the parties to this lawsuit agreed that the contract was probably unenforceable because of the virtual impossibility of appellant obtaining 13.5% financing on the purchase. Appellee's president, Gary Hillock, testified at trial that he was very disappointed that the real-estate agent handling the sale had failed to sell the home either to appellant or to the third-party offeror, Hyzak, who in fact had been told to go elsewhere. The agent had also failed to collect the $4,000 earnest money deposit which appellant had been required to provide when she removed the contingency from the contract of selling her townhouse in Houston.

A few days later, appellant, at her request, met with Hillock and outlined the terms under which she would purchase the residence. Appellant and her attorney husband drafted a new real estate contract pursuant to these terms and Hillock signed the contract, virtually as drafted by appellant.

The new contract, dated May 6, 1981, reflected a lower price as the result of the waiver of the sale commission. The sales price of $179,000 was conditioned only upon the buyer's obtaining a conventional loan of $104,000 at a rate of 16% per annum. The previous condition, the sale of the Houston townhouse which had been deleted in the first contract after appellee received the third party offer from Hyzak, was intentionally omitted by appellant in the second contract.

The contract contained the following clause:

DEFAULT: If Buyer fails to comply herewith, Seller may either enforce specific performance or terminate this contract and receive the Earnest Money as liquidated damages, one half of which (but not exceeding the herein recited Broker's fee) shall be paid by Seller to Broker in full payment of Broker's services....

The second contract required a closing date of June 19, 1981.

Appellant successfully applied for a 16% per annum loan to purchase the residence.

Although when Hillock contacted appellant in late May, 1981, she stated, "Gary [appellee's president], don't get negative thoughts, I want that house," she and her attorney husband had already contacted a certified trial specialist with special expertise in specific performance litigation. This attorney, having studied the real-estate contracts and the factual background of the parties' dealings, informed appellant that she could not be forced into buying the residence, although he cautioned her she might have to pay some small damages to appellee.

On June 14, 1981, five days before the contractual closing date, appellant met with Hillock and informed him that she would not purchase the residence because her Houston townhouse had not been sold. Appellee, at that time as well as all other times, was ready, willing, and able to perform under the terms of the contract drafted by appellant.

On June 25, 1981, appellee's attorney wrote a demand letter to appellant in care of her attorney husband demanding appellant to perform under the terms of the contract and to communicate her intentions within five days. Appellant, acting under the advice of the above mentioned attorney, ignored the demand letter and Hillock's other attempts at communication. Appellant only once contacted appellee through her attorney during the time between her breach of the contract and the commencement of the lawsuit. In this communication, her counsel admitted to appellee that appellant had no defense under the terms of the contract. He later testified that his strategy was one of delay, in which he hoped that time would become their ally and alleviate the situation. After this one communication, appellant and her attorney refused to talk with appellee. Her attorney testified that their later refusal to communicate was intended to give appellee sufficient time in which Gary Hillock would fail to "mitigate his damages and waive any of his contractual remedies."

Appellee, Hillock Homes, Inc., allowed the residence to remain under listing and advertised as being for sale on the open market after appellant refused to purchase the residence. The broker showing the residence testified that he was reminded almost daily by Hillock that the home was still under contract with appellant and that no contract could be signed to sell the home without prior approval by appellee's counsel.

At the time of the actual filing of the lawsuit, appellee had been unable to sell the residence and had incurred additional expenses in continuing to finance the interim construction loan with which it had originally built the home. Appellee had planned on paying this loan off with the proceeds of the sale to appellant. Appellee at all times was ready, willing, and able to convey the home under the terms of the contract.

I.

Appellant's primary contention is that she should not be forced to purchase the residence and comply with the terms of the contract she had drafted because to do so would be "inequitable." Appellant testified that she did not purchase the residence because (1) the interest on the $75,000 "swing loan," with which she planned to make her downpayment, increased from the expected 14% to 21% per annum, (2) all of her liquid assets, with which she had planned to make her interest payments until her Houston townhouse sold, had been spent in paying her federal taxes, and (3) she had been unable to sell her Houston townhouse.

Since appellant in drafting the contract did not include any of the above mentioned reasons as conditions precedent to the execution of the contract and in fact one condition, the sale of the Houston townhouse, was intentionally omitted, appellant in essence seeks to void the contract and deny appellee its contractual remedy of specific performance, not because of the terms of the contract, but because of "equity" or "hardship" to her.

The Supreme Court in Bennett v. Copeland, 149 Tex. 474, 235 S.W.2d 605 (1951) (at 609) stated:

Mere hardship is not sufficient ground for denial of the right to specific...