Perry v. Stewart Title Co., 83-2552

• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)
• Writing for the Court: Before CLARK, Chief Judge, JOHNSON and WILLIAMS; JERRE S. WILLIAMS
• Citation: 756 F.2d 1197
• Parties: Robert B. PERRY and Linda T. Perry, Plaintiffs-Appellants, Cross-Appellees, v. STEWART TITLE CO., et al., Defendants-Appellees, Federal National Mortgage Association, Defendant-Appellee, Cross-Appellant. Hammond Mortgage Corp., Defendant-Appellee, Cross-Appellant.
• Docket Number: No. 83-2552,83-2552
• Decision Date: 08 April 1985

Page 1197

756 F.2d 1197 Robert B. PERRY and Linda T. Perry, Plaintiffs-Appellants,
Cross-Appellees,
v.
STEWART TITLE CO., et al., Defendants-Appellees,
Federal National Mortgage Association, Defendant-Appellee,
Cross-Appellant.
Hammond Mortgage Corp., Defendant-Appellee, Cross-Appellant. No. 83-2552. United States Court of Appeals,
Fifth Circuit. April 8, 1985.
Rehearing Denied May 28, 1985.

Page 1200

Schleider & Francis, Paul S. Francis, Houston, Tex., for plaintiffs-appellants, cross-appellees.

DeLange, Hudspeth, Pitman & Katz, Charles E. Fitch, Ben A. Baring, Houston, Tex., for Stewart Title Co., Stewart Guaranty & D. Walters.

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David C. DuBose, Houston, Tex., for Hammond Mortg. Corp.

Locke, Purnell, Boren, Laney & Neely, Nathan L. Hecht, Harriet Miers, Robert M. Candee, Dallas, Tex., Morris, McCanne, Tinsley, Snowden, Ellis & Wilson, Paul R. Tinsley, Houston, Tex., for Federal Nat. Mortg. Assn.

Crain, Caton, James & Womble, Thomas B. Greene, III, Houston, Tex., for Greiner, Greiner Const. Co.

G. Alan Kramer, Dale C. Scott, Houston, Tex., for Friendswood Development Co.

Appeals from the United States District Court for the Southern District of Texas.

Before CLARK, Chief Judge, JOHNSON and WILLIAMS, Circuit Judges.

JERRE S. WILLIAMS, Circuit Judge:

The creative efforts of plaintiff Robert Perry, a lawyer, and the intransigence of ten defendants turned this relatively simple breach of contract/tort case involving the sale of a residence into a enormously expensive brouhaha for all of the parties. Robert and Linda Perry purchased a $70,000 home and learned that part of their driveway and garage encroached upon an underground utility easement. They sought to rescind their earnest money contract and to that end instituted suit and asserted seventy-six claims against ten defendants. The defendants eventually secured a release of liability for the encroachment at a cost of $100, but the Perrys continued their suit. The parties have collectively spent approximately $500,000 in legal fees prosecuting and defending this suit.

In this appeal, the Perrys challenge a variety of the district court's rulings at the trial. At the close of the evidence after the ten-day jury trial, the district court granted several motions for directed verdicts. The remaining issues were submitted to the jury, and the jury returned a substantial verdict for the Perrys. The district court, however, granted three of the defendants' motions for judgments non obstante veredicto, and those rulings defeated the jury's award to the Perrys. The Perrys challenge the district court's rulings on the defendants' motions for directed verdicts and for judgments n.o.v. and additionally argue that the district court erroneously denied three of their motions for judgments n.o.v. We find all of the district court's rulings correct except for rulings on two closely related and narrow issues.

I.

In 1976, Friendswood Development Company (Friendswood), a real estate developer, deeded to Houston Lighting & Power Co. (HL & P) a five-foot wide "across, under, and over" utility easement for street lighting in a subdivision that Friendswood was developing. Friendswood recorded the HL & P easement on a comprehensive subdivision plat which was filed with the Harris County, Texas, recorder of deeds. In early 1977, Friendswood sold a parcel of land which the easement crossed to Greiner Construction Co. (Greiner), and in connection with that transaction provided Greiner with a copy of the subdivision plat. The general warranty deed Friendswood supplied Greiner clearly stated that Greiner accepted the property subject to all recorded easements.

Later in the same year, Greiner constructed a single family residence on the property. Prior to Greiner's pouring the concrete foundation for the home, Friendswood inspected the wooden foundation forms and approved their dimensions. The garage foundation and part of the driveway actually encroached approximately one foot onto the easement. After Greiner poured the foundation and driveway, HL & P installed underground an electrical conduit, with a diameter of two inches, at a depth of thirty inches and approximately two feet parallel to the foundation and driveway.

In May 1978, the Perrys inspected the home constructed by Greiner and decided to purchase it. The Perrys and Greiner entered into an earnest money contract to purchase the $70,000 home, and they paid

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earnest money in the amount of $1,000 to Stewart Title Co. (Stewart), the escrow agent. Hammond Mortgage Co. (Hammond) was to provide the financing.

The closing of the sales transaction was held on July 5, 1978, at Stewart's office. The Perrys, their real estate agent, and Debra Walters Rod (Rod), Stewart's escrow officer, were present at the closing. Rod supervised the closing of both the residence sale transaction between Greiner and the Perrys and the loan from Hammond to the Perrys. At the completion of the closing, Greiner provided the Perrys with a general warranty deed for the property.

The Perrys had no contractual agreement with Greiner, Hammond, Stewart, or any other party to be furnished with a copy of any land survey prior to the closing. For its own protection, however, Hammond had informed Stewart that it would require Stewart to obtain and furnish to it a copy of a survey before Hammond would provide financing for the transaction. A copy of the survey was not available at the closing, although all of the parties went forward with the closing. At trial, Robert Perry testified that he asked Rod at the closing whether a survey had been conducted and, if so, whether it revealed any problems. According to Perry, Rod replied that a survey had been conducted, that it revealed no problems, and that a copy of the survey would be available shortly. Rod did not dispute this testimony at trial.

On July 6, 1978, the day after the closing, the survey was delivered to Stewart, and it revealed that the Perrys' garage and driveway encroached approximately one foot onto HL & P's easement. Stewart, through its title insurance issuing agent, Stewart Title Guaranty Co. (STG), issued an owner's title policy dated July 6, 1978, to the Perrys which excepted from coverage the one-foot encroachment. The Perrys received this policy on July 12, 1978, and they immediately objected to the easement exception. In response to the objection, five days later Stewart issued a new policy which did not contain any exclusions from coverage as a result of the encroachment. Pursuant to the coverage afforded under the new title policy, the Perrys then demanded Stewart or STG to take steps necessary to cure the encroachment.

In mid-July 1978, Stewart wrote to HL & P and sought to arrange a waiver of the easement. On August 16, 1978, Stewart delivered to the Perrys for their approval a "Consent to Encroachment" that Stewart had received from HL & P regarding the encroachment. HL & P routinely provided consents to encroachments to remedy residential encroachments, such as the Perrys', on its easements. The consent stated that HL & P would not enforce its easement rights against the Perrys unless absolutely necessary. The day after the Perrys received the consent to encroachment they informed Stewart that the consent was an unacceptable method of curing the encroachment. Thereafter, STG sought to obtain from HL & P a full release of any claim held by HL & P for the one-foot encroachment. After discussing the matter with HL & P representatives, the claims counsel of STG by a letter dated August 24, 1978, informed the Perrys that HL & P appeared amenable to executing a full release but that it would take about six weeks to obtain the release.

In the meantime, on August 15, 1978, the Federal National Mortgage Association ( FNMA ) had purchased the Perrys loan from Hammond, although Hammond continued to service the loan for FNMA. On or about August 25, after the Perrys received STG's letter of August 24, the Perrys gave notice to all of the parties, except FNMA, that they intended to rescind the earnest money contract if no release was obtained from HL & P by October 9, 1978. No release was obtained by October 9, and the Perrys notified STG that they rescinded the transaction which had closed on July 5, 1978. On October 21, 1978, the Perrys voluntarily vacated the residence. The Perrys made no additional mortgage payments after that date, demanded that Greiner, Hammond, and Stewart refund their purchase money and payments to that

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date, and canceled their homeowner's insurance policy on the property.

On December 1, 1978, the Perrys filed suit in state court against Friendswood, Greiner, Hammond, Stewart, STG, Rod, and three other defendants. In that suit, the Perrys asserted nearly seventy claims against these nine defendants for the following: breach of contract, breach of warranty, statutory and common law fraud, negligence, deceptive trade practices, usury, loan disclosure violations, violations of state and federal truth in lending and debt collection acts, and violations of related federal and state acts. On December 12, 1978, two weeks after the Perrys filed their suit, HL & P executed a complete release of all rights to that portion of the easement upon which the Perrys' garage and driveway encroached. The cost of securing this release was $100, and Stewart paid the fee.

In mid-1980, FNMA threatened to foreclose on the subject property, and on July 28, 1980, the Perrys brought FNMA into the state suit as a party-defendant. The Perrys asserted that FNMA was liable under an agency theory for the allegedly wrongful acts of Hammond. FNMA removed the case to the United States District Court for the Southern District of Texas.

The case was tried by a jury. At trial, the Perrys insisted that the encroachment of their garage and driveway onto HL & P's easement enabled HL & P to compel the Perrys to destroy their garage and remove their driveway....