Scott v. Sebree

• Decision Date: 11 February 1999
• Docket Number: No. 03-98-00001-CV,03-98-00001-CV
• Citation: 986 S.W.2d 364
• Parties: Hugh L. SCOTT/Jim R. Sebree, Appellants, v. Jim R. SEBREE/Hugh L. Scott, Appellees.
• Court: Texas Court of Appeals

Page 364

986 S.W.2d 364

Hugh L. SCOTT/Jim R. Sebree, Appellants, v. Jim R. SEBREE/Hugh L. Scott, Appellees.

No. 03-98-00001-CV

Court of Appeals of Texas Austin.

Feb. 11, 1999.

Rehearing Overruled March 11, 1999.

Richard L. Welch, Meadows & Welch, Austin, for Appellants.

John C. Augustine, Saegert, Angenend & Augustine, P.C., Austin, for Appellees.

Before Justices JONES, KIDD, and POWERS. ^*

J. WOODFIN JONES, Justice.

This case involves an option contract to purchase real property. Hugh L. Scott, the optionee, sued Jim R. Sebree and Chester Hood, ¹ the optionors, on several theories seeking damages or, alternatively, specific performance. Following a jury trial, the trial court rendered judgment awarding Scott specific performance, attorney's fees, and costs of court. Both parties appeal. We will affirm.

FACTUAL AND PROCEDURAL BACKGROUND

Sebree and Hood each owned an undivided one-half interest in a piece of real property located in Williamson County, Texas. On February 1, 1993, Sebree and Hood entered into a "Lease-Purchase Agreement" (the "Lease") with Scott whereby Scott would lease the property with an option to purchase at any time for $150,000, less the monthly rental payments he had made up to the date of purchase. The parties later amended the Lease to allow Scott to sublease the property to a third party and to increase the amount of monthly rent paid by Scott. The Lease term was three years; the option to purchase therefore expired on February 1, 1996.

Approximately one month before the expiration of the Lease, Scott and Hood discussed Scott's desire to exercise his purchase option; however, the parties disagree on the content of this discussion. Scott testified that he requested Sebree and Hood to prepare a title policy and general warranty deed as required by the Lease terms. Hood, on the other hand, testified that Scott indicated he did not want a title policy because he had previously reviewed the title in connection with his sublease and was satisfied. The parties do agree that Scott did not speak to Sebree directly about Scott's intention to exercise the option.

Sometime in January 1996, Scott contacted a title company to order his own title commitment. Through this process, Scott learned of various liens and encumbrances on the property. Scott complained to Hood that the liens were clouds on the title and must be released before closing. In the meantime, Sebree had contacted his own title company to inquire about a title commitment, although he never actually ordered one. Closing was set for February 1, 1996, but was apparently canceled. The parties disagree as to who canceled the closing: Scott testified that Hood canceled because Hood and Sebree could not produce clear title as required by the Lease terms; Hood testified that Scott canceled. In any event, title to the property was not passed to Scott on February 1, 1996, and the option expired. In May 1996, Hood conveyed his one-half interest in the property to Scott and was dismissed from this lawsuit prior to trial.

At trial, Scott argued that his failure to timely exercise his option was due to Sebree's conduct. Scott relied on the following language found in the Agreement: "Lessor's [sic] affirm that the property is currently free and clear of any and all liens, indebtedness, lawsuits, or other encumbrances ... and that they are obligated to maintain this status-quo throughout the term of the lease." Because the property had unreleased liens throughout the lease period, Scott claimed he was precluded by Sebree's conduct from exercising his option and that Sebree had committed fraud. Sebree's counter-argument was two-fold: first, that he had no knowledge of the liens when he signed the Lease and did not learn of them until January 1996; second, that even though releases of the liens had not yet been filed, the debts secured by the liens had already been paid in full and thus would not hinder closing. Sebree filed a counterclaim against Scott for breach of contract.

The case was submitted to a jury on Scott's theories of (1) breach of contract; (2) statutory fraud in a real estate transaction, Tex. Bus. & Com.Code Ann. § 27.01 (West 1987) ("statutory fraud" or "section 27.01"); and (3) violations of the Deceptive Trade Practices-Consumer Protection Act, Tex. Bus. & Com.Code Ann. §§ 17.41-.63 (West 1987 & Supp.1999) ("DTPA"). Rejecting Sebree's claim that Scott had breached the contract, the jury found that Scott's failure to exercise his option was excused by Sebree's conduct. Further, Scott obtained jury responses supporting his claims for breach of contract, statutory fraud, and DTPA violations, including findings of additional damages under the DTPA claim and exemplary damages under the statutory-fraud claim. Because the parties stipulated as to the amount of actual damages, no jury question was submitted on that issue.

In his "Motion to Sign Judgment," Scott requested that the trial court award him specific performance in lieu of monetary damages, but also requested other damages recoverable under section 27.01: attorney's fees, costs of court, exemplary damages, expert witness costs, and deposition copy costs. ² In response, Sebree argued that specific performance is not available under section 27.01. The trial court apparently agreed, limiting damages to those available for breach of contract--specific performance, attorney's fees, and costs of court. The court declined to award the additional types of damages available under section 27.01--exemplary damages, expert witness fees, and deposition copy costs. Both Scott and Sebree perfected appeals.

In his appeal, Scott argues that the trial court erred in rendering judgment for damages under a breach-of-contract theory rather than allowing him to elect specific performance in lieu of monetary damages as his remedy under his statutory-fraud cause of action. Scott argues he was thus erroneously deprived of the exemplary damages, expert witness fees, and deposition copy costs to which a party recovering under section 27.01 is entitled.

In his capacity as appellant, Sebree presents three issues regarding the breach-of-contract theory on which the judgment favoring Scott was ultimately based: (1) whether there is any evidence to support the submission of the jury question on Sebree's "conduct" excusing Scott's failure to exercise his option; (2) whether Scott is entitled to attorney's fees if he was not excused from exercising his option; and (3) whether the trial court erred in refusing to submit Sebree's counterclaim against Scott for breach of contract. In his capacity as appellee, Sebree also raises three cross-points concerning the sufficiency of the evidence to support the jury's fraud and DTPA findings that ultimately were not the foundation of the judgment: (1) whether there is legally sufficient evidence to support the jury's finding that Sebree committed statutory fraud; (2) whether there is sufficient evidence to show Sebree's conduct was the proximate cause of actual damages to Scott; and (3) whether there was legally or factually sufficient evidence to support the jury's finding that Sebree acted with "actual awareness" to support an award of exemplary damages. ³

DISCUSSION

SCOTT'S ISSUE PRESENTED

The main issue for this Court's consideration is whether specific performance is available as a remedy for statutory fraud. Section 27.01 of the Texas Business and Commerce Code provides a statutory cause of action for fraud in real estate transactions. See Tex. Bus. & Com.Code Ann. § 27.01 (West 1987). The statute provides that a person who makes a false representation of a past or existing material fact in a real estate transaction is liable to the person defrauded for "actual damages" as well as "reasonable and necessary attorney's fees, expert witness fees, costs for copies of depositions, and costs of court." Id. § 27.01(b), (e). If the false representation is made with actual awareness of its falsity, exemplary damages may also be recovered. Id. § 27.01(c).

Sebree does not contend that Scott is barred from electing specific performance as a remedy in this case. Rather, he complains that Scott is attempting to "mix and match" remedies. He asserts that Scott had to make an election: either elect statutory fraud and recover actual (monetary) damages, exemplary damages, attorney's fees, expert witness fees, deposition copy costs, and court costs, or, on the other hand, elect breach of contract and recover specific performance, attorney's fees, and court costs. Sebree argues that Scott may not elect specific performance, which Sebree asserts is only a remedy for breach of contract, and couple it with the special types of damages available under section 27.01.

Scott concedes that section 27.01 does not expressly provide for the remedy of specific performance in lieu of monetary damages. Nonetheless, Scott argues that an award of specific performance is consistent with a finding of statutory fraud. Under the facts of this case, we agree that specific performance was available to Scott in lieu of monetary damages as a remedy for his statutory-fraud cause of action.

Equitable Remedies Under Section 27.01 in Lieu of Actual Damages

Section 27.01(b) provides that a person who commits actionable statutory fraud is liable to the person defrauded for "actual damages." Tex. Bus. & Com.Code Ann. § 27.01(b) (West 1987). In the context of section 27.01, this phrase has been interpreted to mean "such damages as result directly, naturally and proximately from fraud." El Paso Dev. Co. v. Ravel, 339 S.W.2d 360, 364 (Tex.Civ.App.--El Paso 1960, writ ref'd n.r.e.). The Texas Supreme Court has specifically stated that "actual damages" as used in the DTPA means those recoverable at common law. See Farrell v. Hunt, 714 S.W.2d 298, 300 (Tex.1986). Because we believe the court's treatment of "actual damages" under section 27.01 would mirror the construction of that phrase under the...