Deborah H. Underwood Graves v. Nancy D. Logan ( 2010 )

Opinion issued February 27, 2009

Opinion issued January 28, 2010

In The

Court of Appeals

For The

First District of Texas

NO. 01-08-00359-CV

DEBORAH H. UNDERWOOD GRAVES, Appellant

V.

NANCY D. LOGAN, Appellee

On Appeal from the 212th District Court

Galveston County, Texas

Trial Court Cause No. 06CV1225

MEMORANDUM OPINION

           This is a suit for declaratory relief and contract damages associated with an outstanding note secured by real property.  After Deborah Graves failed to provide Nancy Logan with a pay-off statement of the balance of principal and interest Logan owed Graves on a promissory note so that Logan could satisfy the note in time for her to close on a sale of the property to a third party, Logan sued Graves, seeking a determination of the amount of principal and interest owed on the note as well as attorney’s fees and actual damages, based on a breach of contract theory.  The trial court granted summary judgment to Logan, awarded Logan damages for Graves’s failure to provide a pay-off statement, released the underlying lien on the property, and awarded attorney’s fees.  On appeal, Graves challenges the propriety of the trial court’s grant of summary judgment on Logan’s breach of contract claim.  Finding that Logan failed to prove the existence of a contract as a matter of law, we reverse the trial court’s summary judgment in favor of Logan on her breach of contract claim and remand for further proceedings.  We affirm the remainder of the trial court’s judgment.

Background

In April 2000, Graves and Logan signed a promissory note conveying Graves’s property to Logan for $35,000.  In 2006, Logan contracted with a third party to sell the property.  Shortly before the June 2006 closing date, the title company retained for the sales transaction asked Graves to provide a payoff statement containing the total amount of unpaid interest and principal Logan owed on the loan.  Graves did not immediately provide a figure. She informed the title company that she had concerns about the matter because she did not have proof that Logan had made all the payments. 

By September 1, 2006, Logan still had not received a response from Graves, so she sent Graves a letter emphatically restating her request for a payoff figure. Even after that written request, Graves did not provide the requested information until late October 2006, and the figure she provided overstated the actual balance due by more than $6,000.  In the meantime, the earnest money contract between Logan and the third party expired, and the sale did not occur. 

Logan sued Graves, asking for a declaration specifying the total amount of principal and accrued interest due on the promissory note.  Logan also sought damages under a breach of contract theory, contending that, under the lien, Graves, as the note holder, had an implied duty to cooperate with Logan in “determining the amount of unpaid principal and accrued interest on a given installment date.”  Logan claimed that Graves’s breach of that implied term caused Logan incur damages from a planned sale of the property she lost as a result of her inability to convey clear title before the expiration of the earnest money contract. 

The trial court granted Logan’s motion.  In addition to the requested declaratory relief and attorney’s fees, which are not at issue in this appeal, the trial court awarded actual damages of $17,463.24, then offset that amount against the remaining lien and released the lien, leaving a net award of $3,181.10.

Discussion

Standard of review

Graves challenges the propriety of the trial court’s summary judgment in favor of Logan on her breach of contract claim.  A plaintiff moving for summary judgment must conclusively prove all essential elements of its claim.  See Tex. R. Civ. P. 166a(a), (c); MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex. 1986); Roberts v. Clark, 188 S.W.3d 204, 209 (Tex. App.—Tyler 2002, pet. denied). We review a trial court’s summary judgment de novo.  Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005); Provident Life & Accid. Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003).  When reviewing a summary judgment, we take as true all evidence favorable to the nonmovant, and indulge every reasonable inference and resolve any doubts in the nonmovant’s favor.  Dorsett, 164 S.W.3d at 661; Knott, 128 S.W.3d at 215; Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex. 1997). Under Texas Rule of Civil Procedure 166a(c), the party moving for summary judgment bears the burden of showing that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law.  Tex. R. Civ. P. 166a(c); Knott, 128 S.W.3d at 215–16. 

Breach of contract

          The essential elements in a suit for breach of contract are: (1) the existence of a valid contract; (2) the plaintiff performed or tendered performance; (3) the defendant breached the contract; and (4) the plaintiff was damaged as a result of the breach.  Bank of Tex. v. VR Elec., Inc., 276 S.W.3d 671, 677 (Tex. App.—Houston [1st Dist.] 2008, pet. denied); Prime Prods., Inc. v. S.S.I. Plastics, Inc., 97 S.W.3d 631, 636 (Tex. App.—Houston [1st Dist.] 2002, pet. denied).  “A breach of contract occurs when a party fails to perform an act that it has expressly or impliedly promised to perform.”  Case Corp. v. Hi-Class Bus. Sys. of Am., Inc., 184 S.W.3d 760, 769–70 (Tex. App.—Dallas 2005, pet. denied). 

Neither party contests the validity of the promissory note and deed of trust, which do not contain an express provision that requires Graves to provide the payoff figure.  At issue in this case is whether Graves had an obligation, implied by Texas law, to provide Logan with a payoff figure within a “reasonable” amount of time after Logan’s request, and if so, the existence and amount of damages incurred by Logan as a result of the breach of that obligation. 

Existence of duty

The trial court’s summary judgment ruling rests solely on the sworn statement of Logan’s attorney that

the recognized and established, though unwritten, procedure in the State of Texas to consummate a sale of real property against which there is a deed of trust lien is for the title insurance company which will be issuing the an [sic] owner’s policy of title insurance to the purchaser of the property to (i) request from the lender or lien holder a statement of the outstanding principal balance and unpaid accrued interest owning on the promissory note as of the closing date . . ., [and] (ii) obtain from such lender or lien holder the “Pay-off” . . . .  The foregoing procedure is so well established in the State of Texas that its inclusion in the documents between the lender and the borrower (i.e. the promissory note and the deed of trust) is not necessary. . . .

“A contract implied in law, or a quasi-contract, is distinguishable from a true contract because a quasi-contract is a legal fiction, an obligation imposed by law regardless of any actual agreement between the parties.” Fraud-Tech, Inc. v. Choicepoint, Inc., 102 S.W.3d 366, 386 (Tex. App.—Fort Worth 2003, pet. ref’d); see Fortune Prod. Co. v. Conoco, Inc., 52 S.W.3d 671, 684 (Tex. 2000). 

Graves contends that the trial court erred in holding that she owed Logan an implied duty to provide a payoff amount because the promissory note did not require her to do so.  According to Graves, her sole obligation under the deed of trust is to release the lien after Logan’s performance of all conditions precedent—in other words, after Logan paid the note in full according to its terms. 

Logan is correct that “[a] duty to cooperate is implied in every contract in which cooperation is necessary for performance of the contract.  If applicable, this implied duty requires that a party to a contract may not hinder, prevent, or interfere with another party’s ability to perform its duties under the contract.”  Case Corp., 184 S.W.3d at 770. Graves did not, however, interfere with Logan’s ability to perform Logan’s duties under the deed of trust and promissory note.  At most, Graves arguably interfered with Logan’s pursuit of benefits incidental to the full execution of her obligations under the promissory note.  See id. at 774 (distinguishing performance of agreement from benefits derived from agreement in determining whether party had duty to cooperate).  Logan does not identify any authority that supports the imposition of an implied obligation to provide a payoff amount.

According to the Texas Property Code, every conveyance of real property contains certain implied covenants “unless the conveyance expressly provides otherwise.” Tex. Prop. Code Ann. § 5.023 (Vernon 2004).  These include implied covenants

(1)     that prior to the execution of the conveyance the grantor has not conveyed the estate or any interest in the estate to a person other than the grantee; and

(2)     that at the time of the execution of the conveyance the estate is free from encumbrances.

Tex. Prop. Code Ann. 5.023(a).  Another Texas statute specifically obligates a seller to provide a payoff figure on request, but that obligation applies only if the transaction involves “an an executory contract for conveyance of real property,” which the Property Code defines as “an option to purchase real property that includes or is combined or executed concurrently with a residential lease agreement, together with the lease.”  Tex. Prop. Code Ann. § 5.062(a)(2) (Vernon Supp. 2009); see Tex. Prop. Code Ann. § 5.083 (Vernon Supp. 2009).  But Logan has not adduced summary judgment evidence to prove that the conveyance here falls within that statutory definition (like a lease agreement), nor did she plead her case or move for summary judgment on this statutory basis.  Logan has not brought to our attention, and we have not found, any precedential authority to support the existence of an implied covenant to provide a payoff amount in a transaction involving a promissory note and deed of trust.[1]  Accordingly, we hold that the trial court erred in granting summary judgment in favor of Logan based on the existence of such a duty. 

Conclusion

We reverse the trial court’s summary judgment on Logan’s breach of contract claim and remand for further proceedings.  We leave undisturbed the trial court’s grant of declaratory relief establishing the payoff amount of the loan as of the date of the judgment and award of attorney’s fees, which were not challenged on appeal.

                                                          Jane Bland

                                                          Justice

Panel consists of Justices Bland, Sharp, and Taft.[2]

Justice Sharp, concurring and dissenting, with opinion to follow.

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[1]  The parties do not contend or brief that any other Texas statue obligates a contracting party to provide a pay-off amount, and we are aware of none.  Similarly, Graves does not assert, and thus we do not address, whether any federal law or regulation imposes such an obligation.

[2]  Justice Tim Taft, who retired from the First Court of Appeals on June 1, 2009, continues to sit by assignment for the disposition of this case, which was submitted on January 27, 2009.