Untitled Texas Attorney General Opinion

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT
March 27,2006
The Honorable Harold V. Dutton, Jr. Opinion No. GA-0418
Chair, Committee on Juvenile Justice and
Family Issues Re: Retroactivity of Property Code section
Texas House of Representatives 5.077(c), which relates to liquidated damages in
Post Office Box 2910 executory contracts for the sale of real property
Austin, Texas 787682910 (RQ-0402-GA)
Dear Representative Dutton:
You ask about the retroactivity of Property Code section 5.077(c), which relates to liquidated
damages in executory contracts for the sale of real property.’
Property Code chapter 5, subchapter D governs transactions involving an executory contract
“for conveyance of real property used or to be used as the purchaser’s residence or as the residence
of a person related to the purchaser within the second degree by consanguinity.“’ TEX. PROP. CODE
ANN. 3 5.062(a) (Vernon Supp. 2005); see also id. $5 5.061L.085 (Vernon 2004 & Supp. 2005).
Relevant to your questions, section 5.077 provides that a seller in such a contract shall provide the
purchaser with an “annual statement in January of each year for the term of the executory contract.”
Id. 5 5.077(a) (Vernon Supp. 2005). The statement is to include information alerting the purchaser
to, among other things, the amount paid under the contract, the number of payments remaining under
the contract, and the amount paid to taxing authorities on the purchaser’s behalf if collected by the
seller. See id. 5 5.077(b). And
[a] seller who conducts less than two transactions in a 12-month
period under this section who fails to comply with Subsection (a) is
liable to the purchaser for:
‘See Letter fmm Honorable Harold V. Dutton, Jr., Chair, Committee on Juvenile Justice and Family Issues,
Texas House ofRepresentatives, to Honorable Greg Abbott, Attorney General ofTexas (Sept. 30,2005) (on file with
the Opinion Committee, also available at http:ll~.oag.state.hc.us) [hereinafter Request Letter].
‘These executory contracts are also known as “contracts for deed. A contract for deed allows [a] seller to
retain title to property until the purchaser has paid for the property in full.” Flares v. Millennium Interests, Ltd.,
No. 04-1003,200S WL 2397521, at *I (Tex. Sept. 30,2005) (defining executory contracts as the term used in Property
Code chapter 5).
The Honorable Harold V. Dutton, Jr.- Page 2 (GA-041 8)
(1) liquidated damages in the amount of $100 for each
annual statement the seller fails to provide to the purchaser within
the time required by Subsection (a); and
(2) reasonable attorney’s fees.
Id. 5 5.077(c) (emphasis added).
Section 5.077’s liquidated damages language as it reads now was created by House Bill 1823
during the Seventy-ninth Legislature’s regular session and became effective September 1,2005. See
Act of May 26, 2005, 79th Leg., R.S., ch. 978, § 5, 2005 Tex. Gen. Laws 3280, 3282 (“current
section 5.077”). As amended in 2001, however, section 5.077 made any seller in an executory
contract liable for liquidated damages “in the amount of $250 a day for each day after January 3 1 that
the seller fail[ed] to provide the purchaser with the statement.” Act of May 18, 2001, 77th Leg.,
R.S., ch. 693, EJ1,200l Tex. Gen. Laws 1319,1327 (“former section 5.077”). The 2001 legislation
that amended former section 5.077 contained a savings clause that read:
The change in law made by Subsection (c), Section 5.077
applies only to a violation that occurs on or after September 1,
2001. A violation that occurs before September 1,2001, is covered
by the law in effect when the violation occurred, and the former law
is continued in effect for that purpose.
ActofMay 18,2001,77thLeg.,R.S., ch. 693, $3(h),2001 Tex. Gen. Laws 1319,1328. HouseBill
1823, the 2005 bill, contains no such clause for section 5.077. See Act of May 26,2005,79th Leg.,
R.S., ch. 978, 5 5,2005 Tex. Gen. Laws 3280,3282. Thus, you ask:
(1) Whether a seller who satisfies the requirements of House Bill
1823, Section 5.077(c) is liable for liquidated damages that
have accrued under former section 5.077 between January 3 1,
2002 and August 31,2005, i.e., does House Bill 1823, Section
5.077(c) apply retroactively?
(2) Whether the liquidated damages provision contained in former
Section 5.077 applies to lawsuits tiled after September 1,2005
for violations that occurred between September 1, 2001 and
August 3 l,, 2005. Or, stated differently; does House Bill 1823,
Section 5.077(c) apply to all lawsuits filed after September 1,
2005?
Request Letter, supra note 1, at 2.
Without its own savings clause, current section 5.077(c) is subject to the general savings
clause provision set forth in Government Code section 311.031. See TEX. GOV’T CODE ANN.
The Honorable Harold V. Dutton, Jr.- Page 3 (GA-041 8)
5 311.031 (Vernon 2005); see also TEX. PROP. CODE ANN. 5 1.002 (Vernon 2004) (Code
Construction Act applies to the construction of the Property Code except as otherwise expressly
provided). Relevant here, section 311.031 provides that “except as provided by Subsection (b), the
reenactment, revision, amendment, or repeal of a statute does not affect any violation of the
statute or any penalty, forfeiture, or punishment incurred under the statute before its amendment
” TEX. GOV’T CODE ANN. 5 311.031(a)(3) (Vernon 2005). However, subsection (b) provides
that “[i]f the penalty, forfeiture, or punishment for any offense is reduced by a[n] amendment of
a statute, the penalty, forfeiture, or punishment, if not already imposed, shall be imposed according
to the statute as amended.” Id. 5 3 11.03 l(b).
The Texas Supreme Court has determined that former section 5.077’s liquidated damages
provision is a penalty because it awards damages without reference to any actual loss or injury. See
Flows, supra note 2, No. 04-1003,2005 WL 2397521 at *5. And though current section 5.077(c)
has not been construed, it too provides for liquidated damages without reference to actual damages.
See TEX. PROP. CODEANN. 5 5.077(c) (Vernon Supp. 2005) (authorizing liquidated damages in the
event seller fails to provide an annual statement without reference to purchaser’s actual damages).
As such, we must conclude that current section 5.077(c) is a statute that imposes a penalty. Thus,
in answer to your first question, a seller who failed to provide the purchaser with statements between
January 31,2002 and August 31, 2005 would look first to former section 5.077 to determine the
nature of the violation. See TEX. GOV’T CODE ANN. $ 311.03 l(a)(3) (Vernon 2005) (amendment
of statute does not affect violation of statute). But the seller would be liable only for the
amounts mandated by current section 5.077(c) because that language reduces the penalty. See id.
5 3 11.03 1(b) (penalty, if not imposed, “shall be imposed according to the statute as amended”). In
sum, current section 5.077(c) applies retroactively.
You also ask whether current section 5.077(c) applies to all lawsuits tiled after September
1, 2005, even where the violations that form the basis of the lawsuit occurred between September
1,2001, and August 3 1,2005. See Request Letter, supra note 1, at 2. For the same reasons outlined
above, current section 5.077(c) applies to all lawsuits where the violations that form the basis of the
1awsuitoccmreda’iterSeptember 1,2001. SeeT~x. GOV’TCODEANN. 5 311,031(a)(3),(b) (Vernon
2005).
The Honorable Harold V. Dutton, Jr.- Page 4 (GA-0418)
SUMMARY
The general savings clause in Government Code section
311.031 makes retroactive the portion of House Bill 1823 that
amended Property Code section 5.077(c) in 2005. Thus, the portion
of House Bill 1823 that amended Property Code section 5.077(c) in
2005 controls in any lawsuit the basis of which is a violation of
former section 5.077’s terms that occurred after September 1,200l.
BARRY R. MCBEE
First Assistant Attorney General
ELLEN L. WITT
Deputy Attorney General for Legal Counsel
NANCY S. FULLER
Chair, Opinion Committee
Daniel C. Bradford
~Assistant Attorney General, Opinion Committee