Alvarado v. Bolton

749 S.W.2d 47, 31 Tex. Sup. Ct. J. 307, 98 Oil & Gas Rep. 651, 1988 Tex. LEXIS 100, 1988 WL 29284

• Court: Texas Supreme Court
• Decided: April 6, 1988
• Docket: C-5738
• Status: Published

Opinions

OPINION ON MOTION FOR REHEARING

RAY, Justice.

Petitioner’s motion for rehearing is granted and the court's opinion and judgment of November 25, 1987 are withdrawn and the following is substituted.

This suit for reformation of deeds and for damages under the Deceptive Trade Practices Act involves the issue of whether the doctrine of merger applies in a suit under the Act based on breach of an express warranty. After a jury trial, the district court rendered judgment for Alvarado reforming the deeds, awarding actual damages for the value of the oil production; trebling actual damages and awarding attorney’s fees under the DTPA. The court of appeals reversed the judgment of the trial court and rendered a take-nothing judgment against Alvarado predicated on the holding that the doctrine of merger applied. 714 S.W.2d 119. We hold that the doctrine of merger is not applicable, reverse the judgment of the court of appeals and remand this cause to that court.

In 1973, Bolton, as general partner in a limited partnership, and others purchased fifty acres of land. In the deeds conveying the land, Bolton received title to one-half of the oil, gas and other minerals. Bolton, as trustee, then subdivided a portion of the land into twenty-six tracts and conveyed certain tracts to Alvarado and other buyers. Each earnest money contract involved in the conveyances to Alvarado and others contained the clause that Bolton agreed to deliver a general warranty deed and convey the property free and clear of all encumbrances except those named. Some of the contracts were silent regarding Bolton’s outstanding one-half mineral interest and some stated that the conveyance was subject to Bolton’s one-half mineral interest. However, the warranty deeds by which title was conveyed to the plaintiffs specifically reserved one-half of the mineral interest to Bolton, grantor, and were “made subject to all outstanding mineral interests of record in Fort Bend County” for the other one-half of the minerals.

After oil was discovered on the land, plaintiffs learned of Bolton’s reservation of mineral interests and brought suit against Bolton for reformation of the deeds and for damages under the DTPA.

The jury found that: (1) David R. Bolton, Trustee, intended by the earnest money contracts to sell the minerals he owned; (2) David R. Bolton, Trustee, breached an express warranty in his earnest money contracts by reserving minerals in the deeds; and (3) the reservation of minerals by David R. Bolton, Trustee, in the deeds to the plaintiffs was a producing cause of economic loss to the plaintiffs. These findings support the judgment for Alvarado under the DTPA.

The doctrine of merger is stated in Baker v. Baker, 207 S.W.2d 244 (Tex.Civ.App.—San Antonio 1947, writ ref'd n.r.e.):

When a deed is delivered and accepted as performance of a contract to convey, the contract is merged in the deed. Though the terms of the deed may vary from those contained in the contract, still the deed must be looked to alone to determine the rights of the parties.

Id. at 249, quoting 2 DEVLIN, LAW OF DEEDS § 850a.

We hold, however, that the doctrine of merger is not applicable in the present case. In 1980 we stated that “[t]he DTPA does not represent a codification of the common law” and a primary purpose of the Act was to provide consumers a cause of action for deceptive trade practices without the numerous defenses encountered in a common law fraud or breach of warranty suit. Smith v. Baldwin, 611 S.W.2d 611, 616 (Tex.1980). Whether described as a rule of evidence or as a substantive defense, the doctrine of merger was used here as a substantive defense. However, it is not necessary to resolve that issue as we have previously held that under the broad guidelines of the DTPA, the parol evidence rule will not prevent admissibility of oral misrepresentations which may also serve as the basis of a DTPA action. Weitzel v. Barnes, 691 S.W.2d 598, 600 (Tex.1985).

In the instant case, the jury found that statements made in the earnest money contracts created a warranty which was later breached when the deeds reserved Bolton’s mineral interest. The merger doctrine prevents the admission of any warranties made in the prior earnest money contracts which are contradicted in the deed. The parol evidence rule operates identically. Thus, we hold that the doctrine of merger may not be applied to defeat a cause of action under the DTPA for breach of an express warranty made in an earnest money contract and breached by deed.

In his remaining point of error, Alvarado complained that “the court of appeals erred in failing to address [his] fifth counterpoint and cross-point, and in failing to render judgment for attorney’s fees in accordance with appellees’ pleadings and uncon-troverted evidence.” Since the court of appeals based its disposition on the doctrine of merger, it failed to address Alvarado’s concern and Bolton’s remaining points of error (four, five, six and seven). We, therefore, reverse the judgment of the court of appeals and remand this cause to that court for consideration of those remaining points and disposition in accordance with this opinion.

Dissent by WALLACE, J., joined by PHILLIPS, C.J., and GONZALEZ and CULVER, JJ.