John T. Allen, Sr. v. Hines Ranches of Texas, Inc.

• Court: Court of Appeals of Texas
• Decided: December 11, 2003
• Docket: 03-03-00167-CV
• Status: Published

Opinion

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-03-00167-CV

John T. Allen, Sr., Appellant

v.

Hines Ranches of Texas, Inc., Appellee

FROM THE DISTRICT COURT OF LAMPASAS COUNTY, 27TH JUDICIAL DISTRICT NO. 14,456, HONORABLE C. W. DUNCAN, JR., JUDGE PRESIDING

MEMORANDUM OPINION

In a suit concerning the breach of a contract for deed, the district court granted

summary judgment in favor of Hines Ranches of Texas, Inc., finding James T. Allen, Sr. to be in

material breach of the contract and denying Allen’s counterclaims. Allen appeals the summary

judgment claiming that Hines Ranches waived its right to forfeiture, that notice and opportunity to

cure were required under the contract, that Hines Ranches breached the contract by not providing

notice and opportunity to cure, and that fact issues exist regarding his counterclaims. We affirm the

summary judgment because the contract contained an unambiguous non-waiver clause, the law in

effect at the time the contract was formed did not require notice and opportunity to cure, and Allen

failed to raise a genuine issue of material fact regarding any of the challenged elements of his

counterclaims. BACKGROUND

In 1998, Allen entered into a contract for deed to purchase real property from Hines

Ranches. At the time of purchase, Allen chose not to make the property his residence, allowing his

son James to reside there for approximately two years.1 When James moved, Allen’s son Tommy

began making the payments and planned to build a go-kart track on the property. Because the go-

kart track concerned many of the residents of the subdivision, it prompted a number of calls to Hines

Ranches. Initially, Hines Ranches sued to enjoin Allen from building and operating a go-kart track,

an alleged violation of a restrictive covenant prohibiting nuisances. Subsequently, Hines Ranches

amended its petition to seek a declaration that Allen was in material breach of the contract for deed.

Allen countersued alleging: (1) Deceptive Trade Practice Act (DTPA) violations; (2) common-law

fraud; (3) real-estate fraud; (4) negligent misrepresentation; and (5) breach of contract by Hines

Ranches. The district court granted summary judgment in favor of Hines Ranches, declaring that

Allen materially breached the contract and that his rights under the contract were terminated, and

dismissing Allen’s counterclaims. Allen brings this appeal.

DISCUSSION

Breach of the Contract for Deed

Allen first asserts that because material fact issues exist, the district court erred when

it granted summary judgment and found as a matter of law that Allen had breached the terms of the

contract for deed. The standard for reviewing a traditional summary judgment is firmly established:

1 James lived in a small mobile home that has since been removed from the property.

2 (1) the movant must show there is no genuine issue of material fact and it is entitled to judgment as

a matter of law; (2) in deciding whether a disputed material fact issue exists precluding summary

judgment, evidence favorable to the nonmovant is taken as true; and (3) every reasonable inference

is indulged in favor of the nonmovant, and any doubts are resolved in the nonmovant’s favor. See

Tex. R. Civ. P. 166a(c); Pustejovsky v. Rapid-Am. Corp., 35 S.W.3d 643, 645-46 (Tex. 2000); Nixon

v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985). When the judgment does not specify

the grounds upon which summary judgment was granted, as is the case here, the judgment is

affirmed on any meritorious ground raised in the motion. FM Props. Operating Co. v. City of

Austin, 22 S.W.3d 868, 872-73 (Tex. 2000) (citing Star-Telegram, Inc. v. Doe, 915 S.W.2d 471, 473

(Tex. 1995)).

Hines Ranches offered two alternative grounds for establishing that Allen was in

material breach of the contract: first, that Allen breached the contract by failing to pay late fees

stemming from multiple late payments; and second, that Allen assigned the contract to his son

Tommy without the consent of Hines Ranches, thereby violating the express terms of the contract.

Hines Ranches established, as a matter of law, that Allen breached the contract by

failing to pay late fees stemming from multiple late payments. Allen contends that Hines Ranches

waived its right to a late fee for any given month by accepting the late payment for that month

without the late fee. In response, Hines Ranches points to this non-waiver clause in the contract:

No delay by Seller [Hines Ranches] in enforcing any part of this contract shall be deemed a waiver of any of Seller’s remedies. If Seller accepts any payment after its due date, the acceptance shall not be construed as a waiver of any other due date, shall not change any other due date, and shall not waive any of Seller’s rights or remedies. (Emphasis added.)

3 Allen argues that the second sentence of the non-waiver clause only relates to future due dates.

However, Allen cannot ignore the first sentence of the clause, which unambiguously states that no

delay by Hines Ranches in enforcing any part of this contract shall be deemed a waiver of any of

Hines Ranches’ remedies. The contract allows Hines Ranches to collect a late fee when a payment

was more than ten days late. It is uncontroverted that multiple late fees were never paid. Although

Hines Ranches accepted late payments without the corresponding late fees, Allen still owed the late

fees, and the first sentence of the non-waiver clause affords Hines Ranches the opportunity to collect

the fees at a later date. Therefore, until the late fees were paid, Allen was in default under the

contract.

Allen alleges that by accepting the late payments without the late fees, Hines Ranches

waived the right to claim that Allen was in default for non-payment of those fees. In the absence of

an unambiguous non-waiver clause, Allen would be correct. See A.G.E., Inc. v. Buford, 105 S.W.3d

667, 676 (Tex. App.—Austin 2003, pet. denied). However, under this contract, as a matter of law

Hines Ranches did not waive its right to collect the unpaid late fees. “Although non-waiver clauses

may themselves be waived, they are generally considered valid and enforceable.” Id. The existence

of a waiver is ordinarily a question of fact for the jury but can become a question of law where the

facts and circumstances are admitted or clearly established. See Tenneco v. Enterprise Prods. Co.,

925 S.W.2d 640, 643 (Tex. 1996); Caldwell v. Callender Lake Prop. Owners Improvement Ass’n,

888 S.W.2d 903, 910 (Tex. App.—Texarkana 1994, writ denied). Here, Allen admits to making

multiple late payments without paying the associated late fees. In addition, the non-waiver clause

permits Hines Ranches to seek its remedies under the contract despite any delay in doing so.

4 Therefore, the non-waiver clause, in conjunction with Allen’s admissions, defeat the affirmative

defense of waiver. We overrule Allen’s first issue.2

In his second issue, Allen asserts that Hines Ranches was required to provide him

with notice and opportunity to cure before refusing acceptance of the final two-months payments and

seeking to cancel the contract. In addition, Allen countersued Hines Ranches claiming that, by not

providing him with notice and opportunity to cure, it breached the contract. If Allen had used or

planned to use the property as his residence, he would have been entitled to notice and opportunity

to cure prior to forfeiture. See Act of June 17, 1995, 74th Leg., R.S., ch. 994, § 2, sec. 5.061, 1995

Tex. Gen. Laws 4982, 4982-83 (formerly codified as Tex. Prop. Code § 5.061) (seller must provide

notice to purchaser who uses or plans to use the property as purchaser’s residence). But Allen never

used the property as his residence, nor did he ever plan to do so. Nevertheless, Allen contends that

notice was statutorily required under section 5.064 of the property code because his son planned to

use the property as his residence. See Tex. Prop. Code Ann. § 5.064 (West Supp. 2004) (outlining

remedies available to and notice required by seller when purchaser defaults on executory contract).

Allen’s argument is based on section 5.062 of the property code, which is the

applicability section for the subchapter containing section 5.064. See id. § 5.062 (West Supp. 2004).

Section 5.062 indicates that the notice required by section 5.064 applies only to transactions in which

either the purchaser used the property as his residence or a “person related to the purchaser within

the second degree by consanguinity or affinity, as determined under Chapter 573, Government

2 Our holding eliminates the necessity of reviewing the second ground urged in the motion for summary judgment, that Allen breached the contract by assigning it to his son.

5 Code,” used or planned to use the property as a residence. See id. However, section 5.062 did not

take effect until 2001. See Act of June 13, 2001, 77th Leg., R.S., ch. 693, §§ 3(a), (d) - (g), 2001

Tex. Gen. Laws 1319, 1328 (providing that section 5.062, formerly section 5.091, is effective as of

September 1, 2001). Laws are generally presumed to operate prospectively unless it is explicitly

clear that the legislature intended otherwise. See Ex Parte Abell, 613 S.W.2d 255, 258 (Tex. 1981)

(“If there is any doubt, the intention will be resolved against retrospective operation of a statute.”).

Therefore, section 5.062 does not apply to this contract because the legislature did not expressly

provide so.

When Allen and Hines Ranches entered into the contract in 1998, section 5.061

determined the notice a seller attempting to enforce a forfeiture was required to provide to a buyer.

See Act of June 17, 1995, 74th Leg., R.S., ch. 994, § 2, sec. 5.061, 1995 Tex. Gen. Laws 4982, 4982-

83. Former section 5.061 contained no requirement for notice to a property owner when persons

related to the purchaser might use the property as a residence. Compare id., with Tex. Prop. Code

Ann. § 5.062. Therefore, Hines Ranches was not required to provide Allen with notice. Under the

statute in effect when this contract was signed, Allen must have used or intended to use the property

as a residence before notice and opportunity to cure were required. Whether Allen’s son planned

to use the property as his residence is not relevant. We overrule Allen’s second issue and affirm the

dismissal of his counterclaim that Hines Ranches breached the contract by failing to give notice and

opportunity to cure for the same reasons.

We hold that the grant of summary judgment in favor of Hines Ranches was proper

on the ground that Allen failed to pay late fees. We also hold that Hines Ranches was not required

6 to provide Allen with notice and opportunity to cure before pursuing its right to forfeiture. We

affirm the summary judgment as it pertains to the finding that Allen was in material breach of the

contract and to the dismissal of Allen’s counterclaim that Hines Ranches breached the contract.

Allen’s Counterclaims

Allen’s final issue on appeal is that the district court erred when it dismissed his other

four counterclaims. Hines Ranches asserted in its motion for summary judgment that there is no

evidence to support Allen’s counterclaims that Hines Ranches committed violations of the DTPA,

common-law fraud, real-estate fraud, and negligent misrepresentation. A party seeking a no-

evidence summary judgment must assert that no evidence exists as to one or more of the essential

elements of the nonmovant’s claims on which it would have the burden of proof at trial. Holmstrom

v. Lee, 26 S.W.3d 526, 530 (Tex. App.—Austin 2000, no pet.). Once the movant specifies the

elements on which there is no evidence, the burden shifts to the nonmovant to raise a fact issue on

the challenged elements. Tex. R. Civ. P. 166a(i). To raise a genuine issue of material fact, the

nonmovant must set forth more than a scintilla of probative evidence as to every essential element

on which the nonmovant would have the burden of proof at trial. See id.; Merrell Dow Pharms., Inc.

v. Havner, 953 S.W.2d 706, 711 (Tex. 1997). When the evidence supporting a finding rises to a

level that would enable reasonable, fair-minded persons to differ in their conclusions, more than a

scintilla of evidence exists. Havner, 953 S.W.2d at 711. A no-evidence summary judgment is

essentially a directed verdict granted before trial, to which we apply a legal-sufficiency standard of

review. Jackson v. Fiesta Mart, Inc., 979 S.W.2d 68, 70 (Tex. App.—Austin 1998, no pet.). The

district court granted summary judgment dismissing all of Allen’s counterclaims.

7 Initially, Hines Ranches challenged the reliance element of both the DTPA and

statutory-fraud claims. To have an actionable claim under the DTPA, one must allege that the

deceptive act occurred in connection with the purchase of goods or services. See Amstadt v. U.S.

Brass Corp., 919 S.W.2d 644, 649-50 (Tex. 1996). Likewise, a claim of statutory fraud involving

real estate requires that a false representation be made for the purpose of inducing a person to enter

into a contract and be relied on by that person in entering the contract. Tex. Bus. & Com. Code Ann.

§ 27.01 (West 2002). In this case, all of the alleged misrepresentations occurred after the initial

transaction was completed.3 Therefore, Allen could not have relied upon them in connection with

the purchase of the land or his entry into the contract. Because Allen’s response regarding the

challenged element of reliance pertained only to events that occurred after the transaction was

completed, it could not create a genuine issue of material fact as to either claim. Thus, the district

court did not err by granting summary judgment as to Allen’s DTPA and statutory-fraud

counterclaims.

Allen also claimed that Hines Ranches’ actions constituted common-law fraud and

negligent misrepresentation. The elements of common-law fraud are: (1) a material representation

was made; (2) it was false when made; (3) the speaker knew it was false or made it recklessly

without any knowledge of its truth and as a positive assertion; (4) the speaker intended that it be

acted upon by the party; (5) the party acted in reliance; and (6) the party thereby suffered injury.

3 The alleged misrepresentations involved here are statements Hines Ranches’ agents made relating to whether a commercial enterprise could legitimately operate on the land. The statements were made in response to questions from Allen and Tommy regarding the building of a go-kart track on the property. It is undisputed that these questions did not arise until nearly two years after the contract was executed.

8 Eagle Props. Ltd. v. Scharbauer, 807 S.W.2d 714, 722-23 (Tex. 1990). The elements of the tort of

negligent misrepresentation are: (1) the representation is made by a defendant in the course of his

business, or in a transaction in which he has a pecuniary interest; (2) the defendant supplies “false

information” for the guidance of others in their business; (3) the defendant did not exercise

reasonable care or competence in obtaining or communicating the information; and (4) the plaintiff

suffers pecuniary loss by justifiably relying on the representation. Federal Land Bank Ass’n of Tyler

v. Sloan, 825 S.W.2d 439, 442 (Tex. 1991). Hines Ranches challenged all the elements required of

both claims, but we need address only one—the final element, requiring a showing of injury for

common-law fraud and a showing of pecuniary loss for negligent misrepresentation. See Holmstrom,

26 S.W.3d at 530. Allen did not respond to Hines Ranches’ contention that there is no evidence that

the alleged misrepresentation did or will cause any injury or pecuniary loss to Allen. All of the

representations in question concerned whether the property could be used for a commercial purpose

and whether Tommy could build the go-kart track. Hines Ranches has stipulated that no restriction

exists regarding the commercial use of the property. Hines Ranches’ action does not seek a

declaration that Allen is in breach of the use restrictions on the property because Allen is using it for

commercial purposes; rather, Hines Ranches alleges that Allen’s use of the property is a restricted

nuisance. There is no evidence that Allen suffered any injury or pecuniary loss as a result of his

reliance on any representations made by Hines Ranches. Thus, summary judgment on the common-

law fraud and negligent misrepresentation claims was proper.

We therefore overrule Allen’s final issue.

9 CONCLUSION

We conclude that Hines Ranches established that no fact issues are present with

regard to Allen’s failure to pay multiple late fees. In addition, we conclude that notice and

opportunity to cure were not required and thus Hines Ranches did not breach the contract by

pursuing its remedies without providing Allen with notice and opportunity to cure. Therefore, the

grant of summary judgment declaring Allen to be in material breach, while simultaneously declaring

that Hines Ranches did not breach the contract, was proper. Similarly, the district court did not err

by granting Hines Ranches’ motion for summary judgment dismissing Allen’s counterclaims. Hines

Ranches challenged an essential element of each of the counterclaims and Allen failed to raise a

genuine issue of material fact with regard to any of the challenged elements. Summary judgment

was properly granted and the judgment of the district court is affirmed.

Bea Ann Smith, Justice

Before Chief Justice Law, Justices B. A. Smith and Patterson

Affirmed

Filed: December 11, 2003