NETCO, INC. v. Montemayor

352 S.W.3d 733, 2011 WL 1233382
CourtCourt of Appeals of Texas
DecidedMarch 31, 2011
Docket01-09-00705-CV
StatusPublished
Cited by19 cases

This text of 352 S.W.3d 733 (NETCO, INC. v. Montemayor) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
NETCO, INC. v. Montemayor, 352 S.W.3d 733, 2011 WL 1233382 (Tex. Ct. App. 2011).

Opinions

OPINION

JANE BLAND, Justice.

In this escrow account dispute, NETCO Inc. (NETCO) appeals from a judgment against it and in favor of Diana Montema-yor and Ludivina Flores. Montemayor and Flores sued NETCO for breach of fiduciary duty, arising from NETCO’s failure to pay money it held in escrow to a valid lien holder upon NETCO’s closing of a real estate transaction. NETCO asserted a limitations defense, which the trial court submitted to a jury. Following the jury’s finding against the merit of that defense, the parties submitted the breach of fiduciary duty claim to the bench. The trial court found against NETCO and awarded damages. On appeal, NETCO urges that it should have judgment notwithstanding the jury’s verdict because the plaintiffs counsel lacked reasonable diligence in effecting service of process. In addition, it challenges the trial court’s bench trial finding of liability and its award of mental anguish damages.

We hold that the evidence supports the jury’s finding that the plaintiffs exercised reasonable diligence in obtaining service of process, and thus the trial court did not err in denying NETCO’s request for a jnov on its limitations defense. We further hold that sufficient evidence supports the trial court’s liability findings, but that the award of mental anguish damages is not supported as a matter of law, under the standard for mental anguish damages set forth in Parkway v. Woodruff.1 We therefore reverse that award. We affirm the judgment in all other respects.

BACKGROUND

In June 2002, Montemayor entered into a contract for deed with Matthew Logan for the purchase of real property located at 8712 Kimwood in Houston, Texas. After a year of making payments, she decided that she and her cousin, Flores, would purchase the property through a mortgage and deed of trust. Sterling Bank had a lien on the Kimwood property to secure a loan that it had made to Logan.

NETCO conducted the real estate closing for the transaction on December 10, 2003, acting as both title company and escrow agent for the transaction. As part of the closing, NETCO prepared a title commitment and a HUD-1 settlement statement. Montemayor and Flores purchased a title policy on behalf of their lender to insure that, upon closing, clear [737]*737title to the property would transfer. In the commitment, NETCO acknowledged the Sterling Bank lien. But in the settlement statement it did not list Sterling Bank as a lienholder entitled to funds at closing. The “Reduction in Amount Due to Seller — Payoff of first mortgage loan” line item, typically used to indicate a payoff to the seller’s lender, was left blank. Thus, the proceeds that should have been directed to Sterling Bank, as a lien holder, were instead paid to Logan, the seller. Montemayor, Flores, and NETCO signed the HUD-1 settlement statement.

Montemayor and Flores also executed a document identified as NETCO’s Escrow Trust Disbursement Instructions. This document stated that Montemayor and Flores authorized and directed NETCO to make disbursements for the purchase of the property.

NETCO’s escrow agent issued a check for $88,703.35 to Logan. It did not pay Sterling Bank any funds to resolve the bank’s existing lien, to which Logan’s title was subordinated, nor did it secure a release of Sterling Bank’s lien on the property. At closing, Montemayor and Flores paid NETCO $574 for title insurance services and $250 for escrow services.

In 2005, Montemayor and Flores attempted to sell the Kimwood property to Martha Morales. They testified that it was at that time that they discovered that Sterling Bank had a lien on the property. Montemayor and Flores thus lacked marketable title to the property, and could not complete the sale. Montemayor and Flores subsequently abandoned the property, and it was foreclosed. Montemayor and Flores purchased another home prior to the Kimwood foreclosure. At the time the Kimwood property was foreclosed upon, the Sterling Bank lien was still outstanding.

On April 18, 2007, Montemayor and Flores sued NETCO. They also asserted a claim against Logan, which he settled for $35,000. After the trial court denied NETCO’s motion for summary judgment on limitations, it bifurcated the case, and tried the limitations defense to a jury. The jury returned findings that favored Montemayor and Flores. The trial court then held a bench trial on the remaining issues in the case. It awarded Montema-yor and Flores $41,135.20 in economic damages and $50,000 for mental anguish. After applying an offset of $35,000 to credit the settlement from Logan, the trial court rendered judgment for $56,135.20.

STATUTE OF LIMITATIONS

NETCO contends that the trial court erred in denying its motion for jnov after the jury found that Montemayor’s and Flores’s breach of fiduciary duty claims were not barred by the statute of limitations. Both parties agree that the applicable statute of limitation for a breach of fiduciary duty claim is four years. Tex. Civ. Prac. & Rem.Code Ann. § 16.004 (West 2002). The jury found that (1) Montema-yor and Flores should have discovered that the proceeds of the closing were paid to Matt Logan, not Sterling Bank, by May 30, 2005; and (2) that Montemayor and Flores had exercised due diligence in serving NETCO with this lawsuit. The jury’s second finding is necessary if we determine that the service date was outside the limitations period, and the jury’s accrual date is incorrect as a matter of law.

Montemayor and Flores maintain that the jury’s finding that the limitations period did not begin to run until they attempted to sell the property and “discovered” the Sterling Bank lien on May 30, 2005, is legally correct. NETCO responds that the discovery rule is not applicable here, and that the limitations period began to [738]*738run on December 10, 2003 — the date of the real estate closing. NETCO further asserts that because it was not served with process within four years of that date, the breach of fiduciary duty claims against it are time barred as a matter of law. We agree with NETCO’s legal contention about the accrual date, but we uphold the jury’s second finding about diligence in service. We agree with the trial court that NETCO failed to establish its limitations defense as a matter of law because some evidence supports the jury’s conclusion that the plaintiffs exercised reasonable diligence in securing service.

A. Standard of Review

Rulings on motions for jnov are reviewed under the same legal-sufficiency test as are appellate no-evidence challenges if made on an evidentiary basis. See Tanner v. Nationwide Mut. Fire Ins. Co., 289 S.W.3d 828, 830 (Tex.2009) (citing City of Keller v. Wilson, 168 S.W.3d 802, 823 (Tex.2005)). When such a ruling is based on a question of law, we review that aspect of the ruling de novo. In re Humphreys, 880 S.W.2d 402, 404 (Tex.1994) (“[Questions of law are always subject to de novo review.”); John Masek Corp. v. Davis, 848 S.W.2d 170, 173 (Tex.App.Houston [1st Dist.] 1992, writ denied) (providing that jnov is proper when legal principle precludes recovery); see also Morrell v. Finke, M.D., 184 S.W.3d 257

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NETCO, INC. v. Montemayor
352 S.W.3d 733 (Court of Appeals of Texas, 2011)

Cite This Page — Counsel Stack

Bluebook (online)
352 S.W.3d 733, 2011 WL 1233382, Counsel Stack Legal Research, https://law.counselstack.com/opinion/netco-inc-v-montemayor-texapp-2011.