Opinion
05-23-01090-CV
12-19-2024
ARISTOS DJONIS AND MAROULA PHILIPPOU, Appellants v. SANJUANA RODRIGUEZ, Appellee
On Appeal from the 95th District Court Dallas County, Texas Trial Court Cause No. DC-22-04014
Before Justices Reichek, Nowell, and Carlyle
MEMORANDUM OPINION
AMANDA L. REICHEK, JUSTICE
Aristos Djonis and Maroula Philippou appeal the trial court's summary judgment in favor of SanJuana Rodriguez on her claims under section 5.081 of the Texas Property Code. Bringing four issues, appellants contend the trial court erred in (1) concluding section 5.081 was applicable, (2) finding that Rodriguez complied with section 5.081 and appellees did not, (3) failing to find genuine issues of material fact precluded summary judgment, and (4) awarding Rodriguez liquidated damages. Concluding Rodriguez failed to establish her entitlement to summary judgment as a matter of law, we reverse the trial court's judgment and remand the cause for further proceedings.
Although Angela J. Ramirez is named as a plaintiff in the style of the suit below, Ramirez nonsuited her claims against appellants four months before judgment was rendered.
Background
The facts relevant to the disposition of this appeal, as established by the summary judgment evidence, are as follows. On January 15, 2017, the parties executed a "Rent to Own Agreement" (the "Agreement") for a residential property located in Dallas, Texas. The Agreement was handwritten by Phillipou and begins "I, SanJuana Rodriguez / Sostenes Olivera . . . agree to rent to own the house . . . from owner Aristos Djonis." Although the Agreement identifies both Rodriguez and Olivera as parties, the driver's license and social security numbers following their names belong to Rodriguez alone.
Under the terms of the Agreement, Rodriguez and Olivera were to make a non-refundable deposit of $2,000, pay $1,000 by January 21, 2017, and pay another $1,000 by January 27. For a period of three months beginning on February 15, they were required to pay a monthly fee of $500. Thereafter, starting on May 15, they were to pay a monthly "fee/rent" of $750 until January 15, 2031. At that point, the Agreement states the deed for the house would be transferred to them no later than February 15, 2031, and they would have the right to register the house in their names with the Dallas County Records Office. Djonis could cancel the Agreement and refuse to transfer the deed by providing a written, notarized notice that Rodriguez and Olivera were in default because they (1) missed a monthly payment, (2) failed to pay the yearly taxes on the property, (3) failed to pay for insurance on the home, (4) failed to maintain the house to avoid citations from the city, or (5) failed to pay utility bills, or incurred liens on the property. Late payments were to be assessed a 10% charge and any lawyer's fees. A missed payment was grounds for eviction.
The Agreement included an option for the parties to change the contract to allow Rodriguez and Olivera to purchase the house for $89,000 cash or with payments at an interest rate of 10% for a period not longer than ten to twelve years. In the margins of the agreement it states "This contract will/might change to a sale contract within 3 months or earlier for a sale contract - to pay bigger monthly amounts of payments to pay faster." The contract was signed by Djonis as landlord. Under the heading "Signed by me" are the signatures of Rodriguez and Olivera. All payments made under the Agreement were given to Philippou.
On July 9, 2018, Rodriguez signed an "Agreement of Removal." The document states in relevant part,
I SanJuana Rodriguez and Maroula Philippon [sic] & Aristos Djonis made an agreement to remove Mr. Sostenes Olivera off the original "Rent to Own" contract . . . written up January 15, 2017 due to fact Mr. Olivera was deported . . . to Mexico on August 05, 2018.
I am going to add my daughter to the existing "Rent to Own" contract. Angela J. Ramirez [driver's license number and social security number] will have the same existing rights on the original "Rent to Own" contract property [address].
Although Rodriguez appears to have signed the "Agreement of Removal" before a notary, the document does not bear a notary seal. There are no other signatures on the document.
In March 2022, Philippou began looking into obtaining a loan on the house in Rodriguez's name. The parties dispute the purpose and terms of the loan. Ultimately, Rodriguez became concerned about the transaction and hired an attorney.
After consulting with counsel, Rodriguez sent Djonis and Philippou a letter stating she was electing to convert the Agreement into legal title pursuant to section 5.081 of the Texas Property Code. To effectuate the conversion, Rodriguez tendered a promissory note in her name for $81,000, which was the amount she claimed was the total sum remaining due under the Agreement. The terms of the note required Rodriguez to make monthly payments of $750 at a 0% interest rate from April 15, 2022 through January 15, 2031. Payments overdue for more than fifteen days would be assessed a 5% late payment charge. In addition to the promissory note, the letter enclosed a proposed warranty deed and deed of trust. The letter stated that if appellants failed to contact Rodriguez within ten days to schedule execution of the deed and deed of trust, they would be liable for liquidated damages under section 5.079 of the property code.
Appellants received the letter and promissory note on March 24. Rather than directly responding to Rodriguez's demand letter, appellants filed an eviction proceeding on April 4 asserting Rodriguez was in default under the terms of the Agreement.
On April 13, 2022, Rodriguez filed this suit asserting appellants had violated section 5.081(d) by failing to timely respond to her tendered promissory note. Rodriguez sought (1) an injunction restraining appellants from directly or indirectly taking any action to evict her, (2) a declaratory judgment that the Agreement had been converted to legal title subject to the promissory note, proposed warranty deed, and deed of trust, (3) liquidated damages under section 5.079, and (4) attorney's fees.
Rodriguez filed a traditional motion for summary judgment asserting the Agreement was a contract for deed and she had met the requirements of section 5.081(c) to convert it to legal title. She further asserted appellants failed to fulfill their obligation under section 5.081(d) to respond within ten days, entitling her to liquidated damages. In support of the motion, Rodriguez submitted copies of the Agreement and the proposed promissory note.
Appellants filed three responses to the motion for summary judgment. Their first response included an affidavit signed by both appellants in which they stated that, at the time Rodriguez tendered the promissory note, she was in default in the amount of $3,492. Rodriguez replied that any alleged default was irrelevant to her ability to exercise her rights under section 5.081.
The trial court granted Rodriguez's motion for summary judgment in full and awarded her fee simple title to the property. The court further held that appellants owed $222,000 in liquidated damages, offset by the amount still owed on the contract for deed, leaving a remaining balance of $154,500 to be paid to Rodriguez. The trial court denied appellants' motion for new trial and this appeal followed.
Analysis
We review a summary judgment de novo. Travelers Ins. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010). A party moving for traditional summary judgment bears the burden of proving there is no genuine issue of material fact and they are entitled to judgment as a matter of law. Tex.R.Civ.P. 166a(c). Where, as here, the plaintiff moves for summary judgment, they must conclusively prove all elements of their cause of action as a matter of law. Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 223 (Tex. 1999). "Evidence is conclusive only if reasonable people could not differ in their conclusions." City of Keller v. Wilson, 168 S.W.3d 802, 816 (Tex. 2005). A defendant has no burden to respond to a summary judgment where the plaintiff's summary judgment proof is legally insufficient. Rhone-Poulenc, 997 S.W.2d at 222-23.
Rodriguez moved for summary judgment under section 5.081. Section 5.081(a) states "[a] purchaser, at any time and without paying penalties or charges of any kind, is entitled to convert the purchaser's interest in property under an executory contract into recorded, legal title in accordance with this section, regardless of whether the seller has recorded the executory contract." Tex. Prop. Code Ann. § 5.081. A purchaser choosing to convert their interest through execution of a promissory note must deliver to the seller a promissory note "that is equal in amount to the balance of the total amount owed by the purchaser to the seller under the contract and that contains the same interest rate, due dates, and late fees" as the executory contract. Id. § 5.081(c). Once the seller receives a promissory note that substantially complies with the requirements of subsection (c), the seller must, within ten days, either "(1) deliver to the purchaser a written explanation that legally justifies why the seller refuses to convert the purchaser's interest into recorded, legal title under Subsection (c); or (2) communicate with the purchaser to schedule a mutually agreeable day and time to execute the deed and deed of trust under Subsection (c)." Id. § 5.081(d). A seller who violates section 5.081(d) is liable to the purchaser for liquidated damages under section 5.079. Id. § 5.081(e).
Rodriguez argues appellants violated section 5.081(d) by failing to respond to the tendered promissory note within ten days. Appellants contend Rodriguez failed to establish that she complied with section 5.081(c) as a matter of law and there are genuine issues of material fact precluding summary judgment. Assuming without deciding section 5.081 applies in this case, appellants' duty to respond under section 5.081(d) could be triggered only by Rodriguez's delivery of a promissory note that substantially complied with section 5.081(c). The summary judgment evidence shows there is at least a fact issue regarding whether she did so.
Substantial compliance with a statute means compliance with its essential elements. Sorrell v. Estate of Carlton, 593 S.W.3d 167, 174 (Tex. 2019). "In general, courts that have addressed substantial-compliance issues have distinguished between mere technical defects, which can be excused, and those defects that are more substantive in nature and, if overlooked, would read a provision out of the statute or prejudice another party." Mustang Tractor & Equip. Co. v. Hartford Accident & Indem. Co., 263 S.W.3d 437, 441 (Tex. App.-Austin 2008, pet. denied). The deviations from the statutory requirements must not seriously hinder the legislature's purpose in imposing the requirement. Mekhail v. Duncan-Jackson Mortuary, Inc., 369 S.W.3d 482, 485 (Tex. App.-Houston [1st Dist.] 2012, no pet.). When construing the requirements of section 5.081, we must bear in mind that statutes providing for civil penalties are strictly construed against the party seeking the penalty. Zuniga v. Velasquez, 274 S.W.3d 770, 775 (Tex. App.-San Antonio 2008, no pet.). A party seeking liquidated damages under a statute must meet an exacting burden of proof to demonstrate entitlement to the harsh penalty provided. Garces v. Hernandez, No. 13-13-00242-CV, 2016 WL 2970686, at *4 (Tex. App.- Corpus Christi May 19, 2016, no pet.) (mem. op.).
The purpose of section 5.081(c) is to allow a purchaser of a property under an executory contract to convert the contract to legal title with a promissory note that includes the same essential terms as the executory contract. The essential terms are the amount owed, the interest rate, the due dates of the payments, and the late fees. Tex. Prop. Code Ann. § 5.081(c). The Agreement between appellants and Rodriguez specified a 10% late payment charge. In contrast, the promissory note tendered by Rodriguez reduced the late fee to only 5%. With respect to the amount owed under the contract, the summary judgment evidence raises a genuine issue of material fact. The amount of the promissory note was based solely on the sum of the payments that would become due after the note was tendered. But the affidavit submitted by appellants in response to the motion for summary judgment stated that, at the time the note was tendered, Rodriguez was in default, making the promissory note nearly $3,500 less than the full amount owed. The summary judgment evidence, therefore, showed the terms of the promissory note tendered by Rodriguez were either potentially or affirmatively different in substance from at least two of the essential terms of the Agreement. We cannot conclude these differences are mere "technical defects" that would entitle Rodriguez to fee simple title and $154,500 in civil penalties as matter of law. Accordingly, we conclude Rodriguez failed to show she was entitled to summary judgment under section 5.081(c).
Rodriguez did not object to the affidavit in the trial court. On appeal, Rodriguez argues the documents attached to the affidavit were not properly authenticated, but she raises no challenge to the affidavit itself.
We reverse the trial court's judgment and remand the cause for further proceedings. Based on our resolution of these issues, it is unnecessary for us to address appellants' remaining issues.
JUDGMENT
In accordance with this Court's opinion of this date, the judgment of the trial court is REVERSED and this cause is REMANDED to the trial court for further proceedings.
It is ORDERED that appellant ARISTOS DJONIS AND MAROULA PHILIPPOU recover their costs of this appeal from appellee SANJUANA RODRIGUEZ.