Opinion
14-23-00874-CV
12-17-2024
K & B PROPERTIES, L.P., KEN ARMSTRONG, AND BRIAN BATTLE, Appellants v. JAUSHSTEILYEE MARTINEZ, AS INDEPENDENT EXECUTOR OF THE ESTATE OF ABEL CASTRO, DECEASED, Appellee
On Appeal from the Probate Court No. 3 Harris County, Texas Trial Court Cause No. 511,018-401
Panel consists of Justices Wise, Jewell, and Poissant.
MEMORANDUM OPINION
Kevin Jewell Justice
After a bench trial, the trial court found that a purchaser fully performed under a contract for deed and ordered the seller to transfer the deed to the purchaser. In three related issues, the seller argues that the evidence is legally insufficient to support the trial court's finding that the purchaser fully performed and, instead, the evidence establishes as a matter of law that the purchaser breached the terms of the contract for deed. After careful consideration of the contract at issue and the evidence presented at trial, we overrule the seller's three issues and affirm the trial court's judgment.
Background
In 2003, Abel Castro signed a contract for deed with Beltway Trucking, Inc. Guillermo Chavana, then-president of Beltway Trucking, signed the contract on the company's behalf. The contract for deed provided that: Castro was purchasing a duplex on two lots; Castro would "take up the monthly note of $563.48 payable to Laredo Bank;" Castro would pay $2,097.25 in arrears; Castro would pay the taxes on the property; and the final maturity date of the loan is July 6, 2015. At the time, Laredo National Bank held a vendor's lien on the property. The contract for deed was recorded.
In 2007, Castro and Beltway Trucking entered a settlement agreement, which provided that Castro would continue to pay monthly payments "until lien of $21,549.59 is satisfied;" Castro would pay $6,835 "for back due taxes within 10 years;" and would pay the 2006 taxes. The parties agreed that title would be surrendered "when contract is complied."
Beltway Trucking changed owners in 2008, and the new owner, Leobardo Revilla, paid Laredo National Bank a lump sum-"between nine and eleven [thousand]" dollars, which we approximate as $10,000-to satisfy the remainder of the bank's lien on the property. When Castro attempted to make his monthly payment to Laredo National Bank around that time, the bank refused his payment because the balance had already been paid. In February 2009, the bank issued a release of lien, acknowledging full payment of the note.
Castro stopped making monthly payments but continued living on and paying taxes on the property. Revilla did not contact Castro to discuss changing or terminating the contract, nor did Revilla assert that Castro was in default or take any steps to foreclose on the property. Castro's daughter, Hilda, testified that she or her father paid all taxes due on the property until Castro claimed an age-related exemption in 2015, after which no taxes were owed. Hilda also testified that Castro paid the past-due taxes referenced in the settlement agreement "well before ten years."
In December 2017, Castro sent Chavana a demand for the deed to the property but received no response. In 2018, Beltway Trucking sued Castro to quiet title and for trespass to try title. Shortly after filing suit, Beltway Trucking sold the property to K&B Properties. Beltway Trucking issued a quitclaim deed for the property to K&B Properties and substituted K&B Properties as plaintiff in the lawsuit. Throughout the bench trial, Castro maintained that he was entitled to title under the contract for deed because he paid the taxes on the property and continued making payments until the bank refused.
Following the bench trial, Castro requested leave to amend his answer to add a new affirmative defense, adverse possession. The trial court granted leave to amend and rendered judgment that K&B Properties had no title to or interest in the property, the issue of adverse possession had been tried by consent, and Castro established his claim of adverse possession and was entitled to title to the property.
On appeal, the First Court of Appeals reversed the trial court's judgment as to its determination that adverse possession was tried by consent, that Castro established adverse possession, and that K&B Properties had no title to the property. K&B Properties, LP v. Castro, No. 01-19-00686-CV, 2021 WL 4533259, at *6 (Tex. App.-Houston [1st Dist.] Oct. 5, 2021, no pet.) (mem. op.). The court rendered judgment for K&B Properties as to legal title to the property but for Castro as to the right of possession of the property. Id.
Castro died in 2021, and his grandson, Jaushsteilyee Martinez, was appointed independent executor of his estate.
In August 2022, K&B Properties sent Castro a notice of non-compliance, default, and intent to foreclose. The notice asserted that Castro had "not made the required payments on the Premises under the Contract for Deed since approximately July of 2015." If Castro did not pay within thirty days a delinquency of $64,342.58, as well as $1,500 in attorney's fees, K&B Properties intended to foreclose on the property. K&B Properties' accountant testified that he calculated the original delinquency by adding the monthly payments due from 2003 until the contract's maturity date, but he later discovered the settlement agreement, which changed his calculation. In January 2023, K&B Properties sent a second notice of non-compliance, default, and intent to foreclose, seeking a delinquency of $26,656.63, as well as $116,097.01 in attorney's fees. K&B Properties' accountant testified that he believed Castro had only made three payments after the settlement agreement, and the delinquency reflected the "balance that was due."
In late 2022, Martinez filed in probate court the instant case on behalf of the estate against K&B Properties and its two owners, Kenneth Armstrong and Brian Battle (collectively, "K&B Properties"). Martinez sought legal title to the property through specific performance of the contract for deed, injunctive relief (based on alleged trespasses on the property by Armstrong and Battle), damages, and attorney's fees. K&B Properties counterclaimed for judicial foreclosure and attorney's fees.
Martinez also alleged violations of the Fair Debt Collection Act and the Deceptive Trade Practices Act, neither of which are at issue in this appeal.
The trial court conducted a bench trial, during which it granted a directed verdict for Armstrong and Battle on Martinez's claims for conspiracy and trespass. In signed findings of fact and conclusions of law, the court found that Castro fully performed under the contract for deed and concluded that equitable title vested in Castro's estate, that Martinez is entitled to recover legal title to the property, and that K&B Properties take nothing on its claims.
K&B Properties appeals.
Standard of Review
Our sufficiency review of court findings after a bench trial does not differ substantively from that applicable to jury findings. See MBM Fin. Corp. v. Woodlands Operating Co., 292 S.W.3d 660, 663 n.3 (Tex. 2009); Arshad v. Am. Express Bank, FSB, 580 S.W.3d 798, 803 (Tex. App.-Houston [14th Dist.] 2019, no pet.). In reviewing the legal sufficiency of the evidence, we consider the proof in the light most favorable to the finding, crediting evidence in its favor if a reasonable fact finder could and disregarding contrary evidence unless a reasonable fact finder could not. See City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). The proof is legally insufficient if: there is no proof of a vital fact; rules of law or evidence bar the court from giving any weight to the only proof of a vital fact; the proof supporting a vital fact is no more than a scintilla of evidence; or the proof conclusively shows the opposite of a vital fact to be true. See Gharda USA, Inc. v. Control Sols., Inc., 464 S.W.3d 338, 347 (Tex. 2015).
K&B Properties includes in its brief the standard for reviewing the evidence for factual sufficiency. However, the substance of K&B Properties' brief argues only no-evidence or matter-of-law points. Accordingly, we constrain our review to legal sufficiency of the evidence. See, e.g., Public, Inc. v. County of Galveston, 264 S.W.3d 338, 341 (Tex. App.-Houston [14th Dist.] 2008, no pet.) (appellant waived factual sufficiency issue where it failed to argue evidence was factually insufficient in the "Argument" section of its brief, although brief provided the standard of review for a factual sufficiency review); see also McAlester Fuel Co. v. Carpenter, No. 01-07-00653-CV, 2009 WL 417301, at *6 (Tex. App.-Houston [1st Dist.] Feb. 19, 2009, no pet.) (mem. op.) ("We do not address appellant's factual sufficiency challenge because appellant's challenges are no evidence points only.").
This court is not a factfinder. Mar. Overseas Corp. v. Ellis, 971 S.W.2d 402, 407 (Tex. 1998). Instead, the trier of fact, in this case the trial court, is the sole judge of the credibility of the witnesses and the weight to afford their testimony. GTE Mobilnet of S. Tex. Ltd. P'ship v. Pascouet, 61 S.W.3d 599, 615-16 (Tex. App.-Houston [14th Dist.] 2001, pet. denied). Therefore, we may not pass upon the witnesses' credibility or substitute our judgment for that of the trial court, even if the evidence would also support a different result. Id.
Analysis
In K&B Properties' first two issues, it challenges whether there is legally sufficient evidence to support the trial court's finding that Castro fully performed under the contract for deed. K&B Properties argues that the First Court's assertion that "[Beltway Trucking's] new owner, Leobardo Revilla, paid Laredo National Bank a lump sum of about $10,000 to satisfy the remainder of the bank's lien on the property" establishes as a matter of law that Castro did not pay $10,000 to the bank to satisfy the vendor's lien and, pursuant to the doctrine of res judicata, Martinez cannot relitigate that fact. Further, K&B Properties contends that there is no evidence to support a finding that Castro reimbursed Beltway Trucking or K&B Properties the $10,000. Because Castro did not pay (or reimburse) the final $10,000 payment that satisfied the bank's loan, K&B Properties argues that there is no evidence to support the trial court's finding of full performance.
In K&B Properties' third issue, it argues that, because Castro breached the terms of the contract for deed, it should have been permitted to judicially foreclose on the property.
A. Specific Performance
Martinez sued for specific performance of the contract for deed. A contract for deed is an agreement by a seller to deliver a property deed to the purchaser once certain conditions have been met. Graves v. Diehl, 958 S.W.2d 468, 470 (Tex. App.-Houston [14th Dist.] 1997, no pet.). These contracts typically provide that the purchaser is entitled to immediate possession of the property, but title remains with the seller until the purchase price is paid in full and any other conditions are satisfied. See id. at 471. Under a contract for deed, the purchase price is usually paid in installments over a course of years. Id. On signing a contract for deed, the purchaser acquires an equitable right to make payments on the property; the seller retains legal title to the property subject to the purchaser's equitable right. See Gaona v. Gonzales, 997 S.W.2d 784, 786-87 (Tex. App.- Austin 1999, no pet.).
K&B Properties argues that the only basis on which the trial court could find in Castro's favor is either that "Castro paid the $10,000 final amount owed to Laredo National Bank, or that Castro (or Executor Martinez) reimbursed Beltway or K&B Properties." We disagree.
Pursuant to the original 2003 contract, Castro agreed to assume the monthly note payable to the bank, to pay approximately $2,000 in arrears, and to pay the taxes on the property. The 2007 settlement agreement provided that Castro would continue to make monthly payments to the bank until the lien was satisfied and would pay approximately $7,000 in back taxes. K&B Properties does not dispute on appeal that Castro paid the 2003 arrears and all taxes. Thus, in order to fully perform under the contract for deed, Castro must have assumed the monthly note of $563.48 (per the original contract) and continued to pay monthly payments "until lien of $21,549.59 is satisfied" (per the settlement agreement).
Hilda testified that Castro paid the monthly payments on the bank's loan until the loan was satisfied and released in February 2009. In addition to Hilda's testimony, Martinez introduced receipts for payments made by Castro to Laredo Bank. Hilda said that, after the bank refused Castro's payments, she or Castro attempted to pay Chavana or Revilla but neither would accept payments:
Leo [Revilla] would not accept any of our payments because he said he was only renting and that he had not made any contract with my father. And Chavana would say that he no longer was the owner. So neither one of them would accept any of our payments.
At trial, Chavana agreed that there was no amount due on the bank's loan as of February 2009.
According to Hilda, no person or entity made a demand upon her or Castro for payment of any alleged delinquency until after Castro's death, specifically K&B Properties' notice of default in 2022. K&B Properties' accountant also testified that he was not aware of any party making demand of Castro from 2008 to 2022.
Chavana testified that, after the bank loan was fully satisfied, he told Castro that Castro "would have to pay me the difference, what he owed. . . . The balance." However, there is no documentation supporting Chavana's assertion, and the trial court could have disbelieved his testimony. See Montgomery Indep. Sch. Dist. v. Davis, 34 S.W.3d 559, 567 (Tex. 2000) (noting that the trial court, as fact finder, "is the sole judge of the witnesses' credibility and the weight to be given their testimony, and is free to resolve any inconsistencies"); see also In re Est. of Parrimore, No. 14-14-00820-CV, 2016 WL 750293, at *8 (Tex. App.- Houston [14th Dist.] Feb. 25, 2016, no pet.) (mem. op.). There is no enforceable contract obligating Castro to reimburse Beltway Trucking, Chavana, Revilla, or K&B Properties any amount of money they may have paid toward satisfying the loan.
Because the terms of the contract for deed, as modified by the settlement agreement, required Castro to make monthly payments until the bank's lien was fully satisfied, and because it is undisputed that the bank's lien was fully satisfied and released in February 2009, the evidence described above is legally sufficient to support the trial court's finding that Castro fully complied with the terms of the contract for deed. See, e.g., Mitchell v. Davenport, No. 02-05-00111-CV, 2006 WL 563312, at *3 (Tex. App.-Fort Worth Mar. 9, 2006, no pet.) (mem. op.) (although testimony on issue of payments conflicted and parties introduced incomplete records, there was legally and factually sufficient evidence that appellee made all required payments); Sanchez v. Mejia, No. 04-04-00270-CV, 2004 WL 2879405, at *2 (Tex. App.-San Antonio Dec. 15, 2004, no pet.) (mem. op.) (holding evidence was sufficient to support finding that appellees made all payments due under the contract for deed).
We overrule K&B Properties' first two issues.
B. Judicial Foreclosure
Castro's recorded contract for deed is the same as a deed with a vendor's lien. See Tex. Prop. Code § 5.079(a). Ordinarily, a seller with a vendor's lien has a choice of remedies to enforce a vendor's lien on the purchaser's default: a seller may sue for his money and foreclose his lien, he may rescind the contract and take possession, or he may sue to recover title and possession. See Walton v. First Nat'l Bank of Trenton, 956 S.W.2d 647, 652 (Tex. App.-Texarkana 1997, pet. denied). However, the legislature in enacting statutory protections for purchasers under residential contracts for deed in Subchapter D, Chapter 5, Texas Property Code, provided only one remedy on a purchaser's default under a recorded contract for deed: foreclosure, either through a foreclosure sale or judicial foreclosure. See Tex. Prop. Code § 5.079(a) ("A recorded [contract for deed] shall be the same as a deed with a vendor's lien. The vendor's lien . . . may be enforced by foreclosure sale under Section 5.066 or by judicial foreclosure.").
A residential contract for deed does not simply lapse on the purchaser's default; the seller must pursue the statutory remedy of foreclosure to terminate the contract. See Bullard v. Stifflemire, No. 10-17-00029-CV, 2019 WL 1966932, at *2 (Tex. App.-Waco May 1, 2019, no pet.) (mem. op.) ("Indeed, our review of case law and the Texas Property Code relating to contracts for deed has found no authority for the concept that a contract for deed can lapse independent of its terms for default and separate from the requirements to terminate a contract for deed as set forth in the Property Code."). The statutory remedy of foreclosure under Subchapter D requires the seller to give the purchaser notice and the opportunity to cure the default. Tex. Prop. Code § 5.066(b) ("The seller shall notify a purchaser of a default under the contract and allow the purchaser at least 60 days after the date notice is given to cure the default.").
Here, K&B Properties argues that it established as a matter of law that Castro breached the terms of the contract for deed for the same reason that it argues that the evidence does not establish Castro's full compliance-i.e., because Castro did not make the final $10,000 payment. Martinez responds that K&B Properties' foreclosure claim accrued no later than 2015 and is time-barred by a four-year statute of limitations. We need not address Martinez's limitations argument. As detailed above, the evidence sufficiently supports the trial court's finding that Castro fully complied with all terms of the contract for deed. Accordingly, K&B Properties has not shown as a matter of law that it is entitled to judicial foreclosure. We overrule K&B Properties' third and final issue.
Conclusion
We affirm the trial court's judgment.