Summary
holding property code provision was subject to common-law rescission principles because it "was not intended to be punitive"
Summary of this case from Lon Smith & Assocs., Inc. v. KeyOpinion
No. 12–0539.
2013-08-23
Kevin T. MORTON, Petitioner, v. Hung NGUYEN and Carol S. Nguyen, Respondents.
Robert G. Bailey, Attorney at Law, Houston, TX, for Petitioner Kevin T. Bailey. Bobbie Leigh Stratton, Eddy L. De Los Santos Jr., Baker Donelson Bearman Caldwell & Berkowitz PC, Houston, TX, for Respondents Hung Nguyen.
Robert G. Bailey, Attorney at Law, Houston, TX, for Petitioner Kevin T. Bailey. Bobbie Leigh Stratton, Eddy L. De Los Santos Jr., Baker Donelson Bearman Caldwell & Berkowitz PC, Houston, TX, for Respondents Hung Nguyen.
Justice GREEN delivered the opinion of the Court, in which Chief Justice JEFFERSON, Justice HECHT, Justice JOHNSON, Justice GUZMAN, and Justice DEVINE joined.
Chapter 5, Subchapter D of the Texas Property Code imposes various conditions and disclosure requirements on sellers entering into contracts for deed—also known as “executory contracts for the conveyance of real property.” SeeTex. Prop.Code §§ 5.061–.085. A seller's failure to comply with Subchapter D's requirements entitles a buyer to “cancel and rescind” a contract for deed and “receive a full refund of all payments made to the seller.” E.g., id. § 5.069(d)(2). The primary issue in this case is whether a buyer who exercised the statutory right to cancel and rescind a contract for deed must restore to the seller all benefits the buyer received under the contract. We hold that Subchapter D's cancellation-and-rescission remedy contemplates mutual restitution of benefits among the parties. Thus, we conclude that the buyers here must restore to the seller supplemental enrichment in the form of rent for the buyers' interim occupation of the property upon cancellation and rescission of the contract for deed. We reverse the court of appeals' judgment, in part, and remand the case to the trial court for proceedings consistent with this opinion.
I. Background
In January 2007, Kevin Morton, as seller, and Hung and Carol Nguyen, as buyers, entered into a contract for deed. The contract required the Nguyens to make a $5,000 down payment and monthly installments of $1,533.90 for approximately thirty-five years before obtaining the deed. The contract provided for an initial interest rate of 8.875%. After five years, the interest rate was set to escalate yearly by 1% until it reached 12.875%. The transaction was purportedly structured to encourage the Nguyens to seek out a new financing arrangement in a few years after rebuilding their credit. The Nguyens also agreed to pay for homeowners' insurance, property taxes, and homeowners' association fees. The Nguyens made payments for almost three years. During this time, Morton sent the Nguyens an annual statement that reported the amount of interest paid each year and the balance remaining under the contract. However, Morton did not provide the Nguyens with all of the information in the annual statement required by section 5.077 of the Property Code. SeeTex. Prop.Code § 5.077(b) (providing that the annual statement must include, inter alia, the amount paid under the contract and the number of payments remaining under the contract).
In November 2009, the Nguyens notified Morton that they were exercising their statutory right to cancel and rescind the contract for deed. The Nguyens demanded return of all thirty-four monthly payments, the down payment, and the taxes and insurance premiums they paid during the contract's term. Morton ordered the Nguyens out of the house and allegedly began to harass the Nguyens by demanding payments under the contract and demanding that they immediately vacate the property. Morton then sued the Nguyens for breach of contract. The Nguyens counterclaimed, seeking monetary damages, rescission, and statutory damages due to alleged violations under the Property Code, the Finance Code, and the Deceptive Trade Practices Act (DTPA). Morton asserted various affirmative defenses to the Nguyens' counterclaims and alleged that he was entitled to a setoff in the amount of the fair market rental value of the property for the time the Nguyens occupied the house.
Following a bench trial, the trial court found that Morton failed to comply with various sections of Subchapter D pertaining to disclosures in contract-for-deed transactions. As a matter of law, the trial court found that Morton's good-faith defense based on Flores v. Millennium Interests, Ltd., 185 S.W.3d 427 (Tex.2005), did not apply to the Nguyens' counterclaim for liquidated damages under section 5.077 of the Property Code. The trial court rendered judgment in favor of the Nguyens, awarding the Nguyens the following: (1) $63,693.47 in actual damages—which included all payments the Nguyens made under the contract for deed, their down payment, insurance payments, tax payments,and the value of improvements—for cancellation and rescission of the contract for deed under Subchapter D; (2) $160,000 as liquidated damages for violation of section 5.077 of the Property Code; (3) $300 as the statutory remedy for Finance Code violations; (4) $10,000 for mental anguish damages; (5) $67,020 in attorney's fees; and (6) $696.74 in costs. Both parties appealed.
The court of appeals reversed the trial court's judgment on liability for the statutory penalty under section 5.077 of the Property Code and remanded that issue to the trial court to determine whether Morton made a “good faith attempt to inform [the Nguyens] of the current status of their contractual relationship,” as laid out in Flores. 369 S.W.3d 659, 668–69 (Tex.App.–Houston [14th Dist.] 2012) (quoting Flores, 185 S.W.3d at 434). The court of appeals also reversed the $300 awarded for Finance Code violations because the trial court's findings of fact did not support the award. Id. at 676. Finally, the court of appeals affirmed the portion of the trial court's judgment awarding the Nguyens rescission and restitution under the Property Code, attorney's fees, and mental anguish damages. Id. at 674, 677. Only Morton petitioned this Court for review, arguing that the court of appeals erred by (1) denying him mutual restitution upon cancelling and rescinding the contract for deed, and (2) affirming the awards of attorney's fees and mental anguish damages after reversing the only claims that could support such awards. The Nguyens do not challenge the court of appeals' judgment related to the section 5.077 claim or the claim for damages under the Finance Code, so we do not address them. We address the challenged issues in turn.
II. Subchapter D's Cancellation–and–Rescission Remedy
We begin by noting that the court of appeals erred by holding that Morton waived the issue as to whether Subchapter D's cancellation-and-rescission remedy incorporates the common law requirement of mutual restitution. Morton's briefing at the court of appeals was sufficient under Rule 38.1(i) of the Texas Rules of Appellate Procedure to warrant consideration of the issue. SeeTex.R.App. P. 38.1(i); see also Republic Underwriters Ins. Co. v. Mex–Tex, Inc., 150 S.W.3d 423, 427 (Tex.2004) (“[W]e have instructed the courts of appeals to construe the Rules of Appellate Procedure reasonably, yet liberally, so that the right to appeal is not lost by imposing requirements not absolutely necessary to effect the purpose of a rule.” (quoting Verburgt v. Dorner, 959 S.W.2d 615, 616–17 (Tex.1997))). Morton argued in his opening brief that if the Nguyens were entitled to rescission and restitution, then he was entitled to a setoff for the value the Nguyens received for their occupancy of the house. He provided citations to three cases that discussed recovery of the value of the use and occupation of land upon rescission. Morton also addressed the issue more thoroughly and cited to additional authority in his reply brief. Finally, as Morton pointed out in his motion for rehearing, he did not have the benefit of this Court's decision in Cruz v. Andrews Restoration, Inc., 364 S.W.3d 817 (Tex.2012), at the time he filed his briefs in the court of appeals. The court of appeals had the opportunity to review Cruz and did so in reference to the common law restitution requirements of notice and tender. 369 S.W.3d at 671 (citing Cruz, 364 S.W.3d at 825–27). The court of appeals should have also addressed the issue here related to mutual restitution. Rather than remanding to the court of appeals to address Morton's issue, we address this issue in light of our decision in Cruz.
A contract for deed, unlike a typical secured transaction involving a deed of trust, is a financing arrangement that allows the seller to maintain title to the property until the buyer has paid for the property in full. See Flores, 185 S.W.3d at 429. Under Subchapter D, real estate transactions involving contracts for deed require the seller to make certain disclosures and provide certain notices. See, e.g., Tex. Prop.Code §§ 5.069, .070, .072, .085. Various sections in Subchapter D entitle a buyer to “cancel and rescind” the contract for deed and “receive a full refund of all payments made to the seller” if the seller fails to comply with the disclosure and notice requirements. See, e.g., id. §§ 5.069(d), .070(b), .072(e). For instance, if the seller fails to comply with disclosure requirements related to property that is encumbered by an existing lien, then the buyer can “cancel and rescind” the contract for deed and receive from the seller “all payments of any kind made to the seller under the contract” and reimbursement for (1) taxes paid by the buyer, and (2) the value of any improvements made to the property by the buyer. Id. § 5.085(c)(2).
Morton argues that Subchapter D's cancellation-and-rescission remedy incorporates the common law principle of mutual restitution, which requires buyers under a contract for deed to restore the benefits they received under the rescinded contract. The Nguyens, on the other hand, argue that the Legislature did not intend to codify in Subchapter D the common law principle of the equitable remedy of rescission. We addressed a similar issue within the context of the DTPA in Cruz, and our analysis in that case instructs the issue presented here. See Cruz, 364 S.W.3d at at 824–26.
In Cruz, a consumer sought the remedy of “restoration” under section 17.50 of the Business and Commerce Code for alleged DTPA violations. Id. at 823. Subsection 17.50(b)(3) provides that a consumer may obtain “orders necessary to restore to any party to the suit any money or property, real or personal, which may have been acquired in violation of this subchapter.” Tex. Bus. & Com.Code § 17.50(b)(3). The consumer argued that section 17.50's restoration remedy did not incorporate the common law principle of rescission, which necessarily includes mutual restitution. See Cruz, 364 S.W.3d at 825. Therefore, the consumer averred, he was entitled to all the money paid by him (or on his behalf) under the agreement, without surrendering any benefits that he had received—even though such an approach would give the consumer a windfall. Id. at 823, 826. We disagreed with the consumer's position, in part, holding that section 17.50's restoration remedy contemplates mutual restitution, but not the wholesale adoption of all the common law rescission requirements. Id. at 826. We reach the same conclusion in this case.
Our analysis begins with Subchapter D's text, which provides that a buyer's remedy for the seller's noncompliance with certain disclosure requirements is “to cancel and rescind the executory contract and receive a full refund of all payments made to the seller.” SeeTex. Prop.Code §§ 5.069(d)(2), .070(b)(2), .072(e)(2), .085(c)(2). As we recognized in Cruz, rescission is the common name for the composite remedy of rescission and restitution. Cruz, 364 S.W.3d at 825 (citing Restatement (Third) of Restitution And Unjust Enrichment § 54 cmt. a (2011)); see alsoBlack's Law Dictionary 1420–21 (9th ed.2009) (providing that “rescission” is “[a] party's unilateral unmaking of a contract for a legally sufficient reason ... generally available as a remedy ... and is accompanied by restitution of any partial performance, thus restoring the parties to their precontractual positions”). It is a term that requires each party to “restore[ ] property received from the other,” or in other words, mutual restitution. Cruz, 364 S.W.3d at 825–26. In line with Cruz, we conclude that the Legislature intended Subchapter D's cancellation-and-rescission remedy to also contemplate the common law element of mutual restitution.
The Nguyens and the dissent argue that the statutory scheme in Subchapter D compels a different result than that reached in Cruz. We disagree. Like the DTPA's restoration remedy, Subchapter D's cancellation-and-rescission remedy is not intended to be punitive—it merely provides the buyer the option of unwinding the transaction.
See Cruz, 364 S.W.3d at 826. Allowing a buyer to recover all benefits bestowed upon the seller upon rescission without also requiring the buyer to surrender the benefits that he received under the contract would result in a windfall inconsistent with the general nature of Subchapter D's cancellation-and-rescission remedy. See id. at 825–26. “[R]escission is not a one-way street.” Id. at 825. Rather, as we explained in Cruz, “[recission] requires a mutual restoration and accounting, in which each party restores property received from the other.” Id. at 825–26 (citing Restatement (Third) of Restitution and Unjust Enrichment § 37 cmt. d (2011)). A seller's wrongdoing does not excuse the buyers from counter-restitution under the circumstances of this case. See id. at 826. But here, as in Cruz, we similarly hold that notice and restitution or a tender of restitution are not prerequisites to the cancellation-and-rescission remedy under Subchapter D, as long as the affirmative relief to the buyer can be reduced by (or made subject to) the buyer's reciprocal obligation of restitution. See id. at 827 (citing Restatement (Third) of Restitution and Unjust Enrichment § 54(5) (2011)).
As recognized by the dissent, we have held that the liquidated damages provisions in sections 5.077 and 5.079 of Subchapter D are indeed punitive. 412 S.W.3d at 513 (Boyd, J., dissenting) (citing Flores, 185 S.W.3d at 432–33);see alsoTex. Prop.Code §§ 5.077(d) (providing liquidated damages and attorney's fees if a seller fails to provide a buyer with an annual statement), .079(b) (providing liquidated damages and attorney's fees if a seller fails to comply with certain title-transfer requirements). Yet this fact does not compel a conclusion that all of Subchapter D's remedies were intended to be punitive. Cf. Cruz, 364 S.W.3d at 826 (recognizing that the DTPA claims are generally punitive but that “[r]estoration is different”). In addition, we note that sections of Subchapter D that allow a buyer to cancel and rescind a contract for certain violations also make those same violations actionable under the DTPA. See, e.g., Tex. Prop.Code §§ 5.069(d)(1), .070(b)(1), .072(e)(1), .085(c)(1). We disagree with the Nguyens and the dissent that Subchapter D's cancel-and-rescind remedy should be treated differently than the DTPA's restoration remedy that we characterized as non-punitive in Cruz.
The dissent concludes that the statutory language “and receive a full refund of all payments made to the seller” evidences the Legislature's intent not to incorporate the common law elements of rescission. 412 S.W.3d at 513;see, e.g., Tex. Prop.Code §§ 5.069(d), .070(b), .072(e). In reaching this conclusion, the dissent misconstrues the term “full refund” as being a one-sided transaction when, in reality, a refund in a typical transactional setting contemplates both parties giving back what they received.
SeeWebster's Third New International Dictionary 1910 (2002) (defining “refund” as “to give or put back” and “to return (money) in restitution”). This language is consistent with our construction requiring the mutual restoration of benefits. In contract-for-deed transactions, the buyer cannot give back the title to the property in exchange for “a full refund of all payments made to the seller” because the buyer receives title only after all payments have been made. See Flores, 185 S.W.3d at 429. Instead, the buyer must return what it received under the contract for deed at that time—the occupation of the property. SeeRestatement (Third) of Restitution and Unjust Enrichment § 37 cmt. d (2011) (“Rescission is mutual: a plaintiff seeking to be restored to the status quo ante must likewise restore to the defendant whatever the plaintiff has received in the transaction.”); Cruz, 364 S.W.3d at 825–26 (citing same). While the buyer remains entitled to “a full refund of all payments made to the seller,” cancellation and rescission of a contract also requires that the buyer restore to the seller the value of the buyer's occupation of the property.
For example, if a retail store has a policy that entitles a buyer to a full refund for a defective product, surely no logical consumer would think that he or she is entitled to both the product and a refund of the price paid for the product simply because the policy entitles the consumer to a “full refund of the purchase price.”
Because the trial court did not consider the value of the Nguyens' interim occupation of the property, we remand the case to the trial court to determine the Nguyens' liability for the rental value of the property during their occupation.
III. Attorney's Fees and Mental Anguish Damages
We turn next to Morton's issue concerning the awards of attorney's fees and mental anguish damages. Morton argues that the Nguyens are not entitled to either attorney's fees or mental anguish damages because no claims supporting the awards survived the court of appeals' judgment. We agree. The trial court found that Morton's conduct violated various sections of Subchapter D and constituted statutory fraud in a real estate context. The trial court then utilized those findings to afford the Nguyens the maximum recovery by rendering judgment on the Subchapter D violations and Finance Code violations, which included an award of $67,020 in attorney's fees. On appeal, the court of appeals reversed the only two causes of action that supported an award of attorney's fees—the claim for liquidated damages under section 5.077 of the Property Code and the Finance Code claims. See369 S.W.3d at 669, 676. Because no remaining cause of action supports an award of attorney's fees, the court of appeals should have also reversed the award of attorney's fees predicated on the section 5.077 claim and the Finance Code claims. Cf. Parkway Co. v. Woodruff, 901 S.W.2d 434, 441 (Tex.1995) (reversing an award of attorney's fees when the only cause of action that supported the award was reversed on appeal). To the extent that the Nguyens prevailed on their section 5.077 claim on remand or elected to recover under their alternative statutory fraud theory, the trial court could award attorney's fees based on either of those causes of action. SeeTex. Prop.Code § 5.077(c) (providing for reasonable attorney's fees); see alsoTex. Bus. & Com.Code § 27.01(e) (providing for reasonable and necessary attorney's fees for claims of statutory fraud in real estate transactions); Boyce Iron Works v. Sw. Bell Tel. Co., 747 S.W.2d 785, 787 (Tex.1988) (holding that a “[prevailing] party may seek recovery under an alternative theory if the judgment is reversed on appeal”).
For similar reasons, we conclude that the court of appeals should have also reversed the award for mental anguish damages when it reversed the trial court's judgment for damages under the Finance Code. Cf. Parkway, 901 S.W.2d at 441. The Nguyens' pleadings demonstrate that they sought mental anguish damages only for the Finance Code violations and DTPA claims. The trial court did not find that Morton violated the DTPA, and the court of appeals reversed the award for damages under the Finance Code. See369 S.W.3d at 676. Accordingly, no cause of action supports an award of mental anguish damages. Because the Nguyens' pleadings do not support an award for mental anguish damages under any other claim, the court of appeals should have also reversed the award in conjunction with reversal of the Finance Code claim.
SeeTex.R. Civ. P. 301 (providing that a “judgment of the court shall conform to the pleadings”).
The court of appeals held that Morton waived the issue because he did not argue “that the trial court could not have awarded mental anguish damages in conjunction with [the Property Code] violations.” 369 S.W.3d at 676. Even assuming the Nguyens pled for mental anguish damages for the Subchapter D claims, we are not convinced that mental anguish damages are recoverable for the Property Code violations found by the trial court in this case.
IV. Conclusion
Accordingly, we grant Morton's petition for review and, without hearing oral argument, Tex.R.App. P. 59. 1, we reverse the portion of the court of appeals' judgment affirming the trial court's awards of actual damages for cancellation and rescission, mental anguish damages, and attorney's fees, and we remand the case to the trial court for proceedings consistent with this opinion. Justice BOYD filed a concurring and dissenting opinion, in which Justice WILLETT and Justice LEHRMANN joined.
Justice BOYD, joined by Justice WILLETT and Justice LEHRMANN, concurring in part and dissenting in part.
The Court is bothered that a literal application of Subchapter D of Chapter 5 of the Texas Property Code “result[s] in a windfall” to purchasers under an executory contract. Ante at 511. But our task here is to apply the statute as written, and it is not within our power or our role to resolve the Court's concern. As the Court has said repeatedly, even quite recently:
• “The aim of statutory construction is to determine and give effect to the Legislature's intent[.]” CHCA Woman's Hosp., L.P. v. Lidji, 403 S.W.3d 228, 231 (Tex.2013);
• It is “cardinal law” that we begin with the plain language and common meaning of the words in the statute. Traxler v. Entergy Gulf States, Inc., 376 S.W.3d 742, 747 (Tex.2012);
• We “begin (and often end) with the Legislature's chosen language,” Christus Health Gulf Coast v. Aetna, Inc., 397 S.W.3d 651, 653 (Tex.2013), because “the truest manifestation of what lawmakers intended is what they enacted.” Combs v. Roark Amusement & Vending, L.P., ––– S.W.3d ––––, ––––, 2013 WL 855737, at *2 (Tex. March 8, 2013);
• The Legislature's “voted-on language is what constitutes the law, and when a statute's words are unambiguous and yield but one interpretation, ‘the judge's inquiry is at an end.’ ” Id. (quoting Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson, 209 S.W.3d 644, 651–52 (Tex.2006)); and
• “[U]nambiguous text equals determinative text (barring an absurd result).” In re Office of Attorney Gen., ––– S.W.3d ––––, ––––, 2013 WL 854785, at *4 (Tex. Mar. 8, 2013).
See also, e.g., Rachal v. Reitz, 403 S.W.3d 840, 844, 2013 WL 1859249, at *3 (Tex. May 3, 2013); Prairie View A & M Univ. v. Chatha, 381 S.W.3d 500, 507, 511 (2012); Tex. Mut. Ins. Co. v. Ruttiger, 381 S.W.3d 430, 452 (Tex.2012); In re Lopez, 372 S.W.3d 174, 176 (Tex.2012); Molinet v. Kimbrell, 356 S.W.3d 407, 411 (Tex.2011); Am. Zurich Ins. Co. v. Samudio, 370 S.W.3d 363, 368 (Tex.2012); TGS–NOPEC Geophysical Co. v. Combs, 340 S.W.3d 432, 439 (Tex.2011).
We have announced these principles of statutory construction not because we always agree with the Legislature's policy choices or because it is easier to avoid making policy choices ourselves. To the contrary, applying the Legislature's policy choices is often the most difficult part of the judiciary's job, particularly when we disagree with those choices. But “we do not pick and choose among policy options on which the Legislature has spoken.” F.F.P. Operating Partners, L.P. v. Duenez, 237 S.W.3d 680, 690 (Tex.2007). Upholding the Legislature's policy choices is foundational to the judiciary's role within the constitutional separation of powers among the three branches, and necessary to protect the liberty that our unique system of government guarantees. The philosopher Montesquieu explained long ago:
[T]here is no liberty if the powers of judging be not separated from the legislative and executive powers. Were it joined with the legislative, the life and liberty of the subject would be exposed to arbitrary control; for the judge would be the legislator. Were it joined to the executive power, the judge might behave with all the violence of the oppressor.
C. Montesquieu, The Spirit of Laws 202 (T. Nugent trans., D. Carrithers ed.1977) (T. Nugent trans. 1st ed. 1750).
In the present case, a majority of the Court holds that a purchaser's recovery under Subchapter D of Chapter 5 of the Texas Property Code must be reduced by the value of the benefits the purchaser received from the seller. That may be good policy, but the Code repeatedly states that the purchaser is entitled to “receive a full refund of all payments made to the seller.” Tex. Prop.Code §§ 5.069(d)(2), 5.070(b)(2), 5.072(e)(2) (emphases added). Because I cannot join the Court's holding without ignoring this language altogether, I respectfully dissent from this part of the Court's opinion.
I.
Statutory Remedy under the Property Code
In Subchapter D of Chapter 5 of the Texas Property Code, the Legislature has provided that a seller's failure to make certain disclosures before entering into an executory contract for conveyance of real property (i.e., a contract for deed)
entitles the purchaser to cancel and rescind the executory contract and receive a full refund of all payments made to the seller.
Tex. Prop.Code §§ 5.069(d)(2), 5.070(b)(2), 5.072(e)(2) (emphases added). The seller's violation of yet another provision
entitles the purchaser to cancel and rescind the executory contract and receive from the seller:
(A) the return of all payments of any kind made to the seller under the contract; and
(B)reimbursement for:
(i) any payments the purchaser made to a taxing authority for the property; and
(ii) the value of any improvements made to the property by the purchaser.
Id. §§ 5.085(c)(2) (emphases added).
Despite this unambiguous language, the Court holds that a seller's violation of these statutes does not entitle the purchaser to receive “a full refund of all payments made to the seller” or “the return of all payments of any kind made to the seller.” Instead, the Court holds that the purchaser is entitled to receive the difference between the payments the purchaser made and the “value of the [purchaser's] interim occupation of the property.” Ante at 512. Because, in the Court's view, the purchaser is “liab[le] for the rental value of the property during their occupation,” id., the purchaser cannot receive “a full refund of all payments made to the seller.” For the reasons discussed below, I believe the Court has strayed from both its role and its principles of statutory construction in this case.
A. No Punitive Purpose?
First, the Court asserts that its construction of the statute is appropriate because the statute's “cancellation-and-rescission remedy is not intended to be punitive.” Ante at 511. Ignoring for a moment the lack of support for this assertion, and the precedent to the contrary, the best indication of what the Legislature intended is found in the words the Legislature chose. See, e.g., Combs, ––– S.W.3d at ––––, 2013 WL 855737, at *2. It is true that, when a statute that requires certain conduct is “silent on the effect of noncompliance, we must consider the purpose of the statute” to determine the consequences of the violation. Hines v. Hash, 843 S.W.2d 464, 468 (Tex.1992); see also AHF–Arbors at Huntsville I, LLC v. Walker Cnty. App. Dist., 410 S.W.3d 831, 835–36 (Tex.2012) (quoting Hines ). But here, the Legislature is not silent on the effect of a seller's noncompliance with the statute: it expressly states that, when the seller fails to comply with the statute, the purchaser is entitled to “a full refund of all payments made to the seller.” Regardless of whether the Legislature intended this relief to be “punitive,” it is the relief the Legislature expressly provided and thus the relief that the courts must award.
In any event, the Court provides no support for its assertion that the Legislature does not intend this statute's remedies to be “punitive.”
This Court has previously held that Subchapter D's liquidated damages provision is, in fact, “penal in nature” and “punitive rather than compensatory.” Flores v. Millennium Interests, Ltd., 185 S.W.3d 427, 433–34 (Tex.2005). The Court also previously noted that the severity of the statute's damages formula “would in many instances impose a fine far beyond the damages that a purchaseris likely to suffer.” Brown v. De La Cruz, 156 S.W.3d 560, 566 (Tex.2004).
The Court states, “Like the [Texas Deceptive Trade Practices—Consumer Protection Act's (DTPA) ] restoration remedy, Subchapter D's cancellation-and-rescission remedy is not intended to be punitive—it merely provides the buyer the option of unwinding the transaction,” citing Cruz v. Andrews Restoration, Inc., 364 S.W.3d 817, 826 (Tex.2012). Ante at 511. In Cruz, the Court held that the “restor[ation]” provision of the DTPA, section 17.50(b)(3), was not punitive because “ ‘punishment’ ” under the DTPA “is accomplished through the statute's liability and damages provision—prohibiting deceptive practices and allowing recovery of actual damages, mental anguish damages, treble damages for knowing violations, and attorney's fees.” Id.; see alsoTex. Bus. & Com.Code § 17.50(b)(1) (authorizing the award of economic damages plus mental anguish damages and treble damages when appropriate); id. § 17.50(d) (attorney's fees). Cruz did not hold, or indicate in any way, that the provisions of Subchapter D are non-punitive in nature, see Cruz, 364 S.W.3d at 826, and the Property Code provisions at issue here are the statute's liability and damages provisions (though they are expressly nonexclusive). SeeTex. Prop.Code §§ 5.069(d)(2), 5.070(b)(2), 5.072(e)(2). In addition to the differences discussed below, this demonstrates yet another significant difference between the statute at issue in Cruz—which provided for additional relief on top of damages designed to make the claimant whole—and the statute here—which provides for return of all payments made under the invalid contract.
Finally, even if the Legislature did not intend sections 5.069, 5.070, and 5.072 to be punitive in nature, I am not convinced that permitting recovery of “all payments made to the seller” is inherently punitive. Although violation of these provisions constitutes a “false, misleading, or deceptive act or practice” under the Texas Deceptive Trade Practices–Consumer Protection Act (DTPA), seeTex. Prop.Code §§ 5.069(d)(1), 5.070(b)(1), 5.072(e)(1), some claimants entitled to recover under the Property Code will not also recover under the DTPA, as this case demonstrates. Claimants who, like the Nguyens, recover only under sections 5.069, 5.070, or 5.072 do not receive the benefit of the DTPA's provisions for recovery of actual damages, much less the DTPA's more punitive provisions.
See id. §§ 5.069, 5.070, 5.072. Unlike the liquidated damages provided under section 5.077, see id.§ 5.077(c), (d) (providing liquidated damages of up to $250 per day, capped by total property value), it is not “obvious[ ]” that recovery of the amounts paid under a contract for deed obtained in violation of sections 5.069, 5.070, and 5.072 “bears no relation to the harm caused” by the wrongful contract. See Flores, 185 S.W.3d at 433 (construing Tex. Prop.Code § 5.077).
Because the Nguyens did not recover under the DTPA, they could not seek an order under section 17.50(b)(3)—the provision at issue in Cruz. See Cruz, 364 S.W.3d at 823.
Regardless of whether or how “punitive” the statute may be, I see no need to consider legislative history or to argue about the statute's unstated “purpose” when its stated effect is clear. If the Legislature's words are the “surest guide” to the Legislature's intent, see Traxler, 376 S.W.3d at 747, I can only conclude here that the Legislature specifically intended that purchasers receive “a full refund of all payments made to the seller.”
B. “Rescind” Trumps All?
Second, the Court reasons that, by using the word “rescind,” the Legislature “intended Subchapter D's cancellation-and-rescission remedy to also contemplate the common law element of mutual restitution.” Ante at 511. I agree that, generally, we could presume that the Legislature knows and intends the common meaning of a word like “rescind,” but in construing this statute we “must give effect to every word, clause, and sentence” that the Legislature has used. In re Office of Attorney Gen., ––– S.W.3d at ––––, 2013 WL 854785, at *4 (emphasis added). Here, the Legislature stated that a purchaser is entitled “to cancel and rescind the executory contract and receive a full refund of all payments made to the seller.” Tex. Prop.Code §§ 5.069(d)(2), 5.070(b)(2), 5.072(e)(2) (emphasis added).
If the Legislature had intended that the purchaser be entitled only to “the common law element of mutual restitution,” ante at 511, then the Legislature should (and, I must conclude, would) have ended these statutory provisions after the reference to the “executory contract,” omitting the phrase “and receive a full refund of all payments made to the seller” completely. The Legislature did not omit that phrase, but the Court has done so for it. Because “every word or phrase in a statute is presumed to have been intentionally used with a meaning and a purpose,” In re Allen, 366 S.W.3d 696, 706 (Tex.2012) (quoting State v. K.E. W., 315 S.W.3d 16, 21 (Tex.2010)), we may not read that language out of this statute. See also Perkins v. State, 367 S.W.2d 140, 146 (Tex.1963) (“[I]t is settled that every word in a statute is presumed to have been used for a purpose; and a cardinal rule of statutory construction is that each sentence, clause and word is to be given effect if reasonable and possible.”). In my view, the Legislature's use of the word “rescind” does not give us license to ignore the rest of what the Legislature said.
C. Cruz Controls?
Third, the Court relies—incorrectly, I believe—on Cruz v. Andrews Restoration, Inc., 364 S.W.3d 817, 826 (Tex.2012). In Cruz, we interpreted a provision of the DTPA in which the Legislature provided that a court may “ restore to any party to the suit money or property, real or personal, which may have been acquired in violation of this subchapter.” Tex. Bus. & Com.Code § 17.50(b) (emphases added). Reasoning that (1) the words “restore” and “restitution” share “the same root,” (2) “[r]escission is merely the ‘common, shorthand name’ for the composite remedy of rescission and restitution,” and (3) “rescission is not a one-way street” but instead “requires a mutual restoration and accounting,” the Court concluded in Cruz that the Legislature intended that an order “restoring” property to a DTPA consumer must also deduct from that award the value of any benefits the consumer received. 364 S.W.3d at 825–26.
I do not agree that Cruz controls our decision in this case. The statute in Cruz authorized “restoration,” and not just to the consumer, but “to any party to the suit.” Tex. Bus. & Com.Code § 17.50(b)(3). By contrast, the statutes here dictate that the “purchaser ... receive a full refund of all payments made to the seller.” Tex. Prop.Code §§ 5.069(d)(2), 5.070(b)(2), 5.072(e)(2). And, more importantly, the statute in Cruz authorized restoration only of amounts “acquired in violation” of the statute. Tex. Bus. & Com.Code § 17.50(b)(3). By contrast, the statute here requires a “full refund of all payments made to the seller.” Tex. Prop.Code §§ 5.069(d)(2), 5.070(b)(2), 5.072(e)(2).
In short, the Court's construction of the DTPA provision in Cruz may have been consistent with the language of that statute, but that same construction is not consistent with the entirely dissimilar language of the statute at issue here. Because the Legislature's language matters, our construction of very different statutory language in Cruz is of no help here.
D. “Rescind” doesn't mean “rescission”?
Finally, the Court confirms its unwillingness to allow the language of the statute to control the outcome of this case when it concludes that “notice and restitution or a tender of restitution,” which are prerequisites to the common law remedy of rescission, “are not prerequisites to the cancellation-and-rescission remedy under Subchapter D, as long as the affirmative relief to the buyer can be reduced by (or made subject to) the buyer's reciprocal obligation of restitution.” Ante at 511. In other words, having decided that the Legislature's use of the word “rescind” justifies ignoring the statute's refund-of-all-payments provision, the Court then concludes that, actually, the Legislature doesn't really mean “rescind” or “rescission” at all. Instead, it means “restitution,” or what the Court calls “the common law element of mutual restitution.” Id. at 511. Surely, if that's what the Legislature meant, it could have said so. In my view, the Court has at this point gone from interpreting a law to making a law, because it believes restitution is a proper remedy, but rescission (with its inconvenient notice and tender prerequisites) is not. In doing so, the Court has demonstrated why its conclusion is wrong to begin with.
II.
Conclusion
Our principles of statutory construction require the Court to focus on the Legislature's words to determine the Legislature's intent. We do this not because we agree with the Legislature's policy choices—sometimes, we vigorously disagree—but because “[w]e must take the Legislature at its word, respect its policy choices, and resist revising a statute under the guise of interpreting it.” Christus Health Gulf Coast v. Aetna, Inc., 397 S.W.3d 651, 654 (Tex.2013). Even if we were convinced that the Legislature could not have intended to allow purchasers to receive “a full refund of all payments” made to the seller, the Court “must adopt the interpretation of the statute that is most faithful to its text.... ‘If Congress enacted into law something different from what it intended, then it should amend the statute to conform to its intent.’ ” In re Allen, 366 S.W.3d at 708 quoting Harbison v. Bell, 556 U.S. 180, 199, 129 S.Ct. 1481, 173 L.Ed.2d 347 (2009) (Thomas, J., concurring) (quoting Lamie v. United States Trustee, 540 U.S. 526, 542, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004)).
I agree with the Court's decision to reverse the Nguyens' award of attorney's fees and mental anguish damages, but I disagree that Morton is entitled to mutual restitution upon the rescission of the contract for deed. Because the Legislature has said that the Nguyen's are entitled to “a full refund of all payments made to the seller,” I respectfully concur in part and dissent in part.