Pedro Aguiar and Maria Aguiar v. Paul Segal and Geoffrey Abadee--Appeal from 212th District Court of Galveston County

Reversed and Remanded and Majority and Dissenting Opinions filed May 24, 2005

Reversed and Remanded and Majority and Dissenting Opinions filed May 24, 2005.

In The

Fourteenth Court of Appeals

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NO. 14-04-00389-CV

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PEDRO AGUIAR AND MARIA AGUIAR, Appellants

V.

PAUL SEGAL AND GEOFFREY ABADEE, Appellees

On Appeal from the 212th District Court

Galveston County, Texas

Trial Court Cause No. 03CV1497

D I S S E N T I N G O P I N I O N

I do not agree with the majority=s conclusion that the trial court=s findings of fact are unsupported by the record. I must, therefore, respectfully dissent.

As the trier of fact in a bench trial, the trial judge determines the credibility of the witnesses and the weight to be given their testimony, decides whether to believe or disbelieve all or any part of the testimony, and resolves any inconsistencies in the testimony. Tagle v. Galvan, 155 S.W.3d 510, 518 (Tex. App.CSan Antonio2004, no pet.). He may, therefore, draw reasonable inferences from the evidence, and his findings may not be disregarded if the record contains some evidence of probative value from which those inferences may be drawn. Peter v. Ogden Ground Servs., Inc., 915 S.W.2d 648, 650 (Tex. App.CHouston [14th Dist.] 1996, no writ). Accordingly, we must review the evidence in the light most favorable to the trial court=s findings.

The earnest money contracts at issue here were executed on May 12, 2003. As sellers, the Aguiars agreed to sell five properties containing approximately 80 apartment units on or before a closing date of July 15, 2003. Although the buyers, Segal and Abadee, had access to the $1,140,000.00 needed to make a cash purchase of the five properties, they chose instead to apply for a loan from Moody National Bank. In fact, the earnest money contracts contain customary recitations making them contingent on the availability of third party financing.[1] After reviewing the financial status of the buyers, including tax returns and personal financial statements, the bank approved a loan of up to 70% of the value of the properties. On July 9, 2003, the bank issued loan commitments to the buyers contingent upon the receipt of favorable appraisals of the properties. However, on July 15, 2003, the scheduled closing date, the appraisals were not yet complete.[2] Because the buyers were still waiting on financing, both parties continued under the assumption that the express terms of the contract extended the closing date to July 30, 2003.[3]

On July 30, 2003, Pedro Aguiar spoke to Rebecca Habeb, his realtor, and expressed his concern regarding the delayed closing because many of his tenants apparently stopped paying rent once they realized he was a lame duck landlord. Habeb explained to Aguiar that verbal appraisals were coming in one by one on the various properties, but that the bank could not make a full loan without written appraisals.[4] Nevertheless, with the receipt of each verbal appraisal, the bank immediately began finalizing the loan documents for that particular transaction even in advance of receiving the written appraisal. Habeb asked Aguiar if he could wait another week to start the closings.[5] Aguiar said he could wait another week.[6] Habeb asked Aguiar if he still wanted to go forward with the sale. Aguiar said he still wanted to go forward with the sale. Habeb reminded Aguiar that two appraisal inspections were scheduled for July 31, 2003, and another inspection was scheduled for August 5, 2003. Habeb further explained to Aguiar that because at least four of the written appraisals would each be a hundred pages in length, the written appraisals could not be completed until a couple of weeks after the verbal appraisals.[7] Habeb asked Aguiar if he still wanted to go forward. Aguiar said he did.

In preparation for the closing, Aguiar prepared estoppel certificates for the tenants of four of his properties with a cover letter announcing to each tenant that A[y]our building is in the process of being sold.@ Each tenant also received a certificate certifying the commencement date of his/her individual lease, the date of the next rent payment, current terms of the lease, the amount of his/her deposit, the date of expiration of his/her lease, whether he/she had an option to renew, etc. Delivery of these certificates to the tenants began on July 31, 2003.

Although the last apartment appraisal inspection was conducted on August 5, 2003 (in Aguiar=s presence and with his assistance), Aguiar terminated the earnest money contracts the following day on August 6, 2003.[8] One reason given to Habeb for the termination was that Galveston properties were selling for more money than the price stipulated in the earnest money contracts. In fact, Segal testified that in September 2003, Aguiar told him the apartments were worth $5,000 more per unit than they had originally agreed upon. Segal said Aguiar offered to go forward with the sale if he would agree to increase the sale price another $400,000. Segal refused.

If, as here, the parties intend that time is of the essence to a contract, timely performance is essential to a party=s right to require performance by the other party. Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195, 196 (Tex. 2004) (per curiam). However, contractual rights can be waived. Johnson v. Structured Asset Servs., LLC, 148 S.W.3d 711, 722 (Tex. App.CDallas 2004, no pet.). A waiver occurs when a party either intentionally relinquishes a known right or engages in intentional conduct inconsistent with claiming that right. In re Epic Holdings, Inc., 985 S.W.2d 41, 57 (Tex. 1998). A party=s silence or inaction for a period of time long enough to show an intention to yield the known right, is also enough to prove a waiver. Tenneco, Inc. v. Enter. Prods. Co., 925 S.W.2d 640, 643 (Tex. 1996).

Moreover, where a promissee acts to his detriment in reasonable reliance upon an otherwise unenforceable promise, the promisor=s promise is binding if injustice can be avoided only by enforcement of the promise. Wheeler v. White, 398 S.W.2d 93, 96 (Tex. 1965). Thus, estoppel arises where one party has been induced to change his position for the worse because of the conduct of another party. Mass. Bonding & Ins. Co. v. Orkin Exterminating Co., 416 S.W.2d 396, 401 (Tex. 1967). The doctrine of estoppel can be invoked where the conduct of one of the parties has been such as to induce action in reliance upon it, and where it would operate as a fraud upon the assured if he were afterwards allowed to disavow his conduct. Johnson, 148 S.W.3d at 721. Here, Aguiar said he wanted to continue with the transaction although he was not legally obliged to do so. Moreover, he indicated by his conduct that he would permit a reasonable time to obtain the written appraisals. In reliance, thereon, the record indicates the buyers expended $11,400 in appraisal fees, $7,525 in loan fees, $1,739 in survey fees, $2,850 in inspection fees, $257 in tax certificates, and $20,250 for the services of a property manager.

Accordingly, I would defer to the trial court=s finding that the Aguiars Aelected by their silence, conduct and words to treat the contracts as continuing and Plaintiffs relied on that election to their detriment.@ Because I would affirm the trial court=s judgment, I must respectfully dissent.

/s/ J. Harvey Hudson

Justice

Judgment rendered and Majority and Dissenting Opinions filed May 24, 2005.

Panel consists of Justices Yates, Anderson, and Hudson.

[1] The contract for the property located at 2719 Avenue P., for example, states:

A. THIRD PARTY FINANCING:

(1) The contract is contingent upon Buyer obtaining a third party loan secured by the Property in the amount of $120,000 for not less than 20 years with the initial interest rate not to exceed 62 % per annum.

(2) Not later that 7 days after the effective date of the contract. Buyer must apply for the third party loan described in Paragraph A(1). Buyer must make every reasonable effort to obtain the loan. Buyer has obtained the loan when the lender has determined that Buyer has satisfied all of lender=s financial requirements (those items relating to net worth, income, and creditworthiness). If the loan is not obtained within 30 days after the effective date, the contract will terminate and the earnest money, less any independent consideration under Paragraph 7B(3)(a) of the contract, will be returned to Buyer.

(3) Each note to be executed under this addendum is to be secured by vendor=s and deed of trust liens.

(4) If the loan is obtained within the time required under Paragraph A(2) but Buyer=s lender has not completed lender=s closing requirements (for example, survey, insurance, repairs, closing documents, appraisal), the closing date will be extended up to 15 days only if necessary to complete lender=s closing requirements.

[2] In fact, the loan commitments were not formally accepted and agreed to by the buyers until July 21, 2003.

[3] See supra note 1 (subparagraph A(4)).

[4] The record suggests that two verbal appraisals had been obtained by July 30, 2003.

[5] Rebecca Habeb testified on redirect examination:

Q Who can do it in one more week?

A No. If Pedro [Aguiar] can hold out for one more week to start the closings.

Q To start the closings?

A Right.

Q But not to close entirely?

A No. To start the closings.

Q As a matter of fact that=s what your memo says, isn=t it?

A Right.

Q It says eight lines down, could he hold out for one more week. Do you see that?

A Yes.

Q Parentheses, which is when the bank says they can start closing. You even put the word start closing in there, didn=t you?

A Correct.

Q So you did not represent to Pedro [Aguiar] that this deal could be closed in one week, did you?

A No.

Further, Segal testified that he was prepared to conduct individual closings on each of the five properties as the documents were completed, but Aguiar insisted on waiting until all five properties could be closed simultaneously.

[6] Rebecca Habeb testified on redirect examination:

Q Did you ever tell [Aguiar] that all five properties would close within one week?

A No.

Q And he knew they could not close within one week because three properties had not yet been appraised?

MR. FIEGLEIN: Objection, leading. Calls for speculation.

THE COURT: Sustained.

Q Did he know that three of the properties could not close because they had not yet been appraised?

MR. FIEGLEIN: Objection, Your Honor. Calls for speculation. No predicate.

THE COURT: Rephrase it.

Q You heard Mr. Fieglein ask you on cross examination if Mr. Aguiar was aware of the fact that the property had to be appraised, do you remember that?

A Yes.

Q And you answered that he was aware of it?

A Yes.

Q And was he also aware of the fact before the bank would lend the money the property had to be appraised?

A Yes.

Q If he was aware of that and three parcels of property had not yet been appraised was he therefore aware of the fact that the bank was not ready to lend the money on those three parcels until they had been appraised?

MR. FIEGLEIN: Objection. Calls for speculation.

THE COURT: Overruled.

A He was aware, yes.

Q And then it says that I asked him directly if he wanted to extend and he said yes. You asked him if he wanted to extend what?

A The time to closing.

Q. On the five parcels of property?

A Right. The properties, he wouldn=t sell one. It was all five or that was the agreement when the price was set for all five properties.

Q If he wanted to continue with the sale of the property he knew that the three appraisals would have to be accomplished first, did he not?

A Yes.

Q And it would therefore take more than one week, is that correct?

A Yes.

Q Now, did you ever tell him how long it would take to close the sale on these properties after the appraisal?

A No. I was guessing two to three weeks. I had no idea. The bank wasn=t talking to me. They were talking to Paul Segal.

[7] One written appraisal was completed on July 23, 2003; three were completed on August 15, 2003; and another was completed on August 27, 2003.

[8] The bank was ready for closing on all five properties on August 24, 2003.