Ronald Sharp and Debbie Sharp v. Rex Smith and Nancy Smith--Appeal from 294th District Court of Van Zandt County

NO. 12-07-00219-CV

IN THE COURT OF APPEALS

TWELFTH COURT OF APPEALS DISTRICT

TYLER, TEXAS

RONALD SHARP AND DEBBIE SHARP, APPEAL FROM THE 294TH

APPELLANTS

V. JUDICIAL DISTRICT COURT OF

REX SMITH AND NANCY SMITH,

APPELLEES VAN ZANDT COUNTY, TEXAS

MEMORANDUM OPINION

Appellants Ronald and Debbie Sharp appeal the trial court s final judgment. On appeal, the Sharps present five issues. We reverse and remand.

Background

On October 6, 2003, Ronald and Debbie Sharp agreed to purchase a tract of land from Rex Smith for $11,900 under an executory contract of sale, also known as a contract for deed. The tract of land was located in a subdivision in Van Zandt County, Texas. On May 3, 2005, the Sharps filed suit against Rex Smith and his wife, Nancy, alleging that the Smiths failed to provide them with an annual accounting statement for 2003 or 2004 in violation of Section 5.077(a) of the Texas Property Code. Further, the Sharps alleged that the Smiths failed to deliver certain disclosures and statements regarding the tract of land prior to and at the time of sale according to Section 5.069 of the Texas Property Code. In their amended petition, the Sharps stated that the Smiths were liable for liquidated damages of $250 a day for each violation of Section 5.077(a). Because the amount of liquidated damages exceeded the balance owed by the Sharps under the contract for deed, the Sharps also requested specific performance, i.e., that the Smiths be ordered to convey to them the tract of land by general warranty deed. In the alternative and should they not be entitled to specific performance, the Sharps alleged that, in addition to liquidated damages, they were entitled to rescission of the contract for deed and return of all money paid to the Smiths according to Section 5.069. The Sharps also requested reasonable and necessary attorney s fees.

The Smiths filed a general denial and also denied that Nancy Smith was liable in the capacity in which she was sued. Rex Smith filed a counterclaim. Although Rex Smith specifically denied the allegations made by the Sharps, he agreed that the contract for deed should be rescinded by mutual consent as sought in the Sharps original petition. Rex Smith tendered the funds paid by the Sharps under the contract for deed into the registry of the court. Further, the Smiths filed a motion for partial summary judgment, stating that because both parties requested rescission, a summary judgment granting rescission was appropriate. The Sharps responded that the Smiths motion for partial summary judgment was wholly deficient because they presented no summary judgment evidence. Further, the Sharps stated that they never offered nor did they then offer to compromise and settle their claims against the Smiths for rescission and return of the money they had paid under the contract for deed.

On July 19, 2005, the trial court granted the Smiths motion for partial summary judgment. The trial court found that the Sharps sought rescission of the contract for deed and a full refund of all payments made to the Smiths for their failure to provide the information required under Section 5.069 of the Texas Property Code. Further, the trial court found that the Smiths admitted failing to provide the required information, agreed to rescission of the contract for deed, and tendered money into the registry of the court. Although the trial court found that the Sharps requested specific performance, it found no provision for specific performance for violations of Section 5.069. Thus, the trial court ordered that the contract for deed be cancelled and rescinded and that the Sharps be fully refunded the payments they had made.

Later, the Smiths filed a motion for final summary judgment based on no evidence and stated that there was no evidence that Nancy Smith signed any written agreement concerning the Sharps. In their response, the Sharps alleged that the Smiths were joint owners of the subdivision where the tract of land was located and had engaged in transfers of land in the subdivision in which both of them were named as grantors. In an affidavit attached to the response, the Sharps attorney stated that, in his capacity as attorney, he obtained a title run regarding the Tall Oaks Estates and that the property comprising the subdivision in which the tract of land was located was deeded to Rex Smith and wife, Nancy Smith. He also stated that the Smiths jointly filed plats regarding the subdivision. The title run was attached to the Sharps response. On March 19, 2006, the trial court granted Nancy Smith s motion for a final no evidence summary judgment because she did not sign any agreement with the Sharps.

On December 8, 2006, the trial court conducted a bench trial. During the trial, the Sharps asked Rex Smith if he delivered the disclosures required by Section 5.069 of the Texas Property Code to them. The Smiths attorney objected that the trial court already ruled that the contract for deed was rescinded and, thus, such testimony was irrelevant. The Sharps attorney responded that they had sought damages as well as rescission and wanted to present all of the evidence necessary to support their claim for rescission along with their claims for damages under Section 5.077. After a lengthy discussion, the trial court sustained the objection, stating that it had already ruled on the cause of action under Section 5.069 and on rescission of the contract. Thus, the trial court denied any additional damages under Section 5.069. Later, Rex Smith admitted that he did not send any accountings to the Sharps required by Section 5.077 from the execution of the contract for deed until April 12, 2005.

On April 2, 2007, the trial court signed a final judgment incorporating both its summary judgments. Further, the trial court again ordered that the contract for deed be deemed rescinded, that the money paid by the Sharps and deposited into the registry of the court be awarded to them, that Rex Smith be awarded ownership and possession of the tract of land, and that the Sharps remove their mobile home from the tract of land. After a timely request from the Sharps, the trial court filed findings of fact and conclusions of law. This appeal followed.

Rescission of Contract for Deed

In their second issue, the Sharps argue that the trial court erred in granting the Smiths motion for partial summary judgment according to Section 5.069 of the Texas Property Code and granting rescission to the Smiths based on the Smiths wrongful conduct. More specifically, the Sharps contend that the trial court misinterpreted their request for specific performance, and that the Smiths failed to meet their burden of proof on their motion for partial summary judgment.

Standard of Review

In reviewing a traditional motion for summary judgment,1 we apply the standards established in Nixon v. Mr. Property Management Company, 690 S.W.2d 546, 548-49 (Tex. 1985), which are (1) the movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law; (2) in deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the nonmovant will be taken as true; and (3) every reasonable inference must be indulged in favor of the nonmovant and any doubts resolved in its favor. See id. at 548-49. A movant must either negate at least one essential element of the nonmovant's cause of action, or prove all essential elements of an affirmative defense. See Randall's Food Markets, Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex. 1995); see also MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex. 1986). Since the burden of proof is on the movant, and all doubts about the existence of a genuine issue of material fact are resolved against the movant, we must view the evidence and its reasonable inferences in the light most favorable to the nonmovant. See Great Am. Reserve Ins. Co. v. San Antonio Plumbing Supply Co., 391 S.W.2d 41, 47 (Tex. 1965). A movant asserting an affirmative defense is entitled to summary judgment if he or she conclusively proves all essential elements of that defense as a matter of law. Enriquez v. Khouri, 13 S.W.3d 458, 460 (Tex. App. El Paso 2000, no pet.); Freedman v. Cigna Ins. Co. of Tex., 976 S.W.2d 776, 777 (Tex. App. Houston [1st Dist.] 1998, no pet.).

Applicable Law

Section 5.069 of the Texas Property Code states that before an executory contract is signed by the purchaser, the seller must provide the purchaser with (1) a survey, which was completed within the past year, or a plat of a current survey of the real property; (2) a legible copy of any document that describes an encumbrance or other claim, including a restrictive covenant or easement, that affects title to the real property; and (3) a written notice, which must be attached to the contract, informing the purchaser of the condition of the property that must, at a minimum, be executed by the seller and purchaser and read substantially similar to the disclosure notice provided in the statute. Tex. Prop. Code Ann. 5.069(a) (Vernon 2004). The seller s failure to provide information required by Section 5.069 entitles the purchaser to cancel and rescind the executory contract and receive a full refund of all payments made to the seller. Id. 5.069(d)(2) (Vernon 2004).

If a party s remedies or defenses are inconsistent, to hold that a party has made a binding choice between them would be to invoke the doctrine of election of remedies. See Deal v. Madison, 576 S.W.2d 409, 421 (Tex. Civ. App. Dallas 1978, writ ref d n.r.e.), overruled on other grounds, Cypress Creek Util. Svc. Co., Inc. v. Muller, 640 S.W.2d 860, 866 (Tex. 1982). Election of remedies is an affirmative defense. France v. Am. Indem. Co., 648 S.W.2d 283, 285 (Tex. 1983). As an affirmative defense, the election of remedies doctrine may constitute a bar to relief when (1) one successfully exercises an informed choice (2) between two or more remedies, rights, or states of facts (3) that are so inconsistent as to (4) constitute manifest injustice. Bocanegra v. Aetna Life Ins. Co., 605 S.W.2d 848, 851 (Tex. 1980). Pursuing inconsistent remedies, without more, is not enough to invoke application of the doctrine of election. Deal, 576 S.W.2d at 421. Normally, a party need not elect between his theories of recovery until after the verdict. Id. Moreover, a party does not lose a remedy by electing to pursue another unless it appears that he acted voluntarily, intentionally, and with the knowledge essential to the exercise of an intelligent choice. Zimmerman v. First Am. Title Ins. Co., 790 S.W.2d 690, 697 (Tex. App. Tyler 1990, writ denied).

Analysis

In their amended petition, the Sharps pleaded for liquidated damages and specific performance for the Smiths violation of Section 5.077(a) and, in the alternative, rescission of the contract for deed for the Smiths violation of Section 5.069. In their motion for partial summary judgment, the Smiths stated that both parties requested the remedy of rescission and, thus, summary judgment was appropriate. We interpret this as a motion for partial summary judgment on the issue of election of remedies. To show themselves entitled to partial summary judgment, the Smiths must have established all four elements of the election of remedies doctrine. See Tex. Dev. Co. v. Exxon Mobil Corp., 119 S.W.3d 875, 885 (Tex. App. Eastland 2003, no pet.). Merely stating that both parties requested rescission does not conclusively prove all of the elements of the affirmative defense as a matter of law. See id. The Smiths did not present any evidence showing that the Sharps made an informed choice, voluntarily and intentionally, between two or more remedies and that those remedies were so inconsistent as to constitute manifest injustice. See Bocanegro, 605 S.W.2d at 851; Zimmerman, 790 S.W.2d at 697.2 Thus, the Smiths failed to establish any of the elements of their affirmative defense. See Tex. Dev. Co., 119 S.W.3d at 885. Because the Smiths failed to show that they were entitled to judgment as a matter of law, we conclude that they failed to meet their burden of proof on the motion for partial summary judgment. See Nixon, 690 S.W.2d at 548-49.

Having concluded that the Smiths failed to meet their burden of proof on the motion for partial summary judgment, we sustain the Sharps second issue. Because the Sharps second issue is dispositive, we need not consider their first, fourth, or fifth issues.

Summary Judgment for Nancy Smith

In their third issue, the Sharps argue that the trial court erred in granting Nancy Smith s motion for final no evidence summary judgment. More specifically, they contend that the trial court erred by basing its decision solely on the fact that Nancy Smith did not sign the contract for deed.

Standard of Review

In a no evidence summary judgment, a party is entitled to summary judgment if there is no evidence of one or more essential elements of a claim or defense on which an adverse party would have the burden of proof at trial. Tex. R. Civ. P. 166a(i). If the nonmovant presents more than a scintilla of evidence supporting the disputed issue, summary judgment for the movant is improper. King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 751 (Tex. 2003). More than a scintilla of evidence exists if it would allow reasonable and fair minded people to differ in their conclusions. Id.

Applicable Law and Analysis

Community property consists of the property, other than separate property, acquired by either spouse during marriage. Tex. Fam. Code Ann. 3.002 (Vernon 2006). Community property is subject to the joint management, control, and disposition of the spouses unless the spouses provide otherwise by power of attorney in writing or other agreement. Tex. Fam. Code Ann. 3.102(c) (Vernon 2006). Rule 39 of the Texas Rules of Civil Procedure states that a person who is subject to service of process shall be joined as a party in an action if in her absence complete relief cannot be accorded among those already parties. Tex. R. Civ. P. 39(a). Rule 39 focuses not so much upon whether the court has jurisdiction, but upon whether the court ought to proceed with the parties before it. Sabre Oil & Gas Corp. v. Gibson, 72 S.W.3d 812, 816 (Tex. App. Eastland 2002, pet. denied).

In their motion for final no evidence summary judgment, the Smiths alleged that Nancy Smith should not be a party to this suit because she did not sign the contract for deed. In their response, the Sharps alleged that the Smiths were joint owners of the subdivision where the tract of land was located and that they had engaged in transfers of land in the subdivision in which both Smiths were named as grantors. Further, the Sharps produced a title run showing that the property comprising the subdivision in which the tract of land was located was deeded to Rex Smith and his wife, Nancy Smith, and that they had jointly filed plats regarding the subdivision. Because the property was acquired during the Smiths marriage, the property comprising the subdivision in which the subject tract of land was located is presumed to be community property. See Tex. Fam. Code Ann. 3.002. Therefore, without a power of attorney or other agreement providing to the contrary, the property is subject to the joint management of the Smiths. See Tex. Fam. Code Ann. 3.102(c).

One of the Sharps requested remedies included specific performance, i.e., that the Smiths be ordered to convey to them the tract of land by general warranty deed. If the tract of land is the Smiths community property and under their joint management, Rex Smith, acting alone, cannot convey the entire marital property interest or, more particularly, Nancy Smith s interest. See In re Marriage of Morrison, 913 S.W.2d 689, 692 (Tex. App. Texarkana 1995, writ denied). In other words, the Smiths must be joined in a warranty deed to convey the entire property. See Jean v. Tyson-Jean, 118 S.W.3d 1, 5 (Tex. App. Houston [14th Dist.] 2003, pet. denied). Thus, Nancy Smith is a necessary party to the suit in order to accord the Sharps complete relief. See Tex. R. Civ. P. 39(a); Juarez v. Hamner, 674 S.W.2d 856, 860 (Tex. App. Tyler 1984, no writ).

Because the Sharps presented more than a scintilla of evidence supporting the fact that Nancy Smith was a necessary party to the suit, we conclude that summary judgment for Nancy Smith was improper and that the trial court erred in granting her motion for final no evidence summary judgment. Having concluded that the trial court s order was improper, we sustain the Sharps third issue.

Conclusion

Based upon our review of the record, we conclude that, as a matter of law, the Smiths did not show that they were entitled to partial summary judgment granting rescission or that Nancy Smith was entitled to a no evidence summary judgment. Having sustained the Sharps second and third issues, we reverse the trial court s final judgment dated April 2, 2007 and remand the matter for further proceedings consistent with this opinion.

JAMES T. WORTHEN

Chief Justice

Opinion delivered January 31, 2008.

Panel consisted of Worthen, C.J., Griffith, J., and Hoyle, J.

(PUBLISH)

1 See Tex. R. Civ. P. 166a(c).

2 In their response to the motion for partial summary judgment, the Sharps contended that they never offered to compromise and settle their claims for rescission and return of the money that they paid. In fact, they reiterated their claims for damages for the Smiths violations of Sections 5.069 and 5.077 of the Texas Property Code.