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Rex Smith and Nancy Smith v. Kelly Davis and Amber Davis

April 24, 2013

REX SMITH AND NANCY SMITH,
v.
KELLY DAVIS AND AMBER DAVIS, APPELLEES



APPEAL FROM THE 294TH APPELLANTS JUDICIAL DISTRICT COURT VAN ZANDT COUNTY, TEXAS

The opinion of the court was delivered by: J Ames T. W Orthen Chief Justice

MEMORANDUM OPINION

Rex Smith and Nancy Smith appeal the trial court's judgment based on statutory fraud in a real estate transaction in favor of Kelly Davis and Amber Davis. The Smiths raise five issues on appeal. We reverse and remand.

BACKGROUND

The Smiths own the Tall Oaks Estates Subdivision in Van Zandt County, Texas. On February 15, 2003, Rex Smith signed a contract with the Davises to allow them to purchase lot 9 of the subdivision for $43,750.00. The Davises were to make monthly payments over the next 180 months for the purchase of the lot. In April 2004, the Davises executed a vendor's lien note and deed of trust made payable to the Smiths, after which the Smiths executed a warranty deed with vendor's lien conveying lot 9 to the Davises. In March 2005, lot 7 in the subdivision became available for purchase. After a meeting between Rex Smith and the Davises, he and the Davises executed another contract in which the Davises agreed to purchase lot 7 for $65,100.00. The payments the Davises had made to the Smiths for lot 9 were applied to the purchase price for lot 7. Additionally, the Davises reconveyed lot 9 to the Smiths.

Around the end of 2007, the Davises requested that the Smiths give them a deed to lot 7, as they had done on lot 9, so that it could be recorded in the land records of Van Zandt County.

Before sending the Davises the requested deed to lot 7, Rex Smith sent a vendor's lien note and deed of trust for the Davises to sign, similar to the vendor's lien note and deed of trust they had signed on lot 9. In response, the Smiths received the following letter from S. Gary Werley, the attorney for the Davises:

January 15, 2008

Rex Smith and wife, Nancy Smith P. O. Box 536 Eustace, TX 75214 RE: Lots # 7 Tall Oaks Estates Van Zandt County

Dear Mr. and Mrs. Smith:

I represent Kelly and Amber Davis in reference to the executory contract for Lot #7 of Tall Oaks Estates Subdivision, dated March 22, 2005.

You furnished a Deed of Trust and Promissory Note pursuant to Section 5.081 of the Texas Property Code. The section is only availabe [sic] to the purchaser, who is not responsible for any costs and requires you to execute and record a warranty deed. Also the note is to be equal to the balance owed under the contract-not the contract total.

I inquired about the balance and was informed that you had not furnished the Annual Accounting Statement required by Section 5.077. Pursuant to Section 5.077 (d) you are liable for liquidated damages in the amount of $250.00 a day since January 31, 2006 and $500.00 a day since January 31, 2007 for a total of $273,750.00, limited by the fair market value of the property being $90,000.00.

Please send the sum to me, made payable to Kelly and Amber Davis.

Yours truly,

/s/ S. Gary Werley

S. Gary Werley

The Smiths did not pay the sum demanded by the Davises, and on February 28, 2008, the Davises filed suit against the Smiths alleging numerous statutory violations based on the contract to convey lot 7. Eventually, the case was tried to a jury. The jury made findings in favor of the Davises allowing for the recovery of damages based on statutory fraud in a real estate transaction under Section 27.01 of the Texas Business and Commerce Code, as well as common law negligent misrepresentation and mutual mistake. The jury also made findings in favor of the Davises under Texas Property Code Sections 5.069 (failure to provide a survey and disclosures concerning whether the property was within a flood plain), 5.070 (failure to provide tax certificates), 5.072 (failure to provide notice that the written agreement is the final agreement of the parties, and that oral agreements were prohibited), and 5.077 (failure to provide annual statements).*fn1 Before judgment was rendered, ...


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