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Vlasak v. Taxco, Inc.

Court of Appeals of Texas, First District

July 11, 2017

TAXCO, INC., Appellee

         On Appeal from the 11th District Court Harris County, Texas Trial Court Case No. 2014-49207

          Panel consists of Chief Justice Radack and Justices Brown and Lloyd.


          Harvey Brown Justice

         The Silber Family Trust sought to purchase a tear-down house from Taxco, Inc. and, when the sale failed to close, sued Taxco for specific performance. A bench trial resulted in a take-nothing judgment. The trial court held that the sale agreement had expired on the closing date listed in the sale agreement and that, because Taxco had not breached the agreement, the Trust was not entitled to specific performance.

         The Trust appeals the judgment, contending that the evidence is legally and factually insufficient. The Trust argues that the contract did not expire on the specified closing date, Taxco continued to have a contractual obligation to complete the sale, and Taxco breached the agreement by refusing to close two months after the specified closing date.

         We affirm.


         Taxco owned a residential property in Houston, Texas that both parties have referred to as a "tear-down." The Trust had purchased several other tear-downs in the same neighborhood and was interested in purchasing this property, which the Trust's trustee, Thomas Vlasak, described as "derelict" but in a good location. The Trust intended to remove the existing structure, construct a new home, and "flip" it once the new home was ready for sale.

         The Trust and Taxco entered into a standard form residential earnest money contract on December 3, 2013 for a purchase price of $200, 000 with a payment of earnest money. The contract specified that the closing would occur later that month, on or before December 29.

         The earnest money contract provided that the seller, Taxco, was obligated to provide, at the buyer's expense, a title commitment "subject to promulgated exclusions" within 20 days. Other than standard objections, the buyer was required to object to any listed exceptions, but the portion of the form specifying the date for such objections was not completed. If the buyer failed to timely object, it waived its rights, except for the requirements in Schedule C. If the buyer did object, the seller was obligated to cure the timely objection. If the seller failed to do so, the contract would terminate unless the buyer waived the objections. Finally, the contract stated that at the closing the seller and buyer would "execute and deliver any . . . documents reasonably required for . . . the issuance of the Title Policy."

         The Trust had used Chicago Title Co. as a title insurer in other real estate transactions and selected it to issue a title insurance policy on this property. On December 23, Chicago Title issued to the Trust a title commitment, which stated that Chicago Title would issue a title policy "upon compliance with the requirements in Schedule B and Schedule C." Schedule B listed exceptions from coverage, such as outstanding taxes, homestead rights, easements, and set back requirements. Schedule C listed other items that would not be covered under the policy unless the Trust managed to adequately "dispose of these matters to our satisfaction before the Policy is issued."

         Schedule C included four City of Houston notices of public hearing and four orders from the City's Department of Public Works and Engineering. These notices and orders related to violations of the City's ordinances and to the City's earlier findings that the property was "dilapidated, substandard, or unfit for human habitation, " "constitute[d] a hazard to the health, safety or welfare of its occupants and/or the citizens, " and a public nuisance. The notices provided that the house could not be remodeled or torn down without the City's approval. These notices were not liens on the property and did not demand any payment.

         Chicago Title's cover letter to the title commitment highlighted the City-notice issue and informed the parties that Chicago Title would "need a review" of the items listed in Schedule C before closing and would "also need to secure their release." While neither the cover letter nor the title commitment stated whether the burden to obtain the releases was on the buyer or the seller, the contract provided that the seller, Taxco, was obligated to provide a title commitment "subject to promulgated exclusions."

         The parties received the title commitment discussing the City-notice issue six days before the specified closing date.

         With the City-notice issues still unresolved, the Trust signed the closing documents before the specified closing date and paid the purchase price to the title company to hold in escrow. There is no evidence that Taxco was told that the Trust had tendered the purchase price or signed the closing documents.

         Taxco, on its end, contacted the City of Houston to address its notices. According to Taxco's president, Patrick Walker, the City told Taxco that it did not provide releases for its notices.[1] Based on that information, Taxco informed the title company in mid-December that releases could not be obtained.

         On December 23, Chicago Title's vice president, Marc Archuleta, emailed the parties that the title company "still need[ed] some items" from Taxco, referring to releases from the City. Taxco responded by again telling the title company that it could not obtain releases from the City.[2]

         There is no evidence that Chicago Title contacted Taxco between December 23 and December 29 to schedule Taxco's execution of the documents needed for closing or to inform Taxco that the City-release issue was resolved or waived.

         December 29 passed without a closing.

         On January 9, 2014-11 days after the specified closing date-the Trust emailed Taxco to alert it that Chicago Title would be sending a list of "items needed to close, " including the City-notice issue. That same day, Archuleta forwarded copies of the City's notices to both parties for their "reference and to assist in satisfying this matter." There is no documentary evidence that Chicago Title had any further contact with the parties in January.

         Archuleta testified that, even though Chicago Title had requested the parties' assistance in satisfying the City-notice issue, Chicago Title, itself, obtained the City's releases in January, which allowed the closing could go forward. Archuleta did not bring copies of those releases to trial. After this testimony, the trial court granted a continuance that allowed Archuleta to retrieve records from his office. Even after the continuance, he failed to provide documentary evidence that the releases had been obtained.

         There is no documentary evidence that Chicago Title ever provided the parties with copies of the releases. Nor is there evidence that Chicago Title informed Taxco that it had obtained the releases. And Archuleta did not recall ever asking Taxco to execute the closing documents.

         The next month, on February 14, 2014, the Trust emailed Taxco to ask when Taxco would be ready to close. Taxco responded on February 20 that "it does not appear this transaction is going to close, " explaining that Chicago Title had "agreed to check and get back with [Taxco]" about the City's notices but never did. Taxco wrote that it had never received "any notice that this requirement had been waived." According to Taxco, it "assumed the deal had fallen apart" because it was not contacted by the Trust or Chicago Title for over a month following the January 9 email.[3] Taxco concluded by stating that it had assumed that the contract had been terminated because Chicago Title was requiring releases that could not be obtained. Taxco agreed to the return of the Trust's earnest money.

         The trial witnesses provided additional context to these emails through their testimony. Vlasak testified that the Trust had fully complied with its contractual obligations before the December 29 closing date. Yet he did not testify that the Trust ever informed Chicago Title or Taxco that it would waive the exceptions in the title policy for the City notices.

         Archuleta agreed that the Trust closed its portion of the transaction before the closing date. Regarding the City-notice issue, he testified that Taxco did not resolve the issue or request a waiver of the Schedule C exceptions. Instead, Chicago Title resolved the issue itself in January 2014 when it obtained the releases from the city directly.[4] According to Archuleta, because Chicago Title resolved the city-notice issue, all that was left for Taxco to do was show up for the closing. Based on Archuleta's testimony, the Trust argued that Taxco's failure to appear for closing breached the ...

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