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Aflalo v. Harris

Court of Appeals of Texas, Fifth District, Dallas

May 23, 2018


          On Appeal from the 95th Judicial District Court Dallas County, Texas Trial Court Cause No. DC-16-00247

          Before Justices Francis, Evans, and Boatright



         Samuel Adam Aflalo sued Devin Lamar Harris and Meghan Theresa Harris for breach of contract alleging they untimely terminated a sales agreement to purchase his residence. The Harrises counterclaimed for declaratory judgment and attorney's fees. After considering competing motions for summary judgment, the trial court ruled in the Harrises' favor and ordered Aflalo to refund the Harrises' earnest money and pay their attorney's fees. In two issues on appeal, Aflalo challenges the ruling. We affirm.

         The Harrises entered into a standard One To Four Family Residential Contract (Resale) to purchase Aflalo's house for $1.45 million and put down $10, 000 in earnest money. The contract was effective November 20, 2015, and the sale was scheduled to close on December 18. Under section 7B(2) of the contract, Aflalo had three days to provide a Seller's Disclosure Notice regarding the property's condition as required by section 5.008 of the Texas Property Code. If he failed to provide the notice, the Harrises could "terminate the contract at any time prior to the closing" and have their earnest money refunded to them. If Aflalo delivered the notice, the Harrises could terminate for any reason within seven days after receiving the notice or before the closing date, whichever occurred first, and have their earnest money returned to them. If either party defaulted, the other party was entitled to enforce specific performance or terminate the contract and receive the earnest money.

         On November 20, Aflalo provided the Harrises a Seller's Disclosure Notice using a TAR-1406 form promulgated by the Texas Association of Realtors. At the top of the form, in bold writing, it stated: "This form complies with and contains additional disclosures which exceed the minimum disclosures required by the [Property] Code." As relevant here, section 5.008 of the property code requires a seller of residential real property comprising not more than one dwelling unit to provide the purchaser of the property "a written notice as prescribed by this section or a written notice substantially similar to the notice prescribed by this section which contains, at a minimum, all of the items in the notice prescribed by this section." Tex. Prop. Code Ann. § 5.008(a) (West Supp. 2017) (emphasis added). Specifically, section 5.008 requires a seller to disclose if he is aware of numerous conditions on the property, including whether the property is in a 100-year floodplain and has present flood insurance coverage. Id. § 5.008(4) (West Supp. 2017). If the seller answers "yes" to the conditions, the statute requires him to explain and "[a]ttach additional sheets if necessary." Id. The form used by Aflalo asked whether the property was located in a 100-year floodplain, was located in a floodway, and had present flood insurance coverage. Like the statute, the form provided that if the seller answered "yes" he was to "explain" any condition and "[a]ttach additional sheets if necessary[.]" But, in addition to the statute, if the seller answered "yes" to the condition regarding present flood insurance coverage, the form directed the seller to attach TAR-1414, a three-page document that provides information about special flood hazard areas. Below is a copy of the relevant portion of the TAR-1406 completed by Aflalo:

         (Image Omitted)

         Aflalo answered "yes" that the property was located in a floodway and had present flood insurance. Aflalo also provided the following handwritten explanation: "I have flood insurance. My lender told me that it was recently added to a flood area." He did not, however, attach TAR-1414 as directed by the form.

         On November 24, one day after Aflalo's disclosure notice was due under the contract, the Harrises' agent sent an email to Aflalo's agent requesting the missing TAR-1414 form. Aflalo did not respond and did not provide the requested form. One day before closing, the Harrises notified Aflalo they were terminating the contract under section 7B(2). Aflalo relisted his property and made demand on the Harrises to perform according to the agreement. Three weeks later, he sued the Harrises for breach of contract seeking specific performance. Aflalo alleged he timely provided the Harrises with the seller's disclosure notice, giving the Harrises until November 27 to back out of the contract. Instead, he said, they waited until December 17.

         The Harrises filed an amended answer generally denying the allegations and raising several affirmative defenses. They also brought a counterclaim for declaratory judgment, asserting Aflalo failed to provide the disclosure notice by not providing the TAR-1414 form, and sought attorney's fees under the contract.

         The parties filed competing motions for summary judgment on Aflalo's breach of contract claim. In addition, Aflalo filed a no evidence motion on the Harrises' affirmative defenses. The court denied Aflalo's motions, granted the Harrises' motion, ordered that Aflalo take nothing on his claim, ordered Aflalo to take the steps necessary to refund the Harrises' earnest money, and held the question of attorney's fees for a subsequent evidentiary hearing. The Harrises then nonsuited their affirmative claims against Aflalo. Following a bench trial, the trial court awarded the Harrises $140, 000 in attorney's fees through trial, contingent appellate fees, and costs of court. After the trial court denied Aflalo's motion to modify the judgment, Aflalo appealed.

         We review a grant of summary judgment de novo. Exxon Corp. v. Emerald Oil & Gas Co., L.C., 331 S.W.3d 419, 422 (Tex. 2010). A party moving for traditional summary judgment has the burden to prove there is no genuine issue of material fact and it is entitled to judgment as a m a t t e r o f l a w . Tex.R.Civ.P. 166a(c); Mannford Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). When reviewing a summary judgment, we take as true all evidence favorable to the nonmovant, and we indulge every reasonable inference and resolve any doubts in the nonmovant's favor. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005).

         When both sides move for summary judgment, each party bears the burden of establishing it is entitled to judgment as a matter of law. City of Garland v. Dallas Morning News, 22 S.W.3d 351, 356 (Tex. 2000). When the trial court grants one motion and denies the other, we review the summary judgment evidence presented by both parties and determine all questions presented. S. Crushed Concrete, LLC v. City of Houston, 398 S.W.3d 676, 678 (Tex. 2013). In such a situation, we render the judgment the trial court should have rendered. Fielding, 289 S.W.3d at 848.

         A successful breach of contract claim requires proof of the following elements: (1) a valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract by the defendants; and (4) damages sustained by the plaintiff as a result of that breach. See Petras v. Criswell, 248 S.W.3d 471, 477 (Tex. App.-Dallas 2008, no pet.).

         In their motion for summary judgment, the Harrises asserted the evidence showed as a matter of law that (1) Aflalo failed to perform because he did not provide a TAR-1414 form and (2) they did not breach the contract. In his first issue, Aflalo contends the trial court erred by granting the Harrises' motion for summary judgment and denying his motion because the undisputed facts established he provided the required seller's disclosures, rendering the Harrises' termination untimely and a breach of the agreement. To decide this issue, we must resolve the question of whether Aflalo was required to provide a TAR-1414 form to perform under the contract.

         In construing a written contract, the primary concern of the court is to ascertain the true intentions of the parties as expressed in the instrument. Valence Operating Co., 164 S.W.3d at 662. To achieve this objective, courts should examine and consider the entire writing in an effort to harmonize and give effect to all provisions of the contract so that none will be rendered meaningless. Id. We presume the parties to a contract intend every clause to have some effect. Ogden v. Dickinson State Bank, 662 S.W.2d 330, 331 (Tex. 1983). We give terms their plain, ordinary, and generally accepted meanings unless the contract itself shows them to be used in a technical or different sense. Valence Operating Co., 164 S.W.3d at 662. We enforce an unambiguous document as written. Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996).

         Section 7 of the sales contract is entitled "PROPERTY CONDITION." Subsection B is entitled, "SELLER'S DISCLOSURE NOTICE PURSUANT TO § 5.008, TEXAS PROPERTY CODE (Notice)" followed by three subsections. The Harrises checked the box to subsection 7B(2), which stated:

(2) Buyer has not received the Notice. Within 3 days after the effective date of this contract, Seller shall deliver the Notice to Buyer. If Buyer does not receive the Notice, Buyer may terminate this contract at any time prior to the closing and the earnest money will be refunded to Buyer. If Seller delivers the Notice, Buyer may terminate this contract for any reason within 7 days after Buyer receives the Notice or prior to the closing, whichever first occurs, and the earnest money will be refunded to Buyer.

         Aflalo contends the above notice requirement was limited to information required to be disclosed under section 5.008 of the property code and, because neither the property code nor the sales contract mentions the TAR-1414 form, he was not required to provide one under the contract. He further contends the form provided in section 5.008 only required that he answer "yes" or "no" to whether he was aware of "Present Flood Insurance Coverage, " and if so, to "explain" and "[a]ttach additional sheets if necessary, " which he said he did. As support, he relies on Sherman v. Elkowitz, 130 S.W.3d 316 (Tex. App.-Houston [14th] 2004, no pet.), for the proposition that the use of "varying forms should not alter the obligations of a party under the Property Code." Aflalo reads too much into the Houston court's opinion.

         In Sherman, the buyers purchased a home and then discovered various defects in the property. They learned the sellers had sued the prior owner for failing to disclose these same alleged defects. Id. at 318. Neither the defects nor the lawsuit had been disclosed in the seller's disclosure notice. The buyers sued the sellers, the sellers' agent, and the realty company for alleged misrepresentations and nondisclosures in the disclosure notice. The buyers obtained a favorable judgment against the sellers, but the trial court granted a directed verdict in favor of the sellers' agent and realty company. Id. at 319.

         On appeal, the buyers argued they presented evidence that the listing agent knew of the earlier lawsuit and could be held liable for failing to disclose that fact. Id. at 323. The question before the Houston court was whether the buyers were entitled to disclosure of the earlier lawsuit. As in this case, the sellers' disclosure notice varied from the statute. Id. But, unlike here, that variance arguably narrowed the scope of the disclosures required by the statute, so the court used the broader, statutory requirements to determine the sellers' disclosure obligations. See id. The court's analysis showed the buyers were not entitled to relief because the disclosure of a lawsuit that was not pending was not required by either the statute or the TAR form. Nothing in the case suggests that varying forms can never broaden the disclosure obligations of sellers. If anything, the case supports the proposition that such forms cannot reduce the seller's disclosure obligations set out in the statute.

         Here, to meet his contractual obligation, Aflalo used a TAR-1406 form that required him to provide additional information, a TAR-1414 form, if he stated he had present flood insurance coverage. By using a TAR-1406 form to satisfy his notice requirement, Aflalo expanded rather than reduced the disclosure he was required to provide. When he disclosed he had present flood insurance coverage, the form required him to provide the Harrises with a TAR-1414 form. When Aflalo did not attach the form to the disclosure notice provided to the Harrises, the Harrises' agent asked for the additional information. Aflalo did not respond. By failing to provide the TAR-1414 form, he failed to fully comply with his obligation under the sales contract regarding the seller's disclosure notice and the Harrises therefore were allowed to terminate the contract at any time. Because the Harrises established as a matter of law that Aflalo did not perform his obligations and they did not breach the contract, the ...

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