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Ferrara v. Nutt

Court of Appeals of Texas, First District

June 21, 2018

LEONEL FERRARA, Appellant
v.
JOAN NUTT AND MAICK S. DALU, Appellees

          On Appeal from the 334th District Court Harris County, Texas Trial Court Case No. 2013-48461

          Panel consists of Justices Keyes, Brown, and Lloyd.

          OPINION

          Evelyn V. Keyes, Justice

         This real property dispute arises out of an attempt to purchase a piece of property through a contract for deed. Appellant, Leonel Ferrara, sued appellees, Joan Nutt and Maick S. Dalu, for several causes of action including breach of contract, fraud, violations of the Deceptive Trade Practices Act, violations of the Texas Property Code, and a suit to quiet title after Nutt sold the property at issue to Dalu despite having previously executed a contract for deed with Ferrara. Nutt did not answer or appear, and, after a bench trial, the trial court rendered a default judgment against Nutt on Ferrara's breach of contract claim and awarded damages. The trial court dismissed all other claims against Nutt as well as all claims against Dalu.

         In three issues, Ferrara argues on appeal that (1) the trial court erroneously concluded that he was not entitled to the protective provisions of the Texas Property Code concerning certain executory contracts involving residential property; (2) the dismissal of his suit to quiet title "produces a manifestly unjust result" and "condones the very conduct that [the relevant sections of the Property Code] intends to prevent"; and (3) Dalu is required to convey the property to Ferrara under the terms of the contract for deed, which bind the parties' successors and assigns.

         We affirm.

         Background

         In May 2011, Ferrara and Nutt entered into a "Contract for the Lease and Mandatory Purchase of Real Estate" ("the Contract") concerning a residential property in north Houston. The parties agreed that Ferrara would lease the property from Nutt beginning in August 2011 and that the lease term would terminate on August 1, 2024. The Contract provided that Ferrara would pay $847.17 per month in rent to Nutt, and Nutt agreed to pay the assessed property taxes during the lease term.

         The "mandatory purchase" portion of the Contract provided that Nutt would sell the property to Ferrara on or before August 30, 2024. The Contract required Ferrara to pay $3, 000 in earnest money and provided that the purchase price for the property was $55, 000. The Contract allowed Ferrara to deduct the earnest money deposit and all rents that he paid during the lease term from the purchase price. The Contract also required Ferrara to execute a promissory note at closing for the balance of the purchase price at an interest rate of 4.5% per year. The Contract included a provision stating that "[a]ll covenants, conditions and agreements and undertakings" stated in the Contract "shall extend to and be binding on the respective heirs, successors and assigns of the respective parties hereto the same as if they were in every case named and expressed." The second-to-last page of the Contract included a handwritten notation above Nutt's signature stating, "After 12 years or 55, 000.000[, ] fifty five thousand paid, the lessor [sic] shall own the property." Nutt did not record the Contract in the Harris County real property records.

         The property required extensive repairs to be habitable, and Ferrara spent approximately $13, 700 on these repairs beginning in August 2011. Ferrara's expenditures included installing a new air conditioning unit, fixing drywall in the garage and the living room, making repairs to the kitchen and bathrooms, installing new carpet, painting the interior and exterior, landscaping, and removing beehives on the exterior.

         In November 2011, Nutt modified the terms of the Contract in an e-mail to Ferrara. Nutt lowered Ferrara's monthly payments to $540.72, but extended the lease term to fifteen years, or until October 1, 2026, and raised the annual interest rate to 9.1%. Nutt stated in the e-mail, "If 2 months of payments are missed after November 1, 2011, I will have to consider our contract of lease to own void."

         Due to the unexpected expenditures to make the property habitable, Ferrara decided to rent the property to Leticia Rodriguez beginning in 2012 to recoup the money that he had spent repairing the house. Rodriguez paid Ferrara $850 per month in rent. Ferrara continued making his monthly payments, now at the lower rate of $540.72 per month, to Nutt.

         In June 2013, Nutt sold the property to Dalu for approximately $40, 000. Rodriguez continued living at the property after this sale, and, beginning in July 2013, she made her monthly rental payments to Dalu instead of Ferrara.

         In August 2013, Ferrara sued Nutt and Dalu. Ferrara brought a suit to quiet title, asserting that the deed conveying the property from Nutt to Dalu was invalid because Nutt "had no title or interest in the [p]roperty at the time of the conveyance, and had no authority, actual or apparent, to convey [Ferrara's] property." Ferrara alleged that Nutt violated the Deceptive Trade Practices Act ("DTPA") by "advertis[ing] goods or services with intent not to sell them as advertised" and "represent[ing] that an agreement confers or involves rights, remedies, or obligations which it does not have or involve, or which are prohibited by law." Ferrara also alleged that Nutt engaged in false, misleading, or deceptive acts by violating eleven provisions of the Texas Property Code relating to executory contracts for residential property, which are considered "tie in" statutes under the DTPA. Further, Ferrara asserted causes of action for fraud in a real estate transaction, breach of fiduciary duty, money had and received, and breach of contract against Nutt, and causes of action for common law fraud and tortious interference with contract against Nutt and Dalu. Ferrara sought actual damages, treble damages under the DTPA, and exemplary damages.

         Nutt did not file an answer and did not appear at trial. Dalu answered and appeared at trial, representing himself pro se. At a bench trial, Ferrara testified that he purchased the property from Nutt because he was going to live there with his family. He stated that, at the time he entered into the Contract with Nutt, Nutt told him that Dalu had wanted to buy the house, but Nutt preferred to sell it to Ferrara because he and his children lived in a mobile home and needed a larger space, whereas Dalu did not need the house. Ferrara testified that he lived in a mobile home next to his business and that he rented the house to Rodriguez because he had spent a significant amount of money fixing up the house and he "wanted to recover the money that [he] had invested in the house."

         Ferrara testified that Dalu knew that Ferrara had purchased the property from Nutt prior to the June 2013 deed between Nutt and Dalu.[1] Ferrara testified that he had known Dalu for over fifteen years and that he went into one of Dalu's convenience stores on a near-daily basis. On one occasion, Dalu asked Ferrara if he had purchased the house from Nutt, and Ferrara explained the lease-to-own agreement he had made with Nutt. Dalu then suggested that he loan Ferrara $25, 000 to purchase the house, the house could belong to both of them, and they could rent out the house. Ferrara declined this offer, testifying that he told Dalu that Nutt wanted Ferrara to purchase the property for his children, whom Nutt had known for years.

         Rodriguez testified that she began living at the property in 2012. She stated that she first spoke with Dalu around April or May of 2013 when Dalu stopped by the house and asked if she was renting or buying the house. Rodriguez told Dalu that she rented the house and that "the owner lives a couple [of] streets down. His name is Leonel [Ferrara]. He's the owner of the house, not me."

         Dalu testified that, before he purchased the house from Nutt, he stopped by the house and asked Rodriguez if she was renting the house and how much her rental payments were each month. Rodriguez told him that she paid $850 per month, and Dalu testified that Nutt had told him that Ferrara paid her around $500 per month, so his understanding was that Ferrara leased the property from Nutt and then made around $200 or $300 as a commission by leasing the property to Rodriguez. He testified that he was never told that Ferrara had an ownership interest in the property. Dalu denied knowing specific information about the contractual relationship between Nutt and Ferrara.

         The trial court entered a take-nothing judgment on Ferrara's claims against Dalu and dismissed those claims with prejudice. The trial court also granted a default judgment against Nutt and awarded Ferrara judgment on his breach of contract claim against Nutt in the amount of $13, 772.78, plus costs and pre- and post-judgment interest.

         The trial court also entered findings of fact and conclusions of law. Relevant to this appeal, the trial court found that "[n]either Ferrara nor his family members lived at the Property" and that "Ferrara rented the Property to Ms. Leticia Rodriguez, who lived there continuously from early 2012 through all times relevant to this suit." The trial court also found that Ferrara presented no evidence "that he paid the earnest money [deposit] required by the Contract." The trial court entered the following conclusions of law, among others:

3. The evidence presented does not support recovery on any other causes of action pled against Nutt, and all of Plaintiff's claims against Nutt other than breach of contract should be dismissed.
4. The protective provisions of Texas Property Code Section 5, Subchapter D, which relate generally to executory contracts for the conveyance of residential real property, do not apply to the Contract because the Property was not "used or to be used as the purchaser's residence or as the residence of a person related to the purchaser within the second degree by consanguinity or affinity." See Tex. Prop. Code § 5.062(a). There was no or insufficient evidence that the Property was being used as Ferrara's residence or that Ms. Leticia Rodriguez is related to him.
5. There was no or insufficient evidence presented to support Plaintiff's claims against Dalu for breach of contract, fraud, DTPA (if and to the extent pled against him), breach of fiduciary duty, tortious interference with contract, money had and received or for exemplary damages, and all such claims against Dalu should be dismissed.
6. Because the Contract does not comply with Section 5, Subchapter D of the Texas Property Code, Plaintiff's suit to quiet title should be denied.

         This appeal followed.

         Applicability of Provisions Relating to Residential ...


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