Kevin T. Morton v. Hung Nguyen and Carol S. Nguyen
369 S.W.3d 659
Tex. App.2012Background
- Morton entered a January 2007 contract for deed to sell a Spring, Texas house to the Nguyens, with nine years of interest-only payments and escalating interest up to 12.875%.
- Nguyens planned to obtain outside financing but became eligible only after two years and ultimately defaulted on payments; they later sought to cancel and rescind under Texas Property Code and refunds.
- Nguyens gave notice and exercised their statutory cancellation rights on November 30, 2009; they moved out after Morton ordered them from the home amid alleged harassment.
- Trial court awarded the Nguyens $63,693.47 actual damages, $160,000 liquidated damages, $10,000 mental anguish, $300 statutory remedy under the Finance Code, plus fees and interest; Morton appealed and Nguyens cross-appealed for pre-judgment interest.
- Court addressed Flores good-faith standard for 5.077 liquidated damages, whether Flores extends to other Property Code sections, equity defenses to cancellation, and damages/fees issues, ultimately remanding and striking certain damages while affirming the judgment as modified.
- The opinion also discusses whether post-rescission conduct violated the Texas Finance Code and whether such violations trigger DTPA claims, ultimately removing the statutory damages strike and disconnecting some mental anguish findings from statutory violations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicability of Flores good-faith standard to 5.077 liquidated damages | Morton argues Flores governs 5.077, showing substantial compliance precludes damages. | Nguyens argue Flores applies broadly to 5.077 and supports liquidated damages. | Flores applies; remand to determine if statements were so deficient as to fail Flores standard. |
| Flores applicability to other Property Code sections (5.069, 5.070, 5.072, 5.085) | Flores good-faith should extend to all cited sections. | Flores should not extend beyond 5.077. | Flores not extended to 5.069, 5.070, 5.072, 5.085. |
| Equitable defenses (quasi-estoppel and laches) to statutory cancellation | Morton contends defenses bar cancellation. | Statutory remedy not codified to include common-law defenses. | Common-law defenses not available to defeat statutory remedy. |
| DTPA/tie-in effects of Property Code violations and damages | Violations tie into DTPA entitling damages; some damages supported. | DTPA claims not automatically triggered; statutory findings lacking. | Some tie-in effects acknowledged; statutory damages for Finance Code removed; DTPA damages limited by findings. |
| Attorney’s fees segregation and award scope | Fees should be segregated by claim. | If not contested, segregation not preserved. | Issue waived/overruled; fees addressed consistent with statutes and contracts. |
Key Cases Cited
- Flores v. Millennium Interests, Ltd., 185 S.W.3d 427 (Tex. 2005) (Flores held 5.077 is penal and requires good-faith informering, not strict compliance; Flores governs the 5.077 issue.)
- Smith v. Baldwin, 611 S.W.2d 611 (Tex. 1980) (DTPA context; not a codification of common law; informs consumer protections.)
- Nix v. McDavid Pontiac, Inc., 681 S.W.2d 835 (Tex. App.—Dallas 1984) (Restoration of consideration under DTPA incorporates notice/tender concepts from equity.)
- Schenck v. Ebby Halliday Real Estate, Inc., 803 S.W.2d 361 (Tex. App.—Dallas 1990) (Common-law defenses not applied to DTPA; relief considerations vary.)
- Houston & Texas Central Ry. Co. v. H.W. Harry & Bros., 63 Tex. 256 (Tex. 1885) (Early statute interpretation guidance on damages context.)