Barbara D. COSGROVE, Individually and as the Trustee of The Charles and Barbara Cosgrove Family Revocable Living Trust, Petitioner v. Michael CADE and Billie Cade, Respondents
No. 14-0346
Supreme Court of Texas.
June 26, 2015
Rehearing Denied September 11, 2015
468 S.W.3d 32
Justice Willett
T. Derek Carson, Ralph H. Duggins, Philip Avery Vickers, Fort Worth, for Petitioner.
Justice Willett delivered the opinion of the Court, in which Chief Justice Hecht, Justice Green, Justice Lehrmann, and Justice Brown joined.
This deed-reformation dispute resolves whether a mistaken-but-unmistakable omission in an unambiguous warranty deed is the type of injury to which the “discovery rule,” a limited exception to statutes of limitations, should apply. As the court of appeals opinion lamented, “we have no guidance from the Texas Supreme Court on how to apply [the discovery rule‘s inherently undiscoverable injury] standard to the body of law on deed reformation.”1 The stakes are high, as the reliability of record title contributes mightily to the predictability of property ownership that is so indispensable to our legal and economic systems.
Today we expressly hold what we have suggested for almost half a century: Plainly obvious and material omissions in an unambiguous deed charge parties with irrebuttable notice for limitations purposes.2 Also disputed in this case is whether
A grantor who signs an unambiguous deed is presumed as a matter of law to
I. Background
Respondents Michael and Billie Cade sued Petitioner Barbara Cosgrove over two acres of land that Cosgrove purchased from the Cades in 2006 through a trust. The first condition listed under the “Special Provisions” clause of the parties’ Real Estate Contract states, “Sellers to retain all mineral rights.” But the notarized deed, which the Cades either initialed or signed on each page, granted the land in fee simple. The deed was signed and recorded in October 2006. One of the closing documents, the “Acceptance of Title and Closing Agreements,” a form agreement prepared by the title company, bound both parties to “fully cooperate, adjust, and correct any errors or omissions and to execute any and all documents needed or necessary to comply with all provisions of the above mentioned real estate contract.” It is undisputed that the deed mistakenly—but unambiguously—failed to reserve mineral rights.
Prior to entering into the contract, the Cades leased the mineral estate to Dale Resources, LLC, and soon thereafter Chesapeake Energy became operator of the lease. In 2009 and 2010, Chesapeake sent the Cades shut-in checks, which enabled Chesapeake to keep the non-producing lease in force by the payment of a shut-in royalty. In October 2010, Chesapeake sent a letter to the Cades informing them of their rights as royalty owners. That December, Michael Cade contacted Chesapeake to inquire about his royalty payments, and a Chesapeake representative responded there was a “problem” with the deed‘s mineral reservation. Within days, the Cades sent a demand letter to Cosgrove asking Cosgrove to issue a correction deed. Cosgrove replied that the statute of limitations barred any claims the Cades might have over the deed.
In February 2011, the Cades sued Cosgrove for a declaratory judgment that the Cades owned the mineral interests—in effect a suit to reform the deed. They also brought actions for breach of contract (that Cosgrove refused to execute a correction deed in contravention of the Acceptance of Title and Closing Agreements), fee forfeiture, civil theft, and tortious interference with contractual relationship. The tortious interference claim has a two-year limitations period.4 The remaining claims each have a limitations period of four years.5 A four-year period also applies to deed-reformation claims.6 Cosgrove counterclaimed for a declaratory judgment that the Cades’ claims were barred by limitations and the merger doctrine, and sought attorney fees.
Both parties moved for summary judgment. The Cades urged the trial court to declare as a matter of law that the 2006 deed did not convey mineral rights. They also argued that Cosgrove breached the sales contract by refusing to execute a correction deed. Cosgrove asserted that limitations and the merger doctrine barred the Cades’ claims. The trial court ruled that the Cades’ claims were time-barred and also denied their deed-reformation and breach-of-contract arguments. Cosgrove then sought attorney fees, which the trial court denied.
II. Discussion
A. The Discovery Rule Does Not Apply in Plain-Omission Cases
There is generally a rebuttable presumption that a grantor has immediate knowledge of defects in a deed that result from mutual mistake.8 The court of appeals plurality correctly notes that “[a]pplication of the presumption means that the limitations period on a claim to reform an incorrect deed begins to run as soon as the deed is executed because ... the grantor has actual knowledge that the deed is incorrect.”9 This Court has not strictly applied the presumption of knowledge rule because, as we noted many years ago, “[n]umerous exceptions are as well established as the rule itself.”10
The court of appeals plurality did not apply the rebuttable presumption but instead applied the discovery rule, which defers accrual of a claim until the injured party learned of, or in the exercise of reasonable diligence should have learned of, the wrongful act causing the injury.11 Courts apply the discovery rule in limited circumstances where “the nature of the injury incurred is inherently undiscoverable and the evidence of injury is objectively verifiable.”12 Discovery rule cases focus on categorical “types of injury, not causes of action.”13
A plainly evident omission on an unambiguous deed‘s face is not a type of injury for which the discovery rule is available. A generation ago, we held in Sullivan v. Barnett that certain circumstances may trigger a rebuttable presumption that a grantor has immediate knowledge of defects in a deed that result from mutual mistake.14 Once the presumption
We have noted that circumstances may exist where a party is charged with knowledge of a mistake in a deed as a matter of law. For example, in Brown v. Havard, we implicitly recognized the possibility that parties can be charged with knowledge of an obvious mistake: “Nor can it be said that the mistake is so plainly evident as to charge [grantee] with the legal effect of the words used.”17 Decades earlier, in McClung v. Lawrence, we distinguished mistakes about the legal effect of a deed‘s terms from instances where “mineral rights had been entirely omitted from the deeds, a fact plainly evident.”18 In McClung, we cited approvingly two court of appeals cases favoring the bright line we adopt today:
- Kahanek v. Kahanek—“It is well settled ... in suits to correct a mistake in a deed ... if such actor be the grantor, then he is charged, as a matter of law, with knowledge of the contents of his deed from the date of its execution, and limitation begins to run against his action to correct it from that date.”19
- Kennedy v. Brown—Agreeing that at the time the deed is executed a party is charged as a matter of law with knowledge of whether the deed reserves mineral rights provided in the contract, at which time limitations begins to run.20
In plain-omission cases, McClung suggests, and we squarely adopt today, the rule stated by the courts of appeals in Kahanek and Kennedy: Parties are charged as a matter of law with knowledge of an unambiguous deed‘s material omissions from the date of its execution, and the statute of limitations runs from that date.21 The Cades had actual knowledge of the deed‘s omission upon execution. They were charged, as a matter of law, with actual knowledge of what the deed included, and excluded, and limitations began to run from the date of execution. An injury involving a complete omission of mineral interests in an unambiguous deed is inherently discoverable—“a fact plainly evident,” as McClung put it.22 When a reservation of rights is completely omitted from a deed, the presumption of knowledge becomes irrebuttable because the alleged error is obvious. It is impossible to mistake whether the deed reserves rights when it in fact removes rights. In cases like these which involve an unambiguous deed, the conspicuousness of the mistake shatters any argument to the contrary.
B. Section 13.002
The Cades’ assertion that
Our recent decision in Hooks v. Samson Lone Star, Limited Partnership addresses this issue in the fraud setting.30 It recognizes that the date a cause of action accrues is normally a question of law, and the exercise of reasonable diligence is usually a question of fact, but “in some circumstances, we can still determine as a matter of law that reasonable diligence would have uncovered the wrong.”31 After thoroughly surveying our prior decisions, Hooks concludes, “when there is actual or constructive notice, or
Hooks makes two particularly relevant statements that we affirm in the plain-omission setting: (1) reasonable diligence includes examining “readily available information in the public record,”33 and (2) “reasonable diligence should lead to information in the public record.”34 It follows that if HECI imposes an obligation on mineral interest owners “to exercise reasonable diligence in protecting their interests,” and Hooks recognizes that “reasonable diligence should examine readily available information in the public record,” then the Cades cannot claim they acted with reasonable diligence when they failed to notice a plain mistake when executing their deed, and the deed was readily available for inspection in public records for the remainder of the limitations period.
C. The Cades’ Remaining Claims
The Cades’ remaining claims would be available only if they could reform the deed and prove superior right, which they cannot. Because the discovery rule does not apply to, and limitations begin to run against, an action involving a plain omission from an unambiguous deed from the date of execution, the Cades’ remaining claims are barred. Execution of the deed irrefutably establishes the grantor‘s knowledge as a matter of law, so the Cades are prohibited from introducing evidence other than whether the deed was executed and notarized to establish when the parties learned of the deed‘s true contents. Cosgrove owns fee simple title, and the opportunity for an equitable remedy expired with limitations.
A claim for breach of contract accrues when the contract is breached.35 The Cades’ breach of contract claim accrued when the deed was executed and is therefore barred by limitations. The Cades’ argument that the breach occurred when Cosgrove later refused to execute a correction deed in contravention of the Acceptance of Title and Closing Agreements—a form prepared by the title company—fails because the Cades are charged with notice of the contents of their deed upon execution. By the time the Cades asked Cosgrove to reform the deed, limitations had expired, and the Cades could claim no right to Cosgrove‘s property. The Cades cannot circumvent the inapplicability of the discovery rule (and indefinitely toll limitations until the Cades demand a correction deed) simply by recasting their deed-reformation claim as a breach-of-contract claim.36 To hold otherwise would circumvent the statute of limitations by allowing an open-ended breach of contract claim that would defy all that we hold today regarding (1) the inapplicability of the discovery rule to suits involving obvious omissions from the face of a deed, (2) the duty on the mineral interest owner to exercise diligence with regard to the contents of his own mineral interest, (3) the need for stability and certainty in deed records, and (4) our construction of
The Cades were charged with notice—as a matter of law and upon execution of the deed—that the deed failed to retain their mineral rights. Allowing them to slumber on this knowledge, for years or decades or generations, before seeking a corrected deed is not a luxury we have recognized, and would render meaningless parties’ recognized duty to exercise diligence in examining their mineral rights. To be “charged” with notice—as the law mandates—means there are consequences for failure to act on that notice. Hence, we disagree with the dissent insofar as it contends the Cades’ contract claim for refusal to correct the deed is subject to a different limitations period. As a matter of law, the Cades were on notice at the time of execution of a fundamental and obvious error in the deed. They could have declined to close the deal until the deed was corrected. Or they could have closed, demanded immediate correction, and then treated any refusal as a breach of contract. Therefore, under either a contract theory or a deed-reformation theory, both of which have a four-year statute of limitations, the limitations period began to run at the execution of the deed.
The dissent imagines a disagreement over the existence of an enforceable contract. But our analysis nowhere holds, as the dissent implies, that these parties entered into an unenforceable real estate contract. We do not rely on the merger doctrine to hold that a contract to correct the deed was extinguished when the deed was executed, a position that would make no sense. The dissent‘s labored discussion of this doctrine is perplexing. We do not hold that signing a side agreement to correct errors in a deed is, under the merger doctrine, an invariably futile act because the agreement is merged into and therefore extinguished by the deed itself. Our decision does not require this result, nor do we suggest approval of such a stringent rule.
The question before us is how long the Cades may sit on their putative contractual right to request material changes to an unambiguous deed on file in the courthouse. The dissent frets that in failing to see how a title company form upends our analysis of the statute of limitations issue, we are trampling on freedom of contract or elevating equitable rights over legal rights. We do not rely on equitable doctrines but rather recognize that contract rights are paired with contract responsibilities, including the statute of limitations, a legal doctrine. We simply disagree on when limitations began to run in this legal and factual context, and whether relying on a different closing document that was part of a single, routine real estate closing changes the limitations period, when the statute of limitations is four years for equitable reformation and four years for breach of contract.
The virtues of legal certainty and predictability are nowhere more vital than in matters of property ownership, an area of law that requires bright lines and sharp corners. The Cades, charged with instant knowledge of a significant and plainly obvious error in the deed, had four years to act on that knowledge, including under the correction agreement.
D. Cosgrove‘s Claim for Attorney Fees
Before filing her counterclaim, Cosgrove wrote a letter to the Cades advising them that limitations barred the Cades’ claims, and if the Cades brought suit, Cosgrove would seek attorney fees. Cosgrove did
III. Conclusion
The Cades’ subjective beliefs about the contents of the unambiguous deed are irrelevant for purposes of tolling the statute of limitations. The discovery rule does not apply to this mistaken omission, which was inherently discoverable and objectively verifiable. The Cades have been on notice of sufficient facts for any deed-related claims since the date of execution.
We reverse the court of appeals’ judgment and render judgment that the Cades take nothing. We remand the issue of attorney fees to the court of appeals.
Justice Boyd filed an opinion dissenting in part, in which Justice Johnson, Justice Guzman, and Justice Devine joined.
Justice Boyd, joined by Justice Johnson, Justice Guzman, and Justice Devine, dissenting in part.
“This deed-reformation dispute....” Ante at 34.
These first four words of the Court‘s opinion foretell and ensure its erroneous result. This case does involve a deed-reformation dispute, and I agree with the Court‘s holdings as to that dispute: because the law charges the Cades with knowledge of the deed they signed, the discovery rule does not apply and the statute of limitations bars the Cades’ equitable claim to reform the deed. But as the Court curtly acknowledges at the close of its opinion, this case involves other claims, including a claim for breach of a separate contractual agreement the parties signed at closing. I do not agree that the statute of limitations bars the Cades’ claim for breach of the separate closing agreement, because that claim accrued only two months before the Cades filed this suit. As to that part of the Court‘s judgment, I respectfully dissent.
I. Background
In September 2006, the parties entered into a real estate sales contract in which they agreed that the Cades would sell their home and two-acre lot to the Cosgroves1 but retain the mineral interests, which they had previously leased to an oil company. At the closing the following month, the Cades signed and delivered a deed that failed to reserve the mineral interests, contrary to the terms of the sales agreement. Ms. Cosgrove has never disputed that this was a mistake. At the same closing, however, the parties also signed a separate closing agreement in which they mutually promised to “comply with all provisions of the [sales] contract” and to “fully cooperate, adjust, and correct any errors or omissions and to execute any and all documents needed or necessary to comply with all provisions of the above mentioned [sales] contract.”
During the four years following the closing, the lease operator continued to send
The trial court granted Ms. Cosgrove‘s motion for summary judgment and denied the Cades’ cross-motion, finding that the statute of limitations barred all of the Cades’ claims. The court of appeals unanimously reversed and remanded. 430 S.W.3d 488.2 In that court‘s only opinion accompanying its judgment, Justice Dauphinot concluded that fact issues precluded summary judgment for either party. Addressing the Cades’ breach-of-contract claim, Justice Dauphinot explained that “[t]here is no allegation that Cosgrove breached any contract other than the closing agreement, in which she agreed to cooperate in correcting any errors in any documents executed in connection with the transaction.” Id. at 506-07. She concluded that Ms. Cosgrove‘s alleged breach of the closing agreement occurred when she refused the Cades’ request to correct the mistaken deed, two months before they filed this suit, and the claim “was therefore brought within the limitations period.” Id. at 507. Justice Dauphinot thus concluded that Ms. Cosgrove was not entitled to summary judgment on the contract claim. But she concluded that the Cades were not entitled to summary judgment on that claim either, because a “correction deed may be used only to correct facial imperfections,” and the omission of a reservation of mineral interest is more than a facial imperfection. Id. at 507-08 (citing Myrad Props., Inc. v. LaSalle Bank Nat‘l Ass‘n, 300 S.W.3d 746, 750 (Tex. 2009)).3
II. The Equitable Deed-Reformation Claim
The Court holds today that limitations bars the Cades’ deed-reformation claim, and I agree. Although the parties agreed in their sales contract that the Cades would retain the mineral interests, they effectuated that agreement by approving and signing a deed that did not retain those interests. As we have long recognized, “[w]hen a deed is delivered and accepted as performance of a contract to convey, the contract is merged in the deed. Though the terms of the deed may vary from those contained in the contract, still
They can rely, however, on principles of equity. “Despite the merger doctrine, prior agreements are not merged into a realty deed [that] is signed due to fraud, accident, or mistake.” Geodyne Energy Income Prod. P‘ship I-E v. Newton Corp., 161 S.W.3d 482, 487 (Tex. 2005). In equity, Texas law would allow the Cades to sue to reform the deed based on mutual mistake, but they must bring that claim within the four-year statute of limitations. For the reasons the Court explains, I agree that the law charges the Cades with knowledge of the deed‘s contents as of the date they signed it, so they cannot rely on the discovery rule to toll the statute of limitations, which expired before they filed suit to reform the deed in February 2011. See Nat‘l Prop. Holdings, L.P. v. Westergren, 453 S.W.3d 419, 425 (Tex. 2015) (per curiam) (holding that “the law presumes that [a] party knows and accepts” the terms of a contract the party signs, and “it is not the courts’ role ‘to protect parties from their own agreements‘“) (quoting El Paso Field Servs., L.P. v. MasTec N. Am., Inc., 389 S.W.3d 802, 810-11 (Tex. 2012)). As with laches, the “fundamental premise” of limitations is simple: “If you snooze, you lose.” Am. Int‘l Grp., Inc. v. Am. Int‘l Bank, 926 F.2d 829, 835 (9th Cir. 1991) (Kozinski, J., dissenting).
III. The Breach-of-Contract Claim
Another premise, however, is equally fundamental here: “what‘s good for the goose is good for the gander.” In re Allcat Claims Serv., L.P., 356 S.W.3d 455, 480 (Tex. 2011) (Willett, J., concurring in part and dissenting in part). Just as the law must charge the Cades with knowledge of the deed‘s contents and hold them to it, the law must charge Ms. Cosgrove with knowledge of the closing agreement‘s contents and hold her to the promise she made to correct any errors or omissions in the deed. The Court, however, concludes that the four-year statute of limitations bars the Cades’ separate claim for breach of that promise. Ante at 40. I read the Court‘s opinion to assert four reasons for this conclusion: (A) the Cades have no “superior right” to the mineral interests; (B) the claim accrued when the Cades signed the deed at closing; (C) the Cades waited too long to ask Ms. Cosgrove to correct the error; and (D) in light of “the need for stability and certainty” regarding real property titles, the law cannot permit the Cades to “circumvent” limitations against the Cades’ equity claim by asserting a breach-of-contract claim. I disagree with all four reasons.
A. “Superior right” to the Mineral Interests
The Court begins its very brief discussion of the Cades’ “remaining claims” with the conclusory and unsupported assertion that these claims “would be available only if [the Cades] could reform the deed and prove superior right, which they cannot.” Ante at 39. To the extent the Court refers here to the Cades’ claims for tortious interference and statutory theft, I agree that those claims must fail. A claim for tortious interference requires “an existing contract subject to interference,” Prudential Ins. Co. of Am. v. Fin. Review Servs., Inc., 29 S.W.3d 74, 77 (Tex. 2000), and a claim under the Texas Theft Liability Act
The lack of a superior right to the mineral interests, however, has no effect on the Cades’ claim for breach of the closing agreement. The fact that Ms. Cosgrove “owns fee simple title, and the opportunity for an equitable remedy, expired with limitations,” ante at 39, does not undermine the Cades’ breach-of-contract claim—it is the very basis for the claim. It is because the deed erroneously conveyed the mineral interests to the Cosgroves, contrary to the terms of the sales contract, that Ms. Cosgrove had an obligation under the closing agreement to “execute any and all documents needed or necessary to” correct that error. And it is because Ms. Cosgrove refused, in December 2010, to comply with that obligation that the Cades have a breach-of-contract claim against her. The Court sets up a catch-22: the Cades cannot enforce Ms. Cosgrove‘s promise to correct an error in the deed unless they first prove that there is no error in the deed. And to the extent the Cades sought “an equitable remedy” on their breach-of-contract claim, the Court‘s assertion that their opportunity for that remedy “expired with limitations” confuses the deed-reformation claim with the breach-of-contract claim. Whether the Cades may be entitled to equitable relief or only breach-of-contract damages or neither is irrelevant to the sole basis on which Ms. Cosgrove sought summary judgment: the statute of limitations.
B. Accrual of the Breach-of-Contract Claim
The Court concedes that “[a] claim for breach of contract accrues when the contract is breached.” Ante at 39 (citing Stine, 80 S.W.3d at 592). It then proceeds to completely ignore that truth and never once addresses the question of when Ms. Cosgrove breached the closing agreement. Instead, in the very next sentence, the Court concludes that “[the Cades’ breach of contract claim accrued when the deed was executed,” without making any effort to explain how the execution of the deed could constitute or cause a breach of the closing agreement. Id. I respectfully disagree.
“Causes of action accrue and statutes of limitations begin to run when facts come into existence that authorize a claimant to seek a judicial remedy.” Exxon Corp. v. Emerald Oil & Gas Co., 348 S.W.3d 194, 202 (Tex. 2011). Through their breach-of-contract claim, the Cades seek a judicial remedy not for the mistakenly executed deed but for Ms. Cosgrove‘s breach of her promise to execute documents needed to correct errors and effectuate the provisions of the sales agreement, particularly the provision in which the parties agreed the Cades would reserve the mineral interests. “[A] breach of contract claim accrues when the contract is breached,” Stine, 80 S.W.3d at 592, and “‘[b]reach’ of a contract occurs when a party fails to perform an act that it has contractually promised to perform.” Greene v. Farmers Ins. Exch., 446 S.W.3d 761, 765 (Tex. 2014). Here, Ms. Cosgrove did not—indeed, she could not—fail to perform her promise to correct the erroneous deed until after the Cades requested that
I agree with the Cades that Ms. Cosgrove‘s breach of contract occurred when she refused the Cades’ request that she correct the errors and omissions as she had promised. The Court disagrees “because the Cades are charged with notice of the contents of their deed upon execution.” Ante at 39. But the Court makes no effort to explain how the Cades’ notice of the deed‘s contents equates to a breach of contract by Ms. Cosgrove. I agree that the law charges the Cades with knowledge of the deed‘s contents as of the date they signed it, but neither the deed nor its contents breached Ms. Cosgrove‘s separate promise to correct any omissions in the deed. That breach occurred when Ms. Cosgrove refused the Cades’ request that she correct the errors, not when the Cades signed the deed. A breach-of-contract claim accrues when the contract is breached, Greene, 446 S.W.3d at 765, and the Cades’ execution of the mistaken deed could not and did not cause or constitute Ms. Cosgrove‘s breach of the closing agreement.
The Court asserts that, because the Cades are charged with knowledge of the deed‘s contents, they had only two choices: “They could have declined to close the deal until the deed was corrected. Or they could have closed, demanded immediate correction, and then treated any refusal as a breach of contract.” Ante at 40. Because they did neither, and instead “demanded ... correction” four years later, the Court concludes that, “under either a contract theory or a deed-reformation theory, ... the limitations period began to run at the execution of the deed.” Id. As I discuss in the following section, the question of how quickly the Cades should have “demanded ... correction” may raise a legitimate issue, but it is not an issue of limitations, nor one Ms. Cosgrove raises here. Ms. Cosgrove sought summary judgment on limitations, and as to that issue the controlling question is: “Where‘s the breach?” The Court makes no effort to address that question.
I thus disagree with the Court‘s assertion that, “[b]y the time the Cades asked Cosgrove to reform the deed, limitations had expired, and the Cades could claim no right to Cosgrove‘s property.” Ante at 39. I agree that “limitations had expired” by then on the Cades’ equitable deed-reformation claim, but it had not expired on their contract claim because that claim had not even accrued. It accrued later, when Ms. Cosgrove breached the contract by refusing to perform as she had promised.
C. Delayed Demand for Correction
In light of the Court‘s failure to even consider when Ms. Cosgrove breached her promise and caused the Cades’ breach-of-contract claim to accrue, it seems clear that what the Court is actually holding is that the Cades waited too long to request that Ms. Cosgrove correct the mistaken deed, not that they waited too long to sue her for refusing that request. The Court confirms this when it states that “[t]he question before us is how long the Cades may sit on their putative contractual right
Perhaps the Cades did wait “too long” before asking Ms. Cosgrove to fulfill her promise to correct the deed. Or perhaps not. The parties have not argued that issue and the lower courts did not address it. The closing agreement does not provide a deadline by which the Cades had to ask Ms. Cosgrove to correct the deed‘s errors and omissions. The parties certainly could have agreed to such a deadline, but they did not. That does not necessarily mean that the Cades’ right to request Ms. Cosgrove‘s performance was unlimited, or that they possessed “an open-ended breach of contract claim,” as the Court bemoans. Ante at 39. “[I]t is quite elementary that where the contract is silent as to the time of performance, the law implies that a reasonable time is meant.” Tex. Farm Bureau Cotton Ass‘n v. Stovall, 113 Tex. 273, 253 S.W. 1101, 1106 (1923); see also Moore v. Dilworth, 142 Tex. 538, 179 S.W.2d 940, 942 (1944) (“Generally, where no time of performance is stated in a contract, the law will imply a reasonable time.“). “What is a reasonable time depends undoubtedly upon the nature and character of the thing to be done, the circumstances of the particular case, and the difficulties surrounding and attending its accomplishment.” Hart v. Bullion, 48 Tex. 278, 289 (1877).
Here, the Cades requested Ms. Cosgrove‘s performance almost immediately after they actually discovered the mistake in the deed, but the law charges them with knowledge of the deed‘s mistake as of the date they signed it, more than four years earlier. Perhaps the Court might hold that the contract includes an implied reasonable deadline, and perhaps it might hold that the Cades’ four-year delay did not meet that implied deadline. That seems to be what the Court is in fact holding, but it is not what Ms. Cosgrove has argued, not what the trial court or court of appeals addressed, and not even what the Court says it is holding. Instead, the Court says it is holding that the Cades failed to meet a statutory limitations deadline because their breach-of-contract claim accrued when they signed the deed, even though Ms. Cosgrove did not breach the contract until more than four years later. The question of whether the Cades met an implied contractual deadline to ask for Ms. Cosgrove‘s performance is different than whether they met a statutory limitations deadline to sue for her refusal to perform as asked. If this Court desires to address the implied contractual deadline, we should at least allow the parties to raise and argue it first. And more importantly, we should actually address it, rather than confuse it with the limitations issue and thereby provide the wrong answer to the question the parties actually raise.
D. Equity, “Stability,” and “Certainty”
Finally, the Court‘s primary reason for holding that limitations bars the Cades’ contract claim appears to be its view that “[the Cades] cannot circumvent the inapplicability of the discovery rule (and indefinitely toll limitations until the Cades demand a correction deed) simply by re-
would defy all that we hold today regarding (1) the inapplicability of the discovery rule to suits involving obvious omissions from the face of a deed, (2) the duty on the mineral interest owner to exercise diligence with regard to the contents of his own mineral interest, (3) the need for stability and certainty in deed records, and (4) our construction of section 13.002 as applying to the contents of deeds.
Ante at 39. In light of these concerns, the Court chooses to disregard our well-established rules that govern the application of limitations to a claim for breach of contract. Although I share some of the Court‘s concerns, I do not agree that they justify the Court‘s holding here, for at least three reasons: (1) the closing agreement creates independent obligations unaffected by the deed; (2) equitable principles and duties do not trump the parties’ contractual agreements; and (3) the Cades can obtain relief without undermining the stability and certainty of the deed records.
1. Independent Obligations
To justify its holding, the Court variously characterizes the closing agreement as merely a “form prepared by [a] title company,” ante at 39, as “not just any contract, but one concerning a deed,” ante at 40, and as “part of a single, routine real estate closing,” ante at 40. According to the Court, the fact that the Cades rely on such an agreement does not “change[] the limitations period, [because] the statute of limitations is four years for equitable reformation and four years for breach of contract.” Ante at 40. There are at least three obvious and fundamental problems with this analysis.
First, the fact that the closing agreement was a “form prepared by [a] title company” is completely irrelevant to issues in this case. Perhaps that fact would matter if Ms. Cosgrove were arguing over the meaning of the agreement‘s terms. See, e.g., Epps v. Fowler, 351 S.W.3d 862, 866 (Tex. 2011) (looking to how other courts construe a “legal-usage term within a form contract“); Progressive Cnty. Mut. Ins. Co. v. Sink, 107 S.W.3d 547, 553 (Tex. 2003) (explaining that, in construing a standard-form insurance policy, we make “an effort to determine the ordinary lay meaning of the words to the general public“); Ins. Co. of N. Am. v. Cash, 475 S.W.2d 912, 915 (Tex. 1971) (“Printed form contracts are to be construed most strongly against the insurer.“). It might also matter if she were contending that the agreement was unconscionable or otherwise unenforceable. See, e.g., Cate v. Dover Corp., 790 S.W.2d 559, 562 (Tex. 1990) (addressing whether inconspicuous disclaimer of implied warranty in form contract was unconscionable). But Ms. Cosgrove has raised no such arguments, nor does the Court purport to base its holding on them. Form agreement or not, Ms. Cosgrove signed the closing agreement, is charged with knowledge of its contents, and is bound by its provisions. And contrary to the Court‘s suggestion, a claim for its breach accrues when the breach occurs, just as with any other contract.
Second, the Cades are not trying to “change[] the limitations period” applicable to their breach-of-contract claim. Ante at 40. They agree that their equitable deed-reformation claim and their breach-of-contract claim are both subject to a four-year limitations period. The issue is not the length of the applicable limitations period but the date on which that period
And third, the fact that the closing agreement is a contract “concerning a deed” and was “part of a single, routine real estate closing” does not make it unenforceable or subject a claim for its enforcement to different limitations rules. Texas law has never recognized such a concerning-a-deed doctrine or part-of-a-sale doctrine. The closest I can find (and the only similar doctrine the parties address) is the merger doctrine, which the Court acknowledges does not apply to the closing agreement at issue here. Ante at 40 (“We do not rely on the merger doctrine.“).
The merger doctrine is worth considering here, however, because the reasons for its (conceded) inapplicability illustrate the Court‘s error in treating the closing agreement differently just because it is a contract “concerning a deed” and was “part of” a real estate sale. As I briefly mentioned above, “[w]hen a deed is delivered and accepted as performance of a contract to convey, the contract is merged in the deed.” Alvarado, 749 S.W.2d at 48. Under this merger doctrine, if “the terms of the deed ... vary from those contained in the contract, ... the deed must be looked to alone to determine the rights of the parties.” Id. Thus, for example, “[t]he merger doctrine prevents the admission of any warranties made in the prior earnest money contracts which are contradicted in the deed.” Id. “[I]n the absence of fraud, accident or mistake, all prior agreements entered into between the parties are considered merged in the deed.” Commercial Bank, Unincorporated, of Mason v. Satterwhite, 413 S.W.2d 905, 909 (Tex. 1967) (citing Barker v. Coastal Builders, Inc., 153 Tex. 540, 271 S.W.2d 798 (1954)).
The merger doctrine applies, however, only to the parties’ prior agreement regarding the conveyance of an interest in the land, and not to “other distinct and unperformed provisions” of the parties’ contract. Harris v. Rowe, 593 S.W.2d 303, 307 (Tex. 1979). “A contract of sale which provides for the performance of acts other than the conveyance remains in full force and effect as to such other acts.” Id. (citing Sanchez v. Dickinson, 551 S.W.2d 481 (Tex. Civ. App.—San Antonio 1977, no writ)). When the parties have agreed to rights and obligations that are “collateral to and independent of the conveyance, such as completion of construction or escrow agreements pending construction,” those rights “survive[] a deed that is silent in respect to the construction or escrow agreement.” Id. We thus held in Harris that the parties’ execution of an escrow agreement “contemporaneously with” their execution of a deed that “pertained only to the conveyance” itself “plainly shows” that the parties “did not intend to merge the conditions of the agreement into the deed.” Id.
Here, contemporaneously with the parties’ execution of the deed (and after their execution of the sales contract), the parties executed a closing agreement, mutually promising to “fully cooperate, adjust, and correct any errors or omissions and to execute any and all documents needed or necessary to comply with all provisions of the above mentioned [sales] contract.” This agreement was distinct from the sales agreement and collateral to the conveyance itself. It was not, and could not be, performed by the parties’ execution of the deed, because it obligated the parties to correct any errors or omissions, including
Because Ms. Cosgrove‘s promise to correct the error and omission was not merged into the deed, it remains as a separate and enforceable obligation. We cannot disregard that agreement or, as the Court does here, deem it as breached prior to its breach simply because it somehow “concern[ed] a deed” or was “part of” a real estate sale. As a separate agreement, it is independently enforceable, and a claim for its breach accrued only when the breach occurred.
2. Equity and Contract
The Court holds that the Cades “cannot circumvent the inapplicability of the discovery rule ... simply by recasting their deed-reformation claim as a breach-of-contract claim.” Ante at 39. In other words, because limitations bars the Cades’ equity-based claim for deed-reformation, limitations must also bar their contract-based claim for Ms. Cosgrove‘s refusal to correct the errors. This holding ignores the important distinction we have recognized between contractual obligations and obligations under equitable principles. Under Texas law, the parties’ contractual agreements control over the principles of equity. “We generally adhere to the maxim that ‘equity follows the law,’ which requires equitable doctrines to conform to contractual ... mandates, not the other way around.” Fortis Benefits v. Cantu, 234 S.W.3d 642, 648 (Tex. 2007). Thus, “[w]here a valid contract prescribes particular remedies or imposes particular obligations, equity generally must yield unless the contract violates positive law or offends public policy.” Id. at 648-49.5
“This Court has ‘long recognized a strong public policy in favor of preserving the freedom of contract.‘” Id. at 649 (quoting Lawrence v. CDB Servs., Inc., 44 S.W.3d 544, 553 (Tex. 2001)). A party‘s
I cannot join the Court‘s decision to disregard Ms. Cosgrove‘s contractual promises simply because the contract affords the Cades a remedy that equity does not provide. It is the very nature of contracts to impose duties that are different from or in addition to those that already exist under the law. Consistent with Fortis Benefits, I would enforce the closing agreement, into which Ms. Cosgrove freely and voluntarily entered, independent of the availability or unavailability of any equitable claims, subject only to defenses against the enforcement of that agreement. The defense Ms. Cosgrove raised was limitations, and that defense fails because the claim did not accrue until she breached her obligation two months before the Cades filed this suit.
3. Stability and Certainty
Finally, the Court expresses a concern that allowing the Cades to enforce their contract would undermine the “need for stability and certainty regarding titles to real property.” Ante at 38. This case does not implicate the Court‘s concern, however, because there is no evidence or indication that Ms. Cosgrove has conveyed the mineral interests or that any third party has detrimentally relied on the deed that mistakenly conveyed the interest to Ms. Cosgrove. But even if this case implicated the Court‘s concern, the Cades could obtain relief from Ms. Cosgrove while still protecting the interests of any innocent bona fide purchaser or other third party. Even if the Cades could not obtain specific performance in the form of an order requiring Ms. Cosgrove to execute a correction deed, which in effect would retroactively nullify the original mistaken deed, they could seek an order requiring Ms. Cosgrove to convey the interest back to the Cades, to fulfill her promise to execute “any and all documents needed or necessary to comply with all provisions of the ... [sales] contract.” And alternatively, they could seek damages instead of specific performance. See RESTATEMENT (FIRST) OF CONTRACTS § 363 (1932) (“If a plaintiff in good faith sues for specific enforcement, and that relief is denied, damages or restitution may be awarded in the same proceeding, subject to the rules applicable to those remedies.“). Contrary to the Court‘s conclusion, permitting the Cades’ breach-of-contract claim need not undermine “the need for stability and certainty in deed records.” Ante at 39.
IV. Conclusion
We have often confirmed that public policy requires courts to honor and enforce the terms of private agreements:
[I]f there is one thing which more than another public policy requires it is that [people] of full age and competent understanding shall have the utmost liberty of contracting, and that their contracts when entered into freely and voluntarily shall be held sacred and shall be enforced by Courts of justice. Therefore, you have this paramount public policy to consider—that you are not lightly to interfere with this freedom of contract.
Notes
A contracts to sell Blackacre to B, and as part of the same contract, contracts to build a partition fence between Blackacre and another tract of his land. A makes and B accepts a deed of Blackacre, in which nothing is said of the partition fence. A‘s contractual duty to build the fence is not discharged.
RESTATEMENT (FIRST) OF CONTRACTS § 413 illus. 2 (1932).