OPINION
Opinion by
Appellant, UMLIC VP LLC (“UM-LIC”), sued appellees, T & M Sales and Environmental Systems, Inc. (“T & M”), Tomas and Perla Lozano, 1 and Walter M. Ezell, 2 tо recover the overdue balance on a note and guaranty agreement. Appellees asserted the affirmative defense of wrongful foreclosure and counter-claimed for breach of contract and negligence. After a jury found in favor of appellees, the trial court signed a judgment against UMLIC. UMLIC challenges the trial court’s judgment by twenty-eight issues. We reverse and render in part. The remaining part of the trial court’s judgment is reformed and, as reformed, is affirmed.
A. FACTUAL BACKGROUND
On July 19, 1989, T & M obtained a business loan from the Small Business Administration (“SBA”) in the amount of $150,000. Under the terms of the promissory note, T & M agreed to pay $1,992 per month for ten years, with a balloon payment for the unpaid principal being due and payable at the end of the ten-year period. The note was secured by a deed of trust on the land on which T & M was located, a security agreement, and a guaranty executed by the Lozanos and Ezell in their personal capacities. The note matured by its own terms on July 19, 1999. The last payment T & M made on the note was on November 19, 1998. The parties stipulated that as of that date, the remaining principal balance was $49,602.24.
On October 15, 1999, UMLIC purchased the note, deed of trust, security agreement, and guaranty from the SBA. In January 2000, Tomas Lozano contacted UMLIC and offered to continue making
In preparation of the contemplated foreclosure, UMLIC conducted a title search on the property secured by the deed of trust. During the search, UMLIC discovered that local taxing authorities had foreclosed on the property because appellees had failed to pay property taxes. On February 1, 2000, the sheriff sold the proрerty at a public auction to Pablo Gonzalez for $10,000. On June 6, 2000, UMLIC redeemed the property from Gonzalez for $12,500, the amount Gonzalez had paid for the property plus the statutory twenty-five percent penalty. Gonzalez then executed a special warranty deed in favor of UMLIC.
On July 24, 2000, UMLIC sent T & M a notice to vacate the property. 3 On August 25, 2000, UMLIC offered to let T & M redeem the property, on the condition that T & M also pay the balance due on the note. On October 9, 2000, UMLIC filed a petition for forcible detainer in justice court, seeking possession of the property. By letter dated October 20, 2000, T & M tendered a cashier’s check in the amount of $12,500 to UMLIC in an attempt to redeem the property, but T & M made no attempt to pay the note. UMLIC rejected the offer and returned the check. On November 3, 2000, the justice court granted UMLIC possession of the property.
On February 16, 2001, UMLIC made demand for payment on the note and guaranty, but it received no response. On March 6, 2002, UMLIC sold the property to LSS Investments, Inc. for $66,000. UMLIC did not credit the amount received at the sale to the balance due on the note. On June 11, 2001, UMLIC filed the underlying suit to collect the unpaid principal balance and interest. T & M filed a counterclaim, alleging both tort and contract violations.
The jury found against UMLIC on both the note and the guaranty. The jury further found in favor of T & M and the Lozanos on their counterclaims of wrongful foreclosure, negligence, breach of the deed of trust, fraud, and malice. UMLIC filed a motion for judgment notwithstanding the verdict, which the trial court denied. Based on the jury’s findings, the trial court’s judgment awarded T & M the fair market value of the property as determined by the jury, damages for loss of business reputation, and exemplary damages. The judgment also included damages to Tomas and Perla Lozano for mental anguish. UMLIC subsequently filed motions to modify the judgment, for a new trial, and remittitur. The trial court denied the motions. This appeal followed.
B. FRAUD
In its second issue, UMLIC contends the trial court erred in submitting a question to the jury on the issue of fraud because appellees failed to sufficiently plead fraud as a cause of action and the issue was not tried by consent.
1. Sufficiency of Pleadings
A pleading should “consist of a statement in plain and concise language of the plaintiffs cause of action or the defendant’s grounds of defense.” tex. R. Civ. P. 45(b). The purpose of pleadings is “to give the adverse parties [fair] notice of each party’s claims and defenses, as well as notice of the relief sought.”
Woolam v.
In determining whether a cause of action was pleaded, the pleadings must be sufficiently adequate so the court is able, from an examination оf the pleadings alone, to ascertain with reasonable certainty and without resorting to information from another source, the elements of a plaintiffs cause of action and the relief sought with sufficient information upon which to base a judgment.
Id.
(citing
Stoner v. Thompson,
A cause of action for fraud requires (1) a material misrepresentation, (2) which was either known to be false when made or was asserted without knowledge of its truth, (3) was made with the intention that it be acted upon by the other party, (4) the other party acts in reliance upon it, and (5) the other party suffers harm as a result of that reliance.
Bradford v. Vento,
Appellees’s pleadings do not specifically allege that UMLIC committed fraud. Appellees argue that a cause of action for fraud can be deduced from their pleadings. In supрort of their argument, appellees direct our attention to certain sections of their petition. In relevant part, these sections provide:
(A) ... The subsequent actions undertaken by [UMLIC] were in violation of the Texas Finance Code in that the actions were usurious and constituted wrongful debt collection practices as defined in the Texas Finance Code. [T & M] not having had proper notice of the foreclosure or sale were never advised by [UMLIC] of the redemption of the property until after the expiration of 180 days. [UMLIC] then took the position that T & M’s time for redemption of the property permitted under Texas law had expired. [UMLIC] then wrongfully and illegally filed a forcible entry and detain-er action in the justice of the peace court, wherein UMLIC obtained possession of the premises, causing [T & M] tovacate their long established business premises. Finally, on or about March 6, 2002, UMLIC sold the propеrty the subject of this suit....
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(C) [UMLIC] owed [T & M] a duty of good faith and fair dealing which it breached in failing to properly accelerate and give proper notice of its intention to accelerate the note and debt, in failing to accept the payment of $12,500 which amount was the sum [UMLIC] paid to redeem the property from the buyer at the sheriffs sale....
While the pleadings must be construed as favorably as possible to the pleader, the inference that a cause of action has been pleaded must be reasonable in light of what is specifically stated in the pleading.
See Boyles,
2. Trial by Consent
If an issue not raised by the pleadings is tried by the express or implied consent of the parties, it is treated as if it had been raised by the pleadings. TEX. R. CIV. P. 67. However, “[t]he rule of trial by consent is limited to those exceptional cases where the parties clearly tried an unpleaded issue by consent.”
Libhart v. Copeland,
In this case, although evidence relevant to the issue of fraud may have been submitted without objection, UMLIC objected to the submission of a jury question on the issue of fraud because it was not supported by any pleading and served as a surprise to UMLIC. Such a situation prevents the implication that the issue was tried by consent.
See Harkey,
C. FORECLOSURE
In its thirteenth issue, UMLIC asserts that when it redeemed the property, it became vested with fee simple title. As the owner, UMLIC argues, it was not required to execute foreclosure proceedings before selling the property, nor to apply proceeds from the sale to the amount due on the note.
In sub-issue (a) of its thirteenth issue, UMLIC contends the trial court erred in finding that it did nоt acquire fee simple title to the property. Whether redemption of property by a mortgagee under section 34.21 of the Texas Tax Code results in fee simple title is an issue of statutory construction. It is, therefore, a question of law that we review de novo.
El Paso Natural Gas Co. v. Minco Oil & Gas, Inc.,
"When property is sold at a tax sale, the deed purchased vests “good and perfect title in the purchaser or the purchaser’s assigns,” including the right to the use and possession of the property, subject only to the former owner’s right to redemption. tex. Tax Code Ann. § 34.01 (n) (Vernon Supp.2004-05). Under the right to redemption, an owner may redeem the property by paying the purchaser the amount bid for the property, the deed recording fee, and any taxes, penalties, interest, or costs on the property, plus a premium of twenty-five percent, tex. Tax Code Ann. § 34.21(e), (e)(2). Payment must be made no later than 180 days after the day the deed is filed for record, tex. Tax Code Ann. § 34.21(e)(1). UMLIC argues that because Gonzalez became vested with good and perfect title to the property at the tax sale, when Gonzalez assigned a special warranty deed to UMLIC, UMLIC purchased and received all of the same rights in the property that Gonzalez had acquired.
UMLIC now argues for rights of a “purchaser.” However, at the time of the transaction, UMLIC did not attempt to “purchase” the property from Gonzalez. In its letter to Gonzalez, UMLIC clearly stated it was exercising its statutory right to redeem the property and enclosed a cashier’s check for $12,500, the statutorily-determined amount. In a sale, Gonzalez would have had the ability to negotiate price and decide whether he wanted to sell or not sell. In a redemption, Gonzalez had no choice but to transfer the property to the redeemer for the statutorily-determined price.
When an owner of real рroperty tenders an appropriate payment before the end of the redemption period, he effectually extinguishes the rights of the purchaser at the tax sale.
State v. Moak,
Because UMLIC made no actual attempt to purchase the property, we conclude the status of UMLIC’s title does not depend on whether a mortgagee would be eligible to purchase fee simplе title to property at or subsequent to a tax sale, but on what title a mortgagee holds after it redeems property under the redemption statute. Redemption does not operate in the same manner as a purchase. Unlike the purchase of real property, redemption does not establish new title; it restores the parties to the position they were in before the lien. Assoc.
Home Equity Serv. Co., Inc. v. Hunt,
Redemption statutes are construed liberally in favor of the right to redeem.
See Jackson v. Maddox,
In applying the redemption statute, where one co-owner redeems property from a tаx foreclosure sale, courts have concluded that it does not divest any other co-owner of his ownership interest in the property.
See Reynolds v. Batchelor,
The instant case differs in that UMLIC was under no legal obligation to pay the taxes on the property. Further, because neither UMLIC nor the SB A were joined as parties to the tax foreclosure suit, it was not necessary for UMLIC to pay the taxes to protect its security interest.
See Murphee Prop. Holdings, Ltd. v. Sunbelt Sav. Ass’n of Tex.,
Although UMLIC’s security interest in the property did not create any legal obligation, it was only by virtue of this pre-existing interest that UMLIC was eligible to complete the redemption transaction.
See Reynolds,
Accordingly, we conclude the trial court did not err in finding that UMLIC did not acquire fee simple title to the property by virtue of the redemption. Sub-issue (a) of appellant’s thirteenth issue is overruled.
2. Jury Instructions
In its fourteenth issue, UMLIC contends the trial court wrongfully commented on the weight of the evidence by assuming disputed facts. Specificаlly, UMLIC complains of the court’s instruction in Question 4 of the jury charge. Question 4 provides:
Did UMLIC VP, L.L.C. wrongfully foreclose on the property owned by T & M Sales?
A wrongful foreclosure occurs when the holder of a note and deed of trust fails to give proper notice of foreclosure under the deed of trust and improperly sells the property. You are further instructed that a purchaser in a redemption proceeding does not vest fee simple title in the purchaser at the redemption proceeding if the purchaser is also the holder of the deed of trust.
The rules of civil procedure provide that “[t]he court shall not in its charge comment directly on the weight of the evidence.” tex. R. Crv. P. 277. In order to be a direct comment on the weight of the evidence, the issue must suggest to the jury the trial court’s opinion on the matter submitted.
H.E. Butt Grocery Co. v. Bilotto,
3. Adequacy of Pleading
In sub-issue (c) of its thirteenth issue, UMLIC contends appellees
In their third amended answer, after their denial, appellees asserted: “By way of further answer the [appellees] would show ... [that UMLIC] failed to give notice of foreclosure, that it failed to foreclose on the subject property, and that its sale of the subject property was without such notice as required by law and [UMLIC’s] efforts to collect on the unjust debt are wrongful and illegal.” We consider these statements sufficient to affirmatively set out and give fair notice of an intent to pursue a claim of wrongful foreclosure and seek damages. Sub-issue (c) of appellant’s thirteenth issue is overruled.
4. Sufficiency of the Evidence
In sub-issue (b) of its thirteenth issue, UMLIC contends the evidence is legally and factually insufficient to sustain a judgment on wrongful foreclosure. UM-LIC’s challenge to the jury’s finding on this point is again based on UMLIC’s assertion that after redeeming the property from Gonzalez, UMLIC had fee simple title to the property, and as fee simple owner it was not required to go through any foreclosure proceedings. However, because we have already determined that, as a matter of law, UMLIC did not acquire fee simple title to the property, UMLIC’s rights to the property were limited to those rights contained in the deed of trust.
For a sale under a deed of trust to be valid, the terms set out in the deed of trust must be strictly followed.
Univ. Sav. Ass’n v. Springwoods Shopping Ctr.,
Appellees claimed that UMLIC wrongfully foreclosed on the property because UMLIC did not send notice of a trustee’s sale, as provided for in the deed of trust and required under section 51.002(b) of the Texas Property Code. See tex. PROP. Code Ann. § 51.002(b) (Vernon Supp.2004). At trial, UMLIC admitted that it had not sent any notice of a foreclosure to T & M or to the Lozanos. We hold this judicial admission to be legally and factually sufficient evidence to support the jury’s finding that UMLIC wrongfully foreclosed on the property. Sub-issue (b) of appellant’s thirteenth issue is overruled.
5. Damages
In sub-issue (e) of its thirteenth issue, UMLIC contends the trial court submitted the wrong measure of damages for wrongful foreclosure to the jury, and thus the award of damages shоuld be reversed. The trial court’s judgment specifies the entire amount found by the jury to be the fair market value of the property as wrongful foreclosure actual damages.
Nevertheless, the record shows the various elements constituting the total amount of indebtedness at the time of foreclosure are undisputed.
See GXG, Inc. v. Texacal Oil & Gas,
The trial court received into evidence, without objection, the promissory note, the deed of trust, and the guaranty agreement. At trial, the parties stipulated that as of November 19, 1998, the principal balance remaining on the note was $49,602.24. The note provides for simple interest at the rate of ten percent per annum. Interest accrued for 1,203 days. 4 At the rate of ten percent per annum, the per diem interest is $13.59, resulting in total accrued unpaid interest of $16,348.77.
In addition, UMLIC paid $12,500 to Gonzalez to redeem the property after the tax foreclosure sale. Under the terms of the deed of trust, UMLIC was entitled to recoup this expenditure by adding the amount to the balance due on the note. Therefore, we conclude the total amount due on the note on the date of sale of the property was $78,451.01.
We hold that the difference between the fair market value of the property ($79,-600.00) and the total amount due on the note on the date of sale ($78,451.01) produces wrongful foreclosure damages of $1,148.99.
See GXG,
D. JUDGMENT ON THE NOTE
In its first issue, UMLIC argues that, as a matter of law, it was entitled to judgment on the note, breach of the guaranty, and the amount due.
As we stated above, the trial court received into evidence, without objection, the promissory note, the deed of trust, and the guaranty agreement. At trial, the partiеs stipulated that UMLIC is the holder and owner of the note, and that as of November 19, 1998, the principal balance remaining on the note was $49,602.24. Appellees never disputed their signatures on the note, deed of trust, or guaranty agreement. UMLIC argues that appellees failed to plead or prove a viable affirmative defense.
In response, appellees assert that they adequately pleaded and proved that UMLIC wrongfully foreclosed on the property. Wrongful foreclosure is an appropriate affirmative defense to a suit to collect on a note. Cf. Shearer v. Allied Live Oak Bank, 758 S.W.2d 940, 943-44 (Tex.App.-Corpus Christi 1988, writ denied) (noting that the affirmative defense of wrongful foreclosure must be raised at trial). We have already determined that wrongful foreclosure was adequately pleaded and supported by sufficient evidence. Further, in determining actual damages for wrongful foreclosure, the remaining balance due оn the indebtedness was deducted from the fair market value of the property. Appellant’s first issue is overruled.
E. CAUSES OF ACTION IN TORT
In its twenty-first issue, UMLIC contends a mortgagee owes no independent duty of good faith and fair dealing to a mortgagor. In its seventeenth issue, UM-LIC complains the trial court erred in submitting an ordinary negligence claim to the jury.
A tort obligation is a general obligation imposed by law “apart from and independent of promises made and ... the manifested intentions of the parties, to avoid injury to others.”
Southwestern Bell Tel. Co. v. DeLanney,
In its twenty-first issue, UM-LIC contends a mortgagee owes no independent duty of good faith and fair dealing to a mortgagor. The Texas Supreme Court has declined to impose an implied duty of good faith and fair dealing in every contract, though it has recognized that such a duty may arise as a result of “a special relationship between the parties governed or created by a contract.”
Arnold v. Nat’l County Mut. Fire Ins. Co.,
Texas courts have found no special relationship between a mortgagor and a mortgagee, or between a creditor and a guarantor, that would impose an independent common law duty of good faith and fair dealing.
See Coleman,
2. General Negligence
In its seventeenth issue, UMLIC complains the trial court erred in submitting an ordinary negligence claim to the jury. Appellees assert that every contract is accompanied by a common law duty to perform with “care, skill, reasonable expedience, and faithfulness the thing agreed to be done, and a negligent failure to observe any of these conditions is a tort, as well as a breach of contract.”
See Montgomery Ward & Co. v. Scharrenbeck,
The only duty that courts have imposed between a creditor and a debtor or guarantor is that the “secured party owes both the note maker and the guarantor the duty to discharge its respective contractual obligations properly.”
Long,
Though the basic principles of contract and tort causes of action are well settled, it is often difficult to distinguish the type of action brought.
Jim Walter Homes,
a. Source of the Duty
The supreme court has advised that “actions in contract and actions in tort are to be distinguished in that an action in contract is for the breach of a duty arising out of a contract either express or implied, while an action in tort is for a breach of duty imposed by law.”
Smith,
When a mortgagee exercises its option to sell property on which it has
We note that, had there been no contract between the parties, UMLIC’s seizure of possession and subsequent sale of the property to a third party would have supported a cause of action in tort for the resulting damages. However, because T & M gave UMLIC a contractual right to take these actions and executed a contract spelling out the respective rights of the parties in such a circumstance, the contract governs any disputes between the parties relating to the disposition of the property.
See DeWitt County Elec. Coop., Inc. v. Parks,
Accordingly, we conclude that the source of UMLIC’s duty to conduct the foreclosure sale properly was the deed of trust.
b. Nature of Remedy Sought
We next look to the nature of the injury and remedy sought to assist in determining “whether the action sounds in contract alone or also in tort. When the injury is only the economic loss to the subject of a contract itself, the action sounds in contract alone.”
Adolph Coors Co.,
The jury found damages in favor of appellees for loss of business reputation. “[B]usiness reputation is a major factor which usually is included in loss of value or diminution of a business.”
Nelson v. Data Terminal Sys., Inc.,
In its twenty-third issue, UMLIC asserts that these damages are not proper in a breach of contract action. We agree.
“Loss of business reputation is not an element of damages recoverable for breach of contract.”
Rubalcaba v. Pac/Atl. Crop Exch.,
c. Conclusion
Though the discordant nature of the remedy sought does not hеlp to clarify the type of cause of action, the source of the duty is firmly grounded in the contract. Therefore, after weighing both factors, we conclude that the action brought by appel-lees was in substance an action on the contract and does not constitute an independent tort. Appellant’s seventeenth issue is sustained.
Further, because loss of business reputation damages are not recoverable in a contract action, appellant’s twenty-third issue is sustained.
F. BREACH OF CONTRACT
In its twenty-second issue, UMLIC argues that the evidence is legally and factually insufficient to support a judgment based on breach of contract because appel-lees never pointed to a specific term in the contract that was breached.
In order to recover for a breach of contract, appellees must show (1) a valid contract existed between the parties, (2) appellеes performed or tendered performance, (3) UMLIC breached the contract, and (4) appellees suffered damages resulting from that breach.
Ford v. City State Bank of Palacios,
The deed of trust was received into evidence without objection and states that in the event of any foreclosure, the “Beneficiary or Beneficiary’s agent shall give notice of the foreclosure sale as provided by the Texas Property Code as then amended.” These terms are unambiguous and constitute legally and factually sufficient evidence of a specific term of the deed of trust which was breached. Appellant’s twenty-second issue is overruled.
G. MENTAL ANGUISH
In its eighteenth issue, UMLIC contends a lеnder does not owe a common law duty to a guarantor not to inflict mental anguish.
“Texas does not recognize a general legal duty to avoid negligently inflicting mental anguish.”
City of Tyler v. Likes,
The only duty imposed between UMLIC and the Lozanos as guarantors was a duty for UMLIC to exercise ordinary care and conduct the foreclosure sale disposing of the security properly.
See Long,
882
H. EXEMPLARY DAMAGES
The jury found that the harm suffered by T & M resulted from malice and awarded $2.5 million in exemplary damages. In its twenty-seventh issue, UMLIC asserts the evidence is legally and factually insufficient to support the jury’s award of exemplary damages.
Exemplary damages are allowed where a claimant proves by clear аnd convincing evidence that the harm suffered resulted from fraud, malice, or gross negligence.
Dillard Dep’t Stores, Inc. v. Silva,
Because we have already determined that appellees failed to sufficiently plead a cause of action for fraud, and there is no independent cause of action in tort in the case before us, even with a finding of malice, appellees cannot recover exemplary damages based solely on wrongful foreclosure.
See Int’l Bank, N.A. v. Morales,
I. IMPROPER JURY ARGUMENT
In its twenty-eighth issue, UMLIC contends that appellees’ counsel presented improper and inflammatory jury argument, the cumulative effects of which were calculated to and probably did cause rendition of an improper judgment.
To obtain reversal of a judgment on the basis of improper jury argument, a complainant must prove (1) an error; (2) that was not invited or provoked; (3) that was preserved at trial by a proper objection, motion to instruct, or motion for mistrial; (4) was not curable by an instruction, a prompt withdrawal of the statement, or a reprimand by the trial court; and (5) that the argument by its nature, extent, and degree constituted reversibly harmful error.
Krishnan v. Ramirez,
Imprоper jury arguments can be either curable or incurable. Otis
Elevator Co. v. Wood,
Improper jury argument results in incurable harm only in rare instances, such as an appeal to racial prejudice, calling someone a liar or a fraud, or by making an unsupported charge of perjury.
Dover Corp. v. Perez,
UMLIC alleges the following six instances of improper jury argument by appellees’ counsel: (1) counsel mentioned a settlement letter sent by UMLIC to T & M, (2) counsel told the jury that the Loza-nos had no notice of the tax judgment in violation of the motion in limine and without evidence to support the statement, (3) counsel called UMLIC a “vulture” coming to Texas to “pick on a carcass,” (4) counsel claimed he was mislead by a letter UM-LIC sent to appellees when there was no evidence to support the claim and both Tomas and Perla Lozano had testified that they were not mislead by the letter, (5) counsel told the jury that UMLIC had done “the same thing” to other businesses without evidence to support the claim, and (6) counsel told the jury not to let a corporation from out of state treat businesses in “the Valley” the way UMLIC treated ap-pellees. At no point during jury argument did UMLIC’s counsel object or ask for an instruction to the jury regarding the argument. UMLIC argues that these remarks engendered regional bias and discussed evidence that was not eventually offered at trial. We conclude, however, that these remarks do not rise to the level of incurable arguments. Therefore, UMLIC’s failure to object did not preserve error, and the issue is waived. Appellant’s twenty-eighth issue is overruled.
In light of our disposition of these issues, it is unnecessary to address UMLIC’s remaining issues, tex. R. App. P. 47.1.
We REVERSE that part of the trial court’s judgment awarding (1) exemplary damages to T
&
M in the amount of $2,500,000, (2) actual damages to Tomas Lozano in the amount of $8,250, and (3) actual damages to Perla Lozano in the amount of $9,880. We RENDER judg
We REFORM the remaining part of the trial court’s judgment to show that T & M have judgment against UMLIC for wrongful foreclosure in the amount of $1,148.99, together with post-judgment interest at the rate of ten percent per annum from August 15, 2002 until paid. As reformed, the trial court’s judgment is AFFIRMED.
Notes
. T & M was founded, owned, and operated by Tomas and Perla Lozano. The Lozanos are involved in this action both as representatives of the corporation and in their individual capacities.
. At the time of this suit, Ezell no longer worked for T & M and had agreed with the Lozanos that any findings or awards for or against him would be assumed by the Loza-nos. He did not participate in the suit.
. T & M stayed in possession of the property for several months after receiving the notice to vacate.
. Interest accrued on the unpaid balance from November 19, 1998 until March 6, 2002, the date the property was sold to LSS Investments, Inc.