Opinion issued March 29, 2010
In The
Court of Appeals
For The
First District of Texas
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NO. 01-08-00359-CV
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DEBORAH H. UNDERWOOD GRAVES, Appellant
V.
NANCY LOGAN, Appellee
On Appeal from the 212th District Court
Galveston County, Texas
Trial Court Cause No. 06CV1225
Concurring and Dissenting OPINION
This case addresses the allocation of responsibility between the parties to a promissory note secured by a deed of trust. In the event of an early payoff, to whom falls the burden of calculating the “payoff” amount due on the note? Specifically, did appellant Ms. Graves (seller) have an obligation to provide plaintiff/appellee Ms. Logan (purchaser) with a payoff figure within a reasonable amount of time after Ms. Logan’s request?
After Ms. Graves’ refusal to timely provide the “payoff” amount, Ms. Logan sought a declaratory judgment as to what balance was owed, as well as a breach of contract suit for losses suffered when she was unable to close on the re-sale of the property.
Finding neither statutory nor precedential authority to support such an implied covenant in a promissory note and deed of trust, the majority holds that the trial court erred in granting summary judgment in favor of Logan.[1]
I believe that the majority’s opinion both frames the question and reads the code provisions too narrowly in its conclusions:
(a) “Graves did not… interfere w/ Logan’s ability to perform her obligations under the deed of trust and promissory note. At most, Graves did not assist with Logan’s pursuit of benefits accruing to her upon the full execution of her obligations under the promissory note.”
and
(b) “….we have not found any statutory or precedential authority to support the existence of an implied covenant to provide a payoff amount in a transaction involving a promissory note and deed of trust.”
I disagree with the majority opinion’s attempt to frame this issue on such narrow grounds. The proper question presented by this case is whether Graves has a duty to cooperate with Logan, i.e., refrain from hindering, preventing or interfering with Logan’s attempts to exercise her rights under the contract. I would hold that Graves surely does. Here, Ms. Graves was not forthcoming with the payoff amount and, as a result of her five month delay, Ms. Logan’s contract for resale of the property was lost.
Whenever a contract recites that a party has a right to an early payoff, there is an implied contractual duty to provide a payoff statement because failure to do so (and do so in a timely fashion) nullifies (breaches) that provision of the contract. As discussed below, the Legislature has indicated an intent to protect buyers who have fulfilled the requirements of their contract from sellers who impede the conveyance of title. Such a statutorily expressed intent lends support to an implied duty to provide the payoff amount in a timely manner when a contract provides the right to an early payoff and the seller impedes exercise of that right.
The promissory note at issue here clearly sets out Logan’s right to pay off the note early, provided she not exercise that right earlier than five years from the date the note was executed. In accord with the note, Ms. Logan sought to pay Ms. Graves the balance after the five year timeline but was met with resistance from Ms. Graves that was curious: presented with the opportunity to collect money owed to them most people would be eager to facilitate such payment. Neither the title company handling the resale of the property for Ms. Logan nor Ms. Logan herself met any success in obtaining a payoff amount from Ms. Graves until late October, 2006…almost a full four months after the title company’s initial request of her and weeks past the September 15, 2006 closing date for the resale of the property.
The Texas Property Code addresses the provision of a payoff figure in two separate sections. The first, as the majority properly notes, is section 5.082, which requires a seller to provide a payoff figure within 10 days of a buyer’s written request, when the real-estate conveyance is made pursuant to an executory contract. Tex. Prop. Code Ann. § 5.082 (Vernon Supp. 2009).
The second, section §12.017, applicable to mortgages, also charges the seller/mortgagee with the responsibility to provide a “payoff statement”. Specifically, in the event a mortgagee fails to execute and deliver a release of mortgage to the mortgagor or his agent within 60 days after the date of the receipt of payment by the mortgagee “in accordance with a payoff statement furnished by the mortgagee or its mortgage servicer,” an authorized officer of a title insurance company may file an affidavit in the real property records on behalf of the mortgagor which operates as a release of the mortgage. See Tex. Prop. Code Ann. § 12.017(c)–(g) (Vernon Supp. 2009). Both these above-referenced provisions reflect the Legislature’s recognition of the well-established real estate and title insurance industry practice: the provision of payoff statements by sellers/mortgagees to buyers/mortgagors.
Section 5.082’s requirement that payoff amounts are to be timely furnished by the noteholder/seller is prophylactic in nature and serves to curb unscrupulous ‘rent-to-own’ schemes that employ executory contract for deed conveyances and, as such, should not be construed, and was never intended to serve as, a limitation upon real estate conveyances that employ contractual vehicles other than a executory contracts for deed, such as the promissory note secured by a deed of trust at issue here.
We must examine and consider the entire contract “in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless.” Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983) (emphasis in original). We may read additional provisions into a contract only when “necessary in order to effectuate the intention of the parties as disclosed by the contract as a whole.” Danciger Oil & Refining Co. v. Powell, 154 S.W.2d 632, 635 (Tex. 1941) (emphasis added).
Such an “implied covenant must rely on the presumed intention of the parties as gathered from the terms as actually expressed . . . and it must appear that it was so clearly within the contemplation of the parties that they deemed it unnecessary to express it, and therefore omitted to do so, or it must appear that it is necessary to infer such a covenant in order to effectuate the full purpose of the contract as a whole as gathered from the written instrument.” Id.
In the present case, the promissory note clearly expressed the parties’ intent to provide Logan the right to pay the note off early and provided for specific obligations to be fulfilled on her part if she proceeded under that provision of the contact. Implicit in such provision is the corresponding obligation on the part of Graves to provide the appropriate payoff figure[2] so that Logan could exercise her rights and fulfill her obligations pursuant to that contractual provision. Without such an implied covenant, Logan would be unable to discharge her obligations under that provision of the contract, the provision would be rendered ineffectual and meaningless, and its purpose thwarted. We should not construe contracts in a manner that would render meaningless the express intent of the parties. Coker, 650 S.W.2d at 393.
Interpreting the contract to imply an obligation on the part of Graves to provide the payoff figure is consistent with the intent expressed in the contact as a whole, the well-established practice in real-estate transactions of the provision of a payoff figure by a seller (so well-established that the inclusion of an early payoff provision clearly demonstrates that such practice was within the contemplation of the parties and did not need to be expressed), as well as with the Property Code’s recognition of this well-established procedure. To hold otherwise would mean that, even though a buyer was expressly provided the right to an early payoff in a contract, the seller could render the provision meaningless simply by refusing to provide the payoff figure to the buyer. Absent an implied requirement that the seller provide a payoff figure, buyers seeking to exercise a right that was expressly recited by contract and was expressly intended by the parties would (as here) be forced to file declaratory actions to determine the payoff. This cannot be.
The provision of the payoff statement by a mortgagee/seller imposes no harsh burdens upon the seller; indeed, that a seller in good-faith would not relish receipt of the full amount owing would be odd. Moreover, provision of payoff statements would not only facilitate the efficient and unfettered transfer of property but prevent such disputants from seeking recourse to the courts. Were the Legislature to merely codify the pattern and practice of the Texas Real Estate and Title industry (as it has already done with executory contracts), we need never tread this ground again.
I would hold that, where a contract provides a buyer of real-estate the right to an early payoff, it implies a covenant on the part of the seller to provide the payoff figure in a reasonable period of time so that the buyer may exercise this expressly contracted-for right. Consequently, here, Graves had an obligation to provide Logan a payoff statement and her failure to do so in a reasonable period of time breached Grave’s duty to cooperate with Logan, i.e., to refrain from hindering, preventing or interfering with Logan’s attempts to perform her obligations under the contract.
For these reasons, I would affirm the trial court’s summary judgment in favor of Logan’s breach of contract claim and I dissent to that portion of the majority opinion that reverses the trial court’s summary judgment. I concur in the portion of the majority opinion that leaves undisturbed the trial court’s grant of declaratory relief establishing the payoff amount of the loan as of the date of the judgment and award of attorney’s fees, which were not challenged on appeal.
Jim Sharp
Justice
Panel consists of Justices Bland, Sharp and Taft.[3]
Justice Sharp, concurring in part and dissenting in part.
Publish. Tex. R. App. P. 47.2(b).
[1] The majority opinion, I contend, mistakenly states that there does not appear to be any statutory or precedential authority to support the existence of an implied covenant to provide a payoff amount in a transaction involving a promissory note and deed of trust. However, even if that were the case, the lack of support for such a specific implied obligation does not necessarily preclude the existence of a more general duty or obligation to cooperate.
[2] The note made a distinction between prepayment prior to five years and prepayment after five years.
[3] Justice Tim Taft, who retired from the First Court of Appeals effective June 1, 2009, continues to sit by assignment for the disposition of this case, which was submitted on May 26, 2009.