### T E X A S C O U R T O F A P P E A L S , T H I R D D I S T R I C T , A T A U S T I N

NO. 03-11-00508- CV

Alexander Tan and Lan L y Tan, Ap pellants

v. Antonio Di Napol i and Maya Di Napoli, Appellees

F ROM TH E DISTRI CT COURT O F TRAVIS CO UNTY, 200 TH JUDICI AL DISTRICT NO. D-1 -GN-0 9-0 0425 8, H ONO RAB LE AMY CLARK MEACH UM, J UDGE P RESIDING

M E M O R A N D U M O P I N I O N Appellants Alexander a

nd L an L y

Tan (c ollectively

“the Ta ns”) f iled suit to cance l and resc ind an executory contra ct for the purcha se of a home owned by Antonio and May a Di Napoli (collec tively “the Di Napolis”) and t o rec eive damag es under section 5.085 of t he T ex as P ro perty Code based on the Di Napolis’ failure to comply with statutory require ments for executory contra cts

on residential proper

ty encumbe red by exis ting liens. Tex. Prop. Code Ann. §§ 5.06 2 (l i m i ting applicability of subchapte r to residential proper ties),

. 0 8 5 ( We s t Supp. 2012) (prohibiting seller from executing executory contra ct for encumbe red residential proper ty unless statutory require ments are satisfied). The trial court deter mined that the Di Napolis violated sec tion 5.085 as a matter of law and rendere d judgme nt in the Tans’ favor on a jury verdic t awa rding them $500,000 in dam ages. On appea l, the Tans challeng e the leg al and fac tual sufficie ncy of the evidenc e to support the jury ’sdamag es finding s, contending they we re en t itled to rec eive more than $1.9 milli on in statutory

damag es. We will affirm.

BACK GR OUND

I n May 2007, the Tans and the Di Napolis enter ed into an executory contra ct in which the Tans a g ree d to purcha se a luxury home from the Di Napolis for $3.2 milli on (“the contra ct for deed” ). At that time, the home was subject to an exis ting purcha se-money lien held by Washington Mutual Ba

nk, FA with a principal balanc e of $1.625 milli on. The exis tence and terms of this note

wer e known to the Tans long befor e they executed the contra ct for deed, and the note and principal balanc e wer e ref

ere nced in the contra ct for deed. I n fac t, as part of the consideration for purcha sing the Di Napolis’ home, the Tans ag ree d to make monthly principal and interest pay ments to Washington Mutual on the Di Napolis’ behalf in satisfac tion of the exis ting lien. Wit h reg ard to the

rema ining portion o f t h e purcha se price , the Tans ag ree d to make sever al $240,000 lump-sum principal p ay

m ents to the Di Napolis at six -month intervals over a 30-month period and quarte rly interest pay

ments. The Tans further ag ree d to pay $500,000 down in addit ion to a $30,000 escr ow pay

ment. The deed of trust secur ing the Wa s hington Mutual loan included a “due on sale” clause , which authorized the bank to acc eler ate the loan if the Di Napolis transfe rre d any l eg al or benef icial intere st in the property , including by contra ct for de ed, without the bank’ s consent. All parties we re a

war e of the exis tence and potential ra mifications of the due -on-sa le clause and we re repr esente d by counsel in the transac tion. When the time came to close on the transac tion, howeve r, the Di Napolis had not obtained the bank’s consent and the Tans had not applied to assume the note,
2which was a condition pr ece dent to obtaining the bank’s consent. The closing date was delay ed to

addre ss this issue and a d i s p u t e that had arisen betwee n the Di Napolis and the neig hborhood homeowner s’ association (“H OA”) reg arding an ease ment to be convey ed along with the residential proper ty

. The day befor e the schedule d closing , the HOA had filed a lis pendens notice ag ainst the proper ty in an ef

fo rt t o compel the Di Napolis to repla t the residential proper ty and the adjoining

ease ment proper

ty into a single trac t. Although these circ umstances wer e known to all parties, they nonetheless desired to close the transac tion without the matters having been resolved. I n exc h an ge for monetary

c o n s id e r a tions (including a $10,000 cash cre dit at closing ) and amendments to the contra ct to addre ss the lis pendens filing and the risk that the exis ting note could be acc eler ated, the Tans consummated the sale ag ainst the advice of their attorney

. Fo l l o wi ng closing , the monthly pay ments on the Washington Mutual note wer e paid to the Di Napolis, rathe r than to the bank, in an appar ent attempt to preve nt the bank fr om learning about the tra nsaction and a cce lera ting the note

. Over the course of the two y ear s that followed the closing , the Tans paid the interest and principal on the Washington Mutual note fairly consistently , but they wer e fre quently delinquent

on the periodic principal and interest pay ments on the balanc e owed to the Di Napolis. Be cause the Tans wer e signific antly in defa ult on their pay

ment s , t h e Di Napolis twice instit uted eviction proce eding s ag ainst them. Both suits wer e ultimately nonsuited pursuant to settlement ag ree ments that provided for mo n et ary pay ments by the Tans to the Di Napolis in addition to amendment of some of the ter

ms of pay ment in the contra ct for de ed.

3After the second eviction proce eding was settled in the summer of 2009, the Tans

attempted to secur e third-par ty financ ing —with Mrs. Tan’s fathe r as the borrowe r—in order to meet their obliga tions under the contra ct for deed. The bank’s appra isal of the home, howeve r, was more than $1 million l ess than the Ta ns had ag ree d to pay for the house, lea ving a shortfall betwe en the
amount the bank would lend and the amount the Tans still owed to the Di Napolis. The Tans asked the Di Napolis to financ e the sho rt fa l l , b u t t he parties could not rea ch an acc ord reg arding the

secur ity the Tans would provide. Be cause the Tans rema ined unable to m eet their financ ial obliga tions to purcha se the proper ty , the Di Napolis filed a third evict i o n p ro ceeding in October 2009. By rule 11 ag ree ment, the parties ag ree d that the Tans would vaca te the premises on Dec ember

15, 2009, and the Di Na

polis would nonsuit the eviction proc eeding s. During t h e t i m e the Tans occupie d the proper ty , the dispute with the HOA was satisfac torily resolved wh en t he property was replatted after the Tans gave notice in J une 2009 of

an intent to canc el and resc ind the contra ct for deed based on improper platting of the proper ty

. Both p ar t i es ac cu s ed the other of having been an impediment to the eff orts to repla t, but there is no indication that this matter aff ecte d the parties’ ability to perf orm under the contra ct for deed. There is also nothing in the rec ord to sug g est that Washington Mutual attempted or threa tened to acc eler ate the loan or othe rwise inter fer ed with the par ties’ per formanc e of the contra ct for de ed. The day afte r vaca

ting the premises—more than 30 months afte r closing on the
contra ct for deed—the Tans sued the Di Napolis asser ting sever al cause s of action, inclu d i n g an action to canc el and resc ind the contract for deed based on the D i Napolis’ failure to comply with section 5.085 of the Texas Property Code, which (1) prohibits se llers from executing an executory

4contr a c t o n e n c u mb e r e d r e s id e n ti a l proper

ty unless cer

tain statutory require ments are met, (2) entitles the purchaser to canc el and resc ind the contract, and (3) e ntitles the purchase r to rec over f rom the seller “all pay

ments of any kind made to the seller under the contra ct,” “any pay ments the purcha ser made to a taxi ng authority for the pro p er t y , ” an d “the value of any improvements made to the proper ty by the purcha ser.” Id. § 5.08 5 (a) , (b), (c) ; see also id. § 5.062(a)

. The statutory require ments at issue in this case are that (1) the lender does not prohibit the transac tion and consents to provide cer

tain information to the purcha ser about the loan upon reque st and to acc ept pay ments direc tly from the purcha ser if the seller defa ults; (2) the seller provides a separ ate, written disclosure
to the purcha ser at least three day s befor e the contra ct is executed that includes specifie d information about the loan and a conspicuous notice about the possibili ty of fore closure upon the seller’ s defa ult; and (3) the executory contra ct includes covena nts r eg arding pay

ment of the exis ting lien, notice of defa ult, and the purcha ser’ s rig ht to cure d ef ault s. Id. § 5.085(b)( 3)(A) –(D). The statute further provides that noncompliance with the fore g oing require ments is actionable as “a false, misleading ,
or dece ptive act or prac tice” under the Texas Dec eptive Trade Practice s Act, Tex. Bus. & Com. Code Ann. § 17.46 (West 2011). Id. § 5.085(c) (1).

I t is undisputed that the co n t ra ct for deed here , which was draf ted by the Tans’ attorney , did not include the require d seller covena nts. I t is likewise undisputed that the Di Napolis did not secur e Washington Mutual’s consent as require d under the deed of trust and failed to provide the Tans with the statutory disclosures in the manner specifie d by section 5.085. Acc ording ly , the trial court instructed the jury that the Di Napolis violated section 5.085 as a matter of law. The Tans’ damag es we re the n deter

mined by the jury pursuant to the following specia l-issue question:

5What sum of money , if any , if paid now in cash, would fairly and rea sonably

compensa te the Tans, for their damages , i f an y , that resulted from the Di Napolis’ failure to comply

with the Texas Property

Code? Consider the following elements of da mag es, if any , and none othe r. Do not add any

amount for inter est on damag es, if any

. Do not include in y our answe r any amount that y o u fi nd the Tans could have avoided by

the exercise of

rea sonable c are . Answer separ ately

in dollars and ce nts for dama g es, if any

. (a) The amount of all pay ments of any kind made to the Di Napolis under the Contract for Dee d. Answer $____________________ (b) The amount of any pay ments t h e T ans made to a taxi ng authority for the Prope rty

. Answer $____________________ (c) The va lue of a

ny improvements m ade to the P roper ty by the Tans. Answer $____________________

The Tans claimed they wer e entitled to $1,634,961.77 for amounts paid to or on behalf of the Di Napolis under the contra ct for deed. This fig ure included downpay ment money , the escr ow fee , closing costs, principal and interest on the Washington Mutual note, HOA fee s and late fee s, casua lty and persona l proper

ty insurance premiums and late fee s, various leg al fee s, taxes paid o n o t h er proper ty the Di Napolis owned, principal and interest pay ments on the amount owed to the Di Napolis, sums paid pursuant to the settlement ag ree ments, and moving ex p en s es. The Tans 6claimed that they wer e entitled to be reimburse d $32,898.63 for tax pay ments, including interest and penalties for late pay

ments. Finally , the Tans claimed $317,592.51 as the “value ” of improvements such as reg ular m ai n t en ance items, car pet and paint upg rade s, cabine try , and the cost of custom furniture , blinds, and drapes that wer e removed from the property by the Tans. After a seven-day trial, the jury awa

rded the Tans $500,000 for pay ments under the contra ct and zero damag es for the other two cate g ories. The jury deter mined all of the Tans ’ other claims for aff irmative relief adver sely to them. The trial court rende red judgme nt on the jury ’s verdic t, denying the Tans’ motion for judgme nt notwithstanding the verdic t. The Tans’ subsequent motion for new trial was overr uled by opera tion of l aw. On appeal, t he Ta ns challeng e the amount of damag es awarde d on their section 5.085 claim, but they do not challeng e the dispositi on of t heir other cla i m s . The Di Napolis have
not appea led the adver se liability ruling on the section 5.085 claim or the trial court’s direc ted verdic t on their counte rcla ims ag ainst the Tans.

DISCUSSIO N

I n two points of err or, the Tans challeng e the leg al and fac tual sufficie n cy of the evidenc e to support the jury ’s awa rd of damag es. The Tans contend that they conclusively established that they wer e entitled to rec over more than $1.9 mill i o n u n d er section 5.085. Alterna tively , the Tans contend that the jury ’s damag e award i s ag ainst the g rea t weig ht and preponde ranc e of the evidenc e, espec ially since the jury failed to awa rd any damag es for taxes and the value of

improvements.

7W hen, as here , a party attacks the leg al sufficie ncy of the evidenc e suppo rt i n g an

adver se finding on an issue on which he had the burden of proof, he must demonstrate on appea l that the evidenc e establishes, as a matter of law, all vital fac ts in support of the issue. Dow Chem. Corp.

v. Francis , 46 S.W .3d 237, 241 (Tex. 200 1 ) (p er curia m) (citing Sterner v. Marathon Oil Co. , 767 S.W .2d 686, 690 (Tex. 1989)). The revie wing court must first examine the rec ord for evidenc e that supports the finding , while ignor ing all evidenc e to the contra ry unless a rea sonable fac t finder could not. City of

Keller v. W

ilson , 168 S.W .3d 802, 827 (Tex. 2005); Dow Chem. Corp. , 46 S.W .3d
at 241. I f there is no evidenc e to support the fi n ding, the revie wing court will then examine the entire rec ord to deter

mine if the contra

ry proposition is established as a matter of law. Dow Chem. Corp ., 46 S.W .3d at 241. We will sustain such a leg al-suff iciency chal l en ge o n l y i f the contra ry proposition was conc lusively established. Id. I n a fac tual-suffic iency revie w, we consider and weig h all the evidence, b o t h supporting a

nd contra dicting the finding

. See M aritime Ove rseas Corp. v. Ellis , 971 S.W .2d 402, 406-07 (Tex. 1998). A party attacking the fac tual sufficie ncy of the evidenc e supporting an adver se finding on which he had the burden of proof must demonstrate that the jury ’s answe r is ag ainst the g reat weig ht and preponde ranc e of the evidenc e. Dow Chem. Corp. , 46 S.W .3d at 242. We set aside the finding only if it is so contra ry to the overw helming weig ht of the evidenc e as to be clea rly wrong and unjust. Pool v. Ford Motor Co. , 715 S.W .2d 629, 635 (Tex. 1986). We may not substitut e our judgme nt for that of the trier of fac t or pass on the cre dib i l i t y o f t h e wi tnesses. See Maritime Ove rseas Corp. , 971 S.W .2d at 407. When prese nted with conflicting evidenc e, the trier of fac t may

8believe one witness and disbelieve others and ma y resolve inconsistencies i n the testimony of any witness. McG alliard v. Kuhlmann , 722 S.W .2d 694, 697 (Tex. 1986).

As an initial matter, we addre ss the Tans’ contention that they conclusively established the amount of d amage s beca use neither the amounts of their pay ments nor their documentar

y evidenc e in support of their damag es was contested. Whil e neither the Di Napolis nor their expert witness disputed the actua l sums the Tans paid, the Di Napolis did dispute whether the amounts the Tans c laimed wer e within the scope of the reme dies specifie d in se ction 5.085. Wit h reg ard to the amount s t h e T an s cl aim ed to have paid “under the contra ct,” there was a fac t issue about what sums wer e actua lly paid “under the contra ct” as opposed to under the settlement ag ree ments or extrinsi c to any contra ct. For example, the Di Napolis asser t tha t some of the Tans’ claimed damag es wer e pay ments made to settle t h e ev i ction suits. I n addition, the Tans soug ht
cate g ories of damag es that a fac t finder could have conclude d wer e not paid pursuant to the contra ct for deed, such as moving expenses, casua lty and personal property insurance premiums, late fees,
taxes paid on other proper ty the Di Napolis own, and various leg al fee s. Wit h reg ard to tax pay ments for the proper

ty , the Tans soug ht to rec over not only the amount of t he tax es but als o i n t er es t and penalties incurre d due to their failure to timely pay the taxes. Finally , the “value of improvements”
to the proper

ty was heavily disputed. The Tans assume that the value of i m p ro v ements to the proper ty is equivalent to the costs they s p en t o n the proper ty for maintenanc e, repa irs, custom furniture , and various upg rade s. Howev e r , the plain lang uag e of section 5.085 “mea sures the amount of re cover

y by the ‘value ’ rathe r than the ‘cost’ of such improvements.” Morton v. Hung Nguye n , 369 S.W .3d 659, 674 (Tex. App.—Houston [14t h Dist.] 2012, pet. filed); see Tex. Prop. Code Ann. 9§ 5.085(c) (2)( B) (ii). A g enuine issue of materia l fac t exis ted as to whether any value was added to

the proper

ty by virtue of the improvements and, if so, to what extent. I n addition, the Tans’ expert’s

re p o rt indicates that not all damag es were supported by documentar y evidenc e, and there fo re , t h e jury would have to rely on the Tans’ testimony to substantiate their claims. Credibility of witnesses is quintessentially a matter for the jury

. Thus, co n t ra ry to the Tans’ asser tion, the fore g oing fac t issues warr anted submission of the damag es issue to the jury

.

When an issue of materia l fac t is submitt ed to the jury , the sufficie ncy of the evidenc e is measure d by the questions and instructions in the char g e. See Regal Fin. Co. v. Tex Star Motors, Inc. , 355 S.W .3d 595, 601 (Tex. 2010) (noting that evidentiar y sufficie ncy must be measure d ag ainst jury char g e); Romero v . KPH Consol., Inc. , 166 S.W .3d 212, 221 (Tex. 2005) ; City of Fort W orth

v. Zimlich , 29 S.W .3d 62, 71 (Tex. 2000) (obser ving that court bound to revie w evidenc e in light of instruction submitt ed to jury without objec tion); Osterberg v. Pec a , 12 S.W .3d 31, 55 (Tex. 2000) (stating that when submitt ed without objection, co urt’s char g e, not some other unidentified law,

measure s sufficie ncy of evidenc e); see also Secure Comm, Inc. v. Anderson , 31 S.W .3d 428, 430-31 (Tex. App.—Austin 2000, no pet.) (holding that appellant waives rig ht to complain of ruling to whi ch n o er ror was assig ned). I n this case , the jury was asked to awa rd “fa ir and rea sonable” compensa tion to the Tans that “re sulted from” the Di Na p o l i s ’ failure to comply with the Texas Prop er t y C o d e. They wer e also instructed not to include any amounts that “the Tans could have avoided by

the exercise of

rea sonable c are .” When considering the evidenc e in light of the leg al-suff iciency standard articula

ted above and t he jury char g e, we conclude that there is some evidenc e to support the jury ’s damage s 10finding s and that the Tans did not conclusively establish their entitlement to more than $1.9 milli on

in damag es. First, there is evidenc e from which the jury could have conclude d that littl e, if any , of the Tans’ damag es “re sulted from” the Di Napolis’ failure to comply with section 5.085 or that the Tans could have mitigated their damag es to a signific ant deg ree . T h er e is no evidenc e that Washington Mut ual t ook any adver se action on the ex isting not e or that the Di Napolis’ f ailure to comply with section 5.085 impeded or preve nted the Tans from meeting their obliga tions under the
contra ct. Converse ly , there is considera ble evidence that the damage s the Tans sustained r esulted direc tly from their inability or unwillingne ss to meet their financial obl iga tions under the contra ct for de ed and se ttlement ag ree ments. The jury might also have rea sonably conclude d that it would
not be “fa ir and rea sonable” to allow the Tans to rec oup ever y thing they paid afte r living in the home for 30 months and inducing the Di Napolis to nonsuit the eviction proce eding s in relianc e on the Tans’ settlement ag ree ments and further promises to pay . I ndeed, the jury might reasonably have

co n cluded that the Tans could have mitigated their damag es by vacating the premises when they

wer e unable to pay their mortg ag e rathe r than neg otiating to extend their stay in the home and incur additional damag es. I t is also rea s o n ab l e fo r t h e jury to have determined that at l east some of t he damag es the Tans claimed did not fall within the statutory reme dies, including settlement pay ments, moving expenses, leg al fee s, pena l t i es , an d custom furniture

. Be cause there is some evidenc e to support the jury ’s failure to awa rd the Tans all the relief they soug ht, the Tans did not conclusively establish that they wer e entitl ed to rec over the $1.9 milli on in damag es to which they say they are entitled. See D ow Chem. Corp. , 46 S.W .3d at 241-42.

11I n their second issue, the Tans conte nd that the jury ’s damag es awa rd is a g ainst the g reat weig ht and preponde ranc e of the evidenc e beca use the amou n t aw ar d ed is so low in compar ison with the amount they proved they expended. They further contend that the jury was require d to awa

rd something with reg ard to taxes paid and value of improvements beca use there is

some evidenc e of both. I t is true that the Tans expended a g reat deal of money on this proper ty and that the jury ’s awa

rd is meag er in compar ison, but we cannot say that the evidenc e of the amounts the Tans paid gre at l y preponde rate s ag ainst the jury ’s verdic t when compar ed to considera ble evidenc e supporting the jury ’s verdic t with reg ard to what damag es are “fa ir and rea sonable,” “re sulted from” the Di Napolis’ failure to comply with section 5.085, and could have been avoided by the Tans with re asonable car e. See R egal Fin. Co. , 355 S.W .3d at 601 (e videntiary sufficie ncy must be measure d ag ainst jury char g e). Wit h reg ard to the value of improvements i n particula r, t here was no e vidence that the value of the proper

ty incre ased afte r the Tans expended the s ums they claimed for improvements. There was c onsiderable disputed evidenc e reg arding the value of the prope rty at the time the Ta

ns purcha sed it in 2007 and shortly befor e the Tans vacated the premises in 2009. At best, the evidenc e shows that the property was valued about t he same both befor e and afte r t he Tans “im p ro v ed” it. At worst, t he evidence showed t hat t he property was worth about $1 million l ess. I n addition, the jury co u l d re as o nably have deter mined that many of the expenses soug ht to be rec overe d did not qualify as improvements or add any value to the home—such as repa irs, reg ular maintenanc e items, and the thousands of dollars spent on custom furniture —or that the Tans could have avoided those losses had they paid what they owed on their mortg ag e rathe r than incurring considera ble expenses 12for custom furniture , new car petin g, an d p ai n t

. I n addition, there was evidenc e that the Tans

remove d the custom furniture , drape s, and blinds from the proper ty , such that those items could not have added any value to the home. Finally , Antonio Di Napoli testified that additional repa irs had
to be made afte r the Tans vacated the premises in order to make the home marke table for sale. “B y its plain lang uag e, the purcha ser’ s rig ht to rec eive the ‘value of improvements’ under section 5.085 i s desig ned to compensa te the purcha ser for value that is added by the purcha ser to the proper ty , reg ardle ss of t he re as o n , an d that is reta ined by the s eller after the purchaser proper ly canc els and

resc inds the contra ct for deed.” Morton , 369 S.W .3d at 674. I n this case , the jury could rea sonably have conclude d that the proper ty did not incre ase in value due to the expenditures for which the Tans seek reimbursement, and there is very littl e contra ry evidenc e, let alone so much evidenc e as to rende r the jury ’s ver dict clea rly wrong and unjust. See P ool , 715 S.W .2d at 635. I n summary , we co n cl u d e that the evidenc e was leg ally and fac tually sufficie nt to support the jury ’s awa

rd of $500,000 in da

mag es to the Tans for pay ments made to the Di Napolis under the contra ct and zero damag es for tax pay ments and the value of improvements. We there fore

overr ule appe llate issues one a nd two.

CONCLUSION For the re asons stated, we aff irm the trial cour

t’s judgme nt.

13_________________________________________ J . Woodfin J ones, Chief Just ice Be fore Chief J ustice Jones, J ustices Rose and Goodw in Affir med Filed: Oc tober 19, 2012

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