### TEXA S C OU R T OF A PPEAL S, THIR D DIST R ICT , AT AU STIN

NO. 03-03-00274- CV

Dora Am os and Leo Watson, Appellan ts

v. David Fe rre tti; C arole F err ett i; and DC Ind ustries, Inc., Appellees

F ROM THE DISTRICT CO URT OF WILLI AMSO N COUNTY , 277TH JUDICIAL DISTRICT

NO. 02-1 76- C277, H ONO RAB LE KEN ANDERSON, JUDGE P RESIDING

M E M O R

A N D U M O P I N I O N Appellants Dora Amos and L eo W atson (collec tively “Watson”) entere d into a rea l
e state c on tr a c t un de r wh ic h Wat so n wa s to buy fo ur pa rc e ls of land fr om a pp e lle e s D a vid

F e rr e tti , Carole F err etti, a

nd DC I ndustries, I nc. (collec tively , “F err etti”). About nine months af ter c losing the sale, F err etti notified Watson that he was in de fault and that Fe rre tti was acc eler ating the note. Shortly there afte r, the pa

rties discovere d that the title c ompany had made an er ror, omitting f

rom the leg al desc ription of the land two of the four tra cts. Watson sued, seekinga dec laratory judgme nt that Fe rre tti breac hed the contrac t by failing to convey all of the prope rty contemplated by

the par ties and that any defa

ult by Watson was therefor e ex cused. Among othe r cla ims, W atson soug ht damag es fo r b re a c h o f c on tr a c t and statut or y fr a ud and so ug ht e qu ita

ble re lie f o f r e fo rm a tio n a nd sp e c if ic p e r f o r ma n c e . F e r r e tt i c r o s s - c la im e d , s e e k in g ju d g me n t f o r th e d e b t o u ts ta

n d in g u n d e r

th e n o te
.2

After a benc h trial, the trial cour t entere d judgme nt in favor of Fe rre tti. Watson appea ls, arguing that the trial cour

t’s judgme nt is not supported by leg ally or fa ctually

sufficie nt evi d en ce an d t hat the
c ourt a bu se d it s d isc re tio n in

de nyinge qu ita

ble re lie f. We a ff

ir m th e tr ia l c ourt ’s jud g me nt.
F ac tu al & P r oc e dur al B ac kgr ound I n Fe bruar

y 2001, Watson and Fe rre tti entered into a r eal e state contra ct under which Watson ag ree d to buy

four pa rce ls of land for $780,000; F err etti a g ree d to f inance $702,000 of the sales pric e. In May , the par ties closed the sale a

nd Watson ex ecute d a lien note f or $702,000 and
a de e d o f t ru st. Un de r t

he de e d o f t

ru st, Wat so n w a s o bli g a te d to ke e p th e pr op e rt y in g oo d r e pa ir and condition, ma intain insura nce and deliver an insuranc e policy to Fer retti, pay all taxes when due, and, upon re quest, provide e vidence to Fer retti that the taxe s we re paid “whe n due.” F err etti was g iven the rig ht to perf

orm any obligations not fulfilled by Watson and demand re imbursement for tho se ob lig a tio ns . F e rr e tti wa s a lso a llo we d to a c c e le rate the no te if Wat so n de fa ult e d an d f

a ile d to
c ur e his de fa

ult . Watso n w a ive d h is r ig ht t o r e c e ive no tic e of an inte nt t o a c c e le rate . A t th e tim e of c los ing , Fe rr e tti wa s occ up ying sp a c e on the pr op e rt

y , a nd he a g re e d to e ith e r v a c a te wi thi n th ir ty day s or pay

$600 a mont h i n re n t
. Unbeknownst to Watson or Fe rre tti, the tit le company used an
e rr on e ou s le g a l de sc ri pti on of the land , o mittin g tw o o f t he tr a c ts fro m the c los ingdo c ume nts , including the war

ranty deed a nd deed of

trust. After c losing, the pa rties p ro ceeded unde r the assumption that all of the trac ts had bee n conveyed.

On Novembe r 12, 2001, Fe rre tti forwa rded two tax notices he rec eived to W atson,
re min din g Wat so n th a t pr oo f o f paymen t w a s r e qu ir e d; a thi rd ta x noti c e wa s ma ile d d ir e c tly to Watson, but a fourth notice wa s never rec eived by

either pa rty . The notice s stated that taxes were3

due on Oc t o b er 1 , 2001, and would bec ome delinquent on F ebrua ry 1, 2002, but also provided incre asing amounts due if paid in F ebrua ry , Marc h, April, May , or J u n e. W at s o n did not pay the taxes by Fe bruar y 1. He testified that he dec ided not t o p ay by the due date bec ause his bank ha d g one into bankruptc y , ty ing up his fun d s at the same time that he was oblig ated to pay about $100,000 in tax es on various proper ties. To conser

ve ca pital, he chose to pay

some taxes late along with a pena lty , which he ha d done without incident for othe r prope rties in the past. Watson testified that be c a us e the bil ls set ou t pa

y me nt a mou nts du e if pa id u p unti l June , h e be lie ve d h e ha d unti l June to p ay

the ta xes. On Fe bruar

y 6, 2002, Fe rre tti sent W atson a letter titled, “NOTI CE OF DE FAU L T,” inf or min g Wat so n th a t he wa s in de fa ult fo r t he fo llo wi ngre a so ns :
1. FAI L URE TO S UB M I T PAYMENTS PER THE TERMS OF THE REAL ESTATE L I EN NOTE
. . . . NO TE : 11 -1 2- 01 , A

NO TI CE WA S MA I L ED R EGA RD I NG D EL I NQU EN CY CHARGE. CU RE T I ME F OR

TH E A B OV E D EL I

NQ UENC Y - 10 DA YS. 2. FAI L URE TO COMPL Y WI TH GRANTORS OB L I GATI ONS I N THE DE ED OF TRU ST A. KE EP T HE PRO PER TYI N G OO D C ON DI TI ONAN D R EPA I R. B. DEL I VER THE I

NSURANCE POL I CY TO B ENEF I CI ARY. C
. SATI SFACTORY EVI DENCE T H A T A L L T AXES AND AS SESS MENTS ON THE PROPERTY HAVE B EEN PAI D WHEN DUE. CU RE T I ME F OR

TH E A B OV E - 10 DA YS.4

Wat so n r e sp on de d, e nc los ingan in sura nc e c e rt if ic a te and de mand ing $1 40 0 fr om F e rr e tti fo r r e nt. Wat so n d id n ot pay th e tax es, a dd re ss t he iss ue of

ta xes i n h is r e sp on se to F e rr e tti , o r o the rw ise communicate a

ny information to Fe rre tti about the t axes or hi s financ ial situation. On Febr uary 21, Fe rre tti dis cover ed that the taxes had not bee n paid. He paid $4,730.32 in delinquent taxes on the four pa rce ls and sent Watson a letter notifying him that he w as i n defa ult, givingnotice that he w as
acc eler ating the note and de manding pay ment in full by

April 2. Fe rre tti also stated that Watson’s ri g ht t o c oll e c t r e nt f

ro m the pr op e rt

y ’s te na nts wa s te rm inate d a

nd that F e rr e tti wo uld

imm e diate ly take ove r re nt collection.

Watson filed suit on Marc h 27, seekinga dec laration that (1) any defa ult by Watson
wa s e xcu se d b y

F e rr e tti ’s e arl ie r b re a c he s o f f a ili ngto c on ve y

a ll of the pr op e rt

y and fa ili ngto f

ull y pay rent a fter holdingover on the proper ty ; (2) F err etti had n o ri gh t t o ac cele rate the debt or fore close on the pr operty ; (3) F err etti h ad no rig ht to hold the corre cted de ed “hosta g e,” r equiring Watson to agr ee to f

orec losure or w aive his rights to injunctive relief; a nd (4) F err etti had no rig ht to col l ec t re n t. Watson sought damag es for brea ch of c ontrac t, statutory fra ud, brea ch of duty

as ag ent, and tortious interfe renc e. Watson also soug ht equitable relief in the form of re formation of the deed, specific perf

ormanc e, and injunctive r elief ba rring Fe rre tti from forec losing on the proper ty
. Fe rre tti counte rcla imed, seeking judgme nt f or the amount due under the deed of trust and
asser ting that Watson had not per formed ne cessa ry maintenanc e and repa irs, paid all taxes when due,
or c ur e d h is d e fa

ult a ft e r r e c e ivi ngno tic e fr om F e rr e tti . F e rr e tti state d that he wa s “ fu lly wi lli ngto execute and de liver a c orre ction deed a nd any other doc uments nece ssary to corre ct any

err ors in the le g a l de sc ri pti on

of the Pr op e rt

y .” F oll ow ing a be nc h tri a l, the tr ia l c ourt or de re d th a t th e re a l e state5

documents should be corr ecte d as contemplated by the orig inal rea l estate c ontrac t and that Watson
wa s li a ble to F e rr e tti fo r $ 75 3, 40 2. 63 , p lus pr e - a nd po st- jud g me nt i nte re st a

nd a tto rn e y ’s fe e s. On appe al, Watson asserts that F err etti brea che d th e c o ntrac t and committed statutory fra ud when he gav e W at son a dee d convey ing only part of the proper

ty and that Watson was thus excused from “ any

duty under the promissory note and deed of trust.” W atson furthe r ar g ues that the promissory

note and de ed of trust wer e the result of a mistake and invalid, that Watson rec eived inadequate notice of

the taxes, that Fer

retti had no rig ht to acce lerate the debt, and that he is entitled to equitable re lief.
Stand ard of Review

When no findings of

fac t and conc lusions of law are filed, we infer that the trial court made all finding s nece ssary to support its j udg ment. Sixth RMA Partners, L.P. v. Sibley , 111 S.W .3d 46 , 52 (T e x. 20 03 ); see Robe rson v. Robinson , 768 S.W .2d 280, 281 (Tex. 1989). However, when the re cord inc ludes a re porter’ s rec ord, a party may challeng e the lega l and fa ctual suff iciency of the implied findings, and we will revie w t hose arg uments under the same standa rds used to re view jury finding s. Roberson , 768 S.W .2d at 281. I n revie wing leg al sufficie ncy , we view the evidenc e in a light that supports the di sputed finding s, disreg ardingevidenc e and inf ere nces to the c ontrary

when
rea sonable to do so. Sibley , 1 11 S.W. 3d a t 52 ; see ge nerally City of Keller v. W ilson , No. 02-1012, 2005 Tex. L EXI S 436 (J une 10, 2005) ( discussing a nd exp l ai ning pr oper vie w of e vidence under le g a l su ff ic ie nc y re vie w) . I n re vie wi ngfa c tua l su ff ic ie nc y , w e vie w a ll o f t

he e vid e nc e and

up ho ld the f in d in g u n le s s th e s u

p p o rti n g e v id e n c e is s o w e ak o r th e f in d in g s o a g a in s t t

h e o v e r w h e lm ingA m u tual mistake is established when the evidenc e shows that both par ties were acting 1 under the same misunderstandingof the same materia l fac t. Lacy v. Ticor Ti tle Ins. Co. , 794 S.W .2d 781, 784 (Tex. App.—Dallas 1990, wr it denied). 6 weig ht of the evidenc e as to be manifestly unjust. AT & T Corp. v. Rylander , 2 S.W .3d 546, 551-52 (Tex. App.—Austin 1999, pet. denied).

The trial c ourt as finde r of f act is the sole judge of t he cr edibility of the witnesse s and the weig ht to be g iven their testimony
. Raymond v . Rahme , 7 8 S. W.3 d 5 52 , 5 56 (T e x. Ap p. —Aus tin 2 0 0 2 , n o p et
. ). T h e t ri al co u rt m ay dra w r ea s o n ab l e i n fe re n ce s fr o m t h e e v i d en ce , an d i t s fi n d i n gs will not be disturbed on appea l unle ss the rec ord conta ins no probative evide nce on which the cour t could base its infe renc es or the finding s are so contra ry to the evidenc e as to be unjust. Carson v. Sta te , 117 S.W .3d 63, 66 (Tex. A pp.—Austin 2003, no pet.). Our revie w of a t ri al court’s de te rm inatio n o f l e g a l pr inc ipl e s is muc h le ss de fe re nti a l, and the tr ia l c ourt a bu se s it s d isc re tio n if it mis interpre ts or misapplies the law. W alker v . Pack

er , 827 S.W .2d 833, 840 (Tex. 1992).
Discussion By its order that the parties wer e to immediately execute a corr ection dee d, corr ection lien note, and c orre ction deed of trust, the trial court impliedly found and conclude d that a mutual mistake was made at the re al estate closing
. By its order that Fe rre tti should rec over $753,402.63 from Watson, the court impliedly found and c oncluded that Watson had de fau lted on the contra ct
and that th e mut

ua l mi sta ke did no t e xcu se him

fr om c omp lyingwi th h is c on tr a c tua l ob lig a tio ns . The pa rties ag ree that the er

ror in the leg al de s cripti on was a mutual mist ake. As 1 d is c u s s e d b e lo w , a mutu a l m is ta

k e d o e s n o t e xc u s e Wats o nf r o m h is c o n tr a c tu a l o b li g a ti o n s . We7

will first determine whe ther Watson d efa ulted on the ag ree ment. We will then address Watson’s arguments that the mistake amounted to a brea ch of c ontrac t or statutory fra ud excusing Watson’s perf ormanc e. F inally , we will addr ess whethe r Watson’s d ef au l t , i f any , justified Fer retti’s
acc eler ation of the note a

nd whether

Watson was entitled to equitable re lief.
Di d W ats on De fau lt o n th e Con tra c t? I n h is f ou rt h is su e , Wats on c on te nd s tha t the de e d’ s lan g ua g e re late d to tax pa y me nts is u ne nf or c e a bly va g ue , th a t he re c e ive d ina de qu a te no tic e of the ta xes, and

that F e rr e tti wa ive d h is ta x-r e late d c la ims
.

The de ed of trust states that property taxes were r equire d to be paid “whe n due.” T he proper ty tax not ices themselve s state that the taxes “ are due on Oct 1st a nd become delinquent Fe b 1st.” The notice s set out the tax due if paid befor e January 3 1 , as we ll as increa sing a mounts due if paid in Fe bruar

y , Marc h, April, May , or June. W atson argues t hat he wa s confuse d by the conflictinglang uag e of the tax not ices a nd believed he had until J une to pa y t h e taxes. Watson argues that “w hen due” is vag ue bec ause statute provides that proper ty taxes are due “on re ceipt of the tax bil l.” See Tex. Tax Code Ann. § 31.02 (West Supp. 2004-05).

Tax bil ls are to be mailed to proper ty owner s “by October 1 or as soon therea fter a s prac ticable.” Id
. § 31.01(a) (West 2001). The failure to send or rec eive a tax bill g ener ally does not aff ect the validity of the tax, pena lty , or due date. Id . § 31.01(g ). Taxes are due upon re ceipt of a tax bi ll and become delinquent if not paid by Fe bruar y 1 of the ne x t tax y ear . Id . § 31 .0 2( a ); see At lan tic Ri c hfi e ld C

o. v . W arre n I nd e p. Sc h. Di

st. , 453 S.W .2d 190, 201 n.5 (Tex. Civ. App.— Be au m o nt 1970, writ ref ’d n.r.e .) (f

ormer tax code pr ovided that “taxes bec ome due a nd8

pay able not e arlier than October 1 of the taxable year and may not be paid or a cce pted prior to that date,” “do not be come delinquent until F ebrua ry 1 of the succ eedingy ear ,” and c annot be c ollected throug h delinquent-tax suit unt il after July 1 of succ eedingy ear). Watson insi sts that h i s ar gument as to the vagueness of the due date is not one of
mere semantics. Howe ver, the fac t that tax ing a uthorities had in the past allowe d Wa t s o n to pay de lin qu e nt t a xes wit

h an a dd e d pe na lty do e s not ch ang e the fa c t tha t he wa s on n oti c e tha t taxes p a id afte r January

wer e delinquent. The tax bills stated t hat t he tax es were due befor e Februa ry 1, that taxes became delinquent on Fe bruar y 1, and that pay

ments made a fter that d at e would incur additional penalties. Watson testified that he had paid taxes late in the past, that under the contra ct he wa s obligated to pay

the taxes when due, that he knew tax es we re “ due by the end of January ,”
and that mo st o f h is p ro pe rt

y ta xes we re no t pa id “ on tim e ” fo r 20 01
. Wat so n d id n ot c omm un ic a te to Fer retti his intention to pay

the taxes sometime before J une, eve n afte r re ceivingFe rre tti’s letter noting that Watson ha d not pr ovided proof of timely tax pay ments. Furthe r, althoug h neither Watson
n or F err etti rec eived one of the four tax not ices, Watson was not har med by the missing notice beca use he ha d in his possession t he other three and testified that he had no intention of pay ing a ny of the bil ls o n ti me . H e c on sc iou sly chose no t to pa y tho se bil ls b y

F e br ua ry 1 in an atte mpt

to
conser ve funds while his fina

ncial situation was unce rtain. This is not a situa t i o n wh ere Watson failed to pa

y the missing bill out of ignor ance of its exi stence . He f ailed to pay any

of the bills as
a re sult of a consc ious decision.

A common-sense rea ding of the tax code and the tax bills lea ds not to c onfusion but to a conc lusion that tax bills are mailed a round or soon afte r October 1, are due at a ny time betwee n9

Oc tob e r 1 and

Janu ary 31 , a nd be c ome deli nq

ue nt o n F e br

ua ry 1. Th e tr ia l c ourt

did no t e rr in
rea ching this c onclusion and in f inding that Watson unde rstood when the taxes we re due and fa iled to pay them befor e they

beca me delinquent, thus defa

ulting under

the dee d of trust. Watson goe s on to argue that he c annot be considere d in defa ult because he did not
rec eive a dequate notice of the taxes and that Fe rre tti wa ived any rig ht to hold Watson in de fault on the prope rty by his delay in forwa rding the t ax notices. One tax notice was never rec eived by

either party , one wa s sent to Watson, and two were sent to Fe rre tti and then forwa rded to Watson. W atson did not rece ive the forwa

rded notices from F err etti until m id-Novembe r. Onc e Watson rec eived the fo rw ard e d n oti c e s, he be lie ve d th e m to be “ fo r purp os e s of inf or matio n, to be fi le d a

wa y .” F e rr e tti te sti fi e d th a t he di d no t kn owe xac tly wh e n h e re c e ive d th e ta x bill s, wh ic h w e re se nt t o a n o ld addre ss and forw arde d b y t h e p o s t o ffice , but said it was “likely ” that he r ece ived them “a round” October 1. I f Ferr etti rec eived the notices around October 1, he did not forwa

rd the notice s for about six wee ks, and a mortga g ee is require d to forwa rd t ax notices wit hin thirty day s of re ceipt. See Te x. Tax Code Ann. § 3 1. 01 (j ). Wat so n urg e s th at F e rr e tti ’s de lay wa ive d a ny ri g ht he ha d to c la im Watson had defa

ulted by not pa

ying the taxes when due. We disag ree . Fe rre tti may have de lay ed forwa rding the tax notices longe r than he should ha ve, but his mail w as beingforwa rded, r esulting in some delay s, and he did not k now when he rec eived the notice s, althoug h he thoug ht it was probably around O ctober

1. Fur ther, the tax code, while imposing a thirty -day

window to forwa

rd tax not ices, a lso provides that failure to rec eive a tax not ice doe s not e x cuse a proper ty owner from paying his taxes. Id . § 31.01(g ). Watson rec eived three of the four notice s by mid-November , more10

than two months before the taxes became delinquent. He did not pay any of the taxes by

Fe bruar y 1 and testified that he intentionally chose not to pay

for f inancial r easons, not beca use of a ny lack of notice. The trial c ourt did not err in findingthat Watson rece ived ade qu a ten o ti ce, unde rstood the tax deadline, and de faulted on his oblig ation to timely pay the taxes. W e over

rul e Watson’s fo ur th i ssu e on

a pp e a l.
Di d F e rre ttiBr e ac h th e Con tra c t? I n Watson’s first issue, he conte nds that Fe rre tti breac hed the r eal e state contra ct by convey ing le ss property

than the re al estate contra ct contemplated and, thus , Watson was excused fr om a ny duty imp os e d und e r t

he pr omi sso ry

no te and de e d o f t ru st. The e ssential elements of br eac h of contra ct ar e a valid contrac t, perfor mance by the plaintiff, bre ach by the def endant, a nd resulting damag es incurr ed by the plaintiff. Scott v. Sebre e , 986 S.W .2d 364, 372 (Tex. App.—Austin 1999, pet. denied). H ere , assuming Fer retti brea ched the contra ct, Watson has not proved that he perf ormed under t he contract, nor ha s he pre sented e vidence of injury he suff ere d as a r esult of F err etti’s brea ch or e x plained what damag es he ha s sustained. See id. at 373. Indeed, Watson does not see m to urg e that he w as entitl ed to damage s for bre ach of contra ct, althoug h he does se ek attorne y ’s fe es. I n s tead, he urg es that F err etti’s alleg ed bre ach
ex cu s edW at s o n ’s l at er

b re ac h an d

as s er t s t h at h e d i d

n o tt re at t h e c o n t ra ct as co n t i nu i n g. As stated by

the supreme court in Dobbins v. Redde n , a c a s e r e l i e d o nb y W a t s o n , “ It is a we ll e sta bli sh e d r ule that ‘a pa

rt y to a c on tr a c t wh o is him se lf in d e fa ult c ann ot m a int a in a

su it for its brea ch.’” 785 S.W .2d 377, 378 (Tex. 1990) (q u o t i n g Gu l f P ipe Line Co. v. Nearen , 13811

S.W .2d 1065, 1068 (Tex. 1940)). I t wa s Watson who sued, asser ting br eac h of contra ct af ter he himself defa

ulted on his c ontrac tual duties. We be lieve the rule quoted above applies to Watson as
muc h a s it

do e s to F e rr e tti
. Af

te r cl os ing , whe n the a lle g e d “b re a c h” oc c ur re d, Wat so n a

nd F e rr e tti both perfor

med under

the contra ct as if it were c ontinuing and Watson collec ted re nt and exercised
c on tr ol ove r the pr op e rt

y . Wat so n’ s bre a c h wa s in hi s c on sc iou s d e c isi on no t to pa y the ta xes d e sp ite a contr actua l obligation to do so. Fe rre tti’s “brea ch” w as in the nature of a mutual mi stake a nd was
no t di sc ov e re d b y

the pa rt ie s unti l a ft e r Watso n’ s d e fa ult
. Parties to a mutual mistake may be relieve d of their c ontrac tual responsibilities. See A.L.G. Enters. v. Huffman , 660 S.W .2d 603, 606 (Tex. App.—Corpus Christi 1983 ), aff’d as modified , 672 S.W .2d 230 (Tex. 1984). Howe ver, onc e the e rror was discove red, Watson neve r soug ht to avoid the contra ct and instea d sued t o reg ain control over the proper ties. The evide nce a

nd Watson’s pleading s demonstrate that h e wa n t ed the contra ct to be re formed a nd continue as ref ormed. Se e W

al lerste in v . S

pir t , 8 S.W .3d 774, 781 (Tex. App.—Austin 1999, no pet.) (re formation is ava ilable to corr ect mutual mistake ). Thus, even assuming that the title company ’s mistake, of which ne ither par ty was a war e, could be interpre ted as a brea ch by

Fe rre tti, W ats o n ’s later de fault wa s not ex cused by Fe rre tti’s undiscovered e arlier brea ch. Hanks v . GAB Bus. Serv s., Inc. , 644 S.W .2d 707, 708 (Tex. 1982) (“A party who elec ts to treat a c ontrac t as continuing deprive s him se lf of any e xcu se fo r ce a sin g pe rf or manc e on his ow n part
. . . . At a ll t ime s d ur ingthe dis pu te
and su bs e qu e nt l iti g a tio n, GA B c ho se to t re a t th e c on tr a c t a s c on tin uin g . . . . Mo re ov e r, GA B did not pursue it s excuse reme dy until it had already instit uted ac tion to enforce the contra ct, well over a y ear afte r Ha nks’ bre ach of

the cove nant not to compete.” ).12 As Wat so n p oints o ut, mut ua l mis take is no t a de fe ns e to a br e a c h o f c on tr a c t c la im but rathe r i s an equitable g round for resc ission. Gr e at A m. In s. Co. v . No rth Au sti n M un . U til . D ist
. No. 1 , 902 S.W .2d 488, 500 (Tex. App.—Austin 1993), rev’d in part on other grounds , 908 S.W .2d 41 5 ( Te x. 19 95 ). Un de r t he se fa c ts, the tr ia l c ourt

did no t e rr in a g re e ingthat F e rr e tti wa s a pa rt y to a mutual mistake and in conc luding that the mistake did not amount to a brea ch of c o n t ra ct on F e rr e tti ’s pa

rt that w ou ld e xcu se Wat so n’ s f a ilure to m e e t hi s c on tr a c tua l ob lig a tio ns . Did the Error Amount to Statutory Fraud?

I n his second issue, Watson asser ts that F err etti c ommitt ed statutory fra ud and that Watson was thus ex cused f rom the ag ree ment. Al t h o u g h Watson ag ree s that the omission i n the leg al desc ription was a mutual mistake a nd the re sult of the t i t l e company ’s er ror, he argues that F e rr e tti c omm itt e d s tatut or y fr a ud by mis re pr e se nti ngthe pr op e rt y c on ve y e d thr ou g h the re a l e state
co n t ra ct , an ae ri al p h o t o grap h o f th e pr o p er t y , an d a li s t o f t en an t s , wh i ch i n d u ce d W a t s o n t o go throug h with the rea l estate c ontrac t and buy the prope rty . Watson asserts that he wa s damag ed by this mi sconveyance , but does not elaborate on what those damag es wer e. I n lieu of dama g es, Watson argues he w as entitled to specif ic per formanc e. I n a re a l e state tr ans a c tio n, a pe rs on c omm its statut or y fr a ud if (1 ) h e make s a

fa lse repr esentation of a past or e x isting mat er i al fa ct , (2) to a pe rson for the purpose of inducing that pe rs on to e nte r i nto the c on tr a c t, a nd (3 ) the pe rs on re lie s on the mis re pr e se ntatio n in e nte ri ngint o the contra ct. Tex. Bus. & Com. Code Ann. § 27.01(a) (1 ) (W es t 2002). I f the a lleg ed fr aud is an unfulfilled promi se t o do something in the future, the false promise m ust be made with an intention13

not to fulfill it
. Id . § 27 .0 1( a )( 2) ; National Resort Communities, Inc. v . Holleman , 594 S.W .2d 195, 196 (Tex. Civ. App.—Austin 1980, writ ref’d n.r .e.).

Watson is correc t that intent is not usually a n ec essary

element in a statutory

fra ud suit. See Fletche r v. Edwards , 2 6 S
. W
. 3 d 6 6 , 7 7 (T ex . Ap p . —W ac o 2 0 0 0 , p et
. d en i ed ) ( kn o wl ed ge of fa lsity of re prese ntation is not nece ssary in statutory fra ud action). Howeve r, the pa rties ag ree that the er ror in this c ase was a mutual mistake , and there fore any claim for statutory fra ud must fail. See De nm an v . S

tua rt , 176 S.W .2d 730, 732 (Tex. 1944) (“mutual mistake pr eclude s the exist ence of” statut or y fr a ud , cit ingse c tio n 2 7. 01 ’s pr e de c e sso r s tatut e ); Speer v . Pool , 2 1 0 S. W. 2 d 4 2 3 , 4 2 7 ( T e x. Civ . App .— El Pa so 19 47 , no w ri t) ; Moss-Tate Inv. Co. v. Owens , 22 S.W .2d 1096, 1097 (Tex. Civ. Ap p. —D a lla s 1 92 9, wr it r e f’ d) . F ur the r, a lth ou g h Watso n atte mpt s to fra me a s fr a ud F e rr e tti ’s us e of the re al estate contra ct and illustrative exhibits to induce W atson into completing the transac tion, this wo u ld

im p ly th a t F e r r e tt i i n d u c e d Wats o ninto g o in g thr o u g hw it hth e c lo s in g b y

p r o mi s ing throug h the contra ct to convey all of t he contemplated property in the future at closing. Watson does not argue, much less show, that Fe rre tti made that repr esentation with the i ntention of not convey ing all of the prope rty
. See Tex. B us. & Com. Code Ann. § 27.01(a )(2) ; Holleman , 594 S.W .2d at 196.

T h e tr ia l c o u rt d id

n o t e r r in f in d in g th a t F e r

r e tt i d id n o t c o mm it

s tatuto r y f r a u d
. We
ov e rr ule Wat so n’ s se c on d is su e on a pp e a l.
Di d th e Erro r E

x c us e An yDe fau lt o r I nv ali da te theCon tra c t? I n his third issue, W atson contends that the pr omissory note and de ed of trust we re the re sult of a mistake and inva lid. W atson urg es that the promissory n o te and de ed of trust we re invalid be cause they wer e the re sult of a mutual mistake. He a rgues that the trial c ourt should haveWat so n c ite s Hampton v. M inton , 785 S.W .2d 854 (Tex. App.—Austin 1990, writ denied), 2 to support his arguments that his default wa s excused by Fe rre tti’s earlier

brea ch and that his seeking ref ormation should not bar him from asserting his other defense s. I n Hampton , the buy er a rgued that his default did not excuse the seller’ s failure to make pay ments to the prior owne r, re sulting in that party ’s fore closure on the proper ty
. Id . at 857. The court held that the seller ’s obliga tion to perform was ex cused by the buy er’ s prior bre ach. Id . at 857-58. The buy er the n argued that the se ller wa ived her e x cuse by

seekingspecific perf

ormanc e, not re scission. Id . at 858. The court held that the seller had not conc lusively

indicated a

n intention to keep the contr act a live. Id
.

14 applied the r

ule that a c ontrac t may

be avoide d if the par

ties made a

mutual mist ake. See G reat Am. Ins. Co. , 9 02 S.W. 2d

a t 49 9- 50 0. Ho we ve r, a ft e r t he e rr or c a me to lig ht, Wat so n n e ve r a sk e d F e rr e tti to rescind the c ontrac t. I nstead, he demande d a re formed d ee d an d attempted to neg otiate the ref ormation and c ontinuance of the contract. In his pleading s, Watson pleaded mutual mistake but
never argued that the c ontrac t was invalid or void and ne ver soug ht rescission. Inst ea d , Watson
argue d th a t if

F e rr e tti we re a llo we d to fo re c los e up on the pr op e rt

y , Watso n w ou ld “l os e the be ne fi t of [his] barg ain,” a

nd reque sted ref

ormation of the doc uments. Watson may

not se ek and be g rante d equitable relief in the form of r efor

mation and also seek to a

void the contra ct and its re sponsibili ties. Watson c ould ha ve soug ht to invalidate the
c on tr a c t, b ut i nste a d h e op te d f or re fo rm a tio n. B y

that c ho ic e , Watso n e le c te d r e fo rm a tio n a s a
reme d y instead of r escission. See B ocanegra v . Aetna Life Ins. Co. , 6 0 5 S. W. 2 d 8 4 8 , 8 5 1 ( T e x. 2 1980) (e lection-of- reme dies doctrine a ppli e s if p a r ty e xe r c ises informed c hoice be tween inc onsistent
re me die s, ri g hts , o r s tate s o f f a c ts) . We ov e rr

ule Wat so n’ s th ir d is su e on a pp e a l.
W as Ferretti Entitled to Accele rate the Note?

I n his fifth issue, Watson arg ues that F err etti had no ri ght to acce lerate the debt beca use F err etti did not g ive Watson notice of an intent to acc eler ate the note . Watson further a rg ues15

that the waive r cla

use conta ined in the re al estate note i s am b i gu o us and there fore should not be relied upon to pe rmit acc eler ation absent notice
.

Acc eler ation of a de bt is a harsh re m ed y t h at will be enf orce d only

if the circ umstances wa

rra nt it. American B ank of W aco v. W aco Airmotive, I

nc. , 818 S.W .2d 163, 172 (T ex . Ap p . —W ac o 1 9 9 1 , wr i td en i ed ) ( qu o t i n g Brown v

. Ave mco Inv. Corp. , 603 F.2d 1367, 1376 (9th Cir. 1979)). Onc e a c reditor pr ovides proper notice that a de bt has bee n acc eler ated, a debtor no longe r has the r ight to cur e his defa ult. Og den v. G ibraltar Sav. Ass’n , 640 S.W .2d 232, 234 (Tex. 1982)
. Gene rally , a cre ditor may not a cce lerate a loan befor e first demanding cure o f t he defa ult and giving notice of an int ent t o acc eler ate. Id. a t 23 3; see Shumway v. Horizon Credit Corp. , 801 S.W .2d 890, 892 (Tex. 1991). Howe ver, a debtor may expressly

waive his rig ht to notice of an intent to acce l erate. Shumway , 8 01 S.W. 2d a t 89 2- 93 ; Phillips v. Allums , 882 S.W .2d 71, 73-74 (Tex. App.—Houston [14t h Dist.] 1994, writ denied)
.

Th e lie n n ote inc lud e d a

pr ov isi on

wa ivi ngWat so n’ s r ig ht t o n oti c e of an inte nt t o
a c c e le rate , b ut Watso n a

rgue s th e wa ive r w a s v a g ue and un e nf or c e a ble . T he no te pr ov ide d:
I f Make r [ Watson] defa

ults in the pay

ment of this note or in the per formanc e of a ny obligation in any

instrument securingor collate ral to it, and the de fault continues a ft e r P ay e e [F e rr e tti ] g ive s Ma ke r n oti c e of the de fa

ult and the tim e wi thi n w hic h it must be cure d, as may be require d by law or by written ag ree ment, then Pay ee ma y decla re the unpaid p r in c ipa l balance and ea rned inter est on this note immediately due. Ma k e r a nd e ac h s ur e ty

, e nd or ser , and gu aran tor

wai v e all de ma nd s fo r p ay me nt, presentations for payment, notices of int ention to acce lerate maturity, [and] notices of a c c e le ra tio n o

f m atu rit y , . . . to t hee x te nt p e rm itt e d b

ylaw

. (Emphasis adde d.) Watson asserts that the wa iver sente nce is ambig uous when re ad in conjunction with the prec eding sentenc e, which require s notice of defa ult and a time to cure as re quired by law16

or oth e r a g re e me nt. He argue s th a t th e pr ov isi on a s a whole may

be re a d a s r e qu ir ingF e rr e tti to provide a ll notices “re quired by law, g ener al waive r notwithstanding,” a nd that there fore the provision cannot be r ead a s a clear and unambig uous waiver of W atson’s right t o rec eive notice of an intent to acc eler ate. We disag ree .

Th e ri g ht t o r e c e ive no tic e of de fa ult and tim e to c ur e is s e pa

rat e fro m the ri g ht t o
rec eive notice of an intent to ac ce l er ate. See Shum way , 801 S.W .2d at 893-94 (w aiver provision must state specifica lly

and sepa rate ly which rig hts are waived)
. The clause “as may be re quired by law o r wri tte n ag re e me nt” c le arl y re fe rs on ly to Wat so n’ s rig ht to r e c e ive no tic e of de fa ult and tim e to cure , meaningthat Fe rre tti was to n o t i fy W atson of a de fault and howlong he had to cur e the defa ult. Fer retti complied with those re quirements on F ebrua ry 6, when he sent Watson noti ce of his failure to pa

y the taxes and told him he had ten day s to cure . I n the following sentenc e, Watson ag ree d to waive his rig ht to rece ive notice of Fe rre tti’s intent to acc eler ate if Watson failed to c ure his default upon re ceivingnotice.

Th e re a l e state lie n n ote pr ov ide s th a t, i n th e e ve nt o f d e fa ult , Watso n “ wa ive [d] a ll demands for

pay ment, prese ntations f

or pay ment, notices of intention to acc eler ate matur ity , notices of ac cele ra t i o n , p rot ests, and notices of protest.” That provision is a specific a nd unambig uous waiver of Watson’s rig ht to rece ive notice o f F err etti’s intent to acce lera te, and suc h waiver s are valid and enfor cea

ble. Se e id
. F e rr e tti pr ov ide d Watso n w ithno tic e of his de fa ult , w hat he ha d to do to cure the def

ault, and a de adline to cur e. See Hunt v. Jefferson Sav. &Loan Ass’n , 756 S.W .2d 76 2, 76 4 ( Te x. Ap p. —D a lla s 1 98 8, wr it d e nie d) . U nd e r t he lie n no te , F e rr e tti wa s no t re qu ir e d to g ive not ice of his intent to acc eler ate the note. Fe rre tti thus complied wit h the re quirements of the17

deed of trust and other c ontrac tual document s . T h e t ri al court did not err in finding that Watson waived his rig ht to notice of F err etti’s intent to acce lerate. We overr ule Watson’s fifth issue. Th ro ug ho ut h is a

rgume nts , Wat so n a sse rt s that F e rr e tti sh ou ld no t be a llo we d to re ly on the mutual mistake as a de fense beca use Fe rre tti held the refor med dee d “hostag e” a

nd ref used to provide cor

rec ted documents unless Watson ag ree d to foreg o his rights to see k injunctive relief
. Ho we ve r, any

c on dit ion e d o ff

e rs by F e rr e tti oc curr ed aft er the mis take wa s d isc ov e re d w hil e Watson’s lawsuit, filed Marc h 27, was pe nding and afte r Watson’s defa ult and Fe rre tti’s decision to acc eler ate the note . Once Watson fa iled to c ure his de fault within ten day s and Fe rre tti decided to acc el erate, Watson lost any rig ht to cure his def

ault later, see O

gden , 640 S.W .2d at 234, and Fe rre tti’s holding the re formed de ed “hostage” wa s o f n o rea l effe ct. In other wor ds, after
acc eler ation, Watson had no rig ht to insi st that he be a llowed to repa y Fe rre tti and cont inue the contra ct under

the reformed deed. The ref ore, a ny reluc tance to provide a c orre cted de ed has no be ari ngon wh e the r F e rr e tti c omm itt e d fr a ud a t the inc e pti on

of the c on tr a c t or

br e a c he d th e c on tr a c t.
Is W ats on En tit le d to Eq uit

ab le Re lie f? I n h is s ixth a

nd fi na l is su e , Watso n argue s that the tr ia l c ourt a bu se d its dis c re tio n in denying Watson equitable relief
. Eq uit y may pr ote c t a de bto r fr om a c c e le ra tio n if the de fa ult is t he re su lt o f a c c ide nt, mistake, or the c reditor’ s inequitable conduc t. See A meric a n B a n k of W aco , 818 S.W .2d at 172 ( q u o t i n g Br own , 6 03 F .2 d a t 13 76 ); Davis v. Ple tcher , 7 2 7 S. W. 2 d 2 9 , 3 5
- 3 6 ( T e x. Ap p .—San An ton io 19 87 , wr it r e f’ d n .r .e .) . H e re , th e ta x-r e late d d e fa ult wa s n ot t he re su lt o f m ist a ke , a c c ide nt, or any inequitable conduc t on Fer retti’s par t. Watson assumed he could pay the taxes late, rely

ingWatson believes Fe rre tti only soug ht to a cce lerate the note be cause Watson raised the re nt 3 on the prope rty ag ainst Fe rre tti’s wishes. Whatever F err etti’s motives, he was within his contrac tual rig hts to acce lerate the note.
18 on his past experience with other properties. Howe ver, he acknow ledg ed that he kne w the taxes
wer e not paid on time. The fac t that the taxi ng authority allowed a

g rac e per iod of sever al months does not mean that the taxes were not de linquent as of F ebrua ry 1. The e vidence shows that Watson offere d to reimburse Fer retti for the taxes and other costs paid by

Fe rre tti and that neither party rec eived the f ourth tax not ice. Watson also stated that if Fe rre tti h ad s ai d that he intended to pa y the taxes and ac cele rate the note, Watson would have taken steps to avoid a

ny defa ult. The title err or, t he mi ssing tax notice, and Watson’s offe rs might cast doubt on whe ther the ha rsh re medy

of ac cele ration wa s appropr iate in this case. H oweve r, Watson rece ived notice that the tax es we re d u e, ad m i tted rec eiving three of the four notices, and tw ice recei ved no tic e fr om F e rr e tti that he wa s r e qu ir e d to pr ov ide pr oo f o f t he ta x pay

me nts
. Watson not onl y

failed to pa

y any of t he tax es by the J anuar y 31 due date, he failed to pay them by Fe bruar y 21 and neve r communicated with Fe rretti about his financial situation or that he wa s planning to pay

the taxes late. Watson re ceive d notice of his de fault and failed to c ure it within ten

3 day s. Once Fe rre tti sent Watson notice that the de bt had bee n acc eler ated, Watson lost any further rig ht to cure his def

ault. See O

gden , 640 S.W .2d at 234. We cannot hold that the t rial cour t erre d in concludingthat Watson was not entitled to equi t ab l e re l i ef f rom ac cele ration af

ter ig noring F e r r e tt i’ s n o ti c e s r e late d

to taxe s and si ttin g qu ie tl y f o r n e ar ly a mo n th a f te r th e d u e d a te
. We
overr ule Watson’s six th issue.19 Conclusion Havingoverr

uled all of Watson’s i s s u es o n appea l, we af firm the trial c ourt’s jud g me nt.

__________________________________________ David Pury ear , J ustice Be fore Chief J ustice L aw, Justi ces Patter son and Pury ear : Opinion by J ustice Pury ear ; Dissenting O pinion by J ustice Patterson Affir med Filed: June 23, 2005