Court Opinion

ID: 9555525
Source: CourtListenerOpinion
Date Created: 2023-08-13 07:09:49.314734+00
Date Added: 2024-06-11T15:36:18.322009
License: Public Domain

Affirmed and Memorandum Opinion filed August 8, 2023.

                                      In The

                     Fourteenth Court of Appeals

                               NO. 14-22-00695-CV

                             ELI SASSON, Appellant
                                         V.

           WILLIAM LIPSKY AND SHARON LIPSKY, Appellees

                     On Appeal from the 11th District Court
                             Harris County, Texas
                       Trial Court Cause No. 2018-19241

                  MEMORANDUM                     OPINION

      Plaintiff-appellant Eli Sasson agreed to purchase a house owned by
defendant-appellees William (“Bill”) and Sharon Lipsky. A jury found that Sasson
breached the agreement, and that Bill and Sharon did not breach it. Sasson
challenges those findings for factual insufficiency. He also contends the trial court
erroneously excluded certain evidence. We hold that the jury’s findings are not
against the great weight and preponderance of the evidence and that the trial court
did not abuse its discretion in excluding the challenged evidence. We affirm.
                                         Background

       Sasson owns and offers for rent a house next door to the Lipskys. Sasson
and Sharon discussed the potential that Sasson might purchase the Lipskys’ house,
which previously flooded during prolonged rain events. The Lipskys had a flood
insurance policy with the National Flood Insurance Program (“NFIP”),
administered by the Federal Emergency Management Agency (“FEMA”). The
City of Houston, on behalf of the Lipskys, applied for and received a FEMA Flood
Mitigation Assistance grant to raise the elevation of the Lipskys’ flood-prone home
(the “FEMA 2015 Grant”). The city was to be responsible to pay for the elevation
costs from the FEMA 2015 Grant funds up to a certain amount.

       In late May 2017, Bill, Sharon, and Sasson signed a contract for the sale of
the Lipskys’ house to “Eli Sasson or Assignee” (the “First Contract”).1 The
purchase price was $275,000. Sasson agreed to purchase the house “as is,”
provided that the Lipskys completed the following “repairs and treatments: Seller
will transfer and fully cooperate with the BUYER to transfer the FEMA 2015 grant
to the Buyer, including signing any documents required, Permits and maintain the
[sic]”. There is no conclusion to the sentence ending with “maintain the”. The
underlined portion was added to a form contract.

       The parties agreed to close on or before August 31, 2017. The First Contract
included the following “Special Provisions”:

       1.    [C]losing will take place after the grant elevation permits were
             approved by the COH [City of Houston].
       2.    COH approved the permit to repair the property after the flood.

       1
          Sasson testified that he designated “Eli Sasson or Assignee” as the buyer because he
frequently assigns ownership of properties after purchase. Sasson testified that he intended to
use the subject property as a rental property. Sasson never assigned the contract to a third party.

                                                2
       3.   Buyer notified that the property was flooded in the past, and
            currently is approved by the City grant elevation attached to this
            contract.
       4.   Seller will maintain the FEMA flood insurance required by the
            Grant in order to qualify for elevating the Property. [U]pon
            closing or before at the Buyer option to transfer the insurance
            from Seller to the Buyer.
       [5.] Seller and Buyer [m]ay intend to use 1031 Exchange of this
            transaction.2

       Section 14, governing “Casualty Loss,” provided:

       If any part of the Property is damaged or destroyed by fire or other
       casualty after the effective date of this contract, Seller shall restore the
       Property to its previous condition as soon as reasonably possible, but
       in any event by the Closing Date. If Seller fails to do so due to factors
       beyond Seller’s control, Buyer may (a) terminate this contract and the
       earnest money will be refunded to Buyer[,] (b) extend the time for
       performance up to 15 days and the Closing Date will be extended as
       necessary or (c) accept the Property in its damaged condition with an
       assignment of insurance proceeds, if permitted by Seller’s insurance
       carrier, and receive credit from Seller at closing in the amount of the
       deductible under the insurance policy.
       On June 9, 2017, Bill and Sasson signed a second contract (the “Second
Contract”). The terms were identical to the First Contract, except that the date for
closing changed. Whereas the First Contract stated closing would occur no later
than August 31, 2017, the Second Contract provided that closing would occur
“after the grant elevation permits were approved by the COH.” Sharon did not
sign the Second Contract.

       The Lipskys granted Sasson a limited power of attorney to “act[] on [the
Lipskys’] behalf on FEMA 2015 Grant for all permits and constructions [sic]

       2
          “1031 Exchange” refers to a tax-deferred, like-kind exchange pursuant to Section 1031
of the Internal Revenue Code. See infra Part B for more discussion.

                                               3
decisions,” and they gave him keys to the property. Sasson chose Arkitektura
Development, Inc. as the contractor for the elevation project.

       In July 2017, the Lipskys signed two additional contracts. The first was with
Arkitektura, which agreed to perform the elevation work for a contract price of
$197,437.08. The second was with the City of Houston, which agreed to pay
Arkitektura’s contract price for the elevation work from the FEMA 2015 Grant
funds and that the Lipskys were not responsible for any amount of that work. The
Arkitektura contract provided, however, that the Lipskys were responsible for
“non-eligible items.” In mid-August, Arkitektura notified the Lipskys that their
homeowners’ association required a fascia around the elevated house, which was
not covered by the FEMA 2015 Grant and which would cost $7,864.50 to
complete. Bill emailed Sasson, asking, “Do you still intend to buy the property?”

       In late August 2017, Hurricane Harvey struck the Houston area and flooded
the Lipskys’ property. The Lipskys filed a flood insurance claim.

       On September 17, 2017, Bill emailed Sasson, saying, “The contract expired
31 August 2017. If you still wish to purchase the house and property we need a
new contract for the $275,000 and a payment of the $7,864.50 non-elevation costs
so we can immediately pay for the city to elevate.[3] Any insurance money that
may be payable because of the hurricane belongs to us.” Sasson responded that he
was “willing to pay [$7,864.50] to the seller at closing.” He also said that he had
“full intention to buy the property” and that he was “selecting sub paragraph 14C,
and . . . demanding all the insurance information in order to immediately taking
actions on the restorations of the damaged property with the insurance money.”

       3
        According to the relevant contracts, the Lipskys were not paying the city to elevate their
house. The city was paying Arkitektura from the FEMA 2015 Grant funds.

                                                4
      The next day, Bill told Sasson that the Lipskys wanted to “close as soon as
possible.” The Lipskys were willing to “sign whatever assignments [Sasson]
request[ed], net expenses, to assist [him] in obtaining the grant money . . . [and]
assign [their] flood insurance to [Sasson], net expenses, and [Sasson could] deal
with the adjuster on the damages to the house from Harvey.”

      A week later, Bill emailed the public adjuster hired to handle the Lipskys’
flood claim, Mitchell Berg. Bill told Berg, “Sharon and I are in a quandary as to
take the 275K and run for the hills or to scotch the whole deal and wait to get sued
by Eli for the money that the insurance might give us. I think what bothers Sharon
is that he dithered for so many months when the property could have been his and
the claim his.”

      In October, Bill again told Sasson that the Lipskys would assign their rights
under the elevation contract with the city and assign the flood policy as well, so
long as Sasson agreed to a “firm closing date no later than October 18th, 2017.”

      Sasson responded, “I have same interest to close as soon as posible [sic], but
you must help in resolving the pending contingents [sic] issues in the contract.”
Shortly after, Sasson sent a second response, accusing the Lipskys of delaying
closing by not paying the $7,864.50 fee for the fascia, which was required to be
paid before Arkitektura could secure the elevation permit from the city.4

      Bill reiterated that the Lipskys had “fulfilled [their] part of the contract” and
would assign their elevation contract rights and the flood claim, if assignable. Bill
also asked the title company to schedule a closing date “on or close to 20 October
2017.”

      4
          Previously, Sasson indicated he was willing to pay this cost at closing.

                                                  5
      On October 12, Bill paid $7,864.50 to Arkitektura for the fascia cost.
Regarding assignment of the flood claim, on October 15, Bill emailed Sasson a
copy of a memo he received from FEMA addressing assignability. Bill explained
that FEMA authority barred the Lipskys from assigning the flood insurance claim
to Sasson, but they could assign the proceeds from the claim once it settled. Bill
offered to let Sasson know when the Lipskys “finally resolve[d] the claim and the
amount net of [their] costs [they would] receive. Then [they would] need to follow
the Federal Assignment of Claims Act requirements to assign those net proceeds to
[Sasson].” Sasson responded that the “permit for the repair of the house is still
need to be taking care,” but that he understood that the Lipskys intended “to pay
[Sasson] back the proceed from the insurance to cover the damage.”

      The next day, Sasson sent an email to the title company and to Bill, saying
that Sasson believed the parties could “proceed to closing soon.” However, they
still needed to “overcome the home permit repair . . . and to conclude the post-
closing agreement that will insure seller obligations to the buyer proactively pursue
the insurance repair funds to be paid to the Buyer.”

      The City of Houston issued the elevation permit on October 18, 2017.

      On October 26, Sasson’s attorney sent an “assignment and cooperation
agreement” to the Lipskys “to bring a resolution to the outstanding issues
regarding the sale.” The agreement provided that, “[i]n consideration of [Sasson’s]
willingness to complete the sale and accept the Property in its damaged state, [the
Lipskys] hereby assign to [Sasson] all rights to recover proceeds paid under or in
connection with their Flood Claim.” The Lipskys did not sign the agreement.
Sharon testified that she did not want to sign the assignment and cooperation
agreement because she read it as requiring the Lipskys to pay Sasson the difference
if the insurance proceeds were not enough to pay for the repairs.

                                          6
      In December, FEMA paid the Lipskys $266,611.34 for the Hurricane
Harvey flood claim. A month later, the Lipskys’ attorney sent a letter to Sasson’s
attorney, stating:

      The Lipskys are not interested in trying to reach an agreement with
      Mr. Sasson. As you know, Sharon Lipsky never signed either contract
      written and presented by Mr. Sasson. I understand she never saw the
      second contract. Regardless, to the extent there was or is a contract
      between with Mr. Sasson it is terminated.
      By this letter the title company is being notified of the termination.
      My client agrees to a return of Mr. Sasson’s earnest money to him and
      if the title company provides a release it will be signed.
      Arkitektura completed the elevation work in April 2018. As of trial in May
2022, the Lipskys had not repaired the flood damage to the home.

      Sasson sued the Lipskys for breach of contract for refusing to restore the
property to its pre-Harvey condition, for failing to assign the insurance claim to
Sasson, and for refusing to close the sale. The Lipskys answered, arguing that the
Second Contract was not valid because Sharon did not sign it and because the
parties did not reach a meeting of the minds regarding the $7,864.50 payment to
Arkitektura. The Lipskys also asserted a counterclaim for declaratory judgment,
requesting a declaration that Sasson breached the Second Contract and seeking an
award of the $5,000 earnest money held in escrow by the title company.

      The case was tried to a jury, which found that Bill and Sharon agreed to sell
their property to Sasson and Sasson agreed to purchase it (questions 1 and 2); that
neither Bill nor Sharon failed to comply with the contract (questions 3 and 4); and
that Sasson failed to comply with the contract (questions 5 and 6).

      The trial court signed a judgment in accordance with the jury’s findings,
awarding the Lipskys $5,000. Sasson appeals.

                                         7
                                     Analysis

A.    Breach

      In his second issue, Sasson argues that the jury’s breach of contract
findings—that Sasson failed to comply and that the Lipskys did not fail to
comply—are not supported by factually sufficient evidence. When reviewing the
factual sufficiency of the evidence, we examine the entire record, considering all
the evidence both in favor of and contrary to the finding. Vast Constr., LLC v.
CTC Contractors, LLC, 526 S.W.3d 709, 723 (Tex. App.—Houston [14th Dist.]
2017, no pet.). When a party attacks the factual sufficiency of an adverse finding
on an issue on which it had the burden of proof, the party must demonstrate on
appeal that the adverse finding is against the great weight and preponderance of the
evidence. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 242 (Tex. 2001) (per
curiam). When a party attacks the factual sufficiency of an adverse finding on
which it did not have the burden of proof, we may set aside the finding only if it is
so contrary to the overwhelming weight of the evidence as to be clearly wrong and
unjust. Bennett v. Comm’n for Lawyer Discipline, 489 S.W.3d 58, 66 (Tex.
App.—Houston [14th Dist.] 2016, no pet.). We consider all the evidence, but we
will not reverse the judgment unless “the evidence which supports the [] finding is
so weak as to [make the finding] clearly wrong and manifestly unjust.” Star Enter.
v. Marze, 61 S.W.3d 449, 462 (Tex. App.—San Antonio 2001, pet. denied). The
amount of evidence necessary to affirm is far less than the amount necessary to
reverse a judgment. GTE Mobilnet of S. Tex. Ltd. P’ship v. Pascouet, 61 S.W.3d
599, 616 (Tex. App.—Houston [14th Dist.] 2001, pet. denied).

      We apply these standards mindful that this court is not a fact finder.
Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 407 (Tex. 1998). The trier of
fact is the sole judge of witnesses’ credibility and the weight afforded their

                                         8
testimony. GTE Mobilnet, 61 S.W.3d at 615-16. Therefore, we may not pass upon
the witnesses’ credibility or substitute our judgment for that of the fact finder, even
if the evidence would also support a different result. Id.

       The essential elements of a breach of contract claim are: (1) the existence of
a valid contract; (2) performance or tendered performance by the plaintiff;
(3) breach of the contract by the defendant; and (4) damages sustained as a result
of the breach. Valero Mktg. & Supply Co. v. Kalama Int’l, 51 S.W.3d 345, 351
(Tex. App.—Houston [1st Dist.] 2001, no pet.). “A breach [of contract] occurs
when a party fails or refuses to do something he has promised to do.” Mays v.
Pierce, 203 S.W.3d 564, 575 (Tex. App.—Houston [14th Dist.] 2006, pet. denied).
On appeal, Sasson challenges the jury’s findings that the Lipskys complied with
the contract (a negative finding on element 3 of his breach claim) and that Sasson
did not comply with the contract (either a negative finding on element 2 of
Sasson’s affirmative claim or an affirmative finding on element 3 of the Lipskys’
counterclaim).5

       1.     The findings that the Lipskys did not fail to comply

       We begin with the jury’s findings that neither Bill nor Sharon breached the
contract. One of the Lipskys’ obligations was to transfer or assign to Sasson the
FEMA 2015 Grant to elevate the house. The jury heard testimony and received
evidence that the Lipskys tendered performance in compliance with the contract by
offering to assign the elevation permit. Additionally, the Lipskys signed a power
of attorney in Sasson’s favor, gave him the keys to the property, entered into an
agreement with a contractor of Sasson’s choosing to perform the elevation work,

       5
        Ultimately, which party bore the burden of proof on the issue of Sasson’s compliance is
not material to our disposition.

                                               9
and stated more than once their willingness to sign all assignments necessary to
complete the elevation work.

      Sasson insisted that the Lipskys also needed to obtain a “home repair
permit,” separate from the elevation permit. Sasson offered to pay the home repair
permit cost but said that the Lipskys must “cooperate in signing the papers” needed
“to issue the home repair permit.” We see nothing in the contract requiring the
Lipskys to obtain a home repair permit as a prerequisite to closing. The contract
required the Lipskys to “transfer and fully cooperate with [Sasson] to transfer the
FEMA 2015 grant to [Sasson], including signing any documents required [and]
Permits.” This provision relates only to the elevation grant, not to any home repair
permit.

      The contract required the Lipskys to “complete all agreed repairs and
treatments prior to the Closing Date; and [to obtain] required permits.” There is no
evidence that the Lipskys and Sasson agreed that the Lipskys would repair the
home prior to the closing date; indeed, Bill testified that it was not possible to
repair the home until the elevation work was completed, which did not occur until
April 2018. Thus, the jury was free to discount Sasson’s evidence that the Lipskys
breached the contract by not obtaining a home repair permit.

      The contract also required the Lipskys to maintain flood insurance. Also,
Section 14 of the contract governed circumstances in which the property was
damaged by casualty before closing. If the Lipskys failed to restore the property
by the closing date due to factors beyond their control, then Sasson’s options were
to terminate the contract, extend the closing date by fifteen days, or accept the
property as-is along with an assignment of insurance proceeds, if permitted by the
Lipskys’ insurance carrier. After Hurricane Harvey damaged the Lipskys’ house,
Sasson informed the Lipskys that he was choosing the third option—receiving the

                                        10
property as-is, along with an assignment of insurance proceeds if permitted by
NFIP/FEMA. The jury heard evidence that the Lipskys complied with these
provisions by maintaining flood insurance and offering to assign to Sasson the
insurance proceeds from the Hurricane Harvey claim.

       The parties dispute whether the Lipskys could assign the insurance claim
before it was finalized. The Lipskys contend that the Federal Assignment of
Claims Act permits an assignment of an insured’s claim against the United States
to a third party only after the insured’s claim is allowed, the amount of the claim is
decided, and a warrant for payment of the claim has been issued. See 31 U.S.C.
§ 3727(b).6 Further, the Lipskys gave Sasson a memo from the Assistant
Administrator for Federal Insurance to Write Your Own Company Principal
Coordinators and the NFIP Direct Servicing Agent regarding Inclusion of Law
Firms on Checks Arising Out of NFIP Claims. In the memo, the administrator
stated that the manner in which a flood insurance claim payment is issued,
including the payees on a check, “is governed exclusively by applicable federal
laws and regulation, and the terms of the Standard Flood Insurance Policy (SFIP).”
Each SFIP defines “insured” to include “any mortgagee and loss payee named in
the Application and Declarations Page, as well as any other mortgagee or loss
payee determined to exist at the time of the loss in the order of precedence.” At

       6
        Section 3727, which governs assignment of claims against the United States
Government, provides:
       An assignment may be made only after a claim is allowed, the amount of the
       claim is decided, and a warrant for payment of the claim has been issued. The
       assignment shall specify the warrant, must be made freely, and must be attested to
       by 2 witnesses. The person making the assignment shall acknowledge it before an
       official who may acknowledge a deed, and the official shall certify the
       assignment. The certificate shall state that the official completely explained the
       assignment when it was acknowledged. An assignment under this subsection is
       valid for any purpose.
31 U.S.C. § 3727(b).

                                              11
various points in September and October 2017, the Lipskys relied on this memo to
argue that they could not assign the claim to Sasson.

      Sasson argues that this authority only barred assignments with third parties
such as claimants’ attorneys or public adjusters “whose interest did not exist at the
time of the loss,” and did not bar an assignment to purchasers like Sasson with a
property under contract at the time of the loss. Regardless of the assignability of
the Lipskys’ insurance claim, in the event of a casualty loss the contract only
required the Lipskys to assign the “insurance proceeds, if permitted by [their]
insurance carrier.” (Emphasis added). The Lipskys tendered performance in this
respect by expressly offering, in an October 15 email, to “assign the proceeds from
the claim once [the Lipskys] settle[d] the claim.” At trial, the Lipskys’ attorney
asked Sasson: “They offered to assign those proceeds to you if you would come
close?”; “And they offered to assign to you the grant contracts with Arkitektura
and the City of Houston, right?”; and “And that was all they needed to do to
comply with the contract, correct?” To these questions, Sasson answered, “Yes.”

      Sasson contends nonetheless that the Lipskys did not comply with Paragraph
14 of the contract because, after Hurricane Harvey, the Lipskys considered taking
the $275,000 in purchase money and “run[ning] for the hills.” Sasson also testified
that, once the Lipskys received the flood insurance money in December 2017, they
were obligated to assign him the proceeds. Although it is true that Bill considered
“run[ning] for the hills” in September 2017, there was also evidence that the
Lipskys offered to assign Sasson the insurance proceeds in October 2017, long
before the claim was paid. The jury reasonably may have found that by the time
the flood claim was paid in December 2017, Sasson had waited unreasonably long
to complete closing and that Sasson was already in breach. It was within the jury’s
province to resolve any conflicts in the evidence. See Golden Eagle Archery, Inc.

                                         12
v. Jackson, 116 S.W.3d 757, 761 (Tex. 2003) (jury remains sole judge of
witnesses’ credibility and weight to be given their testimony).

      After considering all the evidence both in favor of and contrary to the
challenged findings, we conclude that the jury’s findings that Bill and Sharon did
not breach the contract are not against the great weight and preponderance of the
evidence. See, e.g., Tillison v. Bailey, No. 06-05-00071-CV, 2006 WL 1445611, at
*3 (Tex. App.—Texarkana May 26, 2006, no pet.) (mem. op.) (evidence was
factually sufficient to support finding that Bailey fulfilled his contractual
obligation).

      2.       The findings that Sasson failed to comply

      We next consider the jury’s findings that Sasson failed to comply with his
contractual duties. Principally, Sasson’s duties were to pay $275,000 at closing,
which was to occur, at the latest, within a reasonable time after the elevation
permits were issued on October 18, 2017.

      Based on the evidence, the jury may have reasonably found that Sasson
failed to perform as promised. The Lipskys’ attorney asked Sasson, “The permit to
elevate the house was issued on October 18th, 2017, was it not?” and “And that’s
the date you agreed to in your contract, that date or shortly thereafter, to close; is
that right?” To both questions, Sasson answered, “Yes.” The jury was instructed
that “compliance with an agreement must occur within a reasonable time under the
circumstances unless the parties agree that compliance must occur within a
specified time and the parties intended compliance within such time to be an
essential part of the agreement.” The agreement does not state that the deadline for
closing is of the essence, and the jury reasonably could have found that Sasson
simply refused to close within a reasonable time under the circumstances.

                                          13
      Sasson contends that he was “consistently willing and actively trying to
close the sale in accordance with the terms of the contract.” By example, he points
to his testimony that he agreed to pay the $7,864.50 fee to Arkitektura, even
though he alleges that it was not his responsibility to do so, and to the evidence that
he accepted a power of attorney from the Lipskys so that he could work directly
with the City of Houston to finalize the elevation issues. However, as discussed
above, the jury also heard evidence that Sasson refused to close unless and until the
Lipskys obtained an additional “home repair” permit not required under the
contract. It was the jury’s prerogative as fact finder to determine witness
credibility and to resolve any inconsistencies in the Lipskys’ and Sasson’s
respective versions of events.

      The jury also reasonably could have found that Sasson breached his
contractual duty to accept the property as-is with an assignment of insurance
proceeds because he refused to accept the offered assignment of insurance
proceeds. See B&W Supply, Inc. v. Beckman, 305 S.W.3d 10, 17 (Tex. App.—
Houston [1st Dist.] 2009, pet. denied) (jury could have reasonably concluded that
the Beckmans breached the contract by not paying the third draw); Long Island
Vill. Owners Ass’n, Inc. v. Berry, No. 13-14-00363-CV, 2016 WL 1072856, at *9
(Tex. App.—Corpus Christi Mar. 17, 2016, pet. denied) (mem. op.) (even
assuming that Long Island had no duty to dredge the canals to their original depth,
the jury could have reasonably found that by not dredging the canals at all, or by
acting to postpone the project, Long Island breached its contractual duty to
reasonably maintain the canals by failing to dredge the canals).

      After reviewing all of the evidence in the record, we conclude that the jury’s
finding that Sasson failed to comply with the contract is neither against the great
weight and preponderance of the evidence nor so contrary to the overwhelming

                                          14
weight of the evidence as to be clearly wrong and unjust. We overrule Sasson’s
second issue.

B.    Exclusion of Evidence

      In his first issue, Sasson argues that the trial court erred in excluding
evidence regarding certain tax-deferred monies that he purportedly wanted to use
to fund the purchase of the Lipskys’ home. We review a trial court’s ruling
excluding evidence for an abuse of discretion. Elizondo v. Krist, 338 S.W.3d 17,
21 (Tex. App.—Houston [14th Dist.] 2010), aff’d, 415 S.W.3d 259 (Tex. 2013). A
trial court abuses its discretion when it acts arbitrarily or unreasonably, or without
reference to any guiding principles. Downer v. Aquamarine Operators, Inc., 701
S.W.2d 238, 241-42 (Tex. 1985). We will uphold the trial court’s evidentiary
ruling if there is any legitimate basis for the ruling, even if that ground was not
raised in the trial court. See Owens-Corning Fiberglas Corp. v. Malone, 972
S.W.2d 35, 43 (Tex. 1998); Merrill v. Sprint Waste Servs. LP, 527 S.W.3d 663,
669 (Tex. App.—Houston [14th Dist.] 2017, no pet.). Therefore, we examine all
bases for the trial court’s decision that are suggested by the record or urged by the
parties. Merrill, 527 S.W.3d at 669.

      Internal Revenue Code Section 1031 provides that “[n]o gain or loss shall be
recognized on the exchange of real property held for productive use in a trade or
business or for investment if such real property is exchanged solely for real
property of like kind which is to be held either for productive use in a trade or
business or for investment.” 26 U.S.C. § 1031(a)(1). “Under Section 1031 of the
U.S. Internal Revenue Code, a seller of real property may avoid capital gains tax
by exchanging the sold property for a property of ‘like-kind’ within 180 days of
the sale.” Tukua Invs., LLC v. Spenst, 413 S.W.3d 786, 792 n.2 (Tex. App.—El
Paso 2013, pet. denied). Section 1031 requires an identity between the taxpayer

                                         15
commencing an exchange and the taxpayer completing it. See, e.g., Chase v.
Comm’r, 92 T.C. 874, 881 (1989).

      Sasson sought to admit evidence of his intention to use Section 1031
exchange funds to purchase the Lipskys’ house and that he incurred a substantial
tax liability because he was unable to complete the Section 1031 exchange. Prior
to trial, the Lipskys filed a motion in limine regarding Sasson’s Section 1031
evidence, and the trial court indicated that Sasson “needed to produce tax records
which showed [he] actually suffered some damage or loss.” In response, Sasson
produced a tax return for Far East Land, Ltd. The general partner of Far East was a
limited liability company, in which Sasson’s three adult children were the only
members, and the limited partners of Far East were Sasson’s three children. On
the day trial began, the court held a pretrial conference about Sasson’s Section
1031 evidence. The Lipskys argued that the Section 1031 evidence should not be
admitted because Sasson individually (rather than Far East or his three children)
did not suffer any damage from a failed exchange.

      The trial judge asked Sasson to establish the relevance of the Section 1031
evidence. Sasson’s attorney argued that “if the contract had been assigned, . . .
there could be some relevance.” The judge responded that the contract was not, in
fact, assigned to Far East and asked how the evidence showed Sasson’s loss.
Sasson’s attorney said, “If the contract had happened, [Sasson] could have
assigned the contract.” The court suggested that was a hypothetical occurrence and
stated, “that’s speculative damages that we’re not going to go into.” The court
pointed out that “[Sasson’s] children are not parties to the contract, nor to this
lawsuit, nor is [Far East].” The judge continued, “[Sasson] is the party to the
contract. He did not assign the contract therefore his assignee is not a party to the
contract.” Sasson also urged an alternative reason why the Section 1031 evidence

                                         16
was relevant, namely because it showed that Sasson had the incentive to close the
deal. The judge rejected all of Sasson’s arguments and excluded Sasson’s Section
1031 evidence.

      The court then commenced trial, with Sasson testifying. On the second day
of trial, prior to the jury entering the courtroom, Sasson presented an assignment
dated that day and signed by Sasson’s three children assigning any right, title, and
interest in any claim related to any tax benefits that they did not receive or to any
taxes that they paid due to the “Far East Land, Ltd.’s 2017 1031 exchange and/or
the attempted purchase of the Lipsky home.” Sasson offered the assignment into
evidence, but the trial court excluded the assignment.

      On appeal, Sasson argues that the excluded evidence showed that he wanted
to close the deal and thus he intended to perform. As Sasson puts it, the Lipskys
“knew that the Section 1031 exchange was critically important and that Sasson was
desperate to close the sale. However, as a result of the trial court’s exclusion of
key corroborating documentary evidence, Sasson was not allowed to make that
case to the jury in its most persuasive form, and the jury was misled by the
Lipskys’ false impression.”

      We are not persuaded that the trial court abused its discretion by excluding
the challenged evidence. The taxpayer that initiated the Section 1031 exchange
was Far East. At all relevant times, Far East was not a party to the contract or to
this lawsuit. Transactions between a party and a nonparty are generally not
relevant to the alleged contract between the contracting parties. See, e.g., Gruss v.
Cummins, 329 S.W.2d 496, 502 (Tex. App.—El Paso 1959, writ ref’d n.r.e.)
(telegrams and other documents between appellee and another party not admissible
to show agreement between appellant and appellee as to overriding royalty

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interest). We hold that the trial court did not abuse its discretion in excluding
Sasson’s Section 1031 evidence as irrelevant or speculative.

      We also are not persuaded that the exclusion of the Section 1031 evidence
created a false impression concerning Sasson’s intent or desire to perform that
ultimately harmed him. Sasson characterizes the trial as a “‘he said, she said’
disagreement about whose fault it was that the house sale never closed.” But even
if we were to assume the evidence was relevant for that reason, an error in the
exclusion of evidence is not reversible unless it is controlling on a material issue,
not cumulative, and probably caused the rendition of an improper judgment. See
Gunn v. McCoy, 489 S.W.3d 75, 111 (Tex. App.—Houston [14th Dist.] 2017),
aff’d, 554 S.W.3d 645 (Tex. 2018); Tex. R. App. P. 44.1. Here, even without the
Section 1031 evidence, there was ample evidence the jury could have believed
demonstrating Sasson’s “same interest to close” as soon as possible, including
multiple emails to Bill urging the Lipskys to “resolv[e] the pending contingents
[sic] issues in the contract.” Thus, the Section 1031 evidence was cumulative of
other evidence contained in the admitted emails and testimony.

      Moreover, we determine that the excluded evidence was not controlling on a
material issue and the court’s exclusionary ruling did not lead to an improper
judgment. This is mainly because, to prevail on his breach of contract claim,
Sasson had to prove that he performed or tendered performance. See Grynberg v.
Grey Wolf Drilling Co., L.P., 296 S.W.3d 132, 136 (Tex. App.—Houston [14th
Dist.] 2009, no pet.). A showing that he merely intended to perform—no matter
how fervently he may have desired to do so—is not sufficient to prove this
element. Accord, e.g., Marx v. FDP, LP, 474 S.W.3d 368, 374 (Tex. App.—San
Antonio 2015, pet. denied) (“In the context of a real estate contract, compliance

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with all terms of the contract means that the buyer of land who is seeking specific
performance must prove an actual tender of the purchase price.”).

      We overrule Sasson’s first issue.

                                    Conclusion

      We affirm the trial court’s judgment.

                                       /s/     Kevin Jewell
                                               Justice

Panel consists of Justices Jewell, Hassan, and Wilson.

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