Court Opinion

ID: 9674520
Source: CourtListenerOpinion
Date Created: 2023-08-24 04:30:14.06873+00
Date Added: 2024-06-11T18:16:27.940143
License: Public Domain

STEPHENS, Justice,
dissenting.
The original opinion handed down by this court March 31, 1987, reversed and remanded the cause to the trial court for a new trial. I adhere to the original disposition of the case, and disagree with the majority opinion issued on Motion for Rehearing, accordingly, I dissent.
This multiple-party suit was brought by Shenandoah Associates, the dissatisfied purchaser of a mobile home park in Odessa, Texas. Shenandoah seeks rescission and damages under the Texas Deceptive Trade Practices Act of the Business and Commerce Code as amended in 1979. After a jury trial of several weeks, and the submission of several hundred special issues, the trial court entered its judgment rescinding the sale of the park from J & K to Shenandoah, yet charging Shenandoah with liability for the unpaid balances of the first and second mortgages, and awarding attorney’s fees against Shenandoah for having brought its suit in bad faith and for the purposes of harassment against all defendants except J & K.
*498On appeal, as recited by the majority, Shenandoah presents twelve points of error for our consideration. J & K Properties, Inc., a co-appellant, presents seven points of error, and Home Savings Association, Family Development Corporation, A-l Inc., and John Bushman, appellees, present one cross-point. I agree with Shenandoah’s points of error number one, and number six, and I agree with J & K’s point of error number one, accordingly, I would reverse the judgment of the trial court and remand the case for a new trial.
CHRONOLOGY OF FACTS
The majority opinion correctly recites the chronology of facts, and the judgment rendered by the trial court.
SHENANDOAH’S CLAIMS
Shenandoah’s first point of error complains that the trial court erred by granting partial rescission of the sale of the park instead of full rescission, and by not placing all the parties in the status quo, because partial rescission, not recognized under Texas law, leaves the Bushman group with all the benefits of the transaction.
Shenandoah argues that the rescission is not complete because it still requires Shenandoah to pay $830,000, as evidenced by the assumption agreement, together with the second lien promissory note for $135,-000. For purposes of deciding this point the majority assumes without deciding that the trial court properly granted Shenandoah rescission of its purchase of the park, yet would hold Shenandoah liable on its assumption of the first lien note. This conclusion expresses a rationale with which I cannot agree.
RESCISSION
Rescission is an equitable remedy that may be granted upon certain grounds, such as fraud. Boyter v. MCR Construction Co., 673 S.W.2d 938, 941 (Tex.App.—Dallas 1984, writ ref’d n.r.e.). The defrauded purchaser is put to an election whether he will keep the property and recover damages, or rescind the sale and return the property while recovering the value he has parted with. O’Con v. Hightower, 268 S.W.2d 321, 322 (Tex.Civ.App.—San Antonio 1954, writ ref’d). This court in Boyter set out the prerequisites to the granting of rescission:
To be entitled to the equitable remedy of rescission, however, a party must show either (1) that he and the other party are in the status quo, i.e., that he is not retaining benefits received under the instrument without restoration to the other party, Texas Co. v. State, 154 Tex. 494, 281 S.W.2d 83, 91 (1955); Freyer v. Michels, 360 S.W.2d 559, 562 (Tex.Civ.App.—Dallas 1962, writ dism’d), or (2) that there are special equitable considerations that obviate the need for the parties to be in the status quo, Turner v. Agricultural Credit Corp., 601 S.W.2d 61, 65 (Tex.Civ.App.—Houston [1st Dist.] 1980, no writ); see also Texas Employers Insurance Association v. Kennedy, 135 Tex. 486, 143 S.W.2d 583, 585 (1940).
Boyter, 673 S.W.2d at 941.
Shenandoah complains that the court’s judgment requiring it to give up the property, but to continue to pay on the assumption agreement of the first lien note and to pay the second lien note constitutes a partial rescission. I agree with this argument.
A down-payment of $270,000 was required to purchase the Park. On January 4, 1983, at closing, Shenandoah paid $135,-000 in cash and signed a promissory note payable to J & K secured by a second lien deed of trust in which it promised to pay J & K $135,000. The second lien deed of trust specifically states that the note “represents a portion of the consideration ... for the purchase of the property” described in the deed. Simultaneously with closing, the second lien note was endorsed by J & K, stating that it did “sell, transfer, assign and set over the within note together with all liens securing same to Family Development” with recourse. When the trial court granted the rescission of the sale of the property to Shenandoah, it should have cancelled Shenandoah’s indebtedness on the second lien note, to return the parties to the status quo. See Boyter, 673 S.W.2d at 941. This lien is an indivisible part of *499the contract for the purchase of the Park; the rescission without cancellation of the note constitutes a prohibited “partial rescission.” Raney v. Mack, 504 S.W.2d 527, 534 (Tex.Civ.App.—Texarkana 1973, no writ). Having elected to sue for rescission, Shenandoah should have recovered the value it parted with. O’Con, 268 S.W.2d at 322.
In addition to the cash payment and the execution of the second lien note, Shenandoah assumed the unpaid balance of the original first lien note in the amount of $830,000.00, as a part of the consideration of the sale. Generally, an assumption agreement in a deed of conveyance creates a new contract under which the one making the assumption becomes the principal obli-gor and the original maker becomes the surety. Straus v. Brooks, 136 Tex. 141, 146, 148 S.W.2d 393, 396 (Tex.Com.App.1941). The agreement is an unconditional contract within itself; an unconditional promise to pay the debt. The promisor has made the debt his own, has become primarily liable for its discharge, and has assumed an independent duty of payment, irrespective of the liability of the principal debtor. Id.
However, when the assumption of an existing debt is a part of the consideration for the underlying contract of sale, the cancellation and rescission of the sale demands that equity be done by cancelling the debt assumption. For a purchaser to successfully rescind the purchase of real estate in a court of law, and yet be held to the assumption of the underlying debt is unconscionable. An exception would lie if it be shown that the mortgagee released the original obligor from the debt in reliance on the purchaser, or otherwise altered its position, as a consideration of the sale. This was not shown to be the case here, nor has the majority cited any authority in support of its position that rescission lies, yet the underlying original debt should be paid by Shenandoah. When the equitable relief of rescission. is granted the original status of the parties must be restored. See Texas Co. v. State, 154 Tex. 494, 507-08, 281 S.W.2d 83, 91 (1955); Boyter, 673 S.W.2d 941; Proctor v. Green, 673 S.W.2d 390, 393 (Tex.App.—Houston [1st Dist.] 1984, no writ).
A recognized exception to this rule is when the purchaser terminates the contract and the court has examined the circumstances and determined that it would be more equitable to grant the rescission without the complete or partial restoration of the consideration received by the purchaser while in possession of the purchased item. See Boyter, 673 S.W.2d at 941; Turner v. Houston Agricultural Credit Corp., 601 S.W.2d 61, 65 (Tex.Civ.App.—Houston [1st Dist.] 1980, writ ref d n.r.e.). I believe that the trial court properly weighed the circumstances of this case and found it more equitable not to require Shenandoah to return to J & K the rental payments and other monies obtained while it was in control of the property.
The trial court granted Shenandoah’s request for the equitable relief of rescission; therefore, it follows, and equity dictates, that Shenandoah should be returned to the status quo by requiring J & K to return the rescinded sales agreement purchase money in the sum of $135,000.00, by cancel-ling the second lien note of $135,000, and by cancelling Shenandoah’s assumption agreement of the original loan. Shenandoah’s first point of error should be granted.
In point of error number six, Shenandoah complains that testimony by an expert witness far exceeded the boundaries of a pretrial order, which limited the expert’s testimony to reasonable attorney’s fees and the amount of damages. Shenandoah asserts that the testimony was prejudicial because, contrary to the court’s order, the witness testified freely concerning the reliance of the parties on certain documents, proper documents for a closing, the lack of certain documents at the closing, the generally accepted interpretation of documents and their meanings, whether the attorney for Shenandoah acted with propriety, and the witness also interpreted the Canons of Ethics. These were only a few of the areas of dispute on which the witness testified. I am mindful of the general proposition that the determination of the admissibility of *500opinion testimony is a matter within the sound discretion of the trial court, which will not be disturbed on appeal absent a showing of abuse. UMC, Inc. v. Coonrod Electric Co., 667 S.W.2d 549, 559 (Tex.App.—Corpus Christi 1983, writ ref’d n.r.e.). However, I am of the opinion that in light of the complexity of the case before us, admission of the testimony of this particular witness, far in excess of the limitations placed upon him by the trial court’s pretrial order, was highly prejudicial and the trial court abused its discretion by admitting such testimony.
Appellee argues correctly that if the improper evidence given by the witness is supported by other evidence in the case, admitted without objection, or of the same character or effect, adduced or elicited by the complaining party, the error is harmless. Drake v. Walls, 348 S.W.2d 62, 69 (Tex.Civ.App.—Dallas 1961, writ ref’d n.r.e.); see Missouri-Kansas-Texas Railroad Co. v. Shelton, 383 S.W.2d 842, 848 (Tex.Civ.App.—Dallas 1964, writ ref’d n.r.e.), cert. denied, 382 U.S. 845, 86 S.Ct. 54, 15 L.Ed.2d 85 (1965); City of Houston v. Howe & Wise, 323 S.W.2d 134, 138 (Tex.Civ.App.—Houston 1959, writ ref’d n.r.e.); see Richardson v. Green, 677 S.W.2d 497, 501 (Tex.1984); Columbia Engineering International, Ltd. v. Dorman, 602 S.W.2d 72, 77 (Tex.Civ.App.—Beaumont 1980, writ ref’d n.r.e.). However, appellee has not pointed out to this court what other evidence, properly admitted, would justify a finding that the testimony of this witness was harmless, and I decline to search the thirty-eight hundred pages of testimony to attempt to find such other evidence. Appellant’s sixth point of error should be sustained.
J & K’s CLAIMS
J & K first contends that the trial court erred by admitting into evidence, depositions that were taken without notice to J & K. Notice was only given to A-l.
Texas Rule of Civil Procedure 200(2) states the notice requirements for an oral deposition:
2. Notice of Examination: General Requirements; Notice of Deposition of Organization.
a. Reasonable notice must be served in writing by the party, or his attorney, proposing to take a deposition upon oral examination, to every other party or his attorney of record_
[Emphasis added.] When other parties are not given notice of the deposition, an “ex parte” deposition is not admissible. See Reilly v. Buster, 125 Tex. 323, 328, 82 S.W.2d 931, 933 (1935); Woodall v. Adams, 7 S.W.2d 922, 925 (Tex.Civ.App.—Galveston 1928, no writ); see also Pouncy v. Garner, 626 S.W.2d 337, 344 (Tex.App.—Tyler 1981, writ ref’d n.r.e.).
In the present case, the trial court entered an interlocutory default judgment against J & K and the other defendants, on November 23, 1983, which: (1) rescinded the sales contract; (2) set aside the general warranty deed and bill of sale; (3) can-celled the $135,000 promissory note and second lien deed of trust; (4) cancelled the assumption agreement; and (5) ordered Shenandoah to reconvey the property to the defendants “upon receipt of the restitution and incidental damages hereafter ordered to be paid Plaintiff, by this Court.” The court stated that a hearing would be held to determine the amount of damages to be paid to Shenandoah. Clearly, this interlocutory default judgment only determined J & K’s liability to Shenandoah; the issue of damages was not answered. Therefore, J & K should have been given notice of the taking of depositions since it is a party to the suit in which damages were yet to be determined.
J & K objects to the admission of the deposition testimony of Steve Brindle, Stanley Black, Stephen Babbidge, Michael Jackson, and Geno Olivas. (The other depositions cited by J & K in its brief were never read into evidence and, therefore, are not crucial.) At trial, the depositions of Jackson and Olivas were read into the record without J & K asserting its notice objection. After half of Brindle’s deposition had been read into the record, J & K presented its objection for lack of notice. The trial *501court ruled that the objection was untimely as it applied to the depositions that had already been read into the record, but stated:
The objection insofar as it relates to use of depositions to prove liability and not damages is overruled inasmuch as at the time the depositions were taken, liability had been determined by default judgment against J & K Properties, Incorporated, and when the Court vacated interlocutory default judgment the day before trial commenced J & K Properties, Incorporated, withdrew its motion for continuance, which would have been the proper remedy to allow the retaking of the depositions.
As to the objection insofar as it relates to use of depositions or portions thereof not yet read before the jury and insofar as they relate to the issue of damages against J & K Properties, Incorporated, the Court takes that under advisement and carries it and will make a decision later on that issue.
You’ve preserved your objection on the record as to all portions not yet read, any portion read will be read over your objection, over your motion to strike. If the Court determines that you are correct, it will take such action as necessary later in the trial or after the verdict to prevent any harm with respect to damages.
The court made no further ruling on the admissibility of the depositions as they relate to the issue of damages.
J & K re-urged its objection to the remainder of Brindle’s deposition and to the depositions of Black and Babbidge. Upon reviewing the depositions that were admitted into evidence without objection and those that were admitted over objection, I find damaging evidence that was admitted before the jury that is not “offset” by properly admitted deposition testimony. See Richardson, 677 S.W.2d at 501. (e.g. Brindle had testified about defectively built septic tanks before the objection, and continued to testify concerning various other defective septic tanks after the objection. Brindle then went on to describe defective water lines. Black testified that he was in charge of collecting rent, maintenance, and leasing. He stated that the rent receipt books were “moderately” accurate; that the water lines were not properly attached at the faucets; and there was a great danger of the lines “breaking off at the main,” causing the water to be cut off for repairs “several times” due to this fault.)
I would hold that the remaining portion of Brindle’s deposition and Black’s deposition were improperly admitted for purposes of determining damages after proper objection by J & K. Brindle and Black’s deposition testimony was damaging to J & K as it presented evidence of bad workmanship and improper bookkeeping that supports Shenandoah’s request for damages.
Having made the determination that this deposition testimony was improperly admitted, absent notice to J & K, and being unable to conclude that such admission was harmless error, I would sustain J & K’s first point of error.
The judgment of the trial court should be reversed, and the cause remanded for a new trial.