COCHRAN INVESTMENTS INC v. CHICAGO TITLE INSURANCE COMPANY

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Court of Appeals of Texas, Houston (14th Dist.).

COCHRAN INVESTMENTS, INC., Appellant v. CHICAGO TITLE INSURANCE COMPANY, Appellee

NO. 14-16-00119-CV

Decided: February 06, 2018

Panel consists of Justices Boyce, Donovan, and Jewell.

OPINION

Appellee Chicago Title Insurance Company sued Cochran Investments, Inc. as subrogree of Michael Ayers, who purchased a duplex from Cochran in 2011. After a bench trial, the trial court found that Cochran breached (1) the covenant of seisin implied in the special warranty deed that conveyed the duplex to Ayers; and (2) the residential sales contract executed in connection with the duplex's sale.

Cochran filed a third-party petition against EMC Mortgage LLC in the same proceeding.1 The duplex previously was subject to a deed of trust held by EMC, which had foreclosed on the duplex in 2010. Cochran purchased the property at a foreclosure sale before he sold it to Ayers. Cochran sought indemnity from EMC; the trial court granted summary judgment in favor of EMC on Cochran's claim.

We affirm the trial court's November 9, 2015 final judgment insofar as it grants EMC's motion for summary judgment because Cochran does not address EMC's summary judgment grounds on appeal.

We reverse the trial court's final judgment insofar as it assesses liability against Cochran. Because Cochran conveyed the duplex to Ayers through a special warranty deed that limited Cochran's obligation to defend title, the covenant of seisin was not implied in the deed. Chicago Title's breach of contract claim is not viable because, under the merger doctrine, the parties' residential sales contract merged with the special warranty deed when Ayers accepted the deed's delivery. The special warranty deed delineates the parties' rights; Chicago Title cannot rely on the sales contract to expand these rights.

We render a take-nothing judgment in favor of Cochran.

BACKGROUND

This dispute arises from the 2011 sale of a duplex previously subject to foreclosure.

I. Foreclosure and Subsequent Sale

William England and Medardo Garza owned an east Houston duplex in equal shares. Ownership of the duplex was subject to a deed of trust held by EMC.

England conveyed his one-half interest in the duplex to Garza in September 2009.

An involuntary bankruptcy proceeding was commenced against England in December 2009. England's conveyance of his interest in the duplex was set aside as a fraudulent transfer.

EMC foreclosed its lien on the duplex in December 2010 and the duplex was sold at a foreclosure sale to Cochran for approximately $36,000.

Cochran sold the duplex to Ayers in June 2011 for $125,000. Cochran and Ayers executed a residential sales contract and title was conveyed through a special warranty deed. The special warranty deed states:

Grantor does hereby bind Grantor and Grantor's successors and assigns to WARRANT AND FOREVER DEFEND, all and singular the Property, subject to the matters stated herein, unto Grantee and Grantee's successors and assigns, against every person whomsoever lawfully claiming or to claim the same or any party thereof by, through and under Grantor, but not otherwise.

(emphasis in original). In connection with Ayers's purchase of the duplex, Chicago Title issued an Owner's Policy of Title Insurance. Chicago Title agreed to “pay [Ayers] or take other action if [Ayers] ha[d] a loss resulting from a covered title risk.”

The trustee overseeing England's bankruptcy proceeding sued EMC and Cochran in June 2011 asserting that the foreclosure sale and Cochran's subsequent purchase of the duplex violated the bankruptcy proceeding's automatic stay. The suit was amended to add Ayers as a defendant. Ayers filed a title insurance claim pursuant to the policy issued by Chicago Title, which assumed Ayers's defense in the proceeding.

On the bankruptcy trustee's motion, the bankruptcy court dismissed with prejudice the suit against EMC, Cochran, and Ayers in September 2012. To secure dismissal, Chicago Title paid $45,000 to the bankruptcy trustee and $20,000 to Garza in exchange for a transfer of their interests in the duplex to Ayers.

II. The Underlying Action

Chicago Title sued Cochran in February 2014 and sought to recover as Ayers's subrogree under the title insurance policy. Chicago Title asserted claims for breach of the implied covenant of seisin, breach of contract, money had and received, and unjust enrichment.

Cochran answered and filed a third-party petition against EMC. Cochran's third-party petition asserted that, if liability was assessed against Cochran, then EMC would be obligated to indemnify Cochran.

EMC filed a traditional and no-evidence motion for summary judgment on Cochran's indemnity claim. See Tex. R. Civ. P. 166a(c), (i). The trial court signed an order granting EMC's summary judgment motion in October 2014. The trial court's order did not specify whether it was granting EMC's traditional or no-evidence summary judgment motion. The trial court's October 2014 order granting EMC's summary judgment motion was incorporated into its November 2015 final judgment.

Chicago Title and Cochran proceeded to a bench trial in October 2015. The trial court found in favor of Chicago Title and concluded that Chicago Title was subrogated to the rights of Ayers. In its final judgment signed on November 9, 2015, the trial court found that Cochran breached the (1) covenant of seisin implied in the special warranty deed that conveyed the duplex to Ayers; and (2) residential sales contract executed in connection with the duplex's sale. The trial court assessed against Cochran $125,000 in actual damages and $11,000 as compensation for Chicago Title's reasonable and necessary attorney's fees.

In its oral rendition of judgment following the bench trial's conclusion, the trial court stated that Chicago Title's claim for money had and received was barred by the applicable statute of limitations. The trial court's final judgment did not expressly address Chicago Title's claims for money had and received and unjust enrichment. The final judgment included a Mother Hubbard clause stating that the judgment “disposes of all claims by and against all parties” and that “[a]ll relief not granted herein is denied.”2

After the trial court signed its final judgment, Cochran timely requested findings of fact and conclusions of law. See Tex. R. Civ. P. 296. The trial court did not file findings of fact or conclusions of law and Cochran did not file a notice of past due findings and conclusions. See Tex. R. Civ. P. 297.

ANALYSIS

Cochran requested findings of fact and conclusions of law pursuant to Texas Rule of Civil Procedure 296, but failed to file a notice of past due findings of fact when the trial court did not make the requested findings. See Tex. R. Civ. P. 296, 297. “[W]hen no findings of fact or conclusions of law are filed or properly requested, it is implied that the trial court made all the necessary findings to support its judgment.” Mays v. Pierce, 203 S.W.3d 564, 571 (Tex. App.—Houston [14th Dist.] 2006, pet. denied). Because a complete reporter's record is part of the appellate record in this case, Cochran nevertheless may challenge the legal and factual sufficiency of the trial court's findings. Id.

Cochran asserts a variety of arguments challenging the law and evidence underlying Chicago Title's claims for breach of contract and breach of the implied covenant of seisin:

• Res judicata bars Chicago Title's claims.

• The implied covenant of seisin is not applicable where the parties conveyed property through a special warranty deed.

• Ayers was not evicted nor did he receive a judgment in his favor as necessary to recover on a breach of warranty claim.

• The trial court erred by assessing damages against Cochran for the entire purchase price paid by Ayers since there was only a partial failure of title.

• The merger doctrine bars Chicago Title's breach of contract claim.

• No authority permits Chicago Title's recovery of attorney's fees.

• The evidence does not support Chicago Title's recovery on a breach of contract theory.

We conclude that the (1) special warranty deed precludes recovery for breach of the implied covenant of seisin; and (2) merger doctrine bars recovery for a breach of contract. Therefore, we do not address Cochran's other arguments on appeal.

Cochran also asserts that the trial court erred in granting EMC's motion for summary judgment. Because Cochran's arguments on appeal do not address the bases underlying EMC's motion for summary judgment, we affirm the trial court's order granting EMC's motion.

I. Covenant of Seisin

Cochran asserts that Chicago Title cannot recover for breach of the covenant of seisin because title to the duplex was conveyed by a special warranty deed that limited the implied covenant of title.

The covenant of seisin is “a guaranty against any title existing in a third person which might defeat the estate granted.” Langford v. Newsom, 220 S.W. 544, 545 (Tex. 1920).3 The covenants of seisin and of good right to convey are synonymous and “in the absence of any qualifying expressions ․ are read into every conveyance of land or an interest in land, except in quitclaim deeds.” Childress v. Siler, 272 S.W.2d 417, 420 (Tex. App.—Waco 1954, writ ref'd n.r.e.).

A grantor may expressly limit a covenant of title by stipulating in the conveyance that the grantor is bound only to defend the title against persons claiming “by, through, or under” the grantor. Garrett v. Houston Land & Trust Co., 33 S.W.2d 775, 777 (Tex. Civ. App.—Galveston 1930, writ ref'd).

In Ellis v. Jordan, No. 01-90-00001-CV, 1990 WL 93233 (Tex. App.—Houston [1st Dist.] July 5, 1990, no writ) (not designated for publication), our sister court analyzed whether a covenant of seisin was implied in a special warranty deed that limited the covenant of title to those claiming “by, through and under” the grantor. Id. at *1. Concluding that the special warranty deed did not imply the covenant of seisin, the court stated that, “[i]t is quite clear from the language used in the conveyance that the [grantor] did not intend to, and did not, warrant against any claim of title or encumbrance, except for those which he, or someone claiming under him, had created.” Id.; see also Owen v. Yocum, 341 S.W.2d 709, 710 (Tex. Civ. App.—Fort Worth 1960, no writ) (“The warranty in a deed may be limited by words in the clause of warranty, as where the vendor warrants title against all persons claiming title ‘by, through, or under him’ but not otherwise.”).

Here, the special warranty deed that conveyed the duplex to Ayers limited the warranty of title to those claiming “by, through and under [Cochran], but not otherwise.” This limitation precludes Chicago Title's recovery for breach of the implied covenant of seisin. See Owen, 341 S.W.2d at 710; Garrett, 33 S.W.2d at 777; Ellis, 1990 WL 93233, at *1.

Chicago Title asserts that the special warranty deed's restrictive language does not bar its covenant of seisin claim because “this matter does not involve a preexisting title defect but instead a complete failure of title.” Chicago Title does not cite any cases that support this distinction. Texas case law suggests a broader reach for the meaning of a title “defect” than Chicago Title asserts. See, e.g., McGonagle v. Stewart Title Guar. Co., 432 S.W.3d 535, 540 (Tex. App.—Dallas 2014, pet. denied) (a title defect “involve[s] a flaw in the ownership rights of the property”).

The cases Chicago Title relies on to support its covenant of seisin claim are distinguishable.

The court in Childress concluded that the following language in the parties' oil and gas lease implied the covenant of seisin:

[A]nd ․ [seller] does covenant with [buyer] that he is the lawful owner of the said lease and rights and interest thereunder ․ ; that [seller] has good right and authority to sell and convey the same ․

Childress, 272 S.W.2d at 419-20. This language, the court stated, “reveals that it was covenanted or promised that the seller was the lawful owner of the said lease” and “amount[ed] to [a] covenant[ ] of seizin.” Id. at 420.

Here, the parties' special warranty deed conveying the duplex did not promise that Cochran was the lawful owner of the duplex, nor did it assert that Cochran had good right and authority to sell the duplex. The parties' special warranty deed guaranteed only that Cochran would warrant and defend against title claims asserted “by, through and under [Cochran], but not otherwise.” This restrictive language — unlike that analyzed in Childress — does not imply a covenant of seisin. See id. at 419-20.

Chicago Title's reliance on United States v. Lacy, 234 F.R.D. 140 (S.D. Tex. 2005), and Lykken v. Kindsvater, No. 02-13-00214-CV, 2014 WL 5771832 (Tex. App.—Fort Worth Nov. 6, 2014, no pet.), also is misplaced. In both cases the conveyance at issue involved a general warranty deed. Lacy, 234 F.R.D. at 146; Lykken, 2014 WL 5771832, at *1. Here, conversely, the duplex was conveyed through a special warranty deed that specifically limited the covenant of title.

II. Breach of Contract

Cochran asserts that the merger doctrine bars Chicago Title's breach of contract claim.

Under the merger doctrine, the conveyance provisions in a contract for the sale of real property “merge into the deed executed in accordance with the contract.” Devon Energy Prod. Co. v. KCS Res., LLC, 450 S.W.3d 203, 211 (Tex. App.—Houston [14th Dist.] 2014, pet. denied) (citing Alvarado v. Bolton, 749 S.W.2d 47, 48 (Tex. 1988)). After delivery and acceptance, deeds are generally regarded as the final expression of the parties' agreement and the sole repository of the terms on which they have agreed. Smith v. Harrison Cty., 824 S.W.2d 788, 793 (Tex. App.—Texarkana 1992, no writ). The merger doctrine requires courts “to look to the deed alone in evaluating the parties' respective rights even if the terms of the deed vary from the contract.” Devon Energy Prod. Co., 450 S.W.3d at 211.

Where a party's contract claim “involves the scope of the conveyance itself” and analyzes whether the property was conveyed, it is barred by the merger doctrine. Id. at 214. The merger doctrine applies only in the absence of fraud, accident, or mistake. Givens v. Ward, 272 S.W.3d 63, 68 (Tex. App.—Waco 2008, no pet.).

Here, the trial court's final judgment does not state which particular contractual provision Cochran breached. Chicago Title's pleadings and the evidence at trial indicate that the breach was premised on the contract's conveyance provisions. Chicago Title's petition asserts that Cochran breached its contract with Ayers by “fail[ing] to convey the Property to Ayers as negotiated for under the contract,” and the evidence at trial addressed only Cochran's failure to transfer title to the duplex.

The parties' sales contract merged with the special warranty deed when Ayers accepted the deed's delivery. See Smith, 824 S.W.2d at 793. The deed alone delineates the parties' rights with respect to the real estate transaction at issue. See Devon Energy Prod. Co., 450 S.W.3d at 211; Smith, 824 S.W.2d at 793. Chicago Title cannot rely on the contract's conveyance provisions to redress a failure to transfer title. See Devon Energy Prod. Co., 450 S.W.3d at 211; Smith, 824 S.W.2d at 793.

III. EMC's Summary Judgment Motion

Cochran asserts that the trial court “erred in granting a judgment in favor of EMC” on Cochran's indemnity claim.

EMC asserted in its traditional summary judgment motion that (1) it did not enter into any indemnity agreements with Cochran; and (2) Cochran acknowledged that its remedies were limited to a refund of the purchase price if the foreclosure sale was declared invalid. EMC's no-evidence summary judgment motion asserted that Cochran had no evidence to support its claim for indemnity from EMC. The trial court granted EMC's summary judgment motion without specifying the grounds on which summary judgment was being granted.

Cochran's brief does not address the arguments asserted in EMC's summary judgment motion. Cochran instead contends that the trial court's judgment in favor of Chicago Title depended on the conclusion that the duplex's foreclosure sale by EMC was void, and that Cochran therefore is entitled to a return of the money it paid EMC at the foreclosure sale.

“When, as in the present case, a movant asserts multiple grounds for summary judgment, and the trial court does not specify in the order the ground on which summary judgment was granted, the appellant must negate all grounds on appeal.” Heritage Gulf Coast Props., Ltd. v. Sandalwood Apartments, Inc., 416 S.W.3d 642, 653 (Tex. App.—Houston [14th Dist.] 2013, no pet.) (citing Star-Telegram, Inc. v. Doe, 915 S.W.2d 471, 473 (Tex. 1995); Lewis v. Adams, 979 S.W.2d 831, 833 (Tex. App.—Houston [14th Dist.] 1998, no pet.)). “If the appellant fails to challenge all grounds on which the judgment may have been granted, the appellate court must uphold the summary judgment.” Id.

Cochran's brief does not address EMC's arguments in its summary judgment motion challenging Cochran's indemnity claim. Cochran's brief does not address or provide support for its indemnity claim. Because Cochran failed to challenge the grounds on which EMC's summary judgment motion could have been granted, we are required to affirm the trial court's order granting summary judgment. See id.

CONCLUSION

We affirm the trial court's November 9, 2015 final judgment insofar as it grants EMC's motion for summary judgment. We reverse the trial court's final judgment insofar as it assesses liability against Cochran based on Chicago Title's breach of contract and breach of the covenant of seisin claims. We render a take-nothing judgment in favor of Cochran.

FOOTNOTES

1.   JPMorgan Chase Bank, N.A. is successor by merger to EMC Mortgage LLC.

2.   If there has been a “full trial on the merits either to the bench or before a jury,” a Mother Hubbard clause “indicates the court's intention to finally dispose of the entire matter ․” Lehmann v. Har-Con Corp., 39 S.W.3d 191, 204 (Tex. 2001). The final judgment's Mother Hubbard clause indicates the trial court's intent to dispose of Chicago Title's claims for money had and received and unjust enrichment without assessing liability against Cochran for these claims. Chicago Title does not challenge the trial court's failure to award damages based on its money had and received and unjust enrichment claims, nor does it argue these two claims as an alternative basis for judgment in its favor. We therefore do not address these claims on appeal.

3.   In Texas case law, “seisin” has also been spelled “seisen,” “seizin,” and “seizen.” See Lykken v. Kindsvater, No. 02-13-00214-CV, 2014 WL 5771832, at *3 (Tex. App.—Fort Worth Nov. 6, 2014, no pet.) (per curiam).The covenant of seisin rarely has been applied in recent breach of covenant cases in Texas. Our research found approximately 15 cases from the past 50 years addressing the concept, none of which are from this Court. See also Lykken, 2014 WL 5771832, at *3 n.5 (noting that the covenant of seisin is “relatively uncommon” and applied in “only about sixteen cases in Texas in the past fifty years”).

William J. Boyce Justice

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