Today, the Texas Supreme Court handed down an opinion on three certified questions from the Fifth Circuit which construes Section 5.077 of the Texas Property Code, which deals with accounting requirements the Code places on sellers of real property pursuant to executory contracts. Justice Medina wrote for the six-Justice majority, Justice Wainright wrote a concurring opinion, and three Justices dissented.
Section 5.077(a) of the Property Code requires that a seller of real property under an executory contract provide the purchaser with an annual accounting statement for each year of the contract. Section 5.077(b) provides a list of items that must be included in the statement. Section 5.077(c) provides that a seller who fails to comply with 5.077(a) is liable to the purchaser for liquidated damages of $250.00 per day of noncompliance, as well as reasonable attorneys’ fees.
The Fifth Circuit wanted to know if a seller was liable for liquidated damages under 5.077(c) when the seller timely provided an accounting statement, but that the statement did not included some of the information clearly required by 5.077(b).
The majority here answered “no,” stating that since the liquidated damages provision only referred to 5.077(a), the requirement of an accounting, the seller who provides some kind of good faith effort to keep the purchaser apprised of their contractual relationship is not liable to the purchase under 5.077(c).
The dissent notes that since Section 5.077(b) provides that certain mandatory accountings be included in the statement required by 5.077(a), a statement delivered purportedly pursuant to 5.077(a) is not in fact an accounting statement at all unless it fully complies with 5.077(b). Thus, according to the dissent, “In answering the first certified question, the Court “strictly” construes the statute to require fewer items than the statute itself says “must” be included. That is not a very strict construction. Nor does it comply with the legislative mandate that we give the entire statute effect.”
Cause No. 04-1003 Arturo Flores, et al. v. Millennium Interests, Ltd., et al.
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