If a Texas seller missed annual contract-for-deed statements, do the old higher penalties or the new lower ones apply?

TX AG Opinion GA-0418: Do old or new contract-for-deed penalties apply?

Plain-English summary

A House committee chair asked the Attorney General whether a 2005 change to the penalty for a contract-for-deed seller who fails to send required annual statements applies retroactively. Property Code chapter 5, subchapter D governs executory contracts (commonly called "contracts for deed"), where the seller keeps title until the buyer has paid in full. Under section 5.077, the seller must give the buyer an annual statement each January showing things like how much has been paid, how many payments remain, and how much the seller paid to taxing authorities on the buyer's behalf. A seller who fails to provide the statement is liable for liquidated damages.

The dollar figure changed over time. The 2001 version made a seller liable for $250 a day for each day after January 31 that the seller failed to provide the statement. A 2005 bill, House Bill 1823, lowered that to $100 for each annual statement the seller fails to provide on time, plus reasonable attorney's fees. The catch was that the 2001 law had a savings clause (saying the change applied only to violations on or after a certain date), but the 2005 law had none. The chair asked two things: whether the 2005 amount applies to penalties that accrued under the old law between January 31, 2002 and August 31, 2005, and whether the old higher penalty still applies to lawsuits filed after September 1, 2005 for earlier violations.

The opinion answered that the 2005 lower amount applies retroactively. Because the 2005 bill had no savings clause of its own, the general savings clause in Government Code section 311.031 controls. That statute says an amendment does not affect a violation or penalty already incurred (subsection (a)(3)), but it adds an important exception in subsection (b): if a penalty is reduced by amendment and has not already been imposed, it is imposed according to the amended statute. The Texas Supreme Court had already held that the old section 5.077 liquidated-damages provision is a penalty, because it awards damages without reference to any actual loss, and the new version is a penalty for the same reason. Since the 2005 amendment reduced that penalty, a seller who missed statements between January 31, 2002 and August 31, 2005 looks to the old law to see whether a violation occurred, but is liable only for the reduced 2005 amount. The opinion reached the same result for the second question: the current section 5.077(c) applies to all lawsuits based on violations that occurred after September 1, 2001.

Currency note

This opinion was issued in 2006. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

This opinion addressed the transition between the 2001 and 2005 versions of Property Code section 5.077. The contract-for-deed statutes in Property Code chapter 5 have been amended repeatedly since 2006, including changes to the annual-statement and damages provisions. Anyone with a contract-for-deed dispute today should check the current Property Code and recent cases rather than rely on this 2006 account of the 2001-to-2005 change.

Who this opinion affected (as of 2006)

Contract-for-deed sellers: The opinion told them that, for missed annual statements after September 1, 2001, their liability was capped at the lower 2005 amount ($100 per missed statement plus attorney's fees), not the old $250-a-day figure, in any not-yet-imposed penalty.

Buyers under contracts for deed: It clarified that the penalty they could recover for missed statements was the reduced 2005 amount, even for older violations, because the reduction applied retroactively.

Courts and litigants in pending and future suits: It explained that the current section 5.077(c) controls in any lawsuit based on a violation occurring after September 1, 2001, through the operation of the general savings clause.

Common questions

Did the lower 2005 penalty apply to violations that happened before the 2005 law?
According to the opinion, yes. Because the 2005 law had no savings clause, the general savings clause in Government Code section 311.031 applied, and its subsection (b) imposes a reduced penalty under the amended statute if it has not already been imposed.

Why does it matter that the liquidated damages are a "penalty"?
The opinion explained that the Texas Supreme Court treated the old section 5.077 liquidated-damages provision as a penalty because it awards damages without reference to actual loss. That is what triggers section 311.031(b)'s rule for reduced penalties.

So is the old $250-a-day amount ever recoverable for those years?
The opinion concluded it is not, for any penalty not already imposed. The seller would look to the old law to see whether a violation occurred, but would be liable only for the reduced 2005 amount.

What about lawsuits filed after September 1, 2005 for earlier violations?
The opinion answered that the current section 5.077(c) applies to all lawsuits where the underlying violation occurred after September 1, 2001.

Background and statutory framework

Property Code chapter 5, subchapter D governs executory contracts (contracts for deed) for a residence (Tex. Prop. Code Ann. §§ 5.062(a), 5.061-.085 (Vernon 2004 & Supp. 2005); Flores v. Millennium Interests, Ltd., No. 04-1003, 2005 WL 2397521 (Tex. Sept. 30, 2005)). Section 5.077 requires the seller to give the buyer an annual statement each January with specified information, and a seller who fails to comply is liable for liquidated damages plus reasonable attorney's fees (Tex. Prop. Code Ann. § 5.077(a)-(c) (Vernon Supp. 2005)). The current liquidated-damages figure ($100 per missed statement) came from House Bill 1823, effective September 1, 2005 (Act of May 26, 2005, 79th Leg., R.S., ch. 978, § 5), replacing the 2001 figure of $250 per day (Act of May 18, 2001, 77th Leg., R.S., ch. 693, § 1). The 2001 law had a savings clause limiting its change to violations on or after September 1, 2001; the 2005 law had none (Act of May 18, 2001, ch. 693, § 3(h)).

Without its own savings clause, current section 5.077(c) is subject to the general savings clause in Government Code section 311.031 (Tex. Gov't Code Ann. § 311.031 (Vernon 2005); Tex. Prop. Code Ann. § 1.002 (Vernon 2004) (Code Construction Act applies to the Property Code)). Section 311.031(a)(3) says an amendment does not affect a violation or penalty incurred before the amendment, but subsection (b) provides that a penalty reduced by amendment, if not already imposed, "shall be imposed according to the statute as amended" (id. § 311.031(a)(3), (b)). Because the Texas Supreme Court held the old section 5.077 liquidated-damages provision is a penalty (it awards damages without reference to actual loss), and the current provision is a penalty for the same reason (Flores, 2005 WL 2397521, at *5), and the 2005 amendment reduced that penalty, the opinion concluded the current section 5.077(c) applies retroactively to any not-yet-imposed penalty, controlling in any lawsuit based on a violation occurring after September 1, 2001.

Citations

Statutes:

• Tex. Prop. Code Ann. §§ 1.002, 5.061-.085, 5.062(a), 5.077(a)-(c) (Vernon 2004 & Supp. 2005)
• Tex. Gov't Code Ann. § 311.031(a)(3), (b) (Vernon 2005)
• Act of May 26, 2005, 79th Leg., R.S., ch. 978 (House Bill 1823); Act of May 18, 2001, 77th Leg., R.S., ch. 693

Cases:

• Flores v. Millennium Interests, Ltd., No. 04-1003, 2005 WL 2397521 (Tex. Sept. 30, 2005)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0418
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2006/ga0418.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain - the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT

March 27, 2006

The Honorable Harold V. Dutton, Jr.
Chair, Committee on Juvenile Justice and Family Issues
Texas House of Representatives
Post Office Box 2910
Austin, Texas 78768-2910

Opinion No. GA-0418

Re: Retroactivity of Property Code section 5.077(c), which relates to liquidated damages in executory contracts for the sale of real property (RQ-0402-GA)

Dear Representative Dutton:

You ask about the retroactivity of Property Code section 5.077(c), which relates to liquidated damages in executory contracts for the sale of real property.[1]

Property Code chapter 5, subchapter D governs transactions involving an executory contract "for conveyance of real property used or to be used as the purchaser's residence or as the residence of a person related to the purchaser within the second degree by consanguinity."[2] TEX. PROP. CODE ANN. § 5.062(a) (Vernon Supp. 2005); see also id. §§ 5.061-.085 (Vernon 2004 & Supp. 2005). Relevant to your questions, section 5.077 provides that a seller in such a contract shall provide the purchaser with an "annual statement in January of each year for the term of the executory contract." Id. § 5.077(a) (Vernon Supp. 2005). The statement is to include information alerting the purchaser to, among other things, the amount paid under the contract, the number of payments remaining under the contract, and the amount paid to taxing authorities on the purchaser's behalf if collected by the seller. See id. § 5.077(b). And

[a] seller who conducts less than two transactions in a 12-month period under this section who fails to comply with Subsection (a) is liable to the purchaser for:

(1) liquidated damages in the amount of $100 for each annual statement the seller fails to provide to the purchaser within the time required by Subsection (a); and

(2) reasonable attorney's fees.

Id. § 5.077(c) (emphasis added).

Section 5.077's liquidated damages language as it reads now was created by House Bill 1823 during the Seventy-ninth Legislature's regular session and became effective September 1, 2005. See Act of May 26, 2005, 79th Leg., R.S., ch. 978, § 5, 2005 Tex. Gen. Laws 3280, 3282 ("current section 5.077"). As amended in 2001, however, section 5.077 made any seller in an executory contract liable for liquidated damages "in the amount of $250 a day for each day after January 31 that the seller fail[ed] to provide the purchaser with the statement." Act of May 18, 2001, 77th Leg., R.S., ch. 693, § 1, 2001 Tex. Gen. Laws 1319, 1327 ("former section 5.077"). The 2001 legislation that amended former section 5.077 contained a savings clause that read:

The change in law made by Subsection (c), Section 5.077 applies only to a violation that occurs on or after September 1, 2001. A violation that occurs before September 1, 2001, is covered by the law in effect when the violation occurred, and the former law is continued in effect for that purpose.

Act of May 18, 2001, 77th Leg., R.S., ch. 693, § 3(h), 2001 Tex. Gen. Laws 1319, 1328. House Bill 1823, the 2005 bill, contains no such clause for section 5.077. See Act of May 26, 2005, 79th Leg., R.S., ch. 978, § 5, 2005 Tex. Gen. Laws 3280, 3282. Thus, you ask:

(1) Whether a seller who satisfies the requirements of House Bill 1823, Section 5.077(c) is liable for liquidated damages that have accrued under former section 5.077 between January 31, 2002 and August 31, 2005, i.e., does House Bill 1823, Section 5.077(c) apply retroactively?

(2) Whether the liquidated damages provision contained in former Section 5.077 applies to lawsuits filed after September 1, 2005 for violations that occurred between September 1, 2001 and August 31, 2005. Or, stated differently, does House Bill 1823, Section 5.077(c) apply to all lawsuits filed after September 1, 2005?

Request Letter, supra note 1, at 2.

Without its own savings clause, current section 5.077(c) is subject to the general savings clause provision set forth in Government Code section 311.031. See TEX. GOV'T CODE ANN. § 311.031 (Vernon 2005); see also TEX. PROP. CODE ANN. § 1.002 (Vernon 2004) (Code Construction Act applies to the construction of the Property Code except as otherwise expressly provided). Relevant here, section 311.031 provides that "except as provided by Subsection (b), the reenactment, revision, amendment, or repeal of a statute does not affect . . . any violation of the statute or any penalty, forfeiture, or punishment incurred under the statute before its amendment . . . ." TEX. GOV'T CODE ANN. § 311.031(a)(3) (Vernon 2005). However, subsection (b) provides that "[i]f the penalty, forfeiture, or punishment for any offense is reduced by a[n] . . . amendment of a statute, the penalty, forfeiture, or punishment, if not already imposed, shall be imposed according to the statute as amended." Id. § 311.031(b).

The Texas Supreme Court has determined that former section 5.077's liquidated damages provision is a penalty because it awards damages without reference to any actual loss or injury. See Flores, supra note 2, No. 04-1003, 2005 WL 2397521 at *5. And though current section 5.077(c) has not been construed, it too provides for liquidated damages without reference to actual damages. See TEX. PROP. CODE ANN. § 5.077(c) (Vernon Supp. 2005) (authorizing liquidated damages in the event seller fails to provide an annual statement without reference to purchaser's actual damages). As such, we must conclude that current section 5.077(c) is a statute that imposes a penalty. Thus, in answer to your first question, a seller who failed to provide the purchaser with statements between January 31, 2002 and August 31, 2005 would look first to former section 5.077 to determine the nature of the violation. See TEX. GOV'T CODE ANN. § 311.031(a)(3) (Vernon 2005) (amendment of statute does not affect violation of statute). But the seller would be liable only for the amounts mandated by current section 5.077(c) because that language reduces the penalty. See id. § 311.031(b) (penalty, if not imposed, "shall be imposed according to the statute as amended"). In sum, current section 5.077(c) applies retroactively.

You also ask whether current section 5.077(c) applies to all lawsuits filed after September 1, 2005, even where the violations that form the basis of the lawsuit occurred between September 1, 2001, and August 31, 2005. See Request Letter, supra note 1, at 2. For the same reasons outlined above, current section 5.077(c) applies to all lawsuits where the violations that form the basis of the lawsuit occurred after September 1, 2001. See TEX. GOV'T CODE ANN. § 311.031(a)(3), (b) (Vernon 2005).

SUMMARY

The general savings clause in Government Code section 311.031 makes retroactive the portion of House Bill 1823 that amended Property Code section 5.077(c) in 2005. Thus, the portion of House Bill 1823 that amended Property Code section 5.077(c) in 2005 controls in any lawsuit the basis of which is a violation of former section 5.077's terms that occurred after September 1, 2001.

Very truly yours,

GREG ABBOTT
Attorney General of Texas

BARRY R. MCBEE
First Assistant Attorney General

ELLEN L. WITT
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Daniel C. Bradford
Assistant Attorney General, Opinion Committee

Footnotes

1. See Letter from Honorable Harold V. Dutton, Jr., Chair, Committee on Juvenile Justice and Family Issues, Texas House of Representatives, to Honorable Greg Abbott, Attorney General of Texas (Sept. 30, 2005) (on file with the Opinion Committee, also available at http://www.oag.state.tx.us) [hereinafter Request Letter].

2. These executory contracts are also known as "contracts for deed." A contract for deed . . . allows [a] seller to retain title to . . . property until the purchaser has paid for the property in full." Flores v. Millennium Interests, Ltd., No. 04-1003, 2005 WL 2397521, at *1 (Tex. Sept. 30, 2005) (defining executory contracts as the term used in Property Code chapter 5).