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Flores v. Millennium Interests, Ltd. (2005)

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Flores v. Millennium Interests, Ltd., 185 S.W.3d 427 (Tex. 2005)

Legal information, not legal advice. Verify against the cited opinion.

  • Citation: Flores v. Millennium Interests, Ltd., 185 S.W.3d 427 (Tex. 2005) (No. 04-1003), reh’g denied (Mar. 31, 2006). Answering certified questions from Flores v. Millennium Interests, Ltd., 390 F.3d 374 (5th Cir. 2004); on receipt of the answers, the Fifth Circuit decided Flores v. Millennium Interests, Ltd., 464 F.3d 521 (5th Cir. 2006).
  • Court / Year: Supreme Court of Texas, decided September 30, 2005 (opinion by Medina, J., joined by Hecht, O’Neill, Wainwright, Johnson, and Willett, JJ.; concurrence by Wainwright, J.; dissent by Brister, J.). Argued February 15, 2005.
  • Topic tags: disclosure · annual-statement · § 5.077 · liquidated-damages · statutory-penalty · executory-contract
  • Facts: Millennium Interests develops residential subdivisions in the Houston area and finances most sales through contracts for deed (executory contracts). Three buyer families (the Floreses and Vergaras) sued in federal court, contending that the annual accounting statements Millennium mailed them under Texas Property Code § 5.077 omitted some of the information § 5.077(b) requires, and that each omission triggered the statute’s “liquidated damages” of $250 per day (plus attorney’s fees). The statutory annual-statement right and its liquidated- damages remedy were newly added when the Legislature renumbered and revised the executory-contract statutes (the disclosure regime that became Subchapter D). The U.S. Court of Appeals for the Fifth Circuit, unsure how Texas would construe the new section, certified questions to the Supreme Court of Texas.
  • Holding: The Court answered the first two certified questions “No” and held the third unnecessary to reach. (1) An annual statement that omits some § 5.077(b)-required information does NOT invoke the liquidated-damages provision unless the statement “is so deficient as to be something other than a good faith attempt by the seller to inform the purchaser of the current status of their contractual relationship.” (2) The statements Millennium mailed were timely under § 5.077(a), and the omissions did not render them deficient or trigger § 5.077(c). Because those answers disposed of the buyers’ claim, the Court did not reach the third question. Separately, the Court did construe the remedy itself: the Legislature intended the § 5.077(c) “liquidated damages” to be a penalty, and did not intend that a purchaser prove actual damages as a predicate to recovery. Net result: the seller prevailed — a good-faith annual statement with minor omissions is not penalized — but where the penalty does apply, the buyer recovers without proving harm.
  • Reasoning: The Court read § 5.077 in light of its consumer-protection purpose but declined to make every technical omission a $250/day trap. The trigger is good faith: a statement that genuinely attempts to inform the buyer of the contract’s current status satisfies the statute even if not every itemized field is present; only a sham or grossly deficient “statement” forfeits the safe harbor. In characterizing the remedy, the Court treated the fixed daily sum as a statutory penalty rather than compensatory liquidated damages, so a buyer entitled to it need not prove actual loss — but, by the same logic, the penalty attaches only when the statute’s substantive obligation is actually breached (i.e., no good-faith statement). Justice Brister dissented; Justice Wainwright concurred separately.
  • Practical impact for CFD operators/buyers: Flores is the controlling Texas Supreme Court gloss on the § 5.077 annual-statement duty. For operators, it is partly protective: a good-faith annual statement that informs the buyer of the contract’s status is not exposed to the $250/day penalty merely because a required line item is missing — but the safe harbor is good faith, not substantial compliance with a free pass; an absent, sham, or grossly incomplete statement loses it, and then the penalty runs without the buyer proving any harm and accrues daily (subject to the statutory cap). The compliance takeaway is to send a complete, timely § 5.077 statement every January, because litigation over “good faith” is avoidable and the downside is an uncapped-feeling daily penalty plus fees. For buyers, Flores confirms the liquidated-damages remedy is a penalty recoverable without proof of actual damages, but it will not be awarded for trivial omissions in an otherwise good-faith statement.
  • Good-law status: Good law. Flores remains the Texas Supreme Court’s authoritative construction of § 5.077 and is widely cited (100+ citing references) for the propositions that (a) the § 5.077(c) remedy is a statutory penalty requiring no proof of actual damages, and (b) a good-faith annual statement with minor omissions does not trigger it. Not overruled. Note that § 5.077 has been amended since 2005 (the penalty structure now distinguishes high-volume from low-volume sellers and adds a fair-market-value cap — see the texas page, § 1); the statutory text governs current amounts, while Flores’s good-faith trigger and penalty characterization remain the interpretive law.
  • Source (retrieved):

▸ For Sellers / Operators — Send a complete, timely § 5.077 annual statement every January. Flores gives you a good-faith safe harbor: a statement that genuinely informs the buyer of the contract’s current status is not penalized merely because one required field is missing. But “good faith” is the only shield — a missing, sham, or grossly deficient statement loses it, and then the $250/day statutory penalty runs without the buyer proving any harm (plus attorney’s fees, subject to the amended statutory cap). The cheap, certain move is full compliance, not litigating good faith. See texas (§§ 1, 8).

▸ For Buyers — If the seller skips or fakes the annual statement, the § 5.077(c) remedy is a penalty you can recover without proving actual damages. But a good-faith statement that merely omits a minor item will not trigger it.

Jurisdictions that follow / cite: texas (controlling construction of Tex. Prop. Code § 5.077). Compare the related Texas disclosure-remedy case morton-v-nguyen-2013 (cancel-and-rescind requires mutual restitution).

Disclaimer. Legal information, not legal advice. Flores construes a Texas statute that has since been amended; confirm the current § 5.077 text and penalty amounts, and consult a licensed Texas attorney before relying on it.

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