Legal News
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Another Faulty Property Description Leaves "Owner" Empty-Handed
Gaut v. Daniel. In 1990, the Daniels acquired 28 acres from the Garcias. In 2006, after the Garcias died, their daughter sold 48 acres (which included the 28 acres) to Gaut. The Daniels sued and won in trial court. The appellate court reverses because the legal description of the property in the Daniels’ deed was insufficient. Although the deed has what at first appears to be field notes, upon examination there is no way to determine from the deed where the start point lies. In addition, the angles are not described in minutes and degrees. The Daniels presented much evidence that "everyone" (including the taxing authorities, the Department of Transportation, and some oil exploration companies) knew they owned the 28 acres, but none of that was relevant because Texas real estate law is clear that the deed must "provide within itself, or by reference to some other existing writing in existence at the time of the deed, the means or information by which the land being conveyed can be identified with reasonable certainty." The land now belongs to Gaut. Posted Mon, 29 Jun 2009 14:05:22 -0500
Why You Should Always Record Your Real Estate Documents
Texoma Advertising Co., L.P. v. Siblings, L.L.C. Defendant purchased the property in early 2005. In mid 2006, Defendant determined that an advertising sign on the property had been abandoned and cut the sign down. Defendant claimed the pole was rotting, the ad copy had not been changed during the time the Defendant owned the property, there was no lease filed of record, Defendant had not received any payments, and no one had seen anyone perform any maintenance on the sign. Plaintiff sued, alleging that it owned the sign and had a valid lease with a prior owner. The Court observes that in Texas an unrecorded conveyance of an interest in real property is void as to a subsequent purchaser who purchases the property for valuable consideration and without notice. In this case, the mere existence of the billboard is not sufficient to conclusively establish a duty to ascertain because there was also evidence that the billboard appeared to be abandoned. Because reasonable and fair-minded people might disagree as to whether the pole appeared abandoned, the Defendant did not have constructive knowledge of the lease, is not bound by it, and has no liability for cutting down the sign. Posted Thu, 18 Jun 2009 14:05:11 -0500
Drilling Company Drives Owner Crazy by Driving Over Her Land
Thompson v. Clayton. Under a 1975 letter agreement, the defendants were given the right to pass over the Plaintiff’s land, and the right and privilege of passing to and from at their sole discretion. The plaintiff argued the agreement was a mere license. A license is a privilege to do some act or acts on the land of another, but does not amount to an interest in the land itself. The general rule is that gratuitous licenses are revocable at will, and will terminate upon the death of the licensor. In contrast, the defendants maintained the agreement was an easement. An easement is a liberty, privilege, or advantage in land without profit, existing distinct from the ownership of the soil. An easement is not revocable at will. In this case the Court sides with the defendant, finding the agreement is an easement because the right and privilege of passing to and from at their sole discretion shows an intent to create an easement, even though the agreement contains no grant language, was not acknowledged, was not recorded, and contains at best a vague description of the easement location. Posted Wed, 17 Jun 2009 13:35:23 -0500
Land Transfer to Children Held to be Fraud on Creditors' Rights
Francisco Corpus v. Arriaga. In 1999, Plaintiffs sued Defendants after a business deal went bad. In 2004, Plaintiffs finally obtained a judgment against the Defendants, and 15 days later the Defendants recorded deeds transferring their real estate to their children. Plaintiffs sued under The Uniform Fraudulent Transfer Act (TUFTA), seeking to enforce their judgment against the transferred property. The Defendants alleged that under an agreement dating back to 1994, they would own the property jointly with their children, and because the children’s ownership interest arose before the Plaintiffs got their judgment the transfer was not fraudulent. On appeal, the Court holds that a transfer is made when a deed is recorded, so the Plaintiff’s claim predated the transfer. In addition, there was sufficient evidence to find that the children did not pay reasonably equivalent value for the property, and that the Defendants were insolvent at the time of the transfers or became insolvent as a result of the transfers. Judgment is accordingly rendered for the Plaintiffs. Posted Tue, 02 Jun 2009 13:37:37 -0500
Drafting Error Strikes Again: Seller Loses Mineral Estate
Eastin v. Dial. Buyer and Seller entered into a real estate purchase contract. Because of a pending lawsuit Seller was unable to deliver clear title at closing. The parties agreed that Seller would convey the property by a “temporary” deed at closing, with certain conditions to be satisfied by Seller after closing. Once those conditions were satisfied, Seller would deliver a new and final deed to Buyer. Although the parties had agreed in writing that the Seller would reserve its mineral interest in the property, the warranty deed actually signed by Seller at closing contained no such provision. A dispute later arose between the parties and this suit was filed. On appeal, the court holds that the deed is not ambiguous, and thus the intent of the parties must be construed from what appears on the face of the deed. There is no language in the deed suggesting it was intended to be temporary, or that it was intended to convey less than the Seller’s full estate. Further, because the deed was dated after the parties’ conflicting written agreements, the deed supersedes those agreements. As a result, the mineral estate now belongs to the Buyer. Posted Fri, 29 May 2009 14:02:15 -0500
"Separated" Means Squat: Both Spouses Must Sign Home Improvement Loan Documents
Denmon v. Atlas Leasing, L.L.C. Sarah and Carnell separated in 2001, and they later sold their home. Carnell gave Sarah his share of the sales proceeds, and bought himself a trailer home in Giddings. In July, 2003, Sarah bought a home in her sole name, and three months later she borrowed $10,000 against the home to make improvements. Sarah and Carnell finally divorced in 2004. Sarah defaulted under her loan, and the lender foreclosed. On appeal, the Court holds the foreclosure was invalid because Carnell never signed the loan documents. To fix a lien on a homestead, the improvement contract must be in writing and signed by both spouses. Even though Sarah and Carnell were separated, and Carnell’s name was never on the deed, the parties were still technically married when the loan was made, and the lender presented no evidence that Sarah had lied about her marital status. It makes no difference that Sarah never filed for a homestead tax exemption. Because the lien was invalid, so is the foreclosure, and Sarah is entitled to the return of her property. Posted Wed, 27 May 2009 13:31:10 -0500
Court Gives Guidance on Recoveries in Construction Cases
AMX Enterprises, L.L.P. v. Master Realty Corp. AMX sued MRC for the unpaid balance of a contract to repair flood damage in MRC’s hotel. The trial court reduced the amount of interest awarded to AMX because it found that AMX had unnecessarily delayed the lawsuit. On appeal, the court holds that the Prompt Payment to Contractors Act does not allow for tolling the accrual of interest during periods of litigation delay. However, AMX is not entitled to common law prejudgment interest in addition to interest under the Act. Finally, the court holds that the proper measure of attorney’s fees for in-house legal counsel is the market value of those services, rather than cost-plus. AMX presented sufficient evidence to support an award of attorney’s fees, but the case is remanded to calculate the correct amount. Posted Tue, 21 Apr 2009 13:23:44 -0500
There Goes the Neighborhood? Subdivision Restrictions Invalidated
Meehl v. Wise. Subdivision restrictions specified that all lots were to be used for single-family residences. Neighbors sought an injunction to prohibit the Meehls from constructing a bed-and-breakfast style retreat and educational center for persons with bipolar disorder. The court finds the restriction violates the Texas Community Homes for Disabled Persons Location Act. The case is remanded to the trial court to determine whether the neighbors should be enjoined from further attempts to enforce the restriction. Posted Wed, 15 Apr 2009 13:26:51 -0500
Tenant Saved by a Technicality
Moosavideen v. Garrett. In 1928, Landlord granted Tenant a 99-year lease with an option to purchase the property. The lease required each party to notify the other of any change in address. Landlord later died, and her interest passed to various heirs. The lease was assigned to multiple tenants, and eventually came into Moosavideen's hands. In 2001, Moosavideen sent notice to the four heirs of whom he was aware that he wished to exercise the purchase option. Receiving no response, he eventually filed suit against the four heirs. After learning of additional heirs in the discovery process, Moosavideen notified the additional heirs of his desire to exercise the option and joined them as parties to the suit. In 2002, the heirs sent notice to Moosavideen that they would not honor his option because he was in default under the lease for using the property as a service station "in a manner inconsistent with applicable environmental laws/regulations." The trial court ruled in favor of the heirs. On appeal, the Court holds that the heirs breached the lease by failing to notify Moosavideen of their addresses, so he was excused from his initial failure to properly notify all the heirs of his intent to exercise the option. Further, the Court rules that nothing in the wording of this particular agreement prevents Moosavideen from exercising the option while he is in default. The case is sent back to the trial court to determine whether Moosavideen is entitled to recover attorney's fees from the heirs. Posted Fri, 06 Feb 2009 14:39:30 -0600
No House for You! Grantor Sues to Cancel Deed.
Williams v. Kaufman. Plaintiff, an 87 year-old man whose wife had died a year before, signed a deed conveying the home where he had resided for nearly 40 years to Defendant. Plaintiff subsequently sued to cancel the deed, alleging that he had signed the deed in exchange for Defendant’s promise to care for him for life and to never put him in a nursing home. The Plaintiff was the only person who testified about this promise, but on appeal the Court holds there is sufficient evidence to warrant cancellation of the deed. First, Plaintiff had also named Defendant as his agent in a power of attorney, indicating that he expected to have an ongoing relationship with her. Second, the deed recited that it was given in exchange for "ten dollars and other good and valuable consideration," rather than as a gift, indicating that the Plaintiff expected to receive something in return. Finally, Defendant admitted she had never paid the ten dollars. The Court finds that there is enough evidence to conclude that Defendant made a promise to Plaintiff that she did not intend to keep, and that cancellation of a deed is a proper remedy when promises are fraudulently made with no intention of carrying them out at the time of the deed's execution. Posted Tue, 03 Feb 2009 14:00:13 -0600
Lender Derails Closing at Last Minute; Buyer Pays the Price
Nguyen v. Woodley. On October 3, Buyer signed a real estate purchase contract to buy Seller's home not later than October 21. The night before closing, Buyer's lender notified Buyer that the lender would require roof repairs before making the loan. Buyer sent Seller a memo stating "I would like to notify you that we cannot obtain Financing Approval by now. I ask you to extend the closing date which I will try to find out as soon as I can." On October 24, Buyer satisfied the lender's concerns and requested that the closing be rescheduled, but Seller refused. Buyer sued and lost. On appeal, the Court holds that to be entitled to specific enforcement of a contract, a party must show that the contract in question is valid and enforceable. In this case, the contract specified "If Buyer cannot obtain Financing Approval, Buyer may give written notice to Seller within 20 days after the effective date of this contract and this contract will terminate and the earnest money will be refunded to Buyer." The Court holds that the Buyer's memo was sufficient to invoke this provision, thereby terminating the contract. The contract is not revived by the fact that Buyer subsequently managed to obtain financing approval, so there is no "valid and enforceable" contract to support Buyer's suit. Further, because the Seller prevailed in the suit, Seller is entitled to recover attorney's fees from Buyer. Posted Thu, 29 Jan 2009 14:00:02 -0600
Unfinished Divorce Leaves New "Wife" in a World of Hurt
Bailey-Mason v. Mason. Edward married Rae and subsequently filed for divorce, but the divorce was never finalized. After he separated from Rae, he bought a house. He later "married" Carlyn, with whom he had two children. Eventually Edward deeded the house to the children, and then he died. The probate court determined that Rae was the surviving spouse because she was never formally divorced from Edward. In a separate partition suit, the court ruled that Rae owned 1/2 of the house and each of the children owned 1/4. On appeal, Carlyn seeks reimbursement of $60,000 expended to improve the property. The court holds that she failed to prove that Rae joined in or consented to the improvements, or that the improvements were necessary to preserve the property. Accordingly, Carlyn gets nothing. Posted Fri, 19 Dec 2008 14:18:12 -0600
Plaintiff's Proof Insufficient to Set Aside Deed
Turner v. Hendon. While Turner's elderly mother was hospitalized in 1998 for a broken hip, she signed a deed conveying her property to Hendon. Turner did not learn of the deed until 2004, at which time her mother claimed to have no recollection of signing it. Shortly thereafter, Turner's mother died and Turner sued Hendon to establish that her mother lacked sufficient mental capacity to execute the deed, and was under the undue influence of Turner at the time of the deed's execution. On appeal, the Court holds that the law presumes that the grantor of a deed had sufficient mental capacity at the time of its execution to understand his legal rights, and for that reason the burden rests on the person seeking to set aside the deed to show lack of mental capacity of the grantor at the time the deed was made. All of the evidence at trial concerned the mother's mental state after she was released from the hospital; no evidence was offered relating to her mental capacity at or near the time that she executed the deed. In order to establish undue influence, a party has the burden to show: (1) the existence and exertion of influence; (2) the effective operation of an influence so as to subvert the will or overpower the mind of the grantor at the time of the execution of the deed; and (3) the execution of a deed the maker would not have executed, but for such influence. At best, the evidence at trial supports an inference that Turner had an opportunity to exert influence over the mother, but it does not prove that Turner subverted the mother's will or overpowered her mind. Accordingly, both claims fail. Posted Wed, 05 Nov 2008 13:25:45 -0600
A Costly Mistake: Buyer Defrauded Out of Home and Years of Payments
Casstevens v. Smith. Buyers failed to obtain title insurance upon purchasing their home from Sellers, and Sellers did not disclose that the property was subject to two existing liens. Although Buyers paid Sellers over a period of six years, Sellers failed to discharge the existing liens. The second lien went into foreclosure, and Investor purchased the property subject to the first lien. After Investor was unable to come to agreement with Buyers, Investor paid off the first lien and evicted Buyers. Buyers successfully sued Sellers for fraud, and then sued Investor for various claims, including equitable subrogation, unjust enrichment, and fraud. The Court observes that equitable subrogation applies when one party involuntarily pays a debt primarily owed by another. So, Buyers could have asserted such a claim against the Sellers (who owed the debt secured by the liens) but not against Investor (who was actually a creditor and did not owe any debt paid by Buyers.) Further, Investor purchased the property in the ordinary course of a foreclosure sale, so there was no implied contract between Investor and Buyers that would obligate Investor to reimburse money to Buyers. Consequently, unjust enrichment does not apply. Finally the Court finds that any statements Investor may have made to Buyers regarding a willingness to "work together" with Buyers were too vague to constitute fraud. Posted Tue, 28 Oct 2008 13:58:01 -0500
Buyer Snatches Defeat from Jaws of Victory; Might Still Recover Earnest Money
Digiuseppe v. Lawler. Buyer and Seller entered into an agreement concerning the sale of some land, contingent upon Buyer obtaining acceptable zoning. After a dispute arose between the parties regarding whether the zoning obtained by Buyer was acceptable, Seller attempted to terminate the contract and retain the earnest money. Buyer sued and won an order for specific performance against Seller. The Texas Supreme Court holds that an essential element in obtaining specific performance is that the party seeking such relief must plead and prove he was ready, willing, and able to timely perform his obligations under the contract. In this case, Buyer made the necessary allegations but offered "equivocal and conflicting" proof, and wholly failed to obtain the necessary finding from the jury. As a result, Buyer is not entitled to specific performance. However, the case is returned to the trial court to determine whether Buyer is entitled to a refund of its $200,000 earnest money deposit. Posted Tue, 21 Oct 2008 13:50:25 -0500
Nobody Knows What's Going On; Case Sent Back for Trial
Givens v. Ward. Givens agreed to sell land to Ward. The contract provided that "Seller reserves the following mineral, water, royalty, timber, or other interests," and referenced a copy of an oil, gas, and mineral lease attached to the contract. However, the warranty deed signed at closing contains no reservation of mineral interests. When Givens raised the issue after closing, Ward sued for a declaration that Ward owns the disputed interest. Givens countersued for reformation of the deed due to mistake. The Court observes that generally when a deed is delivered and accepted as performance of a contract to convey, the contract is merged in the deed and thereafter the deed alone determines the rights of the parties. However, the merger doctrine applies to deeds only in the absence of fraud, accident, or mistake. After reviewing the evidence, the Court concludes that neither party has clearly proven whether the deed varies from the parties' original agreement, and if so whether the variance was due to a mistake on the part of the Givenses of which the Wards had (or acquired) knowledge. As a result, the case is returned to the trial court for further proceedings. Posted Tue, 14 Oct 2008 13:59:34 -0500
Neighbors Inherit the Wind: Wind Farm Not a Nuisance
Rankin v. FPL Energy, LLC. Neighbors sued to obtain an injunction against a wind farm operator, alleging that the wind farm was a nuisance. A nuisance is a condition that substantially interferes with the use and enjoyment of land by causing unreasonable discomfort or annoyance to persons of ordinary sensibilities. Trespass to real property occurs when a person enters another's land without consent. In this case, neither has occurred, and the wind farm is operating lawfully. The Court sympathizes with the the plaintiffs' loss of "unobstructed sunsets, panoramic landscapes, and starlit skies," but reiterates that "the law will not declare a thing a nuisance because it is unsightly or disfigured, because it is not in a proper or suitable condition, or because it is unpleasant to the eye and a violation of the rules of propriety and good taste." Posted Tue, 23 Sep 2008 13:32:09 -0500
No Commission for Broker with Unenforceable Agreement
Duncan v. F-Star Management, LLC. Broker sued to recover unpaid commissions. The Real Estate Licensing Act requires that a commission agreement provide a description of the real estate that would satisfy the statute of frauds, meaning that it must identify the property with reasonable certainty. In this case, the properties were described as "Build-to-Suit for Thomson Consumer Electronics Facility in Socorro, Texas," and "Operation Campus View, Socorro, Texas," both of which the Court holds to be insufficient. Accordingly, the commission agreement was unenforceable. Further, Duncan's fraud claim fails because a real-estate broker may not allege fraud to recover a commission on an unenforceable agreement, even if he can prove the elements of fraud. Posted Fri, 29 Aug 2008 14:09:51 -0500
Borrower Saves Lender Trouble of Foreclosing; Gets Sued Anyway
Morrison v. Christie. Morrison borrowed money from Christie secured by a lien on property in Wichita Falls. Later, Morrison executed a Deed In Lieu of Foreclosure ("Deed In Lieu") conveying the property to Christie. Christie sold the property to a third party and, after crediting the sales proceeds to Morrison's note, sued Morrison for the deficiency. The Court notes that a Deed In Lieu is not a specific type of deed, such as a special warranty deed or a quitclaim deed, but rather is deed given in satisfaction of a debt. The Court finds no evidence in this case that the Deed In Lieu was intended to be a mortgage. The Court further finds that Morrison received consideration by avoiding a foreclosure on Morisson's credit record. While it is typical that a Deed In Lieu is given in full satisfaction of the debt, there is no law preventing the parties from agreeing that the conveyance is only in partial satisfaction. Finally, because the transaction does not constitute a foreclosure, Morrison is not entitled to a judicial determination of fair market value of the property. Posted Wed, 27 Aug 2008 13:45:37 -0500
Limited Partners Really Do Have Limited Liability
Asshauer v. Wells Fargo Foothill. Investors formed a series of limited partnerships to construct a commercial project. The original financing was insufficient to complete the project, so Wells Fargo agreed to provide additional financing in exchange for a limited partnership interest in the master limited partnership. Wells Fargo received some money on a subsequent sale. However, the project subsequently failed and when the other investors lost their money they sued Wells Fargo on various fraud theories. The Court holds that (1) a limited partner may not directly sue another limited partner when the alleged injuries damaged the limited partnership; and (2) the investors failed to plead and prove that Wells Fargo was either a de facto general partner or otherwise participated in the control of the partnership for liability purposes. Consequently the plaintiffs lack standing to sue. Posted Thu, 21 Aug 2008 13:51:45 -0500
LLC Shields Owner from Liability for Contract Debts, but not Owner's Personal Wrongdoing
Sanchez v. Mulvaney. Sanchez hired a limited liability company (LLC) owned by Mulvaney to construct a Sonic Drive-in restaurant. The project ran into trouble and, after paying off mechanic's liens, Sanchez sued both the LLC and Mulvaney individually. On appeal, the Court holds that Sanchez's contract was with the LLC, and Sanchez failed to produce evidence of fraud on Mulvaney's part that would entitle Sanchez to hold Mulvaney liable for a breach by the LLC of its contractual obligations. However, Sanchez also alleged certain wrongdoing by Mulvaney personally, including improper disbursements of construction payments, misrepresentation, breach of warranty, and unconscionable conduct. In an action seeking to hold an agent individually liable for his tortious or fraudulent acts, the corporate veil is not required to be pierced, so such claims could proceed to trial. Posted Mon, 11 Aug 2008 14:00:47 -0500
Good Title Work Is Always Better Than Equity: First Lienholder Loses Lien Priority
AMC Mortgage Services, Inc. v. Watts. In 1996 Gonzalez bought a home financed by a first lien to Lender 1 and a second lien to Smith, the seller. In 1999 Gonzales refinanced Lender 1's loan with Ameriquest. In 2000 she obtained a first home equity loan from Ameriquest and all prior liens held by Ameriquest were released. In 2003 she obtained a second home equity loan from Ameriquest and the 2000 home equity loan lien was released. Meanwhile, Gonzales defaulted on the 1996 Smith loan. The lender foreclosed and sold the property to Watts, who borrowed money from Argent to make the purchase. Shortly thereafter Ameriquest conducted a foreclosure of its 2003 home equity lien and tried to evict Watts from the property. Watts countersued and won at trial. On appeal, the Court holds that although equitable subrogation would ordinarily allow Ameriquest to succeed to the rights of Lender 1 upon a showing that Ameriquest had satisfied Gonzalez's obligation to Lender 1, in this case nothing in the public real estate records indicates the debt secured by the 1999 deed of trust was paid with the proceeds of the 2000 and 2003 home equity extensions of credit. As a result, Watts was entitled to conclude that the 1996 Smith loan had first priority because the home equity loans were both later in time, and foreclosure of the first lien extinguishes all junior liens. (Interestingly, the Court did not address the fact that a home equity loan cannot be in "renewal and extension" of a prior debt, and did not explain why Ameriquest had made either loan without requiring a release of the Smith lien.) Ameriquest did find one bright spot, though: the Court confirms that Watts is not entitled to recover attorney's fees in a trespass to try title suit. Posted Thu, 17 Jul 2008 14:27:57 -0500
Poor Drafting Strikes Again
Johnson v. Conner. The Johnsons agreed to sell land to the Conners. The "standard" real estate contract provided space for reservations of minerals, water, royalties, and timber, but the real estate agent noted only that "none of the above are available to be conveyed." At closing, the sellers signed a deed that provided for a reservation of "all presently recorded oil and gas leases, mineral severances, and other instruments ... that affect the property." Upon later learning that the buyers were collecting royalties under an oil and gas lease the sellers sued to reform the deed. Alternatively, they requested the court to avoid the contract on the basis of mutual mistake. The sellers lost on both counts at trial. The appellate court agreed, holding the deed is unambiguous in that it did not reserve the minerals. Further, a mutual mistake of fact occurs when the parties to an agreement have a common intention, but the written contract does not reflect the intention because parties were acting under the same misunderstanding of the same material fact. Although the parties in this case had different understandings of the contract language, they did not have the same misunderstanding. Posted Tue, 15 Jul 2008 13:46:09 -0500
Subcontractor's Lien Affidavit is Close Enough
Mustang Tractor & Equipment Co. v. Hartford Accident and Indemnity Co. Mustang furnished heavy equipment for the site work on a new Home Depot in Austin. When Mustang's invoices were not timely paid it sent notices to the general contractor and the owner, and timely filed mechanic's lien affidavits. A lawsuit resulted and the trial court invalidated the lien affidavits because they failed to specify the date each notice of the claim was sent to the owner and the method by which the notice was sent. The appellate court disagreed, holding that Mustang substantially complied with the law because: (1) the affidavits were otherwise correct, and (2) the owner and contractor actually received the notices containing the required information, so no one was misled or otherwise prejudiced by the omission. Posted Wed, 09 Jul 2008 13:25:16 -0500
Probate Remanded to Give the Parties Another Shot
In re Estate of Wilson. Decedent's spouse filed a copy of Decedent's will for probate because she could not find the original. After the will was admitted, Decedent's son challenged the proceedings. The Court observes that when a will was last known to be in the decedent's possession and cannot be located after death, a rebuttable presumption of revocation arises. The presumption can be overcome by proof and circumstances contrary to the presumption, or evidence that the will was fraudulently destroyed by some other person. Likewise, the recognition of a will's continued validity and the testator's continued affection for the chief beneficiary thereunder, without evidence tending to show the decedent's dissatisfaction with the will or any desire to cancel or change the will, is sufficient to rebut the presumption of revocation. However, in this case the widow had produced no evidence at all as to why the will could not be located. In the interest of justice, the Court sends the case back to the trial court to allow the parties another chance to fully explore the issue of whether the original will had been revoked. Posted Tue, 08 Jul 2008 13:43:22 -0500
Spendthrift Provision Did Not Preclude Trust Beneficiary from Devising His Interest in the Trust by Will
In re Townley Bypass Unified Credit Trust. Decedent's will established a trust for the benefit of his spouse for life, with the remainder to his children, Billy and Jimmy. After Decedent's death, Billy predeceased Decedent's surviving spouse. The Court holds that because Billy was alive when his father died and no condition precedent exists other than the termination of the life estate, his interest was vested. Further, finding no controlling authority, the Court holds that an interest in a trust may be transferred by will or intestacy because a spendthrift provision is to protect the beneficiary from his or her own folly, a purpose that cannot be promoted after the beneficiary's death. As a result, Billy's interest passes to his widow by his will, not to his heirs by intestacy. Posted Tue, 08 Jul 2008 13:43:25 -0500
Defeat Snatched from Jaws of Victory: Adverse Possession Verdit Overturned
Moore v. Stone. Stone claimed to have acquired title by adverse possession. There are statutory periods of adverse possession of 3, 5, 10, and 25 years, depending on the nature of the plaintiff's claim and how the property is used. In this case, the Court holds that casual or incidental fencing of the property for occasional grazing, and the cutting and gathering of natural crops such as hay, will not amount to such adverse and hostile possession and use as will satisfy the 10-year statute. Further, the 3, 5 and 25 year statutes all require the plaintiff to claim "title or color of title," or a deed. Because of a procedural quirk in this case, the plaintiff had neither. As a result, the jury's verdict of adverse possession is reversed. Posted Tue, 08 Jul 2008 13:43:27 -0500
Another Reason to Read Contracts Carefully: Easements Don't Have to Be Reasonable
Smith v. Huston. The plaintiffs each bought lots out of a subdivision, which included a "nonexclusive easement for aircraft for flight and taxiway purposes along, over and across" an adjacent airstrip. The easement provided for a $200 per year fee payable to the owner of the airport for use of the airport, such fee to be increased by no more than 10% annually. The plaintiffs eventually sued, alleging that airstrip owner was unlawfully interfering with their use of the easement, and asking the Court to rule that that any fees charged under the runway easements must be used for maintenance purposes only, must be reasonable and necessary for the actual maintenance of the runway, and that the owners are entitled to a detailed accounting of the fees collected and expended. The Court disagreed, holding that the easements are not ambiguous and thus mean exactly what they say. As a result, the owner of the airstrip is entitled to charge the fee set forth in the easements, and may increase the fee by ten percent each year, even though the fee might eventually exceed the value of the plaintiffs' lots. Further, the fees are not subject to a reasonableness limitation, and the owner is not obligated to account for or segregate any payments for the fees from other funds. However, nothing in the easements addresses remedies available to the owner of the airport in the event any lot owner fails to pay the easement fees, so the airport owner has no right to deny access by the lot owners while fees are unpaid. Posted Tue, 08 Jul 2008 13:43:30 -0500
Court Gives Buyer Another Bite at the Apple
Lovett v. Lovett. Louis alleges he had an oral agreement with Peter under which Louis would pay two-thirds of the monthly mortgage payments for a 26-acre tract, Peter would pay one-third, and title to the property would be divided so that Louis held title to one-half of the acreage along with a house located on the property and Peter would hold title to the other half of the acreage. Peter maintains that Texas real estate law requires an agreement for the sale of real estate to be in writing, so the oral agreement is unenforceable. However, the Court holds that "partial performance" is an exception to this rule. The Court further finds that Louis had paid over $25,000 in mortgage payments, taxes, maintenance and repair costs, and that he has at least raised a fact issue as to whether such sums are partial performance under an oral purchase contract, or merely rent. Accordingly, the case is returned to the trial court for further proceedings.
Updated link to Court's revised opinion. Posted Wed, 09 Jul 2008 13:29:42 -0500
"AS IS" Clause Doesn't Shield Seller from Liability for Fraud
San Antonio Properties, L.P. v. PSRA Investments, Inc. Agreement for sale of apartment complex stated that buyer accepted the property "as is" and that seller had made no representations or warranties not shown in the contract. However, buyer produced proof that it had relied upon operating statements provided by seller that turned out to be incomplete, as well as promises by the seller that the seller had spent large sums improving the property, and that the property was in good working order. The Court holds that even sophisticated buyers have the right to rely on the veracity of the financial information provided by the sellers, and that the evidence is supported the jury's determination that the seller had defrauded the buyer. Posted Tue, 08 Jul 2008 13:43:34 -0500
Borrower Fired Up Over Lender's Use of Insurance Proceeds
Lewis v. Wells Fargo. Two weeks after she bought it, Lewis' house burned. Her lender collected the insurance, and used the money to build a new house on the old foundation. Lewis made no payments, so the lender foreclosed. Lewis sued to challenge the foreclosure, complaining that instead of applying the insurance proceeds to the note and releasing her from liability, Wells Fargo had constructed a new house that was substantially different from the original. The Court holds that the lender was within its rights under the loan documents to rebuild rather than credit the note. However, the case is returned to the trial court to determine whether the lender breached an agreement with Lewis by failing to properly restore the home. Posted Tue, 08 Jul 2008 13:43:38 -0500
Sloppy Drafting Saves Borrower's Land
Fears v. Texas Bank. Borrower's parents gave him a 20-acre tract, which Borrower then conveyed to the Bank to secure payment of a loan. After Borrower defaulted he and his parents sued to recover the land on the basis that the property description in the deed was legally insufficient and therefore void. The Court notes that even when there is little doubt that the parties knew and understood what property was intended to be conveyed, the legal description in a deed must not only describe the location of the land, but also the size, shape, and boundaries of the land. A deed that does not sufficiently describe the land is void and unenforceable. In this case, the deed described the 20-acre tract as "being 20 acres off of the West end of [a certain 100-acre tract], the boundaries of such 20 acres to be located so as not to include any of the waters of Shawnee Creek...." The Court holds that although the deed adequately described the 100-acre tract, it did not provide the length, breadth, or shape of the 20-acre tract. As a result the deed was void and the Bank did not acquire the land from the Borrower. Posted Tue, 08 Jul 2008 13:43:40 -0500
Lender Lucks Out After Foreclosing with Defective Notice
Myrad Properties, Inc. v. LaSalle Bank Nat. Ass'n. Lender made a loan to Borrower secured by two separate apartment complexes. After Borrower defaulted in payment, Lender initiated foreclosure. Lender's foreclosure notice stated generally that Lender intended to foreclose all the real and personal property described in the Deed of Trust, but incorporated field notes for only one apartment complex. The Trustee's Deed also contained only one set of field notes. After the foreclosure Borrower sued to stop Lender from correcting the Trustee's Deed to include both apartment complexes. On appeal, the Court holds that although the notice is confusing, the Borrower was fully aware of Lender's intentions to proceed against both properties, and prospective bidders could readily contact the Trustee before the sale to clear up any confusion. Posted Tue, 08 Jul 2008 13:43:49 -0500
Wife Has No Claim to Nearly $7,000,000 in Cash Upon Divorce
Legrand-Brock v. Brock. Husband owned 740 shares of BTH Holdings when he married Wife. Shortly after the marriage, BTH dissolved, and Husband received $6,975,510 in cash distributions. The divorce court determined the distributions were Husband's separate property because they were in redemption or cancellation of his separate property stock. Wife appealed, claiming the distributions were a "liquidating dividend" because the distributions were the corporation's retained earnings. The Court holds that the source of the funds is immaterial; the cash distributions represented an exchange of Husband's separate property stock for BTH's cash assets, and thus were his separate property. Posted Tue, 08 Jul 2008 13:43:52 -0500
Borrower Not Entitled to Attack Foreclosure Sale in Forcible Detainer Suit
Reynolds v. Wells Fargo Bank, National Association. Lender purchased the property at a foreclosure sale, and then sent notice to Borrowers to vacate. When Borrowers refused, Lender filed a forcible detainer (eviction) suit to obtain possession. Borrowers attempted to defend by challenging the foreclosure notice. The Court holds that the only issue in a forcible detainer action is the right to actual possession. Lender established that it is the owner of the property by virtue of the foreclosure sale, and that Borrower was a tenant at sufferance under the deed of trust. Accordingly, the trial court could determine the issue of immediate possession, and the court properly refused to consider any evidence concerning the notice of foreclosure. Posted Tue, 08 Jul 2008 13:43:55 -0500
Cry a River: Owner Claims Construction Caused Home to Flood
Royce Homes, L.P. v. Humphrey. Homeowner sued Builder, alleging that the slab Builder constructed on an adjacent property diverted the natural flow of surface water and caused Homeowner's house to flood. The jury agreed, and awarded Homeowner $5,300 in repair costs and another $20,000 for reduction in the value of the home due to the flooding "stigma." On appeal, the Court holds that Homeowner proved his entitlement to repair costs and stigma damages, but that the appraiser's testimony as to the amount of loss was not supported by facts and was too speculative to support the verdict. In the interest of justice, the Court remands the case to the trial court to enable Homeowner another opportunity to make his case. Posted Tue, 08 Jul 2008 13:43:57 -0500
Common Sense Prevails: Lien Affidavits May be Sent to Owner First and Filed Later
Arias v. Brookstone, L.P. In March, a sub-subcontractor on a construction project executed mechanic's lien affidavits and mailed copies to the required parties. However, the lien affidavits were not actually filed with the county clerk until early April. The appellate court confirms the validity of the liens, holding that "the purpose of the statute is to ensure that the owner receives actual notice that a lien affidavit has been executed with the intent to file the affidavit and create a lien against the owner's property, thus allowing the owner or original contractor to take appropriate action. Nothing in the statute requires that the property owner or original contractor be notified that the affidavit was actually filed." Posted Tue, 08 Jul 2008 13:43:59 -0500
Court Saves Bank's Bacon (Mostly)
Lasalle Bank National Association v. White. This is an update to a case we first reported in October, 2006. Homeowner took out a home equity loan of $260,000.00, but did not make the payments and the lender sought foreclosure. At trial and on appeal, the courts held that because the land was designated for agricultural use, the Texas Constitution prohibited it from being used as security for a home equity loan. As a result, the lien was to be cancelled and homeowner could keep the money.
However, the Texas Supreme Court notes that over $194,000 of the loan was used to pay off pre-existing valid liens for purchase money and property taxes. Under the doctrine of equitable subrogation, a third party who discharges a lien upon the property of another may step into the original lienholder's shoes and assume the lienholder's right to the security interest against the debtor. Accordingly, while the lender does forfeit the $57,000 cash portion of the loan, it is entitled to equitable subrogation for the refinance portion of the loan proceeds used to extinguish the homeowner's lawful purchase-money and property-tax liens. Posted Tue, 08 Jul 2008 13:44:00 -0500
Refi Paperwork Causes Wife to Lose 1/2 Separate Property Home
Magness v. Magness. Wife owned home prior to marriage. During marriage, she and Husband refinanced the loan. As part of the refinance Wife signed a deed conveying one-half of the property to Husband. In the subsequent divorce, Wife claimed she only signed the deed because of lender requirements to complete the refinance. However, the Court holds that a deed from one spouse to another is presumed to be a gift, and Wife failed to rebut the presumption. As a result, Husband and Wife each own one-half of the home as separate property. Posted Tue, 08 Jul 2008 13:44:03 -0500
Bank Bungles Home Equity Loan But Successfully Addresses the Problem
Fix v. Flagstar Bank, FSB. Borrower took out a home equity loan and then refinanced it with a conventional loan less than a year later. Lender acknowledges that it is not allowed to do a second loan within a year of the first, or to impose personal liability on the borrower. Lender offered to fix the problem by making a new home equity loan at the same or better rate at no cost to borrower, and paying an additional $1000. Borrower declined and demanded that lender forfeit the loan. The Court finds that under the version of the law in effect at the time the lender had made a reasonable offer to cure the violation. The Court further finds that because a loan is neither "goods" nor "services," borrower does not qualify as a consumer under the DTPA. Posted Tue, 08 Jul 2008 13:44:05 -0500
The Perils of Delay: Lender Waits Too Long to Foreclose
Burney v. Citigroup Global Markets Realty Corp. This is an update to an case we first noted in November, 2007. Lender filed an application to foreclose on borrower's home equity loan in April, 2000, but the suit was dismissed for lack of prosecution. In November, 2004, lender filed another application to foreclose. The Court holds that a four-year statute of limitation applies to a suit to recover real property under a real property lien or foreclose on a real property lien. By filing suit in April, 2000, lender is deemed to have accelerated the maturity of the loan and started the limitations period, so the latest date for re-filing the foreclosure application was April, 2004. Because the lender waited until November, 2004, its claim is barred by limitations. Posted Tue, 08 Jul 2008 13:44:09 -0500
Effort to Avoid Probate with Survivorship Designation Falls Short
Beatty v. Holmes. Husband and wife, both deceased, owned a brokerage account as "joint tenants," but never filled out the portion of the account agreement specifying a survivorship account. The Court holds that it will not create a survivorship agreement in the absence of a clear expression of intent by the parties. Likewise, stock certificates held by decedents as "joint tenants with right of survivorship" did not create a right of survivorship because the certificates were not signed by the decedents. Posted Tue, 08 Jul 2008 13:44:11 -0500
Post-Sale Skirmish Over Liability for Property Taxes
Sefzik v. Mady Development, L.P. After purchasing property, Buyer discontinued the agricultural use that had been maintained by the Seller, and as a result rollback taxes were assessed. Court holds that under the unambiguous language of the contract the rollback taxes are the Buyer's responsibility. However, Seller failed to preserve its complaint regarding other sums awarded to the Buyer. The case is remanded to the trial court to determine who is the "prevailing party" for purposes of winning attorney's fees. Posted Tue, 08 Jul 2008 13:44:13 -0500
Devise of Land Does Not Automatically Include Contents
Alford v. Alford. Decedent's Will made a gift of a certain business property, but made no express mention of the personal property used in the business, or the business income. The attorney who drafted the Will testified that the Decedent's intent was that the gift would include the personal property. The Court holds that the Will is not ambiguous on its face, so evidence that the Decedent intended something other than what is written is not admissible. Under Texas law a gift of real estate in a Will conveys only the land, appurtenances and fixtures unless the Will specifies otherwise, such as by making reference to "personal property" or "contents." Posted Tue, 08 Jul 2008 13:44:16 -0500
Temporary Employment Agency Entitled to Mechanic's Lien on Construction Project
Reliance National Indemnity Co. v. Advance'd Temporaries, Inc. Lamar hired Gonzalez to do work on a construction project. Gonzalez did not have enough employees for the job, so he hired Advance'd temporary employment agency to furnish temporary workers. However, Gonzalez did not pay Advance'd, so Advance'd filed a mechanic's lien against the project. The Supreme Court holds that the temporary workers were employed by Advance'd while they worked on the project, and as a result Advance'd "furnished labor" within the meaning of the applicable statutes. Advance'd was thus entitled to a mechanic's lien to secure payment of the sums owed it. Posted Tue, 08 Jul 2008 13:44:19 -0500
Both Spouses Must Sign to Create Valid Lien Against Homestead
Cadle Co. v. Ortiz. During marriage, Wife purchased property on assumption but Husband's name was not on the deed. Later she took out a home improvement loan, and again Husband did not sign. After default in payments the lender foreclosed. The court holds the foreclosure was wrongful because to have a valid lien against homestead both spouses must sign the home improvement contract, and the lender failed to prove that Wife misrepresented her marital status when the improvement loan was made. As a result, the lien is invalidated and the lender is on the hook for Wife's attorney's fees in excess of $23,000.00. Posted Tue, 08 Jul 2008 13:44:27 -0500
Only a Lawyer Could Think This Way: A Will is Construed One Way for One Sentence and Another Way for the Next Sentence
In re Estate of Nash. Nash's Will left everything to his wife, or if she predeceased him then to his step-daughter. Nash and his wife later divorced, but he never changed his Will. When Nash died, he was survived by his former spouse and the step-daughter. The Texas Supreme Court acknowledges that under the Probate Code if a testator divorces after executing a Will, provisions that favor the former spouse must be read as if the former spouse predeceased the testator. Accordingly, the former wife does not receive anything under the Will because she is treated as having pre-deceased Nash. However, the alternative gift to the step-daughter is not triggered because the former spouse did not actually pre-decease Nash. As a result, the step-daughter also has no entitlement under the Will, and his estate passes to his heirs at law. Posted Tue, 08 Jul 2008 13:44:30 -0500
"AS IS" Means What it Says; Landlord Not Liable for Fire
Gym-N-I Playgrounds, Inc. v. Snider. Commercial tenant sued landlord for negligence, fraud, breach of implied warranty of suitability, and violation of the DTPA after a fire destroyed the leased premises. The Texas Supreme Court recognizes that normally commercial landlords impliedly warrant that the premises are suitable for the tenants' intended commercial purposes. However, in this case the tenants expressly disclaimed that warranty and agreed to lease the building “as is.” These two factors eliminate all claims against the landlord based on the property's condition. Posted Tue, 08 Jul 2008 13:44:32 -0500
Plaintiff Waits Too Long to Enforce Restrictive Covenants
Girsh v. St. John. Defendants moved a mobile home onto their property in the mid-1980's in violation of subdivision restrictions. Approximately 13 years later, Plaintiff filed suit to enforce the restrictions, claiming that an overgrowth of trees and brush prevented her from discovering the violation sooner. The Court holds that the statute of limitations for enforcement of restrictions is four years, and that a full-size mobile home on a residential lot in a highly populated subdivision is not inherently undiscoverable. Accordingly, the Plaintiff waited too long to file suit and is not entitled to any remedy. Posted Tue, 08 Jul 2008 13:44:34 -0500
Governor Signs HB 2061
On Wednesday, Governor Perry signed H.B. 2061. The law, which is effective immediately, is the Legislature's response to Attorney General Opinion GA-0519, which effectively shut down the entire real estate industry in Texas for several days in late February, 2007. Under the new law, County and District Clerks will not be subject to liability under the Public Information Act for disclosure of social security numbers contained in documents filed in their respective offices. Posted Tue, 08 Jul 2008 13:44:37 -0500
Look Before You Close: Buyer Had Duty to Investigate Property
Fletcher v. Minton. Fletcher purchased a 12.56 acre parcel. Fletcher's deed purported to include land which had previously been sold to Malecek and Minton. Malecek and Minton had never recorded deeds to their parcels, and as a result Fletcher claimed the prior sales were void as to her because of her status as a "bona fide purchaser for value" without notice of the prior conveyance. However, the court found that Fletcher did have notice before closing of their claims to ownership by virtue of the mobile homes, sheds, vehicles, cows, fences, and other equipment Malecek and Minton had placed on the two tracts, as well as by virtue of discussions between Fletcher's agent and Minton. Because a purchaser of land is charged with notice of all claims of a party in possession of the property that the purchaser might have discovered had she made proper inquiry, Fletcher was not an innocent purchaser and did not acquire title to the tracts previously sold to Malecek and Minton. Posted Tue, 08 Jul 2008 13:44:39 -0500
Architectural Control Committee Falls Asleep at the Switch
Indian Beach Property Owners' Association v. Linden. Property owner constructed a chain link fence on her property. The Owners Association filed suit, alleging the owner had not obtained approval from the Architectural Control Committee (ACC) as required by the deed restrictions. The Court finds that under the wording of these particular deed restrictions, if the ACC fails to approve or disapprove of an application within forty-five days after it is submitted, approval is presumed. Since the ACC did not timely rule on the owner’s application, the application was deemed approved and the fence should be permitted. Posted Tue, 08 Jul 2008 13:44:42 -0500
A Boat is Not Homestead (Does This Really Require a Supreme Court Opinion?)
Norris v. Thomas. The Texas Supreme Court has ruled that a 68-foot, four-bedroom, three-bathroom yacht with a galley and salons may be a home, but it does not qualify for homestead protection. Even though the boat spends most of its time in dry-dock, receiving utilities through an umbilical line, it has not become sufficiently affixed to real estate to alter its status as movable chattel. As such, the boat is not exempt from forced sale by creditors. Posted Tue, 08 Jul 2008 13:44:44 -0500
Can't Have Your Cake and Eat It Too: One Party's Breach of Contract Excuses Performance by the Other Parties
Mandell v. Mandell. Three parties each owned part of a 240 acre tract. To settle a prior lawsuit between them, the parties agreed that they would each have a "preferential purchase right" (option to purchase) in the event any of them were to receive a purchase offer. Almost immediately, and without the consent of the other two co-owners, the plaintiff then conveyed a portion of his interest to his lawyer in payment of attorney's fees. About five years later one of the co-owners agreed to buy out the other, and the plaintiff sued to enforce his rights under the preferential purchase right. The court holds that by conveying part of the land to his attorney the plaintiff breached the settlement agreement, and as a result the other two co-owners are no longer bound by that agreement. Posted Tue, 08 Jul 2008 13:44:46 -0500
Amendment to Master Lease Does Not Amend the Sublease
Four Brothers Boat Works, Inc. v. Tesoro Petroleum Companies, Inc. Defendant entered into a Master Lease with a 10-year term and an option to extend for another 10 years. Defendant then subleased the property to Plaintiff on the same terms (i.e.--a 10-year term with a 10-year option.) Defendant subsequently agreed with the landowner to modify the Master Lease to delete the renewal option, but the Plaintiff was not a party to that amendment and the Sublease was not amended. Upon expiration of the Master Lease Defendant demanded that Plaintiff vacate, but Plaintiff did not do so and sued. The Court holds that the Master Lease amendment had no effect on the Sublease, and that Plaintiff was entitled to prosecute its breach of contract claim against the Defendant. Posted Tue, 08 Jul 2008 13:44:48 -0500
Title Insurer Not Obligated to Defend Adverse Possession Claim
Koenig v. First American Title Insurance Co. of Texas. Plaintiff's neighbor sued for adverse possession of a disputed strip between their homes. After Plaintiff successfully defended the suit Plaintiff sued the title insurance company for not defending the suit. The Court holds that there is no coverage under the policy for "rights of parties in possession." At the time they purchased their property, the Plaintiffs could plainly see that the neighbors had fenced the disputed strip, planted trees on it, and let their large dogs run on it. Such facts were clearly pleaded in the underlying adverse possession suit, and the insurer was entitled to rely upon those pleadings in determining that the policy exception applied. Posted Tue, 08 Jul 2008 13:44:50 -0500
Title Insurance Covers Defects in Title--Not Property Condition
Hanson Business Park, L.P. v. First National Title Insurance Co. Plaintiff discovered the land it had purchased lies in a flood plain. When the underwriter denied Plaintiff's claim under the owner's policy of title insurance, Plaintiff sued the underwriter alleging that the flood plain status so profoundly affected the value of the land as to amount to a defect in title. The Court disagreed, saying a title insurance policy imposes a duty to indemnify the insured against losses caused by defects in ownership rights; it is not a guarantee of the condition, value or marketability of the land. Because there is no question that Plaintiff acquired full ownership of the property, the insurer is entitled to judgment as a matter of law. Posted Tue, 08 Jul 2008 13:44:52 -0500
Effort to Probate Copy of Will Falls Flat
In re Estate of Longron. Decedent's friend attempted to probate a copy of Decedent's will. At trial, the jury determined that the Decedent had revoked the will and that the friend's application for probate had not been filed in good faith. The trial judge disagreed with the jury on the issue of good faith and awarded the friend $45,000 in attorney's fees and expenses to be paid from the estate. After reviewing the evidence (including the testimony of a Decedent's lawyer and another witness who saw Decedent destroy the will) the appellate court ruled that the friend had not conclusively proved that he acted in good faith and that the jury's findings should stand. Posted Tue, 08 Jul 2008 13:44:55 -0500
Mere Mistaken Ownership Is Not Adverse Possession
Tran v. Macha. Neighboring relatives shared the use of a driveway for many years, thinking it belonged to one of them when in fact it belonged to the other. Upon learning the true facts, Plaintiff claimed to have acquired the driveway by adverse possession. The Texas Supreme Court disagreed, holding that adverse possession requires an actual and visible appropriation of real property, commenced and continued under a claim of right that is inconsistent with and is hostile to the claim of another person. Because the neighbors shared use of the strip by agreement, the use was not inconsistent with or hostile to the rights of the true owner. Posted Tue, 08 Jul 2008 13:44:57 -0500
The Long & Winding Road: Easement by Necessity Does Not Guarantee Convenient Access
Crone v. Brumley. Brumley's property, originally part of a larger tract, is landlocked. When the larger parcel was originally subdivided, the owner had access to a roadway to the north, but not to the south. Later a road was built to the south, and Brumley wishes to access his property from that direction because only four-wheel drive vehicles can traverse the path to the north roadway. The Court holds that Brumley is entitled to an easement by necessity because he has no other legal access to his land, but he is not entitled to the most convenient access. Since the original access via the north roadway, his access must still be to that direction; the fact that the easement is impassable until it is repaired is of no consequence. Posted Tue, 08 Jul 2008 13:45:01 -0500
Family Squabble Over Uncle's Estate Turns Case into Procedural Tangle
Fillip v. Till. Despite the best efforts of Uncle and Niece to cut Nephew off, Nephew ended up with a court order awarding him the Uncle's farm. Held: In Texas, an agent under a power of attorney cannot create a trust for the principal. Further, a disclaimer filed more than 9 months after the death of the decedent is ineffective, but can still operate as an assignment of interest. As a result, Niece's daughters have the right to challenge Nephew's ownership of the farm. Posted Tue, 08 Jul 2008 13:45:03 -0500
One Thing at a Time: Eviction Appeals Should be Streamlined
Hong Kong Development, Inc. v. Nguyen. On appeal of Landlord's eviction suit, Tenant countersued Landlord in County Court for various tort claims. This Court holds that it was error for the County Court to consolidate the eviction suit with the tort claims because eviction suits are intended to provide a speedy, summary, and inexpensive determination of the right to immediate possession of real property. Since the tort claims were unrelated to the issue of possession of the property, the County Court lacked jurisdiction to hear them. Posted Tue, 08 Jul 2008 13:45:06 -0500
No Free Money For You!
Doss v. Homecomings Financial Network, Inc. Husband and Wife purchased two pieces of land financed through Homecomings. When they later divorced, Husband and Wife were each awarded one tract land and ordered to pay their respective mortgages. Wife subsequently obtained a new loan, and when Homecomings received the payoff funds it mistakenly applied them to Husband's loan. In the process, Husband's land was paid off and he received a refund. Upon discovering the error Homecomings demanded reimbursement but Husband refused. The court holds that Homecomings asserted a valid claim for "money had and received." As a result, it was entitled to reimbursement plus interest, and to reinstatement of its lien against Husband's land, but could not recover attorney's fees from Husband. Posted Tue, 08 Jul 2008 13:45:08 -0500
Squatter Waits Too Long To Sue
Session v. Woods. Woods purchased the subject property at a tax sale; Session claims he had acquired title by adverse possession ("squatter's rights"), and that such title was superior to Woods' tax deed. The court holds that Session's suit was barred by the statute of limitations. Subject to exceptions not applicable in this case, the Tax Code states that an action for title to property may not be maintained against the purchaser of the property at a tax sale unless the action is commenced "before the first anniversary of the date that the deed executed to the purchaser at the tax sale is filed of record." Posted Tue, 08 Jul 2008 13:45:11 -0500
Illegal Closed Meeting Invalidates Land Sale
City of Laredo v. Escamilla. City wanted to buy a piece of land, and met in closed meeting to discuss the matter before approving the purchase in an open meeting. The court holds that the City failed to prove that discussion in an open meeting would have impaired its negotiating position with third parties, as required by the "real estate exception" to the Texas Open Meetings Act. As a result, the sale was invalidated. Posted Tue, 08 Jul 2008 13:45:13 -0500
Slip-Sliding Away: "As Is" Clause Relieves Developer of Liability
Welwood v. Cypress Creek Estates, Inc. Homeowner sued developer for damages caused by failure of the the slope behind his house. The Court finds that the contract contained an "as is" provision, that the homeowner was aware of the provision, and that there is no evidence of misrepresentation or concealment by the developer. The Court questions whether Texas recognizes an implied warranty of good and workmanlike development, but holds that if such a warranty exists the "as is" language was sufficient to disclaim it. Posted Tue, 08 Jul 2008 13:45:15 -0500
Invalid Non-competition Agreement Can Become Enforceable Later
Alex Sheshunoff Management Services, L.P. v. Johnson (Tex. 10/20/2006). Under prior law, an at-will employer's promise to provide training and access to confidential information would not bind the employee to a non-competition agreement because the employer could avoid the promise by simply firing the employee. Here, the Court modifies the rule to state that an at-will employee's non-compete covenant becomes enforceable when the employer performs the promises it made in exchange for the covenant. Posted Tue, 08 Jul 2008 13:45:18 -0500
Lawyer Gets an Education in Landlord-Tenant Law
Carrasco v. Stewart. Lawyer remained in possession of premises after his lease expired. At trial he claimed that he was a month-to-month tenant under a verbal lease and thus not subject to late fees. HELD: Under the common law, when a tenant "holds over" after a fixed-term lease expires it is presumed that the tenant will be bound by the original lease terms for a period of one year. In this case, the tenant failed to rebut the presumption, and is liable for late fees because the original lease provided for late fees. Posted Tue, 08 Jul 2008 13:45:22 -0500
Divorce Awards Life Insurance to Husband; Wife Gets Proceeds Anyway
Dohnalik v. Somner. Divorce decree awarded Husband "all right, title, interest and claim in . . . [a]ll policies of insurance (including cash values) insuring [Husband's] life." However, Husband never changed the beneficiary designation of his Serviceman's Group Life Insurance (SGLI) policy. HELD: If an SGLI policy-holder wishes to change his designated beneficiary, he must communicate that decision to the proper office. Accordingly, ex-wife was entitled to the SGLI proceeds. Posted Tue, 08 Jul 2008 13:45:24 -0500
Right of First Refusal Invalidated Due to Insufficient Property Description
A right of first refusal described the subject property as 3.0152 acres adjoining a specific tract of land. The court held there were no documents attached to or referenced by the instrument to describe the shape and boundaries of the 3.0152-acre tract. Accordingly, the property description was insufficient as a matter of law and the right of first refusal was invalid. Posted Tue, 08 Jul 2008 13:45:26 -0500
Texas courts will not create a "marriage-like relationship"
Executor sued Decedent's boyfriend to recover property alleged to belong to Decedent's estate. The boyfriend asked the Court to exercise its equitable authority to adopt a "marriage-like relationship" doctrine in recognition of his relationship with the Decedent. HELD: Texas' public policy is unambiguous, clear, and controlling on the question of creating a new equitable remedy akin to marriage: a Court may not create such a remedy. Posted Tue, 08 Jul 2008 13:45:28 -0500
Minor defects in annual contract for deed accounting do not trigger liquidated damages
Home buyer under a Contract for Deed is not entitled to liquidated damages unless the annual statement required by the Property Code 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. Posted Tue, 08 Jul 2008 13:45:30 -0500
Texas homeowner's policy does not cover mold damage
The mandatory homeowner's policy form promulgated by the Texas Department of Insurance says, "We do not cover loss caused by mold," but it also says, "We do cover ensuing loss caused by water damage." Nevertheless, the Court holds the policy is not ambiguous and does not cover mold damage. Posted Tue, 08 Jul 2008 13:45:33 -0500
Wife fails to pierce corporate veil in divorce suit
In a divorce, the court may not use the "alter ego" theory to pierce the corporate veil and divide the business' assets unless (1) the corporation has effectively ceased to exist as a separate entity, and (2) the improper use of the corporation harmed the marital estate to such a degree that reimbursement is no longer a viable remedy. Posted Tue, 08 Jul 2008 13:45:35 -0500
