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Preview: Roberts & Roberts, LLP - Killeen, TX Attorneys - Legal News

Roberts & Roberts, LLP - Killeen, TX Attorneys - Legal News

Breaking legal news, and summaries of interesting recent cases and statutes from the lawyers of Roberts & Roberts, LLP, a Killeen, Texas law firm focusing on real estate, business, probate and estate planning law.

Published: Fri, 08 May 2015 14:07:27 -0500

Last Build Date: Fri, 08 May 2015 14:07:30 -0500


Specific Property Description Controls Over General

Wed, 08 Apr 2015 14:17:52 -0500

McGregor v. Millican DPC Partners, LP. Neighboring landowners got into a dispute about ownership of a particular 34 acre tract, with Millican claiming record title even though the tract lies on McGregors' side of the fence. Millican's deed describes the land two ways: by a general reference to an earlier deed that included the 34 acre tract, and also by field notes that did not. On appeal the Supreme Court holds that, unless the grantor's intention clearly appears otherwise, the metes-and-bounds description is more specific than the general reference to the prior deed, and in case of a conflict the more specific provisions will control over general expressions applicable to the same land.

Mechanic's Liens Against New Subdivisions Should Be Prorated

Mon, 06 Apr 2015 14:44:54 -0500

Moore v. Brenham Ready Mix, Inc. A supplier filed a materialman's lien against a 25-acre tract to secure payment of invoices for concrete and fill dirt used in the development of a new subdivision. The supplier then sued two individual lot owners to foreclose its lien for the full amount owed, rather than their pro rata share. The court holds that generally a materialman's lien attaches to the entire contiguous property on which the owner contracted to have the materials used. However, when the whole tract is then subdivided the claimant may not enforce the full value of its lien against any individually-owned lot, but may instead only enforce its lien to the proportion the individual improved lot bears to the entire tract.

Understanding the Role of the Title Company and Escrow Agent

Tue, 31 Mar 2015 14:00:49 -0500

IQ Holdings, Inc. v. Stewart Title Company. After becoming involved in litigation with the condo association, a condo buyer sued the title company for breach of fiduciary duty and negligence. The court finds no liability. In the first place, a title insurance policy is an indemnity contract; the only duty it imposes is the duty to indemnify the insured against losses caused by defects in title which are not excepted by the policy. Although the insurer must examine the title (or have someone do so in its behalf), this investigation is done for the insurer's own information in order to determine whether or not it will commit itself to issue a policy. The investigation is not done for the benefit of the buyer. A title insurance company is not a title abstractor and owes no duty to examine a title or point out any outstanding encumbrances. Accordingly, the title company did not assume an obligation beyond its contractual duty as indemnitor, and in this case the policy expressly excepted coverage for the matters of which the buyer now complains. Second, although a title insurance company assumes a fiduciary duty to both parties when it acts as an escrow agent, that duty is limited to properly handling the funds and closing of the transaction; it does not extend to an investigation of title. Finally, the title company cannot be held liable for negligence because it had no legal duty to provide title coverage beyond the scope of the written policy, or to disclose risks that the policy did not cover.

Improper Property Description Invalidates Mechanic's Liens

Fri, 27 Mar 2015 13:44:43 -0500

Denco CS Corporation v. Body Bar, LLC. Body Bar rented space in a building and hired Denco to perform the finish-out. A dispute arose over Denco's invoices and Denco asserted statutory and constitutional mechanic's liens to obtain payment. On review the court finds that Denco's lien purported to cover the entire lot owned by the landlord. The court holds that where the contract for labor, materials or construction is not made with the owner or his duly-authorized agent, a lien may not be fixed on his property. Rather, if a lessee contracts for construction, the mechanic's lien attaches only to the leasehold interest, not to the fee interest of the lessor. Because Denco did not properly perfect its liens they are invalid.

Implied Easements Clarified

Thu, 26 Mar 2015 13:32:46 -0500

Hamrick v. Ward. The Texas Supreme Court recognizes two types of implied easements: necessity easements and prior use easements. Necessity easements may be implied in cases involving roadway access to previously unified, landlocked parcels. Because roadways are often substantial encumbrances on property, the Court requires "strict, continuing necessity" to maintain necessity easements. By contrast, some prior use easements may be proved by mere "reasonable necessity" because the improvements at issue (such as utility lines) generally impose a lesser encumbrance on the adjoining tract. Although both doctrines have been applied to roadways in the past, from now on one claiming an implied easement for roadway access to a landlocked, previously unified parcel must pursue a necessity easement rather than a prior use easement.

Contracts for Deed Remain More Trouble Than They're Worth

Wed, 25 Mar 2015 13:30:10 -0500

Smith v. Davis. Smith sold Davis a lot using a contract for deed, under the terms of which the seller retains title until the buyer has paid the full purchase price. Smith missed many of the technical traps applicable to this sort of transaction, including a requirement to provide an annual accounting to the buyer of the payments, taxes and insurance. The buyers sued for rescission of the contract, liquidated damages and attorney's fees. On appeal, the court holds that the buyers failed to prove any actual damages resulting from the seller's violations, so the buyers are not entitled to liquidated damages or attorney's fees. However, they are entitled to cancel the contract and receive a full refund.

No Attorney's Fees In General Warranty Deed Claim

Tue, 24 Mar 2015 14:17:37 -0500

Stumhoffer v. Perales. Perales purchased land from Stumhoffer and received a general warranty deed. Perales was then sued by a neighbor who claimed ownership of a seven-foot strip of land by adverse possession. Perales won that suit, and then sued Stumhoffer to recover nearly $70,000 in attorney's fees spent defending against the neighbor's suit. The court holds that a general warranty deed creates no duty to reimburse attorney's fees incurred by the buyer in defending a third party's unsuccessful adverse possession claim. The purpose of a general warranty clause is to indemnify the purchaser against a loss or injury he may sustain by a defect in the seller's title, and where title has not failed the purchaser is not entitled to indemnity.

80% Cap for Home Equity Loan Calculated After Payment of Debt

Tue, 24 Mar 2015 14:00:32 -0500

The Bank of New York Mellon v. Daryapayma. Homeowners owed $735,000 on a home appraised for $1.5 million. They then took out a $937,500 home equity loan to pay off the existing mortgage. When they later defaulted, the homeowners claimed that the bank violated the 80% cap by loaning more than $465,000 ($1.5M x .8 - $735,000). The court disagrees. Because the parties agreed the home equity loan was made to pay off the existing mortgages, the loan documents reflect this agreement, and the existing mortgages were paid off, the balances of those existing mortgages should not be included when determining whether the amount of the home equity loan exceeds eighty percent of the fair market value of the homestead.

Words Rule; Numbers Drool. Read Your Documents Carefully.

Tue, 24 Mar 2015 13:45:40 -0500

Charles R. Tips Family Trust et al v. PB Commercial, LLC. The bank made a loan to the trust, and all the loan documents described the debt both in numerals ($1,700,000.00) and words (one million seven thousand dollars). The Court holds that if an instrument contains contradictory terms, typewritten terms prevail over printed terms, handwritten terms prevail over both, and words prevail over numbers. Since the bank did not request equitable reformation it does not matter that the borrower actually received $1,700,000; the note only obligated repayment of $1,007,000.

4-Year Statute of Limitations Bars Challenge to Home Equity Loan

Thu, 16 Oct 2014 13:15:45 -0500

Wood v. HSBC Bank. The Wood family obtained a home equity loan in 2004. In 2012 they wrote to their lender claiming that their loan fees illegally exceeded three percent of the loan amount. A few months later they filed suit for forfeiture of the loan. The Court finds that if the borrower was overcharged the error made the loan voidable rather than void, and that this suit is barred by a four-year statute of limitations that began to run at closing.

Act Promptly If You're Going to Rely on a Technicality

Tue, 16 Sep 2014 15:07:15 -0500

Winston Acquisition Corp. v. Blue Valley Apartments, Inc. Winston entered into a contract to buy an apartment complex from Blue Valley. Shortly before closing Winston requested an extension of the closing date, which Blue Valley denied. Winston then sent a notice terminating the contract, claiming that Blue Valley had not provided the EPA Lead Paint Pamphlet. Blue Valley sued to recover the earnest money and attorney's fees. On appeal, the court observes that Winston had a fixed due diligence period during which it was required to notify the seller of its disapproval of any matters, or inability to satisfy certain conditions set forth in the contract. Winston did not object to the missing pamphlet until 10 days after that due diligence period expired. Because Winston's notice was not timely under the plain language of the contract Winston had no right to terminate and breached by refusing to close. Consequently the seller was entitled to recover the earnest money and attorney's fees.

20 Year Delay Prevents Probate of Will

Tue, 19 Aug 2014 15:32:39 -0500

Orr v. Walker. In 2012 Orr attempted to probate the will of her grandmother, who had died in 1992. Walker challenged the application on the basis that normally a will must be probated within four years after the date of death. Orr claimed that she was not aware of the will until she found it among her mother's belongings after her mother died in 2006. At that time another person was named as executor so she sent the will to him. Orr claimed that the four-year deadline did not start until after the death of that executor in 2009. The court assumes without deciding that Orr's mother was not already in default for failing to probate the will during her lifetime. Regardless, under the Estates Code any interested person may apply for probate, so Orr did not use reasonable diligence in filing her application.

Lender Loans Too Much; Loses It All

Fri, 31 Jan 2014 14:29:57 -0600

Wells Fargo Bank, N.A. v. Leath. Borrower took out a $340,000 home equity loan in part to pay off a prior lien on the home. When Lender later initiated foreclosure proceedings Borrower notified Lender that the amount of the loan exceeded 80% of the value of the homestead at the time the loan was made. Lender did not take corrective action and the case went to a jury, which determined that the home was only worth $421,400 at the time of the loan. The trial court accordingly voided the deed of trust lien, ordered forfeiture of the principal and interest on the loan, and granted Borrower judgment for attorney's fees. The appellate court finds no error, and holds that Lender failed to timely raise a claim for equitable subrogation as to the prior lien, so the judgment stands.

Deed Challenge Fails

Thu, 21 Nov 2013 14:10:44 -0600

Kellner v. Kellner. Mother placed her property in a living trust and named her sons, Oscar and Lloyd, as co-trustees. The trust provided that it would terminate upon her death and any assets would be distributed to her estate to be disposed of in accordance with her Last Will and Testament. After her death the mother's Will was admitted to probate as a Muniment of Title, and Oscar signed deeds conveying land from the trust to her estate. Oscar then died. Years later Lloyd sued Oscars wife and children to set aside the deeds in the hopes the land would pass to him under the laws of intestate succession. The court holds it does not matter whether Oscar's deeds were valid or not because in either event: (1) the trust beneficiary (i.e.: the mother's estate) was automatically vested with the land upon termination of the trust; and (2) when a person dies with a valid Will, all of his or her estate devised or bequeathed by such Will automatically in the devisees or legatees of the estate. Accordingly even if the deeds were invalid the land passed according to the Will rather than the laws of descent and distribution.

Buyer Default Leaves Seller Holding the Bag

Thu, 31 Oct 2013 14:12:53 -0500

Goldman v. Olmstead. When Buyer was unable to obtain financing Buyer backed out of a contract to purchase Seller's home. Seller sued. By trial Seller had dropped its claim for specific performance and sought recovery of over $56,000 in additional mortgage interest, utilities, property taxes, insurance, and yard maintenance expenses incurred pending the eventual sale of the home to a third party. On appeal the Court holds that when a real estate contract is breached by the purchaser, the measure of damages is the difference between the price the seller was to receive and the market value of the property at the date of the breach. In this case the Seller admitted that the market value of the house on the date of breach was equal to the contract sales price, so they are not entitled to any recovery.

Shareholders Don't Necessarily Need Stock Certificates

Thu, 24 Oct 2013 13:41:45 -0500

Bakke v. Harvison. Defendant challenged plaintiff’s right to bring suit because plaintiff could not produce original stock certificates previously issued by the corporation. The Court holds that in order to create a stockholder relationship, a party must show an agreement giving the shareholder the ability to exercise a shareholder's rights. Courts often imply such agreements or contracts from the parties' acts and the surrounding circumstances. While a stock certificate is some evidence of ownership in a Texas corporation, the absence of a stock certificate does not necessarily invalidate a party's stock ownership. This is because a certificate of stock is not the stock in a corporation itself, but rather a muniment of title which is evidence of the ownership of the stock. Accordingly, it is possible under some circumstances for one to own stock in a corporation though no certificate has been issued to him or endorsed or delivered to him, and likewise it is possible under some circumstances for title to the stock to pass without delivery of the certificate of stock or without written assignment of it.

Non-Existent LLC Provides No Liability Protection

Mon, 23 Sep 2013 15:53:26 -0500

Curtis v. AGF Spring Creek/Coit II, Ltd. Curtis entered into a commercial lease and three modifications as President or CEO of Atrium Executive Business Centers Richardson, LLC, a limited liability company. However, that entity was never formed. Rather, Curtis formed a corporation named AEBC-Richardson, Inc. and operated the business through that corporation. After a default, the landlord sued Curtis individually. Curtis claims that since reimbursement of the tenant's move-in expenses, as well as the tenant's rent payments, fax transmissions, insurance policy, sales and use tax permit, and service agreements were all made in the name of AEBC rather than Atrium, a lease by conduct was established between the landlord and AEBC. The Court disagrees, saying that: (1) the lease identifies Atrium as the tenant; (2) the lease cannot be modified except in writing; and (3) "when a promoter signs a contract on behalf of an unformed entity, he is personally liable on the contract unless there is an agreement with the contracting party that the promoter is not liable." In addition, if landlord had tried to sue AEBC, AEBC could have defended on the ground that it had not signed the lease. However, the case is remanded for further proceedings on the proper measure of damages.

A Few Violations Do Not a Waiver Make

Thu, 15 Aug 2013 13:28:40 -0500

Moran v. Memorial Point Property Owners Association, Inc. Property owners association sued homeowner to enforce a subdivision restriction prohibiting fences within a 25-foot setback. The Court holds that the restriction will not be enforced if the homeowner can prove that violations are so great as to lead the mind of the average man to reasonably conclude that the restriction in question has been abandoned and its enforcement waived. The Court will consider the number, nature, and severity of the existing violations, any prior enforcements of the restriction, and whether it is still possible to realize to a substantial degree of the benefits of the restriction despite the violations. In this case the homeowner presented evidence of violations on 2.78% to 4.55% of the remaining properties, depending on how the lots are counted. The Court holds that such a rate does not prove abandonment or waiver, so the homeowner must comply with the restriction. 

Neighbors Had No Standing to Enforce Restrictive Covenants

Mon, 22 Jul 2013 14:50:55 -0500

Wasson Interests, Ltd. v. Adams. In 1962, the City leased property to Canino for 99 years. Adams eventually became an assignee of that lease. In 1983, the City sold a tract across the street from the Adams lot and included a provision in the deed restricting the property to "residential development only." Wasson eventually purchased that tract. Wasson began putting hogs, goats, livestock, and old vehicles on his land. The result was, in the Court's words, "not only unsightly but evil smelling." Adams sued to enforce the residential restriction. However, the tenant under the lease was never a party to the grant under the deed so there was no "privity of estate" between Adams and Wasson. In addition, the two tracts are not in the same subdivision. As a result Adams has no legal right to enforce the deed restriction.

Provision of TREC Contracts Invalidated

Mon, 22 Jul 2013 14:34:28 -0500

Magill v. Watson. The seller sued after buyer terminated an earnest money contract. In accordance with the contract terms the trial court awarded the seller the earnest money, plus liquidated damages in an amount equal to three times the earnest money, and attorney's fees, interest, and costs. The appellate court states that the contract "makes no attempt to quantify the actual damages that would be caused by a failure to release the earnest money." Accordingly the treble earnest money is not a valid liquidated damages provision but rather an illegal and unenforceable penalty.

Home Equity Loans May Not Be Closed Using Power of Attorney

Wed, 03 Jul 2013 13:59:03 -0500

Finance Commission of Texas v. Norwood. Plaintiffs sued state agencies to invalidate certain regulations relating to home equity loans. The Texas Supreme Court holds that the state agencies exceeded their authority in the way they defined the term "interest" because the Constitution does not define the term. The Court also holds the agencies erred in allowing home equity loans to be closed using a power of attorney because a loan may be “closed only at the office of the lender, an attorney at law, or a title company," and a rule allowing the borrower to be somewhere else while his agent closes under the power of attorney is inconsistent with this requirement.

Wife Did Not Wait Too Long to Probate Husband's Will

Fri, 17 May 2013 13:36:23 -0500

In the Matter of the Estate Willard O. Allen, Deceased. Husband died in 2005 and wife met with an attorney to discuss probating the will. Believing that an affidavit of heirship would cause everything to pass to her faster and with less expense than a probate, and knowing that her husband had successfully used an affidavit of heirship to resolve his own father's estate, wife chose not to probate the will. In 2010 wife had a dispute with one of her sons regarding some ranch land, and learned for the first time that (unlike the will) the affidavit of heirship caused the son to inherit an interest in that land. She then filed the will for probate and the son contested the probate, pointing out that under Texas law a will generally cannot be admitted to probate after four years from the death of the testator. The Court finds that wife was not in default in failing to timely file the will, given that she acted on the advice of an attorney, believed in good faith that she had done everything required of her, had no prior experience in such matters, and acted promptly once she learned of the problem.

Buyer Mistakenly Waives Fraud Claim by Modifying Loan Terms

Tue, 30 Apr 2013 13:24:03 -0500

R&L Investment Property L.L.C v. Hamm. Buyer purchased land from Seller on seller-financing. Buyer claimed the Seller misrepresented that the property had an active waste-water permit, but that Buyer did not learn of the misrepresentation until after the closing. The Court finds that after learning the permit was expired, Buyer entered into a "Reinstatement, Modification, and Extension Agreement" as an inducement to Seller to stop a foreclosure. Under the agreement, Buyer stipulated that the Seller's lien was "valid and subsisting," and that Buyer had "no claims or offsets against or defenses or counterclaims to" the loan documents. Ratification is the adoption or confirmation by a person with knowledge of all material facts of a prior act which did not then legally bind him and which he had the right to repudiate. Accordingly, when the Buyer signed the modification agreement with the full knowledge of the alleged fraud Buyer ratified the transaction and any fraud claim it may have had was waived.

Lender Lucks Out Because Borrower Waited Too Long to Sue

Fri, 22 Feb 2013 13:40:49 -0600

Priester v. JP Morgan Chase Bank N.A. In 2005 the Priesters obtained a home equity loan and signed the mortgage agreement in their living room. Almost five years later they sued to invalidate the lien and wipe out the debt. The Court agrees that under the Texas Constitution a lien on homestead is valid only if closed at the office of the lender, an attorney, or a title company. However, a four-year statue of limitations applies to home equity lending violations, calculated from the date of closing. Because the Priesters waited too long to sue their claims are dismissed.

Free Legal Forms Screw Things Up Again

Tue, 05 Feb 2013 13:40:54 -0600

In re the Estate Olen F. Cunningham. Olen owned about 84 acres of land in various tracts. It appears from the opinion that all tracts were either owned before his marriage to his wife, Helena, or inherited from his parents, so all the land would have been his separate property. During his marriage he conveyed partial interests to Helena. Shortly before he died, Olen and Helena filled out and signed a fill-in-the-blank form entitled “Agreement to Establish Right of Survivorship to Community Property between Spouses.” The form described the land as community property and specified that it would pass to Helena on Olen's death. After Olen died one of his children from a former marriage sued to challenge the Agreement. On appeal, the Court holds that a mere transfer of a spouse's separate property to the name of the other spouse is insufficient to convert separate property to community property. Because the land was separate property rather than community property, the do-it-yourself form did not create any survivorship rights in Helena. The case is sent back to the trial court for further proceedings. (The opinion doesn't say so, but in Texas when someone dies without a will leaving behind a spouse and children, the spouse acquires only a ⅓ life estate in the separate property land. So to avoid spending a couple hundred dollars for a pair of good wills Olen and Helena tried to do their own legal work, and as a result Helena has had to spend two years of her life and untold thousands of dollars in legal fees fighting to hang onto land that she will probably lose.)

Self-Help Legal Sites Not Much Help

Fri, 14 Sep 2012 14:04:29 -0500

Consumer reports recently evaluated several self-help legal sites to see how well they fared at generating simple legal forms. Their verdict: the product is probably better than something you would draft on your own, but most-consumers are better off consulting a lawyer.

The Writing is on the ... Gable?

Wed, 15 Aug 2012 13:53:09 -0500

Jamison v. Allen. The Allens filed suit when they noticed their neighbors installing HardiPlank siding in violation of subdivision restrictions requiring "exterior walls" to be covered in other materials such as brick, stone or logs. In court the Jamisons claimed that because the Allens had used HardiPlank on their own gables they did not have any right to complain. The Court holds that the term "wall" means a vertical architectural member that connects the foundation and roof, and thus the term includes gables. The Court further holds that quasi-estoppel precludes a person from asserting a right inconsistent with a position previously taken. Because the Allens admitted using HardiPlank on their gables, the Court holds that they are estopped from complaining about the Jamison's use of the same material on an entire side of their home. The suit is effectively dismissed.

An Important Distinction: Restrictions Are Not Reservations

Tue, 12 Jun 2012 13:59:16 -0500

Farm & Ranch Investors Ltd. v. Titan Operating L.L.C. Developer filed a set of restrictions prohibiting oil and gas operations on the property, stating that it would continue to own all mineral rights. Developer later subdivided the land and sold off various parcels by deeds that recited that the conveyance was subject to all restrictions and mineral reservations of record. However, none of the deeds contained a specific reservation of mineral interests. Titan entered into mineral leases with the individual property owners and then sued for a declaratory judgment that it had acquired the mineral rights. The Court observes that the mineral estate may be severed from the surface estate by a grant of the minerals in a deed or lease, or by reservation in a conveyance. Because the Developer's restrictions were not a deed, lease or conveyance, the restrictions did no more than to confirm that the Developer owned the minerals at the time the restrictions were filed. Further, the law says that a general warranty deed conveys all of the interest that a grantor has in the land unless there is language in the instrument which clearly shows an intention to convey a lesser interest, and there is not reserved to the grantor any interest absent a clear and unequivocal expression in the deed itself of such intent. So, when the Developer later executed deeds without an express reservation of mineral interests it conveyed its interests in both the minerals and the surface, and Titan validly acquired those interests.

No Real Estate Commission Without a Proper Contract

Wed, 02 May 2012 13:54:09 -0500

Litton Loan Servicing LP v. Zachariah Manning and Intrarealty Inc. Plaintiff sued to recover a real estate commission after the seller's delay in closing caused the deal to fall through. The Texas Real Estate License Act (RELA) provides that a person may not sue to recover a commission for the sale or purchase of real estate unless the promise or agreement on which the suit is based is in writing and signed by the owner. Strict compliance with the Act is required. In this case, none of the documents on which the Plaintiff relies contains a promise to pay a real estate commission or identifies Plaintiff as a broker to whom a commission will be paid, so Plaintiff is not entitled to any recovery.

Suit Claims Ghosts in Rental Home Justify Return of Security Deposit

Fri, 20 Apr 2012 13:46:41 -0500

A couple in Toms River, N.J., claim in a lawsuit that they are entitled to a refund of their security deposit because their rental home is haunted.

In Collections, Be Specific In Your Threats

Wed, 11 Jan 2012 13:17:10 -0600

APM Enterprises LLC v. National Loan Acquisitions Co. Creditor sued maker and guarantors on a promissory note. The defendants alleged they had not received notice of intent to accelerate or notice of acceleration. A negotiable instrument that is payable at a definite time may provide for the right of acceleration on default. However, because acceleration of a debt is viewed as a harsh remedy any such clause will be strictly construed. Texas law requires clear notice of intent to exercise acceleration rights, followed by notice of actual acceleration if the debtor continues in default. In this case, the loan documents apparently did not waive the required notices. The Court observes that the law does not necessarily require the use of the words "intent to accelerate," in this case the holder's repeated threats to refer the note to legal counsel for collection were not sufficient.

The Wrong Way to Fight Foreclosure of a Home Equity Loan

Tue, 01 Nov 2011 13:50:36 -0500

Huston v. Bank National Association. Lender filed a Rule 736 application for an order allowing foreclosure of a Texas home equity loan. Homeowners countersued, claiming the lender did not have a valid assignment, that the loan violated various provisions of the law, and that the wife did not sign the loan. The Court finds the countersuit is improper in this context; such claims must be brought, if at all, in a separate lawsuit.

How To Terminate a 99 Year Lease in 30 Days

Thu, 13 Oct 2011 13:16:37 -0500

Providence Land Services LLC v. Jones. Starting in the 1970's, the Howells began leasing lakefront lots to tenants on lease forms that the Howells drafted themselves. Many of the leases provided that they were of "indefinite" term. Some of the tenants made substantial improvements under the assumption that they had "long-term" leases. The trial court agreed, and interpreted the leases to be for a term of 99 years. However, on appeal the Court finds that "indefinite" is not ambiguous; it simply means "uncertain." In Texas, a lease for an indefinite and uncertain length of time is an estate at will. The trial court's ruling is reversed.

Unsigned Lease is Still Valid

Tue, 13 Sep 2011 14:12:03 -0500

Thomas J. Sibley, P.C v. Brentwood Investment Development Co. Sibley rented a suite in Brentwood's building in 2001. In 2008, Brentwood sued for past-due rent payments and other sums. Sibley claimed that the lease was not enforceable because it was never signed by a Brentwood representative. The Court holds that the absence of a party's signature does not necessarily destroy an otherwise valid contract. A party may accept a contract and indicate its intent to be bound to the terms by acts and conduct in accordance with the terms. In this case, it is undisputed that Sibley occupied the space defined in the lease, operated a law firm from the premises, and made several partial payments of base rent. Likewise, there is no dispute that Brentwood continually operated and maintained the building in accordance with the lease terms. Because the parties treated the lease as if it were fully executed, the absence of the landlord's signature is not fatal and the lease is enforceable.

Property Remains Restricted to Residential Use

Mon, 18 Jul 2011 13:48:02 -0500

Davis v. Canyon Creek Estates Homeowners Association. Owner sued to invalidate restrictive covenants limiting the use of its property to residential purposes. A court may nullify or void a restrictive covenant limiting property use to residential only when the party seeking to nullify or modify the restriction proves either: (1) the property owners have acquiesced in violations of the residential restriction so as to amount to an abandonment of the covenant or a waiver of the right to enforce it; or (2) there has been "such a change of conditions in the restricted area or surrounding it that it is no longer possible to secure in a substantial degree the benefits sought to be realized through the covenant." To justify voiding a residential restriction based on changed circumstances, the changed conditions must be "radical." In considering whether such a "radical" change has occurred, courts look to: (1) the size of the restricted area; (2) the location of the restricted area with respect to where the change has occurred; (3) the type of change or changes that have occurred; (4) the character and conduct of the parties or their predecessors in title; (5) the purpose of the restrictions; and (6) to some extent, the unexpired term of the restrictions. Greater weight is given to changes that occur within the subdivision than those occurring outside the restricted area. Additionally, Texas courts have recognized a landowner cannot rely on "changed conditions" that have already occurred by the time he acquires the property. In this case, the owner did not meet the required standard of proof, but because the owner had never expressed an absolute refusal to abide by the restrictions it would not be required to pay attorney's fees.

Proceeds From Sale of Homestead are Exempt From Most Creditor Claims for 6 Months

Tue, 24 May 2011 13:33:10 -0500

London v. London. Jeffrey obtained a money judgment against his ex-wife, Leticia. When he learned that she was attempting to sell her Texas homestead, he asked the court to appoint a receiver, and order Leticia to deliver the sales proceeds to the receiver so the receiver could pay the sums owed to Jeffrey. The court holds that a judgment creditor generally cannot foreclose on a homestead to satisfy a debt unrelated to the home, and if a homestead claimant sells the residence, the proceeds are exempt from attachment and execution for six months as a matter of state law. The sales proceeds are to be returned to Leticia.

Fraudulent Lien Suit Falls Short

Tue, 24 May 2011 13:32:30 -0500

Gray v. Entis Mechanical Services L.L.C. Hospital sued electrical subcontractor after the subcontractor refused to cash the hospital's check and release a mechanic's lien the subcontractor had filed on the hospital's property. On appeal, the court holds that in order to establish a fraudulent lien claim under section 12.002 of the Texas Civil Practices and Remedies Code, the hospital had to conclusively prove that the subcontractor (1) made, presented, or used a document with knowledge that it was a fraudulent lien; (2) intended the document be given legal effect; and (3) intended to cause appellee financial injury. In this case, the hospital failed to prove that the subcontractor intended to cause financial harm when he filed the lien affidavit, so the case is sent back to the trial court for further proceedings.

Innocent Bank Prevails Over Innocent Buyer

Tue, 22 Mar 2011 14:42:15 -0500

Noble Mortgage & Investments LLC v. D&M Vision Investments LLC. Banks, the original owner of the property borrowed money from Noble in October, 2007, and the loan was secured by a deed of trust lien against the property. Unknown to Noble, Financial Holdings had obtained a judgment against Banks a year earlier and, although the judgment was never abstracted, succeeded in having the property sold at auction in September, 2007. D&M acquired the property as a result of that sale, but the sheriff's deed was not recorded until December, 2007. D&M subsequently posted "No Trespassing" signs on the property and, for the first time, Noble and D&M became aware of their competing claims to the property. The court holds that a lender can be a bona fide mortgagee if the lender takes a lien in good faith, for valuable consideration, and without actual or constructive notice of outstanding claims. A bona fide mortgagee is entitled to the same protections as a bona fide purchaser. In Texas, a bona fide purchaser prevails over a holder of a prior unrecorded deed or other unrecorded interest in the same property. The court further holds that Noble was not put on notice of the unrecorded judgment by the county's index of the sheriff's sale because that index was not filed in the real property records. Likewise, Nobel did not fail to act in good faith merely because it never obtained a credit report on its borrower, never questioned a series of conveyances back and forth between Banks and a corporation that he owned, and never required Banks to fill out a form disclosing all judgments against him. Accordingly, Noble is not a bona fide purchaser and Noble's bona fide status was proven as a matter of law.

Seller Pays High Price to Save the Cost of a Survey

Fri, 11 Feb 2011 17:12:43 -0600

Smith-Gilbard v. Perry. The seller was approached by the buyer, who sought to purchase land for her husband's pediatric health care facility. The seller agreed, but declined to provide a new survey. Instead, she furnished a copy of her original deed and said there had been no changes to the property since she purchased it in 1965. At closing, the seller signed a deed that described the property using the same metes and bounds as her 1965 deed. Two years later, the seller sued for reformation of the deed, claiming a mistake in that she had only intended to sell part of the property rather than the whole tract. The Court recognizes that a mutual mistake regarding a material fact is grounds for avoiding a contract. 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 of the parties due to a mutual mistake. In contrast, a mistake by only one party to an agreement, not known to or induced by acts of the other party, will not constitute grounds for relief. In this case, the evidence indicated that both parties intended to rely on the metes and bounds description in the 1965 deed, and there was no evidence that the seller ever told the buyer that she only wanted to sell part of the property. In addition, the buyer has been paying the taxes on the entire property since the closing. Accordingly, the Court will not reform the deed.

Is It OK to Lie About Your Homestead in Texas?

Tue, 30 Nov 2010 14:26:13 -0600

In re: Villarreal. After their home was foreclosed in 2005, the Villarreals secretly moved into their place of business. Two years later, the Villarreals settled a lawsuit by signing a promissory note and granting a deed of trust lien on the business property. The deed of trust stated that no part of the property was used as a residence. The Villarreals subsequently defaulted on the note and the lien was foreclosed. The Villarreals then sued for wrongful foreclosure, alleging that the property was their exempt homestead. The 5th Circuit asks the Texas Supreme Court to determine whether the Villarreals are estopped from claiming the homestead exemption when their use of the property as a homestead was surreptitious, and they publicly declared at the time that the lien was placed on the property that no such use of the property was being made. The Texas Supreme Court has set the case for oral argument on March 1, 2011.

Do-It-Yourselfers Beware!

Wed, 29 Sep 2010 13:40:32 -0500

Ritchey v. Pinnell. Pinnell purchased a home for investment and made major improvements himself, including electrical and plumbing work. He then sold the home to Ritchey, who filed suit for fraud and breach of real estate contract. Ritchey alleges that she could not obtain obtain a certificate of occupancy because Pinnell's work was not done properly, and because he did not obtain the necessary licenses, permits, and inspections. The Court holds that Ritchey may pursue her fraud claim because: (1) her home inspection does not necessarily preclude her from relying on a statement in Pinnell's disclosure notice that there were no "alterations or repairs made without necessary permits or not in compliance with building codes in effect at the time," and (2) Pinnell did not properly raise the "as is" clause as a defense to the fraud claim. However, the "as is" clause was properly raised as a defense to the breach of contract claim.

Will Admitted to Probate Even Though Original Was Lost and Filing Was Late

Fri, 24 Sep 2010 14:11:53 -0500

In re Estate of Perez. Husband died in 1995. In 2007, his surviving widow filed an application to probate a copy of his Will because she could not find the original. There are two issues on appeal. First, under Texas probate law when the original Last Will & Testament cannot be found the court normally presumes that the Will was revoked. However, this presumption may be overcome by evidence indicating the Will was not revoked, or that some other person fraudulently destroyed the Will. A witness's testimony that he knew of no act of revocation by the testator may be enough to rebut the presumption. In this case, the widow met her burden by (1) testimony from the husband's attorney that he prepared the Will for the husband, and that the husband did not request the attorney to revoke the Will or prepare a new one, and (2) the widow's own testimony that her husband put the Will in a cedar chest with a lock on it prior to his death, and that his adult daughters had removed items from the chest. The second issue is that a Will cannot be admitted to probate more than four years after the testator's death unless the party requesting probate can prove she was not in default in failing to present the Will sooner. In this case, the widow met her burden by showing (1) she could not afford to pay her former counsel, (2) her educational background was limited to grade school, (3) she believed it was unnecessary to probate the Will, and did not know there was a time limit, and (4) she filed for probate within 30 days of learning of the need to do so.

Buyer Waives Fraud Claim

Tue, 07 Sep 2010 13:54:21 -0500

Chambers v. Equity Bank, SSB. Chambers agreed to purchase a resort from the Bank. A "pre-closing" occurred in June, during which some (but not all) closing documents were signed, and Chambers took possession of the property. The next day, Chambers discovered a problem with the septic system. In July, Chambers and the Bank entered into an amended contract that required the Bank to repair the system at a cost not to exceed $32,000. That same day, the deed and the rest of the closing documents were signed, and money changed hands. Before the repairs could be completed, though, Chambers filed bankruptcy. The Bank foreclosed and sued for a deficiency; Chambers counter-sued for fraud. On appeal, the Court holds that an agreement is ratified if a party, by word or conduct, affirms the agreement after becoming aware of any fraud that would otherwise impair the agreement. That is, ratification occurs whenever the parties act in a way that recognizes, in spite of the revealed fraud, the existence of a binding contract. So, although the Bank may have committed fraud by not disclosing the septic system problems at the outset, Chambers ratified the fraud by signing the contract amendment and proceeding to close after learning of the defect. As a result, he has no claim for damages.

Fences Don't Always Make Good Neighbors

Mon, 30 Aug 2010 14:18:23 -0500

Ferrara v. Moore. Hays subdivided an 11-acre tract of land into five lots, and conveyed each of the five lots with an easement for a "non-exclusive right-of-way for purposes of ingress and egress between a public road and the tract conveyed." Ferrera later purchased Lot 2 and blocked the easement by means of a fence and gate, and eventually by laying cut trees across the easement. The Moores, who owned Lot 5, sued. The court notes that the easement was free of any gates, fences or other obstacles for 21 years before Ferrera's actions, and without the easement the other lots are landlocked. Under the circumstances, it was proper to enjoin Ferrara from placing impediments on the easement that that would interfere with the Moore's free and unrestricted use of the easement.

Homeowner Claims Sticker Shock, But Lender May Foreclose

Thu, 05 Aug 2010 12:58:46 -0500

Cerda v. 2004-EQR1 LLC. Homeowners made a verbal application to refinance their home equity loan for $344,000 in order to obtain a lower fixed interest rate, to pay property taxes, and to obtain $10,000 in cash. By the time the loan closed over a month later, the loan amount had increased to $367,500, the interest rate was variable, and the owners received only $768 in cash. The owners never made a payment, and eight years of litigation ensued. On appeal, the Court holds first that the verbal loan application triggered the waiting period for closing the loan, so the waiting period was not violated even though the written application was not signed until closing. Second, the Court holds that the variable interest rate does not violate the requirement that payments be "substantially equal" because the loan is fully amortized over the life of the note without requiring a balloon payment. Finally, the Court holds that a $3,675 yield spread premium and $11,025 in discount points did not cause the loan to exceed the 3% cap on fees. In so holding, the Court observes that the yield spread premium (a bonus paid to the loan broker for selling a loan above market rates) did not count towards the cap because technically the fee is paid by the lender rather than the homeowner. The Court characterizes the discount points as a form of interest rather than fees (expressly disagreeing with the Texas Bankers Association v. Association of Community Organizations for Reform Now case that we discussed on January 15, 2010.) The trial court order dismissing the homeowners' claims and permitting the foreclosure to proceed is affirmed.

Seller's Breach of Fiduciary Duty Results in Partial Forfeiture of Sales Price

Mon, 26 Jul 2010 13:44:04 -0500

ERI Consulting Engineers, Inc. v. Swinnea. Snodgrass agreed to buy out his partner's interest in their asbestos abatement business, ERI. In exchange the partner, Swinnea, agreed to continue to work for ERI and to not compete with the business. Unknown to Snodgrass, Swinnea had already set up a competing business under the name of Swinnea's wife. After the buyout, Swinnea's revenue production for ERI dropped 30-50%. The relationship deteriorated, and eventually Snodgrass sued for statutory fraud in a real estate and stock transaction, common law fraud, breach of the non-compete clause in the contract, and breach of fiduciary duty. The Supreme Court holds that when a partner in a business breached his fiduciary duty by fraudulently inducing another partner to buy out his interest, the consideration received by the breaching party for his interest in the business is subject to forfeiture as a remedy for the breach, in addition to other damages that result from the tortious conduct. The case is returned to the trial court for further proceedings to correctly calculate the award.

Even Judge Posner Doesn't Read His Home Equity Loan Documents

Fri, 25 Jun 2010 13:49:43 -0500

Ok, this isn't actually news, but it's still amusing. Widely recognized as one of the most respected legal minds in the nation, Judge Posner recently admitted that rather than read hundreds of pages of documentation for his home equity loan, he simply signed where he was told.

Plaintiff Fails to Prove His Claim to Property

Fri, 18 Jun 2010 13:45:45 -0500

Plaintiff filed a trespass to try title suit against the defendants concerning certain disputed property. A trespass to try title action is the exclusive remedy by which to resolve competing claims to property. To recover, the plaintiff must establish a prima facie right of title by proving one of the following: (1) a regular chain of conveyances from the sovereign, (2) a superior title out of a common source, (3) title by limitations, or (4) prior possession, which has not been abandoned. Here, the plaintiff asserted only the fourth ground as a basis for recovery. However, to establish entitlement to relief on this ground, the plaintiff had to prove that he actually and exclusively possessed the land, as opposed to merely constructively possessing it. Because the Court finds no proper evidence showing that the plaintiff actually possessed the land at any time, the case is sent back for trial.

Cutting Corners Leaves Buyer Out in the Cold

Wed, 19 May 2010 13:54:12 -0500

Black v. Washington Mutual Bank. Black purchased a home from Lundy by paying $100,000 down and $8,500 per month, and received a quitclaim deed in return. Presumably Black did this without going through a formal closing and without obtaining title insurance, because Black was unaware that Washington Mutual held a mortgage on the home. Washington Mutual later declared Lundy in default on the loan, foreclosed, and filed a suit to evict Black. Black claimed her deed gave her "equitable title" to the property, and no eviction could be ordered until title was resolved. The Court disagrees. The sole issue to be determined in a forcible detainer action is the entitlement to actual and immediate possession, and the merits of the title shall not be adjudicated. The evidence at trial established a default on the note, a notice of eviction, the foreclosure pursuant to the deed of trust, and the sale of the property to Washington Mutual. Based on this evidence, Washington Mutual was entitled to immediate possession as grantee in the trustee's deed. However, Black may seek recourse against Lundy independent of the forcible detainer suit.

It Pays to Read Before You Sign

Tue, 27 Apr 2010 13:34:47 -0500

Athey v. Mortgage Electronic Registration Systems, Inc. Plaintiffs sued for fraud in connection with a home equity loan, claiming they were told their loan would be a fixed rate loan. In fact, their note had a variable rate and contained the following conspicuous disclaimer in the introductory paragraph: "THIS NOTE CONTAINS PROVISIONS ALLOWING FOR CHANGES IN MY INTEREST RATE AND MY MONTHLY PAYMENT. THIS NOTE LIMITS THE AMOUNT MY INTEREST RATE CAN CHANGE AT ANY ONE TIME AND THE MAXIMUM RATE I MUST PAY." The Court does not hold that the contract language will always provide a shield against a fraudulent misrepresentation, but in this case the Plaintiffs could not reasonably rely upon an oral representation that was so plainly contradicted.

Right of First Refusal Was Not All-Or-Nothing Agreement

Fri, 16 Apr 2010 13:45:27 -0500

Hicks v. Castille. Castille purchased 96 acres of a 100 acre tract owned by Hicks. The four acres retained by Hicks included a 0.28-acre tract subject to a tower lease. As part of the transaction, Castille obtained a right of first refusal to purchase the four-acre tract. Hicks later decided to sell the 0.28-acre tract and sent notice to Castille. Castille did not elect to purchase, but rather filed suit to assert that Hicks was required to sell the four-acre tract as one entire parcel. The court observes that the holder of a right of first refusal has no right to compel a sale or to prevent a sale; he or she has only the right to be offered the property at a fixed price or at a price offered by a bona fide purchaser if and when the owner decides to sell. Castille's interpretation is problematic both because it infringes on Hicks's property rights (by restricting him from selling a portion of his property), and because it compels Hicks to sell more land than he desired to sell. As a result, the Court holds that the agreement permitted the sale of a portion of the four acres so long as Hicks gave proper notice, and the third-party offer was commercially reasonable, imposed in good faith, and not specifically designed to defeat the right of first refusal.

Happy Home Sale Turns to Nightmare for Sellers

Tue, 23 Mar 2010 14:01:08 -0500

Barry v. Jackson. After Buyer signed a contract to purchase their home, Sellers entered into a contract to buy a new home. Buyer then reneged on the deal. Sellers lost their deposit on the new home and the cost of having the new home inspected. Over a year later, and after making additional repairs, Sellers finally sold their old home to someone else for $47,000 less than Buyer had agreed to pay. Sellers then sued Buyer for breach of contract. The Court holds that when the breached contract is for real estate, the measure of damages is the difference between the contract price and the property's market value at the time of the breach. The market value may be determined by a fair resale, with notice to the breaching party, within a reasonable time after the breach. However, over a year elapsed in this case between the breach and the ultimate sale, and Sellers did not present testimony by an appraiser or realtor as to whether the real estate market had undergone significant fluctuations during that year. Accordingly, Sellers failed to prove the market value of their property at the time of the breach. As a small consolation, the Sellers are entitled to recover $3,900 in expenses incurred as a result of having to terminate the contract to purchase the new home.

Tenant Escapes Illegal Lease

Thu, 04 Mar 2010 13:39:42 -0600

Merry Homes, Inc. v. Luu. Landlord and tenant entered into a lease that allowed the property to be used for a "nightclub or bar" and "no other" purpose. A month later, the tenant discovered it would be able to obtain a liquor license because the property was too close to a school. The landlord refused to cancel the lease, taking the position that the tenant should have investigated the issue before signing the lease. On appeal, the Court holds that a contract to fulfill an obligation which cannot be performed without violating the law contravenes public policy and is void. Because the only authorized use of the property is illegal under all circumstances, the lease is unenforceable.

Landlord Plays Lawyer; Suffers the Consequences

Wed, 20 Jan 2010 13:47:31 -0600

Taylor v. Carbajal. Landlord entered into a preprinted commercial lease form with tenant. In doing so, Landlord apparently attempted to convert an option to renew into an option to purchase, but did not fill in a blank specifying the deadline for exercising the option. The Tenant remained in the property after the lease expired, and sent notice to exercise the option to purchase approximately 6 months later. On appeal, the Court notes the ambiguity created by Landlord's sloppy drafting. However, because the Landlord continued to accept Tenant's rent after the lease expired, the Court finds that the lease remained in effect and that the Tenant could exercise the option to purchase during the time the parties continued to perform the lease. The dissent correctly notes that to reach this conclusion, the Court must completely ignore language in the lease requiring the option to be exercised "prior to the expiration of the initial lease term."

Court Invalidates Home Equity Loan Rules

Fri, 15 Jan 2010 13:50:44 -0600

Texas Bankers Association v. Association of Community Organizations for Reform Now. ACORN filed suit to invalidate nine regulations adopted by the Finance Commission and the Credit Union Commission relating to Texas home equity loans. On appeal, the Court upholds a couple of the regulations and finds that certain challenges have become moot due to amendments. However, the Court takes issue with Rule 153.5(3), which states, "Charges an owner or an owner's spouse is required to pay that constitute interest under the law, for example per diem interest and points, are not fees subject to the three percent limitation." The Court observes that the constitution prohibits fees (other than interest) exceeding 3% of the loan. In the Court's view, the Commissions' interpretation allows lenders to characterize fees as interest, and essentially renders the cap meaningless. Because the interpretation is contrary to the plain meaning of the constitution, the Rule is invalid.

Company Must Keep Verbal Promise to Employees

Tue, 05 Jan 2010 13:15:27 -0600

Vanegas v. American Energy Services. "At will" employees allege that, as an incentive for them to stay with the company, the Vice President promised the employees would get 5% of the value of the sale or merger in the event of sale or merger of the company. When the company later refused to pay, the employees sued. The Texas Supreme Court holds that, consistent with its recent rulings on covenants not to compete, the company's promise was unenforceable when made because the company could have fired the "at will" employees at any time. However, the promise later became binding when the employees accepted the offer by staying with the company until the sale or merger was finalized.

Right of First Refusal Was "All or Nothing"

Wed, 16 Dec 2009 13:38:28 -0600

FWT, Inc. v. Haskin Wallace Mason Property Managment. Seller sold undeveloped land to Buyer. As part of the deal Buyer gave Seller a right to re-purchase the land "at the same price and under the same terms and conditions offered by [a] prospective purchaser." After establishing a business on the land, Buyer proposed a package sale of the business and a lease of the land together. The Seller attempted to exercise its right of first refusal as to the land only. Buyer sued to obtain a judgment that Seller's rights had been extinguished by its refusal to accept the land and business as a package deal. The Court holds that an exercise of an option to purchase must be positive, unconditional, and unequivocal; any purported acceptance containing a new demand, proposal, condition, or modification of the terms of the offer is not an acceptance but a rejection. The package deal was not commercially unreasonable, imposed in bad faith, or specifically designed to defeat the Seller's rights. Accordingly, the Seller was required to accept the entire package deal in order to exercise its rights under the option.

Entire House Gets Kicked Out of Subdivision

Thu, 19 Nov 2009 13:43:09 -0600

Letkeman v. Reyes. Defendants purchased a house, had it cut in half, and began moving it into a new subdivision. The plaintiff neighbors complained, alleging that the restrictive covenants prohibited "pre-fabricated structures." The defendants contended that "pre-fabricated" meant structures built in a factory and then moved in sections or by wall panels onto a site. The trial court disagreed with the defendants, and entered an injunction requiring them to remove the home within 60 days. On appeal, the Court observes that restrictive covenants must be "liberally construed" to give effect to their purposes and intent, and holds that "pre-fabricated" means simply "previously made." The Court also holds that, although a party must normally prove a threat of irreparable harm before becoming entitled to an injunction, when enforcing restrictive covenants the harm is established simply by showing a distinct or substantial breach.

Court Announces New Community Property Rule Affecting Trust Distributions

Fri, 30 Oct 2009 14:02:35 -0500

Sharma v. Routh. In the context of a spouse who receives distributions of trust income under an irrevocable trust during marriage, the income distributions are community property if the receiving spouse owns the trust corpus, but the distributions are separate property if the receiving spouse does not own the trust corpus. However, the legal standard for determining whether the receiving spouse owns the trust corpus is unclear. On appeal, the Court holds that, when a spouse receives distributions of trust income under an irrevocable trust during marriage, the income distributions are community property only if the recipient has a present possessory right to part of the corpus.

Another Reason to Avoid Quitclaim Deeds in Texas

Fri, 30 Oct 2009 13:57:18 -0500

Enerlex, Inc. v. Amerada Hess, Inc. This dispute involves competing claims to mineral interests. Plaintiff contends that because it filed the mineral deed before Defendant filed her gift deeds, and because it was a bona fide, good-faith purchaser for value, its title is superior to hers. The Court first notes that a warranty deed to land conveys property, but a quitclaim deed conveys the grantor's right in that property, if any, without warranting or professing that the title is valid. In this case, Plaintiff's deed does not purport to convey any specific interest but instead broadly conveys all of the seller's interest. As such, Plaintiff's mineral deed is actually a quitclaim deed, and because Plaintiff had prior notice of defendant's claim, Plaintiff cannot be a bona-fide purchaser.

No Relief for Buyer who Purchased Damaged Property "As Is"

Fri, 09 Oct 2009 14:13:12 -0500

Kim v. Harstan, Ltd. Buyers sued their real estate agents for for fraud, statutory fraud, negligent misrepresentation, and breach of fiduciary duty after purchasing an apartment complex under a contract with an "As Is" provision. Buyers claimed the agents had knowledge of undisclosed defects in the property. The Court observes that by agreeing to purchase the property "as is," the buyer agrees to make his own assessment of the bargain and to accept the risk that he may be wrong. The Court also notes that real estate brokers are fiduciaries and are required to exercise fidelity and good faith toward their principal. However, contracting parties have an obligation to read what they sign, and a broker does not have a duty to disclose the contents of a written agreement that the principal is obligated to read before he or she signs it. Ultimately, the Court finds that the Buyers failed to properly assert their claims, and that the agents are entitled to summary judgment. As of this writing, the Buyers are seeking review in the Texas Supreme Court.

Contractor's Rights Not Affected by Clerk's Wrongful Refusal to Accept Mechanic's Lien Affidavit

Thu, 03 Sep 2009 13:33:16 -0500

Ready Cable, Inc. v. RJP Southern Comfort Homes, Inc. Defendant attempted to file a mechanic's lien affidavit on the last possible day for it to do so. Attached to the affidavit was a set of field notes describing the subject property. The day after the filing deadline, the county clerk rejected the filing because the field notes contained the phrase "Unofficial Document." A month later the defendant filed a modified affidavit. Plaintiff sued, alleging the lien was invalid because it was not timely filed. On appeal, the Court holds that a county clerk must record any document that meets the standards of Tex. Loc. Gov't. Code Sec. 191.007, and nothing in that statute authorizes rejection of a filing simply because it bears the words "unofficial document." Accordingly, where there is no legitimate basis for the clerk's refusal to file the lien affidavit, the affidavit should be deemed to have been filed on the date it was delivered for filing.

Court Invalidates Fraudulent Transfer to Children

Tue, 25 Aug 2009 13:18:36 -0500

Corpus v. Arriaga. Plaintiffs obtained a judgment against the Arriagas after an agreement between them fell apart. Fifteen days later, the Arriagas transferred two properties to their children, the Defendants in this suit. At trial the Defendants presented evidence that pursuant to an oral agreement that predated the original dispute between the Plaintiffs and the Arriagas, the Defendants had made payments equal to approximately 1/2 of the value of one property, and 1/3 of the value of the other property. On appeal, the Court holds the transfers were fraudulent under the Uniform Fraudulent Transfer Act because: (1) notwithstanding any oral agreement the transfer was not effective until the real estate deeds were recorded, and this did not occur until after the Plaintiffs' claim arose; (2) paying approximately 1/2 and 1/3 of the appraised value of the properties was not "reasonably equivalent value" as required by the statute; and (3) in light of the unsatisfied judgment and a prior bankruptcy, the Arriagas were insolvent at the time of the transfers, or became insolvent as a result of the transfers. The case is sent back to the trial court to consider whether the Plaintiffs are entitled to levy execution on the properties, and whether they are entitled to attorney's fees.

Right to Partition Supersedes Homestead Protection

Thu, 03 Sep 2009 13:15:47 -0600

Grant v. Clouser. Judgment creditor obtained judgment debtor's 50% interest in real property, and then brought partition suit against the owners of the other 50% of the property. The property was not the debtor's homestead, but was the homestead of the cotenants. On appeal, the Court recognizes that the essence of "homestead" is a place of residence where the independence and security of a home may be enjoyed, without danger of its loss, or harassment and disturbance. However, Texas homestead rights attaching to property interests held by a cotenant are subordinate to another cotenant's right to partition. Because one cotenant cannot rely upon a homestead right to trump the partition right of a cotenant who acquired his interest from a prior cotenant, the creditor is entitled to a partition and order of sale.

Lender Tripped Up by Statute of Limitations

Mon, 27 Jul 2009 13:27:09 -0500

Financial Freedom Senior Funding Corp. v. Horrocks. In November, 2002, Mullane completed a reverse mortgage transaction with Financial Freedom. The transaction enabled Mullane to convert the equity in her home into income with no personal obligation to repay the note; instead, the loan was to be repaid in a lump sum from the proceeds from the sale of the home only after she died or sold the property. In March, 2003, Mullane died, but Financial Freedom did not attempt to enforce its lien until July, 2007. The Court holds the statute of limitations expired four years after the date of death, so the liens and powers of sale to enforce the liens are unenforceable.

Wells Fargo Sues Itself in Foreclosure Case

Thu, 16 Jul 2009 14:23:04 -0500

Normally we just report court cases, but this was too good to pass up.

Supreme Court Saves the Day for Non-Probate Planning

Thu, 16 Jul 2009 14:21:20 -0500

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. Likewise, stock certificates held by decedents as "joint tenants with right of survivorship" but were not signed by the decedents. Reversing a decision we reported a year ago, the Supreme Court holds "joint tenancy" or "JT TEN" designation on the investment accounts was sufficient to create rights of survivorship in community property, because precedent, trade usage, and seminal treatises clarified that joint tenancies carried rights of survivorship. In addition, account agreements for spouses' investments created survivorship rights in community property, where one agreement was titled "JOINT ACCOUNT WITH RIGHT OF SURVIVORSHIP" and was signed by both spouses, and other agreement listed spouses' names as "JTWROS" and was signed by both.

Court Gives Guidance on Recoveries in Construction Cases

Tue, 21 Apr 2009 13:23:44 -0500

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.