Bernardo Morales Cervantes v. Bayview Loan Servicing LLC ( 2012 )

Affirmed and Memorandum Opinion filed December 04, 2012.
In The
Fourteenth Court of Appeals
NO. 14-12-00157-CV
BERNARDO MORALES CERVANTES, Appellant,
V.
BAYVIEW LOAN SERVICING, LLC, Appellee.
On Appeal from the 334th District Court
Harris County
Trial Court Cause No. 2010-47515A
MEMORANDUM OPINION
Appellant Bernardo Morales Cervantes appeals the trial court’s grant of summary
judgment on his causes of action for injunctive relief and to remove a cloud on title to
residential property arising from appellee Bayview Loan Servicing, LLC’s lien. In one
issue, Cervantes contends that his equitable title under a contract for deed is superior to
Bayview’s lien, and his open and obvious possession of the property before the lien was
acquired raises a genuine issue of material fact precluding summary judgment. We
affirm.
I
The property at issue is a residential property located at 5626 Elm Spring Drive in
Houston. Cervantes alleges that in 2000, he and the then-record owner of the property,
Riku Melartin, orally agreed that if Cervantes and his family would move into the home
and make substantial improvements to the property, Melartin would sell the property to
Cervantes for $50,000.00. Based on this agreement, Cervantes, his wife, and their three
children moved into the property and made extensive repairs.
On February 22, 2002, Melartin executed a deed of trust on the property to secure
repayment of a $39,000 loan obtained from American Capital Funding Corporation. The
2002 deed of trust was filed of record on March 13, 2002. Shortly after making the loan
to Melartin, American Capital assigned the loan and the deed of trust to another entity.
On March 18, 2010, that entity assigned the loan and deed of trust to Bayview.
On June 29, 2009, Melartin and Cervantes executed a contract for deed, which
reflected an effective date of February 20, 2003. The contract for deed required Cervantes
to pay $4,000.00 as a down payment and make 300 monthly payments of $422.52. Upon
Cervantes’s completion of his contractual obligations, Melartin agreed to execute and
deliver to Cervantes a general warranty deed. The contract for deed was recorded with
the Harris County Clerk in 2009. At the time Cervantes filed suit, he claimed to have paid
the down payment and eighty-seven monthly payments.
According to Cervantes, a judgment was obtained against Melartin in an unrelated
matter in 2005, and on July 7, 2009, the property was sold at a constable’s sale to Saihat
Corporation. Cervantes also alleges that Melartin defaulted under the terms of the 2002
deed of trust and the property was posted for a substitute trustee’s sale to take place on
August 3, 2010.
On August 2, 2010, Cervantes and Saihat filed suit against Melartin, Bayview, and
the substitute trustee.1 As to Bayview, Cervantes and Saihat sought a judgment declaring
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Cervantes and Saihat later nonsuited their claims against the substitute trustee.
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the deed of trust inferior to Cervantes’s interest in the property and removing the cloud
on Cervantes’s and Saihat’s title. Cervantes and Saihat also sought injunctive relief to
prohibit Bayview and the substitute trustee from taking any action to conduct a trustee’s
sale of the property.
Bayview moved for summary judgment on all of Cervantes’s and Saihat’s claims.
The trial court granted Bayview’s motion. Bayview then filed a motion to sever the
claims against it. The trial court granted the motion to sever and rendered a final
judgment in favor of Bayview on November 29, 2011. Cervantes and Saihat filed a
motion for reconsideration of the summary judgment and for new trial, which was
overruled by operation of law. Only Cervantes appealed the trial court’s judgment.
II
In his sole issue, Cervantes contends that his open and obvious possession of the
property put Bayview on notice of his interest in the property at the time Bayview’s lien
was created. In an affidavit supporting his response to Bayview’s motion for summary
judgment, Cervantes averred that, beginning in 2000, his family could be seen “go[ing] in
and out” of the property, the children played in the yard, the family’s cars were parked in
the driveway, and friends visited on numerous occasions. Cervantes further averred that
he mowed the yard and twice painted the house. Cervantes argues that this evidence
raises a fact issue precluding summary judgment for Bayview. Bayview responds that its
lien was acquired before the effective date of Cervantes’s contract for deed; therefore, its
interest is superior to any interest Cervantes may have under the contract for deed.
A
We review a trial court’s grant of summary judgment de novo. Joe v. Two Thirty
Nine Joint Venture, 145 S.W.3d 150, 156 (Tex. 2004); Weingarten Realty Mgmt. Co. v.
Liberty Mut. Fire Ins. Co., 343 S.W.3d 859, 861 (Tex. App.—Houston [14th Dist.] 2011,
pet. denied). The movant must establish that no genuine issues of material fact exist and
that it is entitled to judgment as a matter of law. Nixon v. Mr. Prop. Mgmt. Co., 690
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S.W.2d 546, 548 (Tex. 1985). In our review, we take as true all evidence favorable to the
nonmovant, and we indulge every reasonable inference and resolve any doubts in the
non-movant’s favor. Joe, 145 S.W.3d at 157; Weingarten Realty, 343 S.W.3d at 861.
B
Cervantes maintains that Bayview had constructive notice of his equitable interest
under the contract for deed “because of the open and obvious possession of the property
by Cervantes and his family” before the lien was created. Cervantes relies primarily on
Texas Property Code section 13.001, which provides in relevant part:
(a) A conveyance of real property or an interest in real property or a
mortgage or deed of trust is void as to a creditor or to a subsequent
purchaser for a valuable consideration without notice unless the instrument
has been acknowledged, sworn to, or proved and filed for record as
required by law.
(b) The unrecorded instrument is binding on . . . a subsequent purchaser
who . . . has notice of the instrument.
Tex. Prop. Code § 13.001(a), (b). Cervantes also cites several cases for the proposition
that notice will defeat the protection of a bona fide purchaser. See, e.g., Fletcher v.
Minton, 217 S.W.3d 755, 758 (Tex. App.—Dallas 2007, no pet.); Apex Fin. Corp. v.
Garza, 155 S.W.3d 230, 235 (Tex. App.—Dallas 2004, pet. denied).
But Cervantes does not dispute Bayview’s contention that his contract for deed
was executed and became effective after Bayview’s predecessor obtained the lien on the
property. Melartin and Cervantes executed the contract for deed on June 29, 2009,
effective as of February 20, 2003. Melartin and Bayview’s predecessor executed the deed
of trust on February 22, 2002, and the deed of trust was filed of record on March 13,
2002, nearly a year before the effective date of the contract for deed. When interests in
real property compete for superiority, ordinarily the “first in time is first in right.”
Williams v. Nationstar Mortg., LLC, 349 S.W.3d 90, 93 (Tex. App.—Texarkana 2011,
pet. denied); World Help v. Leisure Lifestyles, Inc., 977 S.W.2d 662, 668 (Tex. App.—
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Fort Worth 1998, pet. denied). Because it is uncontroverted that the 2002 deed of trust
preceded the contract for deed, the deed of trust is superior to the contract for deed.
Moreover, any equitable interest Cervantes may have obtained in the property
under the contract for deed arose after 2002. This court has held that a purchaser under a
contract for deed is vested with equitable title only after he has shown that he has paid the
purchase price and fully performed his contractual obligations. See Cullins v. Foster, 171
S.W.3d 521, 533 (Tex. App.—Houston [14th Dist.] 2005, pet. denied). Until the
purchaser has fully performed, he obtains only an equitable right to complete the
contract. S. Vanguard Ins. Co. v. Silberstein, 2010 WL 2998786, at *4 (Tex. App.—
Houston [14th Dist.] 2010, no pet.) (mem. op.) (citing Cullins, 171 S.W.3d at 533). In his
petition, Cervantes alleges that he paid the $4,000 down payment and made
“approximately 87” of the 300 monthly payments due. And in his affidavit, Cervantes
asserted only that he had “made the monthly payments due under the contract.” He does
not contend that he has fully performed all his obligations under the contract for deed.
Therefore, taking as true all of the evidence favorable to Cervantes and indulging
every reasonable inference in his favor, the evidence shows that Cervantes obtained, at
most, an equitable right to complete the contract for deed on February 20, 2003, the
contract for deed’s effective date. See id. Cervantes does not allege that he obtained
equitable or legal title to the property other than through the contract for deed.2
Consequently, Cervantes’s possession of the property before that date could not have put
Bayview’s predecessor on notice of any alleged claim to the property because no
unrecorded instrument evidencing such a claim existed in 2002 when the deed of trust
was executed. Cervantes’s authorities are thus distinguishable because in those cases the
unrecorded instruments predated the conveyances to the subsequent purchasers. See
Fletcher, 217 S.W.3d at 761–63 (holding that Fletcher was not a bona fide purchaser of
2
Bayview also argues that the contract for deed expressly disclaims the existence of any prior
written or oral agreements between Cervantes and Melartin with respect to the property. In relevant part,
the contract for deed recites as follows: “No agreement(s) in regard to the subject property now exist
between Seller and Purchaser, whether written or oral, except as set forth herein.”
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two tracts of land previously conveyed to Minton and Malecek when Minton and
Malecek’s unrecorded contracts for deed were executed and performed before Fletcher’s
purchase and evidence supported trial court’s findings that Minton’s visible use and
possession of both tracts put Fletcher on constructive notice of competing claims); Apex
Fin. Corp., 155 S.W.3d at 234–35 (holding evidence was sufficient to support finding
that quitclaim-deed holder’s possession was visible, open, and exclusive so as to put
subsequent purchaser on notice).3
Because Cervantes claims title solely on the basis of the contract for deed and
Bayview’s lien predates the contract for deed, Bayview’s lien is first in time and takes
priority over any alleged interest Cervantes later obtained. Therefore, on these facts,
Cervantes’s occupation of the property before the contract for deed’s effective date fails
to raise a genuine issue of material fact.
We hold that the trial court did not err by granting Bayview’s motion for summary
judgment and we overrule Cervantes’s sole issue on appeal.
***
Accordingly, we affirm the trial court’s judgment.
/s/ Jeffrey V. Brown
Justice
Panel consists of Chief Justice Hedges and Justices Brown and Busby.
3
Two other cases Cervantes cites likewise do not support his argument. In Madison v. Gordon,
the court held that the owner of a multifamily rental unit who occupied one of the units did not show that
his possession was sufficiently exclusive or unequivocal to provide constructive notice of his ownership
claim. See 39 S.W.3d 604, 607 (Tex. 2001) (per curiam). In City of Richland Hills v. Bertelsen, the court
held that the city failed to raise a genuine issue of material fact on actual or constructive notice precluding
summary judgment in favor of a subsequent purchaser when the subsequent purchaser relied on a
properly recorded plat rather than the unrecorded plat under which the city claimed a dedicated park. See
724 S.W.2d 428, 430 (Tex. App.—Fort Worth 1987, no writ).
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