Smith, Lorrie Jean v. Sumeer Homes, Inc. ( 2013 )

AFFIRM; and Opinion Filed June 6, 2013.
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-11-01632-CV
LORRIE JEAN SMITH, Appellant
V.
SUMEER HOMES, INC., SCOTT W. RAY, KRISTEN N. RAY, COLONIAL NATIONAL
MORTGAGE, A DIVISION OF COLONIAL SAVINGS, F.A., DAVID A. LEUTHOLD,
KATHLEEN O. LEUTHOLD, WELLS FARGO BANK, N.A., THOMAS NALL,
JINNIFER NALL, PRIMELENDING, A PLAINSCAPITAL COMPANY, AND CAPITAL
TITLE OF TEXAS, LLC, Appellees
On Appeal from the 192nd Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-11-06708-K
MEMORANDUM OPINION
Before Justices O’Neill, Francis, and Murphy
Opinion by Justice Murphy
Lorrie Jean Smith appeals the trial court’s summary judgment granted in favor of
appellees, Sumeer Homes, Inc.; Scott and Kristen Ray; Colonial National Mortgage, a division
of Colonial Savings, F.A.; David and Kathleen Leuthold; Wells Fargo Bank, N.A.; Thomas and
Jinnifer Nall; Primelending, a PlainsCapital Company; and Capital Title of Texas, LLC, in her
lawsuit seeking judicial foreclosure of a judgment lien against certain property. We affirm.
BACKGROUND
The operative facts of this case are undisputed. This case involves real property located
in Denton County, Texas—specifically, three lots designated as Lot 35 in Block A and Lots 4
and 8 in Block M of Pearson Farms, a residential neighborhood located in Frisco, Texas (the
Property).
A. Conveyance of the Property
Capital Title served as an escrow agent for two transactions in July 2008 related to the
Property. The first transaction was the sale of the Property from homebuilder Landstar Homes of
Dallas, Ltd. to Shaddock Builders & Developers, Inc. for $224,250. The second transaction was
the sale of the Property from Shaddock to Basin, Ltd. for the same price. The two transactions
were funded and closed at the same time in mid-July 2008 and were structured as pass-through
transactions. That is, title to the Property was conveyed by Landstar to Shaddock and then
immediately conveyed by Shaddock to Basin.
For the first transaction, Shaddock paid the total purchase price for the Property in
accordance with the closing statements signed by Landstar and Shaddock. A deed conveying the
Property from Landstar to Shaddock was not executed or recorded in Denton County. In the
second transaction, Basin paid the total purchase price in accordance with the closing statements.
After this transaction, Shaddock conveyed the Property to Basin by special warranty deed, which
was recorded on July 14, 2008. Landstar corrected the “oversight” on July 14, 2010 when it
executed a special warranty deed related to the Property to Shaddock. That deed was recorded in
Denton County on July 16, 2010, with an effective date of July 2, 2008.
Over two years after Basin acquired the Property from Shaddock, Basin executed a
special warranty deed conveying Lots 4 and 8 to Sumeer, a homebuilder. That deed was
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recorded on August 18, 2010. Basin also executed a second special warranty deed conveying
Lot 35 to Sumeer. That deed was recorded on September 24, 2010. Sumeer developed the lots
to build residential homes. Sumeer ultimately transferred ownership of Lot 8 to the Nalls, Lot 4
to the Leutholds, and Lot 35 to the Rays in March and April of 2011. Sumeer executed a special
warranty deed conveying each respective lot to the Nalls, Leutholds, and Rays (the
Homeowners), who in turn, executed a deed of trust relating to their particular property to their
respective purchase money lenders, Primelending, Wells Fargo, and Colonial (the Lenders).
Each special warranty deed was recorded in Denton County.
B. Smith’s Judgment Lien and This Lawsuit
Smith obtained a judgment against Shaddock on May 21, 2010 in the amount of
$373,997.69, plus interest. The case styled Lorrie Jean Smith v. Shaddock Builders &
Developers, Inc. a/k/a Sotherby Homes, Cause No. 296-01683-2008, in the 296th Judicial Court
in Collin County, Texas, had no relationship to the Property. Smith recorded an abstract of that
judgment in Denton County on July 15, 2010.
Smith filed this lawsuit against appellees a year later seeking judicial foreclosure against
the Property. She alleged her judgment lien attached to the Property because Shaddock held
unrecorded legal title to the Property at the time and that her lien “primed the interests of all
[appellees]” entitling her to an “order of sale” on the three lots. She also alleged claims for
slander of title and conspiracy against Sumeer and Capital Title, asserting those parties conspired
to slander her title by “back-dating” the deed related to sale of the property from Landstar to
Shaddock. She claimed Sumeer recorded the back-dated deed after she recorded her abstract of
judgment.
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The Homeowners and Lenders moved for summary judgment on Smith’s foreclosure
claim, arguing the evidence established that equitable title to the Property passed from Shaddock
to Basin in July 2008 and, therefore, Smith’s judgment lien did not attach to the Property.
Sumeer and Capital Title each filed a separate motion for summary judgment, also arguing the
evidence established Shaddock did not have equitable title to the Property at the time Smith
recorded her abstract of judgment. Smith responded to the motions and filed a cross-motion for
summary judgment. She argued her judgment lien attached to Shaddock’s legal title to the
Property, which passed from Landstar to Shaddock by virtue of Landstar’s deed. Smith did not
move for summary judgment on her claims for slander of title and conspiracy against Sumeer
and Capital Title.
After the trial court heard argument on the Homeowners and Lenders’ motion, the parties
filed a Rule 11 agreement, stating they agreed to be bound by the court’s ruling on the
Homeowners and Lenders’ summary judgment motion. They also agreed that if the trial court
granted summary judgment in favor of appellees, Smith would take nothing on her claims and
the trial court’s order would be a final and appealable order. The trial court signed a final order
dated December 19, 2011, granting the motions for summary judgment filed by appellees and
denying Smith’s summary judgment motion. Smith appealed, arguing in a single issue the trial
court erred in granting summary judgment for appellees. She does not appear to challenge the
trial court’s denial of her summary judgment motion.
STANDARD OF REVIEW
We review the application of the law to undisputed facts in summary judgments under a
de novo standard of review. Marsh USA Inc. v. Cook, 354 S.W.3d 764, 768 (Tex. 2011); Mid-
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Century Ins. Co. of Tex. v. Ademaj, 243 S.W.3d 618, 621 (Tex. 2007). When reviewing a
traditional summary judgment granted in favor of the defendant, we determine whether the
defendant conclusively disproved at least one element of the plaintiff’s claim or conclusively
proved every element of an affirmative defense. Am. Tobacco Co. v. Grinnell, 951 S.W.2d 420,
425 (Tex. 1997); Holloway v. Dekkers, 380 S.W.3d 315, 319–20 (Tex. App.—Dallas 2012, no
pet.). A matter is conclusively established if ordinary minds cannot differ as to the conclusion to
be drawn from the evidence. Holloway, 380 S.W.3d at 320. The movant has the burden of
showing that it is entitled to judgment as a matter of law. TEX. R. CIV. P. 166a(c); Sysco Food
Servs., Inc. v. Trapnell, 890 S.W.2d 796, 800 (Tex. 1994).
DISCUSSION
A recorded abstract of judgment constitutes a lien on and attaches to “any real property of
the defendant” that is located in the county in which the abstract is recorded. TEX. PROP. CODE
ANN. § 52.001 (West Supp. 2012). A judgment lien, however, attaches only to the interest in the
real property “actually owned” by the judgment debtor, in this case, Shaddock. See First State
Bank of Amarillo v. Jones, 183 S.W. 874, 876 (Tex. 1916); Martin v. Cadle Co., 133 S.W.3d
897, 906 (Tex. App.—Dallas 2004, pet. denied). Thus, the question presented is whether the
evidence established conclusively Shaddock’s ownership interest, if any, in the Property at the
time Smith recorded her abstract of judgment.
Smith argues Shaddock held “legal title” to the Property at the time she recorded her
abstract of judgment. Specifically, she maintains the “ultimate source of title” to the Property
was Shaddock and that no title had been conveyed to Shaddock until the deed from the first
transaction was executed in July 2010 and recorded on July 16, 2010. She contends that because
her abstract of judgment had been recorded the day before the deed was recorded, it
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“immediately attached” to Shaddock’s legal title to the Property, giving her lien “priority over
any interest” held by the subsequent purchasers and their lenders. The law does not support
Smith’s contentions.
While “legal title” to property evidences apparent ownership, it “does not necessarily
signify full and complete title or a beneficial interest.” Longoria v. Lasater, 292 S.W.3d 156,
165 (Tex. App.—San Antonio 2009, pet. denied). Rather, it is the “[o]wnership of the equitable
estate [that] is the real ownership, and the legal estate is no more than the ‘shadow following the
equitable estate,’ which is the substance . . . .” Neeley v. Intercity Mgmt. Corp., 623 S.W.2d 942,
951 (Tex. App.—Houston [1st Dist.] 1981, no writ) (quoting Patty v. Middleton, 17 S.W. 909,
912 (Tex. 1891)).
A purchaser receives equitable title in property when he pays the purchase price and fully
satisfies the obligations under the contract of sale. See Johnson v. Wood, 157 S.W.2d 146, 148
(Tex. 1941); Cadle Co. v. Harvey, 46 S.W.3d 282, 287–88 (Tex. App.—Fort Worth 2001, pet.
denied); see also Yarto v. Gilliland, 287 S.W.3d 83, 89–90 (Tex. App.—Corpus Christi 2009, no
pet.). “Equitable title” indicates a beneficial interest in property and “gives the holder the right
to acquire formal legal title.” Longoria, 292 S.W.3d at 165. It is vested in the purchaser from
the date of the contract to convey real property or from the date he takes possession of the
property. See Cadle Co., 46 S.W.3d at 287 (citing Leeson v. City of Houston, 243 S.W. 485,
488–90 (Tex. Comm’n App. 1922, judgm’t adopted)).
In considering a creditor’s judgment lien, equitable rights vested in third persons will be
protected against the legal lien, which is limited to the actual interest that the judgment debtor
has in the estate. Id.; Gaona v. Gonzales, 997 S.W.2d 784, 787 (Tex. App.—Austin 1999, no
pet.); see also First State Bank of Amarillo, 183 S.W. at 876. Equitable title is superior to legal
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title and may be asserted as a complete defense against the lien of a debtor’s judgment creditor.
Cadle Co., 46 S.W.3d at 287; see also Tex. Am. Bank/Levelland v. Resendez, 706 S.W.2d 343,
346–47 (Tex. App.—Amarillo 1986, no writ); Hammett v. McIntire, 365 S.W.2d 844, 847 (Tex.
Civ. App.—Houston 1962, writ ref’d n.r.e.) (holding abstract of judgment against holder of legal
title does not attach to equitable title).
The summary-judgment evidence shows there were two transactions related to the
Property that occurred in mid-July 2008. In the first transaction, Shaddock paid the total
purchase price of the Property to Landstar in accordance with the closing documents; in the
second transaction, Basin paid the total purchase price of the Property to Shaddock in accordance
with the closing documents for that transaction. There is no dispute the parties fully performed
their obligations under the contracts to convey the Property and that these transactions were
conducted simultaneously. Therefore, as a result of the two transactions, equitable title to the
Property passed from Landstar to Shaddock and then from Shaddock to Basin; such title
remained with Basin until August and September 2010 when it sold the lots to Sumeer. See
Cadle Co., 46 S.W.3d at 287–88 (purchaser receives equitable title when he fully performs the
contract). Equitable title then passed from Sumeer to the Homeowners and Lenders when
Sumeer later developed and sold the lots in March and April 2011. Thus, when Smith recorded
her abstract of judgment on July 15, 2010, Basin, not Shaddock, held equitable title in the
Property as a result of that second transaction.
Smith argues that even though equitable title was acquired by Basin, then Sumeer, and
later by the Homeowners and Lenders, it is not a complete defense to her judgment lien because
section 13.001(a) of the property code provides that a conveyance of a real property interest must
be recorded to be enforceable against a judgment creditor. See TEX. PROP. CODE ANN.
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§ 13.001(a) (West 2004). She maintains the Homeowners and Lenders (the current holders of
equitable title for the respective lots) “needed” the special warranty deed Landstar executed and
recorded in July 2010 to perfect legal title.
Section 13.001(a), commonly referred to as the recording statute, states that a conveyance
of real property is “void as to a creditor or to a subsequent purchaser” without notice of the
conveyance. Id. But equitable title acquired independent of legal title is not subject to or
governed by the recording statute. See Gaona, 997 S.W.2d at 787; Resendez, 706 S.W.2d at 347.
That is because equitable title arises by operation of law and exists independent of the execution
of a deed; the recording of the deed is not essential to an effective conveyance of title. Gaona,
997 S.W.2d at 787. The “superiority of such a title may be asserted against a judgment lien
creditor even though he had no notice of the equitable title at the time of fixing his lien.”
Resendez, 706 S.W.2d at 347 (holding equitable title that results from complete payment under
contract not subject to recordation and is outside scope of recording statute). This rule makes
sense because a judgment creditor, such as Smith, is not injured by the equitable interest held by
another. If her lien fails to attach, she “loses nothing.” See First State Bank of Amarillo, 183
S.W. at 876. She still retains her judgment in its full amount and a lien on any real property
owned by Shaddock in Denton County. Id.; see also TEX. PROP. CODE ANN. § 52.001. Thus,
although Landstar originally failed to record the deed conveying the Property to Shaddock as
part of the first transaction, that failure did not affect the validity of the transaction. Once
Shaddock paid the purchase price and fully satisfied its closing obligations, Shaddock became
the owner of the superior equitable title to the land, which immediately passed to Basin as a part
of the second transaction.
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Shaddock also did not hold “legal title” to the Property on July 15, 2010. “‘[W]hen one
conveys land by warranty of title, or in such a manner as to be estopped to dispute the title of his
grantee, a title subsequently acquired to that land will pass eo instante to his warrantee.’”
Houston First Am. Sav. v. Musick, 650 S.W.2d 764, 770 (Tex. 1983) (quoting Caswell v. Llano
Oil Co., 36 S.W.2d 208, 211 (Tex. Comm’n App. 1931, opinion adopted)). The summary-
judgment evidence shows that on July 14, 2010, Landstar corrected its “conveyance oversight”
relating to the Property by executing a special warranty deed to Shaddock with an effective date
in July 2008. This legal title passed instantly to Basin through Shaddock on July 14, 2010.
We conclude the evidence conclusively establishes that Shaddock had no interest in the
Property at the time Smith recorded her abstract of judgment because equitable title to the
Property had already been transferred from Shaddock to Basin in July 2008 as a result of the
second transaction; any delay in the transfer of legal title to the Property to Basin was corrected
when Landstar executed the special warranty deed to Shaddock on July 14, 2010. Smith’s
judgment lien therefore did not attach to the Property, see First State Bank of Amarillo, 183 S.W.
at 876, and the trial court properly granted summary judgment in favor of appellees.
We overrule Smith’s issue and affirm the trial court’s judgment.
/Mary Murphy/
MARY MURPHY
JUSTICE
111632F.P05
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
LORRIE JEAN SMITH, Appellant On Appeal from the 192nd Judicial District
Court, Dallas County, Texas
No. 05-11-01632-CV V. Trial Court Cause No. DC-11-06708-K.
Opinion delivered by Justice Murphy.
SUMEER HOMES, INC., SCOTT W. RAY, Justices O’Neill and Francis participating.
KRISTEN N. RAY, COLONIAL
NATIONAL MORTGAGE, A DIVISION
OF COLONIAL SAVINGS, F.A., DAVID
A. LEUTHOLD, KATHLEEN O.
LEUTHOLD, WELLS FARGO BANK,
N.A., THOMAS NALL, JINNIFER NALL,
PRIMELENDING, A PLAINSCAPITAL
COMPANY, AND CAPITAL TITLE OF
TEXAS, LLC, Appellees
In accordance with this Court’s opinion of this date, the judgment of the trial court is
AFFIRMED.
It is ORDERED that appellees, Sumeer Homes, Inc., Scott W. Ray, Kristen N. Ray,
Colonial National Mortgage, a Division of Colonial Savings, F.A., David A. Leuthold, Kathleen
O. Leuthold, Wells Fargo Bank, N.A., Thomas Nall, Jinnifer Nall, Primelending, a PlainsCapital
Company, and Capital Title of Texas, LLC, recover their costs of this appeal from appellant
Lorrie Jean Smith.
Judgment entered this 6th day of June, 2013.
/Mary Murphy/
MARY MURPHY
JUSTICE
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