Untitled Texas Attorney General Opinion

OFFICE OF THE ATTORNEYGENERAL- STATEOF TEXAS
JOHN CORNYN
March 27,200l
The Honorable Kip Averitt Opinion No. JC-0357
Chair, Committee on Financial Institutions
Texas House of Representatives Re: Whether section 62.003 of the Property Code,
P.O. Box 2910 which converts a personal property lien on a
Austin, Texas 78768-2910 manufactured home to a purchase money lien on
real property, creates a valid purchase money lien
against homestead property under article XVI,
section 50 of the Texas Constitution (RQ-0293-
JC>
Dear Representative Averitt:
Article XVI, section 50 of the Texas Constitution invalidates any lien against the
“homestead,” unless the lien secures a debt described by that provision, such as a debt for the
“purchase money thereof.” TEX. CONST. art. XVI, § 50(a)(l). A purchase money lien against the
homestead is valid only to the extent of the debt proceeds used to acquire the property. Additionally,
“homestead” is “land” and “the improvements thereon.” Id. art. XVI, 8 5 1. You ask whether section
62.003 of the Property Code, which converts a personal property lien on a manufactured home to
a purchase money lien on real property when the manufactured home is converted to real property,
creates a “valid lien on homestead property” under article XVI, section 50.’ We conclude it does
not because the “purchase money” debt for the manufactured home is not for the acquisition of the
land to which the manufactured home is attached.
Article XVI, section 50 protects a “homestead.” See id. art. XVI, 5 50. Under this
provision, “[n]o mortgage, trust deed, or other lien on the homestead shall ever be valid unless it
secures a debt described by this section, whether such mortgage, trust deed, or other lien, shall have
been created by the owner alone, or together with his or her spouse . . . .” Id. art. XVI, 5 50(c). The
debts permitted under this section are set out in subsection (a), which states:
The homestead of a family, or of a single adult person, shall
be, and is hereby protected from forced sale, for the payment of all
debts except for:
(1) the purchase money thereof. ..;
*Letter from Honorable Kip Aver&, Chair, House Committee on Financial Institutions, to Honorable John
Cornyn, Texas Attorney General (Oct. 9,200O) (on file with Opinion Committee) [hereinafter Request Letter].
The Honorable Kip Averitt - Page 2 (JC-0357)
(2) the taxes due thereon;
(3) an owelty of partition . . . ;
(4) the refinance of a lien against a homestead,
including a federal tax lien . . . ;
(5) work and material used in constructing . . .
improvements thereon . . . :
(6) an extension of credit that:
(A) is secured by a voluntary lien on the
homestead . . . ;
. . . . ; or
(7) a reverse mortgage.
Id. art. XVI, 0 50(a) (emphasis added). Two issues are significant with respect to the constitutionally
permitted “purchase money” debt for the “homestead” as it relates to an understanding of section
62.003 of the Property Code and your question.
First, pursuant to article XVI, section 5 1, the “homestead” is “land” and “the improvements
thereon.” Id. art. XVI, 0 5 1 (“The homestead, not in a town or city, shall consist of not more than
two hundred acres of land . . . with the improvements thereon; the homestead in a city, town or
village, shall consist of lot or contiguous lots amounting to not more than 10 acres of land, together
with any improvements on the land . . . .“); see also TEX. PROP. CODE ANN. 0 41.002(a) (Vernon
2000) (urban homestead shall consist of not more than ten acres together with improvements and
rural homestead of not more than two hundred acres for a family and not more than one hundred
acres for single adult with improvements thereon); England v. FDIC, 975 F.2d 1168, 1172 n.7 (5th
Cir. 1992) (“Homestead interests exist in real property. Proceeds are personal property and cannot
be homestead.“); Cocke v. Conquest, 35 S.W.2d 673, 677-78 (Tex. 1931) (“The homestead right,
when fixed, is an estate in land . . . .”). Thus, the “purchase money” debt permitted by article XVI,
section 50 is a debt for the acquisition of the “land” and “improvements thereon” secured by a lien
on the real property.
Second, a purchase money lien against the “homestead” is valid only to the extent of the
proceeds of the purchase money debt used to acquire the property. See TEX. CONST. art. XVI, 0
5O(a)( 1); see also, e.g., Gregory v. Sunbelt Sav., 835 S.W.2d 155,160 (Tex. App.-Dallas 1992, writ
denied) (where only portion of debt secured by homestead is used to purchase or improve
homestead property, valid lien is created only to extent of purchase money debt due on homestead);
Napier v. FDIC, 144 B.R. 719, 725 (W-D. Tex. 1992) (“[Ulnder the Texas homestead laws, the
Defendant’s lien on Tract One is invalid to the extent that it secures non-purchase money debt.“);
American Guar. v. Miller, 58 B.R. 192, 197 (S.D. Tex. 1985) (“In order for American Guaranty’s
lien to be valid, the lien must be for purchase money, either the straight purchasing of an interest in
real property or a vendor’s lien.“). This means that a purchase money lien on one part of the
homestead cannot be spread to another part of the homestead to provide additional security for the
original purchase money debt. See Baxter v. Crow, 133 S.W.2d 187, 188 (Tex. Civ. App.-San
The Honorable Kip Averitt - Page 3 (JC-0357)
Antonio 1939, writ dism’d judgm’t car.) (valid lien on family homestead land could not by contract
be extended to business homestead as additional security for debt only against family homestead);
Hayes v. First Trust Joint Stock Land Bank, 111 S.W.2d 1172, 1177 (Tex. Civ. App.-Fort Worth
1937, writ dism’d) (in absence of showing that money borrowed was used in payment of purchase
money for second small tract constituting part of rural homestead, no equitable lien would be created
against that tract); Sweet v. Lyon, 88 S.W. 384,385 (Tex. Civ. App.-Austin 1905, writ ref d) (no
valid lien could attach to homestead land when note sued on was not given for purchase money of
land).
Section 62.003 of the Property Code, enacted by the legislature in 1999, attempts to bring
within the constitutionally permitted purchase-money debt for real property the personal-property,
purchase-price debt for a manufactured home that becomes real property and a homestead. See TEX.
PROP. CODE ANN. 5 62.003 (Vernon Supp. 2001).2
A manufactured home is personal property at the time it is acquired. See id. 9 2.001 (Vernon
Supp. 2001); see also Mobile Hous., Inc. v. Moss, 483 S.W.2d 56,58 (Tex. Civ. App.-Tyler 1972,
no writ) (“The mobile home obviously was an item of personal property at the time of its sale. . . .
[T]he mere fact that it is intended that a chattel will be attached to realty does not have the effect of
changing chattel into realty at the time of sale.“). It becomes real property as a matter of law,
however, if it is permanently attached to real property and the manufacturer’s certificate of origin
or the original document of title is surrendered for cancellation, and a certificate of attachment is
filed in the real property records of the county in which the home is located. See TEX. PROP. CODE
ANN. tj 2.001(b) (V emon Supp. 2001); see also TEX. REV. CIV. STAT. ANN. art. 5221f 4 19(Z)
(Vernon Supp. 2001) (if manufactured home is permanently affixed to land, original document of
title may be surrendered to Texas Department of Housing and Community Affairs who shall issue
certificate of attachment).
A manufactured home permanently attached to homestead real estate, as to constitute an
improvement to the real estate, is entitled to homestead protection under article XVI, section 50. See
Minnehoma Fin. Co. v. Ditto, 566 S.W.2d 354,356-57 (Tex. Civ. App. -Fort Worth 1978, writ ref d
n.r.e.); In re Brown, 113 B.R. 320,321 (W.D. Tex. 1990); see also Inwood N. Homeowners ‘Ass ‘n,
Inc. v. Harris, 736 S.W.2d 632,636 (Tex. 1987) (homestead may attach to real property interest less
than fee simple; it may attach to any possessory interest). A debt for the acquisition of the
manufactured home incurred prior to its attachment to the homestead land that is secured by a lien
only on the manufactured home is enforceable, even after the manufactured home becomes
“homestead,” but only against the manufactured home, the property that was purchased with the
proceeds of the debt. See Minnehoma, 566 S.W.2d at 356-57; see also Inwood, 736 S.W.2d at 635
(“Thus, we reaffirm that when the property has not become a homestead at the execution of the
mortgage, deed of trust or other lien, the homestead protections have no application even if the
property later becomes a homestead.“). The lien securing the purchase price of the manufactured
home does not extend to the homestead land on which the manufactured home is attached. See
2Act of May 26, 1999,76th Leg., R-S., ch. 742,s 1, 1999 Tex. Gen. Laws 3352.
The Honorable Kip Averitt - Page 4 (JC-0357)
Minnehoma, 566 S.W.2d at 356-57. In short, it is not a debt for the “purchase money” of the
homestead secured by a lien on the homestead. See id.
By converting a manufactured home purchase money lien into a “real property” lien that
extends to the land to which the manufactured home is attached, chapter 62 of the Property Code
attempts to transform the original debt into a purchase money debt for the “homestead,” i.e., the
manufactured home and the land. See TEX.PROP.CODEANN. $4 62.001-.004 (Vernon Supp. 2001).3
Section 62.002 provides that the chapter applies “only to a lien on a manufactured home if the loan
or credit advance documents state or indicate that the lien . . . is or is in the nature of a vendor’s
lien[,] . . . purchase money lien[,] or . . . a retail installment lien.” Id. 8 62.002. Section 62.003 of
the Property Code directs that “[wlhen the manufactured home converts to real property as provided
by Section 2.001(b)[sicly4 the lien on the property: (1) is converted to apurchase money lien on real
property by operation of law; and (2) exists independently of any existing lien on the real property
to which the home is permanently attached.” Id. 8 62.003 (emphasis added). Additionally, section
62.004 provides that a “lien that is converted to a purchase money lien on real property under section
62.003 may be refinanced with another lien on the real property to which the manufactured home
is permanently attached . . . .” Id. 8 62.004.
Section 62.003 is apparently intended to expand the definition of homestead “purchase
money” debt to facilitate the refinancing of manufactured homes. See id. 5 8 62.003, .004? The bill
analysis for House Bill 1086 enacting chapter 62 states that the conversion “effectively expands the
meaning of Section 50 . . . , Article XVI, Texas Constitution.” HOUSE Corn. ON BUSYNESS &
INDUSTRY, BILL ANALYSIS, Tex. H.B. 1086’76th Leg., R.S. (1999) (“Background and Purpose”).
Additionally, Senator Shapleigh, explaining the purpose of House Bill 1086, stated:
[The bill] is intended to help owners of manufactured homes that are
converted to real estate by providing a way to convert liens on
personal property to liens on real estate. What this bill does - it
allows a lien that was converted to a purchase money lien to be
refinanced with another lien on the real property to which the
manufactured home was permanently attached. When the title of the
manufactured home unit has been converted to real estate, the lien
3A~t of May 26,1999,76th Leg., R.S., ch. 742,s 1,1999 Tex. Gen. Laws 3352.
4The law as codified and the bill enacting it omit any further statutory reference. See Act of May 26, 1999,
76th Leg., R.S., ch. 742, 9 1, 1999 Tex. Gen. Laws 3352. While the House bill analysis appears to refer to the
ManufacmredHousingAct,see HOUSECOMM.ONBUSINESS&INDUSTRY,BILLANALYSIS, Tex.H.B.l086,76thLeg.,
R.S. (1999), we believe the correct reference is to the Property Code given that the Manufactured Housing Act does not
contain a section “2.001(b).” See TEX.REV.CIV.STAT.ANN. art. 5221f (Vernon 1987 & Supp. 2001).
'Seealso HOUSECOMM.ONBUSINESS&INDUSTRY,BILLANALYSIS, Tex.H.B.1086,76thLeg.,R.S.(1999);
Hearings on Tex. H.B. IO86 Before the Senate Comm. on Economic Development, 76th Leg., R.S. (May 14, 1999)
(statement of Senator Shapleigh).
The Honorable Kip Averitt - Page 5 (JC-0357)
against the unit will convert to a lawful purchase money lien on
homestead real estate. This will save owners money in lower interest
rates. The bill will also help owners by allowing a title insurance
company to insure the real estate property title on the manufactured
home which cannot be done under current law.
Hearings on Tex. H.B. IO86 Before the Senate Comm. on Economic Development, 76th Leg., R.S.
(May 14,1999) (statement of Senator Shapleigh). The legislature apparently recognized that a debt
incurred for the acquisition of a manufactured home was not treated as a constitutionally permissible
“purchase money” debt secured by a lien on the manufactured home and the real estate on which it
was placed (the homestead) because (1) the debt remained a personal property obligation based on
when it was incurred (when the manufactured home was purchased and not attached to real
property), and (2) it did not relate to the real estate on which the manufactured home was placed.
See id.6 Consequently, a manufactured home debt could not be refinanced as an existing purchase
money debt against the homestead. See TEX. CONST. art. XVI, 4 50(a)(4) (permitting debt for
refinance of existing “lien against a homestead”) .7 Instead, any “refinancings” were done as an
“extension of credit,” commonly referred to as home equity loans. See id. art. XVI, 5 50(a)(6).*
The question before us is whether section 62.003 may expand the article XVI, section 50
definition of homestead “purchase money” debt to encompass purchase price debt for manufactured
homes. We believe not. When given the power to implement constitutional provisions, the
legislature may define terms which are not defined in the constitution, provided its definitions are
reasonable interpretations of the constitutional language “and do not do violence to the plain
meaning and intent of the constitutional framers.” Swearingen v. City of Texarkana, 596 S.W.2d
157, 160 n. 1 (Tex. Civ. App.-Texarkana 1979, writ ref d n.r.e.). While section 62.003 may be a
reasonable policy response to address the hybrid nature of a manufactured home and provide a more
economical method for refinancing it, it violates the plain meaning of article XVI, section 5O(a)( 1)
to the extent it attempts to redefine purchase money debt for a manufactured home. First, the statute
attempts to convert a purchase price manufactured home debt into a purchase money debt for the
manufactured home and the land to which it is attached - the homestead. See TEX. CONST. art.
XVI, 5 5O(a)( 1) (authorizing debt against “homestead” for “purchase money thereof ‘); XII OXFORD
ENGLISHDICTIONARY 860 (2d ed. 1989) (“purchase-money [means] [t]he stun for which anything
is or may be purchased,‘). But a debt incurred to acquire only the manufactured home, by definition,
remains a debt only for the purchase price of the manufactured home. Second, and relatedly, the
statute extends the lien on the manufactured home (securing only its purchase price) to the land even
%ee also Steven G. Lawrence, P.C., Analysis of Manufactured Home Lien Statute in Chapter 62 of the Texas
Property Code, at 1,3, 14 (attachment to Request Letter, supra note 1) (on file with Opinion Committee) [hereinafter
Lawrence Briefl; John F. Rothermel, III, Stewart Title Guaranty Company, Manufactured Housing Law H.B. 1086,1999
session, Legal Analysis, at 4 (on file with Opinion Committee) [hereinafter Rothermel Briefj.
‘See also Lawrence Brief, supra note 6, at 1; Rothermel Brief, supra note 6, at 4.
‘See also Lawrence Brief, supra note 6, at 3.
The Honorable Kip Averitt - Page 6 (JC-0357)
though the original debt proceeds were not used to acquire the land or any interest therein. A
“purchase money” lien on the land for other than its purchase price or portion thereof is invalid. See
TEX. CONST. art. XVI, 0 50(a)(l), (c).~
Our construction of article XVI, section 50 homestead “purchase money” debt is strict. We
believe such a construction is appropriate for this office in light of article XVI, section 50’s
unambiguous statement that no lien “on the homestead shall ever be valid unless it secures a debt
described by this section,” and the absence of a judicial precedence to the contrary. See id. art. XVI,
0 50(c). A more liberal construction by this office would expand the constitutional purchase money
homestead debt to encompass a wholly new category of debt that may be secured by a lien on the
homestead, but provide no legal protection to a creditor against a constitutional challenge to the
validity of the lien. See Comm ‘rs Court of Titus County v. Agan, 940 S.W.2d 77, 82 (Tex. 1997)
(“While Attorney General’s opinions are persuasive[,] they are not controlling on the courts.“).
‘See also Gregory v. Sunbelt Sav., 835 S.W.2d 155, 160 (Tex. App.- Dallas 1992, writ denied) (where only
portion of debt secured by homestead is used to purchase or improve homestead property, valid lien is created only to
extent of purchase money debt due on homestead); Napier v. FDIC, 144 B.R. 719,725 (W.D. Tex. 1992) (“[Ulnder
the Texas homestead laws, the Defendant’s lien on Tract One is invalid to the extent that it secures non-purchase money
debt.“); American Guar. v. Miller, 58 B.R. 192, 197 (S.D. Tex. 1985) (“In order for American Guaranty’s lien to be
valid, the lien must be for purchase money, either the straight purchasing of an interest in real property or a vendor’s
lien.“); Baxter v. Crow, 133 S.W.2d 187, 188 (Tex. Civ. App.-San Antonio 1939,writ dism’d judgm’t car.) (valid lien
on family homestead land could not by contract be extended to business homestead as additional security for debt only
against family homestead); Hayes v. First Trust Joint Stock Land Bank, 111 S.W.2d 1172, 1177 (Tex. Civ. App.-Fort
Worth 1937, writ dism’d) (in absence of showing that money borrowed was used in payment of purchase money for
second small tract constituting part of rural homestead, no equitable lien would be created against that tract); Sweet v.
Lyon, 88 S.W. 384,385 (Tex. Civ. App.-Austin 1905, writ ref d) ( no valid lien could attach to homestead land when
note sued on was not given for the purchase money of the land).
The Honorable Kip Averitt - Page 7 (JC-0357)
SUMMARY
Section 62.003 of the Property Code, which converts a personal
property lien on a manufactured home to a purchase money lien on real
property when the manufactured home is converted to real property, does not
create a valid purchase money lien on homestead property under article XVI,
section 50 of the Texas Constitution.
JOHN CORNYN
Attorney General of Texas
ANDY TAYLOR
First Assistant Attorney General
CLARK KENT ERVIN
Deputy Attorney General - General Counsel
SUSAN D. GUSKY
Chair, Opinion Committee
Sheela Rai
Assistant Attorney General - Opinion Committee