Sunday, July 31, 2011

Equitable interest claim with respect to land / real estate

Equitable Interest in Real Property

When is such a claim viable, when not?   

A person owns an “equitable interest” in property by virtue of “an equitable title or claim [] on equitable grounds, such as the interest held by a trust beneficiary.” Longoria v. Lasater, 292 S.W.3d 156, 165 (Tex. App.-San Antonio 2009, pet. denied ).

Equitable vs. legal tilte to real property

“Equitable title” is “a title that indicates a beneficial interest in property and that gives the holder the right to acquire formal legal title.” Id. On the other hand, a “legal interest” is “an interest recognized by law, such as legal title.” Id. “Legal title” is “a title that evidences apparent ownership but does not necessarily signify full and complete title or a beneficial interest.” Id.

As a general rule, a judgment lien attaches only to the interest in the land owned by the judgment debtor. Martin v. Cadle Co., 133 S.W.3d 897, 906 (Tex. App.-Dallas 2004, pet. denied). An equitable title is superior to legal title to the property and may be asserted as a complete defense against the lien of a debtor's judgment creditor. Cadle Co. v. Harvey, 46 S.W.3d 282, 287 (Tex. App.-Fort Worth 2001, pet. denied ).

“Equitable rights in real property owned by someone other than the debtor, which rest in parol, will be protected against a judgment lien.” Gaona v. Gonzales, 997 S.W.2d 784, 787 (Tex. App.-Austin 1999, no pet. ); Carlisle v. Holland, 289 S.W.116, 118 (Tex. Civ. App.-El Paso 1926, writ ref'd); see First State Bank of Amarillo v. Jones, 107 Tex. 623, 183 S.W. 874, 876 (1916).

Does a Contract for Sale of land create an equitable interest?

A contract for the sale of real estate is an agreement that binds the purchaser to buy and the seller to sell in accordance with the terms of the contract. Greve v. Cox, 683 S.W.2d 535, 536 (Tex. Civ. App.-Dallas 1984, no writ). The purchaser under a contract for conveyance of property does not acquire equitable title to the property until he pays the purchase price and fully performs the obligations under the contract. Johnson v. Wood, 138 Tex. 106, 109-10, 157 S.W.2d 146, 148 (1941); Cullins v. Foster, 171 S.W.3d 521, 534 (Tex. App.-Houston [14th Dist. 2005, pet. denied). Upon such performance, he becomes vested with equitable title to the property. Cullins, 171 S.W.3d at 534. Until such time, however, the purchaser has only an equitable right to acquire title by carrying out the agreement. See Wood, 157 S.W.2d at 148.

Resulting trust: what is it and how does it relate to equitable interest claims?

A resulting trust is an equitable remedy arising by operation of law when title is conveyed to one person but the purchase price or a portion thereof is paid by another. Cohrs v. Scott, 338 S.W.2d 127, 130 (Tex. 1960); Smith v. Deneve, 285 S.W.3d 904, 912 (Tex. App.-Dallas 2009, no pet.). The parties are presumed to have intended that the grantee hold title for the use of the person who paid the purchase price and whom equity deems to be the true owner. Cohrs, 338 S.W.2d at 130; Troxel v. Bishop, 201 S.W.3d 290, 298 (Tex. App.-Dallas 2006, no pet.). The trust arises out of the transaction and must arise at the time when the title passes. Cohrs, 338 S.W.2d at 130; Smith, 285 S.W.3d at 912. The doctrine of resulting trusts is invoked to prevent unjust enrichment. Nolana Dev. Ass'n v. Corsi, 682 S.W.2d 246, 250 (Tex. 1984).

Legal effect of recorded abstract of judgment - judgment lien

An abstract of judgment recorded in accordance with the provisions of the property code, if the judgment is not dormant, “constitutes a lien on the real property of the defendant located in the county in which the abstract is recorded and indexed, including real property acquired after such recording and indexing.” Tex. Prop. Code Ann. § 52.001 (West Supp. 2010). The property code requires the county clerk to record properly authenticated abstracts of judgment in the county real property records and, at the same time, enter on the alphabetical index to the real property records the name of each plaintiff and each defendant, and the volume and page or instrument number in the records in which the abstract is recorded. Tex. Prop. Code Ann. § 52.004(a)-(b) (West 2007).

Recordation of abstract of judgment and lien priorty

Because a judgment lien is created by statute, substantial compliance with the statutory requirements is mandatory before a judgment creditor's lien will attach. Murray v. Cadle Co., 257 S.W.3d 291, 296 (Tex. App.-Dallas 2008, pet. denied). The purpose of the index is to provide notice to subsequent purchasers of the existence of the judgment and to indicate the source from which the full information about the judgment may be obtained. Id. at 296-97. When properly recorded and indexed, an abstract of judgment creates a judgment lien that is superior to the rights of subsequent purchasers and lienholders. Wilson v. Dvorak, 228 S.W.3d 228, 233 (Tex. App.-San Antonio 2007, pet. denied). The party seeking to foreclose a judgment lien has the burden of proving the abstract of judgment was properly recorded and indexed. Murray, 257 S.W.3d at 296. A party has constructive notice of instruments properly recorded in the proper county. Tex. Prop. Code Ann. § 13.002 (West 2004); AMC Mortg. Servs., Inc. v. Watts, 260 S.W.3d 582, 586 (Tex. App.-Dallas 2008, no pet.).

SOURCE: Dallas Court of Appeals - 05-09-00581-CV - 7/29/11

RELATED LEGAL TERMS: equitable vs. legal title, contract for sale of land, resulting trust, lien and lien priority, judgment lien, recorded lien, instrument, contructive notice of lien, interest in property, encumbrances

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