Contract for Deed vs. Conveyance of Real Property

A contract for deed, unlike a mortgage, allows the seller to retain title to the property until the purchaser has paid for the property in full.

The probate court's order expressly granted Edward's one-half community interest in the property to "his rightful heirs," and Connie does not dispute that Don and Esther are his rightful heirs. At the time of Edward's death, however, Connie and Edward did not have an ownership interest in the property because Mary Rose—as the seller of the property under a contract for deed—retained title to the property. See Flores v. Millennium Interests, Ltd., 185 S.W.3d 427, 429 (Tex. 2005) ("A contract for deed, unlike a mortgage, allows the seller to retain title to the property until the purchaser has paid for the property in full."); Sluder v. Ogden, No. 03-10-00280-CV, 2011 Tex. App. LEXIS 267, at *10 (Tex. App.-Austin Jan. 13, 2011, pet. denied) (mem. op.) (noting that "contract for deed merely establishes conditions precedent to a title's transfer" (citing Graves v. Diehl, 958 S.W.2d 468, 470-71 (Tex. App.-Houston [14th Dist.] 1997, no pet.)).

The evidence established that Connie and Edward had not fully performed under the terms of the contract for deed at the time of Edward's death. Under an executory contract to convey land, such as a contract for deed, the buyer does not acquire title but an "equitable right to make payments on the property and to receive a deed and legal title when [the buyer] complete[s] the payments." See Gaona v. Gonzales, 997 S.W.2d 784, 786-87 (Tex. App.-Austin 1999, no pet.) (citing Johnson v. Wood, 157 S.W.2d 146, 148 (Tex. 1941) and Texas Am. Bank/Levelland v. Resendez, 706 S.W.2d 343, 345 (Tex. App.-Amarillo 1986, no writ)); see also Southern Vanguard Ins. Co. v. Silberstein, No. 14-09-00472-CV, 2010 Tex. App. LEXIS 6202, at *9-12 (Tex. App.-Houston [14th Dist.] Aug. 3, 2010, no pet.) (mem. op.) (concluding that purchaser did not obtain equitable title when entered into contract for deed and explaining differences between contract for deed and mortgage).

SOURCE: AUSTIN COURT OF APPEALS - No. 03-12-00146-CV. - 8/26/2014 

ALL PAYMENTS MUST BE MADE OR CONTRACT MAY BE CANCELLED

A contract for deed is an executory contract constituting an agreement by a seller to deliver a deed to property once certain conditions have been met. See Graves v. Diehl, 958 S.W.2d 468, 470 (Tex. App.-Houston [14th Dist.] 1997, no pet.). Until the executory contract is fully performed, the owner retains legal title to the property, but holds that title subject to the purchaser's equitable right to complete the contract, i.e., to make payments and receive a deed once payments are completed. See Gaona v. Gonzalez, 997 S.W.2d 784, 786-87 (Tex. App.-Austin 1999, no pet.); Graves, 958 S.W.2d at 471. The seller is not obligated to deliver legal title to the property until the purchaser pays the purchase price in full. See Salinas v. Beaudrie, 960 S.W.2d 314, 319 (Tex. App.-Corpus Christi 1997, no pet.). Under a contract for deed, the purchase price is usually paid in installments over a course of years. Id. In the present case, there was undisputed evidence that Ware did not make the payments required by the December 15, 2005 document she contends is a contract for deed. According to that document, Ware was to make eighty monthly payments of $500 to pay the $40,000 purchase price. Assuming her first payment was made in November 2005, Ware was required to pay $500 per month until June 2012. It is undisputed that Ware stopped making payments in the fall of 2008 and made no further payments required by the December 15, 2005 document.^[6] Thus, even though Ware was not obligated to make the payments set forth in the contract for deed, Ware's failure to make those payments meant that title to the Property remained with the seller. See Graves, 958 S.W.2d at 471 (purchaser's equitable right does not ripen into equitable title to property until he has fully performed under the contract, i.e., paid the full purchase price). The trial court was therefore correct in its conclusion that the Estate owned the Property. We overrule Ware's sixth appellate issue.^[7]

SOURCE: HOUSTON COURT OF APPEALS - No. 03-14-00083-CV. - 12/22/2015 

RIGHT TO POSSESSION UNDER CONTRACT FOR DEED VS. OWNERSHIP (TITLE) 

A contract for deed is a form of real-property conveyance in which the purchaser obtains an immediate right to possession, but the seller retains legal title and has no obligation to transfer it unless and until the purchaser finishes paying the full purchase price (and, often, interest, fees, or other related obligations), which is typically done in installments over several years. See Flores v. Millennium Interests, Ltd., 185 S.W.3d 427, 429 (Tex. 2005) ("[E]xecutory contracts [are] also known as contracts for deed. 

A contract for deed, unlike a mortgage, allows the seller to retain title to the property until the purchaser has paid for the property in full."); Reeder v. Curry, 294 S.W.3d 851, 856 (Tex. App.-Dallas 2009, pet. denied) ("In an executory contract for the sale of land, such as the contract for deed in this case, the superior title remains with the seller until the purchaser fulfills its part of the contract" and "[i]f the purchaser defaults under the contract, the seller is entitled to possession of the property."); Ward v. Malone, 115 S.W.3d 267, 270-71 (Tex. App.-Corpus Christi 2003, pet. denied) (stating that a "contract for deed is an agreement by a seller to deliver a deed to property once certain conditions have been met and that it entitled the buyer to immediate possession, that the seller retains title until the purchase price is fully paid, and that the price is typically paid in installments over several years). 

A contract for deed differs from a conventional contract for sale of realty, in which the seller and purchaser mutually agree to complete payment and title transfer on a date certain (the "closing date"). See Flores, 185 S.W.3d at 429. Unlike a contract for deed, under which the buyer has an equitable right, but not obligation, to complete the purchase, Gaona v. Gonzales, 997 S.W.2d 784, 786-87 (Tex. App.-Austin 1999, no pet.), the buyer under a typical real-estate contract is contractually obligated to complete the purchase and may be liable for breach upon failure to pay the seller. Carroll v. Wied, 572 S.W.2d 93, 95 (Tex. Civ. App.-Corpus Christi 1978, no writ)("In a contract of sale, one party is obligated to sell and the other to purchase.").

Based on the foregoing case law and the facts in this case, we disagree with Tran's assertion that the underlying contract is an executory contract. Specifically, the record reflects that Luu signed and conveyed a warranty deed on the day of closing with no vestige of title to the property, even though Tran is still making payments on the note. See, e.g., Brown v. De La Cruz, 156 S.W.3d 560, 566 (Tex. 2004) ("Since 1995, the Texas Property Code has required that sellers by executory contract (or `contract for deed') of certain residential property in Texas must record and transfer a deed within thirty days of final payment."). Indeed, there is no evidence in the record demonstrating that Luu withheld transfer of title or refused to sign the deed subject to Tran completing all installment payments associated with the purchase of the property.

SOURCE: WACO COURT OF APPEALS - No. 10-13-00308-CV. - 4/10/2014 

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