When is a lien filed in the county real estate records presumed fraudulent under the Texas Government Code?

WHEN IS A LIEN PRESUMED FRAUDULENT PER STATUTE? 

Pursuant to Section 51.901 of the Government Code, a document is "presumed" to be fraudulent if:

[T]he document or instrument purports to create a lien or assert a claim against real or personal property or an interest in real or personal property and:

(A) is not a document or instrument provided for by the constitution or law of this state or of the United States;
(B) is not created by implied or express consent or agreement of the obligor, debtor, or the owner of the real or personal property or an interest in the real or personal property, if required under the laws of this state, or by implied or express consent or agreement of an agent, fiduciary, or other representative of that person; or
(C) is not an equitable, constructive, or other lien imposed by a court with jurisdiction created or established under the constitution or laws of this state or of the United States.

TEX. GOV'T CODE ANN. § 51.901(c)(2) (West 2013).

A trial court may presume a document is fraudulent only if it makes one positive finding and three negative findings about the document; if the document is provided for by constitution or statute, created by agreement, or imposed by a court, then it is not "presumed fraudulent" under section 51.901(c)(2). See id.; In re Hai Quang La, No. 02-13-00110-CV, 2013 WL 5651746, at *3 (Tex. App.-Fort Worth Oct. 17, 2013, no pet. h.).

A trial court may base its finding solely on its review of the document itself and without hearing any testimonial evidence. TEX. GOV'T CODE ANN. § 51.903(c) (West 2013). A trial court may review the document ex parte and without delay or notice of any kind, but the trial court may make no finding as to any underlying claim. Id. § 51.903(c), (g); In re Purported Liens or Claims Against Samshi Homes, L.L.C., 321 S.W.3d 665, 667 (Tex. App.-Houston [14th Dist.] 2010, no pet.) (holding that trial court may not rule on validity of underlying lien). The trial court also may not rule on any substantive evidentiary claim. Samshi Homes, 321 S.W.3d at 668.

A document filed in the form of a mechanic's lien is "provided for by the . . . laws of this state" and thus cannot be presumed to be fraudulent under section 51.901(c)(2)(A) of the Government Code. Id. at 667-68; see also David Powers Homes, 355 S.W.3d at 339 (discussing and applying holding of Samshi Homes).

SOURCE: HOUSTON COURT OF APPEALS - 01-13-00509-CV - 1/14/2014

Texas Government Code authorizes action to attack fraudulent lien

LIEN NOT PRESUMPTIVELY FRAUDULENT HERE 

Cardenas notified the Wilsons of his intent to file a mechanic's lien on Wilson's truck. Article 16, section 37 of the Texas Constitution and Chapter 53 of the Texas Property Code both provide a legal basis for a mechanic's lien. TEX. CONST. art. XVI, § 37 (West 1993); TEX. PROP. CODE ANN. Ch. 53 (West 2007). Cardenas' document is provided for by the laws of Texas and is thus not presumed to be fraudulent. See Samshi Homes, 321 S.W.3d at 667-68. The Wilsons respond that they adduced proof that Cardenas forged the repair authorization. The Wilsons' proof, however, does not refute the validity of a lien for a mechanical repair under Texas law, but rather attacks the merit of the underlying claim for payment for the repair.

Under the fraudulent lien statute, the trial court does not rule on the validity of the underlying claim creating the lien or rule on any substantive evidentiary claim. See id. at 667-68.

Conclusion

We hold that Cardenas' lien is not presumed fraudulent as defined by section 51.901 of the Texas Government Code. We therefore reverse and vacate the trial court's orders removing the lien and releasing the truck to the Wilsons.

SOURCE: HOUSTON COURT OF APPEALS - 01-13-00509-CV - 1/14/2014 - Cardenas v Wilson

Related earlier post: Remedy for fraudulent lien under the Texas Government Code

Fraudulent Lien - Statutory Cause of Action & Damages

FRAUDULENT LIEN STATUTE [CPRC § 12.002(a)]

The fraudulent-lien statute provides:

(a) A person may not make, present, or use a document or other record with:

(1) knowledge that the document or other record is a fraudulent court record or a fraudulent lien or claim against real or personal property or an interest in real or personal property;

(2) intent that the document or other record be given the same legal effect as a court record or document of a court created by or established under the constitution or laws of this state or the United States or another entity listed in Section 37.01, Penal Code, evidencing a valid lien or claim against real or personal property or an interest in real or personal property; and

(3) intent to cause another person to suffer:

(A) physical injury;

(B) financial injury; or

(C) mental anguish or emotional distress.

See TEX. CIV. PRAC. & REM.CODE ANN. § 12.002(a) (Vernon Supp. 2011).

The party asserting that a claimed lien is a fraudulent lien has the burden to prove the requisite elements in the statute. Aland v. Martin, 271 S.W.3d 424, 430 (Tex. App.—Dallas 2008, no pet.). A party who satisfies the section 12.002(a) requirements may recover $10,000 or the actual damages caused by the violation, whichever is greater, in addition to court costs, attorney’s fees, and exemplary damages. See TEX. CIV. PRAC. & REM. CODE ANN. § 12.002(b).

SOURCE: HOUSTON COURT OF APPEALS - 1ST DISTRICT - 01-11-00129-CV - 4/26/12

Suit to remove fraudulent lien, instrument in county real estate records

Removal of Fraudulent Lien (statutory cause of action)
     
Texas Government Code section 51.903, entitled “Action on Fraudulent Lien on Property,” provides in subsection (a) as follows:

(a) A person who is the purported debtor or obligor or who owns real or personal property or an interest in real or personal property and who has reason to believe that the document purporting to create a lien or a claim against the real or personal property or an interest in the real or personal property previously filed or submitted for filing and recording is fraudulent may complete and file with the district clerk a motion, verified by affidavit by a completed form for ordinary certificate of acknowledgment, of the same type described by Section 121.007, Civil Practice and Remedies Code, that contains, at a minimum, the information in the following suggested form:

In Re: A Lien or Claim Against (Name of Purported Debtor)

MISC. DOCKET NO. ________
In the _______ Judicial District

In and For ________________ County Texas

Motion for Judicial Review of Documentation or Instrument Purporting to Create a Lien or Claim

Now Comes (name) and files this motion requesting a judicial determination of the status of documentation or an instrument purporting to create an interest in real or personal property or a lien or claim on real or personal property or an interest in real or personal property filed in the office of the Clerk of (county name) County, Texas, and in support of the motion would show the court as follows:

I.
(Name), movant herein, is the purported obligor or debtor or person who owns the real or personal property or the interest in real or personal property described in the documentation or instrument.

II.

On (date), in the exercise of the county clerk’s official duties as County Clerk of (county name) County, Texas, the county clerk received and filed and recorded the documentation or instrument attached hereto and containing (number) pages. Said documentation or instrument purports to have created a lien on real or personal property or an interest in real or personal property against one (name of purported debtor).

III.

Movant alleges that the documentation or instrument attached hereto is fraudulent, as defined by Section 51.901(c)(2), Government Code, and that the documentation or instrument should therefore not be accorded lien status.

IV.

Movant attests that assertions herein are true and correct.

V.

Movant does not request the court to make a finding as to any underlying claim of the parties involved and acknowledges that this motion does not seek to invalidate a legitimate lien. Movant further acknowledges that movant may be subject to sanctions, as provided by Chapter 10, Civil Practice and Remedies Code, if this motion is determined to be frivolous.

PRAYER

Movant requests the court to review the attached documentation or instrument and enter an order determining whether it should be accorded lien status, together with such other orders as the court deems appropriate.



Respectfully submitted,
_________________________
(Signature and typed name and address)

Tex. Gov’t Code Ann. § 51.903(a).

The movant may attach the allegedly fraudulent documentation or instrument to the motion. See id. Section 51.903 further provides, “The court’s finding may be made solely on a review of the documentation or instrument attached to the motion and without hearing any testimonial evidence. The court’s review may be made ex parte without delay or notice of any kind.” Id. § 51.903(c).

For purposes of a section 51.903 action, a fraudulent document or instrument is defined as (1) a document or instrument that “is not a document or instrument provided for by the constitution or laws of this state or of the United States”; (2) a document or instrument “not created by implied or express consent or agreement of the obligor, debtor, or the owner of the real or personal property or an interest in the real or personal property . . ., or by implied or express consent or agreement of an agent, fiduciary, or other representative of that person”; or (3) a document or instrument that “is not an equitable, constructive, or other lien imposed by a court with jurisdiction created or established under the constitution or laws of this state or of the United States.” Id. § 51.901(c)(2); see id. § 51.903(a). Thus, if a trial court finds that a document or instrument is provided for by state or federal law or constitutional provision, the court has determined that the document or instrument is not fraudulent. See id. § 51.901(c)(2); see also id. § 51.903(a).

SOURCE: Houston Court of Appeals - 01-10-00967-CV - 8/18/11