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 

Bona Fide Purchaser Rule in Texas

  
WHO ENJOYS PROTECTIONS OF BONA FIDE PURCHASER DOCTRINE?

The longstanding general rule in Texas is that "earlier title emanating from [a] common source is the better title and is given prevailing effect." Rogers v. Ricane Enters., Inc., 884 S.W.2d 763, 769 (Tex. 1994) (citing Curdy v. Stafford, 30 S.W. 551, 552 (Tex. 1895)). However, "[s]tatus as a bona fide purchaser is an affirmative defense to a title dispute." Madison v. Gordon, 39 S.W.3d 604, 606 (Tex. 2001). To qualify as a bona fide purchaser, "one must acquire property in good faith, for value, and without notice of any third-party claim or interest." Id.; see Swanson v. Grassedonio, 647 S.W.2d 716, 718 (Tex. App.-Corpus Christi 1982, no writ). Notice may be constructive or actual; actual notice rests on personal information or knowledge, whereas constructive notice is notice the law imputes to a person not having personal information or knowledge. Madison, 39 S.W.3d at 606. The bona fide purchaser doctrine is codified in section 13.001 of the Texas Property Code, entitled "Validity of Unrecorded Instrument," which states:

(a) A conveyance of real property or an interest in real property or a mortgage or deed of trust is void as to a creditor or to a subsequent purchaser for a valuable consideration without notice unless the instrument has been acknowledged, sworn to, or proved and filed for record as required by law.

(b) The unrecorded instrument is binding on a party to the instrument, on the party's heirs, and on a subsequent purchaser who does not pay a valuable consideration or who has notice of the instrument.

(c) This section does not apply to a financing statement, a security agreement filed as a financing statement, or a continuation statement filed for record under the Business & Commerce Code.

TEX. PROP. CODE ANN. § 13.001. "An instrument that is properly recorded in the proper county is: (1) notice to all persons of the existence of the instrument; and (2) subject to inspection by the public." Id. § 13.002 (West, Westlaw through 2013 3d C.S.).Commerce Code.

TEX. PROP. CODE ANN. § 13.001. "An instrument that is properly recorded in the proper county is: (1) notice to all persons of the existence of the instrument; and (2) subject to inspection by the public." Id. § 13.002 (West, Westlaw through 2013 3d C.S.). 

SOURCE: CORPUS CHRISTI COURT OF APPEALS  No. 13-13-00462-CV. -  1/15/2015 (superseding opinion) 8/26/2014 (original opinion)

QUITCLAIM DEED WITHOUT WARRANTY PRECLUDES BONA-FIDE PURCHASER STATUS 

The motions for traditional summary judgment filed by appellees were accompanied by, among other evidence, the GeoSouthern Memorandum, the Orca Memoranda, and the assignment agreements applicable to each appellee. The memoranda show that the conveyances to both GeoSouthern and Orca emanated from the Trust. This evidence was sufficient to show appellees' entitlement to judgment as a matter of law because it established that appellees had "earlier title emanating from [a] common source." Rogers, 884 S.W.2d at 769; see TEX. R. CIV. P. 166a(c). The only question on appeal, therefore, is whether Orca raised a fact issue as to its bona fide purchaser defense. See Brownlee, 65 S.W.2d at 112.

The parties do not seem to dispute that Orca paid valuable consideration for the rights conferred in the Letter of Intent, nor do they dispute that Orca lacked actual or constructive notice of the GeoSouthern lease as of the date the Letter of Intent was executed. The dispute instead centers on whether the Letter of Intent constitutes an "acquisition of property" such that the bona fide purchaser defense would apply. See Madison, 39 S.W.3d at 606. In response to appellees' joint motion for traditional summary judgment, Orca produced evidence including the Letter of Intent, which it claims constituted a conveyance of equitable title to the subject properties.^[5] Appellees disagree with Orca that the Letter of Intent conveyed any sort of property interest, and they further argue that the language of the Letter of Intent precludes Orca from claiming bona fide purchaser status.

We agree with appellees on the latter point. Even assuming, but not deciding, that the Letter of Intent conveyed an equitable interest in the subject properties to Orca, that instrument explicitly stated in paragraph 2 that no warranty of title would be provided in any lease eventually executed pursuant thereto. In that regard, to the extent the Letter of Intent conveyed any interest in the subject properties, it was equivalent to a quitclaim deed under which the purchaser agrees to acquire whatever interests are actually owned by the seller. See Geodyne Energy Income Prod. P'ship I-E v. Newton Corp., 161 S.W.3d 482, 486 (Tex. 2005) ("A warranty deed to land conveys property; a quitclaim deed conveys the grantor's rights in that property, if any."); see also BLACK'S LAW DICTIONARY 477 (9th ed. 2009) (defining quitclaim deed as "[a] deed that conveys a grantor's complete interest or claim in certain real property but that neither warrants nor professes that the title is valid"). And, courts have long held that a party acquiring property under a quitclaim deed is not eligible to claim bona fide purchaser status because it is charged with notice of title defects as a matter of law. See Woodward v. Ortiz, 237 S.W.2d 286, 291-92 (Tex. 1951) (holding that a purchaser of property under a quitclaim deed "cannot enjoy the protection afforded a bona fide purchaser" because "he takes with notice of all defects in the title and equities of third persons"); Bright v. Johnson, 302 S.W.3d 483, 492 (Tex. App.-Eastland 2009, no pet.) ("[A] subsequent purchaser is not a bona fide purchaser if the conveyance is made without warranty."); Kidwell v. Black, 104 S.W.3d 686, 691 (Tex. App.-Fort Worth 2003, pet. denied) ("The purchaser of a quitclaim deed takes the deed with notice of all defects in the title and equities of third persons. Because [appellant] is the grantee of a quitclaim deed, he cannot be a bona fide purchaser."); Diversified, Inc. v. Hall, 20 S.W.3d 403, 406 (Tex. App.-Houston [1st Dist.] 2000, pet. denied) ("As the purchaser of a quitclaim deed, [appellant] cannot enjoy the protections afforded a bona fide purchaser, because a grantee in a quitclaim deed is not an innocent purchaser without notice."); Equitable Trust Co. v. Roland, 721 S.W.2d 530, 534 (Tex. App.-Corpus Christi 1986, writ ref'd n.r.e.) ("[A] grantee in a quitclaim deed is not an innocent purchaser, but takes with notice of all defects in his grantor's title"); see also Houston Oil Co. of Tex. v. Niles, 255 S.W. 604, 610 (Tex. Comm'n App. 1923, judgm't adopted) ("[T]he holder of a title in which there appears, however remote, a quitclaim deed is prevented from asserting the defense of innocent purchaser as against an outstanding title or secret trust or equity existing at the time the quitclaim deed was executed.").

In its motion for rehearing, Orca contends that a disclaimer of warranty "does not transform an instrument into a quitclaim deed." In support of this contention, Orca cites three nineteenth-century Texas Supreme Court cases which held that a party was entitled to bona fide purchaser status despite the absence of warranty of title. See White v. Dupree, 40 S.W. 962, 964 (Tex. 1897); Richardson v. Levi, 3 S.W. 444, 447 (Tex. 1887); Taylor v. Harrison, 47 Tex. 454, 461 (1887). These cases, however, merely stand for the proposition that the absence of warranty of title will not by itself preclude bona fide purchaser status. See White, 40 S.W. at 964 ("[W]hile a warranty may be looked to in order to determine whether the grantee may be an innocent purchaser or not, it is by no means conclusive."); Richardson, 3 S.W. at 448 (examining the language of the deed and concluding that the use of the word "quitclaim," under those circumstances, did not "restrict it so as to make it upon its face convey no more than the interest of the grantor in the property"); Taylor, 47 Tex. at 461 (noting that whether a deed is a quitclaim "is not to be determined merely by an omission of the covenant of general warranty of title, but may be inferred not only from the terms of the deed, but from the adequacy of the price given, and other circumstances attending the transaction calculated to show the real intent and purpose of the instrument").

Orca also cites a more recent case, Chesapeake Exploration, L.L.C. v. Valence Operating Co., in which a federal district court held that "an exclusion of warranty cannot, by itself, convert a deed in fee simple to a quitclaim deed." No. H-07-2565, 2008 WL 4240486, at *8-9 (S.D. Tex. Sept. 10, 2008). In that case, the court held that the lease at issue was not a quitclaim because, even though it contained a negation of warranty, the negation of warranty was not included in the habendum clause of the lease. Id. at *8. The court reasoned that "[a] warranty is a separate covenant from the grant. It is not part of the conveyance . . . [.] It is a contract on the part of the grantor to pay damages in the event of failure of title." Id. (citing Bass v. Harper, 441 S.W.2d 825, 827 (Tex. 1969)). On the other hand, the Letter of Intent at issue here did not even contain a habendum clause; that is, it did not contain any language separate from the negation of warranty that could be interpreted as a conveyance of property. Accordingly, the distinction made in Chesapeake is not applicable to this case.

In any event, the courts appear to agree that, "in deciding whether an instrument is a quitclaim deed, courts look to whether the language of the instrument, taken as a whole, conveyed property itself or merely the grantor's rights." Id.; Geodyne Energy, 161 S.W.3d at 486. "Whether an instrument is a quitclaim or not depends upon the intent of the parties to it as that intent appears from the language of the instrument itself." Chesapeake, 2008 WL 4240486, at *8 (citing Winningham v. Dyo, 48 S.W.2d 600, 603 (Tex. 1932)). "In other words, the key to the inquiry is: what did the lessor intend to convey." Id. (emphasis in original). Here, considering the unequivocal language of the entire Letter of Intent, we are left with no doubt that the parties intended to convey, if anything, "merely the grantor's rights" in the specified properties. See id. Accordingly, it is equivalent to a quitclaim deed for purposes of our analysis.

We therefore conclude that Orca did not raise a fact issue as to its status as a bona fide purchaser and that the trial court did not err in granting summary judgment in favor of appellees. Orca's issue is overruled.^[6]

[5] The parties disagree whether, in general, the acquisition of equitable title entitles a party to claim bona fide purchaser status. Compare Madison v. Gordon, 39 S.W.3d 604, 606 (Tex. 2001) (stating that, to be a bona fide purchaser, "one must acquire property," but not distinguishing between legal and equitable title) with Swanson v. Grassedonio, 647 S.W.2d 716, 718 (Tex. App.-Corpus Christi 1982, no writ) (noting that "[a] bona fide purchaser is one who acquires (apparent) legal title to property in good faith for a valuable consideration without actual or constructive notice of an infirmity in the title" (emphasis added)). We do not address this issue because, even if equitable title is generally sufficient to allow a grantee to claim bona fide purchaser status, the language of the Letter of Intent nevertheless precluded Orca from asserting such status. See TEX. R. APP. P. 47.1.

RECORDING STATUTE 

PROPERTY CODE

TITLE 3. PUBLIC RECORDS

CHAPTER 13. EFFECTS OF RECORDING



Sec. 13.001.  VALIDITY OF UNRECORDED INSTRUMENT.  (a)  A conveyance of real property or an interest in real property or a mortgage or deed of trust is void as to a creditor or to a subsequent purchaser for a valuable consideration without notice unless the instrument has been acknowledged, sworn to, or proved and filed for record as required by law.

(b)  The unrecorded instrument is binding on a party to the instrument, on the party's heirs, and on a subsequent purchaser who does not pay a valuable consideration or who has notice of the instrument.

(c)  This section does not apply to a financing statement, a security agreement filed as a financing statement, or a continuation statement filed for record under the Business & Commerce Code.

Acts 1983, 68th Leg., p. 3495, ch. 576, Sec. 1, eff. Jan. 1, 1984.  Amended by Acts 1989, 71st Leg., ch. 162, Sec. 4, eff. Sept. 1, 1989.



Sec. 13.002.  EFFECT OF RECORDED INSTRUMENT.  An instrument that is properly recorded in the proper county is:

(1)  notice to all persons of the existence of the instrument;  and

(2)  subject to inspection by the public.

Acts 1983, 68th Leg., p. 3495, ch. 576, Sec. 1, eff. Jan. 1, 1984.  Amended by Acts 2003, 78th Leg., ch. 715, Sec. 2, eff. Sept. 1, 2003;  Acts 2003, 78th Leg., ch. 960, Sec. 2, eff. Sept. 1, 2003.



Sec. 13.003.  INSTRUMENTS PREVIOUSLY RECORDED IN OTHER COUNTIES.  The original or a certified copy of a conveyance, covenant, agreement, deed of trust, or mortgage, relating to land, that has been recorded in a county of this state other than the county where the land to which the instrument relates is located, is valid as to a creditor or a subsequent purchaser who has paid a valuable consideration and who does not have notice of the instrument only after it is recorded in the county in which the land is located.  Recording a previously recorded instrument in the proper county does not validate an invalid instrument.

Acts 1983, 68th Leg., p. 3496, ch. 576, Sec. 1, eff. Jan. 1, 1984.



Sec. 13.004.  EFFECT OF RECORDING LIS PENDENS.  (a)  A recorded lis pendens is notice to the world of its contents.  The notice is effective from the time it is filed for record and indexed as provided by Section 12.007(c), regardless of whether service has been made on the parties to the proceeding.

(b)  A transfer or encumbrance of real property involved in a proceeding by a party to the proceeding to a third party who has paid a valuable consideration and who does not have actual or constructive notice of the proceeding is effective, even though the judgment is against the party transferring or encumbering the property, unless a notice of the pendency of the proceeding has been recorded and indexed under that party's name as provided by Section 12.007(c) in each county in which the property is located.

Acts 1983, 68th Leg., p. 3496, ch. 576, Sec. 1, eff. Jan. 1, 1984.

Amended by: 

Acts 2011, 82nd Leg., R.S., Ch. 437 (S.B. 1187), Sec. 1, eff. September 1, 2011.



Sec. 13.005.  EFFECT OF RECORDING JUDGMENT OF JUSTICE COURT.  A certified transcript of a justice court judgment recorded under Section 12.015 of this code has the same effect as a recorded deed.  A court shall admit as evidence the transcript or a copy of the transcript, if the copy is certified with the signature and seal of the clerk of the county in which the transcript is recorded, in the same manner and with the same effect as the original judgment and execution.

Acts 1983, 68th Leg., p. 3496, ch. 576, Sec. 1, eff. Jan. 1, 1984.

BONA FIDE PURCHSER & LACK OF ACTUAL NOTICE 

A bona fide purchaser is "[a] person who acquires property in good faith, for value, and without notice of any third-party claim or interest." Fletcher v. Minton, 217 S.W.3d 755, 758 (Tex. App.-Dallas 2007, no pet.). "Status as a bona fide purchaser is an affirmative defense to a title dispute." Madison v. Gordon, 39 S.W.3d 604, 506 (Tex. 2001). "In Texas, a bona fide purchaser prevails over a holder of a prior unrecorded deed or other unrecorded interest in the same property." Noble Mortg. & Invs., LLC, 340 S.W.3d at 75. "Notice will defeat the protection otherwise afforded a bona fide purchaser." Fletcher, 217 S.W.3d at 758. "Notice may be constructive or actual. Actual notice rests on personal information or knowledge. Constructive notice is notice the law imputes to a person not having personal information or knowledge." Madison, 39 S.W.3d at 606 (internal citations omitted). 

"Generally, the question of whether a party has notice is a question of fact." Nguyen v. Chapa, 305 S.W.3d 316, 323 (Tex. App.-Houston [14th] 2009, pet. denied) (citing O'Ferral v. Coolidge, 228 S.W.2d 146, 148 (Tex. 1950)); see also TEX. PROP. CODE ANN. § 13.001(a), (b).^[3]

"`Actual notice' literally means express or positive personal information or knowledge directly communicated to the person to be affected." Flack v. First Nat'l Bank of Dalhart, 226 S.W.2d 628, 631 (Tex. 1950). "In a more comprehensive sense, the term also embraces knowledge of all those facts which reasonable inquiry would have disclosed, the duty of inquiry extending only to matters that are fairly suggested by the facts really known." Id. "[I]f [a subsequent purchaser of property] had knowledge of any fact or circumstance sufficient to put a prudent man upon inquiry which, if prosecuted with ordinary diligence, would lead to actual notice of [the adverse claim], [the subsequent purchaser] [is] charged with such knowledge." Nguyen, 305 S.W.3d at 325.

"Constructive notice creates an irrebuttable presumption of actual notice in some circumstances." Noble Mortg. & Invs., LLC, 340 S.W.3d at 76. For example, "[r]ecorded instruments in a grantee's chain of title generally establish an irrebuttable presumption of notice." Id.; see TEX. PROP. CODE ANN. § 13.002 ("An instrument that is properly recorded in the proper county is notice to all persons of the existence of the instrument."). However, "a document filed for record without statutory authorization does not impart constructive notice to third parties." Countrywide Home Loans, Inc. v. Howard, 240 S.W.3d 1, 4 (Tex. App.-Austin 2007, pet. denied); see TEX. PROP. CODE ANN. § 13.001(a); Hayden, 12 S.W. at 821.

A purchaser of real property "may be charged with constructive notice of an occupant's claims." Madison, 39 S.W.3d at 606. "This implied-notice doctrine applies if a court determines that the purchaser has a duty to ascertain the rights of a third-party possessor. When this duty arises, the purchaser is charged with constructive notice of all the occupant's claims the purchaser might have reasonably discovered upon proper inquiry." Id. (internal citations omitted). The "duty to ascertain the rights of a third-party possessor" arises "only if the occupant's possession is visible, open, exclusive, and unequivocal." Id.; Apex Fin. Corp. v. Garza, 155 S.W.3d 230, 234 (Tex. App.-Dallas 2004, pet. denied).

The general rule describing the "character of possession" that constitutes constructive notice, is that the possession "must consist of open, visible, and unequivocal acts of occupancy in their nature referable to exclusive dominion over the property, sufficient upon observation to put an intending purchaser on inquiry as to the rights of such possessor." Strong v. Strong, 98 S.W.2d 346, 350 (Tex. 1936). Several cases subsequent to Strong provide more definitive guidance. In Madison, the Supreme Court held that possession as a tenant in one unit of a four-plex rental property was not sufficiently exclusive or unequivocal to provide constructive notice of the tenant's ownership claim. Madison, 39 S.W.3d at 607. That Court noted several earlier cases that "seemingly support [the] position that possession alone gives rise to constructive notice." Id. The Madison Court did not "question the ultimate outcome in these cases," but it distinguished the earlier cases stating, "in each of these cases, the occupant lived in a single-unit dwelling. Arguably, this sole possession of property implicates visibility, openness, exclusivity, and unequivocality." Id. In Bell v. Smith, one of the earlier cases noted by the Madison Court, it was held that the appellant, the subsequent purchaser of a house, was not a bona fide purchaser because the appellant's "deed was obtained by her at a time when [the appellee] was in actual possession of the property." Bell v. Smith, 532 S.W.2d 680, 686 (Tex. Civ. App.-Fort Worth 1976, no writ). The Bell Court determined that the appellant had constructive notice of "all the rights and title" of the appellee because the appellee "was then living in [the house] as her home and continued in possession of it until [the] case was tried." Id.

2. Application of Law to Facts

Regan asserts that it is a bona fide purchaser "by virtue of purchasing Dykema's interest in the property." Anticipating Whoa's response, Regan contends that although the Whoa Deed was in fact recorded, it "failed to give any notice to any third party" because the Whoa Deed was not acknowledged as required by law. Whoa does not respond to Regan's contention that a recorded, but improperly acknowledged deed "fail[s] to give any notice to any third party."

Having previously determined that the Whoa Deed was not "effectively recorded," we conclude that the Whoa Deed "[did] not impart constructive notice to third parties."^[4] See Countrywide Home Loans, Inc., 240 S.W.3d at 4.

Whoa contends that even if the Whoa Deed did not provide constructive notice, the Dangtran affidavit raises facts that show Regan and its predecessors in interest had constructive notice of Whoa's claim because of Dangtran's visible, open, exclusive, and unequivocal possession of the property. On appeal, Regan contends that the facts offered in the affidavit are insufficient to raise a genuine issue of material fact.

Dangtran's affidavit makes several statements that Whoa contends raise a genuine issue of material fact regarding whether Dangtran's possession of the property was visible, open, exclusive, and unequivocal. See Madison, 39 S.W.3d at 606-07; Apex Fin. Corp., 155 S.W.3d at 234-36. According to Dangtran, he began living with Le at the property on or about October 31, 2007, but Le ceased living at the property in "late winter or early spring of 2008," while he continued living there until "September or October, 2011." Therefore, Whoa contends that on June 30, 2010, when Le conveyed the property to herself, obtained the loan from DHLC, and executed the Le DOT on the property, Dangtran was in visible, open, exclusive, and unequivocal possession of the property.^[5] Regan contends that the facts offered are insufficient because "the record reflects that Dangtran and Le were married," so Dangtran's possession was not unequivocal.

Regan cites Strong, for the proposition that "possession by a member of the record owner's family [is] not [un]equivocal." However, Strong is distinguishable from the facts in this case. See Strong, 98 S.W.2d at 347-50. The appellees in Strong held an oil and gas lease executed by the appellants' father and the holder of legal title to the property, Manuel Strong, and his second wife. Id. at 347. The appellants were Manuel's two children by his first wife, and they claimed a right to their deceased mother's community interest in the land. Id. at 350. At all relevant times, the appellants occupied the land with Manuel, his second wife, and their five children. "They lived as one family and all helped cultivate the farm." Id. That Court found that the appellants "resided on the land as [] member[s] of Manuel Strong's family and [were] in no sense in open or exclusive possession." Id. Rather, "[t]he visible possession was that of the father, Manuel Strong, who held the legal title." Id. Hence, that Court held "[i]f the presence of [appellant] as a member of the family may be considered possession, it is apparent that his possession was not of the character or quality that gives constructive notice." Strong, 98 S.W.2d at 347. In the case before us, the only evidence offered on this issue is the Whoa Deed, the Le Deed, the Le DOT, and the affidavit of Dangtran. Dangtran's sole reference to a familial relationship is his statement that in late 2007 he was in "a failing marriage with Tuyet Anh Le." We also note that the record shows, in June 2010, Le executed the Le DOT identifying herself as "a single woman."

Dangtran claims that he was still in sole possession of the property when the Le DOT and note were assigned to Dykema and when Regan purchased the property at the trustee's foreclosure sale. As reported by Dangtran, no one inquired about his interest in the property at any time. Whoa contends that had DHLC, Dykema, or Regan inquired about Dangtran's rights to the property, they would have learned about Whoa's claim. In Regan's motion for summary judgment, it claimed it was a bona fide purchaser. Regan did not address the issue of constructive notice from Dangtran's possession in its motion for summary judgment, and no reply was filed to Whoa's response and Dangtran's affidavit.

The record indicates that only Dangtran occupied the property after "late spring or early winter of 2008" when Le moved to California. See Apex Fin. Corp., 155 S.W.3d at 235. Unlike the property in Madison, the subject property in this case is not a multi-unit rental property and no other facts in this record establish that Dangtran's possession was "compatible with another's ownership assertion." See Madison, 39 S.W.3d at 607; Apex Fin. Corp., 155 S.W.3d at 235 (holding that a subsequent purchaser had constructive notice of the possessor's claim and noting that the subsequent purchaser "presented no evidence that it received any assurances of ownership from [the record title owner]" such that the possession was "compatible with another's assertion of ownership"). Like the possessor in Bell, the record shows that Dangtran was "living in [the property] as [his] home" when DHLC, Dykema, and Regan acquired their respective interests in the property. See Bell, 532 S.W.2d at 686; see also Madison, 39 S.W.3d at 607 ("Arguably, this sole possession of [a single-unit dwelling] implicates visibility, openness, exclusivity, and unequivocality."). We agree with Whoa that Dangtran's affidavit raises a genuine issue of material fact regarding whether his possession of the property was visible, open, exclusive, and unequivocal. See Madison, 39 S.W.3d at 606-07; Apex Fin. Corp., 155 S.W.3d at 234-36. Consequently, Regan did not conclusively prove every element of its bona fide purchaser defense and was not entitled to summary judgment. See In re Estate of Hendler, 316 S.W.3d at 707-09. Because we conclude the trial court erred in granting summary judgment in favor of Regan, we decide Whoa's second issue in its favor. See TEX. R. CIV. P. 166a(c).

III. REGAN'S THIRD PARTY CLAIMS

Regan contends that if we reverse the summary judgment declaring that Regan has "proper, exclusive title to the residential property," then we must also reverse the judgment in favor of Dykema on Regan's third party "contingent claims." According to Regan, because Dykema "did not independently move for summary judgment," the only basis for the trial court to grant judgment on the merits of Regan's third party claims was "the contingent nature of Regan's claims." Dykema did not file a brief or appear for submission.

In his "motion joining" Regan's amended third motion for summary judgment, Dykema contended he "is not liable to [Whoa] or Regan on any legal theory asserted in this case" and that he "is a bona fide lender and was entitled to foreclose on the [Le DOT]." The order granting final judgment specified that Regan take nothing on its claims against Dykema "[b]ecause of the Court's grant of summary judgment and the judgment being rendered herein." Because there remains a material issue of fact as to Regan's assertion of its bona fide purchaser status, Regan was not entitled to summary judgment awarding it "proper, exclusive title" to the property, and the trial court erred in granting Dykema summary judgment on that basis. We decide in favor of Regan on its "conditional cross issue."

IV. CONCLUSION

A genuine issue of material fact precludes Regan's entitlement to summary judgment. We reverse the summary judgment in favor of Regan and against Whoa. Because the judgment in favor of Dykema on Regan's third party "contingent claims" was based solely on the summary judgment in Regan's favor and against Whoa, we reverse the judgment in Dykema's favor and against Regan. We remand this case in its entirety to the trial court for proceedings consistent with this opinion.

SOURCE: DALLAS COURT OF APPEALS - No. 05-13-01412-CV. - 11/24/2014 

Nature of title insurance and claim on policy when there is a problem with title to real property

WHAT IS A TITLE INSURANCE POLICY? 

“A title insurance policy is a contract of indemnity.” Chicago Title Ins. Co. v. McDaniel, 875 S.W.2d 310, 311 (Tex. 1994) (citing S. Title Guar. Co. v. Prendergast, 494 S.W.2d 154, 158 (Tex. 1973)). The issuance of a policy does not constitute a guarantee or representation as to the status of title.
McDaniel, 875 S.W.2d at 311. Instead, it obligates the title insurer to pay the loss or damage suffered by the insured as a result of the title defect. Id.

We analyze disputes over the interpretation of insurance contracts under the well-established principles of contract construction, attempting to determine the parties’ intent through the written language of the policy. See Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118, 126 (Tex. 2010). We examine the entire policy and seek to harmonize and give effect to all provisions so that none will be meaningless or inoperative. Id. If a contract for insurance has a clear and definite meaning, then it is not ambiguous as a matter of law, even if the parties interpret the policy differently. Id. at 133.

SOURCE: HOUSTON COURT OF APPEALS - NO. 01-14-00170-CV - 5/12/2015

CITED SUPREME COURT CASE

875 S.W.2d 310 (1994)

CHICAGO TITLE INSURANCE COMPANY
v.
Jerry E. McDANIEL and Christina W. McDaniel.

No. D-3648.

Supreme Court of Texas.

January 5, 1994. Rehearing Overruled June 8, 1994. PER CURIAM.

This cause involves claims against a title insurer based on the Texas Deceptive Trade Practices-Consumer Protection Act, TEX.BUS. & COM.CODE §§ 17.41-.63 (DTPA). The court of appeals held that "there are genuine issues of material fact under the DTPA," and therefore reversed the trial court's summary judgment in favor of the title insurer. 873 S.W.2d 712. Because we conclude that there is no genuine issue of fact concerning any misrepresentations by the title insurer, we reverse the judgment of the court of appeals.

Jerry and Christina McDaniel purchased a home from Couch Mortgage Company in September 1983. At the time of the closing, the McDaniels also purchased a title insurance policy to be issued by Chicago Title Insurance Company. The policy, which the McDaniels received several weeks later, provides in part that Chicago Title "for value does hereby guarantee to the Insured ... that as of the date hereof, the Insured has good and indefeasible title to the estate or interest in the land described or referred to in this policy."

In December 1988, the McDaniels received notice from the bankruptcy trustee of Couch Mortgage that their property was subject to a preexisting lien that had been properly filed and recorded in April 1983. The McDaniels abandoned the property in October 1989. Three months later, a federal bankruptcy court ruled that the McDaniels' purchase money lien on the property was superior to the preexisting lien.

The McDaniels brought this suit in late 1990, seeking damages under the DTPA based on Chicago Title's representations. In April 1991, Chicago Title secured the release of the preexisting lien.

Chicago Title asserts that it has discharged its obligations under the title insurance policy, and that it cannot be liable under the DTPA because it has made no representations regarding the status of the title to the McDaniels' property. We agree.

311*311 A title insurance policy is a contract of indemnity. Southern Title Guar. Co. v. Prendergast, 494 S.W.2d 154, 158 (Tex. 1973). In other words, the only duty imposed by a title insurance policy is the duty to indemnify the insured against losses caused by defects in title. See Martinka v. Commonwealth Land Title Ins. Co., 836 S.W.2d 773, 777 (Tex.App.—Houston [1st Dist.] 1992, writ denied); see also Stewart Title Guar. Co. v. Cheatham, 764 S.W.2d 315, 320-21 (Tex.App.—Texarkana 1988, writ denied). Thus, Chicago Title's issuance of a policy did not constitute a representation regarding the status of the property's title; rather, it constituted an agreement to indemnify the McDaniels against losses caused by any defects.

A title insurer may be held liable under the DTPA for an affirmative representation that is the producing cause of damages to the insured. First Title Co. v. Garrett, 860 S.W.2d 74 (Tex.1993).[1] In the present case, however, there is no allegation of any such affirmative representation. Nor is there any allegation that Chicago Title breached its duty under the contract, or that it may be liable to the McDaniels in any other respect apart from the DTPA. Accordingly, because there is no genuine issue of fact regarding the representations made in the title insurance policy, a majority of this Court grants Chicago Title's application for writ of error and, without hearing oral argument, reverses the judgment of the court of appeals and renders judgment for Chicago Title. Tex. R.App.P. 170.

[1] In First Title, the title commitment issued by the defendant title companies included an affirmative representation that there were no restrictive covenants of record. The record reflected that it was "customary and usual" for an insured to rely on a title commitment as an assessment of the state of title. 860 S.W.2d at 76 n. 2.

Statute of Frauds as to Real Estate - Was the Property Sufficiently Identified?

STATUTE OF FRAUDS AS TO REAL ESTATE TRANSACTIONS - SUFFICIENCY OF DESCRIPTION OR IDENTIFICATION OF THE SUBJECT PROPERTY 

Statute of Frauds and Enforeability of Asserted Right of First Refusal  

A contract for the sale of real property must comply with the statute of frauds. TEX. BUS. & COM. CODE ANN. § 26.01(a)(4) (West 2009). An option to purchase contained in a real estate lease is a contract for the sale of real property that must comply with the statute of frauds. See Matney v. Odom, 147 Tex. 26, 210 S.W.2d 980, 982 (1948). Likewise, a right-of-first-refusal on the sale of real property is unenforceable unless it satisfies the statute of frauds. See Reiland v. Patrick Thomas Props., Inc., 213 S.W.3d 431 (Tex. App.-Houston [1st Dist.] 2006, pet. denied); Jones v. Brown, No. 04-99-00775-CV, 2000 WL 1056028 (Tex. App.-San Antonio Aug. 2, 2000, no pet.)(not designated for publication).

THE CRITICAL NATURE OF ADEQUATE PROPERTY DESCRIPTION 

A contract for the sale of real property satisfies the statute of frauds only if the property description is "so definite and certain upon the face of the instrument itself, or in some other writing referred to, that the land can be identified with reasonable certainty." Matney, 210 S.W.2d at 982. When the contract at issue is an option contained within another document, it is the property to be conveyed pursuant to the option that must be identified with reasonable certainty. See Matney, 210 S.W.2d at 982; Ardmore, Inc. v. Rex Group, Inc., 377 S.W.3d 45, 57 (Tex. App.-Houston [1st Dist.] 2012, pet. denied). Whether the property description in a writing is sufficient to comply with the statute of frauds is a question of law. Dixon v. Amoco Prod. Co., 150 S.W.3d 191, 194 (Tex. App.-Tyler 2004, pet. denied).

SOURCE: SAN ANTONIO COURT OF APPEALS - 04-12-00363-CV - 3/20/2013  

The Hasketts' motion for summary judgment asserted the right-of-first-refusal is unenforceable because the description of the property subject to the right-of-first-refusal fails to furnish any means by which the property referred to can be identified with reasonable certainty. The Hasketts submitted uncontroverted summary judgment evidence that the property is located at 470 S. Main and consists of 0.557 acres, more or less, and a building that is approximately 8,210 square feet. They argue there is no information in the four corners of the lease by which the 5188 square feet "premises" in the lease could be located out of the entire property at 470 S. Main. Further, the lease does not refer to any other document from which the specific identity and location of the property subject to the right-of-first-refusal could be ascertained.

OTR first argues that the lease sufficiently describes the property to be conveyed under the right-of-first-refusal as the property being leased ("approximate[ly] . . . 5188 square feet [at] 407 S. Main Street [in] Boerne, Kendall County, Texas 78006"). It argues that anyone familiar with Boerne could identify the property referred to from the address, the identity of the owners, and identity of the lessee. We disagree. The address in the description of the premises in the lease is incorrect and the lease does not identify the owner of the property, only the lessor. See Matney, 210 S.W.2d at 983 ("It will not necessarily be inferred that he owned the land simply because he signed the lease contract as lessor."). More importantly, "a deed purporting to convey land, which describes it only by quantity and as being part of a larger tract, with nothing whereby to identify what specific portion of the larger tract is intended to be conveyed, is void for uncertainty of description." Matney, 210 S.W.2d at 983 (quoting Smith v. Sorelle, 126 Tex. 353, 87 S.W.2d 703, 705 (1935)); See Texas Builders v. Keller, 928 S.W.2d 479, 481-82 (Tex. 1996) (holding description of property as "58,333 square feet . . . at 12050 Rojas" is insufficient to identify the property with reasonable certainty where the property at that address contained 100,000 square feet and nothing in document identifies which part of the property is being referred to); Hereford v. Tilson, 145 Tex. 600, 200 S.W.2d 985, 988-89 (1947) (holding that where lease provided lessee option to purchase part of property at given location, but it could not be determined what part of the property was included without resort to parol evidence, option violated statute of frauds and would not be enforced).

OTR argues alternatively that the "premises" referred to in the right-of-first-refusal is the entire property—the land and building—at 470 S. Main, and that the property is sufficiently described by identifying the street address and the owner. We again disagree. First, nothing in the lease itself suggests the parties to lease were referring to different things when they used "premises" as opposed to "Premises." To make its argument, OTR resorts to parol evidence regarding the parties' intent. However, this intent was not expressed in the lease. Even if parol evidence established the parties knew and understood what property was intended to be conveyed, the knowledge and intent of the parties will not give validity to a contract with an insufficient property description on its face. Reiland, 213 S.W.3d at 437 (citing Morrow v. Shotwell, 477 S.W.2d 538, 540 (Tex. 1972)).

If we assume that "premises," as used in the right-of-first-refusal, refers to the entire property at 470 S. Main, the property description in the lease is still insufficient to comply with the statute of frauds. A property description consisting of a street address may be sufficient under the statute of frauds if the document also contains a statement of ownership and it is shown that the party to be charged owns only one property fitting the property description in the contract. Moudy v. Manning, 82 S.W.3d 726, 728-29 (Tex. App.-San Antonio 2002, pet. denied); see Pickett v. Bishop, 148 Tex. 207, 223 S.W.2d 222, 223-24 (1949) (holding statement of ownership in the body of the instrument is considered part of the property description). When the description of the property to be conveyed is of doubtful sufficiency, ownership is an important element. Wilson v. Fisher, 144 Tex. 53, 188 S.W.2d 150, 154 (1945). The lease does not expressly identify the owner of the property and contains no statement of ownership. Ownership cannot be inferred from the mere fact that a person is a lessor of the property or contracts to sell it. Matney, 210 at 983; Wilson, 188 S.W.2d at 154. Nor may it be supplied by parol evidence. Id. The mere description of the property by its address, without any statement of ownership is insufficient.

We hold the Hasketts met their burden to establish that the statute of frauds applies to the right-of-first-refusal and the property description is insufficient as a matter of law to comply with the statute of frauds, rendering the right-of-first-refusal unenforceable.

SOURCE: SAN ANTONIO COURT OF APPEALS - 04-12-00363-CV - 3/20/2013  

STATUTE OF FRAUDS AS AFFIRMATIVE DEFENSE 

The statute of frauds is an affirmative defense, and it is waived if not pled. TEX.R.CIV.P. 94; Phillips v. Phillips, 820 S.W.2d 785, 791 (Tex. 1991).  

What is a gift, legally speaking

CLAIM THAT TRANSFERRED PROPERTY WAS A GIFT: ELEMENTS OF PROOF

   

“A gift is a transfer of property made voluntarily and gratuitously, without consideration.” In re Marriage of Skarda, 345 S.W.3d 665, 671 (Tex. App.—Amarillo 2011, no pet.); see also Mora v. Mora, No. 04-12-00638-CV, 2014 WL 769441, at *7 (Tex. App.—San Antonio Feb. 26, 2014, no pet.) (mem. op.); Magness v. Magness, 241 S.W.3d 910, 912 (Tex. App.—Dallas 2007, pet. denied). 

  

“The existence of a gift requires sufficient proof of: (1) intent to make a gift; (2) delivery of the property; and (3) acceptance of the property.” In re Marriage of Skarda, 345 S.W.3d at 671; see also Mora, 2014 WL 769441, at *7; Magness, 241 S.W.3d at 912. “The intent of the donor is the principal issue in determining whether a gift was made.” In re Marriage of Skarda, 345 S.W.3d at 671; see also Mora, 2014 WL 769441, at *7.

PRESUMPTION ARISING FROM INTER-SPOUSAL TRANSFER OF REAL PROPERTY 

“A deed for property from one spouse as grantor to the other spouse as grantee creates a rebuttable presumption that the grantee spouse received the property as separate property by gift.” In re Marriage of Skarda, 345 S.W.3d at 671; see also Mora, 2014 WL 769441, at *7; Magness, 241 S.W.3d at 912. “The presumption may be rebutted by proof the deed was procured by fraud, accident, or mistake.” Magness, 241 S.W.3d at 912-13; see also Mora, 2014 WL 769441, at *7.  

INTERSPOUSAL GIFT - FACT ISSUE 

  

“Whether property given by one spouse to the other is a gift and the recipient’s separate property is a fact-intensive decision.” In re Marriage of Skarda, 345 S.W.3d at 671; see also Mora, 2014 WL 769441, at *7. The trial court, as the fact-finder in this case, is the sole judge of the credibility of the witnesses and may accept or reject any or all of a witness’s testimony. In re Marriage of Skarda, 345 S.W.3d at 672; see also Mora, 2014 WL 769441, at *7; Magness, 241 S.W.3d at 913. 

   

SOURCE: SANANTONIO COURT OF APPEALS - 04-14-00011-CV - 11/19/2014

  

Statute of Frauds as to real estate transactions: What kind of description of the property is sufficient?

   

ADEQUACY - or otherwise - OF PROPERTY DESCRIPTION TO SATISFY THE STATUTE OF FRAUDS

  

The statute of frauds does not require that a complete description of the land to be conveyed appear in a single document. See Padilla v. LaFrance, 907 S.W.2d 454, 460 (Tex. 1995)) (holding that series of letters between parties satisfied statute of frauds). A property description is sufficient if the writing furnishes within itself, or by reference to some other existing writing, the means or data by which the particular land to be conveyed may be identified with reasonable certainty. See AIC Mgmt. v. Crews, 246 S.W.3d 640, 645 (Tex. 2008). The description of the land may be obtained from documents that are prepared in the course of the transaction, even if those documents are prepared after the parties’ contract for sale. See Porter v. Reaves, 728 S.W.2d 948, 949 (Tex. App.—Fort Worth 1987, no writ) (description of land as “1/2 of 20-acre tract” satisfied statute of frauds because location of tract was not disputed, the parties referenced a drawing of the tract in their contract, and seller was required to furnish “current survey” of land after contract was executed); see also Adams v. Abbott, 254 S.W.2d 78, 80 (Tex. 1952) (description furnished by exchange of correspondence between the parties)

   

SOURCE: HOUSTON COURT OF APPEALS - 01-11-00460-CV – 5/25/12 

General Metal Fabricating Corporation v Stergiou (Tex.App.- Houston [1st Dist.] May 24, 2012)