By her will, Genelda Jaster left her estate to her two children, Bruce and Teresa. Bruce was appointed Independent Administrator of the estate. He collected the assets of the estate, paid the estate debts, and distributed most of the estate’s cash (more than $100,000) to Teresa and himself. Not being satisfied with Bruce’s handling of the estate, however, Teresa hired Woodward and brought suit to remove Bruce as Independent Administrator, but later reconciled the matter and dismissed the suit.

During the course of this suit, Teresa incurred substantial attorney’s fees, which she did not pay. Her attorney sued Teresa and obtained a judgment, which he promptly abstracted and recorded in Fayette County property records. Woodward intended the abstract of judgment to attach to Teresa’s interest in a piece of property that the estate had not yet distributed.

Bruce incurred additional expenses as administrator of the estate. Since he had previously distributed most of the estate’s assets, he was forced to sell the only remaining asset, the parcel of real property located in La Grange in Fayette County, in order to pay the new estate expenses in the amount of $5,178.00. Despite the fact that the judgment creditor notified both Bruce and the title company of his judgment lien, Bruce completed the sale of the property and received more than $50,000 in proceeds. Bruce used these proceeds to pay the estate expenses and distributed the remainder to Teresa and himself.

The judgment creditor then brought suit against Bruce, Teresa, and the buyers of the property seeking to foreclose his judgment lien. In addition, the judgment creditor alleged that Bruce and Teresa had conspired to defeat the judgment lien and had committed fraud by disbursing all the estate assets so that the property was the only remaining asset from which the estate debts could be satisfied.

The court of appeals upheld the trial court’s decision in favor of Bruce and Teresa. The court held that although the judgment lien had attached to Teresa’s interest in the property under Probate Code Section 37, when an independent administrator sells property pursuant to his authority to satisfy claims against the estate, the sale divests a beneficiary of her interest and thus extinguishes a lien on the property held by the beneficiary’s creditor.

In amended pleadings, the judgment creditor had also asserted that it would be unconscionable to allow the estate to sell the property to pay such an amount of debts so de minimus in relation to the value of the property, thus allowing such a large amount of money to be paid to the beneficiary/judgment debtor free from an otherwise valid judgment lien. The judgment creditor requested that the court therefore impose a constructive trust on the sales proceeds to satisfy the judgment debt.

The appellate court noted that the trial court had found that it was necessary for the administrator to sell the property in order to satisfy estate debts, and since the judgment creditor had not challenged this finding on appeal, it was not necessary for the appellate court to address the hypothetical issue of whether an administrator may sell property to pay a de minimus debt.

The results of this litigation should give some comfort to title companies that as long as the personal representative of an estate is selling property to pay legitimate debts of the estate, title to the property may be insured even though there may be a judgment lien against a beneficiary of the estate. In other circumstances, however, it should be remembered (and the court in Jaster reaffirms) that a judgment lien does attach to a beneficiary’s interest in estate property.

PURCHASER BOUND BY UNRECORDED EASEMENT
Waggoner v. Morrow, 932 S.W.2d 627 (Tex. App.—Houston [14th Dist.] 1996, no writ).

Mr. and Mrs. Waggoner owned an acreage tract in Brazoria County. In 1977, they decided to divide it into 13 tracts and start giving portions of the property to their children. The partition survey was not recorded.

Only the northernmost tract (Tract 13) had public road access. So, a 60-foot road easement was described on the unrecorded survey.

The Waggoners deeded Tract 2 to their daughter, Gail. The deed refers to the unrecorded partition survey and reserves a 60-foot easement. However, the metes and bounds description of the easement only covered the portion of the easement across tracts 6-13.

A few years later Gail conveyed the eastern portion of Tract 2 to Morrow. The tracts were divided by an existing 12- to 15-foot wide dirt road, presumably within the easement, which provided access to the public road. The legal description in her deed also referred to the partition and the 60-foot easement.

A dispute arose over the location of the easement. Morrow contended that her property abutted but was not subject to the easement. Waggoner contended that approximately 30 feet of the easement was within the western boundary of Morrow’s tract. Under Waggoner construction, the easement boundary would come within a few feet of Morrow’s front porch. The unrecorded partition survey supported Wag- goner’s position.

Morrow argued that she acquired her tract free of the easement since the legal description of record in her chain of title did not include the easement.

The trial court held for Morrow because the easement was not described as being on her land in her deed. The Court of Appeals reversed and held for Waggoner on the grounds that Morrow was on constructive notice of an unrecorded survey by the reference to it in her chain of title. Therefore, she had a duty to inquire about the unrecorded partition. It is an essential link in her chain of title and she was bound to inspect it if she could obtain a copy after diligent inquiry. Since Morrow did not plead or prove that she had looked for and failed to find the survey, she was bound by its terms, which placed the easement on her property.

Author’s Note  If you are asked to handle a transaction involving road easements and an unrecorded survey or map, you may wish to require a new survey that locates the road per the unrecorded document and as actually constructed on the ground. Carefully plotting out the legal descriptions to all fee and easement tracts will not hurt either.

CIVIL FORFEITURE OF PROPERTY
Prear v. State of Texas, 933 S.W.2d 634 (Tex. App.—San Antonio 1996, no writ).

Prear entered into an agreed judgment in a forfeiture proceeding brought against her property. She forfeited $2,437.00, two firearms, two cellular phones, and one scale. She entered into the agreed judgment during her criminal trial for possession of a controlled substance.

Prear claimed that her criminal prosecution was an attempt to punish the same conduct that was punished in the civil forfeiture, and relying on past forfeiture cases like Austin v. U.S., 509 U.S. 602 and U.S. v. Harper, 490 U.S. 435, claimed violation of the double jeopardy clause of the United States Constitution. The court went into an analysis of U.S. v. Ursery, 116 S.Ct. 2135, which reaffirmed the traditional understanding that civil forfeiture does not constitute punishment for the purposes of the double jeopardy clause. Ursery laid out a two-part test to determine if a forfeiture is punitive

(1) whether the Legislature intended pro- ceedings under the forfeiture statute to be criminal or civil; and (2) whether the proceedings are so punitive in fact as to persuade the court that the forfeiture proceedings may not legitimately be viewed as civil in nature, despite legislative intent. The factors looked at to evaluate the statute’s punitive effect are (1) whether the sanction involves an affirmative disability or restraint; (2) whether it was historically regarded as punishment; (3) whether it requires scienter; and (4) whether it promotes retribution and deterrence more than an alternative purpose. The court concluded that Chapter 59 (Texas’ forfeiture statute) was civil in nature and intended to be so by the Legislature and therefore not a punishment for purposes of the double jeopardy clause.

Author’s Note  The courts in Ursery and Prear did not address the issue of whether a statute that passes these tests on its face could be considered to be punitive as applied. A constitutional statute can be applied in an unconstitutional manner. Extreme care should be taken in dealing with property that has been involved in a forfeiture. Things to look for when dealing with property that has been subject to forfeiture include whether there was personal service, whether there was an active defense to the forfeiture proceeding, scope of the forfeiture compared to the activity leading to the forfeiture, whether there was an agreed judgment, and how long has it been since the judgment granting forfeiture.

PAYMENT OF ENTIRE TAX BURDEN BY CO-OWNER ALLOWS SAME CO-OWNER TO FORECLOSE ON TAX LIEN

Rosewood Properties, Inc. v. Community Credit Union, 944 S.W.2d 46 (Tex. App.—Eastland 1997, writ denied).

Rosewood Properties, Inc. owned a 50 percent undivided interest and William Herbert Hunt Trust Estate (hereinafter the “Trust”) owned the other 50 percent undivided interest in land and buildings upon which ad valorem taxes were due. Each was jointly and severally liable for ad valorem tax liens on this property. When the Trust was unable to pay its share of the ad valorem tax, the Trust authorized Rosewood to pay it. In return, Rosewood acquired the taxing authority’s tax lien, and instituted this action to foreclose on the lien.

The Court of Appeals reversed the Trial Court’s award of summary judgment for the defendant and awarded plaintiff’s motion for summary judgment. The Court of Appeals said that plaintiff could foreclose on its tax lien against defendants.

In acquiring its tax lien, Rosewood relied on Texas Property Tax Code Ann. Section 32.06, under which a “person other than the person liable for the taxes when imposed” may pay the tax. The chief advantage is transfer of the tax lien. In this case, Rosewood, the person paying the tax, acquired all of the rights that the taxing authority could exercise under its tax lien. Under 32.06, Rosewood stepped into the shoes of the taxing authority and was entitled to foreclose on the tax lien.

In relevant part, the statute states:

(a) a person may authorize another person to pay the taxes imposed by a taxing unit on his real property by filing with the collector for the unit a sworn statement stating the author- ization, naming the person authorized to pay the taxes, and describing the property.

(b) if a person authorized to pay another’s taxes pursuant to Subsection (a) of this section pays the taxes and any penalties and interest imposed, the collector shall issue a tax receipt to the person paying the taxes. In addition, the collector shall certify on the sworn document that payment of the taxes and any penalties and interest on the described property has been made by a person other than the person liable for the taxes when imposed and that the taxing unit’s tax lien is transferred to the person paying the taxes.

The defendants fought the plaintiff’s effort to foreclosure with three arguments, all of which were rejected by the court. First, the defendants argued that Rosewood was jointly and severally liable with the Trust for the entire tax liability, and once Rosewood paid off the Trust’s share, the tax lien evaporated. The Court of Appeals rejected this theory. Third, defendants argued that the doctrine of after-acquired title estops Rosewood from asserting any interest in the property. The court said this doctrine was not applicable because Rosewood never breached the warranty of title.

Author’s Note  A co-owner of property may pay the tax liability of another co-owner and receive a transfer of the tax lien. The advantage is enormous. If the co-owner is unsuccessful in forcing the debtor/co-owner to pay back the debt owed, the co-owner may foreclose and be repaid from the proceeds of the foreclosure.

JUDGMENT CREDITOR COULD NOT FORECLOSE ON JUDGMENT DEBTOR’S SPOUSE’S INTEREST

Gomez v. Kestermeier, 924 S.W.2d 210 (Tex. App.—Eastland 1996, writ denied).

David and Frances Gomez executed two deeds conveying two separate tracts of land to their three children. After the conveyances, Mary Ann Kestermeier (“Kester- meier”) obtained a default judgment against David Gomez and proceeded to foreclose on the Abstract of Judgment and seize both tracts of land. Kestermeier alleged that the deeds were a fraudulent conveyance and asked the court to set them aside.

The Trial Court declared the deeds void, restored full ownership of the two tracts to David and Frances Gomez, and allowed the foreclosure of the judgment lien against the entire interest of the two tracts. The Court of Appeals overruled the trial court in part and held the deeds to be valid as to Frances Gomez’s interest but not valid as to David Gomez’s interest. The Court of Appeals declared that Frances Gomez was not a judgment debtor of Kestermeier and that the judgment lien did not attach against her interest in the land.

Kestermeier argued that David Gomez’s conveyance of the two tracts was fraudulent and was binding on Frances Gomez because of their marital relationship. Kestermeier relied on the following theories to support her argument that a fraudulent deed from one spouse is binding on the other spouse  (1) common-law rule that a non-negligent husband could be sued for his wife’s negligence without her joinder and (2) a spouse has the power to dispose of non-homestead real estate held solely in that spouse’s name and that the real estate recorded solely in the name of one spouse is presumed to be subject to that spouse’s sole management and control. The Court of Appeals did not consider either of the theories to logically support her argument.

The Court of Appeals declared the conveyance of the two racts from Frances Gomez to the three children to be valid and that her interest could not be foreclosed. The Court of Appeals declared the conveyance of the two tracts from David Gomez to the three children to be void and allowed the foreclosure of the judgment lien on his interest in the two tracts. Kestermeier was entitled to David Gomez’s interest in the two tracts and the three children were entitled to Frances Gomez’s interest in the two tracts.

Author’s Note  This case shows how fact specific arguments over abstracts of judgment can be. Basically, the court held that since only David Gomez, and not his wife, was sued in the original judgment, and appropriate pleadings by the judgment creditor were not later asserted regarding this matter, that the wife’s interest could not be reached. Slightly different facts could have yielded a different result. Great care should be taken whenever an abstract of judgment against either spouse is involved in the chain of title.

Many thanks to the following for their contributions of case summaries for this publication: