Opinion
No. 05-09-00581-CV
Opinion Filed July 29, 2011.
On Appeal from the 296th Judicial District Court Collin County, Texas, Trial Court Cause No. 296-00878-2008.
Before Justices O'NEILL, FRANCIS, and MYERS.
MEMORANDUM OPINION
Two weeks after moving into their recently constructed home, Zakaria and Shagufta Siddiq learned the property was scheduled to be sold at a constable's sale to satisfy a judgment lien held by LaTroy and Anita Hawkins against the Siddiq's builder. The Siddiqs sued the Hawkinses to enjoin the sale. After hearing the evidence, the trial court found against the Siddiqs and awarded attorney's fees to the Hawkinses.
On appeal, the Siddiqs contend the evidence is legally and factually insufficient to support the trial court's failure to find they held an equitable right or interest in the property superior to the Hawkinses' judgment lien. Further, they assert the abstracts of judgment were improperly indexed and failed to provide constructive notice to them or to create a lien against the property. Finally, they contend the issue of attorney's fees must be remanded because the Hawkinses should not have prevailed below. For the reasons set out below, we overrule all issues and affirm the trial court's judgment.
The property that is the subject of this suit is located in the Hills of Breckinridge in the City of Richardson. In 2006, Cresswell Enterprises, Inc. owned the property. That summer, the Siddiqs were looking for a lot to build a house and found the property in dispute. Cresswell, however, would sell the lot only to an approved builder. The Siddiqs approached Penhollow Customer Homes, LLC (PCH), who previously built a home for them. According to Zakaria Siddiq, he talked to Steve Penhollow of PCH about helping him acquire the lot and build a house. Penhollow agreed and the two negotiated the project. In September, the Siddiqs put up a $20,000 lot deposit with PCH and agreed to pay another $1500 "to move forward on concept drawings." On December 15, 2006, PCH purchased the lot from Cresswell Enterprises, Inc. for $234,637.60 in a cash transaction, and title was put in PCH's name. That same day, the Siddiqs and PCH entered into a Residential Construction Contract (RCC) whereby PCH would build a house on the lot for the Siddiqs. Under the contract, the lump sum price for the project was $837,326.19. According to the agreement, the Siddiqs agreed to pay a total of $100,000 with PCH as a deposit on the property and construction contract, including the $20,000 previously paid. So, on that day, the Siddiqs put up another $20,000 and gave PCH a second check for $60,000 dated three days later. Siddiq testified it was his understanding that he owned the lot and PCH was the builder or contractor.
On May 22, 2007, the Hawkinses obtained a judgment against Steven Penhollow and PCH in Collin County in the amount of $566,905 plus court costs and interest. On June 12 and June 15, 2007, the Hawkinses filed abstracts of judgment in Collin and Dallas counties, respectively. On June 30, the Hawkinses garnished PCH's bank account. Less than two weeks later, on July 12, PCH transferred the property at issue on to Penhollow, Inc., the company of Steven's father, John Penhollow. At the time of the transfer, the evidence showed that both John and Steven Penhollow were aware of the Hawkinses' judgment.
On March 4, 2008, the Collin County constable executed a Notice of Constable Sale with respect to the property. By the next day, the Penhollows were aware of the Hawkinses' lien, as evidenced by a letter from their counsel to the Hawkinses' counsel. A few days later, the Siddiqs were informed for the first time that the property had been transferred to Penhollow, Inc. during construction. According to Siddiq, John Penhollow told him he had taken over the project because of construction finance issues and he would be transferring title on the property. On March 11, the Siddiqs signed a Contract of Sale of the property with Penhollow, Inc. The Penhollows did not inform the Siddiqs of the judgment lien. Three days later, on March 14, Penhollow, Inc. conveyed the property to the Siddiqs. The final purchase price was $901,326.19. Two weeks later, after the Siddiqs had moved into their home, they learned a constable's sale of the property was scheduled. The Siddiqs sued the Hawkinses and sought declaratory relief that, no later than December 2006, they acquired equitable right or title to the property superior to any interest claimed by the Hawkinses and also sought to permanently enjoin any efforts to enforce the lien claim based on the PCH judgment.
At the conclusion of the evidence, the trial court found in favor of the Hawkinses and made findings of fact and conclusions of law. Relevant to this appeal, the trial court found the agreement between PCH and the Siddiqs reached on or before December 15, 2006 (1) was not such that the Siddiqs acquired an equitable right or title in the property at the time the parties reached the agreement; (2) did not convey an equitable right or title in the property at the time the parties reached the agreement; and (3) was not such that title to the property was held in trust for the Siddiqs. Additionally, the trial court found PCH did not agree to hold record title for the Siddiqs until the Siddiqs' construction project was completed and closed at which time record title would be transferred to the Siddiqs; the abstracts of judgment were notice to the Siddiqs of the judgment lien; and the Siddiqs did not take title to the property in good faith, without actual or constructive notice of the claims of the Hawkinses. The trial court made the following conclusions of law, challenged by the Siddiqs: (1) the abstracts of judgment were properly recorded and indexed in Collin and Dallas counties and were, as of March 14, 2008, a valid judgment lien on the property at issue and gave notice to the Siddiqs of the lien; (2) the Siddiqs did not obtain equitable title to the property before March 14, 2008; (3) the Hawkinses are entitled to foreclose the judgment lien on the property; and (4) the Hawkinses' judgment lien is superior to any liens, equitable or legal, placed on the property by the Siddiqs or Penhollow, Inc. or PCH.
We review a trial court's findings of fact for legal and factual sufficiency under the same standards as jury findings. Rich v. Olah, 274 S.W.3d 878, 883 (Tex. App.-Dallas 2008, no pet.). To analyze the legal sufficiency of the evidence supporting a finding, we review the record in the light most favorable to the trial court's finding, crediting favorable evidence if a reasonable factfinder could and disregarding contrary evidence unless a reasonable factfinder could not. See City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). A party attacking the legal sufficiency of an adverse finding on an issue on which he bore the burden of proof must demonstrate that the evidence establishes, as a matter of law, all vital facts in support of the issue. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001). In reviewing a factual sufficiency challenge, we consider and weigh all the evidence in a neutral light and may set aside the finding only if the evidence is so weak or the finding is so against the great weight and preponderance of the evidence that is clearly wrong and unjust. Id. In a bench trial, the trial court is the sole judge of the credibility of the witnesses and weight to be given their testimony. LaCroix v. Simpson, 148 S.W.3d 731, 734 (Tex. App.-Dallas 2004, no pet.). We review the trial court's conclusions of law de novo. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002).
In their first issue, the Siddiqs challenge the legal and factual sufficiency of the trial court's findings that the agreement did not convey equitable title or right in the property or was not such that the Siddiqs acquired equitable right or title to the property. They argue they conclusively established they obtained equitable right or title in December 2006, months before the Hawkinses obtained their judgment against PCH and abstracted the judgment. They argue this equitable right or title was superior to the judgment lien. 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 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).
The Siddiqs first assert an equitable right or title was created by an agreement with their builder "whereby the builder would take title to the Lot on the Siddiqs' behalf, build their house on the Lot, and convey the Property to them upon completion of construction and final payment by the Siddiqs." They assert this agreement to convey was evidenced by the testimony of Zakaria Siddiq and Steven Penhollow, who testified PCH took title to the property for the Siddiqs because the developer would sell only to an approved builder. Further, they assert various documents confirmed the existence of the agreement: (1) a September 2006 letter, signed by the Siddiqs and Steven Penhollow, requiring $20,000 as a deposit to secure the lot from Cresswell and further stating Cresswell had agreed to sell the lot to PCH for the "Siddiq residential construction project"; (2) the Residential Construction Contract identifying the Siddiqs as "Owners" of the property, defining that term to mean "all of the persons who have any ownership interest whatsoever in the Property," and setting the price of the construction project; (3) a December 2006 letter executed on the date of the Residential Construction Contract acknowledging receipt of a $20,000 check "as a deposit toward the lot closing" and a $60,000 check as a "deposit on lot and contract on above property"; and (4) actual payment of $100,000 in "up-front money" documented by the three checks. Although the Siddiqs argue this evidence conclusively establishes an oral agreement that PCH took legal title subject to their equitable title in the lot, we cannot agree. As the trier of fact and sole judge of witnesses' credibility, the trial court did not have to believe Siddiq's and Penhollow's testimony regarding their intent, particularly in light of other evidence that showed PCH conveyed the property to a third party, Penhollow, Inc., without notifying the Siddiqs until the improvements were complete and a contract for sale needed to be executed with that third party. As for the "owner" language in the residential construction contract, Steven Penhollow testified the same contract is used regardless of whether the customer or PCH owned the lot. Reviewing the evidence in the light most favorable to the trial court's judgment, the trial court could have reasonably believed the Siddiqs made a down payment to a builder to construct a house for them on a lot they selected, not that they agreed with PCH that PCH would take legal title subject to the Siddiqs' equitable title in the property.
The Siddiqs next argue that, at the least, the Residential Construction Contract established equitable rights or title in the property. They equate the document with a contract for the sale of land and argue it passed equitable title to them. Again, we disagree. 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.
Having reviewed the Residential Construction Contract, we cannot say it is the equivalent of a land sale contract. The RCC is an agreement for services in connection with the construction of a single-family residence. It sets out the responsibilities of the respective parties, the warranties and inspections, the lump sum price of the contract and down payment requirement, and payment provisions. Additionally, it contains provisions for termination of the agreement. The RCC is not an instrument that conveys or passes an interest in property; rather, its purpose was to improve property and provide the guidelines under which those improvements would be made. In fact, the Siddiqs and Penhollow, Inc. executed a "Contract of Sale" to convey the property once the improvements were completed. We conclude the RCC did not create equitable title or right in the Siddiqs to the property. Having reviewed the evidence under the appropriate standards, we conclude it is legally and factually sufficient to support the trial court's findings. We overrule the first issue.
In their second issue, the Siddiqs challenge the legal and factual sufficiency of the evidence to support the trial court's findings that the agreement reached in December 2006 was not such that title to the property was held in trust for the Siddiqs and that PCH did not agree to hold record title for the Siddiqs until the construction project was completed and closed, at which time record title would be transferred to the Siddiqs. They argue the evidence established they were the beneficiaries of a resulting or parol trust that was superior to the Hawkinses' lien claim. They assert a resulting or parol trust was created because they made a $100,000 down payment and also "bound themselves in 2006 to pay the entire purchase price for the Property and the construction of the home[.]" As legal support for this contention, they rely on Williams v. Robinson, No. 12-08-00260-CV, 2009 WL 2356268, *11 (Tex. App.-Tyler July 31, 2009, no pet.) (mem. op.). We are not persuaded.
The Williams case involved the purchase of land on credit. The mother made a down payment on a house and acreage, and her daughter signed a promissory note secured by a deed of trust for the balance of the purchase price. The deed was put in the daughter's name. A dispute arose, and the mother sought to have a resulting trust imposed on the property. In resolving the issue, the court recited law, relied on by the Siddiqs here, that a "resulting trust will arise from the purchase of land on credit even though the grantee gives her note for the purchase price, if the trust claimant can establish that she, before or concurrently with the conveyance to the grantee, became bound to pay the note or to pay the grantee for the money advanced on the grantee's credit."
Here, this case does not involve the purchase of land on credit; it involves a transaction to build a house on a lot selected by the Siddiqs and for which they made a down payment. No evidence shows the Siddiqs, before or concurrently with the conveyance of the lot to Penhollow, became bound to pay a note of PCH's or to pay PCH for money advanced on PCH's credit.
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). The evidence showed the Siddiqs reached an agreement with PCH to build them a home on a lot they selected; PCH purchased the lot; and the Siddiqs made a down payment for the lot and construction. At the time PCH purchased the lot and took title to it, the Siddiqs had paid PCH $40,000, although it is not clear if these funds were in fact applied to the cash closing of the lot by PCH. None of the cases cited by the Siddiqs have facts similar to this case where a party is relying on an agreement to build a house and a down payment to assert a resulting trust. The trial court could have believed the money was to purchase the property from PCH, not that the Siddiqs advanced the money to PCH so that PCH could purchase the property on the Siddiqs' behalf from Cresswell. We conclude the evidence is legally and factually sufficient to support the challenged findings that PCH did not hold the property in trust for the Siddiqs. We overrule the second issue.
The Siddiqs' third and fourth issues challenge the legal and factual sufficiency of the evidence to support the trial court's findings that the abstracts of judgment were notice to the Siddiqs of the judgment lien and that the Siddiqs did not take title to the property in good faith, without actual or constructive notice of the claims of the Hawkins. The issue is whether the abstracts of judgment were properly recorded and indexed and thus provided notice of the lien. The Siddiqs argue the clerks in Dallas and Collin counties indexed the abstracts backwards by identifying the Hawkinses, the judgment creditors, as "grantors" and PCH and Steve Penhollow, the judgment debtors, as "grantees." They complain this "misidentification" in the index is "fatal." In their third issue, they contend they are bona fide purchasers who take the property free and clear of the Hawkinses' lien because the abstracts are not within their chain of title and therefore do not provide constructive notice of the lien. In their fourth issue, they contend the abstracts do not create a lien on the property.
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).
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.).
The Siddiqs' argument regarding how the abstracts were indexed has previously been addressed and rejected by this Court's opinion in Murray. As we explained, the statute requires indexing by "the name of each plaintiff" and "the name of each defendant" and does not mandate, or prohibit, particular headings for the alphabetical index to the real property records. Murray, 257 S.W.3d at 297. The evidence in this case showed the abstracts were recorded in the real property records of Dallas and Collin counties. The abstracts were entered on the alphabetical indices in both counties under the names of LaTroy Hawkins and Anita Hawkins as grantors and Penhollow Custom Homes LLC and Steven Penhollow as grantees and also had the instrument number. As in Murray, we cannot conclude an otherwise valid judgment lien is invalid or fails to provide constructive notice because the Hawkinses were listed under the heading "grantor" instead of "grantee" and PCH was listed under the heading "grantee" instead of "grantor." See id. at 298.
Further, the Hawkinses presented evidence from a title insurance expert, Richard Frasco, who testified it is common knowledge in the title insurance industry that the clerks in Dallas and Collin counties file the abstracts of judgment with the judgment creditor under the "grantor" heading and the judgment debtor under the "grantee" heading. If the property is located in Dallas or Collin County, Frasco said he runs the grantee index back on the current owner and then checks it again in the geographical index under the lot, block, and subdivision. In searching the property at issue here, he said he found the Hawkinses' abstracts of judgment.
We conclude the abstracts of judgment substantially complied with the statutory requirements and a reasonable search of the real property records in Dallas and Collin counties would have revealed the judgment lien against PCH. See Murray, 257 S.W.3d at 299. The evidence is legally and factually sufficient to support the trial court's findings that the abstracts of judgment were notice to the Siddiqs of the judgment lien and that the Siddiqs did not take title to the property in good faith, without actual or constructive notice of the Hawkinses' claim. We overrule the third and fourth issues.
In their fifth issue, the Siddiqs challenge the attorney's fee award to the Hawkinses. This issue, however, is predicated on the Siddiqs' argument that the Hawkinses should not have prevailed at trial. Having concluded otherwise, we likewise conclude this issue is without merit. We overrule the fifth issue.
We affirm the trial court's judgment.