* Pursuant to Local Rule 47.5, the court has determined that this opinion should not be

published and is not precedent except under the limited circumstances set forth in Local Rule

47.5.4. UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 96-20419

CARL G. MUELLER, JR.,

Plaintiff-Appellant,

versus

UNITED STATES OF AMERICA,

Defendant-Appellee.

Appeal from the United States District Court

For the Southern District of Texas

(H-95-CV-3641)

June 10, 1997

Before POLITZ, Chief Judge, WIENER and STEWART, Circuit Judges.

POLITZ, Chief Judge: *

This appeal involves questions o f property ownership under Texas law, of

legal and equitable title, and of the proper application of the Texas recording statute

in the factual scenario presented herein. Concluding that the trial court erred in1 A lower interest rate was available if a party to the purchase money mortgage on the

property was going to occupy the property. Carl attested that he planned to allow Clint and

his wife Karen to lease the property.

2 holding that Carl Mueller owned only a one-half interest in the subject property, we

reverse the grant of summary judgment in favor of the Internal Revenue Service.

For the reasons assigned we render summary judgment in favor of Carl Mueller.

Background

On November 1, 19 79 Carl G. Mueller, Jr. and his son Clint purchased a

piece of property near Houston, Texas known as the Braewick property. Carl paid

the earnest money, down payment, and closing costs totalin g $9,548.85. The

remaining consideration consisted of a purchase money first mortgage in the sum

of $58,000 signed by both Carl and Clint Mueller. It appears that Clint was

included as a signatory on the note in order to secure a more favorable interest

rate. 1 The warranty deed was properly recorded on November 19, 1979.

On December 5, 1979 Clint executed a deed c o nveying his interest in the

property to his father. The instrument was “executed effective as of November 1,

1979.” Carl expressly agreed therein to assume Clint’s obligations on the $58,000

note. Clint and his wife Karen then promptly moved onto the Braewick property

under an unrecorded written lease. Carl thereafter made all mortgage payments on

the property and paid for all subsequent repairs, taxes, and insurance. Carl did not3

record the December 1979 deed, however, until January 1 994 when he sold the

property.

Unbeknownst to Carl, in January of 1987 the IRS filed a Notice of Federal

Tax Lien in Harris County, Texas for the unpaid taxes of Clint and Karen for the

years 1984 and 1985. The IRS filed additional tax liens through May 1993.

In December 1993, preparatory to selling the property, Carl paid the sum of

$48,214.27 in full satisfaction of the purchase money mortgage. As noted, the

following month he recorded the December 1979 deed. Believing the property free

of encumbrances, on May 26, 1994 Carl closed the sale for the sum of $35,587.64.

The IRS immediately se ized one-half of the proceeds, $17,793.82, in partial

satisfaction of its tax liens against Clint and Karen Mueller.

Carl filed the instant wrongful levy action against the IRS. Competing

motions for summary judgment were filed. The IRS contended that by virtue of the

Texas recording statute its tax liens had priority over the late-recorded December

1979 conveyance from Clint to his father. Carl contended that Clint never had an

interest in the property to which the tax liens could attach and, even if he did, the

IRS could not take advantage of the Texas recording statute because it was not a

creditor “without notice.” Finally, Carl maintained that when he paid the purchase

money note he had become subrogated to the mortgagee’s position which primed2 Brock v. Chater , 84 F.3d 726 (5th Cir. 1996).

3 Elliott v. Lynn , 38 F.3d 188 (5th Cir. 1994).

4 Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett , 477 U.S. 317 (1986).

5 United States v. Creamer Indus. , 349 F.2d 625 (5th Cir. 1965).

6 Tex.Prop. Code Ann. § 13.001(a) (Vernon Supp. 1997). The statute provides in relevant

part:

A conveyance of real property or a n interest in real property or a mortgage

4 the tax liens. The district court rejected Carl’s motion and granted that of the IRS,

holding that Clint owned an undivided one-half interest in the subject property.

Carl timely appealed.

Analysis

A. Standard of Review

We review a summary judgment de novo

, applying the same standards used

b y district courts in such matters. 2 The court must review the facts and draw

infe rences in favor of the nonmoving party. 3 Summary judgment is only proper

when there is no genuine issue as to any ma terial fact and the moving party is

entitled to a judgment as a matter of law. 4

B. Notice Under the Texas Recording Statute

We previously have held 5 that the IRS could avail itself of the Texas

recording statute 6 in the filing of a tax l ien. We reject the contention of the IRSdeed of trust is void as to a creditor or to a subsequent purchaser for a valuable

consideration without notice un less the instrument has been acknowledged,

sworn to, or proved and filed for record as required by law.

7 Paris Grocer Co. v. Burks

, 101 Tex. 106, 105 S.W. 174 (1907) (specifically holding

that creditors, like purchasers, must be “without notice” to avoid an unrecorded deed under

the recording statute); s ee also Prewitt v. United States

, 792 F.2d 1353 (5th Cir. 1986 )

(applying the “without notice” requirement to the IRS).

8 Harrison v. Boring

, 44 Tex. 255 (1875); Wethered v. Boon

, 17 Tex. 14 3 (1856).

These cases treat “inquiry notice” as a subset of various forms of constructive notice.

Semantics a side, however, the IRS is charged with knowledge of whatever a reasonable

inquiry would have revealed. Woodward v. Ortiz , 150 Tex. 75, 237 S.W.2d 286 (1951).

5 advanced herein, however, that it somehow is exempt from the notice provisions

of that statute. 7 The recording statute requires that a creditor be without actual,

constructive, or inquiry notice of the c o nveyance that it seeks to avoid, in this

instance the 1979 deed from Clint to his father. 8

Mueller produced evidence that the IRS was on notice of his claim to full

title to the property because his tax returns reflected his son’s rental payments, his

son’s b ankruptcy petition did not list the property, and the original deed did not

specify the proportions of ownership thus creating the potential that he and his son

did not have equal ownership. We need not consider each contention in excessive

detail for we are persuaded beyond peradventure that no lending institution likely

would have relied on an ambiguous deed if offered as collate ral by the son, nor

would any purchaser or Texas title company accept same as dispositive if the son9 See Collum v. Sanger Bros.

, 98 Tex. 162, 82 S.W. 459 (1904) (holdin g that facts

placing a purchaser on inquiry notice will also place a creditor on inquiry notice).

10 The IRS appears to contend that the Texas recording statute somehow prevents Carl

from arguin g that Clint took no title in the original conveyance. The recording statute,

however, only protects the IRS from a subsequent unrecorded conveyance of an interest in

land of which it had no notice. S ee Tex. Prop. Code Ann. § 13.001. It is well settled that

“the superiority of [an equitable] title may be asserted against a judgment lien holder even

though he had no notice of the equitable title at the time of fixing his lien.” G ibralter

Savings Ass’n v. Martin

, 784 S.W.2d 555, 558 (Tex.App.

-- Amarillo 1990, writ denied);

see also Johnson v. Darr

, 114 Tex. 516, 272 S.W. 1098 (1925); Park Central Bank v. JHJ

Investments Co.

, 835 S.W.2d 813 (Tex.App. --Fort Worth 1992, no writ); J ensen v.

Bryson

, 614 S.W.2d 930 (Tex.Civ.App. -- Amarillo 1981, no writ); N ortheast Indep.

School Dist. v. Aldridge

, 528 S.W.2d 341 (Tex.Civ.App.

-- Amarillo 1975, writ ref’d n.r.e.);

Scull v. Davis

, 434 S.W.2d 391 ( Tex.Civ.App. -- El Paso 1968, writ ref’d n.r.e.). Stated

another way, the recording statute cannot affect an equitable title, which cannot be recorded,

that was acquired in the original conveyance.

6 were purporting to sell his half interest. 9 Prudence compels that more specific facts

be determined. On this ground alone, the summary judgment in favor of the IRS

must be reversed.

Carl contends that he is entitled to summary judgment. We must determine

exactly what interests Carl and Clint acquired in the original purchase because, to

satisfy Clint’s tax obligations, the IRS may reach only the portion of the property

that Clint acquired therein. At this stage of the inquiry, the Texas recording statute

is irrelevant. 10

The IRS contends that it may rely on an irrebuttable presumption of equal

interests when grantees take under a deed that is silent as to the respective interests.11 Wooley v. West

, 391 S.W.2d 157 (Tex.Civ.App.--Tyler 1965, writ ref’d n.r.e.). The

case relied upon by the district court, Zephyr v. Zephyr

, 679 S.W.2d 553

(Tex.App.--Houston [14th Dist.] 1984, no writ), likewise so holds.

12 16 Tex.Jur.3d Cotenancy & Joint Tenancy § 9 (1981); see also Wooley ; Bray v. Clark

, 9 S.W.2d 203 (Tex.Civ.App.--Waco 1928, writ dism’d w.o.j.).

7 The district court apparently a ccepted this contention. We are mindful that a

pre sumption of equal ownership initially arises when a deed is silent as to the

respective interes t of the grantees. 1 1 We are also mindful of the proposition that

“where two or more persons join in the purchase of prop erty, they will, in the

absence of an agreement to the contrary, hold title in the proportion in which each

furnished consideration for the purchase.” 12

The summary judgment record fully supports Carl’s contention that it was

n e ver intended that his son would have an ownership interest in the property. In

addition to the December deed, in which Clint conveyed all interests in the property

and Carl assumed full responsibili ty for the purchase price effective back to the

date of the original deed, it is no t disputed that Carl made all payments -- all

payments involved in the original transaction, all payments for interim mortgage,

taxes, insurance, and repair and upkeep expenses, as well as the entirety of the

mortgage satisfaction payment.

We are persuaded that although Carl and Clint originally took legal title, Carl13 Lifemark Corp. v. Merritt

, 655 S.W.2d 310, 316 (Tex.App.--Houston [14th Di st.]

1983, writ ref’d n.r.e.) (citing Cohrs v. Scott , 161 Tex. 111, 338 S.W.2d 127 (1960)); see

also Elliot v. Mansfield

, 398 S.W.2d 442 (Tex.Civ.App.--Beaumont 1965, writ ref’d n.r.e.)

(holding that when property is transferred to one but paid for by another, a presumption of

resulting trust arises).

14 Mills v. Gray

, 147 Tex. 33, 210 S.W.2d 985 (1948) (quoting 54 Am.Jur. Trusts § 188

(1945)).

8 alone had the equitable title. We understand such a situation to be covered by

what, under Texas law, is referred to as a purchase money resulting trust.

A r esulting trust arises by operation of law when title is

conveyed to one person but the purchase price or a portion thereof is

paid by another. The parties are presumed to have intended that the

grantee hold title to the use of him who paid the purchase price and

whom equity deems to be the true owner. 13

“‘From a practical viewpoint, a resulting trust involves primarily the operation of

the equitable doctrine of consideration -- the doctrine that valuable consideration

and not legal title determines the equita ble title or interest resulting from a

transaction. . . .’” 14

The summary judgment record abounds with the accepted indicators that a

resulting trust was effectuated. As noted, the payments at original closing, the

prompt execution of a deed reflecting the true legal status, the lease from father to

s on, the interim payments, and the final mortgage payout all substantiate the

existence of a resulting trust. Clint’s only obligation as the trustee of the resulting15 Nolana Dev. Ass’n v. Corsi

, 682 S.W.2d 246 (Tex. 1984); George T. Bogert, The Law

of Trusts and Trustees § 454 (2d ed. 1991) (noting that claims of a resulting trust are often

confirmed by a deed from the legal title holder to the payer of the purchase price).

16 See Eastham v. Roun dtree , 56 Tex. 110 (1882) (holding that no resulting trust can

spring from an act c o ntrary to public policy); Bute v. Stickney

, 160 S.W.2d 302

(Tex.Civ.App.--San Antonio 1942, writ ref’d w.o.m.) (holding that party seeking resulting

trust must come with clean hands).

17 Nolana Dev. Ass’n

.

9 trust was to convey legal title to his father. 15 This he promptly did.

This leads then to a consideration of the relative equities of the parties to this

litigation, for fairness and public policy considerations predominate when

considering the propriety of a resulting trust. 16 The IRS placed its first tax liens in

the Har ris County deed records in January 1987. At that time approximately

$50,000 remained unpaid on the mortgage. Had the IRS attempted to execute on

the property it would have been unsuccessful because the mortgage lien was

s uperior to its tax liens. The IRS waited seven years until Carl, unaware of its

intentions, made the land marketable by paying off the mortgage in its entirety.

The IRS then quickly confiscated one-half of the sales proceeds. During this

seven-year interval Carl kept up with all mortgage payments, insurance, taxes, and

other expenses. To allow the IRS to retain the benefits of these efforts would result

in unjust enrichment, which is something the resulting trust doctrine is designed to

remedy. 1710

For the foregoing reasons, we REVERSE the summary judgment in favor of

the IRS and RENDER judgment in favor of Carl G. Mueller, Jr.