*Pursuant to 5TH CIR. R. 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this opinion should not be published and is not precedent except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 5TH CIR. R. 47.5.4.

United States Court of Appeals

Fifth Circuit

FILED

August 17, 2006

Charles R. Fulbruge III

Clerk

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 05-50080

IN RE ELIZABETH HAYES,

Debtor,

BANK OF AMERICA, N.A., 

Appellant,

VERSUS

HELEN G. SCHWARTZ, Trustee, JOHN HENDERSON, AND ELIZABETH HAYES,

Appellees.

Appeal from the United States District Court for the 

Western District of Texas, San Antonio Division

( SA-03-CA-1228 )

Before DeMOSS, BENAVIDES, and PRADO, Circuit Judges.

PER CURIAM:*

This bankruptcy appeal presents a dispute over the priority of

two interests in residential real property located in San Antonio,

Texas. Bank of America, successor to NationsBank, appeals the

district court’s order affirming the bankruptcy court’s conclusion

that the bank’s secured interest on a mortgage to the real property
2

does not take priority over Mr. John Henderson’s equitable interest

in the real property. Henderson’s equitable interest was based

upon his purchase of the property by oral contract with the prior

owner, Debtor Elizabeth Hayes, as well as upon Henderson’s

subsequent residence in and improvement of the property and home.

Bank of America alleged a lien against the property based upon a

deed of trust that was executed by Hayes in favor of NationsBank,

after Henderson purchased and took possession of the property. The

deed of trust secured a promissory note in the amount of $62,990.00

and was based upon Hayes’s representation to the bank that the

property was her homestead. The bankruptcy and district courts

concluded that Bank of America had notice of Henderson’s prior

interest in the property by virtue of his open, exclusive, and

unequivocal possession and accordingly that Bank of America was not

a bona fide purchaser without notice.

In February 1997, Henderson and Hayes made an oral contract

for Henderson’s purchase of Hayes’s home in Bexar County, Texas for

$105,144.14. Henderson paid Hayes the following month in two cash

installments. Henderson requested, but never received, a General

Warranty Deed from Hayes. No instrument regarding the sale of the

property was recorded. Henderson occupied the property, and no

other residence, from April 1997 until May 1998. Henderson lived

alone in the home on the property, parked his car in the driveway,

completed improvements to the property (including external

improvements, such as installing security bars on windows and
3

installing a new external air conditioning unit), and interacted

with neighbors and local police as the owner of the property. 

In May 1998, Hayes and NationsBank executed a promissory note

secured by a deed of trust on the property. NationsBank conducted

a title search on the property and determined that Hayes was the

owner of record, but NationsBank did not inspect the property.

Bank of America contends on appeal that its “Desktop Appraisal”

method of title review prior to execution of the note was

sufficient because it comported with industry standards. Henderson

testified that he did not discover the existence of the bank’s loan

to Hayes until July 1999.

Hayes filed a Chapter 7 bankruptcy petition on September 11,

2002, and Helen Schwartz was subsequently appointed trustee. Bank

of America filed a Motion for Relief from Stay, claiming that it

was owed approximately $52,500 in unpaid principal on the note

executed by Hayes, and Henderson filed an opposition, asserting his

equitable lien in the property. The bankruptcy court ordered

filings to determine the validity, extent, and priority of the

liens. 

Henderson ultimately filed a motion for summary judgment

seeking declaration of the priority of his interest in the

property. The bankruptcy court granted the motion, concluding that

Bank of America was on inquiry and constructive notice of

Henderson’s visible, open, exclusive, and unequivocal occupation of

the property and that the bank was not a bona fide purchaser for
4

value without notice of the prior claim. See Madison v. Gordon, 39

S.W.3d 604, 606-07 (Tex. 2001). The bankruptcy court noted that

Henderson’s payment for, occupation of, and improvements to the

property satisfied the exception to the statute of frauds and

relied upon Henderson’s visible, open, exclusive, and unequivocal

possession of the property to trigger Bank of America’s duty of

inquiry. Bank of America appealed to the district court, which

affirmed the bankruptcy court’s order granting summary judgment to

Henderson. The district court declared, again, that Henderson’s

possession of the property was visible, open, exclusive, and

unequivocal, giving constructive notice of title equivalent to the

constructive notice that deed recordation would have provided.

Accordingly, the district court concluded that Bank of America was

not a subsequent purchaser without notice and that Henderson’s

interest took priority. 

This Court reviews the bankruptcy court’s rulings under the

same standards used by the district court on its appellate review:

conclusions of law are reviewed de novo, findings of fact are

reviewed for clear error, and mixed questions of fact and law are

reviewed de novo. In re CPDC, Inc. (Zer-Ilan v. Frankford), 337

F.3d 436, 441 (5th Cir. 2003). The grant of summary judgment is

reviewed de novo, applying the same standards as the district

court. Id. (citing, among others, FED. R. CIV. P. 56(c)).

Bank of America raises multiple challenges to the orders; its
5

primary arguments are equitable in nature. Bank of America argues

that Henderson’s possession was not open, visible, or unequivocal,

but it does not dispute that he alone possessed the property. Bank

of America simply argues that nothing about his possession was

inconsistent with Hayes’s possession. Bank of America also argues

that the lower courts imposed an effective duty of inquiry that

exceeds industry standards; however, it provides no Texas law, and

our independent review reveals none, that requires or permits

banking industry standards to dictate the law of interests in real

property. We decline to read any such rule into the law of the

State of Texas. 

After a careful review of the briefs and oral arguments of the

parties, we AFFIRM the district court’s opinion for essentially the

reasons that court provided. 

AFFIRMED.