Source: https://www.lonestarlandlaw.com/all-lien.html
Timestamp: 2019-04-24 12:47:59+00:00

Document:
The first relevant event in the overall process is the filing by a judgment creditor of an abstract of judgment in the real property records of the county where the property is located (or in any county where the judgment creditor believes that the debtor may have assets). This is true because a judgment by itself does not act as a lien on anything. "The judgment creditor's first step in creating a judicial lien is to obtain an abstract of judgment. When properly recorded and indexed [in the county clerk's real property records], an abstract of judgment creates a judgment lien on nonexempt real property that is superior to the rights of subsequent purchasers and lienholders. The purpose of the abstract of judgment is to create a lien against the judgment debtor's real property and to provide notice to subsequent purchasers and encumbrancers of the existence of the judgment lien." Rogers v. Peeler, 271 S.W.3d 372, 375 (Tex.App.—Texarkana 2008, pet. denied). The key distinction is between exempt and non-exempt property, a critical difference when one is discussing the homestead.
Note on tax liens: liens for ad valorem taxes as well as federal income tax liens resulting from the tax debt of both spouses are expressly permitted by Texas Constitution article 16, section 50(a). There is no removal procedure for such liens other than entering into a payment arrangement with the taxing authority.
The existence of a judgment lien or other type of lien is usually discovered when a title company checks the property records and produces a title commitment in anticipation of a sale or refinance. The appearance of one or more liens on the commitment (schedule C) will adversely affect a property's marketability. This is so because a title company may demand that the lien be paid and released as a condition of issuing a title policy—regardless of whether the lien is valid or not. The title company is being asked to insure title and is going to look after its own interests first and foremost by avoiding unnecessary liability. Fair? Probably not. A fact of life? Often.
The first step in lien release or removal is to contact the judgment creditor or its attorneys, inform them that the lien is invalid (see Part One below) or is currently showing against the homestead (see Parts Two and Three below) and then make formal demand that the creditor execute a partial release—or legal action will be taken without further notice. Creditor attorneys are knowledgeable concerning potential liability for their clients, so they will often cooperate and advise the creditor to sign a partial release when the homestead is involved. Sometimes, however, this does not happen and it will be necessary to proceed with additional action.
The best way to commence the process is to ask your real estate lawyer to send an explanatory demand letter with an already-prepared partial release enclosed, ready to be signed by the creditor. This approach has credibility. Note that any old release will not do. The release must be carefully and correctly drafted or (1) the creditor may not sign it, and/or (2) a title company may not accept it.
What is an M&M lien?
"Chapter 53 of the Property Code governs mechanic's and materialman's liens. . . . A person who provides labor or materials to construct a building or improvement under a contract with the property owner, the owner's agent, or an original contractor is entitled to a lien against that property. . . . A subcontractor is considered a derivative claimant and must rely on his statutory lien remedies. . . . A subcontractor may seek recovery from 'trapped' funds held by the property owner or funds 'retained' by the owner. . . . 'Trapped' funds are funds not yet paid to the original contractor at the time the property owner receives notice that a subcontractor has not been paid; on receiving such notice, the owner may withhold those funds from the original contractor until the claim is paid or settled or until the time during which a subcontractor may file a lien affidavit has passed." Pham v. Harris County Rentals, L.L.C., 455 S.W.3d 702 (Tex.App.—[1st Dist.] 2014, no pet.). A subcontractor or supplier "is a derivative claimant and, unlike a general contractor, has no constitutional, common law, or contractual lien on the owner's property. . . . As a result, a subcontractor's lien rights are totally dependent on compliance with the statutes authorizing the lien." Moore v. Brenham Ready Mix, Inc., 463 S.W.3d 109 (Tex.App.—Houston [1st Dist.] 2015, no pet.).
Mechanics, artisans and materialmen, of every class, shall have a lien upon the buildings and articles made or repaired by them for the value of their labor done thereon, or material furnished therefor; and the Legislature shall provide by law for the speedy and efficient enforcement of said liens.
This constitutional lien is in addition to the statutory mechanic's lien available pursuant to Property Code sections 53.001 et seq. Case law states that "the mechanic's and materialmen's lien statutes of Texas are to be liberally construed for the purposed of protecting laborers, materialmen, and owners." Trinity Drywall Systems, LLC v. TOKA General Contractors, Ltd., 416 S.W.3d 201 (Tex.App.—El Paso 2013, no pet.). All of this legal protection assumes that contractors and subcontractors will act in good faith, timely comply with notice requirements, and file only liens that reflect money legitimately owed them. But this is not always, nor even usually, the case. It has been said that the majority of liens filed in Texas are defective in some way, and that is probably true. In addition, there are always nefarious characters who file wrongful or invalid liens in an effort to shake down an owner or stop a closing until they are paid.
M&M liens may cloud title but they are not self-enforcing (i.e., they do not collect themselves without further action). Property Code sec. 53.154 provides that a "mechanic's lien may be foreclosed only on judgment of a court of competent jurisdiction foreclosing the lien and ordering the sale of the property subject to the lien." In other words, a lawsuit by the lienholder and a judicial foreclosure is required. "To prevail on its claim, the lienholder must prove it performed the labor or furnished the materials and the debt is valid. . . . In addition, the statutory lienholder must establish it substantially complied with the statutory requirements for perfecting a lien. . . ." Crawford Services, Inc. v. Skillman International Firm, L.L.C., 444 S.W.3d 265 (Tex.App.—Dallas 2014, pet. dism'd).
Property Code section 53.157 lists six ways that a mechanic’s lien may be discharged of record. The best method is of course to file a release (or partial release, as the case may be) in the real property records. Four other methods listed in the statute require the filing of a bond. The sixth means of discharge is failure by the lienholder to foreclose within the statute of limitations, which is two years.
The least expensive means of contesting a wrongful or invalid M&M lien would be to file a countervailing affidavit in the real property records, but this would merely state one's sworn opinion that the lien is invalid, perhaps for some title company to evaluate with regard to a future transaction. It would not remove or release the lien.
The motion procedure requires that the defendant (i.e., the person who filed the lien) be given at least 21 days’ notice of the hearing. The motion should be supported by relevant documents and at least one sworn affidavit. The hearing is an evidentiary hearing, a “mini-trial,” and testimony will be taken for the record. The judge then rules and the effect is immediate. There is no requirement that 30 days elapse before the ruling is final, as is the case with final judgments. A certified copy of the order should be filed in the real property records and forwarded to any title company that may be involved. Sale of the property can then proceed without further delay.
Section 53.156 provides that “the court shall award costs and reasonable attorney’s fees as are equitable and just.” An affidavit of attorney’s fees and costs should be attached to the motion.
It is at the discretion of the plaintiff as to whether or not, following a ruling on the motion, any underlying suit should continue or be dismissed. It is likely that this decision will turn on whether or not the ruling itself provides the plaintiff with sufficient compensation.
The opportunity to acquire an investment property at a bargain price may often be accompanied by one or more judgments against the owner. Note, however, that a court judgment against a person does not become a lien against real property merely by virtue of its existence as a final judgment. Several steps must first occur. Pursuant to Chapter 52 of the Property Code, the judgment creditor must obtain an abstract of judgment from the court and then file it in the real property records of the county where the property is located. "Without the abstract of judgment filed in the real property records, the rendition of a judgment does not create a judgment lien against the property." Austin v. Coface Seguro de Credito Mexico. S.A. de C.V., 506S.W.3d 707, 712 (Tex.App.—Houston [1st Dist.] 2016, pet filed. In other words, there may be a judgment, but there is no lien against specific real estate until the judgment is abstracted and filed and indexed by the county clerk. Abstracts filed in multiple counties create separate, independent liens.
A judgment lien attaches to the property only and not to any rents that or other profits that might arise from the property. Donley v. Youngstown Sheet & Tube Co., 328 S.W.2d 192 (Tex.Civ.App.—Eastland 1959, write ref'd n.r.e.).
A judgment lien properly placed against real property may be executed upon even though the underlying judgment is being appealed, and even if an appeal bond has been posted. In re. Dawkins, 11 B.R. 213 (Bankr. N.D. Tex. 1981).
Texas Property Code Section 52.0012(c) states that a judgment lien does not attach to, and does not constitute a lien on, a judgment debtor's exempt real property, including the debtor's homestead. This is simply a fact. Assertion of a bona fide homestead is therefore an absolute defense in the event a creditor seeks to execute on a judgment by forcing the sale of the homestead. The creditor may seek to discover other non-exempt assets of the debtor and attempt execution on those, but not on the homestead. Moreover, if the homestead is sold, Property Code section 41.001(5)(c) provides that the proceeds are not subject to seizure for a creditor's claim for six months after the date of sale. Having said all of that, it is not uncommon to encounter a title company which demands that liens be released prior to closing—even if it is the homestead which is being sold—so lien release (or at least a partial release as to the homestead only) can become an issue.
Some interesting caveats relating to timing: if a judgment lien attaches to property which subsequently becomes the debtor's homestead, the validity of the lien is not affected. The debtor's newly acquired homestead interest is taken subject to the already-attached judgment lien. Similarly, if a debtor occupies a protected homestead but then abandons it, the judgment lien will attach. Barrera v. State, 2005 WL 1691037 (Tex.App.—Houston [14th Dist.] 2005). If a judgment debtor acquires a homestead after a judgment lien is abstracted, filed, and indexed in the county records, the property is nonetheless protected as long as it continues to be the debtor's homestead. Hughes v. Groshart, 150 S.W.2d 827, 830 (Tex.Civ.App.—Galveston 1941, no writ).
Issues are also raised by the death of the owner of a homestead. If the owner of a protected homestead dies (either testate or intestate), and there exists an abstracted judgment against the decedent, then so long as the lien never actually attached to the property, the homestead descends to the heirs free of the judgment lien. National Union Fire Ins. Co. v. Olson, 920 S.W.2d 458, 461 (Tex.App.—Austin 1996, no pet.). However, if an heir is the subject of a judgment lien, then the lien attaches to the heir's share of the former homestead the moment the heir acquires an interest—i.e., immediately upon death of the decedent. Woodward v. Jaster, 933 S.W.2d 777, 781-82 (Tex.App.—Austin, 1996, no pet.). Presumably this rule would not apply if the property were also the existing homestead of the heir at the time of death.
Returning to the issue of which rules apply to release and removal of a particular judgment, one needs to first determine if the judgment in question was abstracted before or after September 1, 2007.
In the case of judgment liens abstracted prior to September 1, 2007, the old law as set out in the 1992 case of Tarrant Bank v. Miller, 833 S.W.2d 666 (Tex. App.—Eastland 1992, writ denied) applies. Tarrant Bank decided that a judgment creditor may be liable in damages if it fails after demand to give a partial release of a judgment as to the debtor's homestead. The best approach to removing an older lien would therefore be to send the creditor's attorney a demand for a partial release accompanied by a credible threat of litigation if the release is not signed. In other words, this is a demand/negotiation scenario rather than a statutory procedure. Eventual recourse to litigation cannot be ruled out. Since the creditor cannot be compelled to accept anything less than full payment, eventual recourse to litigation cannot be ruled out.
Property Code section 52.0012(c), in contrast to the old law, is a statutory notice and affidavit process available as to liens against the homestead which are abstracted September 1, 2007. Note the use of the word "abstracted." If the judgment was rendered before this key date but it was not abstracted until afterward, then the new law would apply. The abstract date is the key date, not the judgment date.
A judgment lien does not attach to a judgment debtor's exempt real property, including the debtor's homestead. It can be difficult, however, to persuade a title company that they should ignore a judgment. The bias of the title company should be noted here. Even though a judgment lien does not attach to a judgment debtor's exempt real property, including the debtor's homestead, it can be difficult to persuade a title company that they should ignore any judgment. A title company's automatic, self-serving reaction is usually to require that all liens be cleared. The homeowner should resist this pressure and insist on his or her homestead rights. The need to change title companies cannot be ruled out.
As is true with other liens, the first step in the process under the new law is a demand letter—in this case, a 30-day letter to the judgment creditor and its attorney. If there is no response, Property Code section 52.0012 provides that a judgment debtor may file a "Homestead Affidavit as Release of Judgment Lien" which "serves as a release of record of a judgment lien established under this chapter." The affidavit must be in proper form, meeting all requirements of the statute. However, if the judgment creditor files a contradicting affidavit, and if after filing such contradicting affidavit a purchaser or mortgagee of real property acquires the purchaser's or mortgagee's interest from the judgment debtor, then the debtor's affidavit does not act as a release of the judgment lien with respect to the purchaser or mortgagee. If the process is followed step-by-step, then the affidavit which the debtor files may be accepted by title companies as release of the judgment lien against the homestead. Nothing in the applicable law here forces a title company to do anything.
7. the proposed purchaser or lender is a bona fide third party, paying money for or lending money against the property.
The judgment creditor has a couple of options. There is nothing in the statute that requires the judgment creditor to do anything. The creditor can choose to take no action at all and usually suffer no consequences. However, potential liability could arise if the abstract actually obstructs or delays the sale of the debtor's exempt homestead. Texas Property Code section 52.0012(c) states that a judgment lien does not attach to, and does not constitute a lien on, a judgment debtor's exempt real property, including the debtor's homestead. If the subject property is clearly indicated to be residential homestead in the records of the county where it is located, the path of least resistance for a judgment creditor may be to execute a partial release of that property from the judgment lien—and then live to fight another day as to property that is non-exempt.
Alternatively, the creditor can (if grounds exist) choose to be pro-active and file an affidavit contradicting the one file by the judgment debtor. Sec. 52.0012(d)(2)(e) provides that the debtor's affidavit that the property is homestead "does not serve as a release of record of a judgment lien . . . with respect to a purchaser or mortgagee of real property that acquires the purchaser's or mortgagee's interest from the judgment debtor after the judgment creditor files a contradicting affidavit" which asserts that the debtor's affidavit is untrue or inaccurate for some other material reason. What happens if the creditor files such a contradicting affidavit? The judgment debtor's affidavit is stopped in its tracks, and the whole matter—you guessed it—then heads to the courthouse.
In order to avoid possible liability for filing a false affidavit, however, a judgment creditor would need to have some plausible grounds for the contradicting affidavit—something more than mere unsubstantiated belief.
From the point of view of the judgment debtor, there is a flaw in the process since there is nothing in the statute that requires a title company to accept the statutory affidavit provided for in section 52.0012 and then go forward with closing the transaction and issuing one or more title policies. In other words, the law is not self-enforcing. Title companies, being the conservative institutions that they are, may hesitate or refuse to go along, which can be a disappointment to a seller—and his or her attorney—who have diligently followed the provisions of the lien removal statute. A title company determined to avoid potential liability may simply claim that one's affidavit is unacceptable to them—and not even explain why, which has happened to this author more than once. What the title company is really saying is that even if the statutory affidavit were inscribed on a tablet of gold by the best team of lawyers in Texas, they would not accept it, for reasons of their own. As in other situations, it may be necessary to shop title companies until one is found that is amenable to this process.
The usual question from a debtor client is "Can you get this lien against my homestead released?" The expectation is that the attorney will obtain a Release of Lien that when recorded will conclusively, as a matter of fact and law, permanently remove the lien. Attorneys must be careful to manage the client's expectations in this regard. The statute does not provide for a traditional Release of Lien. It provides for a "Homestead Affidavit as Release of Judgment Lien" which only serves as a release if a title company agrees that it does. That is a critical difference. Accordingly, the attorney must be careful not to guarantee any particular outcome—only that the statutory notice and affidavit process will be followed. In turn, the client must accept the potential limitations on the process.
When asking that an attorney initiate the process of removing a lien from the homestead, the client should be prepared with a number of items: (1) a copy the abstract of judgment (if a copy of the judgment itself is available, supply that as well); (2) a copy of the warranty deed to the homestead; (3) a print-out from the local appraisal district indicating that the property is classified as homestead (sometimes there is a notation that it is "HS"); (4) the name and address of each judgment creditor and/or its attorneys; and (5) correspondence between the judgment creditor and the client.
Note item (4). Clients often expect a lawyer to be able to locate their creditors as part of the lien removal process. This may not be a reasonable assumption, since lawyers are not usually also private investigators. Demand letters may be returned labeled "no such address" or the like. If an investigator is needed, the client should be prepared to bear that additional expense.
By now it should be clear that a lawyer cannot offer any guarantees relating to the removal of liens from the homestead—either guarantees that negotiations with a creditor will be successful (in the case of pre-9/2007 liens) or that a title company will accept a statutory affidavit as a release of lien (in the case of post-9/2007 liens).
Texas Family Code section 157.3171 establishes a process by which an obligor may obtain the release of a child support lien against the obligor's homestead. The procedure involves the filing of an affidavit and is identical to that contained in section 52.0012 (discussed above). The law states that "the obligor is considered to be a judgment debtor under that section and the claimant under the child support lien is considered to be a judgment creditor under that section." The person claiming the lien may file a contradicting affidavit: "If the claimant files a contradicting affidavit as described by Subsection (d), the issue of whether the real property is subject to the lien must be resolved in an action brought for that purpose in the district court of the county in which the real property is located and the lien was filed." If the property is in the same county in which a divorce or action for child support was had, then the court that heard the case would likely have jurisdiction over the lien issue as well.
There are instances where a purported lien or claim against real property is outright fraudulent. Subchapter J of the Government Code provides three forms of relief in the event a fraudulent instrument is filed. The first is based on action to be taken at the clerk level. If a court clerk or county clerk has a "reasonable basis" for believing that a filed document is fraudulent, section 51.901 provides that the clerk shall, after giving notice, "(1) request the assistance of the county or district attorney to determine whether the document is fraudulent before filing or recording the document; (2) request that the prospective filer provide to the county clerk additional documentation supporting the existence of the lien, such as a contract or other document that contains the alleged debtor or obligor's signature; and (3) forward any additional documentation received to the county or district attorney."
What would provide a reasonable basis for a clerk to take action? Someone would likely have to point out the issue or supply the clerk with an appropriate affidavit.
If the motion is successful, a district judge will rule that the instrument in question not be accorded "lien status."
Since instruments "purporting to create an interest in real or personal property" are expressly mentioned, this statute includes fraudulent deeds filed in the county clerk's real property records.
(4) IS NOT asserted against real or personal property or an interest in real or personal property. There is no valid lien or claim created by this documentation or instrument.
Under this statute, "the court first must affirmatively find that the document purports to create a lien or claim against real or personal property. Tex. Gov't Code Ann. § 51.901(c)(2). Additionally, to find the subject document fraudulent, the court must determine that it is not one of the following three types of legitimate liens or claims: (1) a document or instrument provided for by state or federal law or constitutional provision; (2) a document or instrument created by implied or express consent or agreement of the obligor, debtor, or the owner of the real or personal property; or (3) a document or instrument imposed by a court as an equitable, constructive, or other lien." In re Nguyen, 456 S.W.3d 673 (Tex.App.—Houston [14th Dist.] 2015, no pet.).
Note that if the court so finds, it nonetheless makes no finding as to the underlying claim—only as to the filing of the document or instrument in question. The underlying claim may still be litigated.
Chapter 12 of the Civil Practice & Remedies Code addresses "Liability related to . . . a fraudulent lien or claim filed against real or personal property." A person who knowingly and intentionally files a fraudulent lien may be held liable in civil district court for the greater of $10,000 or actual damages, exemplary damages, and recovery of attorney's fees and costs. It is also a criminal offense. See Tex. Penal Code § 37.01. If applicable, a cause of action under Civil Practice & Remedies Code section 12.002 should be included in any suit against the lien claimant.
Filing of a fraudulent lien may under certain circumstances also form part of a cause of action under the Deceptive Trade Practices Act. Tex. Bus. & Com. Code §§ 17.44 et seq.

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