Opinion ID: 15644
Heading Depth: 3
Heading Rank: 3

Heading: Analysis of Texas Law

Text: With respect to the Texas law arguments, both the case law and authorities cited favor the position of the appellants. As FSB concedes, some of the relevant cases are difficult to reconcile, but the substantial majority of the cases hold that failure to join a lienholder in a tax foreclosure suit does not render a subsequent judgment void as to the parties who were joined in the suit. As stated in 69 Tex. Jur. 3d, Taxation, § 461 (1989), a tax deed 10 “vests good and perfect title” in the purchaser “to [such] interest owned by the defendant,” but is “subject to the rights of any person who had some interest in the property and therefore should have been joined as a party in the suit but was not so joined.” The majority of relevant cases state the same rule. For example, in Tabasco Consol. Indep. School Dist. v. Reyna’s Estate, 93 S.W.2d 796 (Tex. Civ. App.--San Antonio 1936), the court held that although both Texas statutory and decisional authority “provides and contemplates that all proper persons, including lienholders, shall be joined in suits for the collection of taxes against property in this state. It is likewise true that the failure on the part of the tax collecting authority to join all parties interested in the property in the suit shall be no defense or constitute any reason to delay judgment or action against those owners who may be properly before the court.” Id. at 798. This rule was explained by the fact that “[t]hose owners who are not parties defendant are not concluded, and their rights are not injured by the judgment entered.” Id. This appears to be essentially the same rule as is stated in the cases relied on by FSB as well. For example, in Bussan v. Donald, 244 S.W.2d 271 (Tex. Civ. App.--Fort Worth 1951, writ ref’d n.r.e.), one of three cases relied upon by FSB, the court explained that, “strangers to a judgment, that is, [persons] who are not parties or privy to a proceeding, may, when their interests are adversely affected by the judgment, impeach it whenever it is attempted to be enforced against them.” 244 S.W.2d at 273 (citation omitted). 11 As is implied by this passage, the judgment is not wholly void, but simply provides a basis upon which a lienholder may collaterally attack the judgment if it is sought to be enforced against him. As further stated in Bussan, “the prior lien holder . . . , not being a party to [the foreclosure] suit, was not bound thereby,” and “could attack it collaterally when appellants asserted it against his title.” 244 S.W.2d at 274. All of the cases either called to our attention by the parties or revealed by our review of Texas case law indicate that the cases are in substantial accord and support the rule as stated by the appellants.5 In sum, “[a] judgment in a tax suit is not void because all parties who own an interest in the property are not made parties. Such judgment foreclosing the tax lien is good as against the parties in interest joined in the suit, and parties not joined are not bound by any such judgment.” Loper v. Meshaw Lumber Co., 104 S.W.2d 597, 599-600 (Tex. Civ. App.--Eastland 1937, writ dism’d). 5 See Whitehead v. Garbury Indep. School Dist., 45 S.W.2d 421 (Tex. Civ. App.--Fort Worth 1931), in which the court stated that lienholders are proper parties, but, “that the failure to implead one or more of the interested parties did not deprive the trial court of power to render a valid judgment as to those actually impleaded.” Id. at 423 (citation omitted). Cf. Coakley v. Reising, 436 S.W.2d 315, 318 (Tex. 1968) (“[A] judgment by a taxing agency is not binding upon a person who is not a party to the suit, when his ownership is evidenced by an unrecorded document, if the taxing authority has actual or constructive notice of his title or ownership.”). Thus, while the cases state that a lienholder should, or sometimes “must,” be joined, the cases uniformly hold that failure to do so does not wholly invalidate the judgment, but rather renders it “non-binding” upon the omitted lienholder. 12 Accordingly, we hold that the 1991 tax suit was not wholly void, but because the FDIC was not made a party to the suit, its lien interest was not disposed of and appellants took the Property subject to the FDIC’s lien, just as they would have had Metroplex convey it to them subject to the FDIC’s lien but without the FDIC’s knowledge or consent.