Court Opinion

ID: 5176107
Source: CourtListenerOpinion
Date Created: 2022-01-05 07:12:56.909629+00
Date Added: 2024-06-11T08:26:19.317969
License: Public Domain

DISSENT and Opinion Filed December 28, 2021

                                    S  In The
                             Court of Appeals
                      Fifth District of Texas at Dallas
                                No. 05-20-00071-CV

       LENDINGHOME FUNDING CORPORATION, Appellant
                            V.
    TUESDAY REAL ESTATE, LLC, KEVIN MILLER, HARVA DALE
          MILLER, AND ROXANE L. MILLER, Appellees

               On Appeal from the 134th Judicial District Court
                            Dallas County, Texas
                    Trial Court Cause No. DC-18-00266

                           DISSENTING OPINION
                            Opinion by Justice Schenck
      Because Kevin Miller (“Kevin”) held legal title to the property at issue in this

case (the “Property”) when he entered into the loan transaction with LendingHome

Funding Corporation (“LendingHome”), and because LendingHome and Tuesday

Real Estate, LLC (“Tuesday”) were respectively a bona fide mortgagee and a bona

fide purchaser, I dissent from the majority’s affirmance of the trial court’s judgment

(i) declaring the deed of trust Kevin executed in favor of LendingHome, as well as

the substituted trustee’s deed transferring the Property to Tuesday, void, (ii) vesting

title to the Property in Kevin and his wife, Roxane Miller (“Roxane”), and (iii)

awarding Tuesday money damages as against LendingHome.
                  INFORMATION REGARDING PURPORTED CONVEYANCES
                        OF THE PROPERTY AFTER FORECLOSURE

         Having borrowed over $400,000 on the basis of a recorded deed showing title

solely in Kevin’s name, and with his sworn representation and warranty that (1) the

proceeds of the loan would be used for business purposes only and (2) no homestead

interests were effected by the loan,1 Kevin, Roxane, and Kevin’s mother, Harva Dale

Miller (“Harva”), now challenge the resulting foreclosure sale, conducted after

Kevin defaulted on the loan, asserting, contrary to Kevin’s representations, (1) Kevin

and Roxane have a homestead interest in the Property and (2) that Harva was the

actual owner of the Property when LendingHome made the loan according to a deed

said to be lost throughout the life of the loan and coincidentally discovered within

days immediately following the foreclosure sale.

   1
       More particularly, Kevin represented under oath:
         The Property is/will not be owner-occupied. The Property will not be occupied or
         claimed as a Primary or Secondary Residence by any of the Borrowers, and may produce
         revenue. Each Borrower(s) now owns, resides, uses and claims another property or
         properties as Borrower(s) Primary Residence.
   In addition, Kevin acknowledged under oath:
         Lender is originating the Loan in reliance upon the occupancy status indicated above.
         Should the occupancy status not be represented above, and in consideration of Lender
         making the Loan, I/we hereby agree to indemnify Lender and hold lender harmless from
         and against any and all loss, damage, liability or expense, including costs and reasonable
         attorneys’ fees . . . .
         Borrower(s) also understands that any false statements, misrepresentations or
         material omissions may result in civil and criminal penalties.
         The agreements and covenants contained herein shall survive the closing of the Loan.
                                                   –2–
        The following purported conveyances were then recorded in an attempt to vest

title in Kevin and Roxane, post foreclosure free and clear of the encumbrance Kevin

granted to LendingHome:

     On July 11, 2017, a purported conveyance from Delmo J. Johnson, Jr.
      Johnson”) to Harva was recorded;

     On October 30, 2017, a purported conveyance from Kevin to Harva was
      recorded, after Kevin filed an affidavit stating that he had made a mistake
      including the Property in Johnson’s Probate Estate;

     On October 1, 2018, a purported conveyance from Harva to Johnson Grain
      Company, Inc. was recorded; and

     On November 2, 2018, a purported conveyance from Johnson Grain
      Company, Inc. to Kevin and Roxane was recorded.

                                             DISCUSSION

        Assuming, without conceding, the evidence is sufficient to support the trial

court’s finding the Property was the homestead of Kevin and Roxane,2 I note that it

was never intended by the framers of the Constitution that the homestead law should

be used to defeat the rights of an innocent third party, who, in good faith, without

notice, and for valuable consideration, acquired a valid lien against the property.

    2
      Given Kevin’s written representations in the operative loan documents, that contain a merger clause,
disclaiming any homestead interest in the Property, his counter-representations in his affidavit concerning
both his and his wife’s intent are highly problematic. Brannon v. Gulf States Energy Corp., 562 S.W.2d
219, 222 (Tex. 1977) (parole evidence of a different meaning than written words is legally no evidence);
Despite its name, the parol evidence rule is “not a rule of evidence . . . but a rule of substantive law.”
Hubacek v. Ennis State Bank, 317 S.W.2d 30, 31 (1958). Evidence of a meaning different from the written
words is not only excludable at trial but is legally no evidence at all. Brannon, 562 S.W.2d at 222. See
also North Clear Lake Dev. Corp. v. Blackstock, 450 S.W.2d 678, 680 (Tex. App.—Houston [14th Dist.]
1970, writ ref’d n.r.e.) (attempt to vary terms of agreement violates statute of frauds); TEX. BUS. & COM.
CODE ANN. § 26.02 (loan in excess of $50,000 subject to statute of frauds).
                                                   –3–
Nat’l Bond & Mortg. Corp. v. Davis, 60 S.W.2d 429, 434 (Tex. Comm’n App. 1933).

In other words, if a lender takes a lien in good faith, for valuable consideration, and

without actual or constructive notice of outstanding claims, it is a bona fide

mortgagee. TEX. PROP. CODE ANN. § 13.001(a); Houston First Am. Sav. v. Musick,

650 S.W.2d 764, 769 (Tex. 1983). A bona fide mortgagee is entitled to the same

protections at law as a bona fide purchaser. Noble Mortg. & Invs., LLC v. D & M

Vision Invs., LLC, 340 S.W.3d 65, 76 (Tex. App.—Houston [1st Dist.] 2011, no

pet.).

         Notice sufficient to defeat bona fide mortgagee or purchaser status may be

actual or constructive. Flack v. First Nat’l Bank of Dalhart, 226 S.W.2d 628, 631

(Tex. 1950). Actual notice rests on personal information or knowledge. Madison v.

Gordon, 39 S.W.3d 604, 404 (Tex. 2001). Constructive notice is notice the law

imputes to a person not having personal information or knowledge. Id. An example

of constructive notice is where an instrument is properly recorded in the proper

county. Under those circumstances, the recording is notice to all persons of the

existence of the instrument. TEX. PROP. CODE ANN. § 13.002. Consequently, an

unrecorded deed held outside the discoverable public chain of title does not impute

constructive knowledge. Noble Mortg., 340 S.W.3d at 76.

         As to the deed purportedly conveying the Property from Johnson to Harva,

the evidence conclusively established the deed was not recorded when

LendingHome entered into the loan transaction with Kevin and no one alive, at that

                                         –4–
time, other than the notary, was aware of the deed’s existence until after the

foreclosure sale. Clearly, LendingHome is a bona fide mortgagee as against Harva.

         As to whether LendingHome is a bona fide mortgagee against claims asserted

by Kevin and Roxane, the majority, citing article XVI, section 50 of the Texas

Constitution, concludes, because the Property was Kevin and Roxane’s homestead,

LendingHome’s lien on the Property is void and thus, reasons the majority,

LendingHome was not a bona fide mortgagee. I respectfully disagree. Article XVI,

section 50(d), still dealing with homesteads, provides:

         A purchaser or lender for value without actual knowledge may
         conclusively rely on an affidavit that designates other property as the
         homestead of the affiant and that states that the property to be conveyed
         or encumbered is not the homestead of the affiant.

TEX. CONST. art. XVI, § 50(d). Moreover, a lender is afforded equitable protection

when it extends credit and obtains a lien without knowledge or the facts underling

the purported homestead claim. Patterson v. F.D.I.C., 918 F.2d 540, 546–47 (5th

Cir. 1990); Fuller v. Preston State Bank, 667 S.W.2d 214, 217 (Tex. App.—Dallas

1983, writ ref’d n.r.e.).

         Here, the record conclusively shows that Kevin represented in writing and

under oath to LendingHome that he was not residing at the Property, would not

reside at the Property,3 and the loan was for commercial purposes.

   3
       Appellant represented that he resided in Jacksonville, Texas.
                                                    –5–
      Thus, pursuant to article XVI, section 50(d), LendingHome was entitled to

rely on Kevin’s representation and, as established by the testimony of Tuesday’s

representative discussed below, Kevin’s disclosure of the fact that he was a married

man, under the circumstances presented here, did not put LendingHome on notice

of any homestead claim. At trial, Tuesday’s representative established Tuesday is a

sophisticated investor in real estate, the loan LendingHome made to Kevin was a

commercial loan, commercial loans secured by single-family homes are made every

day, and based upon its research, this Property did not appear to be a homestead and

did not require Roxane’s consent to validate LendingHome’s lien.

      Given this evidence, and the fact that LendingHome clearly gave valuable

consideration for the lien, I would conclude LendingHome was a bona fide

mortgagee and the trial court’s finding to the contrary is not sustainable. Because

LendingHome was a bona fide mortgagee, Tuesday was a bona fide purchaser at the

foreclosure sale.   See Moran v. Adler, 570 S.W.2d 883, 885 (Tex. 1978).

Accordingly, I would sustain LendingHome’s second and third issues challenging

the trial court’s findings on the bona fide mortgagee/purchaser issues and pretermit

consideration of the trial court’s findings on LendingHome’s contingent

counterclaims. TEX. R. APP. P. 47.1.

                                   CONCLUSION

      Because I believe the record establishes LendingHome is a bona fide

mortgagee and Tuesday is a bona fide purchaser, I would reverse the trial court’s

                                        –6–
judgment vesting title to the Property in Kevin and Roxane and awarding Tuesday

money damages, and I would render judgment that title is vested in Tuesday. In

light of that conclusion, I find it unnecessary to address LendingHome’s contingent

counterclaims.

      Accordingly, I dissent from the majority’s contrary decision.

                                          /David J. Schenck/
                                          DAVID J. SCHENCK
                                          JUSTICE

200071DF.P05

                                       –7–