Cadle Co. v. Ortiz

227 S.W.3d 831, 2007 Tex. App. LEXIS 3885, 2007 WL 1438373

• Court: Court of Appeals of Texas
• Decided: May 17, 2007
• Docket: 13-06-282-CV
• Status: Published

Opinions

OPINION

Opinion by

Justice BENAVIDES.

This appeal arises from a wrongful foreclosure lawsuit. Mary Ester Ortiz and David Ortiz, appellees, obtained a judgment invalidating a lien on their homestead held by The Cadle Company and Cadleway Properties, Inc. (“Cadle”), appellants. The trial court declared a wrongful

foreclosure and also awarded the Ortizes attorneys’ fees. The issues presented are (1) whether a mechanic’s hen against a marital homestead is valid if the hen documents are not signed by both spouses, and (2) whether attorneys’ fees are available in a foreclosure case wherein title ultimately depends upon a deed’s construction. We hold that the mechanic’s hen is invalid, and attorneys’ fees are available. Accordingly, we affirm the district court’s judgment on both issues.

I. Baokground

Mary Ester Ortiz and David Ortiz married each other in 1979 and divorced later that year. They remarried in 1989 and have been continuously married to each other since then.¹ On February 2, 1994, Ms. Ortiz acquired a house, but she did not include her husband’s name on the assumption deed. Ms. Ortiz deliberately omitted her husband’s name in an effort to protect the property from possible creditors who sought child support payments from Mr. Ortiz. The couple has occupied the home as their marital homestead from 1994 until the present.

On June 13, 1996, after multiple meetings with a salesman named Dean Bostick, the Ortizes contracted for improvements to their home with National Home Services (“NHS”). Ms. Ortiz signed a note, a Contract for Labor and Materials, and a trust deed for the improvements. As she had done on the original assumption deed, she again omitted her husband’s name on the documents.

In order to finance the home improvements, Ms. Ortiz applied for credit from the Department of Housing and Urban Development (“HUD”). She is explicitly marked as “unmarried” on the HUD credit application. According to Ms. Ortiz, this was an error attributable to Mr. Bostick, who completed the application for her after she signed it in blank. Ms. Ortiz also claimed that Mr. Bostick had met her husband and should have known that they were a married couple.²

On December 23, 1998, NHS conveyed the note and the trust deed to Cadle. After making payments to Cadle for several years, the Ortizes defaulted. Cadle foreclosed on the Ortizes’ home on June 1, 2004.

The Ortizes then filed suit against Ca-dle, alleging wrongful foreclosure and seeking attorneys’ fees under the Texas Uniform Declaratory Judgments Act (“DJA”). Tex. Civ. PRAC. & RemlCode Ann. § 37.009 (Vernon 2006). The Ortizes argued that the foreclosure ought to be rescinded because a homestead exemption attached to the property. Cadle pleaded an affirmative defense, conceding that the property was a homestead, but arguing that the Ortizes had waived their homestead rights by committing a fraudulent misrepresentation intended to deceive creditors. After a bench trial, the court invalidated Cadle’s lien and declared a wrongful foreclosure. The court also awarded the Ortizes $23,775.92 in attorneys’ fees. Findings of fact and conclusions of law were not filed, nor did Cadle request them. Cadle now appeals.

II. STANDARD Of REVIEW

When neither findings of fact nor conclusions of law have been filed or requested, the judgment of the trial court after a bench trial implies all necessary findings of fact to support itself. Schoeffler v. Denton, 813 S.W.2d 742, 745 (Tex.App.-Houston [14th Dist.] 1991, no writ). A trial court’s implied findings of fact in a bench trial have the same force and dignity as a jury’s verdict upon jury questions. Anderson v. City of Seven Points, 806 S.W.2d 791, 794 (Tex.1991), Therefore, the trial court’s implied findings are similarly reviewed for legal and factual sufficiency of the evidence. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex.1994); see also City of Keller v. Wilson, 168 S.W.3d 802, 807 (Tex.2005) (legal sufficiency of evidence is to be reviewed in the light most favorable to the challenged finding, crediting favorable evidence if a reasonable fact-finder could and disregarding contrary evidence unless a reasonable fact-finder could not); Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex.1996) (fact findings must only be overturned if they are so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust).

If a party is challenging a finding regarding an issue upon which that party had the burden of proof, the moving party must demonstrate that the adverse finding is against the “great weight and preponderance of the evidence.” Dow Chem. Co. v. Francis, 46 S.W.3d 237, 242 (Tex.2001) (per curiam). In reviewing a challenge that the jury finding is against the great weight and preponderance of the evidence, we must" first examine the record to determine if there is some evidence to support the finding. Id. at 241. If such evidence exists, we must then determine, in light of the entire record, whether the finding is so contrary to the overwhelming weight and preponderance of the evidence as to be clearly wrong and manifestly unjust. Id. We may not disregard the finding of the trial court and substitute our own finding unless the evidence conclusively establishes a different finding. Ponce v. Sandoval, 68 S.W.3d 799, 806 (Tex.App.-Amarillo 2001, no pet.).

Finally, the determination of whether attorneys’ fees are available in a particular case is a question of law, which we review de novo. Holland v. Wal-Mart Stores, Inc., 1 S.W.3d 91, 94 (Tex.1999).

III. The Validity Of The Lien

The State of Texas famously recognizes one of the broadest homestead exemptions in the United States. See Jerry Patterson, Home Equity Reform in Texas, 26 St. Mary’s L.J. 323, 324 (1994) (“the concept of Texas homestead protection has grown to near-mythical proportions”). Homestead rights have traditionally enjoyed great protection in Texas jurisprudence, and statutes which affect homestead rights are liberally construed to protect the homestead. See Florey v. Estate of McConnell, 212 S.W.3d 439, 443 (Tex.App.-Austin 2006, pet. denied).

Nevertheless, exceptions to the homestead exemption do exist. Among them, the Texas Constitution provides that a marital homestead is “protected from forced sale for the payment of all debts except for ... work and material used in constructing new improvements thereon if ... the work and material are contracted for in writing, with the consent of both spouses.” Tex. Const, art. XVI, § 50(a)(5)(A) (emphasis added).

Under the existing homestead law, Cadle’s hen on the Ortiz home must be found invalid because it depends upon three documents — the assumption deed, the note, and the trust deed — that are not signed by both Mr. and Ms. Ortiz as the Texas Constitution explicitly requires. Cadle attempts to overcome the two-spouse signature requirement with an affirmative defense: Cadle argues that Ms. Ortiz misrepresented her marital status by omitting Mr. Ortiz’s name from the hen documents, and thus a finding that the Ortizes did not waive their homestead rights by dehberately misrepresenting creditors is against the great weight and preponderance of the evidence. We disagree.

Texas law recognizes that homestead protection can dissolve if the owners dehberately misrepresent their marital status in order “to defeat the rights of an innocent party who, in good faith, without notice, for valuable consideration, has acquired vahd hens.” Nat’l Bond & Mortgage Carp. v. Davis, 60 S.W.2d 429, 434 (Tex.1933). Such an assertion of misrepresentation is an affirmative defense upon which the defendant bears the burden of proof. Texas Farmers Ins. Co. v. Murphy, 996 S.W.2d 873, 879-80 (1999). If an individual affirmatively misrepresents himself or herself on documents as single when he or she is married, a question arises concerning whether the couple’s homestead rights have been waived. Brown v. Bank of Galveston, Nat’l Ass’n, 963 S.W.2d 511, 515 (Tex.1998).

In Brown, for example, Vincent Brown, a married man, purchased a lot and built a home in Galveston by signing earnest money contracts as “V.A. Brown, a single man” and “Vincent A. Brown, a single man.” Id. at 512. He made no mention of his wife, Hyacinth, on any of the real property documents. Id. When the holder of a mechanic’s hen attempted to enforce the hen on the property, Brown claimed a violation of Hyacinth’s homestead exemption. Id. However, Brown did not obtain a jury question regarding Hyacinth’s homestead rights. Id.

On appeal, Brown was required to show that Hyacinth’s homestead rights were conclusively estabhshed by the record. Id. The supreme court rejected Brown’s argument because “Brown’s statement that he was ‘a single man’ on at least three of the documents admitted in this case is enough to raise a fact question concerning Hyacinth’s homestead rights.” Id. at 515.

Brown suggests that homestead protection is called into question when a person affirmatively lies about his or her marital status. See id. However, although Brown’s holding prohibits misrepresentation, it does not imply that a person is required to list the name of his or her spouse on real property documents in order for homestead status to attach. Texas law is clear that possession of a homestead interest is not dependent upon ownership; a person is permitted to hold homestead rights in his or her spouse’s separate property. Tex. Fam.Cqde ÁNN. § 5.001 (Vernon 2006). A contention that an instrument (such as a deed) is void under homestead laws may be asserted by any person whose homestead rights are affected, regardless of whether the person is a signed party to the instrument. Florey, 212 S.W.3d at 444.

The evidence shows that the home was purchased during the marriage and that the Ortizes occupied the home as their homestead. Rather than represent herself as “unmarried” or “single” on any of the documents Cadle relied upon, Ms. Ortiz merely signed her name and made no mention of her husband.³ This is different than, for example, the affirmative misrepresentation of the married man in Brown who falsely signed his name “Vincent Brown, a single man.” See Brown, 963 S.W.2d at 512. Moreover, because a person may hold a homestead interest in his or her spouse’s separate property, it is not necessary to have one’s name on real property documents in order to maintain a homestead interest in the property. Tex. Fam.Code Ann. § 5.001. Thus, the fact that Mr. Ortiz’s name was not on the assumption deed, note, or trust deed does not mean that he lacks a homestead interest in the Ortiz household. Regardless of Cadle’s ability to defeat Ms. Ortiz’s homestead exemption, it has shown nothing to defeat Mr. Ortiz’s homestead exemption.

We hold, therefore, that Cadle has not demonstrated that the great weight and preponderance of the evidence favors a reversal of the trial court’s implied finding that the Ortizes did not waive their homestead rights. The mechanic’s lien asserted by Cadle against the Ortiz homestead is invalid because the relevant documents do not meet the statutory requirement of having been signed by both spouses. Cadle’s asserted lien does not supersede the Or-tizes’ homestead exemption, and thus the foreclosure on the home was wrongful.⁴

IV. TRESPASS To Tey Title

Having found that Cadle wrongfully foreclosed on the Ortiz homestead, we now turn to the question of whether this wrongful foreclosure suit is a “trespass to try title” or an action properly brought under the DJA. Tex. Civ. Peao. & Rem. (Vernon 2006). The answer to this question determines whether attorneys’ fees are available. Martin v. Amerman, 133 S.W.3d 262, 264 (Tex.2004).

Under the Texas Property Code, a trespass to try title is used to determine title to lands, tenements, or other real property. Tex. PROp.Code Ann. § 22.001 (Vernon 2006). An action under the property code is different from an action under the DJA, which provides that “a person interested under a deed ... may have determined any question of construction or validity arising under the instrument ... and obtain a declaration of rights, status, or other legal relations thereunder.” Tex. Crv. PRAC. & Rem.Code Ann. § 37.004. The recovery of attorneys’ fees under a trespass to try title is barred because it is not provided for by the property code. Martin, 133 S.W.3d at 264. In contrast, the DJA specifically allows for recovery of attorneys’ fees. Tex. Civ. PRAC. & Rem.Code Ann. § 37.009. The Texas Supreme Court requires courts to distinguish between the two types of actions, holding that a party may not seek attorneys’ fees by artfully pleading a trespass to try title action under the DJA. Martin, 133 S.W.3d at 267.

In Martin, the supreme court held that cases which “necessarily involve the question of title,” such as boundary disputes, are considered trespass to try title actions. Id. Although the supreme court sought to clarify the conceptual difference between trespass to try title suits and DJA suits with this language, the distinction it promulgated has been difficult to apply in practice because construing the terms of contracts and deeds frequently implicates the ultimate issue of title. See Roberson v. City of Austin, 157 S.W.3d 130, 135 (Tex.App.-Austin 2005, pet. denied) (describing the post-Martin law as “contradictory and confused”).

Pre-Martin authority suggests that an action seeking to construe the terms of a contract or deed ought to be pleaded under the DJA even if the action’s resolution is effectively a decision on title. Brash v. Reata Oil & Gas Corp., 984 S.W.2d 720, 730 (Tex.App.-Waco 1998, pet. denied). We must decide whether that principle still applies in the wake of Martin.⁵

In the present case, the validity of Cadle’s mechanic’s lien could not be ascertained without first construing the validity of the assumption deed and the contracts signed by Ms. Ortiz. Assessing the validity of these documents is explicitly a stated function of the DJA. Tex. Civ. Prac. & Rem.Code Ann. § 37.004. While it is true that the dispute over the deed’s validity ultimately implicates title, much of contract and deed construction implicates title, and that does not indicate that all such cases are trespass to try title suits. Such an interpretation would render the DJA meaningless. Rodriguez v. Tex. Workforce Comm’n, 986 S.W.2d 781, 783 (Tex.App.-Corpus Christi 1999, pet. denied) (holding that “courts are to construe language used in statutes so as to harmonize all relevant laws, not create conflict”). The central issue in this case was not a “cloud on title” as the trespass to try title action is intended to address; the issue was instead the lien’s validity, which could only be resolved by declaration of the trial court. Analytically, then, the case is properly pleaded and evaluated under the DJA.

This is the type of analysis that courts undertook before Martin, and we see no indications that the Martin holding changed this. Martin does not hold that all property disputes are trespass to try title suits; it merely clarifies the analytical framework that courts must apply when deciding whether a suit is a trespass to try title. Martin, 133 S.W.3d at 267. The Ortizes properly pleaded their suit under the DJA and are now entitled to a recovery of attorneys fees from Cadle. Tex. Civ. PRAC. & Rem.Code Ann. § 37.009.

V. Conclusion

The great weight and preponderance of the evidence in this case conclusively establishes that the Ortizes did not waive their homestead interest by misrepresentation, and thus the district court’s decision to invalidate Cadle’s lien because it was not consented to in writing by both spouses must be upheld. Additionally, the Ortizes properly pleaded their claims under the DJA, and established their right to attorneys’ fees. The judgment of the district court as to both the validity of the hen and the award of attorneys’ fees is AFFIRMED.

Dissenting Opinion by Justice LINDA REYNA YÁÑEZ.

1 . Although Mr. and Ms. Ortiz have been continuously married since 1989, tax returns filed in the record indicate a slightly more erratic situation. In 1994, the couple filed jointly. In 1995, Ms. Ortiz filed as an unmarried single. And in 2003, Ms. Ortiz filed as “head of household.”

2 . Mr. Bostick could not be located for trial and was unable to testify about these matters.

3 . Cadle relied on the assumption deed, note, and trust deed. The only document on which Ms. Ortiz appears to have affirmatively misrepresented herself as "single” was the HUD credit application. Cadle does not argue that it is entitled to rely upon the credit application, so we need not address whether this is a misrepresentation sufficient to vindicate Ca-dle’s lien.

4 . The Ortizes also allege that the home improvements began before the relevant documents had been signed and processed — an allegation to which Cadle never responds. We do not reach this argument, however, because we have already found the lien invalid for not meeting the two-spouse signature requirement. Tex.R.App. P. 47.1. Moreover, the argument was inadequately briefed. Tex. R.App. P. 38.1(h), 38.2(a)(2).

5 . We have cited Martin in the past, but this is the first time we address whether a wrongful foreclosure "necessarily involves the question of title” and must therefore be classified as a trespass to try title action. See Garza v. Gonzales, No. 13-05-200-CV, 2006 WL 3317732, at *7, 2006 Tex.App. LEXIS 9978, at *19 (Tex.App.-Corpus Christi Nov. 16, 2006, no pet.) (mem.op.) (holding that boundary disputes cannot be resolved using the DJA); Americo Energy Res., L.L.C. v. State, No. 13-05-460-CV, 2006 WL 177626, at *6, 2006 Tex. App. LEXIS 661, at *20 (Tex.App.-Corpus Christi Jan. 26, 2006, no pet.) (mem.op.) (holding that the settlement/clarification of easement rights is not a trespass to try title because it is specifically provided for by the DJA); Aguillera v. John G. & Marie Stella Kenedy Mem’l Found., 162 S.W.3d 689, 698 (Tex.App.-Corpus Christi 2005, pet. denied) (holding that competing claims to land ownership constitute a trespass to try title).