2012 Properties, LLC v. Garland Independent School District

ACCEPTED
05-15-01002-CV
FIFTH COURT OF APPEALS
DALLAS, TEXAS
12/10/2015 12:29:40 PM
LISA MATZ
CLERK

No. 05-15-01002-CV

FIFTH COURT OF APPEALS FILED IN
5th COURT OF APPEALS
DALLAS, TEXAS DALLAS, TEXAS
12/10/2015 12:29:40 PM
LISA MATZ
2012 PROPERTIES, LLC, Clerk

Appellant
V.
DALLAS COUNTY, CITY OF GARLAND, GARLAND ISD, CHARLES
HOBBS, TONYA BROYLES, LISA GREUNKE, AND CROW’S NEST, INC.
Appellees

FROM THE 134TH JUDICIAL DISTRICT COURT
DALLAS COUNTY, TEXAS
CAUSE NO. TX-12-40136

BRIEF OF APPELLANT

Ian Ghrist
State Bar No. 24073449
ian@ghristlaw.com

Ghrist Law Firm
1210 Hall Johnson Road, Suite 100C
Colleyville, Texas 76034
Ph. (817) 778-4136
Fax (817) 485-1117

ATTORNEY FOR APPELANT

ORAL ARGUMENT REQUESTED
 TABLE OF CONTENTS

IDENTITY OF PARTIES AND COUNSEL ............................................................3

TABLE OF AUTHORITES ......................................................................................5

REQUEST FOR ORAL ARGUMENT .....................................................................7

GLOSSARY OF DEFINED TERMS ........................................................................8

ABBREVIATIONS AND RECORD REFERENCES ..............................................9

STATEMENT OF THE CASE ..................................................................................9

ISSUES PRESENTED.............................................................................................11

STATEMENT OF FACTS ......................................................................................12

SUMMARY OF ARGUMENT ...............................................................................12

STANDARD OF REVIEW .....................................................................................15

ARGUMENT AND AUTHORITIES ......................................................................17

CONCLUSION AND PRAYER .............................................................................18

BRIEF OF APPELLANT Page 2 of 40
 IDENTITY OF PARTIES AND COUNSEL

Appellant Counsel for Appellant
2012 Properties, LLC Ian Ghrist
State Bar No. 24073449
ian@ghristlaw.com

Ghrist Law Firm
1210 Hall Johnson Road, Suite 100C
Colleyville, Texas 76034
Telephone: (817) 778-4136
Fax: (817) 485-1117
Appellees Counsel for Appellees
Dallas County, Texas Evelyn Conner Hicks
State Bar No. 09575900
Linebarger, Goggan, Blair & Sampson
2777 Stemmons Freeway, Suite 1000
Dallas, Texas 75207
Phone: (214) 880-0089
Fax (469) 221-5171
dallas.litigation@lgbs.com
City of Garland Dustin L. Banks
Garland Independent School District State Bar No. 24064344
Perdue, Brandon, Fielder, Collins & Mott,
LLP
1919 S. Shiloh Road, Suite 310, LB 40
Garland, Texas 75042
Phone: (972) 278-8282
Fax (972) 278-8222
dbanks@pbfcm.com

Attorney Ad Litem for G. Walter McCool
for Lisa Greunke and Crow’s Nest, McCool Law Firm, P.C.
Inc. 9090 Skillman, Suite 182-A-256

BRIEF OF APPELLANT Page 3 of 40
 Dallas, Texas 75243-8262
Phone: (214) 256-3673
Fax (214) 206-1081
walt@mccoollaw.com

Charles Hobbs James Bellevue
Law Office of James Bellevue
6705 W Hwy 290, Suite 502-295
Austin, Texas 78735
Phone : (512) 288-0317
Fax (512) 288-0317
jim@landlawtexas.com

Tonya Broyles Michael Savage
Ackerman and Savage, LLC
8226 Douglas Ave, Suite 330
Dallas, Texas 75225
Phone: (214) 346-4201
Fax (214) 346-4201
mtsavage@ackermansavage.com

BRIEF OF APPELLANT Page 4 of 40
 TABLE OF AUTHORITES

Cases
Lyda Swinerton Builder, Inc. v. Cathay Bank, 409 S.W.3d 221 (Tex. App.—Houston 14th Dist.
2013)……………………………………………………………….….…15, 17, 18, 19, 20, 28, 30
Bank of Am. v. Babu, 340 S.W.3d 917 (Tex. App. Dallas 2011)……………………15, 17, 21, 30
Cash Am. Int’l, Inc. v. Bennett, 35 S.W.3d 12 (Tex. 2000)...........................................................18
Satterfield v. Satterfield, 448 S.W.2d 456 (Tex. 1969)……………………………..................…18
Chicago Title Ins. Co. v. Lawrence Invs., Inc., 782 S.W.2d 332 (Tex. App.—Fort Worth 1989,
writ ref’d)………………………………………………………………………………..…...20, 27
McDermott v. Steck Co., 138 S.W.2d 1106 (Tex. Civ. App.—Austin 1940, writ ref’d)…..……20
Yancy v. United Surgical Partners Int’l, Inc., 236 S.W.3d 778 (Tex. 2007)………..………21, 27
Smart v. Tower Land & Inv. Co., 597 S.W.2d 333 (Tex. 1980)……….……20, 22, 23, 27, 28, 33
Frymire Eng’g Co. v. Jomar Int’l, Ltd., 259 S.W.3d 140 (Tex. 2008)………………….21, 31, 32
Mid-Continent Ins. Co. v. Liberty Mut. Ins. Co., 236 S.W.3d 765 (Tex. 2007)………………..20
Murray v. Cadle Co., 257 S.W.3d 291 (Tex. App.—Dallas 2008)…………………………….21
Benchmark Bank v. Crowder, 919 S.W.2d 657, 662 (Tex. 1996)………………...……21, 27, 32
Diversified Mortg. Investors v. Lloyd D. Blaylock General Contractor, 576 S.W.2d 794 (Tex.
1978)……………………………………………………………………………………….……20
Keck, Mahin & Cate v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 20 S.W.3d 692 (Tex.
2000)………………………………………………………………………………………….…28

Statutes
Texas Tax Code § 32.01………………………………………………………………………...12
Texas Tax Code § 32.06…………………………………………………………..…………….19
Texas Tax Code § 32.07…………………………………………………………………..…….12
Texas Tax Code § 34.04……………………………………………………………..….12, 23, 26

BRIEF OF APPELLANT Page 5 of 40
Legislation
Act of June 17, 2011, 82nd Leg., R.S., ch. 508, 2011 Tex. ALS 508, 2011 Tex. Gen. Laws 508,
2011 Tex. Ch 508, 2011 Tex. HB 1674 (to be codified in various parts of the Family, Tax, and
Criminal Procedure Codes)…………………………………………………………..………..…27

BRIEF OF APPELLANT Page 6 of 40
 REQUEST FOR ORAL ARGUMENT

Under Tex. R. App. P. 39, Appellant respectfully requests oral argument.

Equitable subrogation doctrine has been applied to Section 32.06 of the Texas Tax

Code, but not Section 34.04 of the Texas Tax Code, making this case a matter of

first impression. The outcome will affect tax foreclosure sale buyers across the

State. Thus, oral argument will assist this Court in considering these issues and

reaching a decision in this case.

BRIEF OF APPELLANT Page 7 of 40
 GLOSSARY OF DEFINED TERMS

2012 Properties, LLC (“2012 Properties”)

BRIEF OF APPELLANT Page 8 of 40
 ABBREVIATIONS AND RECORD REFERENCES

[Vol.#] RR [page #] Reporter’s Record
[Vol.#] CR [page#] Clerk’s Record
Appx. [Tab#] Appellant’s Appendix
App. Br. [page#] Appellant’s Brief
Appx. Ex. [letter] Appellant’s Exhibit

BRIEF OF APPELLANT Page 9 of 40
 STATEMENT OF THE CASE

This is an appeal from a petition for excess proceeds filed in a delinquent

property tax suit after the sale of the subject property. 2012 Properties, LLC

petitioned the Court for reimbursement for taxes paid on the former owner’s

behalf. Two of the three former owners also petitioned the Court for disbursement

of excess proceeds held in the registry. The petition of 2012 Properties, LLC was

denied by order executed on August 13th, 2015. 2012 Properties, LLC appeals the

order denying the relief requested in its petition.

BRIEF OF APPELLANT Page 10 of 40
 ISSUES PRESENTED

1. Is equitable subrogation allowed under Texas Tax Code § 34.04?

BRIEF OF APPELLANT Page 11 of 40
 STATEMENT OF FACTS

The property known as 5618 Marina Drive, City of Garland, Dallas County,

Texas was sold by the Dallas County Constable to 2012 Properties, LLC to pay

delinquent property taxes owed to Dallas County, the City of Garland, and Garland

Independent School District.1 The property sold for $35,100.2 After all amounts

recovered in the Judgment obtained by the taxing authorities were paid, excess

funds in the amount of $28,130.27 were deposited into the registry of the Court.3

Because of the delay between the date of judgment and the date of sale,

property taxes typically accrue that are not paid off out of the proceeds of the sale.4

These property taxes are an in personam obligation of the owner of the property

and an in rem obligation attached to the property itself.5 The tax sale buyer

purchases the property subject to those taxes not included in the judgment.

Consequently, if the former owners do not pay the taxes that they are personally

liable for, then the tax sale buyer must pay those taxes if the tax sale buyer wants

to protect its interest in the property from the lien that attached due to the former

owner’s nonpayment. The tax sale buyer does not assume the former owner’s

1
1 CR 73.
2
1 CR 78.
3
Id.
4
Which is why Tex. Tax. Code § 34.04 provides that these accruals be paid out of the excess
proceeds through the procedure set out in Section 34.04 of the Texas Tax Code.
5
Texas Tax Code § 32.01, 32.07.

BRIEF OF APPELLANT Page 12 of 40
personal liability on the tax debt and is only personally liable for taxes accruing

after acquiring ownership of the property.6

In this case, 2012 Properties, LLC paid the taxes that accrued after the

judgment promptly upon purchasing the property. 2012 Properties, LLC had no

personal liability on these taxes because 2012 Properties, LLC did not own the

property at the time that the taxes accrued. Regardless, the taxes created a lien

against the property purchased by 2012 Properties, LLC.

2012 Properties, LLC paid off the lien, not as a gift to the former owners,

but solely to protect the property from the lien.7 The former owners now have no

liability for these property taxes. Thus, a debt for which they alone were personally

liable was extinguished.

Two of the former owners petitioned the Court for disbursement of excess

proceeds from the excess funds held in the Court’s registry under Section 34.04 of

the Texas Tax Code.8 2012 Properties, LLC also petitioned the Court to reimburse

2012 Properties, LLC for the taxes paid for periods where 2012 Properties, LLC

did not own the property.9 Under Texas Tax Code Section 32.01, a tax lien attaches

for all taxes due that year on January 1st of the year. 2012 Properties, LLC’s

6
Texas Tax Code § 32.07.
7
2 RR 18–19.
8
1 CR 78, 111.
9
1 CR 154.

BRIEF OF APPELLANT Page 13 of 40
petition for excess proceeds claimed equitable subrogation to that tax lien. 2012

Properties, LLC pled the elements of equitable subrogation and offered evidence of

each element.10 If 2012 Properties, LLC is equitably subrogated to that tax lien,

then 2012 Properties, LLC is authorized by Sections 34.04(c)(2), (3), or (4) of the

Texas Tax Code to petition for and recover excess proceeds.

The former owners and the taxing authorities disputed (a) whether equitable

subrogation is available under Tax Code Section 34.04, and (b) whether 2012

Properties, LLC met its burden of proof on the elements of equitable subrogation.

The Court sided with the former owners and the taxing authorities, denying the

petition of 2012 Properties, LLC. This appeal ensued.

10
2 RR 9–22, 3 RR 3–14.

BRIEF OF APPELLANT Page 14 of 40
 SUMMARY OF ARGUMENT

Texas caselaw favors equitable subrogation and overwhelmingly establishes

that equitable subrogation is an available remedy in this situation. Moreover, 2012

Properties, LLC amply demonstrated that it met all elements of the doctrine in this

case and no evidence to the contrary was offered.

Dallas County, the City of Garland, and Garland Independent School

District complained to the Court that equitable subrogation is not available under

Section 34.04 of the Texas Tax Code, even though Texas caselaw overwhelmingly

establishes that (a) the Tax Code does not abrogate common law subrogation,11 and

(b) subrogation is available under Tax Code Section 32.06,12 a far more specific

and detailed section, making the idea that subrogation is not allowed under Section

34.04 highly implausible, especially given that “Texas courts are particularly

hospitable to the doctrine of equitable subrogation.”13

Why the taxing authorities oppose the petition of 2012 Properties, LLC

remains a mystery because the taxing authorities have been paid in full. Their only

loss is that they are not accruing additional fees and penalties, which they can

collect out of the remaining proceeds. Assumedly, the taxing authorities seek to

11
Lyda Swinerton Builder, Inc. v. Cathay Bank, 409 S.W.3d 221, 243 (Tex. App.—Houston 14th
Dist. 2013).
12
Id.
13
Bank of Am. v. Babu, 340 S.W.3d 917, 925 (Tex. App. Dallas 2011).

BRIEF OF APPELLANT Page 15 of 40
preserve their ability to maximize the amount of penalties and interest that they can

collect when proceeds are available in the Court’s registry to cover all penalties

and interest that accrue.

The opposition of the former owners of the property makes more sense. By

preventing 2012 Properties, LLC from recovering out of the excess proceeds, the

former owners can take all of the excess proceeds for themselves and simply allow

2012 Properties, LLC to pay their taxes for them, which eliminates their personal

liability on the taxes and allows them to both have their cake and eat it (no

personal liability and they get all the money). Thus, the former owners seek to

become unjustly enriched at 2012 Properties, LLC’s expense.

BRIEF OF APPELLANT Page 16 of 40
 STANDARD OF REVIEW

The legal conclusions of the trial court are reviewed de novo.14 Entitlement

to equitable subrogation is a matter of law that appellate courts will review de

novo.15 The issue of whether equitable subrogation is available under Section

34.04 of the Texas Tax Code is also a legal question for which the standard of

review is de novo.16

14
Bank of Am. v. Babu, 340 S.W.3d 917, 922 (Tex. App. Dallas 2011).
15
Id. at 929.
16
Lyda Swinerton Builders, Inc. v. Cathay Bank, 409 S.W.3d 221, 229 (Tex. App. Houston 14th
Dist. 2013).

BRIEF OF APPELLANT Page 17 of 40
 ARGUMENT AND AUTHORITIES

2012 Properties, LLC offers caselaw almost directly on point to support its

position, while the taxing authorities and former owners have, to date, cited no

authority for their position. Moreover, the position taken by the former owners and

the taxing authorities leads to a blatantly unjust result that cannot have been

intended by the Texas legislature and should not be tolerated by Texas Courts.

I. THE TAX CODE GENERALLY DOES NOT ELIMINATE
EQUITABLE SUBROGATION DOCTRINE

Equitable subrogation is a common law right that the Texas Supreme Court

has been loath to deny even in the face of highly detailed tax statutes that appear to

comprehensively legislate the exact subject matter of lien subrogation.17 Generally,

Texas Courts should not abrogate common law claims.18 Statutes that may be read

to abrogate common law claims are not to be extended beyond their plain

meaning.19

17
Lyda Swinerton Builders, Inc. v. Cathay Bank, 409 S.W.3d 221, 245 (Tex. App. Houston 14th
Dist. 2013), Appx. F.
18
Cash Am. Int’l, Inc. v. Bennett, 35 S.W.3d 12, 16 (Tex. 2000) (”A statute that deprives a
person of a common-law right will not be extended beyond its plain meaning or applied to cases
not clearly within its purview. Abrogating common-law claims is disfavored and requires a clear
repugnance between the common law and statutory causes of action.” (internal quotations and
citation omitted)).
19
Satterfield v. Satterfield, 448 S.W.2d 456, 459 (Tex. 1969) (“While Texas follows the rule that
statutes in derogation of the common law are not to be strictly construed, it is recognized that if a
statute creates a liability unknown to the common law, or deprives a person of a common law
right, the statute will be strictly construed in the sense that it will not be extended beyond its
plain meaning or applied to cases not clearly within its purview.”).

BRIEF OF APPELLANT Page 18 of 40
 Property tax lenders in Texas must follow a detailed procedure outlined in

Texas Tax Code § 32.06 in order to obtain a transfer of the tax lien. This procedure

governs the exact subject matter of subrogation to a tax lien, but the Texas Courts

have found that it is supplemental to, not exclusive of equitable subrogation

doctrine.20

For example, under Section 32.06 of the Texas Tax Code, to obtain

subrogation a person must file a sworn document containing the exact information

specified, follow the special rules governing taxed owed by persons over sixty-five

(65) years of age, make sure that all form and content of the request complies with

rules promulgated by the Finance Commission of Texas, cover only delinquent

taxes, follow the release rules, send by certified mail copies of documents to first

lien holders, etcetera.21 If anything is not done according to the rules, then the

taxing authorities can and will refuse to issue a tax lien transfer certificate.

Regardless, Texas caselaw is abundantly clear that even if you fail to follow the

rules, you can still be equitably subrogated to the tax lien. Granted, the Swinerton

Builders Court held that a lienholder who does not follow all of the rules may not

be entitled to “all special privileges accompanying the taxing authority’s

20
Lyda Swinerton Builders, Inc. v. Cathay Bank, 409 S.W.3d 221, 243 (Tex. App. Houston 14th
Dist. 2013), Appx. F.
21
Texas Tax Code § 32.06.

BRIEF OF APPELLANT Page 19 of 40
constitutional and statutory lien,”22 but the Court was clear that, based on existing

Texas Supreme Court precedent, equitable subrogation doctrine is available.

In the Swinerton Builders case, the Court looked at the tax lien transfer

statutes and held that “nothing in the text of the statute addresses what happens if

the lien is not transferred or suggests a legislative intent to prohibit common law

subrogation if a party pays a tax lien without transferring it.”23 Similarly in this

case, nothing in the text of Section 34.04(c) of the Texas Tax Code suggests that

subrogated lienholders are barred from filing an excess proceeds claim under

34.04(a). In fact, 34.04(a) broadly states that a “person” may file a petition . . .

setting forth a claim to the excess proceeds. Section 34.04(c) sets out the payment

priorities for claimants, but does not state that only claimants with priority can

make a claim. Regardless, under 34.04(c)(3) “any other lienholder, consensual or

otherwise . . .” can make a claim. Nowhere does the Tax Code state that subrogated

lienholders are not lienholders.

“The Texas Supreme Court has endorsed the view that prior versions of the

tax lien transfer statutes did not abrogate common law subrogation.”24 “Even in the

22
Lyda Swinerton Builders, Inc. v. Cathay Bank, 409 S.W.3d 221, 247 (Tex. App. Houston 14th
Dist. 2013), Appx. F.
23
Id. at 244, Appx. F.
24
Id. at 245, Appx. F (citing Chicago Title Ins. Co. v. Lawrence Invs., Inc., 782 S.W.2d 332
(Tex. App.—Fort Worth 1989, writ ref'd) (holding lender was equitably subrogated to tax liens,
but not discussing transfer statutes); McDermott v. Steck Co., 138 S.W.2d 1106, 1109 (Tex. Civ.
App.—Austin 1940, writ ref'd) ("It is not material whether the bank acquired a lien upon the
property under [the tax lien transfer statute]. . . . [A party asserting the bank's interest] was in

BRIEF OF APPELLANT Page 20 of 40
absence of statutory or contractual authorization, a limited right to equitable

subrogation may arise in accordance with certain well-established rules of law.”25

The Texas Supreme Court has said that “Equitable subrogation applies in

‘every instance in which one person . . . has paid a debt for which another was

primarily liable.’” 26 Moreover, “Texas courts are particularly hospitable to the

doctrine of equitable subrogation.”27

Texas courts have given the doctrine “a liberal application . . . broad enough

to include every instance in which one person, not acting voluntarily, has paid a debt

for which another was primarily liable and which in equity and good conscience

should have been discharged by the latter.” 28 Moreover, “Texas courts favor

equitable subrogation.”29

In light of the foregoing authorities, it seems quite obvious that 2012

Properties, LLC is legally entitled to assert an equitable subrogation claim. Section

equity entitled to subrogation to that lien as against a junior incumbrancer . . . ."); see also Yancy
v. United Surgical Partners Int'l, Inc., 236 S.W.3d 778, 786 n.6 (Tex. 2007) ("writ refused" cases
have same precedential value as Texas Supreme Court opinions).
25
Smart v. Tower Land & Inv. Co., 597 S.W.2d 333, 338 (Tex. 1980), Appx. E.
26
Frymire Eng'g Co. v. Jomar Int'l, Ltd., 259 S.W.3d 140, 144 (Tex. 2008) (quoting Mid-
Continent Ins. Co. v. Liberty Mut. Ins. Co., 236 S.W.3d 765, 774 (Tex. 2007) (emphasis added).
27
Bank of Am. v. Babu, 340 S.W.3d 917, 925 (Tex. App. Dallas 2011) (quoting Murray v. Cadle
Co., 257 S.W.3d 291, 299 (Tex. App. Dallas 2008) (emphasis added).
28
Murray v. Cadle Co., 257 S.W.3d 291, 299 (Tex. App. Dallas 2008) (emphasis added)
(quoting Forney v. Jorrie, 511 S.W.2d 379, 386 (Tex. Civ. App.—San Antonio 1974, writ ref'd
n.r.e.).
29
Crowder v. Benchmark Bank, 889 S.W.2d 525, 528 (Tex. App. Dallas 1994) (citing
Diversified Mortg. Investors v. Lloyd D. Blaylock General Contractor, 576 S.W.2d 794, 807
(Tex. 1978)), Appx. G.

BRIEF OF APPELLANT Page 21 of 40
34.04 of the Texas Tax Code governing claims for excess proceeds is nowhere near

as detailed or specific as Section 32.06 governing tax lien transfers. Instead, Section

34.04 of the Tax Code simply sets out a basic five-item list of priorities among

excess proceeds claimants. If the highly detailed and specific Section 32.06 did not

exclude the doctrine of equitable subrogation from consideration, then a fortiori the

simple list of priorities in Section 34.04 of the Tax Code does not exclude equitable

subrogation doctrine. In addition, Texas Courts have a long history of generally

favoring equitable subrogation. Consequently, in cases where the availability of the

doctrine is in doubt, the Courts should generally err on the side of allowing equitable

subrogation claims.

II. THIS CASE PRESENTS THE KIND OF EQUITABLE
SITUATION REFERRED TO IN THE SMART V. TOWER
LAND CASE, WHEREIN EQUITABLE SUBROGATION TO A
TAX LIEN IS APPROPRIATE

Allowing equitable subrogation in this case is not only correct as a matter of

law based on precedent, but is necessary to prevent unjust enrichment. As a matter

of public policy, the former owners should not be able to so easily skirt their tax

obligations and the taxing authorities should certainly not be entitled to

unnecessarily maximize and inflate the amount of interest and penalties that they

can charge.

In Smart v. Tower Land, Texas Supreme Court held that “The mortgagee

who purchases the property with delinquent taxes owed by the mortgagor, may

BRIEF OF APPELLANT Page 22 of 40
account for the delinquent taxes in determining his bid.” 30 Consequently, the Court

found that based on a totality of the circumstances, subrogation was not equitable

for a lender who paid the borrower’s taxes after foreclosure.

The situation in Smart v. Tower Land, however, is entirely different from the

situation in this case. The Court in Smart v. Tower Land first acknowledged that

equitable subrogation to a tax lien for payment of taxes is available under the right

circumstances.31 Then, the Court denied equitable subrogation for two primary

reasons. First, the contract between the lender and the borrower already provided

remedies for non-payment of taxes, which made the Court reticent to judicially add

additional remedies to the contract.32 Second, the Court noted that because the

unpaid taxes were already being added to the mortgage debt, it made little sense for

the lender to also have them as a separate personal liability claim against the

debtor. 33

None of the considerations made by the Smart v. Tower Land Court are

present in this case. First, 2012 Properties, LLC did not have a contract with the

former owners. Consequently, there is no need to avoid judicially modifying the

contract by adding an additional judicial remedy to an agreement entered into

30
Smart v. Tower Land & Inv. Co., 597 S.W.2d 333, 339 (Tex. 1980), Appx. E.
31
Id. at 338, Appx. E.
32
Id., Appx. E (“The parties having fixed their rights by contract, additional rights, such as are
incidental to the sovereign's taxing power, will not be created by judicial intervention.”).
33
Id., Appx. E (“Taxes not paid by the mortgagor are considered to be part of the mortgage
debt”).

BRIEF OF APPELLANT Page 23 of 40
voluntarily by contracting individuals. Second, 2012 Properties, LLC does not

have the ability to add the tax liability onto an existing mortgage debt. In other

words, 2012 Properties, LLC does not have other contractual remedies available to

it that would lessen the need for equitable subrogation. Third, 2012 Properties

cannot simply account for the delinquent taxes in determining the bid on the

property for the reasons explained below.

When there are excess proceeds, the taxing authorities are supposed to

simply take those proceeds out of the Court’s registry pursuant to Texas Tax Code

§ 34.04, but the taxing authorities sometimes fail to do so at all or fail to do so in a

timely manner. Meanwhile, 2012 Properties, LLC must, pursuant to Section 34.015

of the Texas Tax Code, sign a statement every ninety (90) days verifying that 2012

Properties, LLC owns no properties that have delinquent property taxes.

Otherwise, 2012 Properties, LLC is barred from purchasing properties at the

monthly tax sales. Mr. Blackburn testified that personally or through his

companies, he purchased approximately thirty properties at tax auction in the past

two years.34 Consequently, he cannot afford to wait an indeterminate time to find

out if the taxing authorities will, in fact, petition for excess proceeds pursuant to

the statute. He must keep taxes current on all properties at all times regardless of

34
2 RR 12, Appx. C.

BRIEF OF APPELLANT Page 24 of 40
how fast or slow the taxing authorities are in petitioning for excess proceeds or

whether the taxing authorities will choose to petition at all.

Consequently, even though everyone agrees that the taxes should be

promptly paid out of the Court’s registry to the taxing authorities, 2012 Properties,

LLC often has no choice but to either pay the taxes while waiting on the taxing

authorities to facilitate the transfer of funds from the Court’s registry to the taxing

authorities coffers or lose the right to purchase properties at the next month’s

auction. The tax office also runs a search to determine the veracity of 2012

Properties, LLC’s statement, and the statement is a pre-made form document.

Consequently, 2012 Properties, LLC is not able to skirt the statement requirement

by alleging that the taxing authorities are supposed to collect the taxes from the

funds in the Court’s registry on some of the properties and that more than ample

funds exist to cover the payments. It is an unfair Catch 22 situation for 2012

Properties, LLC to be put into, particularly when the simplest possible solution is

to just pay the taxes and seek reimbursement out of the Court proceeds.

With this result, the taxes are paid, which prevents additional penalties and

interest from being taken out of the remaining funds due to the former owners.

Consequently, the former owners benefit from the action taken by 2012 Properties,

LLC. By paying the taxes promptly upon purchase, 2012 Properties, LLC actually

saves the former owners money from interest, attorney’s fees, and penalties such

BRIEF OF APPELLANT Page 25 of 40
that more of the funds in the court’s registry will be paid to the former owners.

Meanwhile, the taxing authorities can hardly complain about whatever loss in

additional penalties and interest was caused by the timely payment of taxes. The

biggest loss is the loss of legal work to the law firms representing the taxing

authorities, which is not an equitable consideration to the parties to the case.

The uncertainty regarding whether and when the taxing authorities will

petition for the proceeds to be paid makes it impossible to simply account for the

taxes in determining the bid, as was possible in Smart v. Tower Land. Anecdotally,

2012 Properties, LLC could tell many stories of situations where the taxing

authorities allowed the former owners to take all of the proceeds, missing taxes

that were owed, or failed to petition for the proceeds to be paid in a timely manner,

or failed to petition at all. Consequently, 2012 Properties, LLC is unable to simply

assume that the taxes will be timely paid out of the excess proceeds even though

the law is clear that payment of the taxes out of the excess proceeds is the intended

result of Section 34.04 of the Texas Tax Code.

III. THE TEXAS LEGISLATURE KNEW, AT THE TIME THAT
34.04 WAS LAST MODIFIED, THAT THE TAX CODE DID
NOT ELIMINATE EQUITABLE SUBROGATION DOCTRINE

The Texas Legislature’s latest modification to Section 34.04 of the Texas

Tax Code came in 2011 when the 82nd Legislature, with HB 1674, added Title IV-

D agencies as parties that can request excess proceeds so that child support owed

BRIEF OF APPELLANT Page 26 of 40
would be easier to collect.35 The Texas Supreme Court has endorsed the view, in

multiple cases dating back to 1980, that the Texas Tax Code does not abrogate

common law subrogation.36 Since at least 1996, in Benchmark Bank v. Crowder,37

it has been established that payment of taxes can give rise to equitable subrogation

to the tax liens. Thus, the Texas Legislature has amended Section 34.04 of the

Texas Tax Code nine times over the past thirty-five years without bothering to

eliminate common law subrogation. Clearly, if the Texas Legislature wanted to

prevent this issue from being heard by the Courts on excess proceeds petitions,

then the Legislature could have so provided, but knowing of existing precedent,

failed to do so.

The law has been clear for the past thirty-five years that common law

subrogation is not eliminated by the Texas Tax Code. For example, the Smart v.

Tower Land case tells us that “Even in the absence of statutory or contractual

35
Act of June 17, 2011, 82nd Leg., R.S., ch. 508, 2011 Tex. ALS 508, 2011 Tex. Gen. Laws 508,
2011 Tex. Ch 508, 2011 Tex. HB 1674 (to be codified in various parts of the Family, Tax, and
Criminal Procedure Codes).
36
Smart v. Tower Land & Inv. Co., 597 S.W.2d 333, 338 (Tex. 1980) (“Even in the absence of
statutory or contractual authorization, a limited right to equitable subrogation may arise in
accordance with certain well-established rules of law”), Appx. E; Chicago Title Ins. Co. v.
Lawrence Invs., Inc., 782 S.W.2d 332 (Tex. App.—Fort Worth 1989, writ ref'd) (holding lender
was equitably subrogated to tax liens, but not discussing transfer statutes); Yancy v. United
Surgical Partners Int'l, Inc., 236 S.W.3d 778, 786 n.6 (Tex. 2007) ("writ refused" cases have
same precedential value as Texas Supreme Court opinions); Lyda Swinerton Builders, Inc. v.
Cathay Bank, 409 S.W.3d 221, 245 (Tex. App. Houston 14th Dist. 2013), Appx. F.
37
Benchmark Bank v. Crowder, 919 S.W.2d 657, 662 (Tex. 1996), Appx. G.

BRIEF OF APPELLANT Page 27 of 40
authorization, a limited right to equitable subrogation may arise in accordance with

certain well-established rules of law.”38 The courts have explained that

“equitable subrogation is only available ‘to the extent
necessary [for the subrogee’s] equitable protection.’ Smart,
597 S.W.2d at 338. ‘When not compelled by the equities
of the situation, full subrogation to all special privileges
accompanying the taxing authoritiy’s constitutional and
statutory lien will be denied.’ Id. This rule limits the extent
of subrogated rights.”39

In this case, no explicit authorization for equitable subrogation under Section

34.04 of the Texas Tax Code exists, but no explicit authorization is necessary.

Instead, equitable subrogation is available “in accordance with well-established

rules of law” as it always has been.

IV. 2012 PROPERTIES, LLC PROVED ITS ENTITLEMENT TO
EQUITABLE SUBROGATION AND NO EVIDENCE TO THE
CONTRARY WAS OFFERED

The taxing authorities and the former owners had an opportunity to offer

evidence contradicting the evidence offered by 2012 Properties, LLC, but did not

do so. Instead, they relied solely on legal arguments. To prevail, 2012 Properties,

LLC needed to offer evidence of the elements of its equitable subrogation claim.

2012 Properties, LLC offered evidence of each element. No evidence to the

38
Smart, 597 S.W.2d at 338, Appx. E.
39
Lyda Swinerton Builders, Inc. v. Cathay Bank, 409 S.W.3d 221, 247 (Tex. App. Houston 14th
Dist. 2013), Appx. F.

BRIEF OF APPELLANT Page 28 of 40
contrary was offered. Thus, the Court should have ruled in 2012 Properties, LLC’s

favor on its equitable subrogation claim. No evidence existed that the Court could

have considered to hold that 2012 Properties, LLC did not meet any of the

elements of equitable subrogation.

a. FIRST ELEMENT: THE PERSON WHOSE DEBT WAS
PAID WAS PRIMARILY LIABLE ON THE DEBT AND
HAS BEEN UNJUSTLY ENRICHED

Mr. Blackburn testified that he paid taxes for which the former owners were

personally liable and introduced into evidence records of such payments.40 In this

case, the former owners are obviously primarily liable on the debt. Section 32.07

of the Texas Tax Code states clearly that the owner is personally liable for

payment of the taxes. The taxing authorities routinely take money judgments

against property owners whose properties do not bring in enough money at

constable’s sale to cover payment of all of the taxes due because those owners are

personally liable for payment of the taxes.

The caselaw on equitable subrogation is full of examples where a person

whose property was encumbered by a lien that was secured by a debt that another

person was personally liable for paid off the debt in order to protect the property.

In every case, it was held that the person who was personally liable for the debt

40
2 RR 15–19, 3 RR 3-14, Appx. C.

BRIEF OF APPELLANT Page 29 of 40
had primary liability for repayment of the debt. Any arguments to the contrary in

this case can only be a product of not reading the caselaw.

For example, in Swinerton Builders,41 the bank paid taxes that were due by

the owner of the property. It was undisputed that the owner was primarily liable for

payment of the taxes.

In Bank of Am. v. Babu,42 a bank paid off a note and deed of trust. It was

undisputed that the debtor was primarily liable on the debt. While the Court held

that the foreclosure sale buyer (Babu et. al.) bought the property subject to an

equitable subrogation lien in favor of the bank, the fact that the foreclosure sale

buyer bought the property subject to the lien did not make the foreclosure sale

buyer primarily liable for the debt. The former owner was still primarily liable for

the debt, just as in the present case, the former owners are still primarily as well as

personally liable for the debt.

2012 Properties, LLC bought the property subject to the encumbrance, but

that does not make 2012 Properties, LLC primarily liable for the debt just as Babu

et. al. did not somehow become primarily liable for the equitable subrogation lien

just because they bought the property at foreclosure sale without a warranty.

41
Swinerton, 409 S.W.3d 221, Appx. F.
42
Bank of Am. v. Babu, 340 S.W.3d 917, 919 (Tex. App. Dallas 2011).

BRIEF OF APPELLANT Page 30 of 40
 2012 Properties, LLC could go on to cite numerous cases where the

subrogee paid off an encumbrance to protect the subrogee’s interest in the property

and the fact that the subrogee bought encumbered property without a warranty did

not somehow make the subrogee primarily liable for the debt. In this case, Section

32.07 clearly makes the former owners primarily liable on the debt.

b. SECOND ELEMENT: THE CLAIMAINT PAID THE
DEBT INVOLUNTARILY

“Texas courts are liberal in their determinations that payments were made

involuntarily.” Frymire Eng’g Co. v. Jomar Int’l, Ltd., 259 S.W.3d 140 (Tex.

2008) (quoting Keck, Mahin & Cate v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA,

20 S.W.3d 692, 702 (Tex. 2000) (quoting Argonaut Ins. Co. v. Allstate Ins. Co.,

869 S.W.2d 537, 542 (Tex. App. Corpus Christi 1993). A payment made to protect

the payor’s interest is considered involuntary.43

Mr. Bellevue did elicit testimony by Daniel Blackburn, manager of 2012

Properties, LLC, that Mr. Blackburn knew that the purchase was without warranty

and that the property was encumbered by the taxes.44 But, knowledge of the

outstanding taxes is irrelevant to the equities of the case. The caselaw on equitable

subrogation does not suggest that the person who pays the debt of another must be

surprised to find out that the debt exists, only that the debt is not paid voluntarily.

43
Frymire Eng'g Co. v. Jomar Int'l, Ltd., 259 S.W.3d 140, 145 n. 26 (Tex. 2008).
44
2 RR 12, Appx. C.

BRIEF OF APPELLANT Page 31 of 40
 For example, in Benchmark Bank v. Crowder, the bank’s knowledge of the

outstanding tax lien did not somehow turn the payment of the taxes into a

voluntary payment.45 A payment is voluntary when the payor acts “without any

assignment or agreement for subrogation, without being under any legal obligation

to make payment, and without being compelled to do so for the preservation of any

rights or property.”46 In this case, 2012 Properties, LLC obviously made the

payment to preserve 2012 Properties, LLC’s rights in the property. Mr. Blackburn

testified that the payment was not intended as a gift to the former owners47 and no

evidence to the contrary was offered.

c. THIRD ELEMENT: NO PREJUDICE TO INTERVENING
LIENHOLDERS

Mr. Blackburn testified that no intervening lienholders exist that could be

prejudiced.48 No one has contested this allegation. It should be undisupted that no

prejudice occurred to intervening lienholders.

45
Benchmark Bank v. Crowder, 919 S.W.2d 657, 661 (Tex. 1996), Appx. G.
46
Frymire, 259 S.W.3d at 145 (quoting First Nat'l Bank of Kerrville v. O'Dell, 856 S.W.2d 410,
415 (Tex. 1993)).
47
2 RR 18–19, Appx. C.
48
2 RR 18, Appx. C.

BRIEF OF APPELLANT Page 32 of 40
 d. FOURTH ELEMENT: BALANCING OF THE EQUITIES
UNDER A TOTALITY OF THE CIRCUMSTANCES
TEST

The taxing authorities and former owners did not offer evidence tending to

show that subrogation would not be equitable. Consequently, all of the evidence

favors equitable subrogation, making a balancing of the equities very easy to

perform.

The only sensible point made by the taxing authorities and former owners

regarding the equities of the case seems to be that 2012 Properties, LLC knew that

the taxes were due and the time of the sale and purchased the property without a

warranty. However, all comparisons to the Smart v. Tower Land49 case have been

debunked in Section II of this Argument. Unlike the debtor in Smart v. Tower

Land, there is no contractual liability on a note from the former owners to 2012

Properties, LLC. The former owners have alleged that 2012 Properties, LLC

should sue them in a separate lawsuit and take a personal liability money judgment

against them.50

Obviously, they are well-aware that if they abscond with the proceeds from

the tax sale, then the chances of 2012 Properties, LLC serving them and

prosecuting a lawsuit with no idea whether the former owners have non-exempt

49
Smart v. Tower Land & Inv. Co., 597 S.W.2d 333 (Tex. 1980).
50
1 CR 205.

BRIEF OF APPELLANT Page 33 of 40
assets adequate to satisfy a money judgment for a couple thousand dollars are

unlikely. Instead, they seek to take money that rightfully belongs to the taxing

authorities, and consequently to 2012 Properties, LLC who paid the taxes, and

force 2012 Properties, LLC to file a completely impractical and unnecessary

lawsuit that will pointlessly clog up the court system when the money to pay the

debt is sitting in the Court’s registry and has been designated by the tax code for

this exact purpose (to pay the taxes due).

That is not equitable. Equitable means fair and that is blatantly unfair. It is

akin to unnecessarily driving up litigation costs in an attempt to force the other side

into a settlement that is not based on the merits of the case. It can be done, and it is

done often, but it is an abuse of the legal system and it is not equitable.

There is no question here as to who owes the money. There is no question as

to how the priorities in Section 34.04 of the tax code are supposed to work. The

taxes are supposed to be paid out of the former owner’s share. The former owners

are supposed to get the remainder after the taxes and other lienholders are paid.

The former owners are not supposed to get the residual funds and the taxes. That is

having your cake and eating it. The taxing authorities are not supposed to get

additional penalties and interest. The taxing authorities have no standing to

complain once they have been paid in full as they have been in this case.

Preservation of the taxing authorities’ (and their law firms’) monopoly on excess

BRIEF OF APPELLANT Page 34 of 40
proceeds petitions is not an appropriate equitable consideration. They are simply

supposed to get paid what they are owed and that payment burden is placed on the

former owners.

BRIEF OF APPELLANT Page 35 of 40
 CONCLUSION AND PRAYER

Based on the foregoing, 2012 Properties, LLC asserts that the record

requires the following relief from this Court:

 That the trial court’s order denying the relief requested in 2012

Properties, LLC’s petition be reversed

 That this court hold that 2012 Properties, LLC has established its

equitable subrogation claim.

 Remand to the trial court for proceedings consistent with the

foregoing.

 The parties have entered into a Rule 11 Agreement, which is attached

to this brief as Exhibit A.51 The parties have agreed “that the issue of

how much taxes have been paid by 2012 Properties, LLC can be

resolved on remand such that it is unnecessary for either appellants or

appellees to brief this issue to the Court of Appeals.”

2012 Properties, LLC prays this Court grant the relief requested herein, and

for such other and further relief as the Court deems proper.

51
Appx. Ex. A.

BRIEF OF APPELLANT Page 36 of 40
 Respectfully submitted,

___________________________
Ian Ghrist
State Bar No. 24073449
ian@ghristlaw.com
Ghrist Law Firm
1210 Hall Johnson Road, Suite 100C
Colleyville, Texas 76034
Telephone: (817) 778-4136
Fax: (817) 485-1117
ATTORNEY FOR APPELLANT

BRIEF OF APPELLANT Page 37 of 40
 CERTIFICATE OF COMPLIANCE
Pursuant to Texas Rules of Appellate Procedure 9.4, I hereby certify that,
absent the caption, identity of parties and counsel, statement regarding oral
argument, table of contents, index of authorities, statement of the case, statement
of issues presented, statement of jurisdiction, statement of procedural history,
signature, proof of service, certification, certificate of compliance, and appendices,
the computer program used to prepare this document prior to its conversion to
portable document format calculates the number of words in the foregoing brief as
6,817.

__________________________
Ian Ghrist

CERTIFICATE OF SERVICE
I certify that on December 10, 2015, I provided a true and correct copy of
the foregoing to the following attorneys for the parties via electronic filing:
Evelyn Conner Hicks
State Bar No. 09575900
Linebarger, Goggan, Blair & Sampson
2777 Stemmons Freeway, Suite 1000
Dallas, Texas 75207
Phone: (214) 880-0089
Fax (469) 221-5171
dallas.litigation@lgbs.com
Dustin L. Banks
State Bar No. 24064344
Perdue, Brandon, Fielder, Collins & Mott, LLP
1919 S. Shiloh Road, Suite 310, LB 40
Garland, Texas 75042
Phone: (972) 278-8282
Fax (972) 278-8222
dbanks@pbfcm.com

BRIEF OF APPELLANT Page 38 of 40
G. Walter McCool
McCool Law Firm, P.C.
9090 Skillman, Suite 182-A-256
Dallas, Texas 75243-8262
Phone: (214) 256-3673
Fax (214) 206-1081
walt@mccoollaw.com

James Bellevue
Law Office of James Bellevue
6705 W Hwy 290, Suite 502-295
Austin, Texas 78735
Phone : (512) 288-0317
Fax (512) 288-0317
jim@landlawtexas.com

Michael Savage
Ackerman and Savage, LLC
8226 Douglas Ave, Suite 330
Dallas, Texas 75225
Phone: (214) 346-4201
Fax (214) 346-4201
mtsavage@ackermansavage.com

Lisa Greunke
1452 Oak Tree Drive
Athens, Texas 75751
Via mail

Crow’s Nest Inc.
5724 Marina Drive
Garland, Texas 75043
Via mail

_____________________
Ian Ghrist

BRIEF OF APPELLANT Page 39 of 40
 INDEX OF APPENDIX

Tab Description Record Cites
A Order Appealed From 1 CR 179
B Findings of Fact and Conclusions of Law 1 CR 213–17
C Excerpts from Testimony of Daniel Blackburn 2 RR 10–20
D Exhibits From Hearing, Payment Records 3 RR 3–14
E Smart v. Tower Land & Inv. Co., 597 S.W.2d
333 (Tex. 1980)
F Lyda Swinerton Builders, Inc. v. Cathay Bank,
409 S.W.3d 221, 226 (Tex. App. Houston 14th
Dist. 2013)
G Benchmark Bank v. Crowder, 919 S.W.2d 657,
659 (Tex. 1996)
Appellant’s Rule 11 Agreement Regarding Taxes Paid
Exhibit A

BRIEF OF APPELLANT Page 40 of 40
Appendix A
 CAUSE NO. TX12-40136

GARLAND INDEPENDENT § IN THE DISTRICT COURT
SCHOOL DISTRICT §
§
vs. § 1341h JUDICIAL DISTRICT
§
§
HEIRS AND UNKNOWN HEIRS OF § DALLAS COUNTY, TEXAS
LENA M. HOBBS §

ORDER DENYING 2012 PROPERTIES, LLC'S
PETITION TO WITHDRAW EXCESS PROCEEDS

On this date, came on for consideration the 2012 Properties, LLC's Petition to Withdraw

Excess Proceeds. The Court, after reading the pleadings, and hearing the evidence, finds:

Upon argument of counsel and for good cause shown, that 2012 Properties, LLC's

Petition to Withdraw Excess Proceeds should be denied.

IT IS HEREBY ORDERED that 2012 Properties, LLC's Petition to Withdraw Excess

Proceeds is DENIED.

Signed on this the 0
•
dayof d-~ ,2015

~~
Judge Presiding

M. Kent Sims, Judge Presiding
Retired Judge of~9 i'f_st ~udicial District Court
Sitting for Judgl~udictal Dtstnct Court
Dallas County, 1'exas

Order Denying 2012 Properties. LLC's Petition to Withdraw EXcess Proceeds
Garland lSD v. Heirs of Lena Hobbs: Cause No. TX-12-401 36, In The 1341h Judicial District, Dallas County, Texas
Page I of I
179
Appendix B
 CAUSE NO. TX-12-40136

GARLAND INDEPENDENT § IN THE DISTRICT COURT
SCHOOL DISTRICT, ET AL., §
§
vs. § 1341h JUDICIAL DISTRICT
§
§
HEIRS AND UNKNOWN HEIRS OF § DALLAS COUNTY, TEXAS
LENA M. HOBBS, ET AL. §

FINDINGS OF FACT AND CONCLUSIONS OF LAW

On August 13, 2015, the Court held a hearing on the following: (1) Petition to Withdraw Excess

Proceeds filed by Tonya Broyles, (2) Third Amended Petition for Excess Proceeds and Response to

Garland ISD's Special Exceptions and Objection, filed by 2012 Properties, LLC, which the Court heard

by agreement of the parties; (3) Garland ISD's Objection to and Special Exception to 2012 Properties

LLC's Petition to Release Funds; and (4) Objections to 2012 Properties, LLC's Petition to Withdraw

Excess Proceeds, filed by Charles Hobbs and the Heirs and Unknown Heirs of Lena M. Hobbs. By

agreement of the parties, the Court heard the Third Amended Petition by 2012 Properties, LLC in lieu of

that party's initial petition, although the amendment was not otherwise timely, and applied the other

parties' objections and special exceptions to the Third Amended Petition. Following the hearing, on

August 13,2015, the Court signed an agreed order granting Tonya Broyles' Petition, and signed its

Order Denying 2012 Properties, LLC's Petition to Withdraw Excess Proceeds.

On August 19,2015, 2012 Properties, LLC filed a timely request for findings of fact and

conclusions of law under TEX. R. C!V. P. 297. In response, the Court makes these findings and fact and

conclusions of law.

Findings of Fact and Conclusions of Law
Garland lSD v. He1rs qf Lena M. Hobbs: Cause ll./o. TXJ2-40136. In The 1341h Judicial District, Dallas County, Texas
Page I of5
213
 FINDINGS OF FACT

I. The City of Garland, Garland Independent School District, County of Dallas, Dallas School

Equalization Fund, Dallas County Community College District, and Parkland Hospital District

("Taxing Units") are authorized to levy and assess ad valorem taxes on the value of property

located within its taxing jurisdictions as of January I of each tax year. The real property that is

the subject of this cause ("Property") is located in the taxing jurisdiction of the Taxing Units.

2. This Court signed its Judgment in favor of the Taxing Units on June 12, 2013 ("Judgment")

naming as Defendants: Heirs and Unknown Heirs of Lena M. Hobbs, Charles Randall Hobbs,

Tonya Broyles, Lisa Greunke (collectively "Former Property Owners"), and Crow's Nest, Inc.

The Judgment included property taxes for tax years 2010-2012.

3. On October 7, 2014, the Property was sold at a tax foreclosure sale.

4. The Property was sold for an amount greater than the amount due under the Judgment, resulting

in surplus funds ("Excess Proceeds") which were deposited into the registry of this Court.

5. The Property was originally owned by Lena M. Hobbs who died intestate on April28, 2005

while single and with issue. Lena M. Hobbs' children are: Charles Hobbs, Tonya Broyles, and

Lisa Greunke.

6. 2012 Properties, LLC ("Tax Purchaser") was the successful bidder at the tax foreclosure sale of

the Property.

7. The Tax Purchaser was not a party to the Judgment.

8. At the time the Tax Purchaser purchased the Property at the tax foreclosure sale, there were post-

judgment taxes due on the Property for the tax years 2013 and 2014 ("Post-Judgment Taxes").

The Post-Judgment Taxes were not included in the Judgment.

Findings of Fact and Conclusions of Law
Garland lSD v. Heirs of Lena M. Hobbs; Cause No. TYJ 2-40136, In The 134'h Judicial District, Dallas County, Texas
Page 2 of5
214
 9. At the time the Tax Purchaser bid on the Property at the tax foreclosure sale, the Tax Purchaser

knew the Post-Judgment Taxes were due on the Property, and the Tax Purchaser knew the Post-

Judgment Taxes would continue to be a lien on the Property after the tax foreclosure sale.

I 0. The Tax Purchaser is an experienced tax foreclosure purchaser, having purchased about thirty

properties at tax foreclosure during the previous approximate two years.

II. At the time the Tax Purchaser bid on the Property at the tax foreclosure sale, the Tax Purchaser

knew that the tax foreclosure deed is a deed without warranty.

12. After the tax foreclosure sale, the Tax Purchaser paid all or a portion of the Post-Judgment

Taxes. Based on the evidence, the Court cannot determine the amount of the Post-Judgment

Taxes the Tax Purchaser paid, nor the amount that was due at the time of the Tax Purchaser's

payment.

13. At the time the Tax Purchaser paid the Post-Judgment Taxes, there was no pending tax

foreclosure lawsuit, nor was there an imminent threat of foreclosure of the tax lien for the Post-

Judgment Taxes.

14. Intervenors County of Dallas, Dallas County School Equalization Fund, Dallas County

Community College District, and Parkland Hospital District filed a petition for the release of a

portion of the Excess Proceeds under TEX. TAX CODE §34.04. This Court signed its Order

Disbursing Excess Proceeds on January 28, 2015, ordering the release of $532.75 for the benefit

oflntervenors as payment for the Intervenors' portion of the 2013 Post-Judgment Taxes.

15. Charles Hobbs filed a petition for the release of a portion of the Excess Proceeds under TEX. TAX

CODE §34.04. This Court signed its Order to Release Excess Proceeds from the Registry of the

Court on January 8, 2015, ordering the release of $8,436.29 for the benefit of Charles Hobbs.

Findings Q( ract and Conclusions of Lav.·
Garland lSD v. Heirs of Lena M Hobbs; Cause lv'o. TX/2-40136. In The 1341h Judicial District. Dallas County, Texas
Page 3 of5
215
 16. Tonya Broyles filed a petition for the release of a portion of the Excess Proceeds under TEX. TAX

CODE §34.04. This Court signed its Order to Release Excess Proceeds from the Registry of the

Court on August 13, 2015, ordering the release of $8,436.29 for the benefit of Tonya Broyles.

17. As of this date, Lisa Greunke has not filed a petition claiming a portion of the Excess Proceeds,

however, the statutory period for her to do so has not expired

18. The tax foreclosure sale of the Property to the Tax Purchaser has not been adjudged void.

CONCLUSIONS OF LAW

I. TEX. TAX CODE §34.04 enumerates the proper claimants, and the priorities between different

types of claimants, to excess proceeds from a tax foreclosure sale.

2. TEX. TAX CODE §34.04( c)(I) does provide that a tax sale buyer is the highest priority claimant to

excess proceeds, but only in the event the tax sale has been adjudged void, which is not the case

here.

3. TEX. TAX CODE §34.04 does not permit a claim by the Tax Purchaser for reimbursement of the

Post-Judgment Taxes paid by the Tax Purchaser.

4. Generally, tax courts do not sit in equity, unless there is no adequate remedy at law, and a clear

case establishing equitable jurisdiction has been made.

5. The Tax Purchaser had an adequate remedy at law, in that the Tax Purchaser could have filed a

separate civil suit against the Former Property Owners seeking reimbursement for the Tax

Purchaser's payment of the Post-Judgment Taxes. The Court draws no conclusion as to the

merits of such a claim.

6. The Tax Purchaser has not made a clear case establishing the equitable jurisdiction of this Court.

Findings of Fact and Conclusions of Law
Garland lSD v_ Heirs of Lena M Hobbs; Cause /1/a. TX/2-40136, In The I 341h Judicial District. Dallas County, Texas
Page 4 of5
216
 7. A tax lien attached to the Property securing the payment of the Post-Judgment Taxes on January

I of each year 2013 and 2014. The Tax Purchaser purchased the Property at the tax foreclosure

sale subject to the 2013 and 2014 tax liens.

8. After the Tax Purchaser purchased the Property at the tax foreclosure sale, the Tax Purchaser had

liability for payment of the Post-Judgment Taxes because the tax lien for the Post-Judgment

Taxes attached to the Property which the Tax Purchaser then owned.

9. The doctrine of equitable subrogation applies when one person, not acting voluntarily, has paid a

debt for which another was primarily liable and which in equity the other should have paid.

I 0. The Tax Purchaser fails the test of equitable subrogation because the Former Property Owners

were not primarily liable for payment of the Post-Judgment Taxes.

11. The Tax Purchaser fails the test of equitable subrogation because the Tax Purchaser was either

primarily or jointly liable for payment of the post-judgment taxes.

12. Based upon the facts of this case, this Court is not compelled by the equities of the situation to

grant equitable relief to the Tax Purchaser.

SIGNEDthis__!l_!f;;y of~--~ , 2015.

L~JUDGE PRESIDING

M. Kent Sims, Judge Presiding
i
Retired Judge of !hf. ),st Judicial District Court
Sitting for Judgektf:MJudicial District Court
Dallas County, Texas

Fmdings of Fact and Conclusions of Law
Garland lSD v. Heirs of Lena M Hobbs: Cause /1/o. TXI 2~401 36, In The 134rh Judicial District, Dallas County, Texas
Page 5 of5
217
Appendix C
 10
Daniel Blackburn - August 13, 2015
Voir Dire Examination by Mr. Bellevue

10:53AM
1 MR. BELLEVUE: I would like to ask some

2 questions for the record.

3 THE COURT: What is your client's name?

4 MR. GHRIST: Dan Blackburn, Your Honor.
10:53AM
5 THE COURT: Mr. Blackburn.

6 THE WITNESS: Yeah.

7 THE COURT: Please raise your right hand.

8 (Witness sworn)

9 THE WITNESS: Yes.
10:53AM
10 THE COURT: If this gets to be too

11 burdensome, court reporter, let me know and we'll get

12 everybody back and put him on the stand.

13 Yes, sir, Mr. Bellevue.

14 DANIEL BLACKBURN,
10:53AM
15 having been first duly sworn, testified as follows:

16 VOIR DIRE EXAMINATION
17 BY MR. BELLEVUE:

18 Q. Mr. Blackburn, would you state your full name

19 for the record?
10:53AM
20 A. Daniel Blackburn.

21 Q. And what is your relationship to 2012

22 Properties, LLC?

23 A. I'm the business manager.

24 Q. And so LLCs have managers that have authority
10:53AM
25 to operate for them, so you're a manager of the LLC; is

HEIDI J. DARST, CSR, RPR, RMR, CRR, TCRR, TMR
CIVIL TAX COURT - DALLAS COUNTY, TEXAS
 11
Daniel Blackburn - August 13, 2015
Voir Dire Examination by Mr. Bellevue

10:53AM
1 that correct?

2 A. Correct.

3 Q. Okay. And 2012 Properties, LLC, purchased the

4 subject property at tax foreclosure sale, correct?
10:54AM
5 A. Yes.

6 Q. Okay. And when you bid -- and you -- were you

7 the one that bid on the property on behalf of the LLC?

8 A. Which property? Is there an address on this

9 one? I don't recall if it was me or my -- or the other
10:54AM
10 manager.

11 Q. Were you involved in the decision-making

12 process of the LLC to bid on the property?

13 A. Yes.

14 Q. And so would your approval have been required
10:54AM
15 for somebody to bid on behalf of the LLC for the

16 property?

17 A. Yes.

18 Q. Okay. And at the time that you -- and I'm

19 assuming you gave that approval; is that correct?
10:54AM
20 A. Yes.

21 Q. At the time that you gave that approval, were

22 you aware that there were post-judgment taxes that were

23 due on the property that would not be included in the

24 minimum bid at tax sale?
10:54AM
25 A. Yes.

HEIDI J. DARST, CSR, RPR, RMR, CRR, TCRR, TMR
CIVIL TAX COURT - DALLAS COUNTY, TEXAS
 12
Daniel Blackburn - August 13, 2015
Voir Dire Examination by Mr. McCool

10:54AM
1 Q. And were you aware that those post-judgment

2 taxes were a lien on the property?

3 A. Yes.

4 Q. Okay. And so you were aware that when you
10:55AM
5 purchased the property, those taxes would be a lien on

6 the property even after you purchased them at tax sale,

7 correct?

8 A. Yes.

9 Q. And about how many properties, tax foreclosure
10:55AM
10 properties have you been involved with the purchase of?

11 A. Approximately 30, probably.

12 Q. Approximately 30 over what time period?

13 A. Two years.

14 Q. Two years, okay.
10:55AM
15 And are you aware that a tax -- the tax deed

16 that one receives from a tax foreclosure sale is without

17 a warranty?

18 A. Yes.

19 Q. Okay.
10:55AM
20 MR. BELLEVUE: I have no further

21 questions at this time, Your Honor.

22 MR. McCOOL: I have -- excuse me. I have

23 one other question, Your Honor.

24 THE COURT: Okay.
10:55AM
25 VOIR DIRE EXAMINATION

HEIDI J. DARST, CSR, RPR, RMR, CRR, TCRR, TMR
CIVIL TAX COURT - DALLAS COUNTY, TEXAS
 13
Daniel Blackburn - August 13, 2015
Voir Dire Examination by Mr. McCool

10:55AM
1 BY MR. McCOOL:

2 Q. At the time of the tax sale purchase, were you

3 aware that the -- that the debt for the taxes as to the

4 prior owners was unsecured?
10:56AM
5 A. No.

6 MR. GHRIST: I'm going to object. I

7 think there's a conclusion in there that hasn't been

8 established.

9 THE COURT: It will be sustained.
10:56AM
10 Q. (By Mr. McCool) Well, did you know that after

11 the tax sale purchase, after your -- after you purchased

12 the property at tax sale, there would no longer be

13 security for the debt as to the prior owners?

14 A. No.
10:56AM
15 MR. GHRIST: Object again. Same reason.

16 THE COURT: I'm unsure what the question

17 is entirely, so I'll sustain the objection. Re- --

18 restate it, please, counsel.

19 Q. (By Mr. McCool) The question is: At the time
10:56AM
20 as of your purchase of the tax -- of the tax sale

21 property, there was no longer security for the debt for

22 the post-judgment taxes as to the prior owners, is that

23 your understanding?

24 MR. GHRIST: I'm going to object again on
10:56AM
25 the grounds that the answer will be a legal conclusion.

HEIDI J. DARST, CSR, RPR, RMR, CRR, TCRR, TMR
CIVIL TAX COURT - DALLAS COUNTY, TEXAS
 14
Daniel Blackburn - August 13, 2015
Voir Dire Examination by Mr. McCool

10:56AM
1 THE COURT: I'll let him answer since

2 he's indicated that he's very familiar with this

3 procedure.

4 A. No.
10:57AM
5 MR. McCOOL: No more questions.

6 THE COURT: Either --

7 MR. BELLEVUE: So --

8 THE COURT: Any of you have other

9 questions of this witness?
10:57AM
10 MR. GHRIST: I do, but we -- we're

11 prepared to present our case, if this is the time.

12 MR. BANKS: I have no questions for the

13 witness, Your Honor.

14 THE COURT: All right.
10:57AM
15 MR. BELLEVUE: I can present my

16 objections before or after he presents his case.

17 THE COURT: Well, I'm not sure what --

18 tell me what your objections are.

19 MR. BELLEVUE: Well, Mr. McCool and I
10:57AM
20 have jointly filed objections that cover nine separate

21 objections to the claim of -- of 2012 Properties, LLC.

22 But to highlight the most important ones, number one, as

23 the taxing authorities have mentioned, the Legislature

24 has not provided for a right for tax sale buyers that
10:57AM
25 pay post-judgment taxes to make a claim against excess

HEIDI J. DARST, CSR, RPR, RMR, CRR, TCRR, TMR
CIVIL TAX COURT - DALLAS COUNTY, TEXAS
 15

10:57AM
1 proceeds, which is what's being attempted in this case.

2 In addition, as Your Honor is aware, tax

3 courts do not sit in equity, but even if you could

4 consider the equitable factors in this particular case,
10:58AM
5 under the petitioner's claim of equitable subrogation,

6 the facts of this case do not justify the court in

7 equity allowing this subrogation. And the --

8 THE COURT: So I'll let counsel present

9 what evidence you might have, please.
10:58AM
10 This will just help complete the record.

11 I've heard some of these before, so I'm pretty familiar

12 with what the result may need to be as far as what I've

13 seen so far.

14 DANIEL BLACKBURN,
10:58AM
15 having been previously duly sworn, continued to testify

16 as follows:

17 DIRECT EXAMINATION

18 BY MR. GHRIST:

19 Q. After the purchase, did 2012 Properties pay
10:58AM
20 the taxes on the property that were due at that time?

21 A. Yes.

22 MR. GHRIST: I'd like to ask the other

23 attorneys if they're opposed to admitting the tax

24 records.
10:59AM
25 MR. BELLEVUE: Are those the same records

HEIDI J. DARST, CSR, RPR, RMR, CRR, TCRR, TMR
CIVIL TAX COURT - DALLAS COUNTY, TEXAS
 16
Daniel Blackburn - August 13, 2015
Direct Examination by Mr. Ghrist

10:59AM
1 that were attached to your petition?

2 MR. GHRIST: Yes.

3 MR. BELLEVUE: No objection.

4 MR. McCOOL: No objection.
10:59AM
5 MR. BANKS: I don't have an objection

6 either, Your Honor.

7 MS. HICKS: No objections from

8 intervenors.

9 THE COURT: So what are they marked as?
10:59AM
10 MR. GHRIST: The Dallas --

11 THE COURT: Or are you just wanting me to

12 take notice as they're attached?

13 MR. GHRIST: If you -- if you would take

14 notice of the attachments to the third amended petition,
10:59AM
15 Your Honor, that would --

16 THE COURT: Is that all that was

17 attached?

18 MR. GHRIST: Yes, Your Honor.

19 MR. BANKS: Your -- Judge, considering
10:59AM
20 the fact that you haven't made a ruling with respect to

21 whether that amended petition is ripe, I would -- I

22 would not be kosher with you taking notice of that

23 amended petition. So I would ask that it be admitted

24 the way he's trying to admit it.
10:59AM
25 THE COURT: Okay. That might be a safer

HEIDI J. DARST, CSR, RPR, RMR, CRR, TCRR, TMR
CIVIL TAX COURT - DALLAS COUNTY, TEXAS
 17
Daniel Blackburn - August 13, 2015
Direct Examination by Mr. Ghrist

11:00AM
1 way. So mark your Exhibit 1.

2 MR. GHRIST: Petitioner would offer

3 Exhibits A --

4 THE COURT: All right.
11:00AM
5 MR. GHRIST: -- B and C. Exhibit A being

6 the taxes from the Dallas County Tax Office, Exhibit B

7 being the taxes from the City of Garland Tax Office, and

8 Exhibit C being the taxes from Garland Independent

9 School District.
11:00AM
10 MR. BANKS: No objection.

11 MS. HICKS: No objections to the tax

12 evidence.

13 MR. McCOOL: No objection.

14 MR. BELLEVUE: No objection, Your Honor.
11:00AM
15 THE COURT: Admitted.

16 Q. (By Mr. Ghrist) Now, Mr. Blackburn, when you

17 paid the taxes -- you've testified previously that you

18 understood there was a lien attached to the property --

19 did you make that payment in order to prevent
11:00AM
20 foreclosure of that lien?

21 A. Yes.

22 Q. And did you also make the payment to avoid

23 further accrual of taxes, penalties, fines or interest

24 on amounts due?
11:01AM
25 A. Yes.

HEIDI J. DARST, CSR, RPR, RMR, CRR, TCRR, TMR
CIVIL TAX COURT - DALLAS COUNTY, TEXAS
 18
Daniel Blackburn - August 13, 2015
Direct Examination by Mr. Ghrist

11:01AM
1 Q. Were those amounts due by the former owner of

2 the property?

3 MR. McCOOL: Objection, it calls for a

4 legal conclusion.
11:01AM
5 MR. GHRIST: Your Honor, I -- I think the

6 answer would be helpful to an understanding of the facts

7 as a lay opinion.

8 THE COURT: I'll sustain the objection.

9 You can show me what you're getting at I assume by the
11:01AM
10 dates of the taxes owed and date of sale and so forth.

11 Q. (By Mr. Ghrist) Did the former owner pay the

12 taxes that were due at the time of the sale?

13 A. The former owner, no.

14 Q. And if you're equitably subrogated to the tax
11:01AM
15 lien that was satisfied by your paying it, would there

16 be any intervening lien holders that would be

17 prejudiced?

18 MR. McCOOL: Objection, calls for a legal

19 conclusion.
11:02AM
20 THE COURT: Sustained.

21 Q. (By Mr. Ghrist) Would there be any intervening

22 lien holders that you're aware of in existence at this

23 time?

24 A. No.
11:02AM
25 Q. Did you intend for that payment to be a gift

HEIDI J. DARST, CSR, RPR, RMR, CRR, TCRR, TMR
CIVIL TAX COURT - DALLAS COUNTY, TEXAS
 19
Daniel Blackburn - August 13, 2015
Cross-Examination by Mr. Bellevue

11:02AM
1 to the former owners?

2 A. No.

3 Q. So you paid the -- you made the payment solely

4 to protect your interest in the property?
11:02AM
5 A. Yes.

6 Q. And have the former owners been enriched by

7 the tax payment that you made?

8 MR. McCOOL: Objection --

9 MS. HICKS: Objection.
11:02AM
10 MR. McCOOL: -- calls for a legal

11 conclusion.

12 THE COURT: Sustained.

13 Q. (By Mr. Ghrist) If you had not paid those

14 taxes, would the taxes still be due?
11:03AM
15 A. Yes.

16 MR. GHRIST: We rest, Your Honor.

17 THE COURT: Any other questions of this

18 witness?

19 MR. BELLEVUE: Yes, Your Honor, I have
11:03AM
20 one question.

21 CROSS-EXAMINATION

22 BY MR. BELLEVUE:

23 Q. Mr. Blackburn, when you stated that you paid

24 the taxes to prevent foreclosure of the property, was
11:03AM
25 there an imminent foreclosure in process, had a new tax

HEIDI J. DARST, CSR, RPR, RMR, CRR, TCRR, TMR
CIVIL TAX COURT - DALLAS COUNTY, TEXAS
 20
Daniel Blackburn - August 13, 2015
Cross-Examination by Mr. Bellevue

11:03AM
1 foreclosure lawsuit been filed against you or the

2 property at that time?

3 A. No.

4 MR. BELLEVUE: No further questions.
11:03AM
5 MR. McCOOL: I have no other questions.

6 THE COURT: Thanks, y'all.

7 So you have evidence on yours, counsel?

8 MR. SAVAGE: I do. Your Honor, we ask

9 the Court to take judicial notice of the heir --
11:03AM
10 affidavit of heirship that was attached to the pleading.

11 We also have proof of notice to the parties.

12 THE COURT: I assume everyone's here that

13 needed notice maybe, right?

14 MR. SAVAGE: There's -- there's one
11:04AM
15 un- --

16 THE COURT: Wait, let me look at the

17 docket sheet.

18 MR. SAVAGE: One -- one, that was

19 Ms Greun- --
11:04AM
20 MR. McCOOL: There's one defendant who is

21 not present --

22 MR. SAVAGE: One defendant who is not --

23 not present.

24 MR. McCOOL: -- Your Honor.
11:04AM
25 THE COURT: And that is?

HEIDI J. DARST, CSR, RPR, RMR, CRR, TCRR, TMR
CIVIL TAX COURT - DALLAS COUNTY, TEXAS
Appendix D
Exhibit A

AUG 1 G 2D15
Dallas County Web Site http://www.dalIasact.com/act_webdev/dallas/showdetail2.jsp?can=26l2...

Owner Search Address Search Account Search Fiduciary Search

Property Tax Balance

All tax information refers to the 2014 Tax Year, unless otherwise noted, l.e. "Prior Year Amount Due". Amounts due
Include penalty. Interest, and collection fees If applicable.

Account Number: 26126750010320000 eStatement Enrollment
Address: Enroll In eStatements to receive your 2015 Current Tax
2012 PPTIES aC Statement by email In October, 2015.
PC BOX 191088
DAUAS, TX 7S219-8088
Market Value: $54,760
Property Site Address:
Land Value: $6,850
S618 MARINA OR, C6
Improvement Value: $47,910
Legal Description:
Capped Value: $0
CAPTAINS QUARTERS 2/CROWS NEST
CROWS NEST
Agricultural Value: $0
SLOG F UNIT 32 CE 2.5%
INT201400270S98 DD10072014 CO-DC
Exemptions: None
1267500103200 32612675001

Current Tax Statement

Current Tax Levy: $363.54
Summary Tax Statement
Current Amount Due: $0.00
Taxes Due Detail by Year and Jurisdiction
Prior Year Amount Due: $0.00
Payment Information
Total Amount Due: $0.00
Account History Report

Payment History Report by Year

Payment History Report

Request an Address Correction

ClickHere to see your estimated amount due for a future date. You can see this information by year and by both year and jurisdiction.

lof2 8/4/2015 11:09 AM
Dallas County Web Site http://wAvw.dallasact.coni/act_webdev/dallas/showdetail2.jsp?can=2612..

Make your check or money orderpayable to:
/r^ JOHN R. AMES, CTA, TAX ASSESSOKCOUMCTOR
Dattaa County Tax Omea
PO BOX 139089
DAUJiS, TEXAS 39313-9099

Go to Your Portfolio 11 Tax Office Home Page |

Terms of Use

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pHI>fOn>gSQ»iOi.cofitng>wo>a

OMLASCOUNTYTAXOFFICE CoiscMn T^cAnotogto.
SOOEUyiSTREET Afi^msarved
DAUA3. TEXAS 7S202<9904
214^7811

2 of2 8/4/2015 11:09 AM
 pay_history_ ^f(vl.9) PAYMENT HISTOR lb:PORT BY YEAR
Account No; 261-267-500-10320000 Run Date: 07/01/2015

Certified Owner: 2012 PPTIES LLC Run Time: 16:49:53

Year: im

DepeaitNo. Rcc
RcialtScq. ' ValidaliaaNo. Depqdt- Receipt : '/Paid;,t^y . Discount PtpBity Intenat
CoUteliaa Refund Vanance
Trp* Date! • :Dale .' i Fees'-'

000008016411 TL 12434103 0000000012434103 12/27196 12/27/96 118.13 0.00 o.oo 0.00 0.00 0.00 0.00 118.13

Yean IW
Rec Deposit Receipt CoUectton Total itaid ;
DefKoitNo. Remit Scq. Validatioa No. Levy Dbeonnt Penally Interest Refmid Variance
Type Dale State Fees

PR99I003MOR U 13490098 0000000013490102 10/03/99 10/03/99 0.00 0.00 0.00 0.00 0.00 -22.63 0.00 -22.63

RD99I003MOR TL 13490098 0000000013490104 llM)3/99 10/03/99 0.00 0.00 0.00 0.00 0.00 22.63 0.00 22.63
RO99I003MOR TL 13490098 0000000013490103 10rt)3/99 10/03/99 0.00 0.00 0.00 0.00 0.00 -22.63 0.00 -22.63
O0OOOSO2O8SI TL 13490098 0000000013490101 12/31/97 12/31/97 90.54 0.00 0.00 0.00 0.00 22.63 0.00 113.17

000008020831 TL 13490098 0000000013490099 12/31/97 1251/97 -113.17 0.00 0.00 0.00 0.00 0.00 0.00 -113.17

000008020831 U 13490098 0000000013490098 12/31/97 12/31/97 113.17 0.00 0.00 0.00 0.00 0.00 0.00 113.17

Totals for Year 1997: 90.34 0.00 0.00 0.00 0.00 0.00 0.00 90.34

Yean 1998

DepoiitNa. 5** VaWalion No.
Deposit Receipt , Paid Levy Dfaconat panalQr Inteicst
fbllectioa Refund Vatiaate ToidPsjd '
RemitSeq.
. T>pe bate Date" Fees

000008023111 TL 14300847 0000000014300847 1253/98 125358 88.49 0.00 0.00 0.00 O.OO 0.00 0.00 88.49

Year: 1999
TMpdsiL Reinpt ' .CoUeclbn
^pepoaltNK Rcc
RctilSq. Vt^^No. : PDal;y Discount Interest Refund.
,;Type '/Date:' !::;'''v:Date-: : ''Fees;'

K10070834863 TL 2010334127 900002011288893 07/08/10 07/08/10 377.83 0.00 43.34 138.70 116.38 0.00 0.00 698.23

Year: 2007
Deposit Receipt Coilecllaii
Deposit No. RemitSeq. Validation No. Paid Levy Discount Penalty Interest Refund Variance Total Paid
Date Date Fees

Page: 1 of 5
 pay_hislory_j
PAYMENT HISTOR PORT BY YEAR
Account No: 261-267-S00-10320000 Run Date: 07/01/2015

Certified Owner: 2012 PPTIES LLC Run Time: 1<;:49:53

Ree Deposit; R^pt piscount Penalty CoilecUott Reiimd. . Vacianee ToialPaid .
DepuitNo.' Remit Scq. Validation No. 'PoM Inlercse
't)ate'- !Paie;;
K10070834863 TL 20l0334i27 900002011288893 07/08/10 07/08/10 386.90 0.00 46.43 116.07 109.87 0.00 0.00 659J7

Year: 2008
Depodt Recdpt ' Colleelion TetidP^
Deposit No. Ree
TtenilSeq. yaiidalionNo. Paid Levy iDis^unt l^alp Interesi Refund < Varianee .
Type Dace 'Dale ^ ' ;Fies'''

KI0070834863 TL 2010334127 900002011288893 07/08/10 07/08/10 336.38 0.00 40.39 60.38 87.31 0.00 0.00 323.06

Year: 2009
Depesil. \ Rccdpt .Inter^ Cbilecibii
DcpotiiNo: 5** JR^lScq. Validalion No.; ' Disepunt^ Penalty
, •JFnts
Refund Variance. Total Paid
Type Dale Date

KI0070834863 TL 2010334127 900002011288893 07/08/10 07/08/10 331.63 0.00 42.19 21.10 82.99 0.00 0.00 497.91

Year: 2010

fffoposltNo.: IvalidationNo. Deposit R^pt l>ald U«y biseouat Penalty .Inlercsl Colleelion Refund Varianee Total Paid
RemitScq. Date 'Date Fees

KI1032238761 TL 2011199646 900002013381433 03/22/ii 03/22/11 363.97 0.00 23.49 121 0.00 0.00 0.00 396.73

Yean 2011
Deposit Receipt' Uiie^n Totai paid '
vDcpositNo. '2*' Remit Seq: 'Vidida&aNo..
Dam .pate
FaM' Levy' Discount Penally Inieicst
" • Tees
Refund Variucc

KI202023788I TL 2012041749 900002017S39144 02A>2/12 02/OI/12 344.89 0.00 20.69 3.46 0.00 0.00 0.00 369.04

Yean 2012

Deposit No. Rcc
RcndlScq^i VaCdadraNo. pep^l' Re^pt Paid Levy Disconnt. Penally Interest
Cqllectioa 'Rdbi^ ykrhnee TotriPaU
Dale bale .'.Fees

S0082083 TL 2014094491 900002021866172 11/11/14 11/11/14 329.71 0.00 39.36 72.33 88.37 0.00 O.OO 530.19

Yean 2013
Deposit Receipt CeDc^n ToibdPtaid
DepositNo. RemitScq. ' ValidalioiiNa^ Paid Le«y Discount Penally Interest RefiiJid Variance'
lypc Dale Date Fees

R00000378624 TL 2014430040 900002023303883 06/30/13 06/30/13 0.00 0.00 0.00 0.00 0.00 -332.73 0.00 -332.73

RA130629 TL 2014430040 900002023304776 06/29/15 03/23/13 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

S0088073 TL 2014747830 900002022923800 03/23/13 03/23/13 338.03 0.00 42.% 42.97 88.79 0.00 0.00 532.73

T0088072 TL 2014430040 900002022923791 03/23/13 03/23/13 0.00 0.00 0.00 0.00 0.00 332.73 0.00 532.73

T0088072 TL 2014430040 900002022923790 03/23/13 03/23/13 •338.03 0.00 -42.% -42.97 -88.79 0.00 0.00 -332.75

ro083004 TL 2014430040 900002022293080 01/20/13 01/20/13 338.03 0.00 42% 42.97 88.79 0.00 0.00 332.73

Totals for Year 2013: 338.03 0.00 42.96 42.97 88.79 0.00 0.00 532.73

Yean 2014
CoUecibMi
DeposftNo. Ji" ReoitSeq. Validalion Nk Deposit
Dale
Receipt
Dale
Paid Lety Diseoual Penalty Interest
Fees
Refiaid Variance TqlalPaid
• Typ®

P0083004 TL 2014430040 900002022293080 01/20/13 01/20/13 363.34 0.00 0.00 0.00 0.00 0.00 0.00 363.54

Grand Totals: 4,017.67 0.00 303.05 482.70 573.91 0.00 OJW 5,377J3

Page: 2 of 5
pay_histoiy_j ^f(vl.9) %
PAYMENT HISTOR REPORT BY YEAR )
Account No: 261-267-500-10320000 Run Date: 07/01/2015

Certified Owner: 2012 PPTIES LLC Run Time: 16:49:53

PAVME^^• msTORV BY pi^osrr
DeiktsU No. j Payer PaidLcYir Discoiiiit Penally- Interest CbiiFees Refund Variance Topi Paid*
OOOOOSOI64II HOMESIDE LENDING INCtf0083S4 118.13 0.00 0.00 0.00 0.00 0.00 0.00 118.13
I4J28 S OUTER FORTY DR
CHESTERFIELD.MO 63017

PR99100SMORT UNKNOWN 0.00 0.00 0.00 0.00 0.00 -2263 0 00 -22.63
UNKNOWN

RO99100SMORT UNKNOWN 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
UNKNOWN

000008020831 HOMESIDE LENDING INC «008384 113.17 0.00 0.00 0.00 0.00 0.00 0.00 113.17
14528 S OUTER FORTY DR
CHESTERFIELD.MO 63017

000008020831 UNKNOWN -22.63 0.00 0.00 0.00 0.00 22.63 0.00 0.00
UNKNOWN

000008023111 HOMESIDE LENDING INC #008384 88.49 0.00 0.00 0.00 0.00 0.00 0.00 88.49
14528 S OUTER FORTY DR
CHESTERFIELD. MO 63017

000008029948 HOMESIDE LENDING INC #008384 91.48 0.00 0.00 0.00 0.00 0.00 0.00 91.48
14528 S OUTER FORTY DR
CHESTERFIELD.MO 63017

000008034620 HOMESIDE LENDING INC #008384 123.99 0.00 0.00 0.00 0.00 0.00 0.00 123.99
14528 S OUTER FORTY DR
CHESTERFIELD.MO 63017

000200004320 HOMESIDE LENDING INC #008384 139.03 0.00 0.00 0.00 0.00 0.00 0.00 139.03
14528 S OUTER FORTY DR
CHESTERFIELD.MO 63017

000200010612 HOMESIDE LENDING INC #008384 152.93 0.00 0.00 0.00 0.00 0.00 0.00 152.93
14528 S OUTER FORTY DR
CHESTERFIELD.MO 63017

Page: 3 of 5
pay_history_; ^^{vl.9) PAYMENT HISTOR lEFORT BY YEAR
Run Date:
)
07/01/2015
Account No: 26I-267-SOO-10320000

Ceiiincd Owner: 2012 PPTIES LLC Run Time: 16:49:53
KI0070834S63 HOBBS LENA M ESTATE OF 377.83 0.00 45.34 158.70 116.38 0.00 0.00 698.25
C/0 LISAGREUNKE
1452 OAK TREE DRIVE
ATHENS.TX 7575WOO

Kia070834863 HOBBS LENA M ESTATE OF 386.90 0.00 46.43 116.07 109.87 0.00 0.00 659.27
OO LISAGREUNKE
1452 OAK TREE DRIVE
ATHENS,TX 75751-0000

K10070834863 HOBBS LENA M ESTATE OF 336.58 0.00 40.39 60.58 87.51 0.00 0.00 525.06
C/O LISAGREUNKE
1452 OAK TREE DRIVE
ATHENS,TX 75751-0000

K10070S34863 HOBBS LENA M ESTATE OF 351.63 0.00 42.19 21.10 82.99 0.00 0.00 497.91
C/O LISAGREUNKE
1452 OAK TREE DRIVE
ATHENS.TX 75751-0000

K11032238761 HOBBS LENA M ESTATE OF 363.97 0.00 25.49 7.27 0.00 0.00 0.00 396.73
OO LISAGREUNKE
1452 OAK TREE DR
ATHENS.TX 75751-9013

K12020237881 HOBBS LENA M ESTATE OF 344.89 0.00 20.69 3.46 0.00 0.00 0.00 369.04
OO LISAGREUNKE
1452 OAK TREE DR
ATHENS.TX 75751-9013

50082085 DISTRICT CLERK PYMT 329.71 0.00 39.56 72.55 88.37 0.00 0.00 530.19
TAX SUIT
DALLAS.TX 75202

RIX)000378624 2012 PROPERTIES. LLC 0.00 0.00 0.00 0.00 0.00 -532.75 0.00 -532.75
PC BOX 191088
DALLAS.TX 75219

RA150629 2012 PROPERTIES. LLC 0.00 0.00 0.00 0.00 0.00 -532.75 0.00 -532.75
PO BOX 191088
DALLAS.TX 75219

RA150629 2012 PROPERTIES. LLC 0.00 0.00 0.00 0.00 0.00 532.75 0.00 532.75
PO BOX 191088
DALLAS.TX 75219

S0088073 DISTRICTCLERK 358.03 0.00 42.96 42.97 88.79 0.00 0.00 532.75
EXCESS FUNDS ON TAX SUIT
DALLAS.TX 75202

Page: 4 of 5
pay_history_; If(v1.9) PAYMENT HISTOR Jei
JEPORT BY YEAR
Account No: 2til-267-500-10320000 Run Date; 07/01/201S

Certified Owner: 2012 PPTIES LLC Run Time: 16:49:53
T0OS8O72 2012 PROPERTIES. LLC •3SS.03 0.00 -42.% -42.97 -88.79 0.00 0.00 -532.75
PO BOX 19108S
DALLAS.TX 75219

T0088072 2012 PR0PERT1E.S. LLC 0.00 0.00 0.00 0.00 0.00 532.75 0.00 532.75
PO BOX 191088
DALLAS.TX 75219

P0085084 2012 PROPERTIES, LLC 358.03 0.00 42.96 42.97 88.79 0.00 0.00 532.75
POBOX 191088
DALLAS.TX 75219

P0085004 2012 PROPERTIES. LLC 363.54 0.00 0.00 0.00 0.00 0.00 0.00 363.54
POBOX 191088
DALLAS.TX 75219

Grand Totals CorDeposit; 4,017.67 0.00 303.05 482.70 573.91 0.00 0.00 S.377J3

Page: 5 of 5
Exhibit B

AU5 1 3
6/28/2015 City of Garland Tax Office

GARLAND
SunSay, June 2B, 201S
Phone: (972)205-2410 Fax: (972)205-2820
PAYMENT HISTORY

AccottPt Nombcr: 0000052833 CAD Nnrober: 26126750010320000
Owner Nime: 20U PPHES LLC Praperiy Address: 5618 MARIKAOR
Address: Le^ I: CAPTAINS QUARTERS2/CROWS NEST
PC 80X191088 CROWS NEST
DAUAS TX 7S219'608e Le9U3: eu)CPUNtT32 ce 2^%
Leeel 4: INT201400270598 DD1C072014 CO-
Acres: 0
Mer^^ Company: Property Type: R
\>ar Paid i'moIlY Intrrt^t Atf«rnr> Total llafe f hrcL .No I'djor Numr
2014 S385.84 10.00 $0.00 $0.00 $38504 01/26/2015 808 2012 PPTieSUC
2013 S38S.84 $40.30 $46.30 $9509 $574.13 01/26/2015 808 2012 PPTIESLLC
2012 $385.84 $46.30 $54.02 $94.42 $58008 11/21/2014 503044343 COUNTY TREASURER
2011 $389.57 $0.00 $0.00 $0.00 $38907 01/31/2012 CREDIT CARD LISAGREUNKE
2010 $411.42 $28.80 $6.23 $0.00 $448.45 03/22/2011 CREDIT GREUNKE. LISAD
2009 $411.42 $41.14 $20.57 $70.97 $544.10 06A}8/2010 CREDIT LlSADOREUNKE

Totat $2,369.03 $162.54 $120.12 $261.08 S2.922.67
Click on a blue Individual year above to view/print a duplicate receipt.
Tax receipt data is current as of our last business day. Website updated daily to reflect current payment activity. Receipt Invalid if payment not honored by
financial institution.
If you havo questions about your taxes please call your tax office.
Otherwise call Governmental Data Services at 800-431-6176 if you experience any Issues using this website.

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htfpy/texaspayinents.coniAXXXXXVP3ymertHistory.a3p 1/1
Exhibit C

"AUG 1 ,? 201';
&28/2015 Garland rs.O

Sunday. June 28. 201$
Phone: (972)494-8570 Fax: (972)494-8631
PAYMENT HISTORY

Aecouat Number: O0CO034911 CAO Numbfn 26126750010320000
Owatr Name: 2012 PPHESILC Property Address: S618 MAAINAD8
Address: CAiTAINS QUARTERS 2/CROWS NEST
PO 80X191086 Legal 2: CROWS NEST
DAUASTX75219-6089 Lefsal 3: 6LOGPUNrT32 CE 2^9^
Lreal4: INT201400270S98 0010072014 CO-
Acres: 0
Moiigage CompaiQ': Properly Type: R
\f:tr Amtiunr I'uid I'riiulh lntrrt«i .\tli>r(ir> InUl l)4lr ( hrcK Vi» rayur Name
2014 5666.31 50.00 504)0 50.00 5088.31 01/27/2015 811 2012 PROPERTIES aC
2013 5666.31 582.38 582.38 5127.85 5978.66 01/27/2015 611 »)12PPTtESaC
2012 5666.31 582.38 5220.87 5137.95 51.127.40 11/21/2014 503044344 COUNTY OP DALLAS
2011 5692.95 504)0 504)0 50410 5692.95 01/3U2012 CC USAGREUNKE
2010 5723.06 586.77 5410A2 517t.37 51.400.62 11/21/2014 503044344 COUNTY OP DALLAS
2010 56.74 51.05 50.67 5160 512.26 11/30Q011 503026547 COUNTY OP DALLAS
2009 5731.80 587.82 5161.00 5147.09 51.127.71 11/30/2011 503026547 COUNTY^ DALLAS

Tolat $4J21S.48 5340.38 5884.52 558580 56.02082

Click on a blue individual year above to view/print a duplicate receipt.

Tax receipt data is current as of our last business day. Website updated daily to reflect current payment activity. Receipt invalid if payment not honored by
financial institution.
If you have questions about your taxes please call your tax office.
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Appendix E
| | Caution
As of: December 10, 2015 11:18 AM EST

Smart v. Tower Land & Inv. Co.
The Supreme Court of Texas
Mar. 12, 1980
No. B-8664

Reporter
597 S.W.2d 333; 1980 Tex. LEXIS 328; 23 Tex. Sup. J. 241
Don M. Smart, Petitioner vs. Tower Land and a deed of trust which contained a no personal
Investment Company, Respondent liability clause. When petitioner defaulted on the
note, respondent repurchased the property at
Subsequent History: [**1] Rehearing Denied foreclosure sale, paid the delinquent taxes and
May 7, 1980 sought reimbursement from petitioner. Petitioner
counterclaimed stating the note was usurious. The
Prior History: From Dallas County, Fifth District lower court granted respondent’s claim and denied
petitioner’s claim. The court reversed both
Core Terms findings. It determined that the mortgage contract
did not give rise to a personal debt for taxes owed
taxes, foreclosure, reimbursement, mortgagee, because both the purchase money debt and the tax
mortgage, usurious, trust deed, mortgagor, debt comprised a single mortgage debt to be
subrogated, acceleration, unearned, personal enforced at foreclosure without personal liability.
liability, ref’d, personal judgment, default, per The court also found that the note was usurious on
annum, parties, terms, maturity, refund, equitable its face because the documents required
subrogation, mortgage debt, prepaid, rights, pays, prepayment of three years of interest, affirmatively
purchase the property, motion for rehearing, provided for the retention of unearned interest,
and did not contain a usury savings clause.
personal debt, no writ, delinquent
Outcome
Case Summary
The court reversed the judgments of the lower
Procedural Posture courts and rendered judgment that respondent
mortgagee take nothing on its claim for
Petitioner mortgagor challenged the decision of reimbursement because there was no basis for
the court of civil appeals, Dallas County, Fifth imposing personal liability against petitioner
District (Texas), which affirmed the trial court’s mortgagor for taxes paid after foreclosure. It also
judgment that granted respondent mortgagee’s reversed the judgments of the lower courts that
claim for reimbursement of taxes and denied held the note was not usurious and remanded the
petitioner’s usury claim. matter for determination of damages because the
note was usurious on its face.
Overview
LexisNexis® Headnotes
Petitioner mortgagor purchased real estate from
respondent mortgagee and paid part of the Real Property Law > Financing > Foreclosures >
purchase price with a promissory note secured by General Overview

Ian Ghrist
 Page 2 of 10
597 S.W.2d 333, *333; 1980 Tex. LEXIS 328, **1

Tax Law > State & Local Taxes > Administration & Subrogation to the creditor’s rights is available,
Procedure > Failure to Pay however, only when the debtor was enriched
unjustly; thus, the payor who confers a benefit as
HN1 If a mortgagor fails to pay taxes he has a mere volunteer is not entitled to this remedy.
promised to pay, the mortgagee may treat the
amount owed for taxes as part of the mortgage Real Property Law > ... > Liens > Nonmortgage
debt. In the usual mortgage agreement the rights Liens > Tax Liens
and obligations of the mortgagor and mortgagee Tax Law > State & Local Taxes > Administration &
for expenses such as property taxes are set out in Procedure > Tax Liens
the deed of trust, and the duty to pay taxes is
Tax Law > State & Local Taxes > Real Property
ordinarily the mortgagor’s. If the mortgagor fails
Taxes > General Overview
to pay the taxes, the mortgagee may pay them and
the amount paid for taxes is considered to be a HN4 One who pays real property taxes assessed
part of the mortgage debt. Both the mortgagor’s while the property was owned by another asserts
obligation to pay the amount due on the purchase a right to be subrogated to the taxing authority’s
price and his obligation to pay taxes are secured constitutional and statutory lien. Under this lien,
by the mortgage. liability for taxes is secured by the property and
may be enforced by foreclosure. Other special
Contracts Law > Contract Interpretation > General rights and privileges have been held to inure to the
Overview
taxing authority in addition to its lien, such as the
HN2 It is the duty of the court to construe the right to enforce tax liability as a personal debt.
contract as an entire instrument, and to consider
Contracts Law > Third Parties > Subrogation
each part with every other part so that the effect
and meaning of one part on any other part may be Contracts Law > Types of Contracts > Express
determined. Contracts
Real Property Law > ... > Liens > Nonmortgage
Contracts Law > Standards of Performance > Liens > Tax Liens
Creditors & Debtors
Tax Law > State & Local Taxes > Administration &
Contracts Law > Remedies > Equitable Relief > Procedure > Tax Liens
General Overview
Contracts Law > ... > Secured Transactions >HN5 The taxpayer’s right to subrogation may
Default > Creditor Obligations arise by statute or by express agreement.
Furthermore, the taxing authority’s lien may be
Contracts Law > Third Parties > Subrogation
transferred. Tex. Rev. Civ. Stat. Ann. art. 7345a
Contracts Law > Types of Contracts > Quasi (1979).
Contracts
Contracts Law > Third Parties > Subrogation
HN3 Equitable subrogation may be invoked to
Insurance Law > Claim, Contract & Practice
prevent unjust enrichment when one person
Issues > Subrogation > Voluntary Payments
confers upon another a benefit that is not required
by legal duty or contract. A right to subrogation is Real Property Law > Financing > Foreclosures >
often asserted by one who pays a debt owed by General Overview
another. If entitled to full subrogation, the payor is Real Property Law > ... > Mortgages & Other
allowed to enforce the rights available to the Security Instruments > Satisfaction & Termination >
creditor, such as rights against the debt’s security. General Overview

Ian Ghrist
 Page 3 of 10
597 S.W.2d 333, *333; 1980 Tex. LEXIS 328, **1

HN6 The mortgagee’s interest in the security of nevertheless when the contract by its terms,
his mortgage makes him more than a mere construed as a whole, is doubtful, or even
volunteer when he pays taxes owed by the susceptible of more than one reasonable
mortgagor. Because the relationship between the construction, the court will adopt the construction
mortgagor and mortgagee is contractual, the extent which comports with legality. It is presumed that
to which the mortgagee is subrogated to the taxing in contracting parties intend to observe and obey
authority’s rights may be addressed in the the law. For this reason the court will not hold a
documents representing their agreement, contract to be in violation of the usury laws
particularly in the deed of trust. Unless provided unless, upon a fair and reasonable interpretation
otherwise, the mortgagee is subrogated to the of all its terms, it is manifest that the intention was
security of the tax debt. Taxes not paid by the to exact more interest than allowed by law.
mortgagor are considered to be part of the
mortgage debt. Upon foreclosure, the proceeds Contracts Law > Defenses > Usury
from the sale of the property may be applied in
HN10 Unless the contract by its express and
satisfaction of the amount paid for taxes.
positive terms evidences an intention which
Real Property Law > Financing > Foreclosures > requires a construction that unearned interest was
General Overview to be collected in all events, the court will give it
the construction that the parties intended that the
HN7 The mortgagee who purchases the property unearned interest should not be collected.
with delinquent taxes owed by the mortgagor,
may account for the delinquent taxes in Contracts Law > Defenses > Usury
determining his bid. The purchasing mortgagee
HN11 The contract under construction will not be
who fails to pursue this course of action and
found usurious on its face unless it expressly
purchases the property with taxes remaining
entitles the lender, upon the happening of a
unpaid will be considered to have purchased with
contingency or otherwise, to exact interest at a
reference to the tax liability.
rate greater than that allowed by law.
Contracts Law > Defenses > Usury
Counsel: For Petitioner: Timothy E. Keeley -
Real Property Law > ... > Mortgages & Other Dallas, TX
Security Instruments > Transfers > Due on Sale
Clauses For Respondent: H. Dee Johnson, Jr. - Dallas, TX
HN8 Upon acceleration of maturity, the failure to
Opinion by: McGEE
properly refund or credit excess unearned interest
may result in usury. Whether the inclusion of an
acceleration clause, and the attendant contingency
Opinion
that excess unearned interest may be collected or
[*335] Sears McGee, Justice
retained, makes a contract usurious is a question
This is a suit for reimbursement of real property
of construction.
taxes that accrued while the property was held
Contracts Law > Defenses > Usury under a deed of trust. The taxes were paid by the
mortgagee, Tower Land and Investment Company
HN9 While courts have no right to depart from (Tower), after Tower foreclosed on the mortgage.
the terms in which the contract is expressed to Tower sought reimbursement from the mortgagor,
make legal what the parties have made unlawful, Don M. Smart. Smart filed a counterclaim for

Ian Ghrist
 Page 4 of 10
597 S.W.2d 333, *335; 1980 Tex. LEXIS 328, **1

usury. The trial court entered judgment for Tower We first find that the mortgage contract did not
for reimbursement for taxes and denied Smart’s give rise to a personal debt for taxes owed by
usury claim. The court of civil appeals affirmed. Smart to Tower. Many Texas cases have held that
582 S.W.2d 543. On Tower’s claim for HN1 if a mortgagor fails to pay taxes he has
reimbursement we reverse the judgments of the promised to pay, the mortgagee may treat the
lower courts and render judgment that Tower take amount owed for taxes as part of the mortgage
nothing. We also reverse the lower courts’ debt. In the usual mortgage agreement the rights
judgments that Smart’s counterclaim for usury be and obligations of the mortgagor and mortgagee
denied. for expenses such as property taxes are set out in
the deed of trust, and the duty to pay taxes is
In 1968 Tower sold approximately 35 acres of
ordinarily the mortgagor’s. If the mortgagor fails
land to Smart. Smart paid part of the purchase
to pay the taxes, the mortgagee may pay them and
price with a promissory note secured by a deed of
the amount paid for taxes is considered to be a
trust. The note and deed of trust represented a ″no
part of the mortgage debt. Both the mortgagor’s
personal liability″ obligation.
obligation to pay the amount due on the purchase
Smart defaulted [**2] on his note in December price and his obligation to pay taxes are secured
1975. Three months later Tower repurchased the by the mortgage. See Stone v. Tilley, 100 Tex. 487,
property at the foreclosure sale. After the sale, 101 S.W. 201, 201-02 (1907); Peurifoy v. Wie-
Tower paid delinquent ad valorem taxes in the busch, 174 S.W.2d 619, 623 (Tex. Civ. App.--El
amount of $18,736.53, which had been assessed Paso 1943, no writ); Bryan v. Dallas Nat’l Bank,
on the property during the time Smart owned the 135 S.W.2d 249, 253 (Tex. Civ. App. Dallas 1939,
property. Tower then brought suit against Smart writ dism’d judgmt cor.); Young v. Harbin Citrus
for reimbursement for the amount paid for taxes. Groves, 130 S.W.2d 896, 901 (Tex. Civ. App.--San
Smart counterclaimed, alleging that the note was Antonio 1939, writ ref’d); Yates [**4] v. Home
usurious. Building & Loan Co., 103 S.W.2d 1081, 1087
(Tex. Civ. App.--Beaumont 1937, no writ); Jeffer-
[*336] REIMBURSEMENT TO TOWER FOR son Standard Life Ins. Co. v. Lindsey, 94 S.W.2d
TAXES 549, 551-52 (Tex. Civ. App.--Eastland 1936, writ
dism’d); The Praetorians v. State, 53 S.W.2d 334,
Neither Smart nor Tower disputes that under the
335 (Tex. Civ. App.--Waco 1932, writ ref’d);
deed of trust Smart was obligated to pay taxes
Wood v. Scott, 48 S.W.2d 1024, 1025 (Tex. Civ.
assessed on the property during the mortgage; the
App.--Waco 1932, writ ref’d).
parties disagree, however, on how Smart’s liability
to Tower for failure to pay taxes may be enforced. Four documents represent the mortgage transaction
Both the trial court and the court of civil appeals between Smart and Tower; a contract of sale, an
held Tower could pay the delinquent taxes after installment note, a deed of trust, and an extension
having purchased the property at the mortgage agreement. Smart and Tower had agreed that these
foreclosure sale and subsequently obtain a personal documents comprise their entire agreement. The
judgment against Smart for reimbursement. We installment note, containing Smart’s promise to
will consider first whether the contractual pay the purchase price and interest, also contains
relationship between Tower as mortgagee and the following nonpersonal liability provision:
Smart as mortgagor gives rise to a personal debt ″[the] maker hereof is not now or shall he ever be
for taxes, and second, whether principles of personally liable on this note….″
equitable subrogation entitle Tower to obtain a The deed of trust form contains the following
personal [**3] judgment for reimbursement. paragraph, quoted in pertinent part, which sets out
Ian Ghrist
 Page 5 of 10
597 S.W.2d 333, *336; 1980 Tex. LEXIS 328, **4

the rights and duties of the parties with respect to phrase ″and shall stand secured and payable by
property taxes: and under this deed in like manner with the other
indebtedness herein mentioned….″ The ″other
″It is agreed and stipulated that [Smart] shall and indebtedness″ is Smart’s promissory note for the
will at [his] own proper cost and expense, keep purchase price and interest, which is described in
the property and premises herein described, and the deed of trust form as follows: ″Said note
[**5] upon which a lien is hereby given and provides that the maker has no personal liability
created, in good repair and condition, and to pay thereunder….″ The tax payment provision in the
and discharge as they are or may become payable, deed of trust provides that Smart’s liability to
all and every taxes and assessmemts that are or Tower for tax reimbursement was to be secured
may become payable thereon under any law, and payable in ″like manner″ as his note. Under
ordinance or regulation, whether made by Federal, these provisions, Tower was entitled to pursue his
State, or Municipal authority, and shall keep said right to reimbursement for taxes at foreclosure,
property fully insured…. And in case of default when he pursued his right to receive the balance
made by [Smart] in performance of any of the due on Smart’s [**7] note. Both the purchase
foregoing stipulations, the same may be performed money debt and the tax debt comprised a single
by the holder of said indebtedness, for account mortgage debt to be enforced at foreclosure
and at the expense of [Smart], and any and all without personal liability.
expenses incurred and paid in so doing shall be
payable by [Smart] to [Tower] with interest at the Wo do not find that the words ″shall be payable by
rate of ten per cent per annum from the date when [Smart]″ give rise to an additional remedy for tax
the same was so incurred or paid, and shall stand reimbursement, enforceable apart from
secured and payable by and under this deed in like foreclosure. By the terms of the installment note
manner with the other indebtedness herein and the deed of trust Smart and Tower limited the
mentioned….″ purchase money debt to a nonpersonal liability,
enforceable only by foreclosure proceedings
According to Tower’s interpretation of this against the property. Under the deed of trust,
paragraph, Smart’s promise to reimburse [*337] Smart’s liability for tax reimbursement is made
Tower for taxes is to exist as a personal debt part of the mortgage debt. There is no contractual
independent of the mortgage debt. Tower authority created whereby Tower is also entitled
emphasizes the following phrase from the to enforce his right to reimbursement as a personal
paragraph: ″and any and all expenses incurred and debt. Regardless whether Tower paid taxes before
paid in so doing shall be payable by [Smart] or after foreclosure, he did not acquire the right to
[**6] to [Tower]….″ a personal judgment against Smart.
The ″Extension of Lien″ agreement executed in
Although the words, ″shall be payable,″ standing
1974 supplies an additional reason for holding
alone may lend some support to the interpretation
that Smart and Tower intended all of Smart’s
urged by Tower, we adhere to the rule that HN2
obligations under the mortgage to be nonpersonal.
″[it] is the duty of the Court to construe the
It contains the following provision:
contract as an entire instrument, and to consider
each part with every other part so that the effect ″And [Smart and Tower] also agree… that the lien
and meaning of one part on any other part may be given and retained to secure the payment of said
determined.″ Steeger v. Beard Drilling, Inc., 371 [**8] Note and all the agreements and covenants
S.W.2d 684, 688 (Tex. 1963). Immediately therein, shall remain in full force and effect. This
following the ″shall be payable″ phrase is the extension lien is without personal liability.″
Ian Ghrist
 Page 6 of 10
597 S.W.2d 333, *337; 1980 Tex. LEXIS 328, **8

(Emphasis added). We conclude that the parties subrogation to the taxing authority’s lien, and if
did not contract for personal liability for taxes. 1 so, the extent to which he is subrogated, equitably
or otherwise, to the special privileges
Tower contends that notwithstanding the terms of accompanying the lien, has been the source of
the mortgage contract, under principles of much litigation. HN5 The taxpayer’s right to
equitable subrogation, it is entitled to a personal subrogation may arise by statute, see McDonald v.
judgment against Smart for tax reimbursement. Doyschen, 28 S.W.2d 243, 246 (Tex. Civ.
HN3 Equitable subrogation may be invoked to App.--Fort Worth 1930, no writ), or by express
prevent unjust enrichment when one person agreement, see Dotson v. Pahl, 206 S.W.2d 272,
confers upon another a benefit that is not required 273 (Tex. Civ. App. Austin 1947, no writ); Kauff-
by legal duty or contract. A right to subrogation is mann v. Hahn, 59 S.W.2d 435, 436 (Tex. Civ.
often asserted by one who [**9] pays a debt owed App.--San Antonio 1933, no writ); Texas Bank &
by another. If entitled to full subrogation, the Trust Co. v. Bankers’ Life Co., 43 S.W.2d, 631,
payor is allowed to enforce the rights available to 631 (Tex. Civ. App.--Waco 1931, writ ref’d).
the creditor, such as rights against the debt’s Furthermore, there is a statutory procedure
security. Subrogation to the creditor’s rights is whereby the taxing authority’s lien may be
available, however, only when the debtor was transferred. See TEX. REV. CIV. STAT. ANN. art.
enriched unjustly; thus, the payor who confers a 7345a (Vernon Supp. 1979). Even in the absence
benefit as a ″mere volunteer″ is not entitled to this of statutory or contractual authorization, a limited
remedy. Oury v. Saunders, 77 Tex. 278, 13 S.W. right to equitable subrogation may arise in
1030, 1031 (1890). accordance with certain well-established rules of
law.
Often HN4 one who pays real property taxes
assessed while the property was owned by [*338] The rule set out in Stone v. Tilley, [**11] supra at
another asserts a right to be subrogated to the 202, with respect to a mortgagee who pays taxes
taxing authority’s constitutional and statutory lien. that his mortgagor is under a duty to pay is
Under this lien, liability for taxes is secured by the consistent with general principles of subrogation.
property and may be enforced by foreclosure. See HN6 The mortgagee’s interest in the security of
TEX. CONST. art. VIII, § 15; TEX. REV. CIV. his mortgage makes him more than a ″mere
STAT. ANN. art. 7172 (Vernon Supp. 1979). Other volunteer″ when he pays taxes owed by the
special rights and privileges have been held to mortgagor. Burkhardt v. Lieberman, 138 Tex. 409,
inure to the taxing authority in addition to its lien, 159 S.W.2d 847, 853 (1942). Because the
such as the right to enforce tax liability as a relationship between the mortgagor and mortgagee
personal debt. See Texas Vegetable Union v. is contractual, the extent to which the mortgagee
Zavala-Dimmitt Counties Water Imp. Dist. No. 1, is subrogated to the taxing authority’s rights may
57 S.W.2d 883 (Tex. Civ. App. San Antonio 1933, be addressed in the documents representing their
writ ref’d); Humble Oil & Refining Co. v. State, 3 agreement, particularly in the deed of trust. Unless
S.W.2d [**10] 559 (Tex. Civ. App.--Waco 1927, provided otherwise, the mortgagee is subrogated
writ ref’d). to the security of the tax debt. Taxes not paid by
the mortgagor are considered to be part of the
Whether one who pays property taxes assessed on mortgage debt. Upon foreclosure, the proceeds
property owned by another is entitled to from the sale of the property may be applied in
1
We do not suggest that if Smart’s mortgage note were a personal liability obligation and the deed of trust and lien extension had not
contained the ″no personal liability″ language, there would be no personal liability for taxes paid by the mortgagee prior to foreclosure
in the event the net proceeds of foreclosure were insufficient to pay them.

Ian Ghrist
 Page 7 of 10
597 S.W.2d 333, *338; 1980 Tex. LEXIS 328, **11

satisfaction of the amount paid for taxes. Stone v. A. 64, 64 (1935). We decline to follow this rule. In
Tilley, supra at 202; Wood v. Scott, 48 S.W.2d The Praetorians v. State, 53 S.W.2d 334 (Tex. Civ.
1024, 1025 (Tex. Civ. App.--Waco 1932, writ App.--Waco 1932, writ ref’d), The Praetorians,
ref’d). As discussed above, the mortgage contract assignee of a mortgagee, purchased the mortgaged
between Smart and Tower comports with this property at foreclosure. Later, the State sought to
right to equitable subrogation to the taxing enforce its lien for taxes that had accrued during
authority’s lien and expressly [**12] precludes the mortgage. The Praetorians, although compelled
personal liability. The parties having fixed their to pay the tax lien to protect its title, was not
rights by contract, additional rights, such as are entitled to a personal judgment for reimbursement
incidental to the sovereign’s taxing power, will against the mortgagor’s grantee, who had taken
not be created by judicial intervention. subject to the mortgage and owned the property
when the taxes accrued.The court held:
After foreclosure, the relationship between the
″[Had] the Praetorians, prior to the foreclosure of
mortgagor and mortgagee in those capacities ends.
its [**14] deed of trust, paid the amount of taxes
If the mortgagee purchases the mortgaged
due the state and county, it would not have been
property, as Tower did in this case, his interest in
entitled to a personal judgment against the lumber
the property becomes an ownership interest. If
company for the taxes so paid, but would have
taxes on the property owed by the mortgagor are
been limited in its recovery to a foreclosure of a
delinquent, the purchaser, whether the mortgagee
lien on the property for the amount of such taxes.
or a disinterested party, may desire to pay them to
The fact that it has foreclosed its lien and is now
prevent foreclosure by the taxing authorities.
the owner of the property and may now be
Because of his interest in protecting his title, the
compelled to pay such taxes in order to protect its
purchaser is not a ″mere volunteer,″ when he
title, does not give it any greater right. It is,
discharges an outstanding tax lien. Under various
therefore, not entitled to a personal judgment
circumstances he may be subrogated to the taxing
against the lumber company for the amount of
authority’s lien to the extent necessary for his own
taxes which it may be required to pay in order to
equitable protection. See McDermott v. Steck Co.,
redeem the property from the judgment in favor of
138 S.W.2d 1106, 1109 (Tex. Civ. App.--Austin
the state.″
1940, writ ref’d). When not compelled by the
equities of the situation, full subrogation to all Id. at 335. HN7 The mortgagee who purchases
special privileges accompanying the taxing the property with delinquent taxes owed by the
authority’s constitutional and statutory lien will mortgagor, may account for the delinquent taxes
be denied. in determining his bid. The purchasing mortgagee
[**13] [*339] Tower urges that this court should who fails to pursue this course of action and
adopt the rule followed in Pennsylvania cases that purchases the property with taxes remaining
hold that a mortgagee who, after foreclosing and unpaid will be considered to have purchased with
purchasing the property at the foreclosure sale, reference to the tax liability. Assuming that the
pays taxes assessed against the former owner, is taxing authority would have been entitled to a
subrogated to the taxing authority’s right to personal judgment against Smart for taxes assessed
maintain a personal action against the former during the mortgage, we do not [**15] believe
owner for the amount of the taxes. Pennsylvania that the equities of this suit entitle Tower to be
Co. for Insurances on Lives and Granting Annui- subrogated to that right.
ties v. Bergson, 307 Pa. 44, 159 A. 32, 35 (1932); Because we find that no basis for imposing
Preston Retreat v. Potter, 120 Pa. Super. 82, 182 personal liability against Smart for taxes paid
Ian Ghrist
 Page 8 of 10
597 S.W.2d 333, *339; 1980 Tex. LEXIS 328, **15

after foreclosure arises from the mortgage contract The note was extended in 1974 and Smart
or by equitable subrogation, we hold that Tower defaulted in 1975. Tower foreclosed on the
may not enforce his reimbursement claim as a property and purchased the property at foreclosure.
personal judgment against Smart. Smart does not contend that Tower received
usurious interest; Smart’s usury claim is based on
SMART’S COUNTERCLAIM FOR USURY his contention that the note is usurious on its face
because under hypothetical circumstances it allows
Smart’s promissory note to Tower contained the the holder to receive more than the lawful rate of
following provision for interest payments prior to interest. The statute providing penalties for usury
maturity: applies in the distinctive to either a contract for, a
charge of, or receipt of usurious interest, and any
″[With] interest thereon from date until three
one of [**17] these triggers the penalty provisions.
years from date at the rate of six percent (6%) per
Tanner Development Co. v. Ferguson, 561 S.W.2d
annum (such portion of the interest being paid for
777, 788 (Tex. 1977) (on motion for rehearing).
the first three years in advance on the date hereof)
and thereafter at the rate of seven percent (7%) According to Smart, the interest in advance terms,
per annum….″ in conjunction with the acceleration clause and no
refund provision, results in a potentially usurious
Only interest was payable until 1974, when
contract. Smart argues that if he had defaulted
payments of the principal amount of $517,549.80
during the first twenty-two months of the loan,
were to begin. Pursuant to these terms, Smart
Tower could have accelerated maturity of the
prepaid the first three years’ interest at 6%, an
entire principal and would not have been required
amount of $93,159,00, at the inception of the note
to refund the three years’ prepaid interest. If
in 1968.
Tower did not credit part of this prepaid interest to
The note also gave Tower the option upon default principal, the rate of interest received by Tower
to accelerate and mature the note: would exceed 10% per annum.HN8

Upon acceleration of maturity, the failure to
″Default in the payment of any part of the
properly refund or credit excess unearned interest
principal or interest when due, or failure to [**16]
may result in usury. Tanner Development Co. v.
comply with any of the agreements and conditions
Ferguson, supra at 788-89 (on motion for
in the instrument given to secure this note shall, at
rehearing). See St. Clair, The ″Spreading of
the option of the holder hereof, mature this note
Interest″ Under the Actuarial Method, 10 ST.
and it shall at once become due and payable…
MARY’S 753, 757 (1979). Whether the inclusion
however, holder shall give marker or enforsers
of an acceleration clause, and the attendant
thirty (30) days’ notice of default before this note
contingency that excess unearned interest may be
can be matured.″
collected or retained, makes a contract usurious is
Another provision ensured that Tower was not a question of construction. The contention [**18]
required to refund payments: that the lender’s right to exercise an acceleration
clause resulted in a usurious contract was discussed
[*340] ″The maker hereof is not know nor shall in Shropshire v. Commerce Farm Credit Co., 120
he ever he personally liable on this note, but the Tex. 400, 30 S.W.2d 282 (1930), on motion for
payees or other holders of this note shall never be rehearing, 120 Tex. 412, 39 S.W.2d 11 (1931),
obligated to refund any payment of interest or cert. denied, 284 U.S. 675 (1931). Holding that
principal after such payment has been made.″ the particular contract under construction gave the
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 Page 9 of 10
597 S.W.2d 333, *340; 1980 Tex. LEXIS 328, **18

lender the right to recover usurious interest, the court will not hold a contract to be in violation of
court stated: the usury laws unless, [**20] upon a fair and
reasonable interpretation of all its terms, it is
″In obedience to the behest of the Constitution to
manifest that the intention was to exact more
provide appropriate penalties to prevent contracts
interest than allowed by law.
for a greater rate of interest than 10 percent per
annum, the Legislature has declared that all written . . .
contracts whatsoever which may in any way,
″[The] rule should be, as clearly recognized in
directly or indirectly, provide for a greater rate of
motion for rehearing in the Shropshire Case
interest than 10 percent per annum, shall be
[Shropshire v. Commerce Farm Credit Co., 120
usurious…. The illegality is the same whether the
Tex. 400, 30 S.W.2d 282, 39 S.W.2d 11, 84 A.L.R.
contract for usury takes the form of a stipulation
1269], that HN10 unless the contract by its
for lawful interest, becoming a stipulation for
express and positive terms evidences an intention
usurious interest through reduction of the original
which requires a construction that unearned
term of the loan and increase in that which may be
interest was to be collected in all events, the court
exacted of the debtor, at the creditor’s option, on
will give it the construction that the parties
no other contingency than the debtor’s default; or
intended that the unearned interest should not be
whether the contract is in the form of a stipulation
collected.″
for interest [**19] in excess of 10 percent per
annum for a specific term. Both contracts provide Id. at 936-37; see Marble Sav. Bank v. Davis, 124
for usury.″ Tex. 560, 80 S.W.2d 298, 299 (1935); Sinclair v.
Mack Trucks, Inc., 355 S.W.2d 563, 564 (Tex. Civ.
Id. at 14 (on motion for rehearing). Significantly,
the court had recognized a duty to give a legal App.--Fort Worth 1962, writ ref’d n.r.e.). These
cases indicate that it will be presumed that the
construction to the contract, but because the ″clear
and positive language″ of the contract provided parties intended a nonusurious contract. HN11
The contract under construction will not be found
for the collection of unearned interest in addition
to the principal balance due, the contract was usurious on its face unless it expressly entitles the
usurious. lender, upon the happening of a contingency or
otherwise, to exact interest at a rate greater than
Several cases decided after Shropshire have given that allowed by law. W.E. Grace Manufacturing
nonusurious constructions to contracts alleged to [**21] Co. v. Levin, 506 S.W.2d 580, 584 (Tex.
be usurious because of acceleration clauses. In 1974).
Walker v. Temple Trust Co., 124 Tex. 575, 80
S.W.2d 935 (1935), this court stated: Nevertheless, under the rule in Shropshire applied
to facts of this case, we are unable to presume
HN9 ″While of course courts have no right to Tower intended a nonusurious contract. This is
depart from the terms in which the contract is not a situation in which the contract is silent on
expressed to make legal what the parties have whether the lender will collect unearned interest
made unlawful, nevertheless when the contract by upon default and acceleration of maturity. To the
its terms, construed as a whole, is doubtful, or contrary, three years’ interest was prepaid and the
even susceptible of more than one reasonable note expresses an intent to retain it in the event of
[*341] construction, the court will adopt the acceleration as excess unearned interest. The note
construction which comports with legality. It is is not merely silent whether prepaid interest will
presumed that in contracting parties intend to be credited or refunded upon acceleration. It
observe and obey the law. For this reason the provides that interest will not be refunded. If

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 Page 10 of 10
597 S.W.2d 333, *341; 1980 Tex. LEXIS 328, **21

acceleration had occurred early in the loan period, nor any of the other documents contains any kind
the transaction would be usurious. Acceleration of usury savings clause whatever. Cf. Nevels v.
upon the first anniversary of the note with the Harris, 129 Tex. 190, 102 S.W.2d 1046, 1049-50
retention of the $93,159.00 prepaid interest for the (1937). In the absence of a savings clause, we find
use of $517,549.80 principal would have resulted that Tower’s expressed authorization to retain
in a rate of approximately 18% per annum, an excess unearned interest overcomes the
amount in excess of the legal rate. presumption of legality accorded to allegedly
Tower argues that the transaction would be saved usurious contract. 2 Because the installment note
from usury if some of the retained interest were is usurious on its face, we remand this case to the
credited to principal. Although we recognize that trial court for determination of the proper remedy
this course of action may prevent usury, there is to be imposed.
nothing [**22] in the note to indicate that Tower
[**23] CONCLUSION
would pursue any course of action other than to
keep unearned interest. The note attempts to give For the reasons stated above, the judgments of the
Tower the right to keep unearned interest in trial court and court of civil [*342] appeals are
addition to the right to recover the balance on the reversed and judgment is rendered that Tower take
note by foreclosure. nothing on its claim for tax reimbursement. The
Having affirmatively provided for the retention of judgments of the lower courts are also reversed
unearned interest, Tower was obliged to make insofar as they hold that Smart’s note to Tower is
further provisions ensuring that the retention of not usurious, and that portion of this suit is
this interest would not result in a usurious remanded for determination of damages.
transaction. Neither the note nor the deed of trust,

2
The effective date of Tex. Laws 1975, ch. 26, § 1, at 47, which added article 5069-1.07(a) to the Revised Civil Statutes of Texas, was
September 1, 1975, subsequent to all the instruments under consideration here. Neither party contends that this case is governed by
section 1.07(b), and we express no opinion on its application to facts such as are presented here.

Ian Ghrist
Appendix F
| | Positive
As of: December 10, 2015 11:21 AM EST

Lyda Swinerton Builders, Inc. v. Cathay Bank
Court of Appeals of Texas, Fourteenth District, Houston
August 13, 2013, Opinion Filed
NO. 14-12-00163-CV

Reporter
409 S.W.3d 221; 2013 Tex. App. LEXIS 10081; 2013 WL 4080743
LYDA SWINERTON BUILDERS, INC, Appellant post-release expenses because the release did not
v. CATHAY BANK, Appellee mention the underlying debt or the filing of future
liens; [2]-Although the bank’s failure to comply
Subsequent History: Petition for review denied with the tax lien transfer statutes, Tex. Tax Code
by Cathay Bank v. Lyda Swinerton Builders, Inc., Ann. §§ 32.06, 32.065 (2008), did not prevent its
2014 Tex. LEXIS 885 (Tex., July 25, 2014)
subrogation to the tax lien, there were fact
Prior History: [**1] On Appeal from the 113th questions regarding whether equity required
District Court, Harris County, Texas. Trial Court subrogation, and the fact questions precluded
Cause No. 2008-64001A. summary judgment.

Core Terms Outcome

Summary judgment affirmed in part and reversed
subrogation, tax lien, summary judgment,
developer, parties, liens, tracts, statutes, Parcel, in part. Case remanded.
post-release, expenses, mechanic’s lien,
Mechanic’s, foreclosure, amend, amended LexisNexis® Headnotes
affidavit, abandoned, requirements, pre-release,
transferred, argues, notice, common law, trust Contracts Law > Third Parties > Subrogation
deed, release’s, unpaid portion, pet, equitable, Real Property Law > ... > Liens > Nonmortgage
contends, indebtedness Liens > Lien Priorities

Case Summary HN1 Subrogation gives someone who pays a debt
the lien priority of the creditor paid. Normally,
Overview subrogation is permissible because it does not
alter the rights of junior lienholders; it merely
HOLDINGS: [1]-A release under Tex. Prop. Code alters the party to whom they are junior. When a
Ann. § 53.152 of a previous mechanic’s lien on party satisfies a tax lien, however, allowing
one tract of land, following a payment made by a subrogation to the taxing authority’s priority
bank in order to gain priority, prevented a builder position may inequitably circumvent notice and
from re-filing a lien against the same property for foreclosure requirements that would otherwise
the remaining pre-release debt but did not affect apply.
the builder’s entitlement to the unpaid portion of
its debt or its ability to file new liens on other Real Property Law > ... > Liens > Nonmortgage
tracts for the unpaid debt or liens on any tracts for Liens > Tax Liens

Ian Ghrist
 Page 2 of 36
409 S.W.3d 221, *221; 2013 Tex. App. LEXIS 10081, **1

HN2 By statute, tax liens are automatically senior primary concern is to ascertain the intent of the
to most other real property liens. Tex. Tax Code parties at the time of the execution of the alleged
Ann. § 32.05(b). release as expressed in the release. To construe the
release, the court may examine evidence of the
Civil Procedure > Appeals > Summary Judgment
circumstances surrounding its negotiation and
Review > Standards of Review
execution. The court may also consider the title of
HN3 The court reviews a trial court’s order the document, but it is not dispositive.
granting traditional summary judgment de novo.
Civil Procedure > Settlements > Releases From
Civil Procedure > ... > Summary Judgment > Liability > General Overview
Entitlement as Matter of Law > Appropriateness Real Property Law > ... > Liens > Nonmortgage
HN4 To be entitled to summary judgment, the Liens > Mechanics’ Liens
movant must demonstrate that no genuine issues HN7 Although Tex. Prop. Code Ann. § 53.152
of material fact exist and that he is entitled to
delineates the minimal obligation of a contractor
judgment as a matter of law. Tex. R. Civ. P.
to release a lien upon receiving payment, nothing
166a(c). If the movant does so, the burden shifts
in the statute suggests that broader releases may
to the non-movant to produce evidence sufficient
not be executed.
to raise a fact issue. When reviewing a summary
judgment motion, the court cannot read between Contracts Law > Contract Interpretation > General
the lines or infer from the pleadings or evidence Overview
any grounds for summary judgment other than
those expressly set forth before the trial court.
HN8 If, in the light of surrounding circumstances,
the language of a contract appears to be capable of
Civil Procedure > Appeals > Summary Judgment only a single meaning, the court can then confine
Review > Standards of Review itself to the writing.
HN5 When both sides move for summary
Real Property Law > ... > Liens > Nonmortgage
judgment and the trial court grants one motion
Liens > General Overview
and denies the other, the reviewing court should
review both sides’ summary judgment evidence HN9 Lien waivers, as their name implies, pertain
and determine all questions presented. When the to lien rights and not to the more general right to
trial court’s order granting summary judgment payment.
does not specify the grounds on which it relied,
the summary judgment will be affirmed if any of Real Property Law > ... > Liens > Nonmortgage
the theories advanced are meritorious. Liens > Mechanics’ Liens

Civil Procedure > Settlements > Releases From HN10 A subcontractor’s lien rights are totally
Liability > Interpretation of Releases dependent on its compliance with the statutes
authorizing the lien.
HN6 A release is a writing that provides that a
duty or obligation owed to one party to the release Real Property Law > ... > Liens > Nonmortgage
is discharged, either immediately or upon the Liens > Mechanics’ Liens
occurrence of a condition. Releases are subject to
the usual rules of contract construction. As in HN11 Substantial compliance with the statutes is
other instances of contract construction, the court’s sufficient to perfect a mechanic’s lien.
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 Page 3 of 36
409 S.W.3d 221, *221; 2013 Tex. App. LEXIS 10081, **1

Real Property Law > ... > Liens > Nonmortgage period to expire. The clock on the filing period
Liens > Mechanics’ Liens starts ticking when indebtedness accrues. Several
HN12 Nothing in the language of the statutes events can trigger the accrual of indebtedness, but
suggests that a mechanic’s lien’s effectiveness each stands in for the cessation of work. For
hinges upon whether affidavits filed after a release example, indebtedness to an original contractor
describe themselves as ″amending″ or ″replacing″ accrues on the last day of a month during which
the pre-release affidavit. either the contractor or the property owner receives
a written declaration from the other party
Real Property Law > ... > Liens > Nonmortgage terminating the contract. Tex. Prop. Code Ann. §
Liens > Mechanics’ Liens 53.053(b)(1). Absent termination, indebtedness
accrues on the last day of the month in which the
HN13 The mechanic’s and materialman’s lien
original contract has been completed, finally
statutes are to be liberally construed for the
settled, or abandoned. § 53.053(b)(2).
purpose of protecting laborers and materialmen.
And courts have been more willing to excuse a Real Property Law > ... > Liens > Nonmortgage
mistake or omission in cases where no party is Liens > Mechanics’ Liens
prejudiced by the defect. Indeed, the Legislature
did not intend that the materialman should lose his HN17 See Tex. Prop. Code Ann. § 53.052.
lien through the technicalities of a warning, where
the owner was not misled to his prejudice. Real Property Law > ... > Liens > Nonmortgage
Liens > Mechanics’ Liens
Contracts Law > Contract Interpretation > Intent
HN18 ″Abandon,″ as applied to mechanic’s liens,
HN14 A contract shall be construed in light of the means to turn from or relinquish.
purposes and objects for which it was made.
Real Property Law > ... > Liens > Nonmortgage
Civil Procedure > Appeals > Appellate Briefs Liens > Mechanics’ Liens
Civil Procedure > Appeals > Reviewability of HN19 For purposes of a statutory mechanic’s
Lower Court Decisions > General Overview lien, a contract terminates when one party receives
HN15 Appellate briefs are to be construed a written notice of termination from the other. Tex.
reasonably, yet liberally, so that the right to Prop. Code Ann. § 53.053(b)(1).
appellate review is not lost by waiver.
Real Property Law > ... > Liens > Nonmortgage
Liens > Mechanics’ Liens
Real Property Law > ... > Liens > Nonmortgage
Liens > Mechanics’ Liens HN20 To obtain a valid lien, a mechanic must file
HN16 Mechanic’s liens first attach at the an affidavit within the statutory period. Tex. Prop.
commencement of construction or delivery of Code Ann. § 53.052. This affidavit must contain
materials, that is visible from inspection of the substantially a sworn statement of the amount of
land. Tex. Prop. Code Ann. § 53.124. Mechanic’s the claim. Tex. Prop. Code Ann. § 53.054(a).
lien statutes require mechanics to file their
Real Property Law > ... > Liens > Nonmortgage
affidavits within a fixed period after their presence Liens > Mechanics’ Liens
on the property ceases. Tex. Prop. Code Ann. §
53.052. After work concludes, a party can avoid HN21 Mechanic’s liens secure payment for,
mechanic’s liens by waiting for the lien-filing among other things, the labor done or material

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 Page 4 of 36
409 S.W.3d 221, *221; 2013 Tex. App. LEXIS 10081, **1

furnished for the construction or repair. Tex. Prop. lienholder by satisfying the prior lien’s associated
Code Ann. § 53.023. debt. One who pays another’s real property taxes
often asserts a right to be subrogated to the taxing
Real Property Law > ... > Liens > Nonmortgage authority’s lien.
Liens > Mechanics’ Liens

HN22 See Tex. Prop. Code Ann. § 53.001(4). Real Property Law > ... > Liens > Nonmortgage
Liens > Tax Liens
Real Property Law > ... > Liens > Nonmortgage
Liens > Mechanics’ Liens HN27 The doctrine of subrogation applies to tax
liens.
HN23 The definition of materials does not always
require actual use or consumption in the direct Governments > Courts > Common Law
prosecution of the work. Instead, mechanic’s liens Governments > Legislation > Interpretation
are also available when items are delivered for use
or consumption. In this way, the availability of a HN28 Statutes can modify common law rules, but
mechanic’s lien becomes a question of how the before the court construes one to do so, the court
parties intended to use equipment and services must look carefully to be sure that was what the
delivered to the project, which is generally a Legislature intended. ″Common law″ in this
question of fact. Intent is a fact question uniquelycontext means the body of law derived from
within the realm of the trier of fact. judicial decisions, rather than from statutes or
Real Property Law > ... > Liens > Nonmortgage
constitutions. When evaluating an argument that a
Liens > Mechanics’ Liens statute deprives a person of a common law right,
the court will not extend the statute beyond its
HN24 To obtain a mechanic’s lien for rental plain meaning or apply it to cases not clearly
expenses, the equipment must be not only within its purview.
delivered for use, but also reasonably required for
use in the direct prosecution of the work. Tex. Real Property Law > ... > Liens > Nonmortgage
Prop. Code Ann. § 53.001(4)(B). Reasonableness Liens > Tax Liens
is ordinarily a question of fact.
HN29 Tex. Tax Code Ann. §§ 32.06, 32.065
Real Property Law > ... > Liens > Nonmortgage (2008) do not abrogate common law subrogation
Liens > Tax Liens doctrines.

HN25 Tax liens are senior to other liens. Tex. Tax Real Property Law > ... > Liens > Nonmortgage
Code Ann. § 32.05(b). Liens > Tax Liens

Real Property Law > ... > Liens > Nonmortgage HN30 The requirements of Tex. Tax Code Ann. §
Liens > General Overview 32.065 (2008) are specifically limited to contracts
between a transferee and the property owner
Real Property Law > ... > Liens > Nonmortgage
Liens > Tax Liens under Tex. Tax Code Ann. § 32.06 (2008). §
32.065(b). Thus, § 32.065 only applies to contracts
HN26 Subrogation is liberally applied and is involving statutory lien transfers. Moreover, §
broad enough to include every instance where one 32.065 specifically notes that § 32.06 does not
person, not acting voluntarily, pays another’s abridge the right of an owner of real property to
debt. Subrogation essentially allows a subsequent enter into a contract for the payment of taxes. §
lienholder to take the lien-priority status of a prior 32.065(a).
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 Page 5 of 36
409 S.W.3d 221, *221; 2013 Tex. App. LEXIS 10081, **1

Real Property Law > ... > Liens > Nonmortgage Contracts Law > Third Parties > Subrogation
Liens > Tax Liens
Real Property Law > ... > Liens > Nonmortgage
HN31 The tax lien statutes supplement, rather Liens > Tax Liens
than eliminate, common law subrogation. HN36 When two parties have a subrogation
contract, equitable considerations that might
Real Property Law > ... > Liens > Nonmortgage
control in the absence of an agreement cannot
Liens > Tax Liens
invalidate it. This rule works between the parties
HN32 Even in the absence of statutory or because the parties have fixed their rights by
contractual authorization, a limited right to contract and additional rights will not be created
equitable subrogation may arise in accordance by judicial intervention. This reasoning’s force
with certain well-established rules of law. Thus, diminishes in cases where enforcing a subrogation
under various circumstances a non-volunteer who contract would alter a nonparty’s rights. In these
satisfies a tax lien may be subrogated to the taxing cases, the right of subrogation is not wholly
authority’s lien to the extent necessary for his own dependent on the application of a contract. Instead,
equitable protection. Statutory transfer procedures as to the nonparty, subrogation depends partially
do not abrogate common law subrogation. on equitable principles. Thus, such cases fall into
a third, hybrid category. The cornerstone of this
Real Property Law > ... > Liens > Nonmortgage equitable analysis, in context of a tax lien, is
Liens > Tax Liens prejudice to the intervening lienholder that is not
a party to the subrogation contract. For example,
HN33 A party can obtain the taxing authority’s
merely changing the identity of the senior
lien priority through equitable subrogation.
lienholder does not affect the intervening
Real Property Law > ... > Liens > Nonmortgage
lienholder’s rights and therefore is not prejudicial.
Liens > Tax Liens Although subrogation may alter who holds the
senior lien, the junior lienholder is still junior and
HN34 The tax lien transfer statutes do not abrogate still in the same amount. Whether subrogation
common law subrogation doctrines. However, prejudices intervening interests is determined as
parties who rely exclusively upon equity to obtain of the time of the transaction supporting
the taxing authority’s priority may face additional subrogation. The consequences of subsequent
obstacles not present under the statutes. For transactions or events are not relevant to this
example, equitable subrogation is only available inquiry.
to the extent necessary for the subrogee’s equitable
protection. When not compelled by the equities of Real Property Law > ... > Liens > Nonmortgage
the situation, full subrogation to all special Liens > General Overview
privileges accompanying the taxing authority’s HN37 In many cases, subrogation to a lien
constitutional and statutory lien will be denied. changes only the intervening lienholder’s identity.
This rule limits the extent of subrogated rights. This change creates no prejudice, so subrogating
the intervening lienholder is appropriate as a
Real Property Law > ... > Liens > Nonmortgage
Liens > Tax Liens matter of law. One court has stated that there is no
prejudice to intervening interest holders absent a
HN35 Subrogation to a tax lien can materially showing that subrogation results in (1) additional
alter the lien’s terms and thereby prejudice debt having priority over or parity with the
intervening lienholders. This prejudice may trigger intervening interest, (2) a material change in the
a factual inquiry to resolve the equities. terms of the superior interest, or (3) other
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 Page 6 of 36
409 S.W.3d 221, *221; 2013 Tex. App. LEXIS 10081, **1

pecuniary loss resulting from the subrogation. In Civil Procedure > Preliminary Considerations >
the absence of prejudice, subrogation must be Equity > General Overview
allowed, but the mere presence of prejudice does Civil Procedure > Trials > Jury Trials > Province of
not necessarily prevent subrogation. Rather, when Court & Jury
prejudice exists, the trial court should, in exercising
its equitable discretion, consider the totality of the HN42 Although a litigant has the right to a trial
circumstances, of which the existence of prejudice by jury in an equitable action, only ultimate issues
to one or more parties is a part. Factors to consider of fact are submitted for jury determination. The
include the extent of prejudice, its foreseeability, jury does not determine the expediency, necessity,
and whether the party claiming prejudice could or propriety of equitable relief.
have avoided it.
Civil Procedure > Appeals > Remands
Real Property Law > ... > Liens > Nonmortgage
Liens > Tax Liens HN41 As long as there is a probability that a case
has for any reason not been fully developed, a
HN38 Eliminating protections that existed prior reviewing court has the discretion to remand
to subrogation constitutes a material change in the rather than render a decision.
terms of a superior tax lien, triggering an equitable
inquiry. Counsel: For APPELLANT: Anthony Todd Golz,
HOUSTON, TX.
Civil Procedure > ... > Summary Judgment >
Entitlement as Matter of Law > Appropriateness
For APPELLEE: Paul J. McConnell, III, Ben A.
Real Property Law > ... > Liens > Nonmortgage Baring, Jr., Vijay Arthur D’Cruz, HOUSTON,
Liens > General Overview TX; Barbara M. Ellis, AUSTIN, TX.
HN39 Although summary judgment is available
Judges: Panel consists of Chief Justice Hedges
in equitable actions, certain factors counsel against
and Justices Brown and Busby (Hedges, C.J.,
summary dispositions in cases of equitable
subrogation to a lien. For example, the material dissenting).
facts in these cases are difficult to define precisely.
Opinion by: J. Brett Busby
The main guiding principle is the prevention of an
unfair or unjust result. Trial courts have a measure
of discretion in weighing the circumstances and Opinion
adjusting the remedy to accomplish this main
goal. But a trial court does not have unfettered [*226] MAJORITY OPINION
discretion to determine the equities of subrogation.
This lien priority case comes to us on appeal from
Rather, the right to subrogation must be determined
the trial court’s rulings on cross-motions for final
in light of its purpose: preventing unjust
summary judgment. The appeal presents two
enrichment.
issues involving two special types of real property
Real Property Law > ... > Liens > Nonmortgage liens.
Liens > General Overview
We first address the scope of a builder’s release of
HN40 The equitable balance necessary to its mechanic’s lien. See generally Tex. Prop. Code
determine whether prejudice to an intervening Ann. Ch. 53 (West 2007 & Supp. 2012). We
lienholder prevents subrogation focuses upon the conclude that the release at issue here did exactly
would-be subrogee and an intervening lienholder. what it purported to do: it released a previous
Ian Ghrist
 Page 7 of 36
409 S.W.3d 221, *226; 2013 Tex. App. LEXIS 10081, **1

mechanic’s lien on one of the tracts of land at Cathay Bank. Both claim a priority interest in
issue. The release did not mention the underlying portions of the property that the developer planned
debt or the filing of future liens, so we conclude to develop. [**3] We refer to these disputed tracts
that with one exception, it did not affect the as ″Parcel A″ and ″Parcel B.″1 Our task is [*227]
builder’s entitlement to the unpaid portion of its to determine priority as between the builder (which
debt or its ability to file new liens. Nonetheless, claims priority based upon its mechanic’s liens)
there are fact questions regarding whether the and the bank (which claims priority based upon
liens that the builder filed after releasing its initial deeds of trust and a tax lien that it satisfied).
lien comply with the applicable statutes. These
fact questions largely preclude summary judgment The builder began work on the project in February
on the validity of the post-release [**2] liens. 2007.2 Over the next several months, the builder
completed ″dirt,″ utility, and foundation work.
Next, we apply subrogation doctrines to a tax lien. During the same period, the bank lent the
HN1 Subrogation gives someone who pays a debt developer approximately $800,000 secured by a
the lien priority of the creditor paid. Normally, deed of trust on Parcel B and approximately
subrogation is permissible because it does not $500,000 secured by a deed of trust encumbering
alter the rights of junior lienholders; it merely the entire property.3
alters the party to whom they are junior. When a
party satisfies a tax lien, however, allowing In October 2007, work ceased due to ″payment
subrogation to the taxing authority’s priority issues″ and never resumed. That month, the builder
position may inequitably circumvent notice and filed its first mechanic’s lien affidavit. The
foreclosure requirements that would otherwise affidavit reflected a lien of approximately $3.2
apply. Fact issues preclude us from resolving the million and only encumbered Parcel A. Generally,
equities on this record. Therefore, with one mechanic’s liens like this one relate back to the
exception described below, we reverse the trial start of work for priority purposes, regardless of
court’s summary judgment and remand the case when the mechanic files its lien affidavit. See
for further proceedings. Diversified Mortg. Investors v. Lloyd D. Blaylock
Gen. Contractor, Inc., 576 S.W.2d 794, 800 (Tex.
BACKGROUND 1978). Thus, although the builder filed its affidavit
after the bank had obtained its deed of trust liens,
Lyda Swinerton Builders, Inc. (the builder) agreed the builder’s lien nonetheless had priority because
to improve real property owned by Park 8 Place, it related back to the start of work in February
L.P. (the developer), but the improvements never 2007.
progressed very far. This case began when the
builder sued the developer, but the developer filed On October 31, 2007, shortly after the builder
for bankruptcy protection and is no longer a party. filed its first lien affidavit, the bank lent the
The only parties remaining are two of the developer approximately $1.9 million. A deed of
developer’s unpaid creditors: the builder and trust encumbering both Parcels A and B secured
1
This case involves six contiguous tracts of land, which Exhibit B to the builder’s summary judgment motion designates as tracts I-VI.
The builder concedes the bank’s superior interest in tracts II, IV, and VI, so this opinion only addresses tracts I, III, and V. We omit details
relating to the parcels that are not in dispute. Moreover, for our purposes, it is unnecessary to distinguish between tracts III and V, so
we refer to those tracts collectively as ″Parcel A.″ We refer to tract I as ″Parcel B.″
2
″’Work’ means any part of construction or repair performed under an original [**4] contract.″ Tex. Prop. Code Ann. § 53.001(14).
For purposes of this appeal, the parties do not dispute when the builder began work.
3
The exact lien amounts are not relevant to our analysis, so we state them as round numbers throughout.

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409 S.W.3d 221, *227; 2013 Tex. App. LEXIS 10081, **3

the bank’s loan. The builder was paid $1.5 million developer’s request. The post-release expenses
of the loan proceeds against [**5] the developer’s reflected in the affidavit were ″administrative and
outstanding debt.4 The builder then filed a lien equipment rental costs related to maintaining the
release. We will discuss the release in detail later, site at an estimated $200,000 per month.″
but for now it suffices to say that the document
recited the receipt of $1.5 million and purported Over the ensuing months, the developer made at
to release the builder’s $3.2 million lien. least one partial payment, but the [**7] developer’s
payment did not keep pace with the builder’s
On the same day that the builder signed its continually accruing expenses. In May 2008, the
release, the bank used a portion of the loan to builder sent the developer a letter stating that if
satisfy outstanding tax liens against the property. the developer failed to cure its debt, the builder
HN2 By statute, these tax liens are automatically would leave the project site and terminate the
senior to most other real property liens. See Tex. contract. The developer did not cure its debt, but
Tax Code Ann. § 32.05(b). The bank later claimed the builder nonetheless remained on the site.
that the principle of subrogation entitled it to the
Indeed, after sending this termination letter, the
taxing authority’s lien position for the portion of
builder ″continued to maintain its office facilities
the loan used to pay taxes. See generally Smart v.
at the Project, continued to store materials and
Tower Land & Inv. Co., 597 S.W.2d 333 (Tex.
equipment at the Project, and maintained water,
1980).
sewer, power, phones and data connections at the
On [**6] November 13, 2007, soon after filing its office complex.″ It also continued to bill the
release, the builder filed an ″[a]mended″ lien developer for these expenses and to file lien
affidavit reciting a debt of approximately $2.9 affidavits to secure payment. Each new amended
million. This sum included both the unpaid portion affidavit reflected the current total owed and each
of the developer’s pre-release debt (approximately encumbered both Parcel A and Parcel B.
$1.7 million) and amounts for post-release
While still on the property accruing expenses
expenses that the builder had since incurred.
(allegedly still at the developer’s request), the
[*228] Like the builder’s first lien affidavit, this
builder sued the developer in October 2008. The
one covered only Parcel A.
bank intervened shortly thereafter, claiming a
The builder contends this post-release affidavit, as superior interest in the property. The trial court
a mechanic’s lien, related back to the start of work eventually severed this lien priority dispute from
in February 2007. As a result, according to the the builder’s action against the developer.
builder, it now had a $2.9 million lien that was
With all this litigation pending, [**8] the builder
senior to the bank’s deeds of trust, notwithstanding
filed its final lien affidavit in January 2009. This
the lien release it had just filed.
was over a year after the builder’s last work on the
Although the builder stated in its lien affidavit project, six months after its termination letter, and
that it had incurred post-release expenses, no three months after filing its lawsuit. The final
post-release work had occurred on the property. amended affidavit reflected a lien on Parcels A
The builder contends that even though it had and B in the amount of $6.75 million, representing
stopped working, it remained on the site at the the builder’s total expenses. As a mechanic’s lien,
4
Approximately $400,000 of this payment went to a subcontractor that is not a party to this appeal. In its brief, the builder appears
to concede that this payment to the subcontractor also reduced its claim against the developer, so our analysis assumes this is the case.
If we misapprehend the transaction, nothing in this opinion prevents a party from asserting on remand that the payment to the
subcontractor did not reduce the builder’s claim against the developer.

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409 S.W.3d 221, *228; 2013 Tex. App. LEXIS 10081, **8

the builder contends this lien related back to the from filing new liens. Second, the bank contended
start of work—almost two years earlier—and was that its foreclosure of a senior tax lien extinguished
therefore senior to the bank’s deed of trust liens [**10] the builder’s interest in the property.
on Parcels A and B. After filing this final lien, the
The trial court granted the bank’s motion and
builder remained on the property for another
denied the builder’s. It held that the bank owned
thirteen months.
the property ″free and clear″ of the builder’s
Shortly after the builder finally decamped from claims. This appeal followed.
the property in March 2010, the bank foreclosed
ANALYSIS
on its October 31, 2007 deed of trust. The builder
received notice of the trustee’s sale, but contends I. STANDARD OF REVIEW
it was unaware that the bank intended to foreclose
on a senior tax lien. The builder contends that, HN3 We review a trial court’s order granting
″had [it] known that [the bank] was foreclosing . traditional summary judgment de novo. Olmstead
. . transferred tax liens, [it] could have . . . bid on v. Napoli, 383 S.W.3d 650, 652 (Tex. App.—
the property at the foreclosure sale to preserve its Houston [14th Dist.] 2012, no pet.). HN4 To be
interest.″ entitled to summary judgment, the movant must
demonstrate that no genuine issues of material
But the builder did not bid at the foreclosure sale. fact exist and that he is entitled to judgment as a
Instead, the bank purchased the property for matter of law. Tex. R. Civ. P. 166a(c). If the
[**9] $10,000. Because this amount was less than movant does so, the burden shifts to the
the bank’s alleged senior tax lien, the bank non-movant to produce evidence sufficient to
contends its foreclosure extinguished all junior raise a fact issue. Olmstead, 383 S.W.3d at 652.
liens—including the builder’s. See I-10 Colony, When reviewing a summary judgment motion, we
Inc. v. Chao Kuan Lee, 393 S.W.3d 467, 472 (Tex. cannot read between the lines or infer from the
App.—Houston [14th Dist.] 2012, pet. filed) (″It is pleadings or evidence any grounds for summary
well settled in Texas that a valid foreclosure on a judgment other than those expressly set forth
senior lien . . . extinguishes a junior lien . . . if before the trial court. Id.
there are [*229] not sufficient excess proceeds
from the foreclosure sale to satisfy the junior The builder presents two issues on appeal, which
lien.″). The bank thus argues that, as a result of we address together: whether the trial court erred
this sale, it owned the property outright. in granting the bank’s motion for summary
judgment, and whether it erred in denying the
In the severed lien priority litigation, the parties builder’s motion. HN5 When both sides move for
filed cross-motions for final summary judgment. summary judgment [**11] and the trial court
The builder argued that because its lien related grants one motion and denies the other, the
back to February 2007, it was senior to the bank’s. reviewing court should review both sides’
Thus, the builder argued that the bank’s purchase summary judgment evidence and determine all
of the property at its own foreclosure sale was questions presented. Id. When, as here, the trial
subject to the builder’s senior lien. court’s order granting summary judgment does
not specify the grounds on which it relied, the
The bank contended that it was entitled to the summary judgment will be affirmed if any of the
property for two reasons. First, the bank argued theories advanced are meritorious. Id. Here, the
that the builder’s release fully terminated any two grounds advanced for summary judgment in
interest it had in the property and prevented it the bank’s favor are (1) the builder’s release and
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409 S.W.3d 221, *229; 2013 Tex. App. LEXIS 10081, **11

(2) the bank’s alleged foreclosure of tax liens. We Omitting the formal parts, the builder’s October
address these grounds in turn. 2007 [**13] release reads as follows:

II. Although the builder fully released its initial RELEASE OF LIEN
lien on Parcel A, it did not waive its right to file
new liens covering other property or securing The [builder] is a holder of a lien (″the lien″)
payment for post-release expenses, and there in the amount of $3,228,444.50 (″the
are fact questions concerning the validity of indebtedness″) filed originally on or about
those new liens. October 10, 2007 [in the] Real Property
Records of Harris County, Texas regarding the
One of the parties’ principal disputes concerns the real property and improvements thereon (″the
builder’s mechanic’s lien. Specifically, the parties property″) generally described as Park 8,
dispute (1) the effect of the builder’s release upon Tower B, [the property’s address] and more
its initial lien and upon its ability to file subsequent particularly described as follows:
liens, and (2) the validity of the builder’s
[Description of Parcel A].
post-release liens. We begin with some undisputed
general principles. FOR AND IN CONSIDERATION of
$1,500,000.00 and other good and valuable
″As a general rule, a properly perfected mechanic’s consideration, the receipt and sufficiency of
[**12] lien ’relates back’ to a time referred to as which is hereby acknowledged, the [builder]
the inception of the lien for the purpose of does hereby release and discharge the property
determining lien priorities.″ Diversified Mortg. from this lien.
Investors, 576 S.W.2d at 800. In most cases, ″the
time of inception of a mechanic’s lien is the HN6 A release is a writing that provides that a
commencement [*230] of construction of duty or obligation owed to one party to the release
improvements or delivery of materials to the land is discharged, either immediately or upon the
on which the improvements are to be located and occurrence of a condition. See Port of Houston
on which the materials are to be used.″ Tex. Prop. Auth. of Harris Cnty. v. Zachry Const. Corp., 377
Code Ann. § 53.124(a). S.W.3d 841, 854 (Tex. App.—Houston [14th Dist.]
2012, pet. filed). Releases are subject to the usual
Here, neither party disputes that the relevant date rules of contract construction. Id. As in other
for inception of the builder’s liens is February instances of contract construction, our primary
2007. Thus, if the builder’s lien affidavits are concern is to ascertain the intent of the parties at
effective, they all relate back to February 2007, the time of the execution of the alleged release
and the bank’s relevant deeds of trust are junior to [**14] as expressed in the release. Id. To construe
them. The bank argues these liens are ineffective, the release, we may examine evidence of the
however, because of (1) the builder’s release and circumstances surrounding its negotiation and
(2) flaws in the post-release liens themselves. As execution. Id. We may also consider the title of
explained below, we hold that with one exception, the document, but it is not dispositive. Id.
the bank is incorrect regarding the release and that
fact issues regarding the validity of the post-release Here, the parties present multiple alternative
liens preclude summary judgment for either party. interpretations of the two-sentence release. They
dispute the release’s effect on the builder’s initial
A. The release did exactly what it said: it October 2007 lien, on the underlying debt, and on
released the builder’s initial lien and nothing the builder’s ability to file subsequent liens.
more. Below, we discuss in detail what the release does
Ian Ghrist
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409 S.W.3d 221, *230; 2013 Tex. App. LEXIS 10081, **14

and why it does not do all of the work that the only received $1.5 million of the $3.2 million it
parties assign to it. was owed, the builder contends it only released
$1.5 million of the initial lien. We disagree.
The short answer is that the release only says that
the builder is releasing the full amount of its The [**16] release contains just two sentences.
initial lien against Parcel A. The builder argues The first describes the lien and the property,
that notwithstanding the release, it could ″re-file″ stating that the lien secures a debt of $3.2 million.
a lien for the unpaid portion of the same debt The second ″release[s] and discharge[s] the
against the same parcel of land. We disagree property from this lien″ ″for and in consideration
because allowing the builder to do so would of $1,500,000.00″ (emphasis added and
render the release meaningless. Thus, the release capitalization omitted). This language does
extinguished the builder’s initial lien and prevented precisely what it says: it releases the whole lien.
it from reasserting the same lien against Parcel A The builder’s contrary interpretation is inconsistent
for the unpaid portion of the pre-release debt. with the unambiguous language of the release and
therefore unreasonable.
The bank argues that the release also did other
things, but the [**15] document in front of us Notwithstanding this plain language, the builder
does not mention them. For example, the bank argues that section 53.152(a) of the Property
argues that the release not only released the lien, Code required it to release its lien ″to the extent of
but also forgave the unpaid portion of the initial the indebtedness paid,″ so we should construe its
debt. The [*231] release does not say that. The release to have only this effect. HN7 Although
bank also argues that the release prevented the ″[s]ection 53.152 delineates the minimal
builder from filing liens for subsequent expenses. obligation of a contractor to release a lien upon
The release does not say that either. Finally, the receiving payment, . . . nothing in the statute
bank contends that the release prevented the suggests that broader releases may not be
builder from securing the unpaid portion of its executed.″ Addicks Servs., Inc. v. GGP-Bridge-
initial debt with a lien on Parcel B. The release land, LP, 596 F.3d 286, 297 (5th Cir. 2010). Here,
also does not say that—it only mentions Parcel A. in exchange for immediate payment, the builder
Accordingly, the release does not entitle the bank executed a broader release and thereby fully
to the final summary judgment it received below. released its initial lien.
But the release itself does not forgive the unpaid
1. The release unambiguously released the full portion of the developer’s [**17] underlying
amount of the initial lien, but it did not forgive debt.5 Thus, although the release extinguished the
or cancel the unpaid portion of the pre-release lien, nothing in the document suggests the builder
debt. intended to forgive the remaining $1.7 million
To explain these conclusions, we begin with the debt that had not been paid. To the contrary, the
release’s effect on the builder’s pre-release lien release distinguishes the ″indebtedness″ from the
and debt. The builder argues that it only released ″lien″ and releases only the lien.
its initial October 2007 lien to the extent of the The document’s first sentence is definitional: it
payment it received. More specifically, because it defines ″the lien,″ ″the indebtedness,″ and ″the
5
The builder asks us to take judicial notice of a judgment it obtained against the developer, which was based on an agreed arbitration
award and included the unpaid portion of the pre-release debt. The bank urges us not to take judicial notice. We need not address the
issue because the judgment against the developer does not affect our decision. As discussed above, the release alone does not establish
that the developer’s entire pre-release debt has been satisfied, and we reject the bank’s argument that it does. Judicial notice that the debt
has been reduced to judgment is unnecessary to reach this conclusion.

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409 S.W.3d 221, *231; 2013 Tex. App. LEXIS 10081, **17

property.″ The use of separate terms to describe payment.″ 3 PHILIP L. BRUNER & PATRICK J.
″the lien″ and ″the indebtedness″ demonstrates a O’CONNOR, JR., CONSTRUCTION LAW § 8:151 (2002).
desire to distinguish one from the other. The Here, neither the release’s text nor the context of
release’s second sentence is operative: it the transaction establishes that the parties intended
″release[s] [**18] and discharge[s] the property to forgive the developer’s underlying debt. We
from this lien.″ The second sentence does not therefore reject the bank’s contention that the
mention the indebtedness. In this way, the builder release had this effect.6
unambiguously demonstrated its intent to release
only ″the lien″ [*232] without forgiving the Thus, following [**20] the release of its initial
unpaid portion of the separately defined October 2007 lien, the builder held no lien against
″indebtedness.″ Parcel A or any other tracts. The developer
remained indebted to the builder, however, for the
Moreover, the circumstances of the transaction $1.7 million unpaid portion of the pre-release
support this construction of the release. Sun Oil debt.
Co. (Del.) v. Madeley, 626 S.W.2d 726, 731 (Tex.
1981) (HN8 ″If, in the light of surrounding 2. The release prohibited the builder from
circumstances, the language of the contract appears re-filing a lien against the same property for the
to be capable of only a single meaning, the court remaining pre-release debt.
can then confine itself to the writing.″). To the
extent the release evidences a contract (see n.6, The builder next argues the release did not prohibit
infra), the parties to that contract are the bank and it from re-filing a lien against the same property
the builder. The bank sought a priority interest in for the unpaid portion of the same debt. This
the property, while the builder sought partial construction is unreasonable because it would
payment. essentially render the release meaningless.

There is no evidence, however, that either party The release’s plain language and the context of
sought to reduce the developer’s debt. As for the the transaction demonstrate that the parties
builder, it had no reason to forgive the developer’s intended for the builder to release its previously
debt because it wanted payment for its work. In filed lien, thereby ensuring the bank’s priority
any event, there is no evidence that the builder position on Parcel A. For this reason, the bank
agreed to—or was even asked to—forgive the paid the builder $1.5 million, and in exchange the
unpaid portion of the underlying debt. As for the builder fully released its lien. Once released, the
bank, nothing in the record suggests that [**19] the lien could not be revived. See Apex Fin. Corp. v.
bank had any interest in reducing the developer’s Brown, 7 S.W.3d 820, 830 (Tex. App.—Texarkana
indebtedness to the builder. The bank wanted to 1999, no pet.). Although a release may be
get the builder’s previously filed lien out of the rescinded for failure of consideration, see Murray
priority line, not to protect the developer. v. Crest Const., Inc., 900 S.W.2d 342, 344 (Tex.
1995), in this case the consideration [**21] was
We must also ″keep in mind that HN9 lien paid, the release was filed, and the builder presents
waivers, as their name implies, pertain to lien no argument that would permit it to rescind the
rights and not to the more general right to release in part.
6
This opinion does not foreclose the parties’ ability on remand to introduce evidence of agreements supplementing the release’s plain
meaning. Although we conclude the release is unambiguous, the parties have not argued that the release is a fully integrated expression
of their agreement, and we express no opinion on that issue. See generally Garner v. Redeaux, 678 S.W.2d 124, 128-29 (Tex.
App.—Houston [14th Dist.] 1984, writ ref’d n.r.e.). The parties’ arguments thus far rely solely upon the release, and we limit our analysis
accordingly.

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409 S.W.3d 221, *233; 2013 Tex. App. LEXIS 10081, **21

[*233] Allowing the builder to re-file a lien for a on Parcel A for the unpaid portion of the
portion of the same debt against the same property, pre-release debt, and it is entitled to partial
however, would effectively allow a rescission. summary judgment to that extent.7 As to the
Nothing in the record suggests that the parties bank’s other contentions, we disagree.
intended for the builder to retain such unilateral
authority. To the contrary, for the bank to obtain Neither the release itself nor any summary
the security it bargained for, the pre-release lien judgment evidence suggests that [**23] the builder
had to stay fully released. We therefore reject the agreed to refrain from filing new liens if it
builder’s argument that the release permitted it to incurred additional expenses. By its terms, the
re-file liens against Parcel A to secure the unpaid release affected only the builder’s pre-release lien.
portion of the pre-release debt. It said nothing about the builder’s ability to file
future liens for post-release expenses.
3. The release did not prohibit the builder from
In this way, the release differs from that in Apex
filing new liens on other tracts for the unpaid
Financial Corporation v. Brown, upon which the
debt or liens on any tracts for post-release
bank relies. In that case, the waiver released lien
expenses.
rights based not only upon ″labor or materials
Having determined the release’s effect on the furnished,″ but also upon labor and materials ″to
builder’s October 2007 lien and the developer’s be furnished in the future.″ 7 S.W.3d at 830. The
pre-release debt, we turn to the release’s effect on court held that this language allowed the party
the builder’s post-release liens. challenging the subsequently filed liens to ″rely
on the fact that the . . . property would not be
After filing the release, the builder filed four burdened by a statutory mechanic’s lien.″ Id.
amended lien affidavits to secure payment for the
unpaid portion of the pre-release debt and for The release here, by contrast, does not purport to
expenses that the builder continued to incur. The waive the builder’s right to file new liens. Instead,
first of these documents, [**22] filed shortly after it refers only to the lien already filed and the
the release in November 2007, asserted a lien only indebtedness already incurred. We therefore do
against Parcel A. The builder filed a second not construe the release as barring liens for
amended affidavit in June 2008, a third in October, post-release expenses.
and a fourth in January 2009. These three
subsequent affidavits placed liens on the entire Similarly, neither the release itself nor any
property, including Parcels A and B. Each affidavit summary judgment evidence suggests the builder
updates the total amount owed by the developer at agreed to refrain from filing a lien against tracts
the time of filing. The final affidavit states that other than Parcel A to [*234] secure the unpaid
approximately $6.75 million is owed. portion [**24] of the pre-release debt. The
builder’s initial October 2007 lien only
The bank argues that summary judgment in its encumbered Parcel A, and its release purported to
favor was proper because the builder’s release release only this lien. The release did not mention
prevented it from filing any further liens on any Parcel B or the property’s other tracts, so we do
tracts to secure any of the developer’s debt. As not construe it to prevent the filing of liens against
discussed above, the bank is right insofar as the those tracts to secure the unpaid portion of the
release prohibited the builder from re-filing a lien developer’s pre-release debt.
7
See Tex. R. App. P. 43.2(a); PAS, Inc. v. Engel, 350 S.W.3d 602, 617 (Tex. App.—Houston [14th Dist.] 2011, no pet.) (affirming
summary judgment on fraud claim to extent based upon a certain misrepresentation).

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409 S.W.3d 221, *234; 2013 Tex. App. LEXIS 10081, **24

This construction is consistent with the release’s Graham v. Sledge, 653 S.W.2d 283, 285 (Tex.
plain meaning and the context of the transaction. 1983)). Although a general contractor may have
The builder released Parcel A from its initial lien, common law, contractual, and constitutional lien
and it cannot avoid this consequence by simply rights as well, the builder has not relied upon such
re-filing. But there is no evidence that the parties rights in [**26] this appeal. Thus, to determine
intended the release to prevent the builder from whether the builder has a statutory lien based
securing the remaining pre-release debt—or any upon its amended affidavits, we need only
other debt for that matter—with a lien on Parcel ″compare the steps the [builder] took to perfect
B. Nor is there any contention that Parcel B is [its] liens with the statutory requirements.″ First
outside the ″[p]roperty to [w]hich [the] [l]ien Nat’l Bank in Graham, 653 S.W.2d at 286.
[e]xtends″ under Texas Property Code section
53.022. Thus, on the record before us, nothing The required contents of a lien affidavit are
prevented the builder from filing a lien against prescribed in section 53.054(a) of the Texas Prop-
Parcel B to secure the unpaid portion of the erty Code. We conclude that each post-release
developer’s pre-release debt. affidavit complies with these requirements, and
the bank does not argue otherwise. Nothing in the
The bank makes additional arguments to avoid statute suggests that the builder sacrificed its
this result, but they do not change our conclusion entitlement to a lien in its November 2007 affidavit
that the release does not entitle the bank [**25] to by adding a statement that this affidavit ″amends″
final summary judgment. The bank contends that the original October 2007 affidavit, which
we must construe the release to waive additional perfected a lien that had been released in the
rights because the release’s language differs from interim.8 To the contrary, the supreme court has
language in other ″partial releases″ that the builder made clear that HN11 ″substantial compliance
filed. Although the relevant release does differ with the statutes is sufficient to perfect a lien.″ Id.
from others in the record, its language still does at 285.
not waive the builder’s right to file future liens for
post-release expenses or forgive the developer’s Our dissenting colleague disagrees with this
unpaid debt. conclusion, relying on the affidavits’ [*235] form
rather than their substance. In her view, the first
The bank also contends that the builder could not post-release affidavit in November 2007 is
″amend″ its October 2007 lien because it fully ineffectual because it purports to amend the
released this lien and therefore had nothing to October 2007 affidavit, but there was nothing to
amend. This contention must be evaluated under amend because the lien perfected by that affidavit
the mechanic’s lien statute because the liens at had been released. Moreover, because the
issue here are creatures of statute. Indeed, HN10 post-release affidavits amend one another, she
″’[a] subcontractor’s lien rights are totally contends those affidavits are ineffectual as well.
dependent on its compliance with the statutes
authorizing the lien.’″ K & N Builder Sales, Inc. v. We disagree with this analysis because it is
Baldwin, No. 14-12-00012-CV, 2013 Tex. App. contrary to the language, established interpretation,
LEXIS 4027, 2013 WL 1279292, at *3 (Tex. and purpose of the mechanic’s lien statutes. HN12
App.—Houston [14th Dist.] Mar. 28, 2013, no Nothing in the language of the statutes suggests
pet.) (mem. op.) (quoting First Nat’l Bank in that a lien’s effectiveness hinges upon whether
8
All of the lien affidavits are substantively identical with the exception of: (1) the amended affidavits’ references to amendment in the
caption and in one numbered sentence; (2) differences in the amount of the claim; and (3) beginning with the second amended affidavit
in June 2008, an expansion of the [**27] property subject to the lien.

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409 S.W.3d 221, *235; 2013 Tex. App. LEXIS 10081, **26

affidavits filed after a release describe themselves misled by the references to amendment in the
as ″amending″ or ″replacing″ the pre-release post-release affidavits. Each affidavit was properly
affidavit. This omission is telling because the filed in the real property records, each clearly
statutes not only contemplate, but require, releases identifies the encumbered property, and each
whenever payment is received. See Tex. Prop. states the amount of the lien.9
Code Ann. § 53.152(a). Release documents are
″an intended and customary part of the payment Moreover, the purpose of these affidavits was to
process″ in construction transactions. 3 BRUNER & give notice of the builder’s interest in the property.
O’CONNOR, supra. See Arias v. Brookstone, L.P., 265 S.W.3d 459,
Given the prevalence and necessity of releases, 464-65 (Tex. App.—Houston [1st Dist.] 2007, pet.
one would expect [**28] that if the Legislature denied) (purpose of serving lien affidavits on
intended ″amended″ post-release affidavits to be property owner is to give notice). If anything,
entirely ineffective, it would have expressed that filing the post-release affidavits as amendments
intent. Certainly some statutory warning would be furthered this purpose. The use of the amendment
appropriate if, as the dissent argues, a mechanic format ensured that all of the amendments were
who proceeds by amendment loses all security for filed together, thus clarifying that each affidavit
expenses incurred after filing a statutorily required
superseded the previous one and that the most
release. Because there is no such warning or
recent stated the full [**30] extent of the builder’s
expression of legislative intent, we adhere to the
interest.
requirements the Legislature did establish in sec-
tion 53.054(a), which are met here as explained
At bottom, the dissent rests on the rule that ″[i]f
above.
there is nothing for an amended [*236] instrument
Cases interpreting the mechanic’s lien statutes
to amend, then such an amended instrument is
also counsel against invalidating a lien on a purely
itself ineffectual nullity.″ Post, at 8. The dissent
technical basis. For example, ″[i]t is well settled
cites no authority for applying this rule to
that HN13 the mechanic’s and materialman’s lien
statutes are to be liberally construed for the mechanic’s lien affidavits, but would apparently
purpose of protecting laborers and materialmen.″ apply it to instruments of every kind. Of course,
Ready Cable, Inc. v. RJP S. Comfort Homes, Inc., we agree that this rule may apply in some
295 S.W.3d 763, 765 (Tex. App.—Austin 2009, no situations. See, e.g., Lazo v. RSI Int’l, Inc., No.
pet.). And courts have been more willing to 14-06-00432-CV, 2007 Tex. App. LEXIS 7077,
excuse a mistake or omission in cases where no 2007 WL 2447299, at *4 (Tex. App.—Houston
party is prejudiced by the defect. Id. (citing cases). [14th Dist.] Aug. 30, 2007, no pet.) (mem. op.)
Indeed, ″[t]he Legislature did not intend that the (endorsement to cancelled insurance policy
materialman should lose his lien through the ineffective). But it does not apply to amended
technicalities of a warning, where the owner pleadings, for example. Because an amended
[**29] was not misled to his prejudice.″ Hunt pleading replaces the original pleading, see Tex.
Developers, Inc. v. W. Steel Co., 409 S.W.2d 443, R. Civ. P. 65, no one would argue that a fatal
449 (Tex. Civ. App.—Corpus Christi 1966, no defect in the original pleading that is absent from
writ). the amended pleading vitiates the latter simply
Here, there is no contention that the bank, the because it states that it amends the original
developer, or anyone else relied upon or was pleading. We decline to apply the dissent’s rule to
9
Although the lien perfected by the original October 2007 affidavit was released, the affidavit itself did not cease to exist, cf. post,
at 8-9, and it is in the record before this Court.

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defeat otherwise valid instruments that effectively after work concludes, there can be notice problems.
serve the purpose for which they were created.10 That is, a party relying solely upon the real
property records will be unaware of a mechanic’s
Here, the amended affidavits gave notice of the
senior lien until after the mechanic files its
builder’s interest in the property in compliance
affidavit. See Diversified Mortg. Investors, 576
with the applicable statutes. Accordingly, they
S.W.2d at 801.
perfected the builder’s lien.11
The mechanic’s visible construction activity on
B. Whether the builder timely filed its the property fills this potential notice gap. Id. at
post-release lien affidavits and whether its 801-02. Thus, HN16 mechanic’s liens first attach
post-release expenses were for ″materials″ as at ″the commencement of construction . . . or
defined in the mechanic’s lien statute involve delivery of materials,″ that is ″visible from
fact questions that preclude final summary inspection of the land.″ Tex. Prop. Code Ann. §
judgment for either party. 53.124. Mechanic’s lien statutes also protect third
The bank next contends that even if the builder’s parties by requiring mechanics to file their
release allowed it to file subsequent lien affidavits, affidavits within a fixed period after their presence
its post-release affidavits were nonetheless on the property ceases. See id. § 53.052. In this
ineffective because (1) they were untimely and (2) way, when work is ongoing, third parties can
the expenses referenced in the affidavits could not observe the mechanic’s presence and assume that
give rise to mechanic’s liens because they were liens may be forthcoming. [**34] See Diversified
not for ″materials furnished for construction″ as Mortg. Investors, 576 S.W.2d at 801. After work
required by the mechanic’s lien statute.12 We concludes, a party can avoid mechanic’s liens by
address each argument in turn. Because there are waiting for the lien-filing period to expire. See id.
fact questions regarding both arguments, neither
The clock on the filing period starts ticking when
party is entitled to final summary judgment
″indebtedness accrues.″ Here, the builder had to
regarding the validity of the post-release
file its lien affidavit HN17 ″not later than the 15th
mechanic’s liens.
day of the fourth calendar month after the day on
1. The timeliness of the builder’s post-release which the indebtedness accrue[d].″ Tex. Prop.
liens presents questions of fact. Code Ann. § 53.052.

Because mechanic’s liens attach on the day work Several events can trigger the accrual of
begins, but need not be recorded [*237] until indebtedness, but each stands in for the cessation
10
Cf. Rogers v. Ricane Enters., Inc., 884 S.W.2d 763, 770 (Tex. 1994) (principle that HN14 ″a contract shall [**31] be construed .
. . in light of the purposes and objects for which it was made″ is ″well-settled″); Union Pac. Res. Grp. v. Neinast, 67 S.W.3d 275, 282
(Tex. App.—Houston [1st Dist.] 2001, no pet.) (lease covenants will be implied to, among other things, ″give effect to the actual intention
of the parties . . . and the purposes sought to be accomplished [by their contract or conveyance]″); Hicks v. Loveless, 714 S.W.2d 30,
34 (Tex. App.—Dallas 1986, writ ref’d n.r.e.) (deed restrictions construed ″in light of the obvious purpose and intent of the restrictions″).
11
The dissent’s ″Supplemental Background″ section discusses the correspondence between the builder and the bank, perhaps
suggesting that this correspondence influences its interpretation of the post-release affidavits. As far as we can tell, however, it does not.
The dissent’s rule would apply with equal force if the only parties were a property owner and a mechanic who received payment and
filed the statutorily required release. If the mechanic filed lien [**32] affidavits as amendments after filing a release, then the dissent
would hold that nothing secures the mechanic’s post-release expenses. As discussed above, we see no reason why this should be the case.
12
The bank’s brief conflates timeliness with whether the builder’s expenses entitle it to a mechanic’s lien, but we construe the brief
to raise both issues. [**33] See Perry v. Cohen, 272 S.W.3d 585, 587 (Tex. 2008) (HN15 ″Appellate briefs are to be construed
reasonably, yet liberally, so that the right to appellate review is not lost by waiver.″).

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409 S.W.3d 221, *237; 2013 Tex. App. LEXIS 10081, **34

of work. For example, indebtedness to an original 749 N.W.2d 388, 391 (Minn. Ct. App. 2008)
contractor13 accrues on the last day of a month (discussing the two approaches). The courts
during which either the contractor or the property [*238] that focus upon the notice-giving purpose
owner receives a written declaration from the of ongoing work believe that the parties’ ″secret
other party terminating the contract. Id. § purposes″ have no place in the analysis. Allison v.
53.053(b)(1). Absent termination, indebtedness Schuler, 1934- NMSC 072, 38 N.M. 506, 36 P.2d
accrues ″on the last day of the month in which the 519, 522 (N.M. 1934). These courts consider only
original contract has been completed, finally the objective appearance of abandonment. See id.
settled, or abandoned.″ Id. § 53.053(b)(2). Other courts emphasize the mechanic’s need for
certainty in order to safeguard its rights and
For our purposes, the only relevant accrual triggers
therefore include in their analysis the parties’
are abandonment and termination. The builder
subjective intent regarding abandonment. See Su-
argues it never abandoned or terminated the
perior Constr. Servs., 749 N.W.2d at 391.
project [**35] until it left the site in March 2010,
so its post-release lien affidavits filed between The parties here have not asked us to adopt one
November 2007 and January 2009 were all timely. side of this split over the other, and we conclude
For its part, the bank argues that the builder that it is unnecessary to do so. Based upon the
abandoned the project when it stopped working in summary judgment evidence, both approaches
October 2007, and thus all but the first of the raise fact questions. Accordingly, neither party is
builder’s post-release lien affidavits were untimely entitled to summary judgment under either
because they were filed after February 15, 2008. approach.
We cannot agree with either party because the
summary judgment evidence fails to conclusively Regarding the parties’ subjective intent, the builder
establish when the builder abandoned or argues that a single fact conclusively establishes
terminated the contract. that it did not abandon the project until March
2010: the developer’s request that it remain on the
Fact questions regarding abandonment. Chapter site until that [**37] time. Given the unique facts
53 of the Property Code does not define of this case, we disagree.
″abandoned.″ See Tex. Prop. Code Ann. § 53.001.
The project began deteriorating long before the
Moreover, neither party has cited, and our research
builder’s March 2010 departure, and there is
has not revealed, a Texas authority exploring the
evidence that one or both of the parties may have
meaning of ″abandoned″ as applied to mechanic’s
abandoned the project prior to that time. Indeed,
liens. We therefore use the word’s ordinary
two and a half years passed between the day the
meaning. See TGS-NOPEC Geophysical Co. v.
builder stopped working and the day it left the
Combs, 340 S.W.3d 432, 439 (Tex. 2011). HN18
project site. During that time, the builder did no
″Abandon,″ as used in this context, means ″to turn
work, received little payment, sent notice of its
from or relinquish.″ WEBSTER’S THIRD NEW
intent to terminate the contract, and sued the
INTERNATIONAL DICTIONARY 2 (1993).
developer. The builder is correct that its continuing
Courts across the country disagree about whether presence on the property supports an inference
the objective appearance of abandonment triggers that it did not abandon the project, but these other
a mechanic’s filing obligation [**36] or whether developments support a contrary inference. This
the parties must actually intend to abandon the evidentiary conflict raises a fact question that
project. See Superior Constr. Servs., Inc. v. Belton, cannot be resolved on summary judgment.
13
The parties agree that the builder is an ″original contractor″ and this was an ″original contract.″

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We also reject the builder’s argument that its [**39] equipment remained on the property,
summary judgment evidence conclusively signaling to third parties that it was working and
established that the parties actually intended to that its liens could come at any time. The bank
complete the project. The builder relies upon focuses upon the long period [*239] during
affidavits from its operations manager and a letter which no work occurred, arguing that a third party
that it sent to the developer in May 2008. One would surmise the work was over.
affidavit says that ″[the developer] repeatedly
The parties’ arguments are both correct, as far as
promised that it was in the process of securing
they go, and demonstrate the existence of a fact
additional financing, and that [the builder]
question on abandonment. Maintaining equipment
[**38] should not demobilize.″ The other states
on the property certainly suggests work may be
that the builder ″did not terminate the contract,
ongoing. But the builder’s extended period of
abandon the contract or demobilize the Project″
inactivity suggests that, at some point, the builder
when it stopped working in October 2007
and the developer may have given up the project.
″[b]ecause of [the developer’s] repeated promises
Deciding if and when the parties abandoned the
that it was in the process of securing additional
contract is therefore a fact question that cannot be
financing.″
resolved on summary judgment.
Neither affidavit reflects exactly when the
developer made these promises or exactly what Fact questions regarding termination. HN19 For
promises it made. Without this information, the purposes of a statutory mechanic’s lien, a contract
mere existence of promises as early as October terminates when one party receives a written
2007 fails to establish conclusively the notice of termination from the other. Tex. Prop.
non-abandonment of the project prior to March Code Ann. § 53.053(b)(1). The builder contends
2010. that ″[i]t is undisputed″ that it ″never received any
notice the Contract was terminated″ (emphasis
The builder’s letter to the developer falls short for added). This appears to be correct. But the builder
similar reasons. The May 2008 letter states that alleged in its original petition below that it ″served
″[the builder] at the request of [the developer] has notice of intent to terminate the [**40] Contract″
remained mobilized at the site.″ Even if the ″[b]y late May, 2008″ (emphasis added). At this
developer made this request prior to May 2008, point, the builder contended it had ″bec[o]me
however, such a request would not conclusively apparent that [the developer] was incapable of
establish that the intent to complete the project obtaining the financing necessary to complete the
survived until March 2010. The summary Project.″ The builder’s termination letter stated
judgment evidence fails to establish conclusively that, if the developer failed to cure its default, the
when the parties intended to abandon the project, contract would terminate on May 27, 2008.14
so neither party is entitled to summary judgment
based upon abandonment. Although this letter appears in the record, we
[**41] do not believe it conclusively proves that
Turning to the objective appearance of the contract terminated in May or June of 2008.
abandonment, the builder argues that its First, there is no evidence that the developer
14
The letter is dated May 20, 2008, and states that the developer’s failure to cure its default within seven days will ″terminate the
Contract.″ The letter also states, however, that it is a ″Notice of Intent to Terminate″ and ″[p]ursuant to″ ″Article 14.1.1″ of the parties’
construction agreement. This provision appears to provide for a fifteen-business-day cure period. In any event, even if the contract
terminated in June 2008, a lien affidavit would have been due by the fifteenth day of the fourth month thereafter, i.e., October 15, 2008.
See Tex. Prop. Code Ann. § 53.052(a). Thus, if the letter terminated the contract in May or June of 2008 (a matter upon which we express
no opinion), then the builder’s affidavits filed on October 23, 2008, and January 16, 2009, would appear to be untimely.

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received this written notice, and section first amended affidavit satisfied the timeliness
53.053(b)(1) provides that receipt triggers the requirement as to all subsequent affidavits.
accrual of indebtedness, not dispatch. Moreover, Although the bank does not dispute the timeliness
neither party’s brief thoroughly addresses the of the first amended lien affidavit, we cannot
termination letter’s effect. Thus, the issue of grant a partial summary judgment that this affidavit
termination also cannot be resolved on summary imposed a valid mechanic’s lien. As an initial
judgment. matter, approximately $1.7 million of the first
amended lien was for pre-release expenses that
2. The builder’s filing of a single timely we have [**43] held the builder could not reassert
mechanic’s lien does not render its amended against Parcel A. Because the first amended
liens timely under the statute. affidavit only mentioned Parcel A, it was
ineffective to re-impose a lien for the pre-release
The builder argues, however, that issues of expenses, and the builder is entitled to partial
termination and abandonment do not prevent final summary judgment to that extent. The remaining
summary judgment in its favor. The builder points $1.1 million in the first amended affidavit appears
out that even if its later post-release affidavits to have been for post-release expenses. As we
were untimely, its first amended lien affidavit discuss below, however, the record does not
filed in November 2007 was still timely. The conclusively establish whether the builder could
builder then contends that any late affidavits obtain a mechanic’s lien for those or other
″relat[e] back″ to this timely one. Under this post-release expenses. As a result, notwithstanding
theory, the builder’s single timely affidavit enabled the apparent timeliness of the first amended
it to more than double its lien on the property at affidavit, fact questions preclude summary
any time regardless of when the statutory filing judgment as to its effectiveness regarding
period expired. We disagree with this construction post-release expenses.
of the filing requirements.
3. Whether the builder’s post-release expenses
The builder’s construction disregards the were for ″material furnished for construction″
[**42] language of the relevant statutes. HN20 To presents fact questions.
obtain a valid lien, a mechanic ″must file an
affidavit″ within the statutory period. Tex. Prop. HN21 Mechanic’s liens secure payment for,
Code Ann. § 53.052. This affidavit [*240] ″must among other things, ″the labor done or material
contain substantially . . . a sworn statement of the furnished for the construction or repair.″ Tex.
amount of the claim.″ Id. § 53.054(a). Here, the Prop. Code Ann. § 53.023. As to the post-release
first amended affidavit, assuming it was timely, liens, there is no contention that the builder ″d[id]
did not contain a substantially correct statement of labor.″ Rather, the builder argues that its services
the amount the builder ultimately claimed. The after construction ceased were ″material
first amended affidavit stated a claim for furnished.″
approximately $2.9 million, and the builder
ultimately claimed approximately $6.75 million. HN22 ″Material″ [**44] means all or part of:
(A) the material, machinery, fixtures, or tools
Thus, the builder’s first amended affidavit satisfied incorporated into the work, consumed in the
both the timeliness requirement and the direct prosecution of the work, or ordered and
amount-of-the-claim requirement only to the extent delivered for incorporation or consumption;
of the $2.9 million claim it substantially recited. (B) rent at a reasonable rate and actual running
We therefore reject the builder’s argument that its repairs at a reasonable cost for construction
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equipment used or reasonably required and tell the extent to which the builder’s expenses
delivered for use in the direct prosecution of were for equipment or services delivered for that
the work at the site of the construction or purpose. Standing alone, the fact that no work
repair; or ultimately occurred does not answer these
questions.
(C) power, water, fuel, and lubricants
consumed or ordered and delivered for Moreover, HN24 to obtain a mechanic’s lien for
consumption in the direct prosecution of the rental expenses, the equipment must be not only
work. ″delivered for use,″ but also ″reasonably required″
for use in the direct prosecution of the work. Tex.
Tex. Prop. Code Ann. § 53.001(4).
Prop. Code Ann. § 53.001(4)(B). In this case, the
The builder generally contends that its post-release builder continued to incur rental expenses for
expenses fall into these categories. The builder’s several months after work had ceased even though
affidavit states that the expenses were for the developer already owed over $1.7 million and
″maintain[ing] its office facilities at the Project, the project had no apparent prospect of adequate
continu[ing] to store materials and equipment at financing. At some point, continuing to incur
the Project, and maintain[ing] water, sewer, power, these expenses may have become unreasonable,
phones and data connections at the office regardless of the parties’ intent. Whether and at
complex.″15 exactly what point these expenses stopped being
″reasonably required″ are questions of fact that
[*241] The bank contends that none of these cannot be answered conclusively on this record.
post-work expenses are ″materials″ because, once Universe Life Ins. Co. v. Giles, 950 S.W.2d 48, 56
work ceased, nothing was ″used″ or ″consumed″ n.6 (Tex. 1997) (″[R]easonableness is ordinarily a
in the ″direct prosecution of the work.″ See id. We question of fact.″).
disagree because HN23 the definition of materials
***
does not always require actual use or consumption
in the direct prosecution of the work. Instead, For these reasons, we affirm the trial court’s grant
mechanic’s liens are also available when items are of summary judgment insofar as it held that the
″delivered for″ use or consumption. Id. In this builder’s lien against Parcel [**47] A for the
way, the availability of a mechanic’s lien becomes unpaid portion of the pre-release debt is junior to
a question of how the parties intended to use the bank’s deed of trust lien. Otherwise, to the
equipment and services delivered to the project, extent the trial court’s granted summary judgment
which is generally a question of fact. State ex rel. for the bank based on the release, the summary
Perrin v. Hoard, 94 Tex. 527, 62 S.W. 1054, 1056 judgment cannot stand.
(Tex. 1901).16
III. Although the bank’s failure to comply with
Here, we cannot determine conclusively from the the tax lien transfer statutes does not prevent
summary judgment evidence exactly when the its subrogation to a tax lien, there are fact
developer and builder ceased intending to questions regarding whether equity requires
prosecute the [**46] work. Therefore, we cannot subrogation here.
15
Aside from the issues noted below, the parties have not briefed whether each of these categories of expenses fall within the statutory
definition of ″materials.″ We therefore express no opinion on whether they otherwise qualify as expenses for [**45] materials.
16
See also Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 434 (Tex. 1986) (″Intent is a fact question uniquely within the realm of
the trier of fact because it so depends upon the credibility of the witnesses and the weight to be given to their testimony.″); Viscardi v.
Pajestka, 576 S.W.2d 16, 19 (Tex. 1978) (″The intent of the grantor is a question of fact.″).

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409 S.W.3d 221, *241; 2013 Tex. App. LEXIS 10081, **47

The parties’ other principal dispute concerns The deed states that the bank ″is subrogated to all
whether the bank became subrogated to a senior rights, liens or interests in any of the Mortgaged
tax lien that it satisfied with part of its loan Property securing the payment of any obligation
proceeds. With a few exceptions that are not satisfied or paid off out of the proceeds of [its]
relevant here, HN25 tax liens are senior to other loans.″ A tax lien was ″paid off out of the
liens. See Tex. Tax Code Ann. § 32.05(b). Thus, if proceeds of″ the bank’s loan, so it contends this
the bank became subrogated to tax liens, these provision entitles it to subrogation under a
liens would be senior to the builder’s mechanic’s contractual subrogation theory. As we explain
liens. As a result, foreclosure of the subrogated below, however, the bank’s right to subrogation
tax liens would have extinguished the builder’s also depends upon equitable [**49] considerations.
mechanic’s lien because the foreclosure sale
The builder counters that the bank is not
proceeds were insufficient to satisfy both. See
subrogated to the tax lien because (1) the bank
I-10 Colony, Inc., 393 S.W.3d at 472. The bank
failed to comply with a statutory procedure for
would therefore own the property free of the
transferring tax liens, and (2) equitable
builder’s liens, and it would be entitled [*242] to
considerations make subrogation inappropriate
final summary judgment regardless of the issues
here.17 We disagree with the builder’s first
discussed in [**48] Part II above.
argument but conclude there are fact issues
HN26 Subrogation is liberally applied and is regarding the second that preclude summary
broad enough to include every instance where one judgment on this record.
person, not acting voluntarily, pays another’s
debt. Lancer Corp. v. Murillo, 909 S.W.2d 122, A. The tax lien transfer statutes do not eliminate
127 (Tex. App.—San Antonio 1995, no writ). As contractual or equitable subrogation of tax
used here, subrogation ″essentially allows a liens.
subsequent lienholder to take the lien-priority The builder first argues that the bank is not
status of a prior lienholder″ by satisfying the prior subrogated to the tax lien because it failed to
lien’s associated debt. Bank of Am. v. Babu, 340 comply with sections 32.06 and 32.065 of the Tax
S.W.3d 917, 925 (Tex. App.—Dallas 2011, pet. Code.18 The principle of subrogation is well
denied). One who pays another’s real property established, however. LaSalle Bank Nat’l Ass’n v.
taxes often asserts a right to be subrogated to the White, 246 S.W.3d 616, 619 (Tex. 2007). ″Perhaps
taxing authority’s lien. E.g., Smart, 597 S.W.2d at the courts of no state have gone further in applying
337-38. the doctrine of subrogation than ha[ve] the court[s]
The bank’s subrogation arguments focus on a of this state.″ Faires v. Cockrill, 88 Tex. 428, 31
clause in its deed of trust signed by the developer. S.W. 190, 194 (Tex. 1895) overruled in part on
17
The builder also argues that the bank failed to identify the tracts on which it paid taxes. The bank submitted a tax map, however,
as an exhibit to one of its summary judgment filings (located at volume 5, page 1111 of the clerk’s record). The account identification
number on a tract that appears to contain Parcels A and B corresponds to the number on checks issued from the title company to the
relevant taxing authorities.

We note, however, that the area of the tract on the tax map appears to be .01 acres smaller than the combined areas of Parcels A and
B on the builder’s map. We cannot tell whether this discrepancy results from rounding or if, in fact, the tract on the tax map excludes
a small portion of the contested parcels depicted in the builder’s map. To the extent this discrepancy creates [**50] a fact issue, the
parties can address it on remand.
18
The builder claims that the version of the statute in effect when the bank satisfied the tax lien prevented subrogation. We therefore
analyze the builder’s arguments [**51] under that version, see Tex. Tax Code Ann. § 32.06, .065 (West 2008), rather than the current
version, see Tex. Tax Code Ann. § 32.06, .065 (West Supp. 2012).

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other grounds by Fox v. Kroeger, 119 Tex. 511, 35 Finally, the statutes make tax lien priority available
S.W.2d 679, 680 (Tex. 1931). Moreover, HN27 the to parties that could not acquire it at common law,
doctrine has long been applied to tax liens. See suggesting an intent to supplement rather than
Stone v. Tilley, 100 Tex. 487, 101 S.W. 201, 201 abrogate pre-existing avenues for obtaining the
(Tex. 1907). Thus, to address the builder’s taxing authority’s priority.
argument, we must determine whether the tax lien
We begin with the text of the statutes themselves.
transfer statutes provide an exclusive means for
The Tax Code permits [**53] tax lien transfers by
acquiring the taxing authority’s [*243] priority,
providing that ″[a] person may authorize another
thereby abrogating common law subrogation of
person to pay the delinquent taxes imposed by a
tax liens.
taxing unit,″ and ″[a] tax lien may be transferred
″Of course, HN28 statutes can modify common to the person who pays the taxes.″ Tex. Tax Code
law rules, but before we construe one to do so, we Ann. § 32.06(a-1), (a-2). Parties wishing to transfer
must look carefully to be sure that was what the a tax lien under this statute must substantially
Legislature intended.″19 Energy Serv. Co. of comply with several requirements. See Genesis
Bowie, Inc. v. Superior Snubbing Servs., Inc., 236 Tax Loan Servs. Inc. v. Kothmann, 339 S.W.3d
S.W.3d 190, 194 (Tex. 2007). When evaluating an 104, 108-111 (Tex. 2011). For example, the
argument that a statute deprives a person of a transferee—the party receiving the tax lien—must
common law right, we will not extend the statute file ″a sworn document″ with ″the collector for
beyond its plain meaning or apply it to cases not the [taxing] unit.″ Tex. Tax Code Ann. § 32.06(a-1).
clearly within its purview. Id. at 194 n.17 (citing The document must, among other things, authorize
Cash Am. Int’l Inc. v. Bennett, 35 S.W.3d 12, 16 payment of taxes, and it must identify the
(Tex. 2000)). With this rule in mind, we construe transferee and the encumbered property. Id.
the tax lien statutes, looking first to the plain and
The transferee’s compliance with the authorization
common meaning of their words. See State ex rel.
section triggers obligations for the tax collector.
State Dep’t of Highways & Pub. Transp. v. ″If a transferee authorized to pay a property
Gonzalez, 82 S.W.3d 322, 327 (Tex. 2002). owner’s taxes pursuant to [the statute’s
authorization section] pays the taxes,″ the tax
1. The statutes’ text shows that they supplement,
collector must issue a receipt, certify that the taxes
rather than abrogate, common law subrogation
are paid, and ″identify . . . the date of the transfer″
doctrines for tax liens.
″in a discrete field in the applicable property
We conclude that the statutes upon which the owner’s account.″ Id. § 32.06(b).
builder relies HN29 do not abrogate common law
subrogation doctrines for several reasons. The After receiving this certification, [**54] the
statutes contain language permitting statutory transferee must notify ″any mortgage servicer and
transfers, but not requiring them. Moreover, the . . . each holder of a recorded [*244] first lien
statutes expressly limit their foreclosure and notice encumbering the property″ of the transfer. Id. §
requirements to statutory transfers; by their terms, 32.06(b-1). In addition, the transferee must ″record
the statutes do not apply to subrogated lienholders. a tax lien transferred as provided by this section
19
We understand ″common law″ in this context to mean ″[t]he body of law derived from judicial decisions, rather than from statutes
or constitutions.″ BLACK’S LAW DICTIONARY 313 (9th ed. 2009). Thus, although equitable subrogation is technically an equitable remedy
as distinguished [**52] from a remedy at law, we nonetheless look carefully to determine whether the Legislature intended abrogation.
Cf. LaSalle Bank, 246 S.W.3d at 619 (construing amendment to Texas Constitution not to abrogate equitable subrogation); Smart, 597
S.W.2d at 338 (describing the ″right to equitable subrogation″ as ″aris[ing] in accordance with certain well-established rules of law″
(emphases added)).

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with the [tax collector’s certification] . . . in the ″transferee[s] [who] seek[ ] to foreclose a tax lien
deed records of each county in which the property on the property under [the statute’s foreclosure
. . . is located.″ Id. § 32.06(d). subsection]″; they do not mention subrogated
lienholders at all. Id. § 32.06(c-1). The statutes
There are also special requirements to foreclose create recording requirements, but only for ″tax
tax liens transferred under the statute. For example, lien[s] transferred as provided by [Section 32.06].″
absent agreement to the contrary, ″foreclosure of a Id. § 32.06(d).20 The permissive language and
tax lien transferred as provided by [section 32.06] narrowly defined scope [**56] of these statutory
may not be instituted within one year from the provisions demonstrates that the statutes do not
date on which the lien is recorded.″ Id. § 32.06(i). provide the exclusive means of acquiring the
Moreover, the foreclosure must be either ″in the taxing authority’s priority position.
manner provided by law for foreclosure of tax
liens″ or by court order pursuant to Texas Rule of The statutes also broaden the ability of a party
Civil Procedure 736, which governs expedited who pays a tax lien to protect itself, but this policy
foreclosure proceedings. Tex. Tax Code Ann. § choice to supplement common law subrogation
32.06(c). When proceeding under Rule 736, the doctrines does not indicate an intent to supersede
transferee must still comply with section 51.002 those doctrines. Specifically, the statutes enable
of the Property Code, concerning deed of trust tax lien transfers when common law subrogation
foreclosures, and section 32.065 of the Tax Code. would not apply if parties satisfy conditions that
Tex. Tax Code Ann. § 32.06(c)(2). Section 32.065 common law subrogation [**57] would not
requires, among other things, [**55] that any require. At common law, for example, a ″mere
holder of a recorded lien on the property receive a volunteer″ with no prior interest in the property
notice that ″THE FORECLOSURE SALE could not obtain equitable subrogation. Smart,
REFFERED TO IN THIS DOCUMENT IS A 597 S.W.2d at 337. Under the statute, anyone can
SUPERIOR TRANSFER TAX LIEN.″ Id. § obtain the taxing authority’s [*245] priority
32.065(b)(6). position by meeting the statutory requirements. At
common law, the taxpayer’s authorization is
This statutory scheme makes the transfer of a tax unnecessary to obtain subrogation. See id. at 335,
lien an option and discusses the rules that apply if 338 (discussing subrogation where taxpayer did
the lien is transferred. But nothing in the text of not authorize). Under the statute, it is required.
the statute addresses what happens if the lien is See Tex. Tax Code Ann. § 32.06(a-2). At common
not transferred or suggests a legislative intent to law (as our next section details), the right to
prohibit common law subrogation if a party pays subrogation may depend partially upon equitable
a tax lien without transferring it. For example, the considerations, making entitlement to subrogation
statutes provide that parties ″may authorize″ unpredictable. The statute eliminates this
payment of taxes, and with such authorization ″[a] uncertainty. These features make the transfer
tax lien may be transferred,″ but transfer is not statutes a useful alternative to traditional
required. Tex. Tax Code Ann. § 32.06(a-1), (a-2). subrogation doctrines and demonstrate that HN31
The statutes also provide foreclosure requirements, the statutes were intended to supplement, rather
but they specifically limit these requirements to than eliminate, common law subrogation.
20
The builder argues that section 32.065 of the Tax Code governs all contracts for the payment of taxes. In fact, that section’s HN30
requirements are specifically limited to ″contract[s] . . . between a transferee and the property owner under Section 32.06.″ Tex. Tax Code
Ann. § 32.065(b). Thus, section 32.065 only applies to contracts involving statutory lien transfers. Moreover, section 32.065 specifically
notes that ″Section 32.06 does not abridge the right of an owner of real property to enter into a contract for the payment of taxes.″ Id.
§ 32.065(a). We therefore reject the builder’s argument that all tax payment contracts must comply with section 32.065’s requirements.

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2. Most courts agree that the statutes do not equitable subrogation may arise in accordance
eliminate common law subrogation. with certain well-established rules of law.″ Smart,
597 S.W.2d at 338. Thus, ″[u]nder various
The Texas Supreme Court has endorsed the view
circumstances [a non-volunteer who satisfies a tax
that prior versions of the tax lien transfer statutes
lien] may be subrogated to the taxing authority’s
did not abrogate common law subrogation. In
lien to the extent necessary for his own equitable
particular, it refused the writ in [**58] a case
protection.″ Id. In reaffirming this equitable
holding that a lender was equitably subrogated to
entitlement, the [*246] court specifically discussed
a tax lien, as well as a case holding that such
statutory transfer procedures, further
subrogation was not affected by the transfer
demonstrating that these procedures do not
statutes. See Chicago Title Ins. Co. v. Lawrence
abrogate common law subrogation.
Invs., Inc., 782 S.W.2d 332 (Tex. App.—Fort
Worth 1989, writ ref’d) (holding lender was In Genesis Tax, however, the Texas Supreme
equitably subrogated to tax liens, but not Court said of a prior version of section 32.06 ″that
discussing transfer statutes); McDermott v. Steck a tax lien is enforceable only if transferred in
Co., 138 S.W.2d 1106, 1109 (Tex. Civ. App.— accordance with the section’s requirements.″ 339
Austin 1940, writ ref’d) (″It is not material whether S.W.3d at 108. The builder contends this quote
the bank acquired a lien upon the property under signals the end of common law subrogation
[the tax lien transfer statute]. . . . [A party doctrines.
asserting the bank’s interest] was in equity entitled
to subrogation to that lien as against a junior We disagree for two reasons. First, subrogation
incumbrancer . . . .″);21 see also Yancy v. United was not at issue in Genesis Tax. The case addressed
Surgical Partners Int’l, Inc., 236 S.W.3d 778, 786 the effectiveness of a section 32.06 tax lien
n.6 (Tex. 2007) (″writ refused″ cases have same transfer when the party failed to comply strictly
precedential value as Texas Supreme Court with certain statutory requirements. See id. at
opinions). Relying upon one of these cases, Dotson 109-11. The opinion does not mention subrogation,
v. Pahl also reached the result we do today. 206 nor does it cite the subrogation [**61] authorities
S.W.2d 272, 273 (Tex. Civ. App.—Austin 1947, no that we analyze above. Thus, read in context, the
writ) (parties were ″entitled to invoke the doctrine case’s statement that ″a tax lien is enforceable
of subrogation, notwithstanding the failure to only if transferred in accordance with [Section
comply with [the prior version of the tax lien 32.06]″ refers only to transfers, not to subrogation.
transfer statute]″).22 See id. at 108-09.

Furthermore, in discussing tax-lien subrogation, Second, the statutory language that Genesis Tax
the Texas Supreme Court has noted [**60] that interpreted differs from that at issue here. The
HN32 ″[e]ven in the absence of statutory or statute in Genesis Tax provided: ″’To be
contractual authorization, a limited right to enforceable, a tax lien transferred as provided by
21
In McDermott, [**59] the tax collector ″transferred″ tax liens at the verbal request of a bank, but the transfer statute required written
authorization from the party owing the taxes. 138 S.W.2d at 1107. The court held that the effectiveness of this intended transfer ″[wa]s
not material″ because equity required subrogation based upon satisfaction of the tax lien. Id. at 1109. Because the court expressly stated
that compliance with the statute was not material, the case holds that equitable subrogation may entitle a party to a priority tax lien
notwithstanding failure to transfer the lien under statutory procedures. See id.
22
The builder contends that ″[the bank] failed to cite any case giving a lender first-priority-lien status based upon subrogation to a
taxing authority’s ’special lien’ rights.″ We disagree. The bank cites McDermott, which gave an otherwise junior lienholder the taxing
authority’s senior priority based upon equitable subrogation. 138 S.W.2d at 1109. Chicago Title, although not cited by either party, also
equitably subrogated a junior lienholder to the taxing authority’s priority position. 782 S.W.2d at 335.

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this section must be recorded . . . .’″ Id. at 108 & But Chicago [**63] Title does not even mention
n.15. The version we now consider alters this the transfer statutes and expressly grounds it
language and provides: ″A transferee shall record holding in equitable subrogation. See 782 S.W.2d
a tax lien transferred as provided by this section . at 332-35. If the subrogated party in Chicago Title
. . .″ Tex. Tax Code Ann. § 32.06(d). In this way, had actually acquired its lien by statutory transfer,
while the Genesis Tax version arguably it would have been unnecessary to rely upon—or
conditioned enforceability of tax liens on even discuss—equitable subrogation. See Genesis
recordation, the version at issue here clarifies that Tax, 339 S.W.3d at 108-11 (not discussing
only transferees (as distinguished from subrogees, subrogation doctrines where party relied upon
for example) must comply with statutory recording statutory transfer). [*247] Chicago Title did
requirements. The version here also specifically discuss equitable subrogation, however, and its
limits the statutory recording requirements to holding rested exclusively upon that doctrine. 782
liens transferred ″as provided by [Section 32.06].″ S.W.2d at 334-35. Thus, we disagree with Cameron
Life’s conclusion that Chicago Title may have
Id.
actually turned upon statutes not mentioned in the
We have found only one Texas case holding that opinion.
the tax lien transfer statutes eliminate common
***
law subrogation, and we disagree with its
interpretation [**62] of the relevant precedents. In For these reasons, we hold that HN34 the tax lien
Cameron Life Insurance Co. v. Pactiv Corp., the transfer statutes do not abrogate common law
court concluded ″there is nothing . . . indicating subrogation doctrines. We note, however, that
that [the section giving tax liens superior priority] parties who rely exclusively upon equity to obtain
applies to anyone other than the taxing authorities the taxing authority’s priority may face additional
[and their statutory transferees].″ No. 13-05-760- obstacles not present under the statutes.
CV, 2007 Tex. App. LEXIS 6773, 2007 WL
2388906, at *5 (Tex. App.—Corpus Christi Aug. For example, equitable subrogation is only
23, 2007, pet. denied) (mem. op.). We disagree available to ″the extent necessary [for the
because the above-cited cases bind us and directly subrogee’s] equitable protection.″ Smart, 597
contradict this conclusion. Indeed, many cases not S.W.2d at 338. ″When not compelled by the
only ″indicate″ but directly hold that HN33 a equities of the situation, full subrogation [**64] to
party can obtain the taxing authority’s lien priority all special privileges accompanying the taxing
through equitable subrogation.23 authority’s constitutional and statutory lien will
be denied.″ Id. This rule limits the extent of
We also disagree with Cameron Life’s analysis of subrogated rights.
the writ-refused Chicago Title case, which granted
equitable subrogation to a tax lien. Cameron Life In addition, as we explain in the next section,
dismissed Chicago Title by saying ″[i]t is unclear HN35 subrogation to a tax lien can materially
. . . what procedure the bank [in Chicago Title] alter the lien’s terms and thereby prejudice
used to pay the tax lien.″ Id. The court thus intervening lienholders. See Providence Inst. for
implied that the subrogation rights at issue in Sav. v. Sims, 441 S.W.2d 516, 520 (Tex. 1969).
Chicago Title may, in fact, have been acquired by Here, this prejudice triggers a factual inquiry to
statutory transfer. Id. resolve the equities. Proceeding by statute avoids
23
In addition to the authorities already cited, see LaSalle Bank Nat’l Ass’n, 246 S.W.3d at 620; Benchmark Bank v. Crowder, 919
S.W.2d 657, 662 (Tex. 1996).

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the time and expense of determining title in this these [*248] cases, the right of subrogation is not
manner.24 wholly dependent on the application of a contract.″
Id. Instead, as to the nonparty, subrogation depends
B. Because subrogation would prejudice the partially on equitable principles. Id. Thus, ″such
builder, an equitable inquiry is required, and cases fall into a third, hybrid category.″ Id.
fact questions prevent us from resolving the The cornerstone of this equitable analysis is
equities on this record. prejudice to the intervening lienholder that is not
a party to the subrogation contract. See Provi-
Having concluded that the bank’s failure to comply
dence Inst. for Sav., 441 S.W.2d at 520; Med Ctr.
with the transfer statutes does not foreclose
Bank v. Fleetwood, 854 S.W.2d 278, 286 (Tex.
common law subrogation, we turn to whether the
App.—Austin 1993, writ denied). For example,
bank is entitled to the taxing authority’s priority
merely changing the identity of the senior
here.
lienholder does not affect the intervening
As an initial matter, the bank argues that a lienholder’s rights and therefore is not prejudicial.
subrogation provision in its deed of trust entitles it Med Ctr. Bank, 854 S.W.2d at 285-86. Although
to contractual subrogation as a matter of law and subrogation may alter who holds the senior lien,
that we cannot examine the equities of subrogation. the junior lienholder is still junior and still in the
We disagree because even though the bank and same amount. See id. Whether subrogation
the developer agreed to subrogation under the prejudices intervening interests is determined as
terms of the deed of trust, the builder was not a of the time of the transaction [**67] supporting
party to that agreement. Our analysis therefore subrogation. Id. at 285. The consequences of
involves equitable considerations as well. subsequent transactions or events are not relevant
to this inquiry. Id.
HN36 When two parties have a subrogation
contract, ″equitable considerations that might HN37 In many cases, subrogation changes only
control . . . in the absence of an agreement″ cannot the intervening lienholder’s identity. This change
invalidate it. Fortis Benefits v. Cantu, 234 S.W.3d creates no prejudice, so subrogating the intervening
642, 650 (Tex. 2007). This rule works between the lienholder is appropriate as a matter of law. See,
parties because ″[t]he parties hav[e] fixed their e.g., id.; Chase Home Fin., L.L.C., 309 S.W.3d at
rights by contract″ and ″additional rights . . . will 631-32; Texas Commerce Bank Nat’l Ass’n v.
not be created by judicial intervention.″ Smart, Liberty Bank, 540 S.W.2d 554, 556-57 (Tex. Civ.
597 S.W.2d at 338. App.—Houston [14th Dist.] 1976, no writ); see
also Providence Inst. for Sav., 441 S.W.2d at 520.
This [**66] reasoning’s force diminishes in cases Indeed, one court has stated that ″there is no
like this one, however, where enforcing a prejudice to intervening interest holders″ ″absent
subrogation contract would alter a nonparty’s a showing that subrogation results in [(1)]
rights. See Chase Home Fin., L.L.C. v. Cal W. additional debt having priority over or parity with
Reconveyance Corp., 309 S.W.3d 619, 631 (Tex. the intervening interest, [(2)] a material change in
App.—Houston [14th Dist.] 2010, no pet.). ″In the terms of the superior interest, or [(3)] other
24
The builder contends that if the tax lien transfer statutes do not eliminate common law subrogation, ″these [statutes] would never
apply.″ That is, parties will never use statutory procedures when equity may entitle them to the same rights without the statutory
hoop-jumping. We doubt this is the case. Compliance with statutory procedures guarantees the lender’s ability to enforce the taxing
authority’s priority lien. Subrogation doctrines guarantee—at best—a shot at this position and high potential for litigation.
Notwithstanding the viability of common law subrogation, we believe many lenders will continue to obtain tax liens through
[**65] statutory transfers.

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pecuniary loss resulting from the subrogation.″25 in a delinquent tax suit in order to be bound by
Med Ctr. Bank, 854 S.W.2d at 286. it.’″). The Due Process Clause of the United
States Constitution also requires that such
In the absence of prejudice, subrogation must be
lienholders receive actual notice of foreclosure.
allowed, but [**68] the mere presence of prejudice
Mennonite Bd. of Missions v. Adams, 462 U.S.
does not necessarily prevent subrogation. See
791, 798-99, 103 S. Ct. 2706, 77 L. Ed. 2d 180
Fleetwood v. Med Ctr. Bank, 786 S.W.2d 550, 555
(1983). If the foreclosure suit succeeds, all parties
n.2 (Tex. App.—Austin 1990, writ denied). Rather,
to the suit must then receive notice of the
″when prejudice exists, the trial court should, in
foreclosure sale. Tex. Tax Code Ann. § 34.01
exercising its equitable discretion, consider the
(West 2008).
totality of the circumstances, of which the
existence of prejudice to one or more parties is a These foreclosure requirements protect intervening
part.″ Id. Factors to consider include the extent of lien holders, and the bank’s deed of trust
prejudice, its foreseeability, and whether the party eliminated them here. The deed of trust does not
claiming prejudice could have avoided it. Id. require the trustee to notify junior lien holders
prior to foreclosure, and the builder had no
1. Subrogation would prejudice the builder by statutory right to notice. See Jones v. Bank United
materially changing the terms of the superior of Texas, FSB, 51 S.W.3d 341, 344 (Tex. App.—
interest. Houston [1st Dist.] 2001, pet. denied);
Applying this analysis, we conclude that [**70] Kothari, 373 S.W.3d at 808-09.
subrogating the bank to the tax liens would In sum, before subrogation, the tax lien could only
prejudice the builder because it would alter the be foreclosed through a judicial proceeding
foreclosure requirements that otherwise apply to requiring the builder as a party, but after
tax liens. Statutory and constitutional constraints subrogation, the bank could foreclose (thereby
dictate a tax lien’s terms. For example, with the extinguishing the builder’s lien) without even
exception of abandoned property, tax liens must notifying the builder. Indeed, the builder has
be foreclosed judicially rather than by trustee’s offered evidence that it had no knowledge that
sale. See Tex. Tax Code Ann. § 33.41 (West 2008); any tax lien existed or that the bank was asserting
City of Wichita Falls v. ITT Commercial Fin. the taxing authority’s priority position in its
Corp., 827 S.W.2d 6, 10 (Tex. App.—Fort Worth foreclosure.
1992) (″[A]d valorem tax liens must be judicially
foreclosed [**69] . . . .″), aff’d in part, rev’d in HN38 Eliminating protections that existed prior
part on other grounds, 835 S.W.2d 65 (Tex. 1992). to subrogation constitutes a ″material change in
Texas Rule of Civil Procedure 39 requires the the terms of the superior [tax lien],″ triggering an
taxing authority to join any party with an interest equitable inquiry. See Med Ctr. Bank, 854 S.W.2d
in the property in [*249] the foreclosure suit. at 286; cf. First Nat’l Bank of Kerrville v. O’Dell,
Murphee Prop. Holdings, Ltd. v. Sunbelt Sav. 856 S.W.2d 410, 416 (Tex. 1993) (where ″[b]ank
Ass’n of Texas, 817 S.W.2d 850, 852 (Tex. App.— through its ’secret’ (as to [junior lienholder])
Houston [1st Dist.] 1991, no writ); see also foreclosure would obtain the title and extra equity″
Kothari v. Oyervidez, 373 S.W.3d 801, 810 (Tex. and deprive junior lienholder of his interest, court
App.—Houston [1st Dist.] 2012, pet. denied) ″would not allow such an inequitable result under
(″[A]t least generally, ’a lienholder must be joined the guise of ’equitable’ subrogation″).
25
Because we conclude that one of these circumstances exists here, we decline to address whether these are, in fact, the only
circumstances that may demonstrate prejudice to an intervening lienholder.

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2. Questions of fact regarding the equities of The prejudice to the builder if subrogation is
subrogation preclude summary judgment. allowed, the extent of unjust enrichment to the
builder if subrogation is not allowed, and the
HN39 Although summary judgment is available
extent to which subrogation is necessary for the
in equitable actions, certain factors counsel against
bank’s equitable protection all play a role in the
summary dispositions [**71] in equitable
analysis as discussed above. For example, whether
subrogation cases. Fleetwood, 786 S.W.2d at
the builder knowingly allowed the bank to protect
556-57. For example, the ″material facts″ in these
the property from any foreclosure, the imminence
cases are difficult to define precisely. Id. at 556.
of a tax foreclosure suit without the bank’s
″The main guiding principle is the prevention of
an unfair or unjust result.″ Id. Trial courts have a intervention, [**73] and the developer’s potential
″measure of discretion″ in weighing the alternatives to foreclosure may be relevant
circumstances and adjusting the remedy to considerations. Cf. World Help v. Leisure Life-
accomplish this main goal. See id. at 555-57 & styles, Inc., 977 S.W.2d 662, 682 (Tex. App.—Fort
n.2. Worth 1998, pet. denied) (holding party who
purchased vendor’s and deed of trust liens knowing
But a trial court does not have unfettered discretion
taxes were due on property and subsequently paid
to determine the equities of subrogation. Rather,
taxes was not equitably subrogated to tax liens).
the right to subrogation must be determined in
light of its purpose: preventing unjust enrichment.
See Smart, 597 S.W.2d at 337. Thus, the principal Whether the bank intended to be subrogated to the
issue is the extent to which subrogation is tax lien initially is also relevant. See Fleetwood,
necessary to prevent the bank’s property tax 786 S.W.2d at 556 (remanding to consider, among
payments from unjustly enriching the builder. See other things, whether parties initially intended
id. at 337-38. subrogation). If the bank sought subrogation
The unresolved factual issues here become clearer initially, its reason for not complying with the tax
when one understands the usual basis for finding lien transfer statute would be relevant. For
unjust enrichment in this type of case.26 When a example, if the bank intentionally avoided a
junior lienholder [*250] satisfies a tax lien to statutory transfer to surprise the builder, this fact
protect its own interest, everyone with an interest would likely cut against subrogation.
in the property benefits as a result. Instead of a
tax-lien foreclosure potentially extinguishing all With a more developed record, these and other
interests, everyone keeps what they have. fact issues that bear on the equities of subrogation
Subrogating [**72] the party who actually satisfies can be better addressed. See id. at 557 (reversing
the senior debt places the parties where equity summary judgment where the ″record does not
would have them. The junior interest holders who fully develop the facts on which the trial court’s
declined to satisfy the lien remain subject to it. equitable discretion must be exercised, and where
The party who paid the senior debt gets what it the facts that are developed, [even if]
paid for. uncontroverted, can give [**74] rise to more than
Factual questions regarding whether this reasoning
applies here cannot be resolved on this record.
26
Equitable subrogation is generally used to avoid unjustly enriching the debtor (here, the developer). See First Nat’l Bank of Kerrville,
856 S.W.2d at 415. But as discussed above, HN40 the equitable balance necessary to determine whether prejudice to an intervening
lienholder prevents subrogation focuses upon the would-be subrogee (the bank) and the intervening lienholder (the builder). See
Fleetwood, 786 S.W.2d at 556-57.

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one reasonable inference″).27 For now, HN41 establish, however, that the builder was not entitled
″[a]s long as there is a probability that a case has to re-file a mechanic’s lien against Parcel A to
for any reason not been fully developed, [we] secure the unpaid portion of the pre-release debt.
ha[ve] the discretion to remand rather than render We therefore affirm in part the trial court’s grant
a decision.″ Pena v. Smith, 321 S.W.3d 755, 759 of summary judgment for the bank, holding that
(Tex. App.—Fort Worth 2010, no pet.); see also the bank’s interest in Parcel A is not subject to the
Scott Bader, Inc., v. Sandstone Prods., Inc., 248 builder’s lien for the unpaid pre-release debt.
S.W.3d 802, 822 (Tex. App.—Houston [1st Dist.]
2008, no pet.).28 Because the bank is not entitled As to the bank’s contention that the tax liens
to [*251] summary judgment on this record on entitle it to summary judgment, fact issues
the ground that it is subrogated to the tax liens, we regarding the equities of subrogating the bank to
reverse the remainder of the summary judgment these liens preclude summary judgment on the
in favor of the bank and remand for further present record. We therefore reverse the remainder
proceedings consistent with this opinion. of the trial court’s summary judgment and remand
this case for further proceedings consistent with
CONCLUSION this opinion.29

For these reasons, there are fact issues regarding /s/ J. Brett Busby
the parties’ claims that largely preclude summary
Justice
judgment. We therefore sustain in part the builder’s
first issue on appeal, in which it argues that the
Appendix
trial court erred in granting summary judgment
for the bank. Nonetheless, neither the builder nor [EDITOR’S NOTE: The page numbers of this
the bank has established an entitlement to final document may appear to be out of sequence;
judgment as a matter of law. Thus, we overrule the however, this pagination accurately reflects the
builder’s [**76] second issue, in which it argues pagination of the original published document.]
its entitlement to summary judgment.
Following are excerpts from the Released Lien
Specifically, fact issues preclude final summary affidavit and each of the four [*256contd]
judgment for either party based upon the builder’s amended lien affidavits. The amending language
mechanic’s liens because we cannot determine in each amended lien affidavit is emphasized.
when the contract was terminated or abandoned
and whether the builder’s post-release expenses AFFIDAVIT FOR MECHANIC’S AND
entitle it to mechanic’s liens. The release does MATERIALMAN’S LIEN
27
On remand, the parties and the trial court should consider which facts material to the equitable analysis are uncontroverted, as well
as which are disputed and may need to be found by a jury. See State v. Tex. Pet Foods, Inc., 591 S.W.2d 800, 803 (Tex. 1979) (HN42
″Although a litigant has the right to a trial by jury in an equitable action, only ultimate issues of fact are submitted for jury determination.
The jury does not determine the expediency, necessity, or propriety of equitable relief.″). We recognize the possibility [**75] that
additional discovery may resolve some or all of the fact questions that now prevent summary judgment. This opinion does not prevent
the parties from filing future motions for summary judgment, including motions that seek to narrow or resolve the subrogation dispute.
28
The builder argues it is nevertheless entitled to summary judgment based upon Conroy Mortgage Corporation v. Fielder, 375 S.W.2d
344 (Tex. App.—Fort Worth 1964, writ ref’d n.r.e.). We disagree because the equities in Conroy were much clearer than those here. The
party seeking subrogation in Conroy appears to have been a volunteer, and the intervening lienholder had no notice whatsoever of the
foreclosure sale that extinguished its interest in the property. Neither of those circumstances are present here.
29
We do not intend this opinion to dictate how the trial court should proceed in addressing the live issues in this case. The trial court
[**77] should exercise its discretion to address these issues in the order and manner it deems most appropriate.

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409 S.W.3d 221, *256contd; 2013 Tex. App. LEXIS 10081, **76

BEFORE ME, the undersigned authority, for Mechanic’s and Materialman’s Lien
personally appeared Brian Duncan, who upon originally filed for record on October 10,
his oath, deposed and stated the following: 2007 at Document No. 20070615856, Volume
050-84, Pages 0564, et. seq. of the Real
...
Property Records of Harris County, Texas.
4. The labor, materials and work furnished by
...
Claimant are generally described as follows:
labor and materials necessary for the 5. The labor, materials and work furnished by
construction of the Park 8, Tower B, Houston, Claimant are generally described as follows:
Harris County, Texas. labor and materials necessary for the
5. The real property sought to be charged with construction of the Park 8, Tower B, Houston,
a lien by Claimant is generally described [as] Harris County, Texas.
the Park 8, Tower B, 8018 W. Sam Houston 6. The real property sought to be charged with
Parkway South, Houston, Texas 77072 and a lien by Claimant is generally described [as]
more particularly described as follows: the Park 8, Tower B, 8018 W. Sam Houston
TRACT I: Being a 0.8664 acre (37,739 Parkway South, Houston, Texas 77072 and
square foot) tract of land out of the more particularly described as follows:
remainder of 62.01 acre tract of land . . . . TRACT I: Being a 0.8664 acre (37,739
TRACT II: Being a 0.1072 acre (4,669 [**79] square foot) tract of land out of the
square foot) tract of land out of the remainder of 62.01 acre tract of land . . . .
remainder of a 62.01 acre tract of land . . TRACT II: Being a 0.1072 acre (4,669
.. square foot) tract of land out of the
... remainder of a 62.01 acre tract of land . .
..
7. After all just credits, offsets and payments,
the amount [**78] of $3,228,444.50 remains ...
unpaid and is due and owing to Claimant 8. After all just credits, offsets and payments,
under its contract with Park 8 Place, L.P., and the amount of $2,887,070.20 remains unpaid
Claimant claims a lien on said property and and is due and owing to Claimant under its
improvements under the provisions of Texas contract with Park 8 Place, L.P., and Claimant
Property Code § 53.001 et seq. to secure claims a lien on said property and
payment of said amount. improvements under the provisions of Texas
Property Code § 53.001 et seq. [*257contd] to
FIRST AMENDED AFFIDAVIT FOR secure payment of said amount.
MECHANIC’S AND MATERIALMAN’S
LIEN SECOND AMENDED AFFIDAVIT FOR
BEFORE ME, the undersigned authority, MECHANIC’S AND MATERIALMAN’S
personally appeared Brian Duncan, who upon LIEN
his oath, deposed and stated the following: BEFORE ME, the undersigned authority,
... personally appeared Brian Duncan, who upon
his oath, deposed and stated the following:
3. This First Amended Affidavit for Mechanic’s
and Materialman’s Lien amends the Affidavit ...
Ian Ghrist
 Page 31 of 36
409 S.W.3d 221, *257contd; 2013 Tex. App. LEXIS 10081, **79

3. This Second Amended Affidavit for REMAINDER OF A 62.01 ACRE TRACT . .
Mechanic’s and Materialman’s Lien amends ..
the First Amended Affidavit for Mechanic’s
and Materialman’s Lien originally filed for TRACT III
record on November 13, 2007 at Document BEING A 10.4179 ACRE (453,803 SQUARE
No. 2007067266, Volume 051-78, Pages 1978, FOOT) TRACT OF LAND OUT OF THE
et. seq. of the Real Property Records of Harris REMAINDER OF A 62.01 ACRE TRACT . .
County, Texas. ..
...
TRACT IV
5. The labor, materials and work furnished by
Claimant are generally described as follows: BEING A 0.4236 ACRE (18,450 SQUARE
labor and materials necessary for the FOOT) TRACT OF LAND OUT OF THE
construction of the Park 8, Tower [**80] B, REMAINDER OF A 62.01 ACRE TRACT . .
Houston, Harris County, Texas. ..

6. The real property sought to be charged with TRACT V
a lien by Claimant is generally described [as]
BEING A 1.2451 ACRE (54,235 SQUARE
the Park 8, Tower B, 8018 W. Sam Houston
FOOT) TRACT OF LAND OUT OF THE
Parkway South, Houston, Texas 77072,
REMAINDER [**81] OF A 62.01 ACRE
consisting of six (6) adjacent tracts of land,
TRACT . . . .
more particularly described in Exhibit A
attached hereto and incorporated herein. TRACT VI
... BEING A 3.4235 ACRE (149,128 SQUARE
8. After all just credits, offsets and payments, FOOT) TRACT OF LAND OUT OF THE
the amount of $5,845,532.00 remains unpaid REMAINDER OF A 62.01 ACRE TRACT . .
and is due and owing to Claimant under its ..
contract with Park 8 Place, L.P., and Claimant
claims a lien on said property and THIRD AMENDED AFFIDAVIT FOR
improvements under the provisions of Texas MECHANIC’S AND MATERIALMAN’S
Property Code § 53.001 et seq. to secure LIEN
payment of said amount. BEFORE ME, the undersigned authority,
personally appeared Brian Duncan, who upon
EXHIBIT ″A″ his oath, deposed and stated the following:
...
TRACT I
3. This Third Amended Affidavit for
BEING A 0.8664 ACRE (37,739 SQUARE Mechanic’s and Materialman’s Lien
FOOT) TRACT OF LAND OUT OF THE [*258contd] amends the First Amended
REMAINDER OF A 62.01 ACRE TRACT . . Affidavit for Mechanic’s and Materialman’s
.. Lien originally filed for record on November
13, 2007 at Document No. 2007067266,
TRACT II Volume 051-78, Pages 1978, et. seq. of the
BEING A 0.1072 ACRE (4,669 SQUARE Real Property Records of Harris County, Texas
FOOT) TRACT OF LAND OUT OF THE [sic].
Ian Ghrist
 Page 32 of 36
409 S.W.3d 221, *258contd; 2013 Tex. App. LEXIS 10081, **81

... 5. The labor, materials and work furnished by
Claimant are generally described as follows:
5. The labor, materials and work furnished by
labor and materials necessary for the
Claimant are generally described as follows:
construction of the Park 8, Tower B, Houston,
labor and materials necessary for the
Harris County, Texas.
construction of the Park 8, Tower B, Houston,
Harris County, Texas. 6. The real property sought to be charged with
a lien by Claimant is generally described [as]
6. The real property sought to be charged with the Park 8, Tower B, 8018 W. Sam Houston
a lien by Claimant is generally described [as] Parkway South, Houston, Texas [**83] 77072,
the Park 8, Tower B, 8018 W. Sam Houston consisting of six (6) adjacent tracts of land,
Parkway South, Houston, Texas 77072, more particularly described in Exhibit A
consisting of six (6) adjacent tracts of land,
attached hereto and incorporated herein.
more particularly described in Exhibit A
...
attached hereto and incorporated herein.
8. After all just credits, offsets and payments,
... the amount of $6,771,386.45 remains unpaid
8. After all just credits, offsets and payments, and is due and owing to Claimant under its
[**82] the amount of $6,098,768.07 remains contract with Park 8 Place, L.P., and Claimant
unpaid and is due and owing to Claimant claims a lien on said property and
under its contract with Park 8 Place, L.P., and improvements under the provisions of Texas
Claimant claims a lien on said property and Property Code § 53.001 et seq. to secure
improvements under the provisions of Texas payment of said amount.
Property Code § 53.001 et seq. to secure [Exhibit A, identical to that described supra is
payment of said amount. attached.]
[Exhibit A, identical to that described supra is
attached.] Dissent by: Adele Hedges

FOURTH AMENDED AFFIDAVIT FOR Dissent
MECHANIC’S AND MATERIALMAN’S
In Part II of its opinion, the majority concludes
LIEN
that appellant Lyda Swinerton Builders, Inc. (the
BEFORE ME, the undersigned authority, ″Builder″) fully released its materialman’s and
personally appeared Brian Duncan, who upon mechanic’s (″M&M″) lien, but ″did not waive its
his oath, deposed and stated the following: right to file new M&M liens covering other
... property or securing payment for post-release
expenses.″ I would hold that these post-release
3. This Fourth Amended Affidavit for amended M&M lien affidavits could not have
Mechanic’s and Materialman’s Lien amends created a new M&M lien. I would affirm summary
the Third Amended Affidavit for Mechanic’s judgment in favor of Cathay Bank (the ″Bank″)
and Materialman’s Lien originally filed for on the basis that it established its lien priority as a
record on October 23, 2008 in RP Vol. 060-60, matter of law because the Builder’s amended lien
Pages 0587, et. seq., Document No. affidavits were ineffective to create new M&M
20080530463 of the Real Property Records of liens. Therefore, I respectfully dissent.
Harris County, Texas.
...

Ian Ghrist
 Page 33 of 36
409 S.W.3d 221, *258contd; 2013 Tex. App. LEXIS 10081, **83

Supplemental [**84] Background1 The Developer stopped paying the Builder for its
work on the Project in August 2007. Because of
[EDITOR’S NOTE: The page numbers of this
these payment issues, the Builder ceased working
document may appear to be out of sequence;
on the Project on October 4, 2007. On October 10,
however, this pagination accurately reflects the
pagination of the original published document.] 2007, the Builder filed its first M&M lien affidavit,
reflecting a lien of approximately $3.2 million
This case involves a parcel of land consisting of and encumbering Tracts I and II of the property.
six contiguous tracts making up nearly 16.5 acres Apparently, around this same time, the Builder,
(the ″Property″). According to the Builder’s M&M the Bank, and the Developer engaged in meetings
lien affidavits, these tracts are described as follows: regarding obtaining funding for the Project. On
Tract I — 0.8664 acre in area; Tract II — 0.1072 October [**86] 19, 2007, the Builder’s Houston
acre in area; Tract III — 10.4179 [*252] acres in operations manager, Brian Duncan, sent the
area; Tract IV — 0.4236 acre in area; Tract V — following email to the Bank’s representatives:
1.2451 acres in area; and Tract VI — 3.4235 acres
in area.2
We [the Builder] suspended all work on
The Property was owned by Park 8 Place, L.P. October 4th due to the outstanding payment
(the ″Developer″), which, as noted by the majority, issues. All of the subcontractors have
is not a party to this suit. See ante, at 2. The demobilized from the site. No additional work
Builder executed a contract with the Developer to has been performed since our meeting. We are
make improvements to the Property in February preparing to take down the tower crane and
2007 (the ″Project″). At the time that the Builder remove the concrete forms for the tower
executed the contract, it had already begun structure by the end of the month.
working on the Project in January 2007. Further,
[**85] the Builder acknowledges that, when it Previous emails indicate that Duncan had met
began work on the Project, the Bank had a deed of with at least one of the Bank’s representatives
trust lien recorded on March 15, 2004, covering earlier in October. The first email is dated October
Tracts III, IV, and V, i.e., approximately 12.086611, 2007 and is from Duncan. In it, Duncan
acres of the property. The Bank’s deed of trust inquires about the availability of ″the $1.5M
lien secured repayment of approximately $1.4 funding,″ asks for an update on the ″status of the
million it had loaned to the Developer’s loan,″ and requests that ″the funds″ be wired to
predecessor-in-interest.
the Builder’s bank. The subject line of this email,
After the Builder began work, the Bank loaned the and the rest of the emails contained in the string,
Developer additional funds. In May 2007, the is ″Park 8 [the Developer] Funding Status.″
Bank filed a deed of trust lien against Tract VI,
securing the repayment of a loan of $800,700.00 The Bank subsequently loaned the Developer
made to the Developer. In August, the Bank filed approximately $1.9 million. This loan closed on
another deed of trust lien, covering the entire
Property, securing the repayment of $502,000.00
loaned to the Developer.
1
I include my own background section to supplement the majority’s facts and to focus on those facts that are important to my
resolution of this dispute.
2
The Builder numbers these tracts differently in an exhibit. The majority uses the numbers as referenced in the Builder’s exhibit, but
I use the tract numbers referenced in the lien affidavits. This difference in numbering has no impact on the analysis.

Ian Ghrist
 Page 34 of 36
409 S.W.3d 221, *252; 2013 Tex. App. LEXIS 10081, **87

October 31, 2007.3 The HUD settlement statement through VI, each specifically referencing and
from the closing of the Bank’s loan to the purporting to amend a prior [**89] M&M lien
Developer reflects that the Builder received affidavit, and each for an increased amount. The
$1,086,914.62 from the loan funds.4 The [*253] final indebtedness the Builder claimed is over
record [**87] contains a ″Release of Lien,″ $6.7 million.
executed by the Builder, which reflects that, in
consideration of $1.5 million,5 the Builder released On October 24, 2008, while still maintaining a
its October 10, 2007 M&M lien described above presence on the Property and still incurring
(the ″Released M&M Lien″). This lien release expenses, the Builder filed suit against the
was signed on October 31 and filed on November Developer for breach of contract and to foreclose
5, 2007 in the Harris County Property Records. on its M&M lien. In December 2008, the Bank
Also on October 31, the Developer signed a deed intervened in the lawsuit, asserting a superior
of trust in favor of the Bank, covering the entirety interest in some or all of the Property. The Builder
of the Property and securing the Bank’s $1.9 finally demobilized from the Project in March
million loan. This deed of trust was filed of record 2010—nearly eighteen months after filing suit
on November 5, 2007 (the ″November deed of against the Developer. The Developer filed for
trust″). bankruptcy protection, which temporarily abated
proceedings in the underlying suit.
After releasing its original M&M lien, the Builder
maintained a presence on the Property and The Bank moved to sever the lien priority issues
continued to submit bills to the Developer, but from the underlying suit in December 2009 and
never recommenced work on the Project. On lift the stay. This severance was granted in January
November 13, 2007, the Builder filed a ″First 2010 and the abatement previously ordered was
Amended Affidavit for Mechanic’s and lifted to be effective March 20, 2010. On March
Materialman’s Lien,″ which in its body specifically 16, 2010, the Bank served a Notice of Substitute
described and purported to amend the Released Trustee’s Sale Under Deed of Trust, indicating
M&M Lien. This M&M lien purportedly that the Bank intended to sell the Property on
encumbered Tracts I and II and claimed an April 6, 2010 ″unless all indebtedness owing to
indebtedness of $2,887,070.20, which included the [Bank]″ was settled before the foreclosure
indebtedness of $2,141,529.88 remaining from date. The notice of sale indicated that it was based
the Released M&M Lien that was not paid through [**90] upon the Bank’s November deed of trust.
the loan funds. This amended M&M lien affidavit
was followed by three more amended M&M lien The Builder filed a supplemental petition seeking
affidavits, filed on June 12, 2008, October 23, to temporarily enjoin the foreclosure sale until the
2008, and January 16, 2009, each encumbering lien priority dispute between it and the Bank had
Tracts I and II, as well as adding Tracts III been fully and finally adjudicated. The Bank
3
The record contains another email from Duncan, dated October 30, 2007, to an individual at the title company handling the closing
of the loan between the Bank and the Developer. Attached to this email is an unexecuted release of the Builder’s lien. In the email,
Duncan asks ″what time tomorrow″ he should come to the title company to sign the release and pick up the Builder’s check for
$1,086,914.62.
4
The majority states that the Bank paid the Builder these funds. See ante, at 4. More accurately, the money for this payment came from
funds the Bank loaned to the Developer. This amount was paid during settlement of the loan directly [**88] to the Builder by the title
company handling the loan closing. Thus it is more precise to state that the Developer paid these amounts.
5
Another subcontract, not a party to this dispute, was paid $413,085.38 out of the Developer’s loan funds and also released its M&M
lien, which is why the release reflects $1.5 million.

Ian Ghrist
 Page 35 of 36
409 S.W.3d 221, *253; 2013 Tex. App. LEXIS 10081, **90

responded, asserting a general denial. It further I agree with the majority that the Builder fully
alleged that the Builder did not meet the released its October 10, 2007 M&M lien. See
requirements for obtaining injunctive relief ante, at 10-11. This lien encumbered Tracts I and
because the Builder had, inter alia, (1) released its II. Once released, this M&M lien could not be
M&M lien and agreed to subordinate any potential revived. See Apex Fin. Corp. v. Brown, 7 S.W.3d
liens in favor of the Bank and was estopped 820, 830 (Tex. App.—Texarkana 1999, no pet.);
[*254] from claiming lien priority over the Bank, [**92] Collinsville Mfg. Co. v. Street, 196
(2) unclean hands because it had accepted $1.5 S.W.284, 287 (Tex. Civ. App.—Amarillo 1917, no
million dollars advanced by the Bank in return for writ) (stating that a statutory M&M lien may be
a release of all liens it had against the Project and waived and that once waived, it cannot be revived).
then, less than two weeks after it had accepted Moreover, the Bank has a superior interest in
these funds, purported to re-file liens against the Tracts III, IV, and V pursuant to its deed of trust
Project, and (3) failed to timely file and perfect
filed prior to the Builder starting the project. See
any M&M liens against the Property, except the
ante, at 3 n.1.
one it had released. After a hearing, the trial court
denied the Builder’s request for a temporary
I disagree, however, with the majority’s conclusion
injunction. The Bank then purchased the property
that the subsequently filed amended M&M lien
at the foreclosure sale for $10,000.00. The Builder
did not attend the sale. affidavits functioned as new liens for newly
incurred or unpaid expenses relating back to the
Meanwhile, the Bank and the Builder proceeded inception of work. The majority concludes that
to dispute lien [**91] priority in the severed suit.
these amended M&M lien affidavits function
They filed cross-motions for final summary
substantively as new M&M liens because they
judgment, replies, and responses. In the Builder’s
substantially comply with the requirements of
motion, it asserted it was entitled to lien priority
Texas Property Code section 53.054. See ante, at
based on its final amended M&M lien filed on
16-18. This section details the requirements of a
January 16, 2009, which it contended related back
mechanic’s lien. See Tex. Prop. Code § 53.054(a).
to the start of work in January 2007. It argued that
the Bank’s purchase of the property at the I do not agree that the simple fact that these
foreclosure sale was subject to the Builder’s amended M&M lien affidavits, which may have
senior lien. complied with the statutory requirements, were
transformed into new M&M liens because they
As is relevant to this dissent, the Bank contended
clearly and unequivocally state that they are
that the Builder had released its October 2007
amended M&M liens.
M&M lien and could not amend this M&M lien
once it was released. Although both the Bank’s
The majority misconstrues my point. I am not
and Builder’s summary-judgment motions were
denied twice by two different judges, the Bank’s promoting form over substance: as noted
motion was later granted and the Builder’s was [**93] above and as is evident in the attached
denied. The trial court held that the Bank owned Appendix, in each of the amended M&M lien
the property ″free and clear″ of the Builder’s affidavits, Brian Duncan, on behalf of the Builder,
claims. After the Builder’s motion for new trial states under oath that the M&M lien affidavit
was overruled by operation of law, this appeal amends either the original or a subsequent
timely followed.

Analysis

Ian Ghrist
 Page 36 of 36
409 S.W.3d 221, *254; 2013 Tex. App. LEXIS 10081, **93

amended M&M lien affidavit.6 When the Builder In short, the Builder filed amended M&M lien
[*255] itself claims, under oath, that each one affidavits, rather than new M&M liens. But
amends, or replaces, the previous one, we should because the original M&M lien upon which all the
take the Builder at its word. Cf. Lazo v. RSI Int’l, amendments rest was released, there was nothing
Inc., No. 14-06-00432-CV, 2007 Tex. App. LEXIS to amend. See Apex Fin. Corp., 7 S.W.3d at 830
7077, 2007 WL 2447299, at *4 (Tex. App.— (explaining that, once waived, a statutory lien
Houston [14th Dist.] Aug. 30, 2007, no pet.) cannot be revived);9 Collinsville Mfg. Co., 196
(mem. op.) (holding that endorsement that S.W. at 287 (same); cf. Lazo, 2007 Tex. App.
purported to amend insurance policy issued after LEXIS 7077, 2007 WL 2447299, at *4. The
policy was cancelled was a nullity because ″there Builder constructed a house of cards out of
was nothing to amend″). amended lien affidavits, with each amended
In fact, in the first amended M&M lien affidavit, affidavit resting on a previous affidavit, and all of
Duncan avers that he is amending the original them relying on the non-existent foundation of the
M&M lien.7 In the second and third amended Released Lien. Ultimately, the Builder’s amended
M&M lien affidavits, he similarly states under lien affidavits built upon the Released Lien tumble
oath [**94] that he is amending the first amended down like a house of cards.
M&M lien. Finally, in the fourth amended M&M
lien affidavit, he declares that he is amending the Conclusion
third amended M&M lien affidavit. In short, each
For the foregoing reasons, I would affirm the trial
of the amended M&M lien affidavits rests on a
court’s summary judgment because none of the
previously filed M&M lien affidavit, tracing its
post-release amended M&M lien affidavits were
way back to the Released M&M Lien.8
effective to create a new M&M lien. Accordingly,
In my view, these four M&M lien affidavits are
the Bank established its lien priority as a matter of
exactly what they purport to be: amended M&M
law. I therefore respectfully dissent.
lien affidavits. If there is nothing for an amended
instrument to amend, then such an amended /s/ Adele Hedges
instrument is itself ineffectual nullity. Cf. id. The
Builder has rested its amended lien affidavits Chief Justice
[**95] on a non-existent foundation.

6
These statements are not mistakes or surplusage. These statements specifically reference the document numbers of the lien affidavits
they purport to amend, the dates these lien affidavits were filed for record, and the volume and page numbers of the Harris County Real
Property Records where these lien affidavits may be located.
7
The majority implies that this first amended M&M lien was ineffective because it asserted a lien only against the same parcels as
the Released Lien. See ante, at 14.
8
The majority notes in footnote 11 that my ″rule″ would apply ″with equal force″ if an M&M lienholder received payment and filed
the statutorily required release and then filed lien affidavits as amendments. My ″rule″ would apply only if this lienholder, in the body
of his lien affidavit, averred that he was amending the previously released lien. I simply do not believe that this particular fact pattern
would occur in many instances.
9
I recognize that the waiver filed in Apex was broader than the release filed here. The waiver filed of record in Apex stated that it
released the contractor’s ″right to a statutory lien based on labor or materials furnished or to be furnished.″ Apex, 7 S.W.3d at 830. Here,
as the majority notes, there is no language in the release indicating that the Builder intended to refrain from filing new M&M liens. See
ante, at 15. I believe, however, that the fact that [**96] the Builder filed amended, rather than new, M&M lien affidavits, is dispositive
of this issue.

Ian Ghrist
Appendix G
| | Caution
As of: December 10, 2015 11:30 AM EST

Benchmark Bank v. Crowder
Supreme Court of Texas
September 6, 1995, Argued ; March 7, 1996, Delivered
No. 95-0052

Reporter
919 S.W.2d 657; 1996 Tex. LEXIS 26; 39 Tex. Sup. J. 361
BENCHMARK BANK, PETITIONER v. FRANK IRS released its lien against respondent husband’s
L. CROWDER AND MARION N. CROWDER, corporation. Petitioner had a lien against
RESPONDENTS respondents’ homestead and subrogation rights to
any lien the loan proceeds were used to pay.
Prior History: [**1] ON APPLICATION FOR Respondents defaulted on the loan and petitioner
WRIT OF ERROR TO THE COURT OF foreclosed and sold the property at a nonjudicial
APPEALS FOR THE FIFTH DISTRICT OF sale. The appellate court concluded that petitioner
TEXAS. was precluded from enforcing the IRS lien by the
homestead protection under Tex. Const. art. XVI,
Core Terms § 50. The court reversed the part of the judgment
that denied petitioner’s motion for summary
homestead, liens, foreclosure, subrogated, judgment because petitioner was subrogated to
summary judgment, federal tax lien, trust deed, the IRS’s federal tax lien and was entitled to
tax lien, taxes, foreclosed, insurance agency, third enforce the lien against respondents’ homestead
party, trial court, penalties, totalled, rights, by foreclosure. The IRS’ release of its lien against
homestead interest, unpaid taxes, appeals, invalid, respondent husband did not extinguish petitioners
abated, notice right to subrogation. The court affirmed and
remanded the part of the judgment that reversed
Case Summary the summary judgment to respondent wife’s claim
for compensation for the loss of her homestead
Procedural Posture because petitioner was required to compensate
respondent wife, a nondelinquent spouse, for the
Petitioner bank sought review of a judgment of forced sale of her interest in the homestead.
the Court of Appeals for the Fifth District of
Texas, which denied petitioner’s motion for Outcome
summary judgment that petitioner was subrogated
The court reversed the part of the judgment that
to a valid federal tax lien against respondents’,
denied petitioner bank’s motion for summary
husband and wife, homestead interest and that its
judgment because petitioner was subrogated to
foreclosure was not wrongful under Tex. Const.
the IRS’ tax lien and was entitled to enforce the
art. XVI, § 50.
lien against respondents’, husband and wife,
Overview homestead by foreclosure. The court affirmed the
part of the judgment that required petitioner to
Respondents, husband and wife, paid loan compensate respondent wife for the forced sale of
proceeds from petitioner bank to the IRS and the her interest in the homestead.
Ian Ghrist
 Page 2 of 9
919 S.W.2d 657, *657; 1996 Tex. LEXIS 26, **1

LexisNexis® Headnotes HN3 A third party who refinances a debt secured
by a valid mechanic’s lien against a homestead
Real Property Law > Exemptions & Immunities > may be subrogated to the lien.
Homestead Exemptions
Real Property Law > Exemptions & Immunities >
Tax Law > Federal Tax Administration &
Procedures > Tax Credits & Liabilities > General Homestead Exemptions
Overview Tax Law > ... > Tax Credits & Liabilities > Tax
Tax Law > ... > Tax Credits & Liabilities > Tax Liens > General Overview
Liens > General Overview
HN4 Homestead owners must have the ability to
HN1 Tex. Const. art. XVI, § 50 protects a renew, rearrange, and readjust the encumbering
homestead from forced sale except for the payment obligation to prevent a loss of the homestead
of debts for purchase money, ad valorem taxes through foreclosure.
due on the property, or work or materials used in
constructing improvements on the property. No Real Property Law > Exemptions & Immunities >
mortgage, trust deed, or lien is ever valid on the Homestead Exemptions
homestead unless such lien secures payment of Real Property Law > ... > Liens > Nonmortgage
one of these three debts. Liens > Tax Liens
Tax Law > Federal Tax Administration &
Constitutional Law > Supremacy Clause > General
Procedures > Tax Credits & Liabilities > General
Overview
Overview
Real Property Law > Exemptions & Immunities >
Tax Law > ... > Tax Credits & Liabilities > Tax
Homestead Exemptions
Liens > General Overview
Tax Law > Federal Tax Administration &
Procedures > Tax Credits & Liabilities > General HN5 Where a bank is subrogated to the federal
Overview government’s tax lien, the bank may enforce its
lien against the homestead through foreclosure.
Tax Law > ... > Tax Credits & Liabilities > Tax
Liens > General Overview
Business & Corporate Law > ... > Directors &
HN2 Under U.S. Const. art. VI, cl.2, the Officers > Management Duties & Liabilities >
Supremacy Clause of the United States General Overview
Constitution, the IRS may obtain a valid federal Business & Corporate Law > ... > Corporate
tax lien and enforce its lien against a Texas Finance > Franchise Tax > Penalties for
homestead. Noncompliance

Real Property Law > Exemptions & Immunities > HN6 Tex. Tax Code § 171.255(a) provides that
Homestead Exemptions corporate officers are liable for debts of the
corporation incurred after the corporation has
Real Property Law > ... > Liens > Nonmortgage
forfeited its privileges.
Liens > Mechanics’ Liens
Tax Law > Federal Tax Administration & Business & Corporate Law > ... > Directors &
Procedures > Tax Credits & Liabilities > General Officers > Management Duties & Liabilities >
Overview General Overview
Tax Law > ... > Tax Credits & Liabilities > Tax Criminal Law & Procedure > ... > Fraud Against the
Liens > General Overview Government > Tax Fraud > Penalties

Ian Ghrist
 Page 3 of 9
919 S.W.2d 657, *657; 1996 Tex. LEXIS 26, **1

Tax Law > ... > Tax Credits & Liabilities > Civil HN9 When a homestead is subject to foreclosure
Penalties > General Overview of a federal tax lien on an indebtedness owed by
Business & Corporate Compliance > ... > Tax a taxpayer, the taxpayer’s spouse, who does not
Credits & Liabilities > Civil Penalties > Failure to owe any of that indebtedness, has a separate
Collect & Pay Tax homestead interest and must be compensated for
Tax Law > ... > C Corporations > Shareholder the loss of the homestead estate.
Taxation > General Overview
Counsel: For PETITIONER: Love, Mr. G. Roland,
HN7 26 U.S.C. S. § 6672 of the federal tax laws Gudgel, Mr. Trent A., McCauley MacDonald
provides that a corporate officer or employee may Love & Devin, Dallas, TX. Fossi, Mr. Lawrence
be personally liable for unpaid corporate taxes if J., Malin, Mr. Steven C., Carter, Mr. John L.,
the individual is a person responsible for the Vinson & Elkins, Houston, TX.
collection and payment of taxes and the person
willfully fails to do so. For RESPONDENTS: Yarbrough, Jr., Mr. George
M., Yarborough & Elliott, Dallas, TX.
Tax Law > Federal Tax Administration &
Procedures > Tax Credits & Liabilities > General Judges: JUSTICE ENOCH delivered the opinion
Overview
of the Court.
Tax Law > ... > Tax Credits & Liabilities >
Deficiencies > General Overview Opinion by: CRAIG T. ENOCH
Tax Law > ... > Tax Credits & Liabilities > Tax
Liens > General Overview Opinion
Tax Law > ... > Tax Credits & Liabilities > Tax
[*659] The principal issue in this case is whether
Liens > Neglect & Refusal to Pay Taxes
a third party may be subrogated to a federal
Tax Law > ... > Tax Liens > Duration of Liens > government tax lien and thus, entitled to enforce
Times Liens Arise
the lien against the taxpayer’s homestead. We
HN8 Federal tax liens do not arise automatically conclude that the answer is yes, but that in selling
and are not self-executing. Such tax liens arise the property through foreclosure, the third party
only after the IRS assesses a deficiency, gives must compensate a nondelinquent spouse for his
notice to the taxpayer of the deficiency, and the or her interest in the homestead estate. We reverse
taxpayer refuses the demand for payment. 26 in part and affirm in part the judgment of the court
U.S.C. S. § 6321. of appeals. 889 S.W.2d 525.
Frank Crowder operated an insurance agency, first
Estate, Gift & Trust Law > Estate Administration >
as a sole proprietorship and then as a corporation,
Allowances > General Overview
Crowder Insurance Agency, Inc. He was the sole
Estate, Gift & Trust Law > Estate Administration > officer, director, and shareholder of the
Allowances > Homesteads corporation. The corporation did not pay [**2] its
Family Law > Marital Duties & Rights > Property federal payroll taxes and the Internal Revenue
Rights > Homestead Rights Service assessed liens for the unpaid taxes, interest,
Real Property Law > Exemptions & Immunities > and penalties against Frank Crowder’s property
Homestead Exemptions and the corporation’s property.

Real Property Law > ... > Liens > Nonmortgage Frank Crowder obtained a loan from Benchmark
Liens > Tax Liens Bank’s predecessor to pay off the tax debts. Frank
Ian Ghrist
 Page 4 of 9
919 S.W.2d 657, *659; 1996 Tex. LEXIS 26, **2

and his wife, Marion, signed a promissory note The Crowders [**4] appealed, asserting that
payable to the Bank and gave the Bank a deed of summary judgment was improper because the lien
trust purporting to create a lien against the against the homestead was invalid and the Bank
Crowders’ 1.85 acre estate, which the Crowders did not seek to partition the non-exempt portion of
claimed as their homestead. The deed of trust also the property; the Bank had no lien against Marion
provided to the extent the loan proceeds were Crowder’s homestead interest; the Bank did not
used to pay any outstanding liens, the Bank was to follow the procedures applicable to foreclosure of
be subrogated to any and all rights and liens. The a federal tax lien; and the Bank’s defenses of
Crowders paid the loan proceeds to the IRS and novation and accord and satisfaction were
the IRS released its liens against Frank Crowder unavailable or there were fact issues as to these
and the corporation. The Crowders defaulted on defenses that precluded summary judgment. By
the loan and the Bank eventually foreclosed on cross-points, the Bank argued summary judgment
their property and sold the property at a nonjudicial was proper because it had a valid lien against the
sale. The Bank purchased the property at the Crowders’ homestead and the Crowders’ summary
foreclosure sale subject to a first lien. judgment affidavits were inadmissible. The court
of appeals reversed the trial court’s take-nothing
The Crowders sued the Bank, seeking a declaration
judgment. That court concluded that the Bank’s
that (1) the lien granted by the deed of trust was
attempt to obtain or enforce the IRS’s tax lien was
invalid, (2) the deed of trust did not authorize a
precluded by the homestead protection afforded
nonjudicial foreclosure, and (3) the foreclosure
under the Texas Constitution. 889 S.W.2d at 529.
[**3] was wrongful. In addition, the Crowders
The court of appeals did not consider the remaining
sought damages for wrongful foreclosure alleging,
issues.
among other things, that the Bank’s lien was
invalid against the homestead or, alternatively, if I
the lien were valid, the foreclosure was wrongful
because the Bank did not conduct a judicially HN1 The Texas Constitution protects a homestead
supervised sale as required by federal law. See 26 from forced sale except for the payment of debts
U.S.C. § 7304. The Crowders sought a partial for purchase money, ad valorem taxes due on the
summary judgment on liability only. The Bank property, or work or materials used in constructing
sought summary judgment that it was subrogated [**5] improvements on the property. TEX.
to a valid lien against the homestead interest of CONST. art. XVI, § 50. No mortgage, trust deed,
both Frank and Marion Crowder and that its or lien is ever valid on the homestead unless such
foreclosure was not wrongful. The Bank also lien secures payment of one of these three debts.
sought summary judgment that the Crowders’ Id.; Thompson v. Thompson, 149 Tex. 632, 236
post-foreclosure conduct in agreeing to try to sell S.W.2d 779, 788 (Tex. 1951). While the federal tax
the property for the Bank constituted a novation liens are not within those specifically identified as
or accord and satisfaction that affirmed the validity valid in Article XVI, Section 50, the Bank argues
of the lien and the foreclosure. The trial court that a federal tax lien is valid against the Crowders’
denied the Crowders’ motion for partial summary homestead and that it was both equitably and
judgment and granted the Bank’s motion for contractually subrogated to the federal tax liens
summary judgment. In its judgment, the trial court assessed against the Crowders’ estate.
determined that the deed of trust given by the At the outset we note that Texans approved by
Crowders [*660] created a valid lien against their election on November 7, 1995, a constitutional
homestead and rendered a take-nothing judgment amendment that would permit an encumbrance
on their claims against the Bank. against a homestead for the refinance of a lien
Ian Ghrist
 Page 5 of 9
919 S.W.2d 657, *660; 1996 Tex. LEXIS 26, **5

against a homestead, including a federal tax lien. Clause, the Court concluded, without discussion,
TEX. CONST. art. XVI, § 50 (1876, amended 1973 that Vaughn was the owner of the federal tax lien
and 1995). That amendment, however, has no and was subrogated to the government’s rights.
bearing on our disposition of this case because the Staley, 50 S.W.2d at 912.
tax lien and the Bank’s subrogation rights were
fixed before the amendment’s adoption. See TEX. [*661] While Staley is some authority that a third
CONST. art. XVII, § 1 (amended 1972) (an party may be subrogated to a federal government
amendment becomes a part of the Constitution tax lien, it is not clearly dispositive. Because of
upon the majority of votes cast in favor of the the lack of discussion on the issue, there is
[**6] amendment and proclamation made by the nothing to suggest that the parties in that case
Governor). We must determine whether, in the contested the propriety of subrogation in these
absence of the amendment to Article XVI, Section circumstances. Rather, Staley suggests that the
50, the Bank obtained through subrogation a valid parties simply contested the validity of a federal
and enforceable lien against the Crowders’ tax lien against a homestead and assumed that if
homestead. the tax lien were valid, Vaughn was subrogated to
that valid lien. We believe Staley correctly, if
HN2 Under the Supremacy Clause of the United cursorily, concluded that subrogation in these
States Constitution, the IRS may obtain a valid circumstances is proper.
federal tax lien and enforce its lien against a Texas
homestead. U.S. Const. art. VI, cl. 2; United [**8] We have previously held that HN3 a third
States v. Rodgers, 461 U.S. 677, 701-02, 76 L. Ed. party who refinances a debt secured by a valid
2d 236, 103 S. Ct. 2132 (1983); Staley v. Vaughn, mechanic’s lien against a homestead may be
50 S.W.2d 907, 911-12 (Tex. Civ. App.--Amarillo subrogated to the lien. Farm & Home Sav. & Loan
1932, writ ref’d). The Crowders argue, however, Ass’n. v. Martin, 126 Tex. 417, 88 S.W.2d 459,
that although the federal government has a valid 469-70 (Tex. 1935). We see no difference between
tax lien against the homestead, that lien is invalid the refinancing of debt secured by a mechanic’s
and unenforceable in the hands of a third party lien and the refinancing of debt secured by a
who has financed a loan to discharge that lien. We federal tax lien. Once valid, the lien does not
disagree. become invalid against the homestead simply
because the original debt has been refinanced. To
In Staley v. Vaughn, 50 S.W.2d at 912, we
hold otherwise, in fact, would defeat the very
suggested that a third party could be subrogated
purpose of the homestead protection. HN4
by deed of trust to a federal tax lien. There, the
Homestead owners must have the ability to renew,
Staleys gave Vaughn a deed of trust to secure
rearrange, and readjust the encumbering obligation
payment of a judgment rendered on a foreclosed
to prevent a loss of the homestead through
materialmen’s lien and to secure payment of a
foreclosure. Machicek v. Barcak, 141 Tex. 165,
federal income tax lien assessed against the
170 S.W.2d 715, 717 (Tex. 1943). We hold that the
Staleys’ homestead. The [**7] deed of trust
Bank was contractually and equitably subrogated
subrogated Vaughn to all the government’s rights
to the federal government’s tax lien against the
in the Staleys’ homestead. Vaughn eventually
Crowders’ homestead.
foreclosed on the lien and purchased the property
at the foreclosure sale. The Staleys sued Vaughn, II
asserting that the materialmen’s lien and federal
tax lien were void against the homestead. After HN5 Because the Bank was subrogated to the
concluding that the federal tax lien was valid federal government’s tax lien, the Bank may
against the homestead under the Supremacy enforce its lien against the homestead through

Ian Ghrist
 Page 6 of 9
919 S.W.2d 657, *661; 1996 Tex. LEXIS 26, **8

foreclosure. The Crowders argue, however, that in corporation. Accordingly, the Bank claims, the
this instance the Bank must compensate Marion government’s lien extends to her interest in the
[**9] Crowder for her interest in the homestead homestead.
because the IRS had assessed no taxes against
Even assuming there may be some basis for
Marion Crowder and had no liens against her Marion Crowder’s personal liability to the IRS for
property. Rodgers, 461 U.S. at 697. We agree that the unpaid taxes, subrogation does not entitle the
Rodgers requires compensation to a nondelinquent Bank to assert and enforce nonexistent liens. HN8
spouse for the forced sale of his or her interest in Federal tax liens do not arise automatically and
a homestead. are not self-executing. Such tax liens arise only
after the IRS assesses a deficiency, gives notice to
The summary judgment evidence shows the IRS the taxpayer of the deficiency, and the taxpayer
assessed taxes (including interest and penalties) [**11] refuses the demand for payment. 26
only against Crowder Insurance Agency, Inc. and U.S.C. § 6321; United States v. Blakeman, 997
Frank Crowder and asserted its liens securing F.2d 1084, 1088 [*662] (5th Cir. 1993). None of
payment of those taxes only against the property these preconditions apply to Marion Crowder.
of the corporation and Frank Crowder individually. When the Bank refinanced the original tax debt,
The IRS did not assess any taxes or liens against and thus, when the Bank succeeded to the federal
Marion Crowder or her property. The Bank argues government’s rights and liens, the IRS had
that the tax liens are valid against Marion assessed no taxes against Marion Crowder and no
Crowder’s homestead interest because she is tax liens attached to her property. In short, there
personally liable for the unpaid taxes under sec- were no liens against Marion Crowder’s property
tion 171.255 of the Texas Tax Code and 26 U.S.C. to which the Bank could be subrogated.
§ 6672. We disagree.
HN9 When a homestead is subject to foreclosure
HN6 Section 171.255 of the Texas Tax Code of a federal tax lien on an indebtedness owed by
provides that corporate officers are liable for a taxpayer, the taxpayer’s spouse, who does not
debts of the corporation incurred after the owe any of that indebtedness, has a separate
corporation has forfeited its privileges. TEX. TAX homestead interest and must be compensated for
CODE § 171.255(a). According to the Bank, the the loss of the homestead estate. Rodgers, 461
corporation incurred unpaid taxes in 1985 when U.S. at 680; see also Paddock v. Siemoneit, 147
the corporation had forfeited [**10] its privileges Tex. 571, 218 S.W.2d 428, 436 (Tex. 1949) (spouse
in Texas for nonpayment of franchise taxes. HN7 has a vested estate in the land of which she cannot
Section 6672 of the federal tax laws provides that be divested during her life except by abandonment
a corporate officer or employee may be personally or a voluntary conveyance in the manner
liable for unpaid corporate taxes if the individual prescribed by law). Accordingly, while the Bank
is a person responsible for the collection and is subrogated to a valid federal tax lien against the
payment of taxes and the person willfully fails to Crowders’ homestead and may enforce its lien
do so. 26 U.S.C. § 6672; Slodov v. United States, through [**12] foreclosure, the Bank must
436 U.S. 238, 244-45, 56 L. Ed. 2d 251, 98 S. Ct. compensate Marion Crowder for the loss of her
1778 (1978). The IRS assessed penalties under separate, vested interest in the homestead upon
section 6672 against Frank Crowder as a person foreclosure. The trial court’s take-nothing
responsible. The Bank argues that Marion Crowder summary judgment for the Bank as to Marion
is personally responsible under section 6672 for at Crowder was improper.
least a portion of the unpaid taxes because she had
significant control over the finances of the III
Ian Ghrist
 Page 7 of 9
919 S.W.2d 657, *662; 1996 Tex. LEXIS 26, **12

Our inquiry does not end here. The Crowders debt. Rodgers, 461 U.S. at 691. The Crowders
contend that even if the Bank is subrogated to the assert that the liens on Frank Crowder’s property
IRS’s liens and may foreclose on their homestead, totalled considerably [**14] less than the amount
the foreclosure was wrongful in its entirety because of the loan; therefore, the Bank improperly
the Bank did not follow federal procedures for foreclosed on a debt in excess of the liens against
foreclosure of a federal tax lien. 26 U.S.C. § 7403. Frank Crowder’s property.
In particular, the Crowders assert that at a
minimum, the Bank was required to conduct a The Crowders misconstrue Rodgers. Rodgers
judicially supervised sale of the property, as is states that ″the Government may not ultimately
required of the federal government. Id. We collect, as satisfaction for the indebtedness owed
disagree. to it, more than the value of the property interests
that are actually liable for that debt.″ Rodgers, 461
The Bank was both equitably and contractually U.S. at 691 (emphasis added). When, as in this
subrogated to the federal government’s tax liens. case, another person has an interest in the property
The Bank obtained contractual subrogation subject to the liens and that person is not liable on
through the deed of trust issued by the Crowders the tax debt, Rodgers simply limits the
in favor of the Bank. The deed of trust did not government’s enforcement to the value of only
create a new lien against the Crowders’ property. the delinquent taxpayer’s interest in the property.
Rather, the deed of trust preserved and extended In other words, the government may not collect
the existing tax lien, but also prescribed new [*663] against the other person’s interests in the
terms and conditions for foreclosure. Providence property.
Institution for Sav. v. Sims [**13] , 441 S.W.2d
Although it is unclear from their briefing, the
516, 520 (Tex. 1969); Continental State Bank of
Crowders appear to suggest that Rodgers would
Big Sandy v. Pepper, 130 Tex. 71, 106 S.W.2d 654,
preclude foreclosure if the government or its
658-59 (Tex. 1937). One of the new terms agreed
subrogee collected more than the amount of the
to by the Crowders in the deed of trust to the Bank
liens assessed against the property. As the Supreme
was the power of sale. Foreclosure in accordance
Court noted in Rodgers, however, ″the right to
with the terms of the Bank’s deed of trust was
collect and the right to seek a forced sale are two
valid. See W.C. Belcher Land Mortgage Co. v.
quite different things.″ Id. The [**15] fact that the
Taylor, 212 S.W. 647, 650 (Tex. Comm’n App.
debt foreclosed upon may exceed the value of the
1919, judgm’t adopted) (foreclosure against
liens assessed against the property interest of the
homestead under power of sale in deed of trust on
delinquent taxpayer does not render the foreclosure
debt originally secured by lien without power of
wrongful. It simply would give rise to a right of
sale was valid as the new deed of trust did not
reimbursement from the proceeds of sale collected
create a new debt or lien but continued the
in excess of the amount necessary to satisfy the
original debt and lien securing that debt and
liens.
provided new terms for foreclosure).
In this case, the Bank’s summary judgment
In a related argument, the Crowders assert that the evidence shows the IRS had assessed a lien
Bank’s foreclosure was wrongful because the against Frank Crowder as sole proprietor totalling
Bank foreclosed on a debt greater than the value $ 6,071.76; a lien against Frank Crowder doing
of the liens assessed against the property. Federal business as Crowder Insurance Agency totalling $
law, the Crowders submit, precludes the IRS from 35,811.16; and a lien against Frank Crowder
collecting on a tax debt more than the value of the individually for the $ 27,392.87 penalty assessment
property interests that are actually liable for the as a responsible person under 26 U.S.C. § 6672.
Ian Ghrist
 Page 8 of 9
919 S.W.2d 657, *663; 1996 Tex. LEXIS 26, **15

These liens totalled $ 69,275.79. The debt owing presumed that trial court did not consider the
and satisfied by foreclosure and sale of the response). The only summary judgment evidence
property totalled $ 54,809.48. On this summary is that the IRS released its liens against Frank
judgment record, the Bank did not foreclose on a Crowder and the corporation. The Bank’s
debt exceeding the value of the liens assessed subrogation rights are not extinguished simply
against the property. because the IRS released its liens after payment of
the proceeds of the loan to satisfy the outstanding
The Crowders argue that the liens against Frank tax liability.
Crowder’s property total only $ 8,935.48. They
argue that upon payment of the delinquent taxes, The Crowders’ argument that the liens against the
interest, and penalties, the IRS abated or reversed property exclude those assessed against Frank
the $ 27,392.87 penalty assessment against [**16] Crowder, doing business as Crowder Insurance
Frank Crowder. Once abated or reversed, the Agency, likewise is without merit. The IRS lien
Crowders assert, the lien against Frank Crowder’s notice for the $ 35,811.16 in delinquent taxes
property in that amount no longer existed and unequivocally identifies Frank Crowder as the
could not support the Bank’s foreclosure for the taxpayer against whom the lien is assessed. The
full $ 54,809.48. In addition, the Crowders assert notice states:
that the liens assessed against Frank Crowder,
doing business as Crowder Insurance Agency, Notice is given that taxes (including interest
were for taxes owed only by the corporation. and penalties) have been assessed against the
Thus, the Crowders contend, these liens were not following-named taxpayer. Demand for
assessed against Frank Crowder individually. We payment of this liability has been made, but it
disagree. remains unpaid. Therefore, there is [**18] a
lien in favor of the United States on all
The summary judgment evidence shows the IRS property and rights to property belonging to
released its lien for the $ 27,392.87 penalty this taxpayer for the [*664] amount of these
assessment. The only evidence that the lien was taxes, and additional penalties, interest, and
abated is by affidavit of David F. McCool, a costs that may accrue.
Certified Public Accountant, in which he gives his
opinion that the IRS abated the penalty assessment. Name of Taxpayer
Even assuming there is some material significance Frank L. Crowder d/b/a Crowder Insurance
to abatement, as opposed to the release of a lien, Agency
McCool’s testimony is not part of the summary
judgment record. McCool’s affidavit was filed When giving notice of liens against the
two days before the summary judgment hearing. corporation, the IRS identified Crowder Insurance
Summary judgment evidence may be filed late, Agency, Inc. as the named taxpayer.
but only with leave of court. TEX. R. CIV. P.
The summary judgment record shows that the IRS
166a(c). There is no order in this record granting
had liens totalling $ 69,275.79 against the property
the Crowders leave to file McCool’s affidavit late.
of Frank Crowder. The debt collected by the Bank
[**17] McCool’s affidavit was not properly
through foreclosure did not exceed the value of
before the trial court on the motions for summary
the tax liens against the property. The trial court
judgment. See INA of Texas v. Bryant, 686 S.W.2d
did not err in granting summary judgment for the
614, 615 (Tex. 1985) (where nothing appears of
Bank on Frank Crowder’s claims.
record to indicate that late filing of summary
judgment response was with leave of court, it is * * * *

Ian Ghrist
 Page 9 of 9
919 S.W.2d 657, *664; 1996 Tex. LEXIS 26, **18

We hold that the Bank was properly subrogated to [**19] with this opinion. We otherwise
the federal government’s tax liens and that the reverse the judgment of the court of appeals and
Bank was entitled to foreclose upon the Crowders’ render judgment that Frank Crowder take nothing.
homestead. We affirm the judgment of the court of
appeals only to the extent that it reversed the Craig T. Enoch
summary judgment as to Marion Crowder’s claim Justice
for compensation of the loss of her homestead
interest upon foreclosure and remand her claim to Opinion delivered: March 7, 1996
the trial court for further proceedings consistent

Ian Ghrist
Appellant's
Exhibit A
 I elephone: (u I 7) 778-4136
Fax: (817)485-1117

Appellees Counselfor Appellees

Dallas County, Texas
Evelyn ConnerHicks
StateBar No. 09575900
Linebarger,Goggan,Blair & Sampson
2777 StemmonsFreeway,Suite 1000
Dallas,Texas75207
Phone:(214) 880-0089
Fax (469) 221-5171
dallas.I itigation@lgbs.com

City of Garland DustinL. Banks
GarlandIndependentSchool District StateBar No. 24064344
Perdue,Brandon,Fielder,Collins & Mott,
LLP
1 9 1 9S . S h i l o hR o a d .S u i t e3 1 0 .L B 4 0
Garland,Texas75042
Phone:(972)278-8282
Fax (972)278-8222
dbanks@pbfcm.com

/,. l;
AttorneyAd Litemfor UL-
,t'L'tit4-
Gl WalterMcCool
for , McCoolLaw Firm,P.C.

u
i-tc I f: t ,fn\ l(u 1