United States Court of Appeals,
Fifth Circuit.
No. 93-7129.
RESOLUTION TRUST CORPORATION as Receiver for Valley Federal
Savings Association, Plaintiff-Appellee,
v.
Guadalupe OLIVAREZ, Sr., et al., Defendants-Appellants.
Aug. 18, 1994.
Appeal from the United States District Court for the Southern
District of Texas.
Before WISDOM, BARKSDALE and EMILIO M. GARZA, Circuit Judges.
EMILIO M. GARZA, Circuit Judge:
Defendants, Guadalupe Olivarez, Sr. ("Guadalupe"), Viola B.
Olivarez ("Viola"), and their son, Jesus Olivarez ("Jesus"), appeal
a summary judgment entered in favor of the plaintiff, Resolution
Trust Corporation ("RTC"). The summary judgment declares that the
RTC has a valid lien on certain real property in Alamo, Texas, and
the Olivarezes argue that the real estate in question was the
homestead of Guadalupe and Viola when the lien allegedly attached,
such that the lien is invalid under Tex. Const. art. XVI, § 50. We
affirm.
I
Guadalupe and Viola lived at 814 East Citrus Street in Alamo,
Texas, and owned that property prior to the following transactions.
On 11 September 1981 Guadalupe and Viola executed a Residential
Earnest Money Contract, which provided: "Guadalupe Olivarez and
wife, Viola B. Olivarez (Seller) agrees to sell and convey to their
1
son, Jesus G. Olivarez (Buyer) and Buyer agrees to buy from Seller
the following property situated in Hidalgo County, Texas, known as
814 East Citrus Street, P.O. Box 141 Alamo, Tx. 78516." Both
Guadalupe and Viola signed the contract. Thereafter, on 18
December 1981, Jesus executed a deed of trust conveying to the
trustee, for the benefit of Valley Federal Savings and Loan
Association of McAllen ("Valley Federal"), the property at 814 East
Citrus Street. The deed of trust secured Jesus' debt to Valley
Federal in the amount of $36,000, which is evidenced by a note
executed 18 December 1981. In 1986 Jesus executed a quitclaim
deed, whereby he quitclaimed to Viola and Guadalupe all of his
right, title and interest in the East Citrus Street property. The
Olivarezes contend that at all times relevant to this litigation
Guadalupe and Viola continued to live at 814 East Citrus Street.
Jesus defaulted on the $36,000 note, and the RTC, as receiver
for Valley Federal, brought suit in the district court against
Viola, Guadalupe, and Jesus "for a declaration establishing a lien
against [the East Citrus Street] property ..., for foreclosure of
same, and for declaration that any claims of [Guadalupe, Viola and
Jesus] be adjudged inferior and secondary to the lien of [the
RTC]." The Olivarezes answered, denying that Jesus' note for
$36,000, payable to Valley Federal, was secured by the deed of
trust on the East Citrus Street property: the Olivarezes alleged
that the property purportedly conveyed by Jesus in the deed of
trust had in fact been "the subject of a simulated sale, i.e.,
ownership of the home for all parties concerned remained in the
2
hands of" Guadalupe and Viola at all times. The Olivarezes also
alleged in their Answer that, based on "the defense of homestead,"
the RTC's lien "was not properly attached to said property and is
disallowed."
The RTC moved for summary judgment, arguing that the
Olivarezes' reliance on an alleged simulated sale was barred by
D'Oench Duhme & Co. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed.2d
956 (1942), Templin v. Weisgram, 867 F.2d 240 (5th Cir.1989), cert.
denied, 493 U.S. 814, 110 S.Ct. 63, 107 L.Ed.2d 31 (1989), and 12
U.S.C. § 1823(e) (1988), because the simulated sale was not
reflected in Valley Federal's records. In their response to the
motion for summary judgment, the Olivarezes disclaimed any reliance
on the previously alleged simulated sale of the East Citrus Street
property, expressly relying instead on Texas homestead law.
The United States Magistrate Judge recommended that summary
judgment be granted for the RTC, on the grounds that the lien
created by Jesus' deed of trust remained a valid and existing lien
on the property at 814 East Citrus Street. The magistrate held
specifically that "[e]ven if the subject property was the homestead
of [Guadalupe and Viola] prior to December 18, 1981, it ceased to
be their homestead after they transferred all their interest in the
property to [Jesus]," and "Article 16 § 50 of the Texas
Constitution (re: homestead) has no application in this case as
... [Guadalupe and Viola] sold all their interest in the property
and abandoned any homestead claim on or before December 18, 1981."
The magistrate further held that Guadalupe and Viola's homestead
3
claim was untenable because it could "only be established by
proving the existence of an oral agreement contrary to the written
agreement between the parties (the subject Note and Deed of
Trust)," and under D'Oench Duhme, Templin, and § 1823(e) the
Olivarezes were estopped from asserting such a side agreement. The
district court adopted the magistrate's report and recommendation,
and the Olivarezes appeal.
II
The Olivarezes contend that the district court erred by
granting summary judgment in favor of the RTC. We review the
district court's grant of summary judgment de novo. Davis v.
Illinois Cent. R.R., 921 F.2d 616, 617-18 (5th Cir.1991). Summary
judgment is appropriate if the record discloses "that there is no
genuine issue of material fact and that the moving party is
entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).
The Olivarezes contend that summary judgment was improper
because, contrary to the magistrate's conclusion, they were not
barred by D'Oench Duhme, Templin, and 12 U.S.C. § 1823(e) from
asserting their claim of a homestead exemption. They argue that
D'Oench Duhme, Templin, and § 1823(e) are inapplicable because
Guadalupe and Viola's homestead claim is not predicated on a side
agreement. The Olivarezes also challenge the district court's
holding that the property at 814 East Citrus "ceased to be
[Guadalupe and Viola's] homestead after they transferred all their
interest in the property to" Jesus. The Olivarezes concede that
the record reflects a sale of the East Citrus Street property to
4
Jesus,1 but they argue that Guadalupe and Viola's continued
occupancy of the premises is sufficient to sustain their homestead
exemption.
We assume arguendo that (1) Guadalupe and Viola's homestead
claim is not predicated on a side agreement; (2) the district
court's reliance on D'Oench Duhme, Templin, and § 1823(e) was in
error; and (3) the Olivarezes therefore are not estopped from
claiming a homestead exemption. We decide only whether the
property in Alamo "ceased to be [Guadalupe and Viola's] homestead
after they transferred all their interest in the property" to
Jesus, despite the fact that they allegedly continued to use the
property as their homestead.2 We review de novo the district
court's determination of that state law question. See Matter of
Bradley, 960 F.2d 502, 507 (5th Cir.1992) ("The de novo standard
requires that this Court conduct an independent analysis of Texas
homestead law." (citing Salve Regina College v. Russell, 499 U.S.
225, 230-232, 111 S.Ct. 1217, 1221, 113 L.Ed.2d 190 (1991))), cert.
denied, --- U.S. ----, 113 S.Ct. 1412, 122 L.Ed.2d 783 (1993).
1
Counsel for the Olivarezes conceded this at oral argument.
2
Guadalupe and Viola's sale of the East Citrus Street
property deprived them of any homestead interest which could
prevent foreclosure of the RTC's lien. See infra. Because
Guadalupe and Viola's homestead claim fails on its merits, we
affirm the judgment of the district court, and we need not decide
the issue of estoppel. The Olivarezes rely heavily on In re
Patterson, 918 F.2d 540 (5th Cir.1990), In re Rubarts, 896 F.2d
107 (5th Cir.1990), In re Niland, 825 F.2d 801 (5th Cir.1987),
and In re Howard, 65 B.R. 498 (Bankr.W.D.Tex.1986), all of which
deal primarily with the issue of when a party is estopped from
claiming a homestead exemption. Because we do not reach the
issue of estoppel, we do not address the Olivarezes' arguments
premised on Patterson, Rubarts, Niland, and Howard.
5
The Constitution of the State of Texas provides:
The homestead of a family, or of a single adult person,
shall be, and is hereby protected from forced sale, for the
payment of all debts except for the purchase money thereof, or
a part of such purchase money, the taxes due thereon, or for
work and material used in constructing improvements thereon,
and in this last case only when the work and material are
contracted for in writing, with the consent of both spouses,
in the case of a family homestead, given in the same manner as
is required in making a sale and conveyance of the homestead;
nor may the owner or claimant of the property claimed as
homestead, if married, sell or abandon the homestead without
the consent of the other spouse, given in such manner as may
be prescribed by law. No mortgage, trust deed, or other lien
on the homestead shall ever be valid, except for the purchase
money therefor, or improvements made thereon, as hereinbefore
provided, whether such mortgage, or trust deed, or other lien,
shall have been created by the owner alone, or together with
his or her spouse, in case the owner is married. All
pretended sales of the homestead involving any condition of
defeasance shall be void. This amendment shall become
effective upon its adoption.
Tex. Const. art. XVI, § 50. "A homestead is the dwelling house
constituting the family residence, together with the land on which
it is situated and the appurtenances connected therewith."
Lifemark Corp. v. Merrit, 655 S.W.2d 310, 314 (Tex.App.—Houston
[14th Dist.] 1983, writ ref'd n.r.e.). "It is well settled in
[Texas] that in order to establish homestead rights, the proof must
show a combination of both overt acts of homestead usage and the
intention on the part of the owner to claim the land as a
homestead." Id.; Sims v. Beeson, 545 S.W.2d 262, 263
(Tex.Civ.App.—Tyler 1976, writ ref'd n.r.e.).
We assume arguendo that Viola and Guadalupe established
homestead rights in the property at 814 East Citrus before selling
the property to Jesus. The important question, however, is whether
the property was the homestead of Guadalupe and Viola on 18
6
December 1981, when Jesus executed the note and deed of trust in
favor of Valley Federal Savings. See Braden Steel Corp. v.
McClure, 603 S.W.2d 288, 294 (Tex.Civ.App.—Amarillo 1980) ("[T]he
validity of the deed of trust is determined by the conditions that
existed at the time the lien was given...."); see also Inwood
North Homeowners' Ass'n v. Harris, 736 S.W.2d 632, 635 (Tex.1987)
("[W]hen the property has not become a homestead at the execution
of the mortgage, deed of trust or other lien, the homestead
protections have no application even if the property later becomes
a homestead."). On 18 December Guadalupe and Viola did not have
title to the property at 814 East Citrus; title was held by
Jesus.3 Because Guadalupe and Viola occupied the property with
Jesus' permission, but without any title to the property, their
interest in the premises was a tenancy at will. See DeGrassi v.
DeGrassi, 533 S.W.2d 81, 87 (Tex.Civ.App.—Amarillo 1976, writ ref'd
n.r.e.) ("The occupancy of the residence by the grantors after the
conveyance was with the permission of [the grantee] and constituted
a tenancy at will. That the grantors paid no rent for their
occupancy does not affect the existence of the landlord-tenant
relationship.").
Under Texas law a homestead claimant need not hold the
property in fee simple in order to invoke the exemption. "[A]ny
possessory interest in a lot or lots, the fee-simple title not
3
The Olivarezes do not challenge the magistrate's
finding—which was adopted by the district court—that "[o]n
December 18, 1981, JESUS GUADALUPE OLIVAREZ was the record owner
of the property [at 814 East Citrus Street]."
7
being required to support it, coupled with the requisite occupancy
by the husband and his family, is sufficient to support a homestead
claim." Capitol Aggregates, Inc. v. Walker, 448 S.W.2d 830, 837
(Tex.Civ.App.—Austin 1969, writ ref'd n.r.e.); First Nat'l Bank of
Kaufman v. Dismukes, 241 S.W. 199, 200 (Tex.Civ.App.—Texarkana
1922, no writ). Furthermore, "[i]t has been held that the rural
homestead rights protected by Article 16, Section 50 of the
Constitution of Texas may attach to property held ... at the will
of the record owners." Sullivan v. Barnett, 471 S.W.2d 39, 43
(Tex.1971) (citation omitted) (citing cases).
However, according to the Texas Supreme Court "[i]t is ... a
well-recognized principle of law that one's homestead right in
property can never rise any higher than the right, title, or
interest that he owns in the property attempted to be impressed
with a homestead right." Sayers v. Pyland, 139 Tex. 57, 161 S.W.2d
769, 773 (1942), cited in Inwood North Homeowners' Ass'n, 736
S.W.2d at 636.4 In Shepler v. Kubena, 563 S.W.2d 382
(Tex.Civ.App.—Austin 1978, no writ), that principle was applied to
a homestead claimant who, like Guadalupe and Viola, occupied her
homestead under a tenancy at will. See id. at 386. The Austin
Court of Civil Appeals decided that the homestead claimant's
"exemption from forced sale protect[ed] only such estate as she
[held] in the property," and that the claimant, "having naked
4
See also Capitol Aggregates, 448 S.W.2d at 836 (noting that
where "the claimant would not have the right of possession or
title ... there would be nothing to which a claim of homestead
could attach").
8
possession without any title ... [could] maintain her claim of
homestead against all creditors save the true owner or one having
better title." Id. (citing Sayers).5 It was further held that the
"homestead interest in the possessory estate of a tenancy at will
... [would] survive judicial foreclosure of the deed of trust and
sale of the property," but "the longevity of [that] estate [would]
depend ultimately upon decision of the new fee title owner, at
whose option the tenancy at will [might] be terminated or
extended." Id.
The foregoing decisions suggest that, because Guadalupe and
Viola occupied the 814 East Citrus residence with the intent that
it would be their homestead, a valid homestead interest attached to
their possessory interest in the property. However, because any
such homestead interest could rise no higher than Guadalupe and
Viola's interest in the property—a tenancy at will—it protects from
foreclosure only their right to remain on the property at the will
of the title holder. Therefore Viola and Guadalupe do not have a
right enforceable against the RTC to possess the East Citrus Street
property, and the district court correctly held that the RTC has a
valid and existing lien on the property.
A number of Texas cases suggest that absence of record title
completely negates any homestead right, despite occupancy of the
5
See also Cleveland v. Milner, 141 Tex. 120, 170 S.W.2d 472,
475 (1943) ("Possibly the homestead laws, liberally construed,
would have prohibited interference by judicial process with
Milner's possession of the premises in a contest between him and
his creditor.... Milner had merely permissive and partial
possession....")
9
property by the homestead claimant.6 Those decisions provide
additional support for our holding that Texas homestead law does
not invalidate the RTC's lien. We need not decide whether those
cases would defeat Guadalupe and Viola's homestead interest in
their tenancy at will. Even if Guadalupe and Viola's tenancy at
will is protected by the homestead exemption, that tenancy affords
them only the right to remain on the property so long as permitted
to do so by the title holder. See Shepler, 563 S.W.2d at 386.
Therefore neither the validity of the RTC's lien nor its right to
foreclose is compromised by the tenancy at will held by Guadalupe
6
See Greene v. White, 137 Tex. 361, 153 S.W.2d 575, 579, 586
(1941) (holding that homestead exemption was unavailable "even
though [claimants] were ... living on the land and claiming it as
homestead" with the "permission or acquiescence" of the owner,
"for they could have no homestead right or interest in land to
which they had no title"); Rettig v. Houston West End Realty
Co., 254 S.W. 765, 767-68 (Tex.Comm'n App.1923, judgm't adopted)
(holding that son had no homestead interest in property, even
though he resided upon it with his father's consent, because son
had neither title, nor a present right to possess land, nor right
to demand partition from father, who was his cotenant); Nash v.
Conatser, 410 S.W.2d 512, 521-22 (Tex.Civ.App.—Dallas 1966, no
writ) ("It is the law of this state that when ... a business
homestead is conveyed to a corporation ... the property is no
longer the homestead of the grantors, even though they may
continue to occupy it."); Sparks v. Robertson, 203 S.W.2d 622,
626 (Tex.Civ.App.—Austin 1947, writ ref'd) ("One can not have a
homestead interest in property the title to which is in neither
spouse nor in the community."); Williams v. Corpus Christi Bank
& Trust Co., 104 S.W.2d 56, 57 (Tex.Civ.App.—San Antonio 1937,
writ ref'd) ("After the Williams had conveyed this tract to the
Townsite Company, it ceased to be their homestead, and ... the
fact that they continued to use the land at the sufferance of the
grantees[ ] did not change the situation."); Hampton v.
Gilliland, 23 Tex.Civ.App. 87, 56 S.W. 572, 573-74 (1900, no
writ) (holding that son, who lived on land entirely by virtue of
his mother's consent, "owned no estate to which the homestead
right could attach," and that "the homestead right cannot be
based on so precarious a tenure" as the son's occupancy at the
will of his mother).
10
and Viola, and we need not decide whether that tenancy is protected
from foreclosure by Texas homestead law.
The Olivarezes contend, nevertheless, that their homestead
interest in the East Citrus Street property persisted on 18
December 1981—when Jesus executed the note and deed of
trust—because they never abandoned their homestead by discontinuing
its use as such. They cite In re Hunt, 61 B.R. 224
(Bankr.S.D.Tex.1986), where the bankruptcy court stated, "when
there is a home in fact, such home cannot be abandoned while
actually used as the home of the family." Id. at 229. Hunt is
factually distinguishable, because the homestead claimant in that
case had not alienated title to the homestead. See id. at 226.
The claimant purchased a new home in Houston and argued that it
became his homestead immediately upon its purchase, even though he
had not yet sold or vacated his homestead in Midland. See id. at
227-29. The bankruptcy court rejected that argument, holding that
the claimant's homestead interest remained attached to the Midland
property. See id. at 229. Because title to the Midland property
remained with the homestead claimant, Hunt does not stand for the
proposition that a homestead interest persists despite alienation
of title, so long as occupancy continues.
Furthermore, we do not believe that the rule set out in
Sayers, Inwood North, and Shepler—that a homestead interest can
rise no higher than the claimant's interest in the property—is in
conflict with the often cited rule that abandonment occurs only
11
when use of the homestead is discontinued.7 Abandonment and
alienation of title have frequently been described as distinct
methods of extinguishing a homestead interest. See, e.g., United
States v. Rodgers, 461 U.S. 677, 686, 103 S.Ct. 2132, 2139, 76
L.Ed.2d 236 (1983) (stating that Texas homestead exemption may not
be divested " "except by abandonment or a voluntary conveyance' "
(quoting Paddock v. Seimoneit, 218 S.W.2d 428, 436 (Tex.1949)));
Matter of Bradley, 960 F.2d at 507 n. 8 (" "The only way for
property to lose its homestead, after it has been dedicated as a
homestead, is by death, abandonment or alienation.' " (quoting
Garrard v. Henderson, 209 S.W.2d 225, 229 (Tex.Civ.App.—Dallas
1948, no writ))); Intertex, Inc. v. Kneisley, 837 S.W.2d 136, 138
(Tex.App.—Houston [14th Dist.] 1992, writ denied) ("Th[e]
conveyance was made on May 15, 1985. Upon this date, the property
ceased being the Bealls' homestead.... The Texas case law is clear
that a homestead property loses its homestead protection upon the
death of the claimants, abandonment or alienation by them....");
Hollifield v. Hilton, 515 S.W.2d 717, 721 (Tex.Civ.App.—Fort Worth
1974, writ ref'd n.r.e.) ("It is settled law that once homestead
character has attached to realty and the family relationship
continues to exist, it can be terminated only by sale or actual
permanent abandonment of use as such."); Long Bell Lumber Co. v.
Miller, 240 S.W.2d 405, 406-07 (Tex.Civ.App.—Amarillo 1951, no
7
See, e.g., Franklin v. Woods, 598 S.W.2d 946, 949
(Tex.Civ.App.—Corpus Christi 1980, no writ) ("Abandonment of a
homestead requires both the cessation or discontinuance of use of
the property as a homestead coupled with the intent to
permanently abandon the homestead.").
12
writ) ("[T]he homestead exemption was not lost by alienation or by
death, so we have only the proposition of whether or not the
homestead was lost by abandonment."). These cases strongly suggest
that alienation of title may result in termination of a homestead
interest, even though abandonment by discontinuation of use is not
shown.
Birdwell v. Burleson, 31 Tex.Civ.App. 31, 72 S.W. 446 (1902,
writ ref'd), at first blush seems to suggest that Texas homestead
law prohibits foreclosure of the RTC's lien even though Guadalupe
and Viola did not hold title to the homestead property when the
lien attached. The Court of Civil Appeals in Birdwell described
the issue before it as follows:
Briefly stated, the question is whether a father, residing
with his minor children upon land, the legal title to which is
entirely in the children, and managing and controlling such
land, and using the proceeds for the support of himself and
the family, has such interest in the land as will form the
basis of a homestead exemption. It is true that he has no
legal title to the land.... Yet, he is in possession, and his
possession is in no wise unlawful or wrongful.... He cannot
be said to be an intruder or bare trespasser.
Id. at 448. The court held that the property was exempt from
foreclosure by a creditor of the father, because "where property is
rightfully and peaceably held in possession, and occupied as the
home of the family, it should be exempt from forced sale, even
though that possession be merely permissive." Id. at 449-50.
Birdwell is distinguishable, however, because in that case the
homestead exemption was not asserted against a creditor of the
title holder. In Birdwell, the homestead exemption was asserted
against a creditor of the father, who held no title to the
13
property. See id. at 447. In this case, on the other hand, the
Olivarezes press their homestead claim against the RTC as a
creditor of Jesus, the title holder to the homestead property.
Shepler recognized this distinction by holding that the homestead
claimant, "having naked possession without any title ... may
maintain her claim of homestead against all creditors save the true
owner or one having better title." Shepler, 563 S.W.2d at 386
(emphasis added). The Court of Civil Appeals in Birdwell
acknowledged the same principle, quoting the following language
from Pendleton v. Hooper, 87 Ga. 108, 13 S.E. 313 (1891): "[A]s
[Hooper] retained possession, he is still the owner against all the
world, except his donees.... Even were he a trespasser relatively
to his donees, he would, whilst in possession, be owner relatively
to his creditors." Birdwell, 72 S.W. at 449. Because Guadalupe
and Viola assert their homestead exemption against a party claiming
under the title holder, Birdwell is not controlling. See 43
Tex.Jur.3d Homesteads § 45 (1985) ("Mere possession is enough to
sustain a claim of homestead and prevent a forced sale against all
the world except the true owner and those claiming under him.").
Because Viola and Guadalupe's homestead interest can rise no
higher than their interest in the homestead—a mere tenancy at
will—the homestead exemption protects, at most, their right to
remain on the land at the will of the title holder. Therefore the
district court correctly held that the RTC's lien is valid. There
is no genuine issue of material fact, and the district court
properly granted summary judgment for the RTC.
14
III
For the foregoing reasons, we AFFIRM.8
8
The Olivarezes and the RTC agree that the following
conclusion of law in the United States Magistrate Judge's report
and recommendation is erroneous in two respects: "17. In the
case at hand, summary judgment is proper, because when viewing
the evidence in the light most favorable to Plaintiff, there is
no genuine issue as to any material fact and Defendants are
entitled to judgment as a matter of law." The statement that
"Defendants are entitled to judgment as a matter of law" is
erroneous because the plaintiff, RTC, not the Defendants, moved
for summary judgment. The statement that the court viewed the
evidence "in the light most favorable to Plaintiff" was also
erroneous. In ruling on a motion for summary judgment, the
district court views the evidence in the light most favorable to
the party opposing the motion—in this case the defendants, the
Olivarezes. Reversal is not required, as the record reveals that
the foregoing errors were merely clerical and did not result in
prejudice.
15