In re Collins, 2-05-192-CV.
| Decision Date | 26 August 2005 |
| Docket Number | No. 2-05-192-CV.,2-05-192-CV. |
| Citation | 172 S.W.3d 287 |
| Parties | In re Burk COLLINS, Fountain Mall, Inc., and Mall Group, Ltd., Relators. |
| Court | Texas Supreme Court |
Kelly, Hart and Hallman, P.C., Dee J. Kelly, Jr., Brian S. Stagner, John T. Wilson, IV, Fort Worth, for Relators.
Thompson & Knight, L.L.P., Debora B. Alsup, Austin, Jennifer P. Henry, Fort Worth, for Real Party In Interest.
Panel A: CAYCE, C.J.; GARDNER and WALKER, JJ.
In this original proceeding challenging the trial court's grant of a motion to void a lis pendens, the primary issue we must resolve is whether, in deciding the motion, the trial court was required to look solely to the pleadings of the party who filed the notice of lis pendens to determine whether the party is claiming a direct or collateral interest in the real property at issue, or whether the trial court could look beyond the pleadings and consider evidence relevant to the question of whether the party's alleged property interest is direct or collateral. Because we hold that the trial court could consider such evidence and was, in fact, required to do so in this case, but that the trial court should have denied the motion because the evidence raises a fact issue regarding the nature of the alleged property interest, we conditionally grant the writ of mandamus.
Relators Burk Collins (an individual), Fountain Mall, Inc., and Mall Group, Ltd. (collectively, the Collins parties) are defendants and third-party plaintiffs in the underlying lawsuit. Michael Kest and the real party in interest, Tex Mall, L.P., are third-party defendants below.
Collins and Kest are former business partners. Together, they and entities owned or controlled by them, including Fountain Mall and Mall Group,1 formed a partnership known as North Hills Creek Mall, L.P. (Creek Mall). Creek Mall owned and operated a shopping center in North Richland Hills, Texas known as North Hills Mall (the Mall).
In 2003, Creek Mall breached certain loan covenants with its lender, and the lender foreclosed on the Mall property. Several months before the foreclosure, on March 28, 2003, Kest and Collins entered into a Memorandum of Understanding (MOU) under which KCT Richland, a Kest affiliate, agreed to provide short-term capital for Creek Mall in exchange for promises from Collins. Among those promises was an agreement that the Collins parties would not oppose the foreclosure, if it occurred, that Kest could do "whatever [he] wish[ed] regarding the Mall,"2 and that the parties would arbitrate any disputes over the terms of the MOU before the American Arbitration Association (AAA) in Los Angeles, California.
The Collins parties assert that, in further consideration for Collins's promises in the MOU, Kest agreed to convey a 50 percent interest in the Mall property back to him if the property went into foreclosure. The Collins parties concede, however, that the MOU does not contain this term. Collins acknowledges that he signed the MOU knowing that it lacked this term, but he contends his signature was subject to a separate memorandum, also dated March 28, 2003, in which he informed Kest that the MOU was "null and void" unless Kest agreed to the above-stated reconveyance in the event of foreclosure.
The Mall property was foreclosed in Tarrant County in October 2003, and Tex Mall, a company Kest had formed, purchased the property. After the foreclosure, Kest did not give Collins an interest in the Mall property. The Collins parties contend that, since the foreclosure, Kest, through Tex Mall, has owned and operated the Mall.
In January 2004, Kest sought and obtained an order from the trial court compelling arbitration of the parties' disputes. Although arbitration was initiated, numerous related disputes and problems apparently arose.
In June 2004, Fountain Mall and Mall Group filed a third-party petition in the trial court against Tex Mall and Kest. The third-party petition asserts claims of fraud, conspiracy to commit fraud, breach of fiduciary duty, and conspiracy to breach fiduciary duty. The third-party plaintiffs also seek a declaratory judgment that they own a 50 percent interest in the Mall property or Tex Mall. In addition, they seek money damages and a constructive trust on 50 percent of the Mall property.
In conjunction with the third-party petition, the Collins parties filed a notice of lis pendens in the Tarrant County Real Property Records. Tex Mall and Kest both filed pleas in abatement, asking the trial court to abate the third-party suit until completion of the arbitration proceeding in Los Angeles.3 Nothing further happened in the trial court or the arbitration proceeding until April 29, 2005, when Tex Mall moved to void the Collins parties' lis pendens.
Meanwhile, Tex Mall had begun efforts to develop the Mall property. In anticipation of completing certain real estate transactions, Tex Mall discovered the Collins parties' lis pendens. In its motion, Tex Mall contends that the lis pendens is improper because title to land is not disputed in the third-party lawsuit and the suit does not seek to enforce an encumbrance on land. In support of its motion, Tex Mall asked the trial court to take judicial notice of certain documents.4
After a hearing, on May 25, 2005, the trial court granted both the motion to void the lis pendens and the request for judicial notice. The Collins parties seek an order directing the trial court to vacate the May 25 order voiding the lis pendens. We have stayed that order pending the outcome of this original proceeding.
The Collins parties complain of the trial court's granting of Tex Mall's motion to void lis pendens on two grounds:
1. The trial court abused its discretion by looking beyond the pleadings and hearing evidence on the nature of the Collins parties' claimed interest in the Mall property.
2. Alternatively, the trial court abused its discretion by refusing to refer the motion to void the lis pendens to arbitration in Los Angeles.
In deciding whether a writ of mandamus is appropriate, we recognize that mandamus will issue only to correct a clear abuse of discretion or the violation of a duty imposed by law when there is no other adequate remedy at law.5 Absent extraordinary circumstances, mandamus will not issue unless the relator lacks an adequate appellate remedy.6
A trial court clearly abuses its discretion when it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law.7 With respect to the resolution of factual issues or matters committed to the trial court's discretion, we may not substitute our judgment for that of the trial court unless the relator establishes that the trial court reasonably could have reached only one decision and that the trial court's decision is arbitrary and unreasonable.8 This burden is a heavy one.9 Our review is much less deferential with respect to a trial court's determination of the legal principles controlling its ruling because a trial court has no discretion in determining what the law is or in applying the law to the facts, even when the law is unsettled.10 Thus, a clear failure by the trial court to analyze or apply the law correctly will constitute an abuse of discretion and may result in mandamus.11
The lis pendens statute gives litigants a method to constructively notify anyone taking an interest in real property that a claim is being litigated against the property.12 A notice of lis pendens may be filed during the pendency of an action involving (1) title to real property, (2) the establishment of an interest in real property or (3) the enforcement of an encumbrance against real property.13 "A recorded lis pendens is notice to the world of its contents," regardless of whether service has been made on the parties to the proceeding.14
If a notice of lis pendens satisfies the requirements of section 12.007, the trial court may not cancel it except as provided in section 12.008.15 The trial court in this case did not cancel the lis pendens in accordance with section 12.008; therefore, if the lis pendens complies with section 12.007, the trial court's order granting Tex Mall's motion is improper.
To satisfy section 12.007, the suit on which the lis pendens is based must claim a direct interest in real property, not a collateral one.16 In other words, the property against which the lis pendens is filed must be the subject matter of the underlying lawsuit.17 If the suit seeks a property interest only to secure the recovery of damages or other relief that the plaintiff may be awarded, the interest is merely collateral and will not support a lis pendens.18
The parties disagree over what a trial court may consider in determining whether a suit involves a claim to a direct interest in property and, therefore, complies with section 12.007. The Collins parties assert that the trial court must limit its review to the pleadings of the party who filed the lis pendens. Tex Mall, on the other hand, contends that the trial court may look beyond the pleadings and consider evidence relevant to the question of whether the party's alleged interest in the property is direct or collateral.
The courts of appeals that have addressed this question appear to be split. The First Court of Appeals has held that the validity of a lis pendens must be determined based on the pleadings alone.19 At least two other courts of appeals have followed the First Court.20 Three of our sister courts, however, allow evidence to be considered in determining whether a lis pendens is improper.21
In resolving this issue, we find the supreme court's analysis in cases involving pleas to the jurisdiction instructive. The supreme court has held that when a plea to the jurisdiction challenges the pleadings, the trial court looks...
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