C & L Lumber and Supply, Inc. v. Texas American Bank/Galeria
| Decision Date | 13 June 1990 |
| Docket Number | No. 18800,18800 |
| Parties | C & L LUMBER AND SUPPLY, INC., Plaintiff-Appellee, v. TEXAS AMERICAN BANK/GALERIA, Defendant-Appellant, v. George J. AUBIN, Wichita Equine, Inc., W.E. New Mexico, Inc., Kenny's Welding, Barney Rue, Frankie Reynolds, Briscoe West and Myrl West, Defendants-Appellees. |
| Court | New Mexico Supreme Court |
Texas American Bank appeals from a decision that its mortgages on two tracts of Ruidoso land are void and that, in a proceeding to foreclose mechanics' and materialmen's liens on the property, the priority of such resulting equitable mortgage liens as were found by the court follows those of the other lien claimants. We affirm.
In August 1980, Joe McDermott, while married to Dixie McDermott, purchased from Briscoe and Myrl West a 1.7 acre tract (small tract) of land adjacent to the racetrack in Ruidoso. McDermott paid $10,000 in cash and entered into a real estate contract with the Wests for the remaining $80,000 of the purchase price. In October 1981, McDermott also purchased from the Wests an adjacent 6.4 acre tract (large tract) for $300,000. McDermott paid the Wests $200,000 in cash from a loan and mortgage with Ruidoso State Bank for that amount, and financed the other $100,000 through a second mortgage to the Wests on both tracts. Dixie McDermott joined in none of these instruments which stated that the property was the sole and separate estate of Joe McDermott, a married man.
In June 1983, McDermott borrowed $200,000 from Texas American Bank and paid off the loan to Ruidoso State Bank. Texas American Bank obtained a mortgage on the large tract and, pursuant to a subordination agreement with the Wests, was placed in first position over the Wests' mortgage of October 1981. McDermott also borrowed $120,000 from Texas American Bank in July 1983 and used $60,000 of the loan to pay off the real estate contract on the small tract.1 Pursuant to this loan, the Bank obtained a mortgage on the small tract, and because of a subordination agreement with the Wests, acquired first position over the Wests' mortgage of September 1981.
In August 1984, McDermott and his wife were divorced. At that time she conveyed to him her community interest in the two tracts by special warranty deed recorded in November 1984.
The promissory notes on the large and small tracts given by McDermott to Texas American Bank were due and payable in six months from the time of execution. However, the Bank and McDermott entered into various extension agreements between September 1984 and March 1985. Eventually, construction of horse barns was begun on the two tracts on April 7, 1986, and was substantially completed in July 1986.
C & L Lumber, the materials supplier for the construction project, brought suit in December 1986 to foreclose its materialmen's lien on the property. In the foreclosure action, the court determined the lien priorities of the following parties: Texas American Bank, the Wests, and mechanics' and materialmen's lien claimants C & L Lumber, Barney Rue, Frankie Reynolds, and Kenny's Welding.
The court held that Texas American Bank was not entitled to first priority as to either of the tracts because the mortgages granted by McDermott were void, not having been signed also by his wife. Except in the case of purchase-money mortgages, spouses must join in all mortgages of community real property. NMSA 1978 Sec. 40-3-13(A) (Repl.Pamp.1989). Any attempt to mortgage community real property made by either spouse alone is void. Id.
Regarding the small tract, the court determined the lien priorities to be: (1) C & L Lumber, (2) Frankie Reynolds, (3) Kenny's Welding, (4) Barney Rue, and (5) Texas American Bank. Regarding the large tract, the lien priorities were determined to be: (1) the Wests, (2) Barney Rue, and (3) Texas American Bank.
Texas American Bank renews various arguments on appeal: that the Bank's refinancing of the West real estate contract and the Ruidoso State Bank mortgage created purchase-money mortgages which come within the exception set forth in Section 40-3-13(A); that the Bank was subrogated to the purchase-money mortgage position held by the Wests and Ruidoso State Bank; that by virtue of the various extensions of the Bank's notes and liens, which were recorded before the mechanics' and materialmen's liens were perfected, the Bank has liens against both tracts superior to the mechanics' and materialmen's liens; that the Wests are estopped to deny the validity or priority of the Bank's mortgages on the large tract by virtue of the mortgage subordination agreement; that any defect in the Bank's mortgages was cured by "after-acquired title." Additionally, the Bank now claims that the court erred in applying the joinder requirement of Section 40-3-13(A) inasmuch as the two tracts were not community property. The Bank also asserts that it is error to apply the joinder requirement in favor of parties other than a nonsigning spouse.
Community property issues. We first address arguments that the Bank raises concerning the characterization of the two tracts as community property and the intended application of the joinder statute. The Bank asserts that the appellees failed to meet their burden of proving that the two tracts were community property. The Bank points to the documents executed by McDermott as "a married man dealing with his sole and separate property," and states that under Sanchez v. Sanchez, 106 N.M. 648, 748 P.2d 21 (Ct.App.), cert. denied, 106 N.M. 627, 747 P.2d 922 (1987), this raises a presumption that the property was McDermott's separate property. The Bank's argument misconstrues New Mexico community property law.
Under Section 40-3-12(A), property acquired during marriage by either spouse is presumed to be community property. The recitation in a deed not signed by both spouses that the property is the "sole and separate property" of a married man does not affect this presumption. The party seeking to rebut the presumption has the burden of introducing factual evidence that the disputed property meets a criterion of separate property as defined in Section 40-3-8. Arch, Ltd. v. Yu, 108 N.M. 67, 766 P.2d 911 (1989). Texas American Bank failed to produce at trial any evidence that would support a characterization of the two tracts as separate property under Section 40-3-8; nor was it suggested that the tracts were purchased with McDermott's separate funds.
Additionally, the Bank is mistaken in its claim that it is entitled to the benefit of a presumption of separate property under Sanchez. In that case, the court applied a statutory presumption applicable to property acquired by a married woman in her name alone. Sanchez, 106 N.M. at 650, 748 P.2d at 23. Even so, the Community Property Act of 1973 repealed this presumption for transactions occurring after passage of the Act. See 1973 N.M.Laws, ch. 320, Sec. 14; NMSA 1978, Sec. 40-3-12.
Finally, we note that Texas American Bank never requested a finding or conclusion that the property was McDermott's separate property. A party who has failed to request a finding of ultimate fact has waived such a finding, SCRA 1986, 1-052(B)(1)(f), and has not preserved the question for appeal. Davis v. Davis, 77 N.M. 135, 419 P.2d 974 (1966). Having failed to preserve for appeal a question of McDermott's separate property, Texas American Bank cannot contest the court's finding treating the property as a community asset, nor can the Bank obtain a review of the evidence supporting this characterization of the asset. See Wagner Land & Inv. Co. v. Halderman, 83 N.M. 628, 495 P.2d 1075 (1972).
The Bank's final argument on this point is that Section 40-3-13 was intended to protect the interests of a nonjoining spouse, and the court erred in allowing lien claimants to raise the joinder issue. A review of our cases involving the joinder statute shows, however, that the issue has been raised by a variety of parties in addition to the nonjoining spouse. See, e.g., Arch, Ltd. v. Yu, 108 N.M. 67, 766 P.2d 911 (1989) (); Hannah v. Tennant, 92 N.M. 444, 589 P.2d 1035 (1979) (). See also McGrail v Fields, 53 N.M. 158, 203 P.2d 1000 (1949) (). The joinder statute is directed at the conveyance itself not at the identity of the person claiming the conveyance is void. We believe it contains no limitations regarding for whose benefit it may be used.
Purchase-money mortgage exception to Section 40-3-13(A). Assuming that the two tracts were community property, the Bank states that the refinancing agreements on both tracts should be treated as purchase-money mortgages, an express exception to the joinder requirement of Section 40-3-13(A) for mortgages affecting community property. The Bank reasons that either each transaction itself created a valid purchase-money mortgage, or the refinancing transactions subrogated the Bank to the purchase-money mortgage position held by Ruidoso State Bank on the large tract, and the Wests on the small one.
A purchase-money mortgage is a mortgage executed at the same time as the deed of the purchase of land, or in pursuance of agreement as part of one continuous...
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