Cohen v. Sandcastle Homes, Inc.

Decision Date26 February 2015
Docket Number01–13–00233–CV,NOS. 01–13–00267–CV,S. 01–13–00267–CV
Citation469 S.W.3d 173
PartiesJay H. Cohen, Individually and as Trustee of the JHC Trusts I and II, Appellant v. Sandcastle Homes, Inc., Appellee Jay H. Cohen, Individually and as Trustee of the JHC Trust I and II, Appellant v. NewBiss Property, LP, Appellee
CourtTexas Court of Appeals

Nicole S. Bakare, Kemp W. Gorthey, Doyle, Restrepo, Harvin & Robbins, L.L.P., Houston, for Appellant.

Blaine Hummel, Bradford W. Irelan, Irelan Hargis, P.L.L.C., Houston, for Appellee.

Panel consists of Chief Justice Radack and Justices Massengale and Huddle.

OPINION

Sherry Radack, Chief Justice

In related proceedings, appellant Jay H. Cohen, Individually and as Trustee of the JHC Trusts I and II, challenges the trial court's summary judgments granted in favor of appellees Sandcastle Homes, Inc. and NewBiss Property, LP Specifically, Cohen challenges the trial court's conclusion that the Sandcastle and NewBiss established their status as bona-fide purchasers of certain real property in which Cohen claims an interest. The primary issue we must resolve is whether the purchaser of real property can establish bona-fide purchaser status if that purchaser has actual knowledge about information contained in a notice of lis pendens that has been filed, and then later expunged, on the property. We answer that question in the affirmative, and affirm the trial court's judgments.

BACKGROUND

The underlying suit involves Cohen's claims against numerous defendants related to several parcels of real estate. The summary judgments at issue in favor of Sandcastle and NewBiss were severed from the remaining claims against other parties, rendering them final and appealable.1 Because only these two judgments are at issue, we limit our discussion to basic background facts and discussion of the summary-judgment evidence relevant to these judgments.

Through a series of transfers over the years, Cohen transferred several pieces of real estate into different partnerships. In the underlying lawsuit, Cohen claims that defendant Mathew Dilick acted wrongfully and fraudulently (both individually and through entities he controlled) with respect to management of the properties through a series of transfers, sales, and debt encumbrances. In conjunction with his lawsuit, Cohen also filed numerous notices of lis pendens on various properties.

This appeal involves properties covered by Cohen's July 27, 2010 Second Supplemental Notice of Lis Pendens. That notice impacts several properties, including the property at issue in this case, i.e., 2.4373 acres known as the “West Newcastle Property.” That notice identifies the underlying suit and states its purpose is to set aside certain transfers of real property, including the prior transfer of the West Newcastle Property from Flat Stone II, Ltd. to West Newcastle Ltd, and to “set aside and cancel liens” granted by Flat Stone II to Regions Bank.

Several defendants in the underlying proceedings filed emergency motions to expunge the notices of lis pendens.

September 1 & 7, 2010. The trial court signed orders granting all the motions to lift the lis pendens notices,2 concluding that Cohen failed to state direct real-property claims, and specifically noting that it “did not consider evidence or make a determination of the sufficiency of the evidence.” Cohen challenged these interlocutory expungement orders in this Court, filing a petition for writ of mandamus and a motion to stay the trial court's orders.

September 30, 2010. This Court granted Cohen's motion to stay the trial court's orders expunging the notices of lis pendens.

October 8, 2010. Defendant Dilick made the first of two property transfers relevant to the subject matter of this appeal. Specifically, he effectuated the sale from titleholder West Newcastle Ltd. of a 0.95 acres portion of the West Newcastle Property (“West Newcastle Tract I”) to appellant Sandcastle Homes for $750,000.

April 14, 2011. This Court conditionally granted Cohen's request for mandamus relief from the trial court's orders expunging all of the notices of lis pendens. In re Cohen, 340 S.W.3d 889, 899–900 (Tex.App.—Houston [1st Dist.] 2011, orig. proceeding). In our opinion, we first noted that—because of recent statutory amendments—there are two ways to successfully establish that a notice of lis pendens should be expunged, i.e., by establishing that: (1) the pleadings do not “contain a real property claim” or (2) that the claimant has not shown the “probable validity” of the claim. Id. at 892 (citing Tex. Prop.Code Ann. § 12.0071(c) ). We held that the trial court erred by concluding that the face of Cohen's pleadings did not articulate a real-property claim. Id. at 899. Although we accordingly directed the trial court to vacate its orders expunging the notices of lis pendens based on the pleadings, we expressed no opinion about whether Cohen could demonstrate the “probable validity” of his claims following an evidentiary hearing. Id. at 900.

May 11, 2011. Cohen added Sandcastle as a defendant in the underlying suit, seeking to set aside its purchase of West Newcastle Tract I.

May 17, 2011. The trial court held another hearing, this time to hear evidence Cohen offered in support of his July 27, 2010 Second Supplemental Notice of Lis Pendens, which burdened the entire West Newcastle Property and other properties.

June 23, 2011. Defendant Dilick transferred the remaining 1.483 acre portion of the West Newcastle Property (West Newcastle Tract II) from titleholder West Newcastle, Ltd. to a previous titleholder, Flat Stone II.

June 29, 2011. The trial court entered an order stating that Cohen “failed to establish by a preponderance of the evidence the probable validly of a real property claim” and that the “Second Supplemental Notice of Lis Pendens filed by Plaintiff on July 27, 2010 is void.” Accordingly, the court ordered the notice burdening the West Newcastle Property (now split into Tracts I and II) was “cancelled and expunged in its entirety.”

Cohen filed a petition for writ of mandamus and motion for emergency stay in this Court challenging the trial court's expungement orders. We denied the motion and petition.

September 26, 2011. Defendant Dilick made the second property transfer relevant to this appeal. He effectuated a sale of West Newcastle Tract II to from Flat Stone II to appellee NewBiss for approximately $1.8 million.

November 10, 2011. Cohen added NewBiss as a defendant in the underlying suit, seeking to set aside its purchase of West Newcastle Tract II.

SUMMARY JUDGMENTS
A. Sandcastle Homes

Sandcastle filed a traditional motion for summary judgment on its affirmative defense that it was a “bona fide purchaser, based on the fact that it purchased [West Newcastle Tract I] from West Newcastle, Ltd., in good faith, for value, and without knowledge of any competing claims of Cohen or the Cohen Trusts.” Sandcastle acknowledged that there was a lis pendens in effect on the property at the time of purchase, but argued that [s]ince the instrument was subsequently declared void, it has no force and effect and cannot serve as ‘constructive’ notice to Sandcastle.” Sandcastle contended that its summary-judgment evidence otherwise established its status as a bona fide purchaser as a matter of law.

Cohen responded that summary judgment in Sandcastle's favor was not appropriate because, he alleged, (1) there was a fact issue about whether Sandcastle had actual notice, (2) there was a fact issue about whether Sandcastle had constructive notice, (3) the trial court erred by expunging the lis pendens, and (4) the statute providing for expungement of notices of lis pendens is unconstitutional.

On September 12, 2012, the trial court granted Sandcastle's motion. On February 22, 2013, the trial court severed the summary judgment in favor of Sandcastle and rendering judgment between Cohen and Sandcastle final.

B. NewBiss

NewBiss filed a traditional motion for summary judgment, also asserting that it was entitled to summary judgment because its summary-judgment evidence established, as a matter of law, that it was a protected bona-fide purchaser for value. It acknowledges that it was aware of this lawsuit, but argued that it “rightfully relied on [the] court's order of expungement as an affirmative determination of [Cohen's] lack of right or interest” in the West Newcastle Tract II. Because, it asserted, it had “no independent knowledge of any other facts that would place it on notice that Flat Stone II did not have full authority to convey” the property, “NewBiss was a good faith purchaser as a matter of law.”

Cohen responded that summary judgment in NewBiss's favor was not appropriate because, he alleged, (1) NewBiss had actual notice of his lawsuit, which was not legally impacted by expungement of the lis pendens, (2) the trial court erred by expunging the lis pendens, (3) the statute providing for expungement of notices of lis pendens is unconstitutional, (4) NewBiss's summary judgment motion did not address his direct claim against NewBiss.

On September 12, 2012, the trial court granted NewBiss's motion. On February 8, 2013, the trial court severed the summary judgment in favor of NewBiss, rendering judgment between Cohen and NewBiss final.

ISSUES ON APPEAL

A. Issues Cohen raises challenging the Sandcastle judgment

1. “The trial court erred in granting Sandcastle's summary judgment because Cohen raised a fact issue as to whether Sandcastle had actual notice of his claims.”
2. “The trial court erred in granting Sandcastle's summary judgment because Cohen raised a fact issue as to whether Sandcastle had constructive notice of his claims.”
3. “To the extent that the trial court concluded that its June 29, 2011 order expunging Mr. Cohen's Second Supplemental Notice of Lis Pendens obliterated from existence and from all effect any other kind of notice arising independently of the Lis Pendens obtained by Sandcastle in any manner
...

To continue reading

Request your trial
3 cases
  • Sommers v. Sandcastle Homes, Inc.
    • United States
    • Texas Supreme Court
    • June 16, 2017
    ...affirmed, holding that the expunction statute extinguishes actual and constructive notice of the underlying claims. 469 S.W.3d 173 (Tex. App.—Houston [1st Dist.] 2015). Two days before the court of appeals issued its opinion, the underlying lawsuit was removed to bankruptcy court, though th......
  • Cohen v. Newbiss Prop., L.P
    • United States
    • Texas Court of Appeals
    • November 24, 2020
    ...purchasers, because expunction of the lis pendens extinguished actual and constructive notice of the underlying claims. Cohen v. Sandcastle, 469 S.W.3d 173, 185-86 (Tex. App.—Houston [1st Dist.] 2015, rev'd, Sommers v. Sandcastle Homes, Inc., 521 S.W.3d 749 (Tex. 2017). Texas Supreme Court ......
  • Handmaker v. CertusBank, N.A.
    • United States
    • U.S. District Court — Western District of Kentucky
    • May 24, 2016
    ...likely than not that the plaintiff will obtain a judgment against the defendant on that claim"); Cohen v. Sandcastle Homes, Inc. , 469 S.W.3d 173, 183 (Tex.App.–.Hous. [1st Dist.] 2015). Handmaker and Vredeveld argue "probable validity" is akin to probable cause, a phrase common in criminal......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT