McGahey v. Ford, 17934
| Decision Date | 09 March 1978 |
| Docket Number | No. 17934,17934 |
| Citation | 563 S.W.2d 857 |
| Parties | Philip C. McGAHEY, Trustee and Summers Electric, Inc., Appellants, v. Bruce M. FORD et ux., and Southwest Savings Association, Appellees. |
| Court | Texas Court of Appeals |
Nelson & Lewis, Denton, Bagby, McGahey, Ross & DeVore, and Philip C. McGahey, Arlington, for appellants.
Jack Gray, Denton, Biggers, Lloyd, Biggers, Beasley & Amerine, and Arch A. Beasley and Rick W. Hightower, Dallas, for appellees.
Philip McGahey, Trustee, and Summers Electric, Inc., appeal from a judgment granting a permanent injunction against their foreclosing a deed of trust lien taken to secure pre-existing debts and covering certain real estate which was alleged to be homestead property. Appellants contend that the property was not homestead because record title was in a corporation when they took their deed of trust. Appellees are the subsequent purchasers of the property and their mortgagee. The trial court held that the deed of trust was a void attempt to mortgage homestead property under Tex.Const. art. 16, § 50 because the transfer to the corporation was a pretended sale of the homestead and also void under Article 16, § 50.
We affirm.
Bruce M. Ford and his wife are the owners of a home purchased under a warranty deed executed by Tim P. West, Inc. and Tim P. West and his wife, Carolyn Snow West. The Fords and their mortgagee, Southwest Savings Association, alleged that the Wests had executed an earlier warranty deed on their homestead property to the corporation for the purpose of mortgaging it for debts other than purchase money and improvements on the homestead. Later, both the corporation and West, individually, executed another deed of trust covering the property in favor of Philip C. McGahey, Trustee, for the benefit of Mayfield Building Supply Co., Inc. (a wholly-owned subsidiary of Summers Electric, Inc.). The Fords allege that this deed of trust is a void attempt to mortgage homestead property prohibited by Tex.Const. art. 16, § 50.
The trustee alleged that at the time Mayfield Building Supply received its note and deed of trust the property was not the homestead of the Wests because the legal title was shown by the deed records to be vested in fee simple in the corporation.
The trustee filed a cross-action against Southwest Savings and the Fords, alleging their lien is inferior to Mayfield Building Supply's deed of trust lien and seeking to foreclose. He also joined the Wests and the corporation as third-party defendants, seeking a judgment for $39,718.52 plus interest and attorney's fees.
The trial court granted judgment for the Fords and Southwest Savings, declaring the deed of trust of October 31, 1975, from the corporation and Tim P. West to Mayfield Building Supply invalid. The court removed the deed of trust lien from the record as a cloud on the Fords' title and enjoined the trustee from foreclosing on the property. The court also awarded Mayfield Building Supply a judgment against Mr. West and the corporation for $33,715.38.
The record reflects the following series of events:
1. July 18, 1973 Tim P. West, Inc. purchased the property and became its record owner.
2. March 27, 1974 A warranty deed from the corporation to Mr. and Mrs. West was filed for record, as well as a deed of trust from the Wests to the Irving Savings and Loan Association to finance the building of the house.
3. January 13, 1975 By warranty deed the Wests deeded the property to the corporation, which assumed the $55,000.00 first lien obligation to Irving Savings. The corporation, through Mr. West, as its president executed a second lien deed of trust on the property to Irving Savings, to secure a $25,000.00 loan from Irving Savings to the corporation.
4. March 10, 1975 The warranty deed of January 13, 1975, was filed for record.
5. October 31, 1975 Mr. West, on behalf of himself individually and the corporation, executed a note and deed of trust in favor of Mayfield Building Supply, with Philip C. McGahey as trustee. The note and deed of trust were filed for record on November 12, 1975.
6. May 1976 The Fords purchased the property by warranty deed from the Wests and the corporation. Southwest Savings Association took a note and deed of trust to secure its loan to the Fords.
The court found that the warranty deed contained an assumption of the original $55,000.00 lien and stated further consideration of an additional loan by West, Inc. of $25,000.00. The court further found that contemporaneously with the warranty deed, the corporation executed a note and deed of trust to Irving Savings Association for the additional loan of $25,000.00 to the corporation and that both the warranty deed and deed of trust were filed in the deed records of Denton County, Texas on March 10, 1975. The court also found that the deed was a pretended sale of homestead property for the purpose of mortgaging the homestead for the debts of the corporation.
The court further found that the corporation was in the home building and land development business and that it was wholly-owned by Mr. and Mrs. West, with Mr. West acting as its chief executive officer. There was evidence that after the transfer of the home to the corporation the Wests continued to occupy it as their home but paid no rent. The corporation never demanded possession of the home. West testified the reason he and his wife transferred it to the corporation was to borrow an additional sum of money. The $25,000.00 was used in the business. West also testified that although the corporation assumed the payments on Irving Savings' first lien, both he and the corporation made the monthly payments to Irving Savings. He further testified that Irving Savings let him borrow the money only to enable him to generate the cash to pay off some things and it probably would have been advantageous from a tax point of view because of tax losses in the corporation. But there was also testimony by West that the reason he deeded the property to the corporation was to borrow money on his homestead, and that any tax benefit was only an incidental one.
Cecil W. Mayfield, Mayfield Building Supply's president, testified that West gave them a note representing amounts past due on the corporate account which had accrued prior to the date of the note. They sought security for the note and West suggested his personal home in which he and his family were living at the time although the record title was in the corporation. Mr. West told Mayfield he had put title in the corporation to avoid paying capital gains in the event he sold it because he had a loss carried forward in his operations. Mr. Feddock, Mayfield's credit manager, also testified to this effect. The trial court found that Mayfield Building Supply had knowledge that the Wests were occupying the property as their homestead when it took its deed of trust.
The trial court found that this deed of trust was not given to secure purchase money indebtedness or for improvements to the homestead. The court also found that the consideration for the deed of trust was pre-existing debts owed by the corporation and West, individually, to Mayfield Building Supply. There was also a finding that Mayfield's attorney searched the title records before the financing arrangements were made between it and the corporation.
West also testified that he gave Mayfield Building Supply the deed of trust to better secure them on the indebtedness he owed them and that Mayfield advanced no money to the corporation or to him personally.
The trial court found that the Wests continuously occupied the property as their homestead from March 20, 1974, to May 11, 1976. At the time of the sale to the Fords the first and second liens were paid off from the proceeds of the sale. Releases of those liens were obtained and filed for record. Mayfield Building Supply received no payments on its note and deed of trust.
In point of error no. 1 the trustee contends that the trial court erroneously permitted the Fords and Southwest Savings to make a homestead claim on behalf of the Wests because homestead rights are personal.
The Fords and Southwest argue that they were properly permitted to raise the homestead issue because of the prohibition contained in Tex.Const. art. 16 § 50 which states in part:
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 husband alone, or together with his wife; and all pretended sales of the homestead involving any condition of defeasance shall be void.
We conclude that the Fords were properly permitted to raise the homestead issue. A void instrument has no effect, even as to persons not parties to it, and its invalidity may be asserted by anyone whose rights are affected. J. P. Wooten Motor Co. v. First Bank of Swenson, 281 S.W. 196 (Tex.Comm'n App.1926, jdgmt adopted). Similarly, a purchaser has standing to assert that a judgment lien never attached to homestead property where the homestead had not been abandoned by his vendee. Hoffman v. Love, 494 S.W.2d 591 (Tex.Civ.App. Dallas) aff'd on other grounds, 499 S.W.2d 295 (1973).
The cases cited by the trustee are inapplicable. In Maxey v. Patterson, 82 S.W.2d 386 (Tex.Civ.App. Waco 1935, writ dism'd) the court states only that the privilege of occupancy of one who owns no fee interest is personal and does not pass to others by inheritance nor can it be conveyed. In Walters v. Thompson, 189 S.W.2d 766 () the original owners permitted a default...
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