Olivares v. Nix Trust

• Decision Date: 05 November 2003
• Docket Number: No. 04-02-00942-CV.,04-02-00942-CV.
• Citation: 126 S.W.3d 242
• Parties: Jose F. OLIVARES and Nancy C. Olivares, Individually and as Trustee, Appellants, v. Birdie L. NIX TRUST, Appellee.
• Court: Texas Court of Appeals

126 S.W.3d 242

Jose F. OLIVARES and Nancy C. Olivares, Individually and as Trustee, Appellants, v. Birdie L. NIX TRUST, Appellee.

No. 04-02-00942-CV.

Court of Appeals of Texas, San Antonio.

November 5, 2003.

Pepos S. Dounson, San Antonio, for appellants.

Jeffrey T. Cullinane, Cathy Raba Turcotte, Douglas W. Sanders, Oppenheimer, Blend, Harrison & Tate, Inc., San Antonio, for appellee.

Sitting: ALMA L. LÓPEZ, Justice, SANDEE BRYAN MARION, Justice, PHYLIS J. SPEEDLIN, Justice.

OPINION

Opinion by: ALMA L. LÓPEZ, Chief Justice.

This appeal is from the grant of the Birdie Nix Trust's ("BNT") Motion to Pay Judgment, under which the trial court ordered payment to BNT, as lienholder, from condemnation proceeds deposited in the registry of the court. The Olivareses present four issues on appeal: (1) whether Jose Olivares owned the property at the time BNT recorded its abstract of judgment; (2) whether the abstract of judgment substantially complied with the mandatory requirements to make it a valid and effective judgment lien; (3) whether BNT's judgment was dormant and barred by limitations when a writ of execution had issued on January 23, 1976, and no other writ was issued within 10 years; and (4) whether the trial court erred in denying the motion for adjudication of title of Nancy Olivares. We affirm the trial court's judgment.

BACKGROUND

Between 1966 and 1969, Jose F. Olivares ("Jose Olivares") acquired title to three properties near downtown San Antonio.¹ Tract 2 was encumbered by a recorded Vendor's lien and recorded deed of trust dated May 16, 1966, which secured a note payable to Ed Steves & Sons, Inc. ("Steves"), the prior owner. No release or transfer of these liens was ever recorded.

On November 24, 1975, BNT obtained a judgment against Jose Olivares and his father, Joe Olivares, Sr., in the amount of $20,921.45. BNT abstracted, recorded, and indexed the judgment in the Bexar County Real Property Records on March 15, 1976 in order to secure a judgment lien. The judgment lien attached to all property in Bexar County owned by Jose Olivares and his father.

On December 2, 1975, eight days after the BNT judgment was rendered, three non-judicial foreclosures were conducted, and the three tracts were auctioned to George Warner. On January 5, 1976, three substitute trustee deeds were filed as a record of these sales. According to the recitals in the substitute trustee deeds, Warner was also the foreclosing lienholder on these properties at the time of sale. However, the foreclosed deeds of trust held by Warner on Tracts 1, 2, and 3 were not recorded, and the alleged transfer or assignment to Warner of Steves's deed of trust on Tract 2 was also not recorded. Warner and his wife conveyed the three tracts to Nancy Carroll Olivares ("Nancy Olivares"), trustee², who is Warner's step-daughter and Jose Olivares's wife, in a warranty deed dated July 1, 1976 and recorded September 19, 1978.

On December 31, 1977, the Urban Renewal Agency of the City of San Antonio commenced condemnation proceedings against Jose Olivares on the three tracts of land, and an award based on the value of the property was deposited into the registry of the court. Jose Olivares, Nancy Olivares, and the Estate of George Warner appeared as owners and claimants. Seven lienholders asserted security interests in the properties at the time of condemnation. BNT filed a Plea in Intervention in the condemnation proceedings and sought to secure the proceeds in payment of its judgment lien. An appeal was made regarding the amount of the award, and the cause was transferred to the district court.

On February 16, 1979, a jury verdict concerning the value of the property was entered into judgment by the district court, and the increase in value was ordered deposited into the registry. Since the interest of each of the owners and claimants was not readily ascertainable, the court ordered lienholders to be paid by the district court upon proper application for withdrawal. The nature of these interests were to be later determined in a proper Motion for Adjudication To Question Title.

The determination of the priority of title and the payment of the condemnation proceeds sat dormant until March 27, 2002, when Nancy Olivares filed an Application for Withdrawal of Funds from the registry in Probate Court No. 1. The probate court refused to rule on the application, and on April 3, 2002, Nancy Olivares filed a Motion for Adjudication To Question of Title in the 225th Judicial District Court. On July 9, 2002, BNT filed a Motion for Payment of Judgment. Based on its findings³, the trial court denied Olivares's motion, granted BNT's motion, and ordered payment to BNT on its judgment lien, accrued interest, and attorneys fees.

LEGAL OWNERSHIP WHEN BNT'S ABSTRACT OF JUDGMENT WAS RECORDED

In their first issue on appeal, the Olivareses attack BNT's entitlement to condemnation funds on the grounds that BNT's judgment lien could not attach to the three properties. The Olivareses contend that Jose Olivares did not own the three parcels of real property when, on March 16, 1976, BNT recorded its Abstract of Judgment, and as such, BNT did not have a valid lien on the property or entitlement to condemnation proceeds.

The Olivareses contend that legal title was transferred from Jose Olivares to Warner through three substitute trustee deeds. These deeds purport to convey property to Warner in a foreclosure sale executed under the authority of three deeds of trust held by Warner. Both the foreclosure sale and the filing of the substitute trustee deeds occurred before March 15, 1976, when BNT recorded its abstract of judgment. However, there are no deeds of trust or appointments of substitute trustees on record to provide authority for the execution of the substitute trustee deeds.

A deed of trust does not pass legal title, but only equitable title. Farm Credit Bank v. Snyder Nat'l Bank, 802 S.W.2d 709, 713 (Tex.App.-Eastland 1990, writ denied). In a deed of trust, the mortgagor conveys only the equitable title and retains the legal title, whereas a sale transfers legal title. Id. In executing the foreclosure deed, the trustee merely effects the transfer of legal title from the debtor to the foreclosure purchaser. Sandel v. Burney, 714 S.W.2d 40, 41 (Tex. App.-San Antonio 1986, no writ).

However, the power of a trustee to sell the property is derived solely from the deed of trust and can only be exercised in strict compliance with the note and conditions of sale. Bonilla v. Roberson, 918 S.W.2d 17, 21 (Tex.App.-Corpus Christi 1996, no writ). The trustee must pursue the terms of the trust instrument, the provisions of law relative to the sale, and the details prescribed as to the manner of the sale. Conversion Prop., L.L.C. v. Kessler, 994 S.W.2d 810, 813-14 (Tex.App.-Dallas 1999, pet. denied). In addition, a purchaser at a foreclosure sale obtains only that title which the trustee has authority to convey. Bonilla, 918 S.W.2d at 21 (citing Durkay v. Madco Oil Co., 862 S.W.2d 14, 17 (Tex.App.-Corpus Christi 1993, writ denied)). Where no deed of trust is recorded, the scope and existence of the trustee's purported authority of sale is unknown, and a subsequent purchaser is unable to determine what title, if any, the trustee has authority to convey. The same is true where the substitution of a trustee is unrecorded. Thus, a gap in the chain of title arises when the trustee executes a conveyance without recorded authority to do so. See University Sav. Ass'n v. Springwoods Shopping Ctr., 644 S.W.2d 705, 706 (Tex. 1982) (stating that the failure to follow the terms of the deed of trust can give rise to an action to set aside the trustee's deed).

Similarly, in the context of a judicial sale, Texas courts have held that without proof of his power to sell, a sheriff's or constable's deed must be treated as a nullity. Atkinson v. Dailey, 238 S.W.2d 584, 587 (Tex.Civ.App.-Amarillo 1951, no writ) (citing Leland v. Wilson, 34 Tex. 79, 1871 WL 7358 (1870)). If the decree and the order of sale fail to authorize such a sale as the sheriff undertook to make, no title passes thereby. Id. (citing Trevino v. Fernandez, 13 Tex. 630, 1855 WL 4831 (1855)).

Here, the purported deeds of trust securing a lien in favor of Warner for Tracts 1 and 3 were not recorded nor were they produced at trial. Furthermore, the purported transfer of the Steves deed of trust for Tract 2 to Warner was neither recorded nor produced at trial. Because the three substitute trustee deeds were unsupported, legal title to the three tracts did not pass to Warner. Jose Olivares held legal title⁴ to the three tracts both when BNT recorded its abstract of judgment and when the land was condemned.⁵ The Olivareses' first issue is overruled.

STATUTORY COMPLIANCE OF BNT'S ABSTRACT OF JUDGMENT

In their second issue on appeal, the Olivareses contend that BNT's Abstract of Judgment did not substantially comply with the statutory mandatory requirements to make it a valid and effective judgment lien. Specifically, the appellants contend that BNT's Abstract of Judgment 1) failed to show the address of Jose Olivares in the record of the suit and 2) failed to show the address of Jose Olivares, the nature of the citation, and the date and place of service.

The purpose of an abstract of judgment is to create a lien against the debtor's property and to provide notice to subsequent purchasers and encumbrancers of the existence of the judgment and the lien. Citicorp Real Estate, Inc. v. Banque Arabe Internationale D'Investissement, 747 S.W.2d 926, 929 (Tex.App.-Dallas 1988, writ denied). It is well settled in Texas that it is the judgment creditor's responsibility to insure that the clerk abstracts the judgment properly. Caruso v. Shropshire, 954 S.W.2d 115, 116 (Tex.App.-San Antonio 1997, no pet.); Citicorp Real Estate, Inc., 747 S.W.2d at 929; Tex. Am. Bank/Fort Worth, N.A. v. S. Union Exploration Co., 714 S.W.2d 105, 107 (Tex.A...