REAL ESTATE LAW

FALL 2011

McKeehan v. McKeehan, W.L. 2706962; LEXIS 5181 (Tex. App.—Austin 2011)

Choice of Law: This case involved a choice of law question as well as an issue regarding joint tenancy with right of survivorship in an investment account. Three weeks prior to his death, Dale McKeehan and his wife, appellant Marcia McKeehan, executed a change request form to add her as joint owner of his interest in an investment program. In subsequent probate court proceedings regarding his estate, Dale McKeehan's children from a previous marriage successfully argued that Marcia McKeehan's joint ownership of the Ford investment held no survivorship rights under Texas law, and thus, the Ford investment should pass to Dale McKeehan's testamentary beneficiaries as part of his probate estate. Held: The Ford investment program was subject to a valid choice-of-law provision requiring that Michigan law be used to govern and construe the Ford investment program. Because under Michigan law Marcia McKeehan and Dale McKeehan held the Ford investment as joint tenants with right of survivorship, the Court rendered judgment that ownership of the Ford investment passed to Marcia McKeehan as the surviving joint owner. Michigan law governed the due to an express provision in the investment agreement. Despite the fact that there wasn’t an express provision of survivorship as was required by Texas law, under Michigan law a joint tenancy with right of survivorship was presumed under Michigan law when property was jointly owned by spouses. Upon Dale’s death the investment account was owned solely by Marcia as the survivor and was a non-probate asset.

Garcia v. Huerta, 340 S.W.3d 864 (Tex. App.—San Antonio 2011)

Arbitration: The Huertas obtained a home equity loan from Wells Fargo. They eventually defaulted on the loan and filed for bankruptcy. The debt was discharged in bankruptcy. Thereafter, Wells Fargo, through its counsel Langley & Banack, sought a non-judicial foreclosure of the home equity loan. The property was purchased by Wells Fargo at the foreclosure sale. Wells Fargo and its wholly-owned subsidiary, Premier Asset Services, then hired Garcia, a real estate agent, to evict the Huertas and to remove their belongings from their home. Premiere asked Garcia to use his best efforts to sell the property, and specifically directed him to clean up and repair the property. Following the eviction, the Huertas filed suit against Wells Fargo, America's Servicing Company, Langley & Banack, Jones, Premiere, and Garcia. All defendants, including Garcia, moved to compel arbitration. In response to the motions to compel arbitration, the Huertas asserted there was not a valid and binding arbitration agreement because, among other reasons, the agreement was only between “Wells Fargo Bank Texas, N.A.” and the Huertas, not any of the actual parties to the lawsuit. The trial court denied all of the motions to compel arbitration.

Held: The Settlement Agreement entered into by the Huertas and all defendants other than the real estate agent did not extend to waive Garcia's right to arbitration. Garcia was an agent of Wells Fargo and the Huertas' claims against Garcia related to his behavior as Wells Fargo's agent. Therefore, Garcia was entitled to enforce the arbitration agreement as an agent of Wells Fargo. Wells Fargo's express waiver of its own right to arbitrate contained in the Settlement Agreement did not operate to deny Garcia his right to enforce the arbitration agreement. Whether a party had waived his right to arbitration was a question of law that the Court reviewed de novo, giving no deference to the trial court's ruling. The Huertas did not allege waiver based on invocation of the judicial process; rather, they asserted that Wells Fargo's express waiver contained in the Settlement Agreement must be imputed to Garcia because he acted as an agent of Wells Fargo, and his right to arbitration was therefore derivative of Wells Fargo's. The Huertas cited no authority for this proposition, and the Court could not agree that one party's waiver of the right to arbitration can be imputed to another.

The Huertas did not allege that Garcia himself acted in such a way so as to repudiate his right to enforce the arbitration agreement, and there was no evidence in the record of a knowing or intentional waiver by Garcia. Additionally, the Huertas had not alleged that Garcia did anything inconsistent with an intent to rely on the arbitration process. To the contrary, Garcia had consistently invoked his right to enforce the arbitration agreement during the entire course of this proceeding. The mere fact that Wells Fargo subsequently waived “any rights to enforce the arbitration agreement as it ... relate[s] to any claims asserted against Garcia” does not mean that Garcia—who relied upon this Court's holding that he had the right to enforce the agreement—also waived his right to enforce the arbitration agreement. Further, there was a strong presumption against waiver under the FAA and any doubts regarding waiver were to be resolved in favor of arbitration. In re Bruce Terminix Co., 988 S.W.2d 702, 705 (Tex.1998). In light of this presumption, and acknowledging the lack of evidence of waiver by Garcia, the Court did not conclude that Wells Fargo's waiver of arbitration was imputed to Garcia. The Court reversed the judgment of the trial court, and remanded the cause to the trial court with instructions to enter an order compelling arbitration as to Garcia and staying all other proceedings pending the outcome of the arbitration.

Neary v. Mikob Properties, Inc., 340 S.W.3d 578 (Tex. App.—Dallas 2011)

Brokerage Fees: Appellants, Michael Neary and St. John's Holdings, Inc. (SJH), brought suit to recover a brokerage fee in connection with the sale of eight apartment complexes to appellee Comunidad Corporation in December, 2003. The final purchase agreement did not include a provision awarding a real estate broker's fee. Neary was a licensed real estate broker. SJH was a Texas corporation wholly owned by Neary, to which Neary had assigned his commissions. The appellees were individuals and entities connected with the 2003 transaction. As described by appellees, the buyer Comunidad Corporation was a Texas limited liability company that was created to take ownership and title to the subject apartments as part of the sale to Comunidad Corp. that closed on December 29, 2003. Certain limited partnerships owned by Kobernick and appellee Allan Klein were the sellers in the transaction. Appellee O. Creek Management, Inc., was “acting as trustee” for the Seller entities, according to appellees' brief. Appellee Preston Affiliates, Inc. was awarded the asset management contract for the apartments. Appellees asserted in their motion for summary judgment that the Term Sheet and other documents did not satisfy the requirements of §1101.806 (c) of RELA. Appellees also asserted that SJH was not licensed as a broker until November 1, 2007, and therefore could not file suit to recover a commission from the Comunidad transaction. §1101.806 (c) of the Occupations Code provides: “A person may not maintain an action in this state to recover a commission for the sale or purchase of real estate unless the promise or agreement on which the action is based, or a memorandum, is in writing and signed by the party against whom the action is brought or by a person authorized by that party to sign the document.”

Appellants conceded this provision applied to their claim for a commission, but contend that the statutory requirements had been met by reading together the Term Sheet and the e-mail messages. §1101.806 (c) was most recently considered by the court in Lathem v. Kruse, 290 S.W.3d 922 (Tex.App.—Dallas 2009, no pet.). Held: The Court explained that “strict compliance with RELA is required; the agreement to pay a real estate commission must be in writing or it is not enforceable.” Appellees conceded that the Term Sheet did not satisfy RELA. The Court noted that the Term Sheet included a statement that it was “a guideline only, and is not binding.” The Term Sheet had additional deficiencies including failing to identify the seller and was signed by Neary who was not named as a purchaser. None of the writings relied on by Neary to comprise the memorandum satisfying the statute of frauds contained information to establish he had authority to sign on behalf of the purchasers. Additionally the Term Sheet did not contain a definite commission and the name of the broker to be paid. The Term Sheet also failed to identify the property with reasonable certainty. While a metes and bounds description was not necessary, the writing must furnish the data to identify the property with reasonable certainty. Parol evidence may be used to explain or clarify the written agreement, but not to supply the essential terms. Appellants argued that the final purchase agreement further identified “Harris County, Texas” as the location of the apartment complexes, and the property was “more particularly described in Exhibit A” to the agreement. Exhibit A was not attached to the copy of the agreement appellants referenced in the record. We question whether the property had been described with “reasonable certainty” as required under RELA. The court did not decide that issue, however, because the Term Sheet was insufficient under RELA for the reasons already discussed. The Court concluded that because there was no contract meeting the requirements of RELA, summary judgment for appellees was proper.

Noble Mortgage & Investments, LLC v. D & M Vision Investments, LLC, 340 S.W.3d 65 (Tex. App.—Houston [1^st Dist.] 2011)

Bona Fide Purchaser: Danny Whitfield (“Whitfield”) purchased property at an execution sale held to satisfy a county court judgment against the then owner, Kenneth Banks (“Banks”). The plaintiff, D & M Vision Investment (“D & M”), a company owned by Whitfield and an assignee of title to the property, filed a trespass to try title action against Noble Mortgage (“Noble”), another party claiming later-acquired title to the same property. Noble counterclaimed against D & M and filed cross-claims against Whitfield and his wife, seeking title to the property or, alternatively, a subrogation lien. Through a series of transactions involving the subject property, Noble Mortgage had obtained an interest in the property on November 2, 2007 when it entered into a Deed of Trust with Banks that was recorded in the real property records of Harris County. However, unbeknownst to Noble, on October 30, 2006, Financial Holdings, Inc. had obtained a default judgment against Banks in the County Civil Court at Law No. 2 of Harris County, Texas. Financial Holdings did not file an abstract of that judgment in the real property records. It did, however, obtain an execution and order of sale on July 5, 2007, which resulted in a constable's sale of the property on September 4, 2007. The high bidder was Whitfield. The sale was documented in the litigation records in the County Civil Court at Law No. 2 by the constable's filing of a “return of execution” on September 11, 2007. On November 14, 2007, the constable prepared a deed transferring the property to Whitfield, which Whitfield recorded in the real property records on December 31, 2007. That December 31, 2007 filing was the first time any reference to the Financial Holdings Judgment, lien, or sale to Whitfield appeared in the real property records, and it was after Noble's interest was recorded in the real property records. On January 14, 2008, the Whitfields transferred title of the property to their company D & M. After filing D & M's deed in the real property records, Whitfield posted “No Trespassing” signs at the property. Around the same time, Noble foreclosed on Houston Kaco's note secured by the property. Upon finding Whitfield's signs on the property, Noble's owner, Darrell Daik, called Whitfield and, for the first time, the parties discovered that they had competing claims to title of the property.

Noble challenged the trial court's factual finding and legal conclusion that “Noble Mortgage is not a bona fide purchaser or mortgagee as against Danny K. Whitfield, Sr.'s prior claims.” Noble also challenged, among other conclusions, the trial court's determination that the “filing of the Execution and order of Sale and the Officer's Return of Execution on the sale of the Property to satisfy the Judgment in the records of the Harris County Clerk satisfied the recording statute of the Texas Property Code.” Held: In a matter of first impression, a recording in the execution docket was held not to be a recording for purposes of importing constructive notice to subsequent creditors and purchasers; and the evidence failed to establish that Noble had notice that an unrecorded money judgment in the County Court of Law records existed.