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holding that the complaint of failure to segregate was waived where it was not raised until after the trial court granted summary judgment awarding attorney’s fees
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No. 14-08-00352-CV
Memorandum Opinion filed June 25, 2009.
On Appeal from the 189th District Court Harris County, Texas, Trial Court Cause No. 2006-80850.
Panel consists of Chief Justice HEDGES and Justices ANDERSON and SEYMORE.
MEMORANDUM OPINION
This case involves the priority of competing liens on real property. Appellant, Red Rock Properties 2005, Ltd. ("Red Rock"), appeals the trial court's denial of its motion for summary judgment and the granting of two motions for summary judgment filed by appellee, Chase Home Finance, L.L.C. ("Chase"), that declared Chase's lien superior to any lien retained by Red Rock. In three issues, Red Rock contends that the trial court erred based on Red Rock's superior lien, in (1) denying its motion for summary judgment and granting Chase's motions and (2) awarding attorney's fees to Chase. We affirm.
BACKGROUND
The real property in dispute is a condominium that is a part of the Holly Hall Townhomes complex, developed in a 1980s construction project. On March 15, 1984, a condominium declaration ("the Declaration") for the Holly Hall construction project was recorded in Harris County. The Declaration created a homeowner's association and authorized the association to assess and collect monthly maintenance fees from each condominium owner. On July 11, 1984, Shealulu Liu purchased the condominium subject of this suit ("the Property"). As part of the purchase, Liu executed a promissory note in the amount of $72,150.00 payable to Holland Mortgage and Investment Corporation ("Holland mortgage note"). The Holland mortgage note was secured by a deed of trust on the Property.
On October 18, 2002, Liu and her husband, Richard Barbour (collectively "the Barbours"), refinanced the Holland mortgage note and executed a second promissory note in the sum of $107,200.00 payable to Community Home Loan, L.L.C. ("Refinanced note"). The lien securing the Holland mortgage note was released and the Refinanced note was secured by a deed of trust on the Property, recorded on October 23, 2002 in Harris County. The Refinanced note was disbursed as follows: (1) $53,595.08 to Community Home Loan, L.L.C., (2) $49,016.62 to the Barbours, and (3) $5,166.76 for closing costs associated with refinancing the mortgage. Thereafter, the Refinanced note was assigned to Chase Manhattan Corporation. Chase Manhattan Corporation merged with Chase, appellee in this appeal. As the successor to Chase Manhattan Mortgage Corporation, Chase is the owner and holder of the Refinanced note.
In or around November 2004, the Barbours failed to timely pay the monthly homeowner's dues and defaulted on their assessments. After posting the Property for a non-judicial foreclosure, the association's trustee sold the Property at a foreclosure sale to Red Rock and Glenn Sohl on December 6, 2005, for $35,000.00. Sohl subsequently conveyed his interest in the Property to Red Rock.
Because the Barbours' delinquent assessments totaled $2,510.00, the sale resulted in excess proceeds in the amount of $32,490.00. The association's trustee filed an interpleader action and interpleaded the excess proceeds with the court's registry. The Barbours, Red Rock, and Sohl were parties to the interpleader suit. On January 16, 2007, an amended judgment in the interpleader action was signed, directing that the excess proceeds be distributed as follows: (1) $2,959.00 to the association's trustee, (2) $11,010.50 to the Barbours, and (3) $18,520.50 to Red Rock.
In November 2006, the Barbours defaulted on the Refinanced note payable to Chase. After the Barbours failed to cure their default, Chase accelerated the note and scheduled the Property for a foreclosure sale. Before Chase could actually foreclose on the Property, Red Rock filed the instant lawsuit against Chase seeking a declaration that it had a superior interest in the Property. Red Rock also brought a trespass to try title claim against Chase. Chase answered the lawsuit and sought its own declaratory judgment to declare it as the superior lienholder. Chase also counterclaimed to recoup rental payments received by Red Rock on the Property and for unjust enrichment, judicial foreclosure, and various property-related causes of action.
Thereafter, Red Rock filed a traditional summary judgment motion seeking to be declared the superior lienholder. Chase responded to Red Rock's summary judgment motion and filed a traditional and no-evidence motion for summary judgment, also requesting to be declared the superior lienholder. The trial court denied Red Rock's summary judgment and granted Chase's motion, declaring Chase as the superior lienholder. The trial court also awarded $17,600.00 in attorney's fees to Chase. Chase filed a second summary judgment motion on its counterclaims for assignment of rents, unjust enrichment, and conversion. Red Rock did not respond to this motion. The trial court granted Chase's second motion with respect to the assignment of rents and unjust enrichment counterclaims and awarded Chase an additional $30,000.00. Chase subsequently nonsuited its remaining counterclaims against Red Rock. Red Rock later filed a motion for new trial, alleging, among other things, that the award of attorney's fees was improper because Chase failed to segregate its attorney's fees. The motion for new trial was denied.
On appeal, Red Rock raises three issues, asserting that the trial court erred in (1) denying its motion for summary judgment and granting Chase's motions and (2) awarding attorney's fees to Chase.
STANDARDS OF REVIEW
Red Rock moved for summary judgment under rule 166a(c), while Chase moved for summary judgment under both rule 166a(c) and rule 166a(i). Traditional summary judgment under civil procedure rule 166a(c) is proper only when a movant establishes that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c); Randall's Food Mkts., Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex. 1995); Mayer v. Willowbrook Plaza Ltd. P'ship, 278 S.W.3d 901, 908 (Tex.App. 2009, no pet.). In deciding whether there is a disputed issue of material fact, every doubt must be resolved in favor of the nonmovant, and evidence favorable to the nonmovant must be taken as true. Fort Worth Osteopathic Hosp., Inc. v. Reese, 148 S.W.3d 94, 99 (Tex. 2004).
Under rule 166a(i), a party may move for summary judgment on the ground that there is no evidence of one or more essential elements of a claim or defense on which an adverse party would have the burden of proof at trial. W. Invs., Inc., v. Urena, 162 S.W.3d 547, 550 (Tex. 2005); Nguyen v. Woodley, 273 S.W.3d 891, 897 (Tex.App. 2008, no pet.). To defeat a no-evidence motion for summary judgment, the nonmovant must produce summary judgment evidence raising a genuine issue of material fact. Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 600 (Tex. 2004). A genuine issue of material fact exists if the nonmovant produces more than a scintilla of evidence establishing the existence of the challenged element. Id.
When, as here, both parties move for summary judgment and the trial court grants one motion and denies the other, we review the summary judgment evidence presented by both sides, determine all questions presented, and render the judgment the trial court should have rendered. Tex. Worker's Comp. Comm'n v. Patient Advocates of Tex., 136 S.W.3d 643, 648 (Tex. 2004). We must affirm a summary judgment if any of the summary judgment grounds are meritorious. Id.
LIEN PRIORITY
In its first issue, Red Rock contends that the trial court erred in denying its motion for summary judgment and granting Chase's motions because Red Rock is the superior lienholder. Specifically, Red Rock contends that it is the superior lienholder because its lien was created and recorded before Chase's lien. According to Red Rock, the assessment lien was created when the Declaration was recorded in 1984, prior to Chase's 2002 deed, and the association's 2005 foreclosure sale extinguished Chase's lien.
Generally, different liens upon the same property have priority according to the time of their creation. See AMC Mortg. Servs., Inc. v. Watts, 260 S.W.3d 582, 585 (Tex.App. 2008, no pet.); World Help v. Leisure Lifestyles, Inc., 977 S.W.2d 662, 668 (Tex.App.-Fort Worth 1998, pet. denied). This rule is known as "first in time is first in right." Windham v. Citizens Nat'l Bank, 105 S.W.2d 348, 351 (Tex.Civ.App. 1937, writ dism'd). However, the parties in the instant case dispute whether the assessment lien attached in 1984 when the Declaration was recorded, or subsequently when the Barbours defaulted on the monthly assessments in November 2004. Relying on Inwood N. Homeowners' Ass'n v. Harris, Red Rock contends that the assessment lien relates back to the Declaration and attached on the date in which the Declaration was filed. 736 S.W.2d 632 (Tex. 1987).
In Inwood, the Supreme Court of Texas determined the priority of competing interests on the same property. The issue of lien priority arose in the context of a conflict between an association's declaration that created assessment liens and a homeowner's homestead rights in the same property. Id. at 633-34. The Inwood court held that the association's interest was superior to the homeowners' homestead rights because the association's assessment lien attached when the original declaration was filed, before the homeowners took title, and because the assessment lien ran with the land. Id. at 635-36. In determining when the assessment lien attached, the Inwood Court looked to the parties' agreement in the original declaration, which created assessment liens on the date of the declaration. See id. at 634-35.
Likewise, we look to the condominium declaration in the instant case to determine whether the assessment lien attached when the Declaration was filed in 1984 or when the Barbours defaulted on the monthly assessments in November 2004. See id. Section 5.8 of the Declaration provides in pertinent part:
a. All common monthly assessments and special assessments assessed but unpaid by a Unit Owner for its share of Common Expenses chargeable to its respective Condominium Unit, including interest thereon at ten percent (10%) per annum, plus any attorney's fees incurred by the Association in order to enforce compliance by any Owner with the terms of this Declaration, the By-Laws, Articles of Incorporation, or Rules and Regulations of the Association, shall constitute a lien on such Unit superior (prior) to all other liens and encumbrances, except only for:
(1) All taxes and special assessments levied by governmental and taxing authorities; and
(2) All liens securing sums due or to become due under any prior recorded money mortgage, vendor's lien or deed of trust.
b. To evidence such lien the Association may, but shall not be required to, prepare written notice setting forth the amount of such unpaid indebtedness, the name of the Owner of the Condominium Unit and a description of the Condominium Unit. Such notice shall be signed by one (1) of the Board of Directors and may be recorded in the Office of the Clerk and Recorder of Harris County, Texas. Such lien for the Common Expenses shall attach from the date of the failure of payment of the assessment. . . .
The Declaration in the instant case created assessment liens only upon default of monthly assessments, whereas the Inwood declaration stated that the assessment liens attached on the date of the declaration. Accordingly, Inwood is factually distinguishable.
Under section 5.8(a) of the Declaration, the assessment deficiencies give rise to a lien when the monthly assessments are assessed, but unpaid. Section 5.8(b) further provides that an assessment lien attaches "from the date of the failure of payment of the assessment." When construing written instruments, a court's primary duty is to arrive at the parties' intentions. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003); Aghili v. Banks, 63 S.W.3d 812, 816 (Tex.App.-Houston [14th Dist.] 2001, pet. denied). Courts must not overthrow a written instrument's clear and explicit intentions. See Inwood, 736 S.W.2d at 634; see also Tenneco Inc. v. Enterprise Prods. Co., 925 S.W.2d 640, 646 (Tex. 1996) (reasoning that courts should not rewrite agreements to insert provisions parties could have included or imply restraints for which they did not bargain). Here, the clear and explicit intention reflected in section 5.8(a) and (b) is that the act of nonpayment gives rise to an assessment lien; nothing in section 5.8 or otherwise in the Declaration suggest than an assessment lien relates back to a previously recorded document or the date on which the Declaration was signed or recorded.
While we are confronted with the same legal issue as the Inwood court, i.e., when an assessment lien attached, the real property covenant in Inwood and the covenant in this case are not identical. Unlike the covenant in Inwood, the real property covenant in this case gave rise to a lien only upon default of monthly assessments. There is no basis in the Declaration for attaching the assessment lien in 1984. Because an assessment lien neither arose nor attached until the Barbours defaulted on their assessments, the earliest date in which an assessment lien could have attached was in November 2004, after Chase's lien attached to the Property.
Therefore, the assessment lien did not attach when the Declaration was filed 1984. Rather, it attached upon nonpayment of the monthly assessments, in or around November 2004. Accordingly, Chase is the superior lienholder. We overrule Red Rock's first issue.
We need not address the additional grounds raised in the parties' briefs as this particular ground is meritorious; however, we note that there is no merit to Red Rock's contention that Chase's lien is inferior with respect to a portion of the mortgage funds advanced to the Barbous by Chase. Section 5.9 of the Declaration provides that assessment liens are subordinate to any subsequent recorded mortgage "granted or created by the Owner of any Condominium Unit to secure the payment of monies advanced and used for the purpose of purchasing and/or improving such Unit." Relying on AMC Mortg. Servs. Inc. v. Watts, Red Rock argues that Chase's lien is not superior with respect to the part of the purchase money advanced directly to the Barbours because those funds were not used for the purchase or improvement of the Property. 260 S.W.3d 582 (Tex.App. 2008, no pet.). Watts does not support Red Rock's proposition and is not on point. In Watts, the issue was whether a lender was entitled to equitable subordination, and if so, whether appellees qualified as a bona fide purchaser for value based on lack of actual or constructive knowledge of the lender's claim. See id generally. The record in this case clearly reflects that Chase's mortgage was created for the purpose of refinancing the Barbours mortgage on the Property. Red Rock cites no authority for the proposition that Chase's lien is inferior to its own with respect to monies advanced directly to the Barbours. Accordingly, we reject this argument.
ATTORNEY'S FEES UNDER THE UDJA
Having found that Chase is the superior lienholder, we now turn to Red Rock's second issue disputing the availability of attorney's fees under the Uniform Declaratory Judgments Act. Red Rock argues that the trial court erroneously awarded attorney's fees to Chase because Chase's counterclaim is a trespass to try title suit in the guise of a request for declaratory relief. Because attorney's fees are not available in suits for trespass to try title, Red Rock argues that Chase was not entitled to recover attorney's fees.
A trial court's award of attorney's fees under the UDJA is reviewed for an abuse of discretion. Ridge Oil Co. v. Guinn Invs., Inc., 148 S.W.3d 143, 163 (Tex. 2004); Florey v. Estate of McConnell, 212 S.W.3d 439, 447 (Tex.App. 2006, pet. denied). In Texas, attorney's fees may not be recovered from an opposing party unless such recovery is provided by statute or by contract between the parties. Gulf States Utils. Co. v. Low, 79 S.W.3d 561, 567 (Tex. 2002). Under the UDJA, a court "may award . . . reasonable and necessary attorney's fees as are equitable and just." Tex. Civ. Prac. Rem. Code § 37.009. A declaration under the UDJA is appropriate "to settle and afford relief from uncertainty and insecurity with respect to rights, status, and other legal relations." Id. § 37.002(b). However, a party may not recover attorney's fees under the UDJA when the only issues, aside from attorney's fees, concern clearing of title or trespass to try title. Watts, 260 S.W.3d at 588; see also Sani v. Powell, 153 S.W.3d 736, 745-46 (Tex.App. 2005, pet. denied). The recovery of attorney's fees for trespass to try title is barred because it is not provided for by the property code. See Martin v. Amerman, 133 S.W.3d 262, 264 (Tex. 2004).
We agree with Chase that its counterclaim is not an action to determine title. Under the Texas Property Code, trespass to try title is used to determine title to lands, tenements, or other real property. Tex. Prop. Code § 22.001; Florey, 212 S.W.3d at 449. Chase's suit, by contrast, seeks adjudication of the validity and superiority of Chase's lien. Chase's pleadings reflect that it filed a suit under the UDJA because (1) "[a] justiciable controversy exists between Red Rock and [Chase] as to the rights and status of the parties." Chase further requested that the trial court declare (1) Chase's deed of trust a prior recorded deed under the terms of the Declaration, (2) Chase's deed of trust "a duly recorded first mortgage lien," (3) that "the . . . assessment lien did not attach to the Property until on or after November 10, 2004,"(4) Chase's deed of trust superior to the "assessment lien upon which the Holly Hall HOA sold the Property at foreclosure on December 6, 2005," (5) that "Red Rock's purchase of the Property at the December 6, 2005 foreclosure sale did not extinguish [Chase]'s lien against the Property. . . .," and (6) that "Red Rock acquired the Property at the December 6, 2005 foreclosure sale subject to [Chase]'s lien against the Property. . . ." The trial court construed the terms of the Declaration and Chase's deed of trust to determine which party was the superior lienholder. See Bonham State Bank v. Beadle, 907 S.W.2d 465, 467 (Tex. 1995) (reasoning that a declaratory judgment is appropriate if a justiciable controversy exists as to the rights and status of the parties and the controversy will be resolved by the declaration sought).
We recognize that the dispute over lien superiority in this case prospectively impacts possession of title. However, while contract and deed construction cases often implicate title, such cases are not automatically deemed trespass to try title suits. All property disputes are not necessarily barred under the UDJA. See Tex. Civ. Prac. Rem. Code § 37.004(a). In fact, Chase's claim to resolve a dispute over the superiority of competing liens is authorized by the terms of the UDJA:
A person interested under a deed, will, written contract, or other writings constituting a contract or whose rights, status, or other legal relations are affected by a statute, municipal ordinance, contract, or franchise may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract, or franchise and obtain a declaration of rights, status, or other legal relations thereunder.
Id. The central issue in this case was not a "cloud on title" as a trespass to try title action is intended to address. The trial court's judgment did not declare title, but rather construed the terms of the Declaration and Chase's deed of trust and determined the validity and superiority of two lienholders. See Aquaduct, L.L.C. v. McElhenie, 116 S.W.3d 438, 445 (Tex.App. 2003, no pet.) (concluding that superiority of competing liens is a proper subject for declaratory judgment). Chase's requested relief, and the relief afforded by the trial court, are a proper subject matter under the UDJA. We overrule appellant's second issue.
SEGREGATION OF ATTORNEY'S FEES
In its third issue, Red Rock contends that the trial court erroneously awarded attorney's fees to Chase because it failed to segregate the fees. Chase contends that Red Rock has waived its segregation argument because Red Rock did not timely dispute Chase's failure to segregate attorney's fees before the trial court. We agree.
Because attorney's fees must be authorized by statute or contract, a party presenting more than one claim in a single cause must segregate attorney's fees between recoverable and nonrecoverable claims. See Green Intern., Inc. v. Solis, 951 S.W.2d 384, 389 (Tex. 1997); AU Pharmaceutical, Inc. v. Boston, 986 S.W.2d 331, 336 (Tex.App.-Texarkana 1999, no pet.). However, if no one objects to the fact that the attorney's fees are not segregated as to specific claims, the objection is waived. Solis, 951 S.W.2d at 389; Hruska v. First State Bank of Deanville, 747 S.W.2d 783, 785 (Tex. 1988).
Chase filed two summary judgment motions in this case. Red Rock responded to the first motion but did not raise the segregation issue. Red Rock did not respond to Chase's second summary judgment motion. After the trial court signed both summary judgments in favor of Chase, Red Rock filed a motion for new trial, arguing for the first time that Chase was required to segregate its attorney's fees. Thus, we must determine whether Red Rock's motion for new trial preserved the issue of segregation of attorney's fees for appellate review.
Appellate procedure rule 33.1 requires that a party lodge a "timely request, objection, or motion" to present a complaint for appellate review. Tex. R. App. P. 33.1(a)(1); see also Solis, 951 S.W.2d at 389 ("[I]f no one objects to the fact that the attorney's fees are not segregated as to specific claims, then the objection is waived."); Hoxie Implement Co., Inc. v. Baker, 65 S.W.3d 140, 145 (Tex.App. 2001, pet. denied) (concluding that appellate rule 33.1 requires "objections to a trial court's proposed conduct be urged in a timely manner"). Chase filed two motions for summary judgment and presented evidence on its attorney's fees. Although Red Rock later objected to Chase's failure to segregate in a post-judgment motion, Red Rock made no objection while the issue of attorney's fees was considered by the trial court or prior to the award of attorney's fees. Red Rock was required to make a timely objection or motion and to alert the trial court of its objection to allow the court an opportunity to correct any alleged error. See Kleas v. BMC W. Corp., No. 03-05-00190-CV, 2008 WL 5264883, at *5-6 (Tex.App. Dec. 19, 2008, pet. denied) (mem. op.); Baker, 65 S.W.3d at 145-46 (Tex.App. 2001, pet. denied) (concluding that an objection "in a motion for new trial does not satisfy the contemporaneous objection rule if the complaint could have been urged earlier"). Because Red Rock failed to object to Chase's failure to segregate attorney's fees at the time in which the evidence of attorney's fees was presented and considered by the trial court, its objection is untimely and, thus, any error is waived. See Tex. R. App. P. 33.1(a)(1); see also Kleas, 2008 WL 5264883, at *5-6 (raising segregation of attorney's fees for the first time in a motion for new trial did not preserve issue for appellate review where party failed to object while the issue was litigated before the trial court); Baker, 65 S.W.3d at 145. We overrule Red Rock's third issue.
Having overruled all of Red Rock's appellate issues, we affirm the trial court's judgment.