2006 San Antonio, Texas

CASE LAW UPDATE Presented by DAVID A. WEATHERBIE Carrie, Cramer & Weatherbie, L.L.P. Dallas, Texas 16TH ANNUAL ROBERT C. SNEED LAND TITLE INSTITUTE NOVEMBER 30 & DECEMBER 1, 2006 SAN ANTONIO, TEXAS DAVID A. WEATHERBIE CARRIE, CRAMER & WEATHERBIE, L.L.P. EDUCATION: M B.A., Southern Methodist University - 1971 M Juris Doctor, cum laude, Southern Methodist University - 1976 M Order of the Coif M Research Editor, Southwestern Law Journal PROFESSIONAL ACTIVITIES: M Licensed to practice in the State of Texas M Partner - Carrie, Cramer & Weatherbie, L.L.P., Dallas, Texas ACADEMIC APPOINTMENTS, PROFESSIONAL ACTIVITIES, AND HONORS M Adjunct Professor of Law, Southern Methodist University School of Law / Real Estate Transactions - 1986 to 1995 M Council Member, Real Estate, Probate & Trust Section, State Bar of Texas M Member, American College of Real Estate Lawyers M Listed as 2003, 2004, 2005, and 2006 Texas Monthly “Super Lawyer” M Listed in Best Lawyers in America LAW RELATED PUBLICATIONS AND PRESENTATIONS: M Author B Weatherbie=s Texas Real Estate Law Digest (James Publishing, 1999) M Course Director for the State Bar of Texas, Advanced Real Estate Law Course – 1995 M Course Director for the University of Texas at Austin - Mortgage Lending Institute - 2002 M Author/Speaker for the State Bar of Texas, Advanced Real Estate Law Course - 1987 to present M Author/Speaker for the University of Texas at Austin - Mortgage Lending Institute - 1992 to present M Author/Speaker for Texas Land Title Institute - 1992 to present M Author/Speaker for Southern Methodist University - Leases in Depth - 1992 to 2000 M Author/Speaker for Southern Methodist University - Transactions in Depth - 1992 to 2000 M Author/Speaker for the State Bar of Texas, Advanced Real Estate Drafting Course M Panel Member for State Bar of Texas, Advanced Real Estate Transactions Course B 1997 M Author of “Annual Survey of Texas Law -- Real Estate,” 51 SMU L. Rev. 1321 (1998) and 52 SMU L. Rev. 1393 (1999). M Author/Speaker for the Houston Real Estate Law Council for 1998 to present CASE LAW UPDATE DAVID A. WEATHERBIE CARRIE, CRAMER & WEATHERBIE, L.L.P. DALLAS, TEXAS The case selection for this episode of Case Law Update, like all of them in the past, is very arbitrary. If a case is not mentioned, it is completely the author’s fault. In an effort to streamline the case discussions, various statutory and other references have been reduced to a more convenient shorthand. The following is an index of the more commonly used abbreviations. “Bankruptcy Code” – The Federal Bankruptcy Code, 11 U.S.C.A. §§ 101 et seq. “DTPA” – The Texas Deceptive Trade Practices Act, Texas Business and Commerce Code, Chapter 17. “UCC” – The Texas Uniform Commercial Code, Texas Business and Commerce Code, Chapters 1 through 9. “Prudential” – Prudential Insurance Co. of America v. Jefferson Associates, 896 S.W.2d 156 (Tex.1995), the leading case regarding “as-is” provisions in Texas. The Texas Property Code and the other various Texas Codes are referred to by their respective names. The references to various statutes and codes used throughout this presentation are based upon the cases in which they arise. You should refer to the case, rather than to my summary, and to the statute or code in question, to determine whether there have been any amendments that might affect the outcome of any issue. TABLE OF CONTENTS PART I MORTGAGES AND FORECLOSURES........................................................................ 1 PART II HOME EQUITY LOANS............................................................................................... 6 PART III PROMISSORY NOTES, LOAN COMMITMENTS, LOAN AGREEMENTS........ 10 PART IV GUARANTIES............................................................................................................. 15 PART V USURY.......................................................................................................................... 18 PART VI LENDER LIABILITY................................................................................................. 19 PART VII DEEDS AND CONVEYANCE DOCUMENTS........................................................ 20 PART VIII LEASES..................................................................................................................... 22 PART IX VENDOR AND PURCHASER ................................................................................... 29 PART X BROKERS.................................................................................................................... 46 PART XI TITLE INSURANCE AND ESCROW AGENTS...................................................... 46 PART XII ADVERSE POSSESSION......................................................................................... 51 PART XIII EASEMENTS........................................................................................................... 54 PART XIV RESTRICTIVE COVENANTS, SUBDIVISIONS, AND CONDOMINIUMS....... 59 PART XV HOMESTEAD............................................................................................................ 60 PART XVI CONSTRUCTION AND MECHANICS’ LIENS .................................................... 62 PART XVII AD VALOREM TAXATION................................................................................. 68 PART XVIII CONDEMNATION............................................................................................... 73 PART XIX MISCELLANEOUS................................................................................................. 74 CASE UPDATE DAVID WEATHERBIE CARRIE, CRAMER & WEATHERBIE, L.L.P. DALLAS, TEXAS and Borrower.” PART I MORTGAGES AND FORECLOSURES The fact that a person might receive an incidental benefit from a contract to which he is Canfield v. Countrywide Home Loans, not a party does not give that person a right of Inc., 187 S.W.3d 258 (Tex.App.—Beaumont action to enforce the contract. A third party may 2006, no pet.). Brian and Barbara Boyd bought recover on a contract made between other parties a house and got a loan from Countrywide’s only if the parties intended to secure some predecessor. Brian died and Barbara defaulted benefit to that third party, and only if the on the mortgage. contracting parties entered into the contract directly for the third party’s benefit. Therefore, Canfield ran a foreclosure listing service the intentions of the contracting parties are business and when he found the foreclosure controlling. A court will not create a third-party posting for the Boyd’s house, he entered into a beneficiary contract by implication. The transaction with Barbara whereby she conveyed intention to contract or confer a direct benefit to the house to Canfield’s relatives subject to the a third party must be clearly and fully spelled existing debt. out or enforcement by the third party must be denied. Consequently, a presumption exists that The Boyd’s loan was an HUD loan that parties contracted for themselves unless it restricted sales to investors or other non-HUD clearly appears that they intended a third party to approved owners. In order to keep the lender benefit from the contract. from knowing what was going on, Canfield had Barbara send some “form” letters that told the In this case, the court found nothing in lender she was going to be out of town for a the terms of any of the documents executed by while and to send any notices and payment the Boyds and North American intending to coupons to another address. She also requested confer a direct benefit on Canfield. that, on payoff of the loan, all of the existing Furthermore, because Canfield explicitly and escrow accounts be delivered to Canfield’s openly refused to formally assume the Boyds’ designee. financial obligation, Countrywide was under no duty to recognize any putative “successor” or After the loan payoff, Canfield asked “assign” of the Boyds that was not first Countrywide to send him the escrow balance. determined to be a “creditworthy owner- Countrywide declined to do so, and Canfield occupant” in compliance with the provisions sued. Canfield argued that he was the contained in the “notice to homeowner” “successor and assign” of the Boyds and was document. thus entitled to the escrow balances. Canfield’s argument was that his legal entitlement to the Lavigne v. Holder, 186 S.W.3d 625 escrow account funds derived from paragraph (Tex.App.—Ft.Worth 2006, no pet.). Lavigne twelve in the deed of trust and from the notation bought some property from Holder and the in the warranty deed from Barbara Boyd that purchase price was paid, in part, by a note “all escrows pass to grantee.” The pertinent secured by a deed of trust. The deed of trust language he pointed to was that the covenants contained a provision that prohibited creating and agreements of the deed of trust “shall bind encumbrances against the property other than and benefit the successors and assigns of Lender one that was subordinate to the deed of trust. 1 When Lavigne granted an easement, Holder for a temporary injunction must plead and prove accelerated the indebtedness and attempted to three specific elements: (1) a cause of action foreclose. Lavigne sued Holder to enjoin the against the defendant; (2) a probable right to the foreclosure sale, seeking both a temporary and a relief sought; and (3) probable injury in the permanent injunction. Both parties moved for interim. When the only relief sought on final summary judgment on the issue underlying trial is injunctive, the applicant must show a Lavigne’s request for

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