Noble Mortgage & Investments, LLC v. D & M Vision Investments, LLC
340 S.W.3d 65
Tex. App.2011Background
- Property at 1923 Blodgett Street in Houston was purchased at a constable's sale to satisfy a county court judgment against Kenneth Banks, later claimed by Noble Mortgage and by D & M Vision Investments.
- Noble loaned money to Banks/Houston Kaco in 2007 secured by a deed of trust; Noble paid off prior liens from the loan proceeds but did not record a judgment against Banks in the real property records.
- Whitfield (and D & M, his assignee) acquired title via Whitfield’s foreclosure sale in 2007; Whitfield recorded deed under execution in December 2007 transferring to Whitfield and later to D & M.
- Noble foreclosed its mortgage on Houston Kaco’s note; Noble and Whitfield learned of competing claims only after Whitfield posted trespass notices.
- Trial court found D & M held title subject to Noble’s subrogation lien; Noble was not found to be a bona fide purchaser/mortgagee, and D & M was deemed entitled to possession.
- On appeal, Noble challenges the trial court’s findings on bona fide status, the effect of Rule 656 recording, and the validity of the subrogation lien and title allocation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is Noble a bona fide mortgagee/purchaser despite unrecorded claims? | Noble relied on good faith and lack of notice of unrecorded judgments. | D & M and Whitfields had unrecorded interests; Noble did not have notice. | Noble is a bona fide purchaser/mortgagee; D & M's title is void against Noble. |
| Does recording under Rule 656 constitute constructive notice under the Property Code? | Recording on the execution docket should be treated as record notice. | Rule 656 records are not 'filed for record' under 13.001; no constructive notice. | Rule 656 recording is not a statutory recording for constructive notice; Noble takes in good faith. |
| Does the lack of a proper abstract of judgment defeat Noble’s bona fide status? | Abstracts should provide notice; execution records may suffice. | Abstracts in Chapter 52 are the correct mechanism to give notice; execution docket is insufficient. | Recording via execution docket does not defeat Noble’s bona fide status; Noble is not bound by unrecorded judgments. |
| Did Noble have actual or constructive notice outside the chain of title affecting its good-faith status? | Noble should have known of the Financial Holdings Judgment or other unrecorded liens. | No evidence shows Noble had notice; good faith was maintained. | Noble took in good faith; other notice arguments fail. |
| Did the trial court err in concluding D & M possessed superior title and Noble’s subrogation rights? | D & M has superior title; Noble’s subrogation lien may be valid only to the extent proven. | Trial court erred by divesting Noble and by misallocating subrogation rights. | Court reversed; Noble entitled to possession and title; remanded for consistent judgment. |
Key Cases Cited
- Madison v. Gordon, 39 S.W.3d 604 (Tex. 2001) (bona fide purchaser standard; notice and good faith)
- Richards v. Suckle, 871 S.W.2d 239 (Tex.App.-Houston [14th Dist.] 1994) (unrecorded interest defeated by lack of notice)
- Houston First Am. Sav. & Mortg. v. Musick, 650 S.W.2d 764 (Tex. 1983) (bona fide purchaser protections for liens)
- Nguyen v. Chapa, 305 S.W.3d 316 (Tex.App.-Houston [14th Dist.] 2009) (chain-of-title notice; records provide notice)
- Sanchez v. Telles, 960 S.W.2d 762 (Tex.App.-El Paso 1997) (recording sufficient for notice; outside chain not binding)
- Permian Oil Co. v. Smith, 73 S.W.2d 490 (Tex. 1934) (recording of judgments; county clerk duties)
- Goggans v. Green, 165 S.W.2d 928 (Tex. Civ. App.-Texarkana 1942) (execution docket as evidence of writs; distinct from recording acts)
- Wilson v. Dvorak, 228 S.W.3d 228 (Tex.App.-San Antonio 2007) (abstract of judgment; creates lien and notice upon recording)
- Ford v. Exxon Mobil Chem. Co., 235 S.W.3d 615 (Tex. 2007) (constructive notice through recorded documents; chain of title focus)
- Cohen v. Hawkins, No. 14-07-00043-CV (Tex. App.-Houston [14th Dist.] 2008) (good faith concept in bona fide purchaser context)