Paull & Partners Investments, LLC v. John B .Berry, Patricia P. Berry, and Exbury Investments, LLC
558 S.W.3d 802
Tex. App.2018Background
- John and Patricia Berry bought and lived in a Houston residence (Exbury property) and obtained a homestead exemption. They later formed Exbury Investments, LLC and deeded the property to it shortly before Exbury borrowed $275,000 from Paull & Partners, secured by a deed of trust on the property.
- The deed recited nominal consideration; the Berrys continued to live in the home after closing and dispute who actually made loan payments. Paull inspected the property pre-closing and knew the Berrys remained in residence.
- The Berrys sued, seeking a declaration that the deed was a void “pretended sale” under Tex. Const. art. XVI, §50(c), contending the loan also violated home‑equity requirements in §50(a)(6) and seeking forfeiture of all principal and interest under §50(a)(6)(Q)(x).
- The trial court granted summary judgment for the Berrys: it declared the deed void as a pretended sale, held the loan violated multiple §50 provisions, declared the lien invalid, vested title back in the Berrys, and ordered forfeiture of principal and interest plus attorney’s fees.
- On appeal, Paull & Partners argued: (1) the Berrys failed to conclusively prove a pretended sale (lack of intent to vest title and a condition of defeasance), and (2) forfeiture of principal and interest is not an independent constitutional cause of action/remedy.
- The Court of Appeals reversed the summary judgment and remanded: it held genuine fact issues exist about intent and no conclusive evidence of a condition of defeasance; and it held forfeiture is not an independent constitutional remedy but must be pursued through contract or other legal claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the conveyance to Exbury was a void "pretended sale" under Tex. Const. art. XVI, §50(c) | Berrys: deed was a sham to secure a loan; they never intended to divest title and remained in homestead — so sale is void | Paull & Partners: deed was executed, delivered, recorded; evidence raises fact issues about intent to vest title and no express defeasance | Reversed: Berrys did not conclusively prove lack of intent to vest title or a condition of defeasance; fact issues remain for trial |
| Whether a condition of defeasance existed (seller’s right to reclaim title after debt repaid) | Berrys: equitable/title control as sole LLC members and transaction purpose imply defeasance | Paull & Partners: no express defeasance clause or contemporaneous agreement; equitable control does not equal pre‑existing defeasance | Reversed: no conclusive evidence of a condition of defeasance; movant failed to prove this element |
| Whether Paull & Partners had notice sufficient to render the transaction a pretended sale as a matter of law | Berrys: lender knew the property was homestead, the conveyance was immediate, and Berrys remained in residence — so lender was on notice | Paull & Partners: knowledge of occupancy and rapid timing do not conclusively show the lender knew title would not vest | Reversed: those circumstances are probative but do not conclusively establish pretended sale; issue for factfinder |
| Whether §50(a)(6)(Q)(x) creates an independent constitutional cause of action to forfeit all principal and interest | Berrys: sought forfeiture under that constitutional provision for lender’s noncompliance | Paull & Partners: forfeiture is not an independent constitutional remedy; it is a contractual-term remedy and must be litigated in contract/context | Reversed (also independently sustained): forfeiture is not an independent constitutional cause of action; remedy under §50 is invalidation of homestead lien, not automatic forfeiture of loan principal/interest |
Key Cases Cited
- Valence Operating Co. v. Dorsett, 164 S.W.3d 656 (Tex. 2005) (standard of review for traditional summary judgment)
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (when evidence is conclusive for summary judgment)
- Wood v. HSBC Bank USA, N.A., 505 S.W.3d 542 (Tex. 2016) (historical homestead protection and limits on constitutionally created remedies)
- Garofolo v. Ocwen Loan Serv., L.L.C., 497 S.W.3d 474 (Tex. 2016) (home‑equity terms are contractual; forfeiture not an independent constitutional remedy)
- Kyle v. Strasburger, 522 S.W.3d 461 (Tex. 2017) (forfeiture provision does not create independent constitutional cause of action)
- In re Perry, 345 F.3d 303 (5th Cir. 2003) (distinguishing abandonment and alienation; corporation conveyances can divest homestead character)
- Red River Nat’l Bank in Clarksville v. Latimer, 110 S.W.2d 232 (Tex. Civ. App.—Texarkana 1937) (fact issue on pretended sale; circumstances probative but not dispositive)
- Anglin v. Cisco Mortg. Loan Co., 141 S.W.2d 935 (Tex. 1940) (sale to corporation to obtain credit not automatically void)