Ron Sommers, as Chapter 7 Trustee for Alabama and Dunlavy, Ltd., Flat Stone II, Ltd., and Flat Stone, Ltd., and as Successor in Interest to Jay Cohen, Individually and as Trustee of the Jhc Trusts I and Ii v. Sandcastle Homes, Inc.
521 S.W.3d 749
| Tex. | 2017Background
- Cohen (trustee) sued to set aside allegedly fraudulent transfers of West Newcastle property and recorded notices of lis pendens describing the suit.
- Trial court twice ordered the lis pendens expunged (first for lack of a real-property claim; second for failure to show probable validity), and expunctions were recorded; one expunction was stayed by the court of appeals while on mandamus.
- Dilick sold Tract I to Sandcastle while the appeal/stay was pending and later sold Tract II to NewBiss after the second expungement; both purchasers asserted bona-fide-purchaser defenses relying on the expunctions.
- The court of appeals (divided) held that expunction erases all actual and constructive notice of the underlying claims; plaintiffs (later the bankruptcy trustee Sommers) challenged that view.
- The Texas Supreme Court reversed the court of appeals: it held the expunction statute nullifies notice and information derived from the recorded lis pendens but does not erase independent actual or other non‑derived notice; whether Sandcastle and NewBiss had independent notice is a fact issue precluding summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does an expungement of a recorded lis pendens erase all notice of the underlying suit, including independent actual notice? | Sommers: No — the statute only expunges the recorded notice and "information derived from the notice," not unrelated independent notice. | Sandcastle/NewBiss: Yes — expunction eliminates all notice of the claims and protects purchasers regardless of how they learned of the suit. | Held: Expunction removes the recorded notice and information derived from it, including actual/constructive notice tied to the recorded instrument, but it does not extinguish independent notice from other sources; whether independent notice existed is a fact question. |
Key Cases Cited
- Neely v. Wilson, 418 S.W.3d 52 (Tex. 2013) (standard of review for summary judgment issues)
- Valence Operating Co. v. Dorsett, 164 S.W.3d 656 (Tex. 2005) (summary-judgment standard)
- Douglas v. Delp, 987 S.W.2d 879 (Tex. 1999) (bankruptcy trustee has exclusive standing to assert estate claims)
- City of San Benito v. Rio Grande Valley Gas Co., 109 S.W.3d 750 (Tex. 2003) (generally only a named party may appeal)