Year in Review • December 2023

Real Estate Law

By Roland Love

The year 2023 saw a number of reported cases regarding real estate but only a few that warrant special mention—that is, opinions practitioners need to know without question. A complete summary of 2023 reported cases can be found at D. Weatherbie, Case Law Update, State Bar of Texas, 45th Annual Real Estate Law, July, 2023.

The first case is PNC Mortgage v. Howard ¹ and addresses equitable subrogation. The original purchase money loan was refinanced and then assigned to PNC. However, the assigning lender accelerated the note before the assignment and then foreclosed the lien after the assignment. The Howards successfully sued to set aside the foreclosure, and PNC sought to recover on the debt. It was, however, more than four years since the debt had been accelerated, so PNC asserted equitable subrogation to the original debt and lien, arguing that the 30-year term of the original debt was still available to it. The Supreme Court noted that the original note was extinguished by the refinance and the only transfer to the refinancing lender was the security interest itself. PNC did not have decades to foreclose on a debt that had been accelerated more than four years earlier. PNC’s claim was time barred.

In Lennar Homes of Texas Land and Construction, Ltd. v. Whitely,² the original purchase contract included an arbitration provision for the limited warranties provided to the buyer. The deed included the arbitration provision and stated it ran with the land and was binding on successors and assigns. The court applied a “direct benefits estoppel” theory and found the contractual arbitration provision that was made a “subject to” provision of the original special warranty deed ran with the land. The subsequent purchaser found a mold issue with the property and filed suit against Lennar on various claims. Lennar asserted the right to arbitration, and the court reversed the court of appeals to uphold the right to arbitration. This case continues to receive much debate, especially as to an arbitration provision running with the land. Notably, two subcontractors were found liable not having the benefit to the arbitration provision and Lennar’s limited warranties.

Finally, Mitchell v. MAP Resources, Inc.³ deals with substituted service. Elizabeth Mitchell had been foreclosed out of her interest in the property via tax suit where she was served by posting citation on the courthouse door. Her heirs, the plaintiffs, argued the service was defective and violated Mitchell’s due process rights because her address was available in eight recorded deeds and in the county’s tax records. When public property and tax records include contact information for a defendant served via publication, a court hearing a collateral attack on a judgment on due process grounds may consider those records. In this case, service by posting did not comply with procedural due process.

One case is recommended to the reader for the entertainment value in the choice of words—Pecos County Appraisal District v. Iraan-Sheffield ISD.⁴ While the case deals with whether or not taxes were delinquent and the hiring by the school district of a lawyer based on a contingency, the word selections warrant a review. The collecting attorney was a “tax ferret” with a contingent fee arrangement—a “tax ferret contract”—and the taxpayer a “tax cheat” and the “progeny of Enron.” Admirably the court noted:

“We assume the parties mean no disrespect to the furry mammal itself, a beloved pet of Queen Elizabeth I, celebrated annually on National Ferret Day, April 2.”

Roland Love is the 2022 recipient of the State Bar of Texas Real Estate, Probate, and Trust Law Section Lifetime Achievement Award in Real Estate and the Texas Bar College Patrick A. Nester Award for Outstanding Achievement in CLE. In 2018, he was recognized by the Texas Land Title Association as the Outstanding Title Person of the Year. Love currently serves as chair of the State Bar of Texas Real Estate Forms Committee and as a member of the Texas Title Examination Standards Board. He is also a board member of the Texas Land Title Association and is the chair of its Regulatory Committee. He is a past chair of the State Bar of Texas Real Estate, Probate, and Trust Law Section and a fellow of the American College of Real Estate Lawyers.