in Re Rescue Concepts, Inc. , 498 S.W.3d 190 ( 2016 )


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  • Opinion issued June 7, 2016
    In The
    Court of Appeals
    For The
    First District of Texas
    ————————————
    NO. 01-15-00624-CV
    ———————————
    IN RE RESCUE CONCEPTS, INC., Relator
    Original Proceeding on Petition for Writ of Mandamus
    OPINION
    Real party in interest HouReal Corporation (“HouReal”) filed a lis pendens
    in conjunction with its original petition in the underlying suit.1 The relator, Rescue
    Concepts, Inc. (“Rescue”), filed a motion to expunge the lis pendens pursuant to
    Texas Property Code section 12.0071 and asked the trial court to tax costs against
    1
    The underlying case is The HouReal Corporation v. Rescue Concepts, Inc., Cause
    No. 2014-71749, in the 270th District Court of Harris County, Texas, the
    Honorable Brent Gamble presiding.
    HouReal in the underlying proceeding. The trial court denied the motion to
    expunge, and Rescue filed this petition for a writ of mandamus seeking to vacate
    the respondent trial judge’s order denying the motion to expunge. We conditionally
    grant the petition.
    Background
    Rescue and HouReal entered into a contract for the sale of a parcel of real
    property in Liberty County (the “Property”). Under the contract, HouReal was to
    buy the Property from Rescue for $12 million by the closing date of January 7,
    2015, but the sale never closed.
    On December 10, 2014, HouReal sued Rescue in Harris County. HouReal’s
    original petition listed the following three causes of action: (1) breach of contract
    seeking monetary damages for the attempted purchase of the Property;
    (2) attorney’s fees; and (3) an application for a temporary restraining order and a
    temporary injunction to prohibit Rescue from selling the Property or, alternatively,
    an order that Rescue pay the funds from any sale of the Property into the court
    registry. HouReal neither sought specific performance of the sale contract nor
    claimed that it owned the Property in its original petition.
    On April 20, 2015, HouReal recorded a notice of lis pendens for the
    Property in the Liberty County clerk’s records.        A properly filed lis pendens
    operates as constructive notice that a specific piece of real property is subject to a
    2
    pending lawsuit and that any interest acquired by a prospective buyer is subject to
    the outcome of the pending litigation. See TEX. PROP. CODE ANN. § 13.004(a)
    (West 2014).
    On April 29, 2015, Rescue moved to expunge the lis pendens under a
    statute mandating expunction when either: (1) the “pleading on which the notice
    [of lis pendens] is based” does not contain a real property claim or (2) “the [party
    filing lis pendens] fails to establish by a preponderance of the evidence the
    probable validity of the real property claim.” 
    Id. § 12.0071(c)(1)–(2)
    (West 2014).
    Specifically, Rescue argued that HouReal’s petition did not contain a real property
    claim because it sought only monetary damages for breach of contract for the
    failed sale. See 
    id. § 12.0071(c)(1).
    Alternatively, Rescue argued that, even if
    HouReal’s original petition asserted a real property claim, HouReal did not
    satisfy section 12.0071(c)(2) because it failed to establish the probable validity of
    this claim by a preponderance of the evidence. See 
    id. § 12.0071(c)(2).
    HouReal
    subsequently amended its petition to request that the trial court reinstate the sale
    contract and order Rescue to sell the Property to HouReal.            HouReal still
    requested, in the alternative, that Rescue pay the sale proceeds of the Property to
    the court and monetary damages for breach of contract and attorney’s fees to
    HouReal.
    3
    On May 26, 2015, HouReal filed its response to Rescue’s motion to
    expunge the lis pendens. HouReal’s response did not attach any evidence other
    than its notice of lis pendens and its original and amended petitions. HouReal did
    not present any evidence or argument that established the probable validity of a
    real property claim. It argued only that it had alleged a real property claim.
    Although the Texas Property Code expressly permits an evidentiary hearing in
    response to a motion to expunge a lis pendens, HouReal did not request such a
    hearing. See 
    id. § 12.0071(b)(1)
    (“The court may: (1) permit evidence on the
    motion to be received in the form of oral testimony[.]”).
    On June 12, 2015, the trial court held a hearing on the motion to expunge
    lis pendens at which no evidence was submitted. On July 13, 2015, the trial court
    signed an order denying Rescue’s motion to expunge lis pendens.
    Rescue then filed this mandamus petition seeking to have the trial court
    vacate its July 13, 2015 order denying its motion to expunge lis pendens and to
    enter an order expunging HouReal’s lis pendens and taxing costs against
    HouReal. Rescue’s petition claimed that the trial court’s July 13, 2015 order
    denying Rescue’s motion to expunge the lis pendens was an abuse of discretion
    primarily because HouReal failed to introduce evidence of the probable validity
    of its claim and its pleading did not contain a real property claim.
    4
    HouReal responded that: (1) the t r i a l court did not abuse its discretion by
    denying R es cu e ’s motion to expunge; (2) Rescue misinterprets section
    12.0071(c)(2); and (3) the live pleadings supported the trial court’s denial of
    Rescue’s motion to expunge lis pendens.
    Standard of Review
    Mandamus is an extraordinary remedy, available only when the relator can
    show both that: (1) the trial court clearly abused its discretion or violated a duty
    imposed by law; and (2) there is no adequate remedy by way of appeal. In re Ford
    Motor Co., 
    165 S.W.3d 315
    , 317 (Tex. 2005) (per curiam) (orig. proceeding);
    Walker v. Packer, 
    827 S.W.2d 833
    , 839–40 (Tex. 1992) (orig. proceeding). A trial
    court commits a clear abuse of discretion when its ruling is “so arbitrary and
    unreasonable as to amount to a clear and prejudicial error of law.” In re CSX
    Corp., 
    124 S.W.3d 149
    , 151 (Tex. 2003) (per curiam) (orig. proceeding) (quoting
    CSR Ltd. v. Link, 
    925 S.W.2d 591
    , 596 (Tex. 1996)).
    “Mandamus has been recognized as the appropriate remedy when issues
    have arisen concerning the issuance of notices of lis pendens.” In re Cohen, 
    340 S.W.3d 889
    , 900 (Tex. App.—Houston [1st Dist.] 2011, orig. proceeding) (internal
    quotation marks and citations omitted). Thus, there is no need for a relator to show
    that it lacks an adequate appellate remedy in the context of a dispute involving a lis
    5
    pendens. See Flores v. Haberman, 
    915 S.W.2d 477
    , 478 (Tex. 1995) (per curiam)
    (orig. proceeding).
    Lis Pendens
    “A lis pendens is a notice of litigation, placed in the real property records,
    asserting an interest in the property, and notifying third parties that ownership of
    the property is disputed.” In re Miller, 
    433 S.W.3d 82
    , 84 (Tex. App.—Houston
    [1st Dist.] 2014, orig. proceeding). The doctrine is codified in Property Code
    section 12.007(a):
    [D]uring the pendency of an action involving title to real property, the
    establishment of an interest in real property, or the enforcement of an
    encumbrance against real property, a party to the action who is
    seeking affirmative relief may file for record with the county clerk of
    each county where a part of the property is located a notice that the
    action is pending.
    TEX. PROP. CODE ANN. § 12.007(a) (West 2014); see In re 
    Miller, 433 S.W.3d at 84
    .
    The notice must contain certain information, including the style and cause
    number of the proceedings, the court in which it is pending, the names of the
    parties, identification of the kind of proceedings, and a description of the property
    affected. TEX. PROP. CODE ANN. § 12.007(b); see In re 
    Cohen, 340 S.W.3d at 892
    .
    A properly filed lis pendens is not itself a lien, but rather it operates as constructive
    notice “to the world of its contents.” TEX. PROP. CODE ANN. § 13.004(a); see also
    B & T Distribs., Inc. v. White, 
    325 S.W.3d 786
    , 789 (Tex. App.—El Paso 2010, no
    6
    pet.) (“The purpose of a notice of lis pendens is to put those interested in a
    particular tract of land on inquiry about the facts and issues involved in the suit and
    to put prospective buyers on notice that they acquire any interest subject to the
    outcome of the pending litigation.”) (citing Countrywide Home Loans, Inc. v.
    Howard, 
    240 S.W.3d 1
    , 4 (Tex. App.—Austin 2007, pet. denied)).
    A notice of lis pendens may be expunged, however, if certain procedures are
    followed and the trial court determines that the party filing the notice either has not
    pleaded a real-property claim or has not demonstrated the probable validity of the
    claim:
    (a) A party to an action in connection with which a notice of lis
    pendens has been filed may:
    (1) apply to the court to expunge the notice; and
    (2) file evidence, including declarations, with the motion to
    expunge the notice.
    (b) The court may:
    (1) permit evidence on the motion to be received in the form of
    oral testimony; and
    (2) make any orders the court considers just to provide for
    discovery by a party affected by the motion.
    (c) The court shall order the notice of lis pendens expunged if the
    court determines that:
    (1) the pleading on which the notice is based does not contain a
    real property claim;
    7
    (2) the claimant fails to establish by a preponderance of the
    evidence the probable validity of the real property claim; or
    (3) the person who filed the notice for record did not serve a copy
    of the notice on each party entitled to a copy under Section
    12.007(d). . . .
    TEX. PROP. CODE ANN. § 12.0071(a)–(c).
    At the hearing on the motion, the trial court may permit evidence in the form
    of oral testimony, and the trial court must then “rule on the motion for expunction
    based on the affidavits and counteraffidavits on file and on any other proof the
    court allows.” 
    Id. § 12.0071(b)(1),
    (e). After considering the evidence, the trial
    court must grant the motion for expunction of a lis pendens notice if the claimant
    failed “to establish by a preponderance of the evidence the probable validity of the
    real property claim[.]” 
    Id. § 12.0071(c)(2);
    Nat’l City Bank of Ind. v. Ortiz, 
    401 S.W.3d 867
    , 887 (Tex. App.—Houston [14th Dist.] 2013, pet. denied).
    Analysis
    The parties dispute whether HouReal properly pleaded a real property claim.
    Assuming without deciding that it did, HouReal failed to submit any evidence in
    its response to Rescue’s motion to expunge in the trial court. Thus, it necessarily
    failed to establish by a preponderance of the evidence the probable validity of its
    real property claim. Because HouReal failed to meet its evidentiary burden under
    section 12.0071(c)(2), the trial court abused its discretion in denying Rescue’s
    motion to expunge. See TEX. PROP. CODE ANN. § 12.0071(c)(2).
    8
    Mandamus relief is “the appropriate remedy when issues have arisen
    concerning the issuance of notices of lis pendens.” In re 
    Cohen, 340 S.W.3d at 900
    . Thus, because we hold that the trial court abused its discretion by denying
    Rescue’s motion to expunge HouReal’s notice of lis pendens under section
    12.0071, Rescue need not demonstrate the inadequacy of an appellate remedy. See
    In re Moody Nat’l Kirby Houston S, LLC, 
    412 S.W.3d 570
    , 571 (Tex. App.—
    Houston [1st Dist.] 2013, orig. proceeding) (“Mandamus has been recognized as an
    appropriate remedy when interlocutory issues have arisen concerning the issuance
    of notices of lis pendens.”).
    CONCLUSION
    Accordingly, we conditionally grant Rescue’s mandamus petition and direct
    the trial court to vacate its July 13, 2015 order denying Rescue’s motion to
    expunge lis pendens and to order HouReal’s notice of lis pendens expunged. We
    remand the case to the trial court for further proceedings consistent with this
    opinion. We are confident that the trial court will promptly comply, and our writ
    will issue only if it does not comply within thirty days of the date of this opinion.
    Evelyn V. Keyes
    Justice
    Panel consists of Justices Keyes, Brown, and Huddle.
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