Foy and Betty Jean Crockett v. Eunice Elaine McSwain

11th Court of Appeals Eastland, Texas Opinion Foy and Betty Jean Crockett Appellants Vs. No. 11-00-00374-CV B Appeal from Erath County Eunice Elaine McSwain Appellee Following a bench trial, the trial court rendered judgment that Eunice Elaine McSwain had a valid first lien on 12.04 acres of land in Erath County. The trial court ordered the judicial foreclosure and sale of the land to satisfy a judgment debt owed to Eunice under a divorce decree. The trial court also entered a take-nothing judgment against Foy and Betty Jean Crockett on their counterclaim for a declaratory judgment that they had a superior lien against the land. The Crocketts argue that the trial court erred in finding that Eunice had a lien against any part of the land. The Crocketts also argue that the trial court should have entered a declaratory judgment that they are subrogated to the rights of the Internal Revenue Service (IRS) and have a superior lien against the 12.04 acres. Finally, the Crocketts contend that the trial court erred in awarding Eunice attorney=s fees and in failing to award them attorney=s fees. We reverse the trial court=s judgment, rendering judgment in favor of the Crocketts on their claim and remanding the case to the trial court for a decision on attorney=s fees. Background Facts Eunice and Michael Ray McSwain were divorced on November 13, 1986. The agreed judgment entered in that case includes the following provisions: Petitioner, MICHAEL RAY McSWAIN, is awarded the following as Petitioner=s sole and separate property, and Respondent is divested of all right, title, interest, and claim in and to such property: (1) The following real property: The unfinished house consisting of foundation, walls and roof situated on the following described property, to wit: [the 12.04 acres]. (9) The business known as 3-WAY SERVICE. Respondent, EUNICE ELAINE McSWAIN, is awarded the following: (12) In consideration for Respondent transferring and conveying all of her right, title and interest in the business known as 3-Way Service, Inc., and her interest in the homestead [the 12.04 acres], Respondent shall receive the sum of FORTY THOUSAND AND 00/100 DOLLARS ($40,000.00) payable as follows: Five Thousand and 00/100 ($5,000.00) being paid each year in equal monthly installments for a period of eight (8) years. The payments from Petitioner to Respondent are to be secured by a lien on the property awarded to Petitioner in Paragraph 1, Page 6 of this Decree [the 12.04 acres]. Although the divorce decree ordered Eunice to execute certain documents to effect the transfer of her interest in the land and 3-Way business to Michael, the record indicates that nothing was done. The trial court found that Michael made no payments on the $40,000 note. The IRS filed a federal tax lien on the property in October 1989 because Michael had failed to pay withholding taxes for 3-Way Service, Inc. during the last quarter of 1985 and all four quarters of 1986. By July 31, 1995, Michael=s tax liability was $94,550.44, including penalty and interest. The IRS accepted Michael=s compromise offer to pay $45,000 in satisfaction of the entire claim. The Crocketts loaned the $45,000 to Michael and Susan, secured by a lien in a deed of trust on the 12.04 acres after Michael and Susan had declared the 12.04 acres to be non-homestead property. Michael subsequently died. On April 4, 1997, Eunice filed this in rem action to foreclose her Aequitable vendor=s lien@ on the property. She joined Susan and the Crocketts, among others, as defendants. In her pleadings and during the trial, Eunice maintained that she was seeking to enforce an equitable vendor=s lien that arose from the divorce decree. The Crocketts= position at trial was that the property was the homestead of Eunice and Michael; therefore, Eunice could not have had a lien on any part of the property except the one-half interest that she conveyed to Michael in the divorce. They also contended that, because the divorce decree failed to specify the amount of the $40,000 that was attributable to Eunice=s interest in the property, no lien was created against the property. Finally, the Crocketts argued at trial that they had been subrogated to the rights of the IRS and that those rights included a claim by the IRS against Eunice for the taxes. The trial court found that the divorce decree was unambiguous and created a superior express lien in favor of Eunice against the land. The trial court also found that Eunice=s lien was an owelty lien on the entire 12.04 acres. The trial court entered judgment for Eunice, denied any relief to the Crocketts on their counterclaim, and awarded attorney=s fees to Eunice. Analysis Eunice and Michael agreed to a division of their marital estate; that agreement was incorporated into an agreed divorce decree. An agreed judgment is both a contract and a judgment, and it is interpreted under the rules of contract construction. See Allen v. Allen, 717 S.W.2d 311, 313 (Tex.1986); McGoodwin v. McGoodwin, 671 S.W.2d 880, 882 (Tex.1984). We agree with the trial court that the divorce decree is unambiguous. Construction of an unambiguous contract is a question of law. Edwards v. Lone Star Gas Company, a Division of Enserch Corporation, 782 S.W.2d 840 (Tex.1990). We review the trial court=s conclusions of law de novo. See Hitzelberger v. Samedan Oil Corporation, 948 S.W.2d 497, 503 (Tex.App. - Waco 1997, writ den=d); Armbrister v. Morales, 943 S.W.2d 202, 205 (Tex.App. - Austin 1997, no writ). In their first issue, the Crocketts argue that any lien in favor of Eunice could only be against the one-half community interest that she conveyed to Michael in the divorce decree. The Crocketts also contend that, because no lien in favor of Eunice was created against Michael=s one-half of the homestead, their lien on his one-half of the 12.04 acres is superior to any lien claim of Eunice. We agree. Eunice does not dispute that the 12.04 acres was their homestead. The divorce decree declares that Eunice shall receive $40,000 for her Ainterest in the business known as 3-Way Service, Inc. and her interest in the homestead.@ The only land mentioned in the divorce decree was the 12.04 acres; therefore, the Ahomestead@ must refer to the 12.04 acres. Although the trial court found that Eunice=s lien was an express lien, there is no evidence that any express lien in Eunice=s favor was reserved or granted in any deed or deed of trust. The divorce decree simply states that the payments from Michael to Eunice Aare to be secured@ by a lien on the 12.04 acres Aawarded to@ Michael. Even when there is no document creating an express lien, if the purchase money is not paid to a spouse for conveying his or her homestead interest to the other upon divorce, a vendor=s lien arises by implication in favor of the conveying spouse to secure payment of the purchase money. McGoodwin v. McGoodwin, supra at 882. But whether express or implied, any lien in favor of Eunice could only be for a vendor=s lien to secure the purchase money owed for conveying her one-half of the homestead to Michael. Id. at 882; Magallanez v. Magallanez, 911 S.W.2d 91, 94-95 (Tex.App. - El Paso 1995, no writ). At the time of the McSwain divorce, the Texas Constitution only permitted liens against a homestead to secure purchase money debt, taxes due, or home improvement debts. TEX. CONST. art. XVI, ' 50. Michael continued to own his one-half of the homestead, and no lien was created against his one-half by the divorce decree. Cole v. Cole, 880 S.W.2d 477 (Tex.App. - Fort Worth 1994, no writ). Susan and Michael created a valid lien on the 12.04 acres in favor of the Crocketts; their claim on Michael=s one-half is superior to Eunice=s. The Crocketts= first issue is sustained. In their second issue, the Crocketts contend that, because the divorce decree failed to specify what portion of the $40,000 was attributable to Eunice=s conveyance of her one-half of the homestead, no lien was created in her favor against the 12.04 acres. The divorce decree clearly provides that the $40,000 was for her interest in the 3-Way business and her interest in the 12.04 acres, but there is no allocation of the purchase money between the two properties. Because this provision of the divorce decree is unambiguous, the trial court should not have considered extrinsic or parol evidence concerning the provision. See Wilson v. Uzzel, 953 S.W.2d 384, 388 (Tex.App. - El Paso 1997, no writ). The trial court erred in its findings of fact and conclusions of law that the $40,000 note and lien were consideration for Eunice=s interest in all of the marital estate or to equalize the division of the marital estate. Trison Investment Company v. Woodard, 838 S.W.2d 790 (Tex.App. - Dallas 1992, writ den=d), holds that an implied vendor=s lien can only arise to secure the specific purchase money amount that a spouse will receive for conveying his or her interest in real estate to the other spouse. An implied vendor=s lien does not arise on the real property if there is no apportionment of the consideration between the real property conveyed and the personal or other property conveyed. Id. at 792-93; Goodwin v. Smith, 84 S.W.2d 827 (Tex.Civ.App. - Beaumont 1935, writ dism=d). Even though Trison did not involve a homestead interest and even assuming that the McSwain divorce decree created an express lien, the reasoning of Trison is persuasive. The Trison court was dealing with the legal fiction of implying a vendor=s lien, and the court reasoned that vendor=s liens are given to secure the purchase money amount to be paid for the real estate interest. At the time of the McSwain divorce, Article XVI, section 50 only permitted liens against the homestead to secure purchase money debt, taxes due, or home improvement debts. The divorce decree provides that the lien was to secure the entire $40,000 and that the $40,000 was to be paid for Eunice=s interest in the 3-Way business and for her interest in the 12.04 acres. The divorce decree represents an attempt to create an unconstitutional lien to the extent of any consideration paid for Eunice=s interest in the 3-Way business because the record reflects that Michael continued to use the 12.04 acres as his homestead immediately after the divorce decree. Michael was made the managing conservator of Eunice=s son, and the divorce decree recognized Michael=s homestead interest by precluding foreclosure of Eunice=s lien until after the son reached 21 years of age. Because the 12.04 acres was Michael=s homestead, the divorce court could only impose a vendor=s lien for a specific amount that was to be paid for Eunice=s interest in the homestead. Cole v. Cole, supra at 484. The Crocketts= second issue is sustained. The trial court erred in finding that Eunice had an owelty lien. Eunice, in her pleadings, judicially admitted that she was requesting foreclosure of an Aequitable vendor=s lien.@ See Dutton v. Dutton, 18 S.W.3d 849, 853 (Tex.App. - Eastland 2000, writ den=d); Schoellkopf v. Pledger, 778 S.W.2d 897 (Tex.App. - Dallas 1989, writ den=d). Her pleadings did not request relief based on an owelty lien. Owelty liens are appropriate where the court cannot partition real estate into equal shares without materially injuring its value.[1] The court may divide the real property into unequal shares, order payment of an owelty to equalize the value of the shares, and then impose a lien on the greater share in favor of the recipient of the lesser share to secure the owelty payment. See Sayers v. Pyland, 161 S.W.2d 769, 772 (Tex.1942). There is nothing in the divorce decree to indicate that the lien was an owelty lien. To the contrary, the divorce decree states that the lien was to secure the $40,000 to be paid for Eunice=s interest in the 3-Way business and her interest in the homestead. And, although owelty liens are now expressly authorized by the Texas Constitution, Article XVI, section 50, at the time of the McSwain divorce, did not authorize owelty liens against homestead property. In their third and fourth issues, the Crocketts contend that the trial court should have declared that their lien claim is superior to any claim of Eunice and that they are entitled to their attorney=s fees. The evidence shows that Michael and Susan gave a valid lien on the 12.04 acres to the Crocketts and that the Crocketts were subrogated to the rights of the IRS against Michael. We need not decide whether the Crocketts were subrogated to any IRS rights against Eunice. The divorce decree failed to establish a lien in favor of Eunice. The trial court erred in failing to declare that the Crocketts have a lien on the 12.04 acres that is superior to Eunice=s claim. The Crocketts= third and fourth issues are sustained, except that we will remand the case to the trial court for a decision on whether attorney=s fees should be awarded to the Crocketts. The Texas Declaratory Judgments Act provides that, in any proceeding under the Act, the court may award Areasonable and necessary attorney=s fees as are equitable and just.@ TEX. CIV. PRAC. & REM. CODE ANN. ' 37.009 (Vernon 1997). The Act does not require an award of attorney=s fees to the prevailing party. Instead, the Act provides the trial court a measure of discretion in deciding whether to award attorney=s fees or not. Bocquet v. Herring, 972 S.W.2d 19 (Tex.1998); Commissioners Court of Titus County v. Agan, 940 S.W.2d 77, 81 (Tex.1997). Remand for a determination on the award of attorney=s fees is appropriate. In their fifth issue, the Crocketts contend that, because Eunice judicially admitted that her claim was an in rem action for judicial foreclosure of a vendor=s lien, the trial court erred in awarding attorney=s fees to her based on TEX. FAM. CODE ANN. ' 9.014 (Vernon 1998). The Crocketts are correct. Section 9.014 provides that a trial court has the discretion to award reasonable attorney=s fees only in an action to enforce a divorce decree. Eunice did not bring an action to enforce the terms of a divorce decree; Michael=s estate was not named as a defendant. The authority for an award of attorney=s fees in a judicial foreclosure action is found in the terms of the debt instrument creating the lien. See Jeffreys v. McGlamery, 96 S.W.2d 572, 576 (Tex.Civ.App. - Amarillo 1936, no writ). The divorce decree did not provide for attorney=s fees in the event of foreclosure. Our reversal of the trial court=s judgment also dictates a reversal of the award of attorney=s fees to Eunice. The Crocketts= fifth issue is sustained. This Court=s Ruling We reverse the trial court=s judgment. We render judgment that the Crocketts= lien claim on the 12.04 acres is superior to Eunice=s claim and remand the case to the trial court for a decision on whether attorney=s fees should be awarded. November 1, 2001 TERRY McCALL Do not publish. See TEX.R.APP.P. 47.3(b). JUSTICE Panel consists of: Arnot, C.J., and Wright, J., and McCall, J. [1]Owelty liens today can be used to effect an equal division of the entire marital estate. Article XVI, section 50; TEX. PROP. CODE ANN. ' 41.001 (Vernon 2000).