Bank of America v. Schwartz (In Re Hayes) - Appellate Brief

Case: 05-50080 Document: 0051331875 Page: 1 Date Filed: 09/27/2005
NO. 05-50080
IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT
BANK OF AME RICA, N.A.,
Appellant
V.
HELEN G. SCHWARTZ, JOHN HENDERSON

AND ELIZABETH HAYES,
App ellees
Appealed from the United States District Court

for the Western District of Texas
San Antonio Division
BRIEF OF APPELLEE, JOHN HENDERSON
Cathy J. Sheehan
PLUNKETT & GIBBON, INC.
Renaissance Plaza, Suite 1100
70 N .E. Loop 410
San Antonio, Texas 78216
Phone : 210/734-7092
Fax : 210/734-0379
ATTORNEY FOR APPELLEE,

JOHN HENDERSON
CERTIFICATE OF INTERESTED PARTIES
The undersigned counsel of record certifies that the following listed persons and
entities have an interest in the outcome of this case . These representations are
made in order that the Judges of this Court may evaluate possible disqualifications
' or recusal .
' 1 . BANK OF AMERICA, N .A. ("APPELLANT"), Creditor/Appellant,

represented by Richard D . Brady, Barrett Burke Wilson Castle Daffin
' & Frappier, L .L .C ., 1900 St . James Place, Suite 500, Houston, Texas
~ 77056.
' 2 . JOHN HENDERSON ("HENDERSON"), Appellee, represented by

Cathy J . Sheehan in the appellate court and Nina E . Henderson in the
trial court, Plunkett & Gibson, Inc ., 70 N.E. Loop 410, Suite 1100,
' 3 . HELEN G . SCHWARTZ ("Scxw Ax'rz"), Appellee, represented by

Helen G. Schwartz, Chapter 7 Trustee, Habbeshaw, Kalmans &
Schwartz, P .C., 9901 IH 10 West, Suite 770, San Antonio, Texas
78230
' 4. ELIZABETH HAYES ("APPELLEE/DEBTOR" or "HAYES"), Appellee,

represented by Johnny W . Thomas, 1153 E . Commerce, San Antonio,
' Texas 78205
Cathy J . Sheehan
State Bar No . 18174460
PLUNKETT & GIBBON, INC .

t
70 N.E. Loop 410, Suite 1100
(210) 734-7092 Telephone
(210) 734-0379 Facsimile
ATTORNEY FOR APPELLEE,

JOHN HENDERSON
11
STATEMENT REGARDING ORAL ARGUMENT
Appellee asserts that oral argument is unnecessary in the present case . The
issues are not complex and the controlling principles of law are clear .
' Accordingly, Appellee maintains that this case should be placed on the Court's
summary calendar .
iii
TABLE OF CONTENTS
PAGE
CERTIFICATE OF INTERESTED PARTIES . . .. .. . . . .. .. .. .. . . .. . . . . . . .. .. . . .. .. . . . . .. .. . . .. . . . .ii
STATEMENT REGARDING ORAL ARGUMENT . . . . . . . . . . . .. .. .. .. . . . . .. .. . . . . .. .. .. .. .. .iii
TABLE OF CONTENTS . . . . . . . . . .. .: . . . .. .. .. .. .. .. .. .. . . . .. .. .. . . .. . . . .. . . . . .. .. .. .. . . . . .. .. .. . . . . . . .. .. .. . iv
TABLE OF AUTHORITI ES. . . . .. .. . . . .. . . .. .. .. .. .. .. . . . .. .. .. .. .. .. . . . . . . . .. .. . . .. . . . . . . .. .. . . . . . . .. .. .. . vi
JURISDICTIONAL STATEMENT .. . . .. . . . . .. .. .. . . .. . .. .. .. .. . . . . .. . . . .. . . . . . . . . . . . . .. .. . .. . . . .. .. .viii
I. REPLY TO APPELLANT'S ISSUES .. . . .. . .. .. .. .. .. . . .. . . . . . . .. . . . . . . . . . .. .. . . . . . . .. .. . . ..1
II. STATEMENT OF THE CASE . . . .... .. .. .. . . .. . . . .. . . .. .. .. .. . . . . . . .. . . . . . . . . . . . . . . .. . . . .. . . . . .. 3
III. STATEMENT OF THE FACTS . . .. . . . . . .. . . .. . . . .. . . . . .. .. .. . . . . . . . . . . . . . . . . . . . . . . .. . . . .. . . . . . . 4
IV . STANDARD O F REVIEW . . . .. .. . . .. . . . .. .. . . .. . . . ... . . . .. .. .. . . . . . . .. .. .. . . . . . .. . .. .. . . . ... . . . . . 6
V. SUMMARY O F THE ARGUMENT . .. .. .. .. . . .. . . . .. .. .. .. . . . . .. .. .. . . .. .. .. .. .. . . . . .. .. .. . 7
A. Standard for granting Motions for Summary

Judgment . . . . . . . .. .. .. .. .. . . . .. .. .. .. .. . . . .. .. .. .. .. .. .. .. . . . .. .. .. .. .. . . .. .. .. .. .. .. .. .. .. .. .. .. .. . 7
B . Summary Judgment was Properly Granted . .. .. .. .. . . .. .. . . . . .. . . .. . . .. .. . . .. .. . 7
VI. ARGUM ENT AND AUTHORITIES . .. .. .. . . .. .. .. . . . .. .. . . .. . . . . .. .. . . . . .. . . .. . . .. .. . . . . .. . 9
A. Constructive or Inquiry Notice . . . .. . . . . . . .. .. . . . .. . . . . . . . . . . .. . . . . . . . . . . .. . . .. . . . . . . .. . 9
B . The same duty of inquiry applies to Appellant, as a

mortgagee, as would be imposed upon any other subsequent
purchaser of real property in these circumstances . . . . . . .. .. . . . .. . . . . . .. . . . . I l
C . Mr. Henderson presented uncontested evidence that the

possession of the property was "open, viable, and
unequivocal ." . . . . . .. .. . . . .. .. .. .. . ... . . . .. . . .. .. . . . . .. . .. .. . . . . .. .. .. .. .. . . .. .. .. .. . . .. .. .. .. ..12
iv
D. Mr. Henderson's actions were sufficient to bring the oral

conveyance of the property out of the statute of frauds and
to impose an equitable interest superior to the mortgage
lien of NationsBank . . . . .. .. .. .. . . .. .. . . . . . .. .. .. . . .. . . .. .. . . . . . . . . . . . . . . . . . . . . .. . . . . . .. . .. .14
E. Mr. Henderson's action have not been of a nature to

preclude him from asserting equitable title to real property
of a lien that is superior to the Appellant . .. .. .. . . . . . . .. .. .. . . . . . . . . .. .. . . . . .. .. . 15
F . The Bankruptcy Court did not commit reversible error in

mentioning the proximity of Bank of America to the real
property at issue . . . .. .. . . . . ... .. .. .. .. .. .. . . . . . . . .. . . .. .. .. .. .. .. .. .. :. .. . . .. .. . . .. .. .. .. .. .. .16
VII. CONCLUSION . . . .. .. .. .. . . . . . .. .. . . . . . .. .. .. . . .. .. . . . . . . . .. .. .. .. .. .. .. .. .. .. .. .. . . .. .. . . .. .. .. . . .. .. .16
VIII. PRAYER . . . . . . .. .. . . .. ... . . .. .. .. . . . .. .. .. .. .. .. .. . . . .. . . .. .. .. .. .. .. .. .. . . .. .. .. . . .. .. . . .. .. .. . . .. .. . 1 7
CERTIFICATE OF SERVICE . .. .. .. . . . .. .. .. .. .. .. .. . . . .. .. .. .. .. .. .. .. . . .. .. .. .. .. . . . . .. .. .. .. . . . . .. .. .18
v
TABLE OF AUTHORITIES
CASES : PAGE
Boyd v. United Bank,

794 S.W. 2d 839 (Tex . App-El Paso 1990) . .. . . . . .. .. . . . . . . . . .. .. .. . . . . . . .. . . . . . .. . . . . 10
Boyer v . Tauber,
834 S.W.2d 60 (Tex . 1992) .. . . . . . . . . . .. .. .. .. . . . .. .. .. .. . . . . .. . . . . . .. . . . . . . . . . . . . . . . . .. .. .. .. .. ..13
Cameron Compress Co . v. Jacobs,

10 S.W.2d 1040 (Tex . Civ. App.-Austin 1928, writ ref d) . . .. .. . . .. .. .. .. .. .. 14
Celotex Corp. v. Catrett,

477 U.S 317 (1986) . . . .. . . . .. .. .. .. .. .. . . .. . . . .. .. . . . . . . . . .. . . . . .. .. .. .. .. . . . . . . .. .. .. . . .. . . .. .. .. . . .. ..7
Chicago Title Ins . Co. v. Alfors,

3 S .W. 2d 164 (Tex . App .-Eastland 1999) . .. . . . . . . .. .. .. .. .. . . . . .. .. .. . . .. . . .. . .10, 10,12
Dallas Bldg. & Loan Ass 'n v . Patterson, et al.,

48 S .W. 2d 657 (Tex. App 1932) . .. . . . .. .. .. . . .. . . .. .. . . . . .. .. .. .. . . .. .. .. .. .. .. .. . . .. .. .. . . ..11
Douglas v. USAA,
79 F . 3d 1415 (5th Cir : 1996) . . . .. .. . . . . . . . . . . . . . .. .. .. . . . . . . . . . . .. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Forsyth v. Barr,
19 F . 3d 1527 (5th Cir .), cert. denied, U.S. 115 S . Ct 195 (1994) . . . . . . . . . . . . . . 7
Gen. Elec. Capital Corp . v. Acosta,

406 F .3d 367 (5th Cir. 2005). . . . . . .. .. . . . .. .. .. .. . . .. .. .. . . . . . . . . . . . . . . . . . . . . . . . .. . . .. . . . . .. .. .. .. . 6
Harris v. Potts,
545 S .W.2d 1 26 (Tex . 1976). .. . . . .. .. .. .. . . .. . . . .. . . .. .. . . . . . . . . . . . . . . . .. . . . . . . .. .. .. . . .. .. . . .. . 14
Henderson v. Hayes,
Cause No . 99-CI-15117,
166th Judicial District Court, Bexar County, Texas .. .. .. .. .. .. .. .. . . .. .. .. . . . . . 8,15
Hooks v. Bridgewater,
229 S .W. 1114 (Tex . 1921) . .. . . .. . . . . .. . . . .. . . .. .. . . . . .. . . . . . . . . .. . . . . . . . . . . .. .. . . . . . . . . . .. . . . . . .14
vi
In the Matter of Fairchild Aircraft Corp .,

6 F . 3d 1119 (5th Cir. 1993).. .. .. .. . . . . .. .. . . . .. .. . . . .. . . . . . .. . . . . . . . . . . . . . . . . . . . . . .. .. .. .. .. .. ..15
In re Gilchrist,
891 F. 2d 559 (5th Cir. 1990).. .. .. .. .. . . .. . . . . . . .. .. :. . . . . . . . . .. . . . . . .. . . . . . . . . . . . . . .. .. .. .. .. ..15
Paris Grocer Co . v. Bucks,

105 S .W. 174 (Tex. 1907) . . . . . .. . . . . .. . . . . . . .. . . . . .. .. .. . . .. . . . . .. .. . . . . . . . . . . .. . . . . . . . . .. .. . . 8, 10
Ragas v. Tennessee Gas Pipeline Co .,

136 F.3d 455 (5th Cir 1998) . . . . .... .. .. .. .. .. .. .. .. .. .. . . .. .. .. .. .. . . .. .. .. .. .. .. .. . . . . . . . .. .. .. . . . 7
Republic Nat 'l Leasing Corp. v. Schindler,

717 S .W.2d 606 (Tex . 1986) . . . . . .. .. . . .. .. . . .. .. .. .. .. .. . . . . .. .. .. .. .. . . .. .. .. . . .. . . . . . . . . . .. .. .10
Tomlinson v. Higgenbotham,
229 S .W. 2d 290 (Tex . 1950) . .. .. .. . . . .. .. .. .. .. . . .. .. .. .. . . . . .. .. .. .. . . . . .. .. . . .. . . . . . . . .. .. .. .13
Transcon . Gas Pipe Line Corp . v. Transp . Ins . Co.,

953 F.2d 985 (5th Cir . 1992). . .. .. . . . . . .. .. .. .. .. .. .. .. .. .. . . . . .. .. . . . . .. . . .. .. .. .. . . . . . . . .. .. .. . . . 6
United States v. Raddatz,

447 U. S . 667 (1980) ..................... ........................ ..... . .... . . .. . . . . . . . . . . . . . . . . . .. ....... .... .. .. .. .. 6
Westchester Fire Ins. Co. v. Haspel-Kansas Inv . P 'ship,

342 F.3d 416 (5th Cir . 2003)........................... .. .... .. .. .. . . . . . . . . . . . . . . . . . . . . . .. .. ....... . . . . . . . . . . . . 6
OTHER SOURCES :
FED .R. Crv P . 56(c).. . . . . . . .. .. .. . . . .. . . . . .. .. . . .. .. . . . .. . .. . . .. . . . . . . .. .. . . . . . . . . . . .. .. . . . . . . . . .. .. .. .. . . . . . . .. . . . 7
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VII
JURISDICTIONAL STATEMENT
This Court has jurisdiction of this appeal pursuant to 28 U .S .C . § 1291

because it is an appeal from a final Order of Dismissal from the United States
District Court, Western District of Texas, San Antonio Division, The Honorable
Xavier Rodriguez presiding. The District Court had jurisdiction of this case
pursuant to 28 U .S .C. § 158 .
Viii
NO. 05-50080
IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT
BANK OF AMERICA, N .A.,
Appellant
V.
HELEN G . SC HWARTZ, JOH N HENDERS ON

AND ELIZABETH HAYES,
Appellees
Appealed from the United States District Court

for the Western District of Texas
San Antonio Division
BRIEF OF APPELLEE, JOHN HENDERSON
TO THE HONORABLE JUDGES OF THE FIFTH CIRCUIT COURT OF

APPEALS :
Appellee, JOHN HENDERSON (hereinafter "Henderson") submits this
Brief in response to the brief filed by Appellant, Bank of America, N .A., and
would show unto the Court as follows"
I. REPLY TO APPELLANT'S ISSUES
1 . The District Court did not err in affirming the Bankruptcy Court's granting
of Defendant John Henderson's Motion for Summary Judgment and Plaintiff
Helen G . Schwartz's Joinder in the Motion for Summary Judgment as there
was no genuine issue as to any material fact .
2 . The District Court did not err in affirming the Bankruptcy Court's finding
that there was no genuine issue of material fact concerning whether John
Henderson held a valid and existing equitable claim against or in the real
property .
I
III , that John Henderson held a valid and existing equitable claim against or in
the subject real property .
4. The District Court did not err in affirming the Bankruptcy Court's finding
Henderson's actions constituted partial performance of an oral contract so as
to exclude the sale of the subject real property from the Statute of Frauds .
that John Henderson's actions constituted partial performance of an oral
contract so as to exclude the sale of the subject real property from the Statute
of Frauds .
that that there was no genuine issue of material fact concerning whether
John Henderson's possession of the subject real property was of such a
character so as to give Bank of America's predecessor in interest
constructive notice of John Henderson's equitable claim against or in the
subject real property at the time of the origination of its mortgage loan in
1998 .
that John Henderson's possession of the subject property was of such a
character as to give Bank of America's predecessor in interest constructive
notice of John Henderson's equitable claim against or in the subject real
property at the time of the origination of its mortgage loan in 1998 .
Henderson's possession of the subject real property was "open, visible, and
unequivocal" at the time that Bank of America's predecessor in interest
originated its mortgage loan in May of 1998 .
2
that John Henderson's possession of the subject real property was "open,
visible, and unequivocal" at the time that Bank of America's predecessor in
interest originated its mortgage loan in May of 1998 .
Henderson's equitable claim against or in the subject real property held a
priority higher than that held by the mortgage lien of Bank of America in the
subject real property .
that John Henderson's equitable claim against or in the subject real property
held a priority higher than that held by the mortgage lien of Bank of
America in the subject real property .
12 . The District Court did not err in affirming the Bankruptcy Court's
application of the same standard for constructive notice with regard to home
equity lenders and bona fide purchasers of fee simple absolute interests in
real property.
II. STATEMENT OF THE CASE
This case comes to this Court on appeal from the United States District Court's
Order affirming the Bankruptcy Court's summary judgment in favor of Henderson .
2CR77 ; App. 13 .
The bankruptcy trustee, Helen G . Schwartz, brought this original adversary
proceeding on September 11, 2002, in the United States Bankruptcy Court for the
Western District of Texas, on account of Debtor Jane Elizabeth Hayes' Chapter 7
bankruptcy filing . 2CR1 ; App. 3. On August 8, 2003, Appellee John Henderson
filed a Motion for Summary Judgment and a supplemental Motion for Summary
Judgment, and the court thereafter granted the motion, holding, that : 1) Bank of
3
America was not entitled to priority of interest since they had inquiry notice of
John Henderson's "open, visible, and unequivocal" possession and ownership of
the home before their asserted lien was consummated ; and 2) the underlying
property conveyance between John Henderson and Elizabeth Jane Hayes met the
partial performance exception to the Statute of Frauds . 2CR27; App. 6. The case
was appealed to the United States District Court and that court affirmed the
Bankruptcy Court's decision . 1 CR77-99 ; App . 13.
III. STATEMENT OF FACTS
In February of 1997, John Henderson, entered into an agreement with
Elizabeth Jane Hayes, Debtor, for the purchase of her home, located at 8523 Ridge
Garden, San Antonio, Texas 78239 . 2CR46-76 ; App. 6. Pursuant to the
agreement, Mr . Henderson paid Ms . Hayes the purchase price in two cash
installments of $40,000 .00 and $65,144 .14, dated March 12th and 18th, 1997,
respectively . Id. Mr. Henderson requested a General Warranty Deed for the
property, but Ms . Hayes never complied . Id.
After these payments were made, Mr . Henderson occupied the property
continually and at no time between April 1997 and May 1998 did he reside
anywhere else . Id. In July of 1999, Mr. Henderson discovered that on or about
May 26, 1998, Ms . Hayes executed a Deed of Trust in favor of NationsBank which
4
purported to secure a promissory note given by her to NationsBank in the amount
of $63,000 .00. 2CR37-45 ; App. 6.
In 1998, NationsBank, the predecessor in interest to Bank of America,
loaned money to Debtor Elizabeth Jane Hayes under the representation that she
was the true owner of the home. 2CR74-77, 81 ; App. 10. NationsBank conducted
a cursory examination of the property records and concluded that Ms . Hayes was
the owner of the property. 2CR74-75 ; App. 10. NationsBank did not perform any
inspection of the premises, nor did they contact the current occupant to ensure Ms .
Hayes' ownership of the home . Id.
On or about April 24, 2003, Helen G. Schwartz, Chapter 7 Trustee, filed a
Complaint to Determine Validity, Priority and Extent of Liens on the subject
property purchased by Mr. Henderson from Ms. Haye s. 2CR1 ; App. 3 ,
In Bankruptcy Court, Mr . Henderson asserted a priority equitable lien on the
real property even though the bank had a deed of trust in its favor based on Ms .
Hayes' securing a promissory note . 2CR5 ; App. 4. Mr . Henderson presented
evidence that he occupied the home and made visible repairs to the home to
support his equitable lien . 2CR46-47 ; App. 6. Prior to and after moving into the
property in question in April of 1997, Mr . Henderson worked on ongoing
construction projects, including installing siding and burglar bars . Id. He
purchased a new air conditioning unit as well . Id. Mr. Henderson always parked
5
his truck in the driveway, his mail was delivered to the property, and the phone
number at the house was registered to him. Id. Furthermore, he was registered
with City of Converse Police Department as the person authorized to turn off the
alarm for his neighbor, Mr . Jim Holbrook . Id. At no time after April of 1997 did
Ms. Hayes occupy all or any part of the property . Id.
IV. STANDARD OF REVIEW
This court reviews decisions from the district court by implementing the
same standard that the district court applied to the bankruptcy court's findings of
fact and conclusions of law . Gen . Elec. Capital Corp. v. Acosta, 406 F.3d 367, 372
(5th Cir . 2005). Thus, the district court's findings of fact are reviewed under the
clearly erroneous standard, and its conclusions of law are reviewed de novo . Id.
A factual finding is overruled for clear error only where there is a definite
and firm belief that a mistake has been committed . Westchester Fire Ins . Co. v .
Haspel-Kansas Inv . P'ship, 342 F.3d 416, 418-19 (5th Cir. 2003) . De novo review
requires an independent examination of the legal issues . United States v . Raddatz,
447 U.S . 667, 690 (1980) . However, determinations of state law by federal courts
are governed by the final rulings of the highest court of the state . Transcon . Gas
Pipe Line Corp . v. Transp. Ins. Co., 953 F.2d 985, 988 (5th Cir . 1992).
6
V. SUMMARY O F THE ARGUMENT
A. Standard for granting Motions for Summary Judgment.
Summary judgment is proper under FED . R. CIv P . 56(c) when there is no
genuine issue of material fact and the moving party is entitled to judgment as a
matter of law . Summary judgment will be granted when :
pleadings, depositions, answers to interrogatories, and admissions on

file, together with the affidavits, if any, show that there are no genuine
issues of material fact as to any material fact that the moving party is
entitled to judgment as a matter of law .
Celotex Corp. v. Catrett, 477 U.S 317, 323-325 (1986); Ragas v. Tennessee Gas
Pipeline Co., 136 F . 3d 455, 458 (5th Cir. 1998). Once the movant satisfies the
burden of showing that there is no issue of material fact, the burden shifts to the
non-moving party to identify specific evidence in the summary judgment record
that shows there is an issue of material fact . Douglas v. USAA, 79 F . 3d 1415,
1428 (5th Cir. 1996) ; Forsyth v. Barr, 19 F. 3d 1527, 1533 (5th Cir .), cert. denied,
U.S. 115 S. Ct 195 (1994) . .A material fact issue exists when the "evidence is such
that a reasonable jury could return a verdict for the nonmoving party." Id.
Unsubstantiated assertions will not meet the non-movants burden . Id.
B. Summary Judgment was Properly Granted
The district court properly affirmed the Bankruptcy Court's granting of the
motion for summary judgment. Numerous issues are presented for review, each
focusing on two inquiries : 1) did the conveyance of real property from Ms . Hayes
7
to Mr. Henderson meet the partial performance exception to the statute of frauds ;
and 2) did the overt conduct of Mr. Henderson put NationsBank on notice that he
was the true owner of the home?
In response to these issues, the bankruptcy court correctly held that the
conveyance of real property satisfied the partial performance exception to the
statute of frauds and that Mr . Henderson's open, exclusive, and visible possession
of the home placed NationsBank on inquiry notice that he was, in fact, the true
owner of the home . The Texas Supreme Court directly supports this finding in
Paris Grocer Co . v. Burks, wherein it is stated that "open, exclusive and visible
possession maintained by the holder of the unrecorded deed when the right of the
creditor attaches is notice of the right under which it is held ." Paris Grocer Co. v.
Bucks, 105 S.W. 174, 175 (Tex. 1907) . The Court aptly reasoned that those
seeking to acquire an interest in property have a duty, "in the exercise of common
prudence, to learn of a possession held by others than him whose rights he
purposes to acquire, and to make inquiry of the possessor as to the nature of the
claim under which he holds ." Id.
Bank of America, attempts to shift the focus of this appeal by cavalierly
portraying Mr . Henderson as the culprit behind this controversy, essentially stating
that he did nothing to "alert anyone of his unrecorded claim" and that equitable
considerations should prevent this court from affirming Mr . Henderson's superior
8 '
priority interest . Appellant's Opening Brief, p . 10. To the contrary, Mr.
Henderson instituted action to settle this matter by filing a petition for a restraining
order on October 22, 1999 . Furthermore, it is equally simple to declare that
NationsBank's desktop loan evaluation did nothing to ascertain the true owner and
occupier of the property, especially where a simple phone call or property
inspection would have disclosed Mr. Henderson's open, exclusive, and visible
ownership . Out of an abundance of caution, Appellee addresses Bank of
America's estoppel argument, even though it was not properly preserved for
appellate review .
VI. ARGUMENT AND AUTHORITIES
' A. Constructive or Inquiry Notice
Mr. Henderson's possession of the property was "open, visible, and
unequivocal" such as to impose a duty of inquiry upon NationsBank as to the
occupant's claim to ownership of the property . 2CR46-47, 51-52 ; App. 7.
Mr. Henderson presented evidence of his "open, visible, and unequivocal"
possession of the subject property . Id. Bank of America, successor in interest to
NationsBank, did not dispute the fact that Mr . Henderson lived on the property
continuously from April of 1997 through May of 1998 . It is also undisputed that
the Deed of Trust that Ms . Hayes gave to NationsBank occurred more than a year
after Mr. Henderson moved onto the property . 2CR84 ; App . 11 . Most
9
importantly, Bank of America did not contest the affidavits of Mr . Henderson and
Mr. Holbrook in which they state that Mr . Henderson lived on the property in an
"open, visible, and unequivocal" manner . Id. Bank of America cannot understate
the importance of their failure to dispute the affidavit . See Republic Nat'l Leasing
Corp. v. Schindler, 717 S.W.2d 606, 607 (Tex . 1986) .
Constructive notice of title by possession of property is equivalent to
constructive notice by registration of the deed to property. Chicago Title Ins . Co.
v. Alfors, 3 S .W. 2d 164, 169 (Tex. App .-Eastland 1999) . There was no recorded
deed in this case but Mr . Henderson's undisputed possession equates to
constructive notice . Id. Mr. Henderson's possession triggered notice of facts that
would put a reasonably prudent person on a duty of inquiry. Boyd v. United Bank,
794 S .W. 2d 839, 841 (Tex . App-El Paso 1990) . When another party other than
the mortgagor possesses and occupies real property, such occupation puts the
mortgagee on notice of an equitable interest or adverse claim in the property just as
if the contract on which it is based had been recorded . Id.
It is well settled in Texas law that an open, exclusive, and visible

possession, maintained by the holder of the unrecorded deed when the
right of the creditor attaches, is notice of the right under which it is
held.
Paris Grocer Co . v. Bucks, 105 S.W. 174, 175 (Tex . 1907). One who wants to
acquire an interest in land is expected:
10
in the exercise of common prudence, to learn of a possession held by

others than him whose rights he proposes to acquire and to make
inquiry of the possessor as to the nature of the claim under which he
holds .
Id. A person dealing with land :
must take notice of an actual, open, and exclusive possession ; and

when this, concurring with interest in the possessor, makes it [his]
homestead, the lender stands charged with notice of that fact, it
matters not what contrary declarations the borrower may make .
Dallas Bldg & Loan Assn v . Patterson, et al ., 48 S .W. 2d 657, 661 (Tex. App
1932). NationsBank, as one who sought to acquire an interest in land, did not
exercise simple common prudence by making an inquiry into the possession and /or
occupation of the land.
B. The same duty of inquiry applies to Appellant, as a mortgagee, as would

be imposed upon any other subsequent purchaser of real property in
these circumstances.
Bank of America complains that the Bankruptcy Court "imposed a
heightened `duty of inquiry"' upon lenders for the type of loan given to Ms .
Hayes. Appellant's Opening Brief, p . 10. The Bankruptcy Court on page 12
paragraph 3 of its Decision states that "thus, since open, exclusive, and visible
possession would be notice to a subsequent purchaser, it is also notice to a
subsequent creditor, such as NationsBank here ." 2CR89 ; App. 11 . Bank of
America did not dispute that Mr . Henderson's possession of the subject
property was "open, visible, and unequivocal ." Id. Constructive notice of title
11
by possession of property is equivalent to constructive notice by registration of
a deed. Chicago Title, 3 S .W. 3d at 169 . Mr. Henderson's title, by possession,
put NationsBank on the same constructive notice as registration by deed . Id.
Because of its constructive notice of possession, NationsBank had a duty to
inquire as to the nature of Mr . Henderson's possession .
The Bankruptcy and District Courts did not impose a new bright-line rule
governing the specific inquiry lenders must perform . Rather, the Bankruptcy
Court applied the long-standing "standards of reasonableness" to the precise
facts involved in this case . Id.

∎
C. Mr. Henderson presented uncontested evidence that his possession of
the property was "open, visible, and unequivocal ."
The Bankruptcy and District Courts properly stated that Appellants did not
∎
contest the affidavits of Mr . Henderson and Mr. Holbrook, which contend that Mr .
Henderson lived in the property in an "open, visible and unequivocal" manner .
2CR84. The Appellants did not contest, in any way, the nature of Mr . Henderson's
possession-they merely state in an emphasized and conclusory fashion that "Bank
of America contested the open, visible and unequivocal nature of Mr . Henderson's

~I possession . . . ." Appellant's Opening Brief, p . 22. No explanation or references
~I follow .
Also, they argue that the desktop "Valuation Model" and title search, used
~ by NationsBank were sufficient to determine all interests in the property .
12
Appellant's Opening Brief, pp . 26-27. Bank of America vehemently argues that its
predecessor in interest, NationsBank, complied with "industry standards," for
which they did not submit a definition or any evidence . Appellant's Opening
Brief, pp. 26-27. It should be noted that the "industry standard" is not necessarily
the legal standard, as shown in this case . See generally Cameron Compress Co . v.
Jacobs, 10 S .W.2d 1040, 1041 (Tex . Civ. App.-Austin 1928, writ ref d) (holding
that, in the context of negligence, industry standards do "not afford a conclusive
legal standard of conduct") .
Appellant also asserts that the repairs being done to the house would not
give anyone notice that the workman doing repairs was claiming an ownership
interest in real property . Appellants' Opening Brief, p . 23 . Appellants are
mistaken on this issue . The Texas Supreme Court held to the contrary in
Tomlinson v. Higgenbotham, 229 S .W. 2d 920 (Tex . 1950). In this case, a deed of
trust lien holder asserted that he was a holder in good faith, had given
consideration, and was without actual or constructive notice . Id. at 922 . The court
held that the lien holder was charged with notice when he saw labor being
performed on the property and made no inquiry of the people who furnished the
labor and materials . Id. The court stated:
In law whatever fairly puts a person on inquiry is sufficient notice,

' where the means of knowledge are at hand, which if pursued by the
proper inquiry the full truth might have been ascertained . Means of
I 13
knowledge with the duty of using them are in equity equivalent to

knowledge itself.
Id. Mr. Henderson presented evidence of his "open, visible, and unequivocal"
possession of the subject property and this possession gave rise to inquiry notice .
2CR84 . NationsBank was on inquiry notice .
D. Mr. Henderson's actions were sufficient to bring the oral conveyance of

the property out of the statute of frauds and to impose an equitable
interest superior to the mortgage lien of NationsBank.
While the Appellants' argument again is improper because it is being raised
for the first time on appeal, it should be noted that the circumstances of this case
remove this transaction from the statute of frauds under the doctrine of partial
performance . Boyer v. Tauber, 834 S.W.2d 60, 63 (Tex . 1992); see Harris v.
Potts, 545 S .W .2d 126 (Tex . 1976) (citing Hooks v. Bridgewater, 229 S.W . 1114
(Tex. 1921)) . Mr. Henderson showed conclusive proof to the Bankruptcy Court
that he paid consideration, took possession of the property and made permanent
improvements on the property with the consent of the seller . 2CR46-52; App. 6.
Appellants did not raise any issues of material fact nor did they present any
evidence to controvert Mr . Henderson's evidence that this oral conveyance of real
property is outside the statute of frauds .
~I Appellant's statute of frauds issue was not asserted during proceedings in the
~I Bankruptcy Court, instead, it was raised for the first time on appeal to the District
Court, and once again during this appeal . See Appellant's Opening Brief (Dist .
~ I 14
Ct.), p. 20 ; Appellant's Opening Brief (App . Ct.), p. 28 . Mr. Henderson produced
evidence to show that he met all the elements necessary to take the conveyance out
of the statute of frauds and, thereby, had an equitable lien on the property. 2CR46-
52 ; App . 6 . Appellants did not object nor produce any evidence contrary to this
argument. The Fifth Circuit has noted that "it is well established that [reviewing
courts] do not consider arguments or claims not presented to the bankruptcy court ."
In the Matter of Fairchild Aircraft Corp ., 6 F. 3d 1119 (5th Cir . 1993); In re
Gilchrist, 891 F. 2d 559, 561 (5th Cir. 1990). Bank of America has waived appeal
of these issues . Id. Neither the Bankruptcy Court nor the District Court erred by
granting the Motion for Summary Judgment on these points .
E. Mr. Henderson 's actions have not been of a nature to preclude him
from a sserting equitabl e title to th e real prop erty or a lien that is
superior to th e Appellant.
While it is unnecessary to respond to Bank of America's late assertion of
estoppel because these issues were not raised prior to appeal, the argument is
totally without merit . The Bankruptcy Court highlighted that Mr . Henderson
"requested on numerous occasions that [Ms . Hayes] complete the transaction by
transferring the property to [Mr. Henderson] by General Warranty Deed, but [Ms .
Hayes] failed to do so ." 2CR9 1 ; App. 11 . It is uncontested that Mr. Henderson
learned of NationsBank's lien on the property in July of 1999 . 2CR80 ; App. 11 . It
is also uncontested and a matter of record that Mr . Henderson instituted action to
15
settle this matter by filing a petition for a restraining order on October 22, 1999 .
See CR Ex. to Doc . 14, Tab 5 . Mr. Henderson sought legal advice and filed his
petition within the span of ninety days .
F. The Bankruptcy Court did not commit reversible error in mentioning

the proximity of Bank of America to the real property at issue .
Appellant alleges that the Bankruptcy Court impermissibly "considered and
relied upon" a statement outside of the record concerning the proximity of banking
centers to the Henderson residence, thereby committing reversible error .
Appellants Opening Brief, pp . 25-26. The context of the statement removes any
and all doubt on this issue ; the Bankruptcy court, in two places, emphasized that a
"phone call" would have met the reasonableness standard of inquiry . Id. .
Accordingly, the physical proximity of the bank was not a necessary element of the
court's ultimate conclusion .
VII. CONCLUSION
The overt conduct of Mr . Henderson put NationsBank on notice that he was the
true owner of the home . The affidavit of Mr. Henderson and Mr . Holbrook, stating that
Mr. Henderson lived on the property in an "open, visible, and unequivocal" manner,
establishes this fact . The Texas Supreme Court has ruled that possession in such a
manner imposes the duty of inquiry upon any subsequent creditor, such as NationsBank .
Further, the Bankruptcy court properly held that his duty applies to both subsequent
16
I pPurchasers and subsequent creditors, like NationsBank . There is no genuine issue of
' material fact that NationsBank did not fulfill that duty .
Furthermore, the underlying conveyance of the property from Ms . Hayes to
Mr. Henderson met the partial performance exception to the statute of frauds . Mr.
'' Henderson's conduct prior to this suit also supports his claim for equitable title to
I!,' the property. Reversible error was not committed and no genuine issue of material
fact remains .
VIII. PRAYER
WHEREFORE, PREMISES CONSIDERED, Appellee, JOHN
' HENDERSON respectfully prays that this Honorable Court affirm the District
Court's decision in affirming the Bankruptcy Court, and for such other and further
relief to which they are justly entitled .
Respectfully submitted,
ff I ~ } // '~W
By:
Cathy J . S ehan
' State Bar o . 18174460
' PLUNKETT & GIBBON, INC .

70 N.E. Loop 410, Suite 1100
(210) 734-7092 Telephone
(210) 734-0379 Facsimile
' ATTORNEY FOR APPELLEE,

JOHN HENDERSON
' 17
CERTIFICATE OF SERVICE
I certify that a true and correct hard and disc copy of the above Brief of
Appellee, John Henderson has on this the day of August, 2005, been
forwarded via certified mail, return receipt requested to the following parties :
Richard D . Brady
BARRETT, BURKE, WILSON, CASTLE,
DAFFIN & FRAPPIER, L .L.P.
1900 St. James Place, Suite 500
Houston, TX 77056
Helen G. Schwartz
Chapter 7 Trustee
9901 IH-10 West, Suite 770
San Antonio, TX 78230
Johnny W. Thomas
Attorney at Law
St. Paul Square
1153 E . Commerce
San Antonio, TX 78205
3855-002/#285616
18

Bank of America v. Schwartz (In Re Hayes) - Appellate Brief

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Bank of America v. Schwartz (In Re Hayes) - Appellate Brief

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Case: 05-50080 Document: 0051331875 Page: 1 Date Filed: 09/27/2005

IN THE UNITED STATES COURT OF APPEALS

BANK OF AME RICA, N.A.,

HELEN G. SCHWARTZ, JOHN HENDERSON

Appealed from the United States District Court

BRIEF OF APPELLEE, JOHN HENDERSON

ATTORNEY FOR APPELLEE,

CERTIFICATE OF INTERESTED PARTIES

' 1 . BANK OF AMERICA, N .A. ("APPELLANT"), Creditor/Appellant,

' 2 . JOHN HENDERSON ("HENDERSON"), Appellee, represented by

' 3 . HELEN G . SCHWARTZ ("Scxw Ax'rz"), Appellee, represented by

' 4. ELIZABETH HAYES ("APPELLEE/DEBTOR" or "HAYES"), Appellee,

PLUNKETT & GIBBON, INC .

ATTORNEY FOR APPELLEE,

STATEMENT REGARDING ORAL ARGUMENT

CERTIFICATE OF INTERESTED PARTIES . . .. .. . . . .. .. .. .. . . .. . . . . . . .. .. . . .. .. . . . . .. .. . . .. . . . .ii

STATEMENT REGARDING ORAL ARGUMENT . . . . . . . . . . . .. .. .. .. . . . . .. .. . . . . .. .. .. .. .. .iii

TABLE OF AUTHORITI ES. . . . .. .. . . . .. . . .. .. .. .. .. .. . . . .. .. .. .. .. .. . . . . . . . .. .. . . .. . . . . . . .. .. . . . . . . .. .. .. . vi

JURISDICTIONAL STATEMENT .. . . .. . . . . .. .. .. . . .. . .. .. .. .. . . . . .. . . . .. . . . . . . . . . . . . .. .. . .. . . . .. .. .viii

I. REPLY TO APPELLANT'S ISSUES .. . . .. . .. .. .. .. .. . . .. . . . . . . .. . . . . . . . . . .. .. . . . . . . .. .. . . ..1

II. STATEMENT OF THE CASE . . . .... .. .. .. . . .. . . . .. . . .. .. .. .. . . . . . . .. . . . . . . . . . . . . . . .. . . . .. . . . . .. 3

III. STATEMENT OF THE FACTS . . .. . . . . . .. . . .. . . . .. . . . . .. .. .. . . . . . . . . . . . . . . . . . . . . . . .. . . . .. . . . . . . 4

IV . STANDARD O F REVIEW . . . .. .. . . .. . . . .. .. . . .. . . . ... . . . .. .. .. . . . . . . .. .. .. . . . . . .. . .. .. . . . ... . . . . . 6

V. SUMMARY O F THE ARGUMENT . .. .. .. .. . . .. . . . .. .. .. .. . . . . .. .. .. . . .. .. .. .. .. . . . . .. .. .. . 7

A. Standard for granting Motions for Summary

B . Summary Judgment was Properly Granted . .. .. .. .. . . .. .. . . . . .. . . .. . . .. .. . . .. .. . 7

VI. ARGUM ENT AND AUTHORITIES . .. .. .. . . .. .. .. . . . .. .. . . .. . . . . .. .. . . . . .. . . .. . . .. .. . . . . .. . 9

A. Constructive or Inquiry Notice . . . .. . . . . . . .. .. . . . .. . . . . . . . . . . .. . . . . . . . . . . .. . . .. . . . . . . .. . 9

B . The same duty of inquiry applies to Appellant, as a

C . Mr. Henderson presented uncontested evidence that the

D. Mr. Henderson's actions were sufficient to bring the oral

E. Mr. Henderson's action have not been of a nature to

F . The Bankruptcy Court did not commit reversible error in

VII. CONCLUSION . . . .. .. .. .. . . . . . .. .. . . . . . .. .. .. . . .. .. . . . . . . . .. .. .. .. .. .. .. .. .. .. .. .. . . .. .. . . .. .. .. . . .. .. .16

VIII. PRAYER . . . . . . .. .. . . .. ... . . .. .. .. . . . .. .. .. .. .. .. .. . . . .. . . .. .. .. .. .. .. .. .. . . .. .. .. . . .. .. . . .. .. .. . . .. .. . 1 7

CERTIFICATE OF SERVICE . .. .. .. . . . .. .. .. .. .. .. .. . . . .. .. .. .. .. .. .. .. . . .. .. .. .. .. . . . . .. .. .. .. . . . . .. .. .18

Boyd v. United Bank,

Cameron Compress Co . v. Jacobs,

Celotex Corp. v. Catrett,

Chicago Title Ins . Co. v. Alfors,

Dallas Bldg. & Loan Ass 'n v . Patterson, et al.,

Gen. Elec. Capital Corp . v. Acosta,

In the Matter of Fairchild Aircraft Corp .,

Paris Grocer Co . v. Bucks,

Ragas v. Tennessee Gas Pipeline Co .,

Republic Nat 'l Leasing Corp. v. Schindler,

Transcon . Gas Pipe Line Corp . v. Transp . Ins . Co.,

United States v. Raddatz,

Westchester Fire Ins. Co. v. Haspel-Kansas Inv . P 'ship,

FED .R. Crv P . 56(c).. . . . . . . .. .. .. . . . .. . . . . .. .. . . .. .. . . . .. . .. . . .. . . . . . . .. .. . . . . . . . . . . .. .. . . . . . . . . .. .. .. .. . . . . . . .. . . . 7

This Court has jurisdiction of this appeal pursuant to 28 U .S .C . § 1291

IN THE UNITED STATES COURT OF APPEALS

BANK OF AMERICA, N .A.,

HELEN G . SC HWARTZ, JOH N HENDERS ON

Appealed from the United States District Court

BRIEF OF APPELLEE, JOHN HENDERSON

TO THE HONORABLE JUDGES OF THE FIFTH CIRCUIT COURT OF

Appellee, JOHN HENDERSON (hereinafter "Henderson") submits this

would show unto the Court as follows"

I. REPLY TO APPELLANT'S ISSUES

II. STATEMENT OF THE CASE

Order affirming the Bankruptcy Court's summary judgment in favor of Henderson .

The bankruptcy trustee, Helen G . Schwartz, brought this original adversary