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Click here for the full text of this decision FACTS:ABN AMRO Mortgage Group (ABN) appeals from a summary judgment in favor of the appellee, TCB Farm and Ranch Land Investments (TCB), and the denial of summary judgment in favor of ABN. In May 2000, Sue Fleckenstein purchased real property at 4300 Mesa Drive in Carrollton. She and her husband borrowed $197,500 from Greenpoint Mortgage Funding Inc. and $37,036 from Compass Bank, giving Greenpoint a vendor’s lien and deed of trust and Compass Bank a second lien deed of trust. On Sept. 6, 2002, the Fleckensteins refinanced the vendor’s lien and the two deeds of trust with ABN for a total loan of $241,000, executing a new deed of trust to ABN as security for the refinancing. By mistake, ABN’s deed of trust was not filed of record until Oct. 7, 2003. In the meantime, the Fleckensteins fell behind on their ad valorem property taxes and arranged for payment of those taxes by Genesis Tax Loan Services Inc. (Genesis). On July 23, 2003, the Fleckensteins executed a deed of trust to Genesis as security for the payment of their taxes by Genesis. The deed of trust to Genesis recites: “Notice: this Lien Is a Transfer Tax Lien Executed Pursuant to Section 32.06 of the Texas Tax Code. This Lien Is a Superior Lien and Takes Priority over a Homestead Interest in the Property and Takes Priority over the Claim of Any Holder of a Lien on Property Encumbered by this Tax Lien, whether or not the Lien Existed Before Attachment of this Tax Lien. See Section 32.05 of the Texas Tax Code.” The Fleckensteins also executed an Affidavit Authorizing Transfer of Tax Lien. On August 5, 2003, the Denton County Tax Collector certified and transferred its tax lien to Genesis for the payment by Genesis of the delinquent taxes owed by the Fleckensteins. On September 23, 2003, about two weeks before ABN filed its deed of trust, Genesis filed its deed of trust, the Affidavit, and the Denton County Tax Collector’s certificate of transfer of the tax lien. The Fleckensteins thereafter defaulted on both ABN’s and Genesis’s notes and declared bankruptcy. Genesis obtained an order lifting the stay in the bankruptcy proceeding and, on December 14, 2003, posted the property for non-judicial foreclosure, notifying all parties claiming an interest, including ABN. On March 2, 2004, Genesis foreclosed on its transferred tax lien and conveyed the property by foreclosure sale deed to TCB for the bid price of $10,680. TCB recorded its foreclosure sale deed on the same date. TCB also purchased all remaining rights of the Fleckensteins, who executed a “Deed without Warranty” to TCB, including any rights of redemption held by the Fleckensteins at the time of the foreclosure sale. On March 12, 2004, ABN served notice on Genesis that it stood ready to tender the payoff amount of Genesis’s deed of trust pursuant to Section 32.06(f) of the tax code. On March 22, 2004, ABN tendered to TCB the amount necessary to redeem the property under tax code Section 32.06(i). Both Genesis and TBC refused ABN’s attempted redemption. On April 12, 2004, ABN filed this suit against Genesis for wrongful foreclosure and against TCB for a declaratory judgment. ABN sought to rescind the foreclosure sale deed to TCB and to confirm ABN’s right as secured lienholder to redeem the property from TCB pursuant to Section 32.06(i) of the tax code or, alternatively, to declare that ABN holds an equitable lien in the amount of $234,134.91 and to order sale to foreclose on that lien. TCB asserted a counterclaim to quiet title to the property and to declare it the owner free and clear of ABN’s lien. The parties filed cross-motions for traditional summary judgments. The trial court denied ABN’s motion for summary judgment and granted TCB’s cross-motion on the ground that Genesis had acquired a valid first lien under Chapter 32 of the tax code and that ABN’s lien was extinguished by the foreclosure sale to TCB, and ordered title quieted in TCB to the property, free and clear of ABN’s lien. HOLDING:Reversed and rendered. ABN argues that under a liberal interpretation favoring rights of redemption, as required by Texas law, its lien is the “first lien” under Texas Tax Code �32.06(i) even though its lien was not filed of record when the tax lien was transferred to Genesis, and that it thus had the right to redeem the property upon foreclosure. Under TCB’s interpretation of the statute, which was accepted by the trial court, the term “first lien” under the statute means first recorded lien so that, when the Genesis’s lien was recorded first, it took priority over ABN’s lien, making its lien the senior or “first lien,” and ABN’s lien was relegated to junior lien status with no right of redemption under �32.06(i). The court disagrees that ABN’s prior lien was required to be recorded first in order to be a “first lien” entitling ABN to exercise the right of redemption under �32.06(i). The court agrees the Beaumont Court of Appeals that priority of liens as between claimants does not affect the applicability of a right of redemption as between an existing lienholder and a purchaser at a tax sale. Assocs. Home Equity Servs. Co. v. Hunt, 151 S.W.3d 559 (Tex. App. Beaumont 2004, no pet.). Nothing in �32.06(d) indicates that recording the transfer of a tax lien converts the tax lien to a “first lien” as that term is used in the redemption statute, so as to give it priority over a prior existing lien. TCB argues that, because ABN had not recorded its deed of trust when the tax lien was transferred to Genesis, ABN’s lien was void as to Genesis because nothing in the record indicates Genesis had notice of ABN’s prior lien at that time. TCB relies on �13.001(a) of the property code providing an unrecorded deed is “void” as to a subsequent creditor who extends its loan and acquires its lien without notice of the earlier lien. But the record affirmatively establishes the contrary, the court states. The redemption provision of �32.06 mitigates the harsh effect of a transferred tax lien foreclosure by allowing the holder of a “first lien,” in addition to the owner of the property, a specified period of time to redeem the property from the purchaser after sale upon foreclosure of the transferred tax lien. Statutes granting redemption rights upon foreclosure of tax liens are to be construed liberally in favor of the right of redemption. The court agrees with ABN that, as a matter of law, its lien is a first lien under �32.06(i) of the tax code and was not extinguished by the foreclosure or sale to TCB. The court reverses those parts of the trial court’s judgment that pertain to ABN’s request for declaratory relief on its right to redemption and to TCB’s claim to quiet title, and renders judgment for ABN, declaring that ABN has the right to redeem the property under the relevant version of �32.06(i) tax sale by paying TCB the tax sale purchase price, plus costs, and interest accrued on the judgment to the date of redemption or 118 percent of the amount of the judgment, whichever is less. OPINION:Gardner, J.; Dauphinot, Holman and Gardner, J.J.

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