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Click here for the full text of this decision FACTS:In April 1995, Jerry Gantt sued Carol Gantt for divorce. While still married to Carol, Jerry bought “his mistress, Janice Lisa Foster,” a home located in Houston. Foster held title to the property in her name. During the divorce, Carol alleged that Jerry had fraudulently transferred the property to Foster using community assets of the marital estate. Because of the dispute over the property, Carol filed a lis pendens notice on Feb. 15, 1996, and she filed a second lis pendens notice on March 20, 1996. Both notices stated that title to the property appeared in the name of Foster and that title and ownership was in dispute. Carol properly recorded both lis pendens notices. On June 20, 1996, trial in the divorce action between Jerry and Carol commenced, and on Oct. 30, 1996, the trial court rendered a Modified Final Judgment and Decree of Divorce, dismissing all of Carol’s claims against Foster concerning the property. On motion by Foster, the trial judge signed a cancellation order on Nov. 5, 1996, canceling the two lis pendens notices previously filed by Carol. The cancellation order was properly filed in the Harris County real property records on Dec. 5, 1996. After the trial court’s judgment, Carol filed a Motion for Clarification of Judgment, Motion for New Trial (Restated), Motion for Severance, and Request for Rehearing on Motion to Cancel Lis Pendens, which the court denied on June 4, 1997. Carol then properly perfected her appeal of the modified final judgment and divorce decree, and the appeal was transferred to the 13th District Court of Appeals. Carol did not file an appeal of the cancellation order of the lis pendens, nor did she file a stay or supersedes bond. On Aug. 12, 1999, the 13th Court of Appeals held the trial court erred by not submitting Carol’s civil conspiracy cause of action against Foster. The court reversed the judgment of the trial court to Carol’s claims against Foster and remanded that particular claim for trial. Approximately five months after the 13th Court’s decision, on Jan. 6, 2000, Jerry and Foster, who were married at this time, went to World Savings Bank FSB and obtained a mortgage on the property, secured by a deed of trust. Chicago Title Insurance Co. issued a title policy to the bank. The policy issued by Chicago Title did not reflect the property was encumbered by any lis pendens claims by Carol. The bank and Chicago Title relied on the cancellation order signed by the court. Because of the 13th Court’s opinion requiring a remand, the Gantt divorce was tried once again. On Sept. 9, 2002, the trial court found that Jerry Gantt had fraudulently transferred the property to Lisa Foster. The trial court granted Carol a money judgment against both Jerry and Foster and ordered that she could levy execution of the judgments against the property. Accordingly, in October 2003, the trial court appointed Ray Lemmon as a receiver to sell the property. Lemmon entered into a contract to sell the property for $340,000, and the trial court confirmed the sale on Nov. 2, 2004. Carol received a final account on Nov. 24, 2004, and learned that Lemmon used $210,352.58 of the proceeds from the sale to pay off the bank for the mortgage on the property. Carol objected to this payment, claiming the bank had no right to any proceeds from the sale of the property, because the conveyance of the property to Foster had been deemed null and void. On Dec. 28, 2004, Carol requested a show cause hearing requiring the bank to appear in court to determine whether it should be held in contempt for refusing to return the money to Carol. That same day, Carol filed a Supplemental Amended Petition and Application for Temporary Injunction and Permanent Injunction, adding the bank as a party. Carol alleged a cause of action for trespass to try title. On May 16, 2005, Carol filed a summary judgment motion, claiming the bank issued the mortgage subject to two lis pendens notices and the reversal of the trial court by the 13th Court of Appeals. In response, the bank filed a competing motion for summary judgment, arguing that the trial judge entered a cancellation notice regarding the two lis pendens and raising the affirmative defenses of bona fide lender/mortgagee and estoppel. The trial court granted Carol’s summary judgment and ordered the bank to pay Carol the $210,352.58 it received from the sale of the property. The bank appealed the judgment, but the judgment was interlocutory since the trial court had not yet addressed the claims against Jerry, Foster and Lemmon. Accordingly, the bank obtained a severance of its claims and filed an amended notice of appeal from the summary judgment in the severed cause. HOLDING:Reversed and remanded. In its first issue, the bank argued that it was entitled to rely on an order from the trial court canceling the lis pendens, because nothing else in the chain of title indicated a continuing dispute over the title. The bank argued that the cancelled lis pendens was not effective to impute notice to it, despite the appellate court’s reversal of the case, because Carol did nothing further to provide notice of her appeal. Carol argued that the trial court did not err, because the bank failed to ensure the validity of the title by checking the real property records against the referenced court records. Carol claimed because of the existence of the lis pendens notices, the rights of the bank were derivative of Jerry and Foster; therefore, the bank acquired no better title than Jerry or Foster. Furthermore, Carol argued that the bank had both actual and constructive notice of the lis pendens and the continuing litigation. Under the Texas Property Code �12.007, the court stated, a party to an action involving title to real property may file a lis pendens notice with the county clerk where the property is located. A lis pendens’ ultimate effect, the court stated, is to prevent either party to the litigation from alienating the property in dispute. This case, the court stated, is not as simple as a filed lis pendens notice. In this case, the trial court ordered a cancellation of both lis pendens notices and the order was filed in the Harris County real property records. The bank then relied on the cancellation order without any further inquiry and granted a mortgage on the property, which was still the subject of ongoing litigation. The court stated it was unable to find any Texas law on the issue, but believed the ultimate issue in this case centered around the question of actual notice. The court, however, found one older Texas case to be persuasive in deciding the issue: Hexter v. Pratt, a 1926 decision by the Texas Civil Court of Appeals in Dallas. In Hexter, a lis pendens filing did not constitute constructive notice because of a subsequent dismissal order. Under Texas law, the court stated, a person is charged with a duty to inquire when that person searches the real property records and any description, recital of fact, reference to other documents or any other disclosure suggests that as a matter of prudence further inquiry would disclose the real situation. Under Hexter, the court stated, a lis pendens constituted actual notice, because the facts stated in the lis pendens were undoubtedly sufficient to put J.K. Hexter on inquiry, and if such inquiry had been pursued, Hexter might have ascertained full knowledge of all the facts concerning the property at issue. Moving on to Carol’s case, the court first noted that actual notice is a question of fact. Because of the conflicting evidence in the record, the court found that there was a genuine issue of material fact regarding what information and documents the bank reviewed when granting the mortgage to Jerry and Foster. Under this record, the court could not say that Carol met her burden of proving as a matter of law the bank was aware of enough facts to put a reasonably prudent man on inquiry. Therefore, the court sustained the bank’s first issue and held that the trial court erred in granting Carol’s motion for summary judgment. For the same reason, the court affirmed the trial court’s decision denying the bank’s summary judgment motion. OPINION:Anderson, J.; Yates and Anderson, JJ., and Sears, S.J.

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