Long Beach Mortgage Co. v. Evans

In Long Beach Mortgage Co. v. Evans, 284 S.W.3d 406, 414-15 (Tex. App. - Dallas 2009, pet. denied), the Dallas Court of Appeals considered a situation similar to that before us here. There, a Dallas residence was purchased with money wrongfully acquired from TLC America, Inc. The residence was also used as collateral for a home equity loan funded by Long Beach Mortgage, upon which the owners later defaulted. The home became the subject of competing claims by Evans, TLC's receiver in California SEC litigation, and Long Beach Mortgage. Id. at 409. Upon discovering that TLC's funds had been used as purchase money, Evans filed a lis pendens on the property on July 23, 2002; the California court imposed a constructive trust on the residence in December 2002. Id. Long Beach Mortgage had recorded its deed of trust on August 2, 2002. Evans filed suit in Dallas to resolve the conflicting claims. The Dallas Court of Appeals found that because Evans filed the lis pendens prior to the date Long Beach executed and filed its deed of trust, Long Beach's lien claim was, as a matter of law, subordinate to Evans's lis pendens. Id. at 415. The Court noted that, under Tex. Prop. Code Ann. 12.007, "During 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." The lis pendens statute gives litigants a method to constructively notify anyone taking an interest in real property that a claim is being litigated against the property. A recorded lis pendens is notice to the world of its contents . . . . Id. at 413-14. The Dallas court appeared completely untroubled by the parties' status as competing judgment creditors. It simply held that, because Evans's lis pendens was recorded first, Long Beach's lien claim was subordinate to Evans's rights under the constructive trust. Id. at 414-15.