Backfiring Texas Judgment Liens

In Step #5 of How to Collect Your Own Judgment in Texas, I discuss the creation of a judgment lien on your judgment debtor’s real property.  But, a judgment lien does not attach to your judgment debtor’s homestead.  It does, however, create a cloud on his homestead. That cloud can hinder your judgment debtor’s ability to sell his home.  Consequently, Texas homestead protection requires that you release your judgment lien as to the homestead property if the judgment debtor requests you to do so.  Failure to release the judgment lien as to the homestead property may give your judgment debtor a claim against you.  In other words, your judgment debtor can sue you and win a judgment that requires you to pay him money damages.  This does happen in the real world of Texas judgment enforcement.

On August 11, 2008, the Dallas Court of Appeals dealt with just such a scenario in 2008-TX-0812.109, Ramsey v. Davis (Tex. App. — Dallas August 11, 2008, no pet.).

Facts

In this case, Larry Ramsey obtained a judgment against his former business partner, Leslie Parrent.  Parrent was the owner of Les Parrent Homes.  Parrent did not pay the judgment.
While driving through Plano, Texas, Ramsey discovered a Les Parrent Homes sign on a lot on Edgewater Drive.  Upon searching Collin County records he found that Jeffrey and Tamara Davis had a contract with Les Parrent Homes for the construction of a house on that lot.  The contract was for $520,000.00.

Ramsey filed an application for Writ of Garnishment against the Davises claiming they were indebted to Parrent under the contract they had with him for the construction of their home.  The gist of his claim was that he wanted their payments to Parrent redirected to him to pay towards his judgment against Parrent.  The Davises filed a verified answer denying any indebtedness to Parrent.  The case was subsequently dismissed but reinstated and set for trial.  The Davises did not receive notice of the trial setting.  They were not present when the trial court rendered judgment against them.

Ramsey abstracted the judgment against the Davises’ Edgewater Drive home.  Approximately 18 months later the Davises learned of the garnishment judgment.  They had a contract for the sale of the home.  The title company discovered the abstract of judgment.  The Davises contacted Ramsey requesting that he release the lien.  Ramsey refused.  As a result, the contract to purchase the Davises’ home was terminated by the buyer.  As I mention in the book, no knowledgeable buyer will purchase a property with a judgment lien cloud on the title.

The Davises then filed a proceeding to vacate the garnishment judgment.  They also made a claim for declaratory judgment, wrongful garnishment and slander of title.  The trial court did set the garnishment judgment aside.  The case then went to trial on the Davises’ claims of wrongful garnishment and slander of title.  The trial court rendered judgment against Ramsey in favor of the Davises in the amount of $99,220.14 for wrongful garnishment and $20,000.00 for slander of title.  Ramsey appealed that judgment.  That appeal is the case I am discussing here.

Legal Reasoning

On appeal, Ramsey argues that the trial court erred in awarding the Davises a judgment for their wrongful garnishment claim.  He argues that there is no evidence of damages recoverable for wrongful garnishment.  On this point, the appellate court agrees with Ramsey.  The court reasons that damages for wrongful garnishment include recovery of the improperly garnished funds.  The court states that other damages are also recoverable if they are the result of being denied access to the garnished funds. The Davises’ funds were never actually garnished so there are no garnished funds to recover.  The appellate court reversed the trial court on the damages award of $99,220.14 for wrongful garnishment.  Ramsey is not liable to the Davises for that amount.

On the Davises’ claim for slander of title, Ramsey does not fair as well.  The appellate court found that Ramsey’s abstract of judgment did not create a valid lien against the Davises’ Edgewater Drive home.  But, the abstracted judgment did create a cloud on the title.  The court explains that to establish slander of title, the Davises must allege and prove that Ramsey, with legal malice, published disparaging words about their title to their homestead that were false and resulted in the loss of a specific sale.  Malice means deliberate conduct without reasonable cause.

The evidence showed that two attorneys wrote letters to Ramsey advising him to release the lien because the Edgewater property was the Davises’ homestead.  The manager for the title company also called Ramsey requesting that he release the lien.  Ramsey refused all such requests.

The court finds that Ramsey’s refusal to release his judgment lien on the Davises’ homestead resulted in a lost sale and constitutes slander of title.  The Davises damages for slander of title include the amount of money they would have realized if the sale had been consummated and the amount of additional payments they made due to the loss of the sale.

The evidence showed that if the sale had closed without the release of lien, the Davises would have received $32,546.24.  If the lien had been released, they would have received $99,220.64.  Jeffrey Davis testified that he made an additional $50,017.00 in monthly payments on the property as a result of the lost sale.  The court, therefore, found sufficient evidence to support the trial court’s $20,000.00 award for slander of title.  Ramsey remained liable to the Davises for $20,000.00.

Application

The Ramsey v. Davis case drives home the point I make in How to Collect Your Own Judgment in Texas.  If you discover that your abstracted judgment creates a cloud on the title of your judgment debtor’s homestead, the smart thing to do is to release the lien as to the homestead.  You do not have to provide the judgment debtor with a blanket release.  You just need to release the specific property he claims as a homestead.

As a practical matter, I suggest waiting for the judgment debtor to contact you and request a release of the lien as to his homestead.  Until you get such a request you really do not have actual knowledge that you are creating a cloud on his homestead.  But, once you get that request, do the partial release.  If you refuse to do so, you just may find yourself on the wrong end of a slander of title lawsuit.

I do want to see you collect your judgment.  But, I want you to be smart about it.  Pick your battles wisely.  Stay away from those battles that are clear and certain losers.  “Digging in your heels” and refusing to release your judgment lien as to your judgment debtor’s homestead is just plain foolish.

To learn more about Texas judgment collection techniques, get a copy of How to Collect Your Own Judgment in Texas.  Receive a 10% discount for reading this article.  Simply enter the discount code “backfiring” when you checkout.

To your success,
Harvey L. Cox
Texas Judgment Collection Center