Opinion
03-20-00452-CV
02-03-2022
Berit McMillan and Gerald McMillan, Appellants v. Tally Two Investment Group, LLC; CCRE, LLC; NLB Investments, Inc.; JRSW1 Ltd.; Rice Capital, LLC Series 7; Equity Trust Company Custodian FBO David Blakely IRA;and Mooney-Glasgow, LP, Appellees
FROM THE 250TH DISTRICT COURT OF TRAVIS COUNTY NO. D-1-GN-20-001471, THE HONORABLE KARIN CRUMP, JUDGE PRESIDING
Before Chief Justice Byrne, Justices Baker and Smith.
MEMORANDUM OPINION
THOMAS J. BAKER, JUSTICE.
Berit and Gerald McMillan appeal from the trial court's orders granting appellees' Rule 91a motions and dismissing with prejudice the McMillans' Original Petition to Void Warranty Deed. See Tex. R. Civ. P. 91a. We affirm the trial court's orders.
Appellees are Tally Two Investment Group, LLC-who filed one of the Rule 91a motions-and CCRE, LLC; NLB Investments, Inc.; JRSW1 Ltd.; Rice Capital, LLC Series 7; Equity Trust Company Custodian FBO David Blakely IRA; and Mooney-Glasgow, LP (collectively Purchasers)-who jointly filed the other Rule 91a motion.
BACKGROUND
This appeal stems from the third lawsuit between the McMillans and Tally Two Investment Group, LLC, concerning the validity of a warranty deed to a certain tract of real property (Property) that the McMillans purchased in 2007. In 2015, Tally Two loaned the McMillans $100,000. The loan was secured by a warranty deed on the Property. The details of the warranty deed, the loan transaction, and much of the background surrounding this dispute are outlined in McMillan v. Tally Two Investment Group, LLC, No. 03-18-00550-CV, 2019 WL 3680130, at *1-2 (Tex. App.-Austin Aug. 7, 2019, no pet.) (mem. op). See also McMillan v. Tally Two Inv. Grp. LLC, No. 03-18-00040-CV, 2018 WL 3849460, at *1 (Tex. App.-Austin Aug. 14, 2018, pet. denied) (mem. op.) (dismissing McMillans' restricted appeal for want of prosecution). We therefore do not recite the background here except to note that the parties litigated the validity of the warranty deed in 2017 when Tally Two filed what the parties have dubbed the Tally Two Lawsuit, a declaratory-judgment action seeking to remove cloud from and quiet title to the Property. In the Tally Two Judgment, rendered on July 19, 2017, the trial court removed cloud from Tally Two's title to the Property and quieted title in Tally Two "forever."
In what the parties have dubbed the McMillan Lawsuit, filed in November 2017, the McMillans alleged that the warranty deed is void because it violates a provision of the Texas Business and Commerce Code pertaining to residential real estate and seeking a declaratory judgment invalidating the deed. In a February 21, 2018 order, the trial court granted Tally Two's Rule 91a motion to dismiss and motion for summary judgment, which order this Court affirmed. See McMillan, 2019 WL 3680130, at *4.
In their live petition in this third lawsuit involving the warranty deed, the McMillans sought a declaration that both the deed and the Tally Two Judgment are void because the Property is or was, at the relevant time, their homestead. The McMillans filed this lawsuit against Tally Two and Purchasers, who purchased the Property in 2018 at a foreclosure sale. The McMillans timely perfected appeal of the trial court's two orders granting Tally Two's and Purchasers' respective Rule 91a motions.
DISCUSSION
In one issue, the McMillans contend that the trial court erred in granting appellees' Rule 91a motions and dismissing with prejudice this third lawsuit because they are entitled to collaterally attack the allegedly void Tally Two Judgment. See Tex. R. Civ. P. 91a (setting forth procedure to dismiss baseless causes of action). They argue that the Tally Two Judgment is void because the trial court lacked subject-matter jurisdiction to declare the warranty deed valid when the deed violates a provision of the Texas Constitution allegedly prohibiting the type of loan transaction the parties employed because the Property was the McMillans' homestead. See Tex. Const. art. XVI, §50(c) ("All pretended sales of the homestead involving a condition of defeasance shall be void.").
The McMillans' argument fails for two reasons. First and foremost, even assuming that the McMillans are correct that the warranty deed violates the Texas Constitution, a trial court's erroneous determination of a legal question does not, without more, deprive that court of subject-matter jurisdiction over that question. In other words, and to the issue specifically at hand, there is a dispositive difference between (1) a trial court's adjudication (even if erroneous) of the validity of an existing lien or deed, and (2) a trial court's creation or imposition in the first instance of a previously non-existing lien. The former may be attacked only directly, not collaterally, and does not implicate the trial court's jurisdiction; the latter may be collaterally attacked if the plaintiffs claim colorably challenges the trial court's authority to impose the lien at issue. See Mosley v. Ticor Title Ins., 875 S.W.2d 10, 11 (Tex. App.-Eastland 1994, writ denied); cf. Cline v. Niblo, 8 S.W.2d 633, 635 (Tex. 1928) (holding that statutory probate court lacked jurisdiction to order homestead property sold for purpose of paying general creditors of estate but acknowledging distinction between adjudication of existing lien and imposition by court of previously non-existing lien); Curtis Sharp Custom Homes, Inc. v. Glover, 701 S.W.2d 24, 28 (Tex. App-Dallas 1985, writ ref d n.r.e.) (holding judgment imposing equitable lien on homestead in violation of article XVI, section 50(c) void and subject to collateral attack); see also In re Christodolou, 383 S.W.3d 718, 721 (Tex. App.-Amarillo 2012, no pet.) (noting that while liens on homesteads that do not fall within exceptions in article XVI, section 50 of Texas Constitution are void, "the validity of a lien is a question of law, subject to de novo review"). By their lawsuits, the McMillans have challenged the court's determination of the validity of the warranty deed; they have not thereby challenged the court's imposition or creation of any lien or like encumbrance. Accordingly, the McMillans may not collaterally attack the Tally Two Judgment. See Mosley, 875 S.W.2d at 11 (holding that appellants could not collaterally attack judgment that merely adjudicated validity of existing lien because otherwise "litigation involving the validity of a lien on homestead property can never be finally resolved because any judgment resolving the contested issue can be collaterally attacked at a later date as void").
Secondly, this third lawsuit is barred by res judicata. See id (affirming summary judgment determining that parties' claims that existing lien on homestead was void and subject to collateral attack were barred by res judicata and collateral estoppel). As in the McMillan Lawsuit, here the McMillans again attempt to relitigate the same main issue that was litigated in the Tally Two Lawsuit: the validity of the warranty deed. This Court determined in the McMillan Lawsuit that res judicata bars the McMillans from further attempting to challenge the validity of the warranty deed, yet they attempt to do so by this lawsuit. See McMillan, 2019 WL 3680130, at *5. The doctrine of res judicata applies although the McMillans did not expressly raise their article XVI, section 50(c) argument in the Tally Two Lawsuit because a judgment in a prior lawsuit precludes a second action by the parties and their privies on matters both actually litigated and on causes of action or defenses arising out of the same subject matter that might have been litigated in the first suit. See Garcia v. RC Cola-7-Up Bottling Co., 667 S.W.2d 517, 518 (Tex. 1984). That the McMillans have framed their challenge to the deed's validity this time as a challenge to the trial court's subject-matter jurisdiction does not remove the challenge from the reach of the universal doctrine of res judicata because the McMillans could have raised the issue of the warranty deed's alleged voidness under article XVI, section 50(c) in the first lawsuit. The issue of the deed's validity has been finally adjudicated, and res judicata bars the McMillans' further attempts to invalidate the deed. We accordingly overrule the McMillans' sole issue.
That the McMillans did not answer the Tally Two Lawsuit, which resulted in a default judgment in Tally Two's favor, or pursue appellate remedies of that default judgment does not alter the application of res judicata. See McMillan v. Tally Two Inv. Grp., LLC, No. 03-18-00550-CV, 2019 WL 3680130, at *5 (Tex. App.-Austin Aug. 7, 2019, no pet.) (mem. op). We also note that in its pleadings in that first lawsuit, Tally Two alleged that the McMillans disputed its title to the Property by averring that it was their homestead.
CONCLUSION
We affirm the trial court's two orders granting appellees' Rule 91a motions and dismissing with prejudice the McMillans' lawsuit.
Affirmed.