law-bona-fide-purchasor

Actual or constructive notice of the lease

The trial court did not make an express finding of fact with regard to The Siblings' actual or
constructive notice of the lease.  It did, however, make findings of fact that: (1) the lease was
never recorded in the real property records; and (2) Texoma had no contact with The Siblings
prior to the mailing of the April 2006 rent check.  The Siblings maintains that it had no actual
knowledge of the 1998 lease agreement at the time it purchased the real property on which the
billboard sits.  Texoma argues that Don Spencer told Roger Hooten about the revenue from the
sign at the time of the sale to The Siblings.  However, Roger Hooten disputed that testimony
and denied any knowledge of such a conversation.  Because there was disputed evidence with
regard to
actual knowledge, the evidence is legally sufficient to support an implied finding of
fact that The Siblings did not have actual knowledge of the lease.  See City of Keller, 168
S.W.3d at 827; see also Vickery, 5 S.W.3d at 258 (where trial court makes findings of fact but
fails to include an element of a claim or defense, implied findings will be made in support of the
judgment where the omission was not pointed out to the trial court).
Texoma Advertising Co., LP v. The Siblings, LLC (Tex.App.- Houston [14th Dist.] Jun. 16, 2009)(Yates)(lease
agreement for advertising disputed,
actual or constructive knowledge, statute of frauds conveyance of interest
in real estate,
ratification of disputed contract, acceptance of benefits under it with knowledge of its terms)

Texoma maintains on appeal that the more important issue is whether The Siblings had
constructive notice of the lease.  Texoma bases its
constructive notice argument on the fact
that the billboard was located on the property, for all to see, and that a simple phone call by
The Siblings could have ascertained the existence of the lease.  This evidence, according to
Texoma, satisfies the requirement that an occupant's possession be visible, open, exclusive,
and unequivocal.  We disagree.

Under Section 13.001 of the Texas Property Code, an
unrecorded conveyance of an
interest in real property is void as to a subsequent purchaser who purchases the property for
valuable consideration and without notice.  See Tex. Prop. Code Ann.  §13.001(a) (Vernon
2003).  The unrecorded instrument is binding, however, on a subsequent purchaser who does
not pay a valuable consideration or who has notice of the instrument.  See id. § 13.001(b).  To
receive the
bona fide purchaser protection, a party must acquire the property in good faith,
for value, and without notice of any third-party claim or interest.  Madison v. Gordon, 39 S.W.3d
604, 606 (Tex. 2001) (per curiam).  
Notice of a third-party's claim or interest can be either
actual or constructive.  Id.; Flack v. First Nat'l Bank, 226 S.W.2d 628, 631 (Tex. 1950).  
Actual knowledge is found based on personal information or knowledge.  Madison, 39 S.W.3d
at 606.  "Constructive notice is notice the law imputes to a person not having personal
information or knowledge." Id.  

The law will impute
constructive knowledge where a subsequent purchaser has a duty to
ascertain the rights of a party in possession.  Id.  The duty to ascertain arises only if the
possession is visible, open, exclusive, and unequivocal.  Id.  "Possession that meets these
requirements - visible, open, exclusive, and unequivocal possession-affords notice of title
equivalent to the constructive notice deed registration affords."  Id. (citing Strong v. Strong, 128
Tex. 470, 98 S.W.2d 346, 348 (1936)).  However, possession that is ambiguous or equivocal,
which may appear subservient or attributable to the possession of the holder of the legal title, is
not sufficiently indicative of ownership to impute constructive notice.  Id.  If the
duty to
ascertain
arises, then the subsequent purchaser is charged with notice of all the occupant's
claims that the purchaser might have reasonably discovered on proper inquiry.  Id.

Although the billboard was visible, open, and appeared exclusive, the evidence raised a fact
issue with regard to whether Texoma's possession was unequivocal.  When an occupant's
possession is consistent or compatible with another's ownership assertion, the occupant's
possession cannot be said to be unequivocal.  Madison, 39 S.W.3d at 607; Strong, 98 S.W.2d
at 350.  Roger Hooten testified that the billboard was in poor condition and appeared to be
abandoned.  The billboard was built in 1971 and was concededly an older sign.  From February
2005 until April 2006, neither Roger nor Nathaniel saw anyone perform maintenance on the
sign, although Texoma presented evidence that the lawn was cut at least once.  Roger
observed that the pole was rotting and that the advertising on the billboard had not been
changed since The Siblings had owned the property.  The trial court, as the fact finder, was the
sole arbiter of the credibility of, and weight to be given, the witnesses' testimony.  See
Nordstrom, 965 S.W.2d at 580-81.  Given the evidence, reasonable and fair-minded people
might disagree as to whether the pole appeared abandoned and subservient to Spencer's
ownership of the property at the time of the sale.  But that was a question for the trial court to
resolve acting as the fact finder.  The evidence supports an implied finding of fact that The
Siblings did not have constructive knowledge of the lease.  As a result, legally sufficient
evidence exists to support the trial court's legal conclusion that there was no binding lease
agreement between Texoma and The Siblings. See City of Keller, 168 S.W.3d at 827.  

Texoma relies on Melvin R. Storm Family Partners, L.P. v. Northcutt, No. 11-05-00402-CV,
2007 WL 2204170 (Tex. App.- Eastland Aug. 2, 2007, no pet.) (mem. op.), to support its
constructive notice argument.  We find Melvin R. Storm distinguishable.  In Melvin R. Storm,
an oil and gas operator had a lease for conducting oil and gas operations on a portion of land
purchased by the defendant.  Id. at *3.  The purchaser argued that it could not be bound by the
lease because it could not be charged with constructive knowledge.  Id.  In finding that legally
and factually sufficient evidence existed to support a finding that the oil and gas operator's
possession was visible, open, exclusive, and unequivocal, the court of appeals highlighted
testimony from the purchaser that he actually saw the operator coming in and out of the
property and operating the wells before the purchase of the property.  Id. at *4.  The court of
appeals found that this evidence put the purchaser on notice to investigate the rights under
any existing leases.  Id.  In contrast, the only evidence Texoma points to in this case is the fact
that the billboard was in existence on the property at the time of the sale and the testimony from
Don Spencer regarding his comments to Roger Hooten about revenue from the sign.  As noted
above, the evidence in this case was disputed as to whether the billboard appeared to be
abandoned, and Roger Hooten denied the conversation with Spencer regarding revenue.

Likewise, we find other authority cited by Texoma in support of its
constructive notice
argument
unpersuasive.  In each of the cases, there were facts that put the purchaser on
notice that further inquiry was necessary.  See, e.g., Fletcher v. Minton, 217 S.W.3d 755, 761
(Tex. App.- Dallas 2007, no pet.) (presence of cows, a fence, and equipment, coupled with
observation by purchaser's agent of the occupant going to and from property was sufficient to
put purchaser on notice); Startex First Equip. Ltd. v. Aelina Enters., Inc., 208 S.W.3d 596, 602
(Tex. App.- Austin 2006, pet. denied) (lease was recorded in deed records, plus "inquiry notice"
was triggered where occupant was operating gasoline sales business from premises); Texas
Wood Mill Cabinets, Inc. v. Butter, 117 S.W.3d 98, 105 (Tex. App.-Tyler 2003, no pet.) (statute
relating to mechanics' and materialmen's lien provided for constructive notice; additionally,
purchaser's personal knowledge of improvements being made put purchaser on notice lien can
be filed).  There are no such facts in this case.  The mere existence of the billboard is not
sufficient to conclusively establish a duty to ascertain because there was also evidence that the
billboard appeared to be abandoned.  The trial court resolved the factual dispute in favor of
The Siblings.

Because there was more than a mere scintilla of evidence to support an implied finding that
Texoma's possession was not unequivocal, the trial court properly concluded that the lease
agreement was not binding on The Siblings based on constructive notice.