Petition for Writ of Certiorari — Blanche v. United States

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') FILED

99 462 SEP-9199

NO. : THE CLER}

In the

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM 1999

Andrew E. Blanche, Jr. and

Cynthia D. Blanche,

Petitioners

¥.

United States of America,

William S. Hewitt, and

First Nationwide Mortgage Corporation,

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Fifth Circuit

PETITION FOR A WRIT OF CERTIORARI

Cynthia D. Blanche

Andrew E. Blanche, Jr.

2011 Campbell Parkway

Richardson, TX 75082-4849

(972) 699-8807

QUESTIONS PRESENTED

Whether petitioners’ appeal of a lower court decision

negating their property interest is rendered moot by a

subsequent foreclosure, or other sale, of the property.

Whether I.R.C. § 6323 requires application of the law of

subrogation when a court negates the assumption or purchase

of property after a good-faith buyer (reasonably believing the

buyer purchased an interest in property and assumed the

seller’s underlying debt) made payments on that debt.

Whether I.R.C. § 6323 applies automatically, without further

inquiry, if a buyer establishes that the buyer held at least one

of the qualifying property interests and obtained equitable and

legal title under local law, before the United States properly

filed a tax lien.

Whether an interest that is created by a written executory or

completed contract and qualifies as a “purchaser” interest

within the meaning or I.R.C. § 6323(h)(6), may be converted

into a nonqualifying lien or security interest by virtue of the

seller’s unilateral repudiation or rescission (either explicit or

implied by law) of the contract.

Whether the United States can legally seize property not

subject to its lien, cause the property to be sold by the

Government’s acts or omissions, and not compensate the

innocent owners for their property loss.

LIST OF PARTIES

(BEFORE THE COURT)

NAME AND CONNECTION

Andrew FE. Blanche, Jr.,

Petitioner

Cynthia D. Blanche,

Petitioner

United States of America,

Respondent

William S. Hewitt,

Respondent

Peggy Hewitt,

Non- party to appeal

First Nationwide Mortgage

Corporation,

Non-party to appeal

INTEREST

Claims 100% ownership of

property the Internal Revenue

Service (United States) sued to

foreclose against to satisfy the

Hewitts’ tax liability.

Spouse of Mr. Blanche and has

same interest as Mr. Blanche.

Sued to foreclose a federal tax

lien against the Hewitts on

property involved in a contract

and related deed between the

Blanches and the Hewitts.

Delinquent taxpayer who cross-

claimed that he did not transfer

his 50% interest in the property

to the Blanches.

Delinquent taxpayer and spouse

of William Hewitt who signed

a contract, assumption agree-

ment and deed transferring

property to the Blanches.

Successor to first lien mortgage

holder, Lomas Mortgage,

USA. Foreclosed on property

when United States decided

against a tax sale. The

Blanches claim subrogation to

their mortgage.

LIST OF PARTIES

(IN THE PROCEEDINGS BELOW)

NAME AND CONNECTION INTEREST

Andrew E. Blanche, Jr.., Claims 100% ownership of

Defendant-Cross Claimant- property the Internal Revenue

Counter Claimant-Appellant Service (United States) sued to

foreclose against to satisfy the

Hewitts’ tax liability.

Cynthia D. Blanche, Spouse of Mr. Blanche, same

Defendant-Cross Claimant- interest as Mr. Blanche

Counter Claimant-Appellant

United States of America, Sued to foreclose a federal tax

Plaintiff-Appellee lien against the Hewitts on

William S. Hewitt,

Defendant-Cross Defendant-

Appellee

Peggy Hewitt,

Non-party to suit

Non- party to appeal

Lomas Mortgage, U.S.A..,

Defendant under suit

Non-party to appeal.

Hank Wilson,

Defendant under suit

Non-party to appeal

property involved in a contract

and related deed between the

Blanches and the Hewitts.

Delinquent taxpayer; cross-

claimed that he did not transfer

his half-interest in the property.

Spouse of William Hewitt,

signed contract, assumption

agreement and deed transfer-

ring property to the Blanches.

Held first lien on property;

filed bankruptcy before trial;

transferred mortgage to First

Nationwide Mortgage before

district court rendered its

decision.

Held mechanic’s lien against

property. Court entered a de-

fault judgment against him.

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED...............-.0:ceseeeseeeeeeeeeeeeees l

LIST OF PARTIES

ie Ne CO... ccsuiasabscunnsscedeqcsenesasansaaseasunssan 2

In the Proceedings Below ...............:sceeeeeeenereeeeeeeeeees 3

TABLE OF AUTHORITIES....................0-. aa er aceaiacnines 6

CPTEIES, TIE oo c nc vncccccccvcssecccaceessesencsccscssetanvssess 7

TI oi ii i's scncccnscxsvaconadeuendcnchcocasexcasnassuaeene 7

STATUTORY PROVISION INVOLVED ...................00005 7

OP TIE 4: cceddansécdabendueneastinn seas toh 5 ee dcaskenee 8

REASONS FOR GRANTING THE WRIT..............----005 13

I. THE COURT OF APPEALS DECISION TO DISMISS

CONFLICTS WITH LONG STANDING SUPREME

COMET PA IE. nic cicsiccanicciscortcvcisscacancedsoteness 17

A. THE FORECLOSE SALE SUBSTITUTED

FOR THE TAX SALE TO ACCORD WITH

THE DISTRICT COURT’S JUDGMENT.........-----+++ 17

B. THE COURT OF APPEALS’ DISMISSAL DIRECTLY

CONFLICTS WITH SUPREME COURT RULINGS..... 21

Il. THE FIFTH CIRCUIT AND NINTH CIRCUIT

INTERPRETATIONS OF I.R.C. § 6323(h)(6)

i I 8 sos: scanccundsxesachesstanonn 25

III. THE QUESTIONS PRESENTED ARE IMPORTANT........ 30

CRUE a nccccccocssccsccsacesessscssenennnsassasaconensannenneena 32

INDEX TO APPENDICES

APPENDIX A

Court of Appeals Opinion ..............cccsccscscsceeseess Al-A3

APPENDIX B

ORNTEEE Cats GHRTIIID ccncccnensscecesecsencdussmanueanees B1-B23

APPENDIX C

Court of Appeals Order Denying Rehearing ........... C1-C2

APPENDIX D

Court of Appeals Order Denying Stay ....................... DI

APPENDIX E

District Court Order Denying Stay ....................... E1l-E2

APPENDIX F

BOER GE Eee Aes B Gee Cre cececccncccssccdsccobacconunn F1-F2

APPENDIX G

ee G1-G22

APPENDIX H

District Court Order Denying Reconsideration

Or New Trial and Lifting Stay..........................4 H1-H2

TABLE OF AUTHORITIES

Cases:

Bull v. United States,

295 U.S. 247 (1934).....-cceeeceeeeeeeeeensnneeesssenenenennesees 18

Calderon v. Moore,

S18 U.S. 149 (1996)........---cceeeeceeeeennneesceeeeesanensseneees 24

Church of Scientology v. United States,

506 U.S. 9 (1992).........cceceeeeeeeeseeeeeeeeneseneenenenenees 22-24

Cramer v. Phoenix Life Ins. Co.,

9] F.2d 141 (Sth Cir. 1937) .........-----eeeeeeeeeeeeneneen essen 22

Dakota County v. Glidden,

113 U.S. 222 (1885).........-cceseeeeeeeeeensenersenececennensenees 21

Erwin v. Lowry,

12 L.Ed. 655 (1849)........2--cseceeeeeeeeseenneeenersenenesseseees 21

Josevig-Kennecott Copper Co. v. Howarth Co.,

261 F. 567 (Oth Cir. 1919)..........ceceeeeeeeereeeeeeeeeeeeesees 22

Mills v. Green,

159 U.S. 651 (1895).......----cceeeeeseeeeeeneneeeennecennneseeenes 24

Newnham v. United States,

813 F.2d 1384 (9th Cir. 1987) ........-..c-ceesceereeeeeeees 25, 27

O'Hara v. McConnell,

D3 U.S. 150 (1876) .........2ccceeeceseeeeecensnsersnneccnanensneees 21

Sinclair Refining v. Allbritton,

218 S.W.2d 185 (Tex. 1949).......-. ia sbakspegnubaneseeele 14

United States v. National Bank of Commerce,

472. U.S. 713 (1985)....--220eeeeecceeecerseseceneeseasnecensneneees 18

United States v. Rodgers,

461 U.S. 677 (1983)........----+ 13-14, 16, 18, 24-25, 29, 31

Wildmon v. Berwick Universal Pictures,

983 F.2d 21 (Sth Cir. 1987) ......-----eeceeeeserenenesseeeenteess 19

Statutes:

LR.C. § 6323(a) and (h)(6) ......------ 7, 11, 14, 16, 24, 29, 30-31

ER.C. $ 6323 (1) .....2e0eccccceseresecenescsnncnnceessssnncesessonorees 11

LR.C. § 7403 amd § 7604 ........----eeeeeeeerererennenreneneeesssete 22

BIR.C., © F480 .......ccccccccrecsccrcessensesonccnncanecosscsssesooores 13-14

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

Andrew E. Blanche, Jr. and Cynthia D. Blanche respectfully

petition for a writ of certiorari to review the judgment of the

United States Court of Appeals for the Fifth Circuit in this case.

OPINIONS BELOW

The opinion of the court of appeals (App. A, infra, Al-A3) is

reported at 169 F.3d 956. The opinion of the district court

(App. B, infra, B1-B23) is reported at 79 A.F.T.R.2d (RIA)

1557.

JURISDICTION

The court of appeals entered its judgment on March 12, 1999

(App. A, infra, Al-A3). The court of appeals denied a timely

petition for rehearing on June 11, 1999 (App. C, infra, C1-C2).

The jurisdiction of this Court is invoked under 28 U.S.C.

§1254(1).

STATUTORY PROVISION INVOLVED

The Internal Revenue Code (26 U.S.C.) § 6323 provides that a

federal tax lien is not valid against any purchaser of property

until proper notice is filed by the United States. I.R.C.

§ 6323(h)(6) states that an executory contract or option contract

to lease or purchase property that meets the criteria given

qualifies a person as a “purchaser” under I.R.C. § 6323.

(App. F).

DO EIN Ae EA Hs, ance i NaF ts Yo dad WN RENE AOA ee

STATEMENT

The United States sued to foreclose a tax lien against

certain real property’ they believed was owned 50% by

Respondent William S. Hewitt (“Hewitt”). The United States

joined Petitioners, Lomas Mortgage U.S.A. (“Lomas”), and

Hank Wilson as parties with recorded interests or liens against

Foxbriar.

Lomas (who held a mortgage lien against Foxbriar)

answered and requested that, alternatively to the United States

foreclosing its tax lien, Lomas be allowed to foreclose its

mortgage lien against Foxbriar. Lomas filed Chapter 11

bankruptcy before trial.

Hewitt answered admitting he held a 50% interest in

Foxbriar. Hewitt cross-claimed against Petitioners for back

rental payments, saying he was one-half owner during a period

Petitioners occupied Foxbriar without his consent. Hewitt

asserted a conspiracy claim against Petitioners and Lomas.

Petitioners, a husband and wife, claimed 100%

ownership of Foxbriar under a lease option/earnest money

contract signed by William S. and Peggy L. Hewitt (husband and

wife) and a related assumption agreement and deed, executed by

Peggy Hewitt and filed in the county records; all of which arose

before the United States filed its tax lien.

Petitioners cross-claimed against Hewitt for specific

performance of their sales contract and to quiet title to Foxbriar

because of the defect created when Hewitt was unavailable to sign

the deed.

The option contract required Hewitt to make particular

repairs to the property and Petitioners to make certain payments.

Even though Petitioners made all the payments as required,

Hewitt never made the repairs either during or after the option

period as the parties agreed and never attempted to do so because

he was living in Tacoma, Washington. After the option period,

' 3325 Foxbriar Lane, Cibolo, Guadalupe County, Texas

(“Foxbriar”)

Petitioners agreed to continue the payments under the option

terms and try to work something out with the Hewitts about

completing the sale.

A dispute arose between Petitioners and Hewitt because

his failure to make the repairs impeded Petitioners’ efforts to

obtain financing to complete the sale. Hewitt further aggravated

the situation when he left his wife, Peggy, in September 1991 and

did not contact Petitioners to let them know how to reach him.

Peggy told Petitioners she did not know how to contact Hewitt.

Petitioners never heard from Hewitt about Foxbriar until he filed

his answer. Hewitt never contacted Lomas to ensure the

mortgage was current.

Meanwhile, Petitioners continued making payments to

Peggy. Peggy and Petitioners entered negotiations to complete

the sale of Foxbriar.? During these negotiations and unbeknownst

to Petitioners, Hewitt and Peggy did not pay the mortgage and

Lomas commenced foreclosure action. To avoid losing their

home, Petitioners agreed (with Peggy Hewitt) to cure the

mortgage default, accept the property “as is”, forgo the repairs,

assume the mortgage and all liabilities against Foxbriar, and

apply the earnest money paid, and, thus, complete the purchase

of Foxbriar. This agreement was executed and a deed signed and

recorded in August 1992. Following Peggy’s instructions,

Petitioners sent copies for Hewitt’s signature but Petitioners

never heard from him.

In September 1992, Peggy told Hewitt about the

completed sale and Hewitt saw the deed in the county records.

However, Hewitt never contacted Petitioners or Lomas to protest

against the transaction. Hewitt told the United States that he

owned 50% of the property and thus the United States sued.

Lomas filed Chapter 11 bankruptcy before the case went

to trial. After trial but before the district court’s decision, Lomas

sold or transferred the Foxbriar mortgage to Respondent First

2 Petitioners originally agreed to accept Foxbriar “as is” and waive

the repairs, assume the mortgage and all other liabilities against

Foxbriar, apply the earnest money already paid of $9,600 and give the

Hewitts a note for $20,000. However, the foreclosure of the mortgage

impeded this arrangement.

Mans BRS aS RNA i NNR ASIN

OTs Be 5 hla Boh Ks om

Ala SOE Ms

Sibatretine aes

Nationwide Mortgage Corporation (“First Nationwide”).? The

case went to trial March 6, 1996, and the district court issued its

findings of facts and conclusions of law and judgment on

February 28, 1997.

In his opinion and orders, the district court judge:

1) held that Petitioners had no interest in Foxbriar when

the federal tax lien was filed and never owned

Foxbriar;

2) denied Petitioners’ claim for specific performance;

3) granted the United States a judgment against Hewitt

for his tax liability plus accruals;

4) granted Petitioners a judgment for repairs and

improvements to Foxbriar;

5) held that the federal tax lien against Foxbriar was valid

and could be foreclosed;

6) held that any foreclosure proceeds should be distributed

a) first to Lomas for any outstanding mortgage,

b) second to Petitioners as restitution for curing the

mortgage default and for improvements made to

Foxbriar,

c) third to the United States for Hewitt's unpaid tax

liability, and

d) fourth to the Hewitts as owners of Foxbriar; and

6) transferred Hewitt's conspiracy cross-claim to the

bankruptcy court.

During the eleven months between the trial and the

district court’s decision, the Foxbriar mortgage transferred from

Lomas to First Nationwide. From August 1992 forward,

Petitioners continued the monthly mortgage payments to Lomas

and then First Nationwide. Petitioners paid for necessary repairs

to Foxbriar during the years after their assumption of the

mortgage.

Petitioners filed a Motion for Reconsideration and a

motion to stay the judgment. The United States opposed the stay

> The Court of Appeals opinion erroneously shows this as the Federal

National Mortgage Association.

claiming it was important to sell the property immediately.* The

judge granted the stay then lifted it when he denied the motion for

reconsideration.

Petitioners filed a timely notice of appeal. The issue on

appeal was that Petitioners were purchasers under

I.R.C. § 6323(h)(6) from May 1990 forward; they were the

equitable and legal owners and Hewitt held no interest in

Foxbriar when the United States filed its lien. Therefore, in

conformity with I.R.C. § 6323, the federal tax lien never

attached to Foxbriar and the United States’ suit to foreclose was

wrongful.

Alternatively, Petitioners argued that, under Texas law,

at a minimum they held 50% of the legal title to Foxbriar and,

therefore, United States v. Rodgers’, controlled. Furthermore,

Petitioners claimed that even if the Court of Appeals sustained the

District Court, I.R.C. § 6323(i)(2) required that Texas

subrogation laws be applied in determining Petitioners’ rights

regarding mortgage payments made to Lomas and First

Nationwide. Petitioners argued the District Court erred in

refusing to apply the Texas law of subrogation.

Petitioners requested a stay of judgment pending appeal,

however, the United States vigorously opposed the stay and the

district court denied it. Petitioners then requested a stay pending

appeal from the Court of Appeals. Again, the United States

opposed the stay, asserting the need to sell Foxbriar quickly to

avoid waste and devaluation.

The Court of Appeals denied Petitioners a stay but gave

the United States a caveat. The Court of Appeals said that, if the

United States lost on appeal, the government would be held to

their concession to pay Petitioners the value of their interest in

Foxbriar and the United States was judicially estopped from

denying such payment. In June 1997, First Nationwide

informed Petitioners that First Nationwide was named a party

defendant in the suit and would do what was necessary to protect

their mortgage.

* — See note 14, infra.

> 461 U.S. 677 (1983).

® See App. D, infra.

During the five months from the judgment and denial of

rehearing, Petitioners made mortgage payments through the July

1997 payment. Contrary to the district court order, First

Nationwide continued to treat Petitioners as liable for the

Foxbriar mortgage and pursued collection of the mortgage against

Petitioners, rather than the Hewitts. In August 1997, First

Nationwide started filing negative credit information against

Petitioners showing delinquent mortgage payments and liability

for the Foxbriar mortgage.

First Nationwide systematically sent Petitioners

collections letters, called them, and reported the delinquency to

the Veterans Administration. In October 1997, the United States,

First Nationwide, and Mr. Blanche discussed the sale of Foxbriar

because the Hewitts were not paying the mortgage. The United

States said they would sell the property by close of December

1997. First Nationwide said that, if the United States did not

hold its sale by then, First Nationwide would foreclose its lien.

Petitioners filed for a rehearing that was denied

August 15, 1997. After receiving the judicial estoppel, the

United States reassessed their position and decided they should

not sell Foxbriar after all. The United States did not inform the

court or Petitioners of this drastic change in position. While the

appeal went forward, Hewitt did not pay the mortgage and the

United States did not foreclose. Hewitt filed for Chapter 7

bankruptcy in April 1998 and received a discharge in August

1998, which discharged the taxes that were the basis of the

United States’ suit.

First Nationwide continued to pursue collection against

Petitioners and not the Hewitts. Because of the damage this

created to Petitioners’ financial position and credit worthiness, in

June 1998, Petitioners filed a motion with the District Court to

issue a writ of execution to the United States to sell Foxbriar.

The District court denied this motion.

The case was briefed and argued. In their brief and reply

brief, Petitioners asserted that (1) they did not breach either

contract; (1) their 100% ownership, (2) Hewitt waived his right

to rescind the contract and was estopped from rescinding the

contract and deed after accepting the benefits,’ and (3) and

Petitioners were entitled to attorney fees pursuant to I.R.C.

§ 7430. Alternatively, Petitioners averred that (1) they had a

minimum 50% ownership, (2) the Government should pay them

the value of their 50% interest under United States v. Rodgers,

(3) their should be subrogated to Lomas’s/First Nationwide’s

mortgage, (4) the lower court should have awarded them their

earnest money paid to the Hewitts, and (5) they should be paid

interest on the judgment.

Petitioners declared they qualified as “purchasers” under

I.R.C. § 6323 because they held uninterrupted equitable and legal

title to 100% of Foxbriar before IRS filed its tax lien. Petitioners

evinced this through a factual and legal analysis that established

that:

1) the option and executory contracts were separate and

divisible;

2) Petitioners had a valid executory contract, signed by Hewitt,

that arose when they fully performed under the option

contract;

3) Hewitt breached the option and executory contracts when he

never repaired the property and did not maintain the

mortgage from foreclosure;

4) Mrs. Hewitt acted for the community and Hewitt consented

to and ratified her actions in his answer and at the trial;

5) the assumption agreement was a modification of the original

contract not a new agreement;

6) Hewitt waived his right to rescind the contract and deed and

was estopped from refusing to transfer the property;

7) Even though he did not sign the assumption deed, Hewitt was

bound by it when he accepted the benefits it bestowed, and it

became the agreement of the parties;

8) Hewitt never properly rescinded the contract under either its

terms or the Texas statutes and legal precedent; and

’ Benefits bestowed were earnest money received, repairs forgone,

assumption of his debts against Foxbriar, no damage to his credit,

mortgage, insurance, and taxes paid by Petitioners, and property repairs

improvements made by Petitioners.

eli eh Si MMR a ei nh tho lL cat sce

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9) Petitioners were entitled to attorney’s fees under

I.R.C. § 7430, and interest.

In addition, Petitioners asserted that the district courts findings of

fact were contradictory, erroneous and not supported by the

record and the legal conclusions ignored relevant Texas Supreme

Court case law*, and was founded on erroneous facts and faulty

analysis.°

Petitioners’ first alternate position asserted a 50%

ownership of Foxbriar because, considering items (1) through (8)

above, Hewitt confirmed and consented to Peggy’s transfer of at

least her 50% interest in Foxbriar.'° Based on this, Petitioners

asserted that United States v. Rodgers, determined Petitioners

compensation when the United States sold Foxbriar.

Petitioners’ final alternate position, if the Court of

Appeals fully sustained the district court on the ownership issue,

reasoned that, I.R.C. § 6323(i) required that Petitioners be

subrogated to First Nationwide’s (Lomas’s) lien to the extent of

the mortgage paid. Petitioners also discussed that they were

entitled to interest on the judgment.

Hewitt did not file a brief refuting any of Petitioners

factual statements."

* — The District Court complete ignored Sinclair Refining Co. v.

Allbritton, 218 S.W.2d 185 (Tex. 1949), the pre-eminent case on the

relationship between option and executory contracts.

% In his findings of fact and conclusions of law, the judge asserted

that the Blanche/Hewitt contract ended on its own terms on June 30,

1991. The district court then concluded that Petitioners’ contract was

invalid because they breached when they did not obtain third party

financing by August 31, 1991. It is illogical that Petitioners could

breach the contract two (2) months after the District Court said it ended!

The lower court provides no legal analysis to explain such an

incongruous result.

'0 In his answer and during the trial, Hewitt asserted that Peggy

Hewitt transferred her half of the property but not his half.

'' This is significant because Hewitt was the only other party in the

suit who could establish the intent of the parties during the initial

transaction.

The United States argued Petitioners were not

“purchasers” under I.R.C. § 6323. In their brief, the United

States acknowledged that Petitioners held three of the requisite

property interests outlined in I.R.C. § 6323(h)(6). The United

States proposed, however, that these interests were not valid

because Petitioners only held an equitable “lien” right that ended

when the contract ended, and Petitioners’ deed was invalid

because Hewitt did not sign it.

The Court of Appeals heard oral arguments on

September 2, 1998. During oral arguments, two of the circuit

judges expressed the opinion that at a minimum they saw

Petitioners as 50% owners of Foxbriar. Concerned that Hewitt

did not sign the assumption agreement and deed, the appellate

panel requested legal memoranda discussing the state of

Washington rulings regarding transfers of community property by

one spouse.'* The United States sent a legal memorandum and

Petitioners responded.

In October 1998, after waiting fourteen months for the

United States to foreclose its tax lien, First Nationwide foreclosed

its mortgage lien against Petitioners and reported it on their

credit. Foxbriar was sold in December 1998 and the proceeds

fully paid First Nationwide’s lien with only a $10.00 excess.

In February 1999, the United States wrote the Fifth

Circuit about the foreclosure sale. The Government implied that

the sale made the appeal moot and promised their legal analysis

of the situation would ensure. The United States asserted the sale

extinguished all liens to the property and Petitioners failure to

challenge the validity or superiority of the mortgage lien rendered

their appeal moot. The court informed the parties it was inclined

to dismiss the appeal on this basis and requested legal comment

from the parties.

Petitioners filed a memorandum with the Court of

Appeals arguing against dismissal because the basis of the appeal

'2 When they signed the original contract, the Hewitts lived in

Tacoma, Washington and Peggy Hewitt was in Tacoma when the

assumption agreement and deed were executed. However, William

Hewitt arranged for the sale of Foxbriar in Texas and he, Petitioners,

and the real estate broker signed the contracts in Texas.

- ere Te Oe

———————eEE ee

was that the district court erred in erasing their ownership of

Foxbriar; the sale did not affect this issue. Petitioners reminded

the Court that, at the start of the appeal, the Fifth Circuit

anticipated the United States’ foreclosure sale and argued that the

foreclosure sale by First Nationwide merely substituted for that

tax sale. Furthermore, Petitioners argued that the subrogation

issue was a challenge to the validity and superiority of the first

lien mortgage, was not moot, and should be decided.

Nevertheless, the Court of Appeals dismissed the appeal

as moot for lack of a challenge to the validity of the first lien

mortgage, and never reached the issues on appeal. The Fifth

Circuit denied Petitioners’ petition for rehearing and suggestion

for rehearing en banc on June 11, 1999; and this petition for writ

of certiorari ensues from that denial.

REASONS FOR GRANTING THE WRIT

This conflict effects the rights of private parties to settle

contractual disputes without interference from the United States

government.

The Court of Appeals dismissal of Petitioners’ case was

arbitrary and capricious and an abuse of discretion. The Fifth

Circuit’s act conflicts with long standing, and recent, rulings of

this Court. Moreover, the order is confoundingly devoid of any

legal analysis that would elucidate the rationale for why this

Supreme Court precedent is not binding in the present case and

precludes a decision on the merits of the issues presented.

The United States abused its authority when it overreached

I.R.C. § 6323 to collect tax. The tactics of United States counsel

against Petitioners and before the lower courts was reprehensible

in its underhandedness and perfidy. Dismissing Petitioners’

claims sanctions these iniquitous actions of the United States.

The Fifth Circuit’s response to the government’s abuse of

authority remarks a blasé demeanor, that stands in sharp contrast

to the Ninth Circuit’s denouncement of the same tactics in the

only other case to reach the appellate courts.

This Court decided the issue of the United States ability to

seize property owned jointly by delinquent and non-delinquent

taxpayers, in United States v. Rogers, 461 U.S. 677 (1983).

However, the question of whether the United States can seize

property from a good faith buyer by standing in for a delinquent

taxpayer to rescind an executory or completed contract is new.

This case is a timely’ and rare opportunity for this Court to

provide guidance on government intrusion into private contracts.

I. The Court Of Appeals Decision To Dismiss

Conflicts With Long Standing Supreme Court

Rulings.

A. THE NON-JUDICIAL FORECLOSURE SALE STOOD

IN PLACE OF THE TAX LIEN FORECLOSURE SALE

AND EFFECTED SALE OF FOXBRIAR UNDER THE

DISTRICT COURT’S DECREE.

The Fifth Circuit dismissed this appeal as moot because

the real property the subject of the underlying suit (“Foxbriar”)

was sold in a non-judicial foreclosure sale by the first lienholder.

This lienholder was the same lienholder that the District Court

decreed would be paid first when the United States foreclosed its

lien and sold the property through a foreclosure sale. The Court

of Appeals reasons that because there was no challenge to the

validity of this lien, the sale renders the appeal moot. The Fifth

Circuit’s reasoning fails both factually and legally.

First, Petitioners did challenge First Nationwide’s

(Lomas’) priority against their right to be subrogated for the

mortgage payments they made on the Hewitts’ mortgage.

Petitioners raised this in their brief against dismissal. The Fifth

Circuit provides no reason why this was not a challenge to

validity or failed as a challenge to validity. Furthermore, the

United States initiated this case to foreclose its tax lien. The

United States received its order to foreclose and sell and attacked

'S Especially, in light of the recent Senate hearings into the Internal

Revenue Service’s overzealous collection practices.

PE i

;

Petitioners personally for seeking to stay the judgment pending

appeal. '*

‘* The Blanches requested, and the court granted, a stay pending the

court's consideration of their Motion for Reconsideration/New Trial.

The United States opposed the stay and reconsideration in its Motion to

Set Aside Order Granting Stay and Response to Motion for

Reconsideration/New Trial. The United States cited to certain court

case(s) that call for “speedy collection of taxes". E.g., Bull v. United

States, 295 U.S. 247 (1934); United States v. National Bank of

Commerce, 472 U.S. 713 (1985); and United States v. Rodgers, 461

U.S. 677 (1983). In those motions, the United States pleaded to the

District Court that:

"The United States has no way to ensure that waste

does not occur with respect to the subject matter property.

In this regard, the Blanches, Hewitt or some third party

tenant could reduce or destroy the equity currently existing

in the subject matter property either through the non-

payment of mortgage payments or through the failure to

maintain the property.

The Blanches Motion for Reconsideration . . .serves

only to delay the inevitable while placing the United

States at continued risk that the equity in the property

may be destroyed or diminished. (Emphasis added).

The United States filed a motion requesting the District Court deny

Petitioners’ request for stay pending appeal, arguing:

It appears that their [Petitioners’] appeal serves no

purpose other than to delay the United States collection of

Hewitt's long delinquent taxes. The United States stands in a

position junior to both the first lien holder and to the Blanches.

[A]Jny diminution in the equity of the subject matter

property during the pendency of an appeal will tend to

more seriously impact the United States . . .

There is a strong public interest in the prompt and orderly

collection of taxes. That interest has already been

considerably delayed. The primary reason for the

[government's] underlying suit was that there was little

likelihood of collecting Hewitt's tax delinquency absent a

sale of the subject matter property. (emphasis added)

Both the district court and the Fifth Circuit denied

Petitioners’ request for stay. These denials cleared the way for

the United States to foreclose. It was reasonably foreseeable that,

if the Government did not conduct its tax sale, First Nationwide

would foreclose because the Hewitts were not paying the

mortgage.'* The district court reiterated that Petitioners did not

own the property."

When the Fifth Circuit denied stay, however, the United

States received a caveat that, if the Court of Appeals decided in

Petitioners’ favor, the government would be held to the principle

they espoused from Wildmon v. Berwick Universal Pictures”.

Accordingly, Petitioners would be paid the fair market value of

Finally, the United States adjured the Fifth Circuit to deny stay

asserting:

“Because they no longer reside at the property, [Petitioners]

can hardly claim that they will suffer irreparable injury if the

property is sold while this appeal is pending. In the event the

property is sold, and [the Fifth Circuit] ultimately determines

that the Blanches had an interest in the property that primed the

federal tax lien, they may be made whole at that time by being

paid the fair market value of their interest. (Cite omitted.)

(“By definition, ‘irreparable injury’ is that for which

compensatory damages are unsuitable” .)

A lien foreclosure action such as the instant case, is one of

the collection tools Congress has afforded “to ensure the

prompt and certain enforcement of the tax laws”. (Cite

omitted). The Government has prevailed in this case, and the

public interest will be served by permitting the Government

to sell the property sooner rather than later. A sale of the

property now will not substantially harm the Blanches because

they are no longer using the property as their homestead.

(emphasis added).

'S This occurred once during the Blanche/Hewitt transaction and

Petitioners’ cure of the mortgage default is the only reason the property

was available for the United States to assert its lien.

" 983 F.2d 21 (Sth Cir. 1987)

their interest and the Government would be estopped to deny that

payment. The United States determined that this estoppel placed

them at risk and decided not to hold a tax sale."* The United

States knew that if they did not hold the tax sale First Nationwide

would foreclose its mortgage lien because the mortgage had not

been paid since July 1997." Thus, the sale by First Nationwide

substituted for the Government's tax sale.”

‘© Petitioners sent a motion to the District Court (and advisory to the

Fifth Circuit) to issue a writ and compel the sell of Foxbriar because the

mortgage company was reporting the delinquent debt and mortgage

payments against Petitioners’ credit. Counsel for the United States sent

a letter to the Fifth Circuit responding to the motion stating :

“In light of the conditions placed on the sale by the Court in

its order dated July 14, 1997, resolving the stay issue, the

Government subsequently determined that it was in the best

interests of the parties concerned to postpone selling the

property pending the Court's resolution of the Blanches’

[Petitioners] appeal.”

Counsel did not speak for all the parties. At that time, Hewitt was in

bankruptcy and Petitioners asserted that not selling was damaging their

financial status and credit. Therefore, the only interest served in

delaying the sale was the Government's interest. The “condition”

counsel claimed the Fifth Circuit placed on them was merely a

reiteration of the United States own admission in its opposition to stay

cited in note 6, supra.

' Petitioners’ Letter Memorandum to the Fifth Circuit dated February

24, 1999, includes a sworn statement from Mr. Blanche detailing a

telephone conversation between Mr. Blanche, Tom Herrin, Attorney for

the United States, Lori Condon, First Nationwide’s Support Litigation

Administrator. Because Hewitt was not making mortgage payments,

Ms. Condon advised that if the United States did not sell the property by

end of December 1997, First Nationwide would foreclose their

mortgage.

® This is supported by the District Court in its order denying

Petitioners’ Motion to Compel Deposit of Foreclosure Proceeds. The

District Court “noted that its 1997 judgment gave no instructions to the

mortgage company regarding how or when it was to sell the property

_. . [but] the company is, of course bound by the [District] Court's

decree to prioritize the proceeds as that decree directs it to do.”

B. THE COURT OF APPEALS DISMISSAL DIRECTLY

CONFLICTS WITH SUPREME COURT RULINGS.

The principles ruling against dismissal of an appeal

because of compliance with the lower court order are long

standing. Ancient decisions of this Court clearly establish that

the fact that money or property changes hands by force of a

judgment or decree does not dispose of the underlying errors

asserted by the defendant opposing that judgment.

In Erwin v. Lowry, 7 How. 171, 184 (12 L. Ed. 655), this

Court ruled that

. . IN no instance within our knowledge has an appeal or

writ of error been dismissed on the assumption that a

release of errors was implied from the fact that money or

property had changed hands by force of the judgment or

decree. If the judgment is reversed it is the duty of the

inferior court on the cause being remanded to restore the

parties to their rights.

In O'Hara v. McConnell, 93 U.S. 150, 154 (1876), it was held

that the making of a conveyance as ordered by the decree of the

court does not deprive the defendant of the right of appeal.

These principles were reiterated in Dakota County v. Glidden,

113 U.S. 222, where this Court said:

“There can be no question that a debtor against whom

a judgment for money is recovered may pay that

judgment and bring a writ of error to reverse it, and if

reversed can recover back his money, and a defendant in

an action of ejectment may bring a writ of error, and

failing to give a supersedeas bond, may submit to the

judgment by giving possession of the land, which he can

recover, if he reverses the judgment, by means of a writ

of restitution. In both these cases the defendant has

merely submitted to perform the judgment of the court,

> ™ Sa i

and has not thereby lost his right to seek a reversal of that

judgment by writ of error or appeal.”

Dakota County v. Glidden, 113 U.S. at 224. The Ninth, Eighth,

and District of Columbia circuits followed these holdings and

reversed dismissal of appeals where defendants complied with

lower court orders after unsuccessful attempts or failure to obtain

a Stay or post a supersedeas bond to stay proceedings.”

A pivotal case specifically regarding the actions of the United

States in carrying out its tax enforcement is Church of

Scientology v. United States, 506 U.S. 9 (1992). The rationale

in Scientology harmonizes with that of the older cases cited

supra, although it does not cite these cases specifically.

Petitioners’ case parallels Church of Scientology in several

respects as follows. First, in both instances, the property the

United States sought to obtain was in the hands of a third party.

The district court had the tapes in Scientology” and Petitioners

held possession of Foxbriar.

Second, in both instances, the United States invoked the

District Court’s jurisdiction under I.R.C.” § 7403”. In the

present, case the United States invokes its authority to file suit

under I.R.C. § 7403 to enforce a lien (Doc. | at 1),” while in

Scientology it invoked the authority of I.R.C. § 7604 to enforce a

21 See, Josevig-Kennecott Copper Co. v. Howarth Co., 261 F. 567,

568-569 (9th Cir. 1919); Cramer v. Phoenix Life Ins. Co., 91 F.2d

141, 145 (8th Cir. 1937); and Holcomb v. Holcomb, 209 F.2d 794, 797

(D.C. Cir. 1954).

2 Church of Scientology, 506 U.S. at 448-449.

2% Refers to Internal Revenue Code of 1986, as amended (26 U.S.C.)

and cited by its popular abbreviation “I.R.C.”

* Church of Scientology, 506 U.S. at 449.

5 United States of America’s Complaint. All references to the record

are to the document numbers in the District Court’s file unless

otherwise stated.

summons.” Also, im both instances, the owner of the property

opposed the United States motion to enforce.

Third, the District Court divested Petitioners of title to

Foxbriar and entered an order enforcing the tax lien and allowing

a sell of the property to collect taxes, just as the District Court

entered an order enforcing the summons.”

Fourth, Petitioners appealed the District Court’s decision

stripping them of ownership of Foxbriar, similar to the Church of

Scientology appealing the district court’s decision to remove them

of possession of their tapes. Both Petitioners were denied stay of

judgment and had their property removed from their control

pending appeal.”

Finally, the Government argued that when the lower court

compelled the Church to comply with its summons and the

Church complied, the controversy on appeal ceased to exist.

Similarly, in her letter to the Fifth Circuit dated February 10,

1999, counsel for the United States says that that foreclosure of

the property effectively settled the claims in the property and

renders Petitioners appeal moot.

This Court disagreed with the Government’s rationale in

Scientology for why the appeal was moot. This Court said:

While a court may not be able to return the parties to the

Status quo ante . . . a court can fashion some form of

meaningful relief in circumstances such as_ these.

Taxpayers have an obvious possessory interest in their

records. When the Government has obtained such

materials as a result of an unlawful summons, that

27 Ibid.

8 The United States in the present case, however, did not act on the

right to foreclose but delegated this to First Nationwide. Clearly based

on the District Court’s order Denying Deposit of Foreclosure Proceeds,

the mortgage foreclosure sale was in accord with the judgment.

interest is violated and a court can effectuate relief by

ordering the Government to return the records.

There is nothing in the statute to suggest that Congress

sought to preclude appellate review of district court

enforcement orders. To the contrary, we have expressly

held that IRS summons enforcement orders are subject to

appellate review.

Church of Scientology, 506 U.S. at 450-451. This rule is

relevant to seizure of real property to enforce federal tax liens

and should apply in that context.”

In a per curiam opinion, the Supreme Court clearly and

succinctly restates the “Scientology rule” in Calderon v. Moore,

518 U.S. 149, holding:

. . .[A]n appeal should therefore be dismissed as

moot when by virtue of an intervening event, a Court of

Appeals cannot grant “any effectual relief whatever” in

favor of the appellant.” The available remedy, however,

does not need to be “fully satisfactory” to avoid

mootness. To the contrary, even the availability of a

“partial remedy,” is sufficient to prevent [a] case from

being moot.”

Calderon v. Moore, 518 U.S. at 150. In the denial of stay, the

Court of Appeals provided Petitioners with an alternate remedy in

lieu of return of Foxbriar. The judicial estoppel was in keeping

with the precedent proscribed above and the Court of Appeals

should be held to that. The Fifth Circuit gives no reason why the

foreclosure sale precludes a decision on the merits that the

District Court’s decision that Petitioners were not purchasers

under I.R.C. § 6323 was erroneous. Also, in their brief

2° Maybe even more so because, usually, seized records are returned.

In contrast, the intent of lien enforcement is to dispose of the property

beyond the reach of the owner from whom it was seized.

*® Citing to Mills v. Green, 159 U.S. 651 (1895).

opposing dismissal, Petitioners gave a list of possible relief

including, subrogation to the mortgage company for the mortgage

paid, and 50% ownership of Foxbriar and application of United

States v. Rodgers.”"

The fact that the foreclosure sale was conducted by First

Nationwide is of no consequence because the result was the

foreclosure and sale of Foxbriar that the United States

requested.” The United States action in refusing to hold the tax

sale necessitated the sale by First Nationwide. For the United

States to circumvent Petitioners appeal through a sale that is the

direct result of its judgment is unthinkable and a misuse of the

justice system and is a direct conflict with the directives of this

Court.

The Court of Appeals decision is erroneous because dismisses an

appeal where some relief is available. Because this conflicts with

the Supreme Court’s crystal-clear holdings, the Court should

grant certiorari to review this important issue.

II. The Court of Appeals Interpretation of I.R.C. § 6323

Conflicts with the Ninth Circuit’s Interpretation.

The Ninth Circuit faced the same issue” in Newnham v.

United States, 813 F.2d 1384 (9th Cir. 1987). The Fifth Circuit

1 461 U.S. 677 (1983).

2 Based on the Government’s letter dated June 19, 1998, one could

infer that the United States “got what they asked for” and did not like it.

> There exist important c: »trasts between Newnham and the present

case that make the governmeni s actions and the District Court and Fifth

Circuit rulings even more harmful to an innocent party in a private

contract dispute with a delinquent taxpayer.

In Newnham, Patricia Newnham executed a contract and the seller

sought to repudiate before the sale was complete. Newnham sued for

specific performance and filed a lis pendens before the Government

filed its tax lien. During the pendency of Newnham’s case, the IRS

ee ae oe

PF Te Pe ge Oe ee Le ae ay ee

recorded tax liens against the repudiating seller and issued a levy to

seize the property. Shortly after, Newnham received specific

performance under a court-ordered settlement but the United States

insisted on the validity of its lien and refused to release it. Newnham

sued to effect release of the lien and enjoin the government from

holding its tax sale. The government asserted that the seller's

repudiation of the contract before they filed the tax lien effectively gave

Newnham only a lien interest in the property. The District Court's

analysis in Newnham turned on whether or not she had a lien interest as

opposed to a possessory interest.

The situation in the present case is more complex and even more

compelling for the proposition that I.R.C. § 6323 prevented the

government's intrusion into Petitioners contract. Petitioners had a lease

option contract to purchase the property not just an executory contract

The lease option required both the buyer and seller to perform, the

buyer to pay money and the seller to make repairs to the property to

Petitioners’ satisfaction. (App. G, infra, G11). It is undisputed on the

record that Petitioners made ail the required payments and exercised

their option to purchase the property in accords with the contract. While

the District Court rejected Petitioners arguments that failure of Hewitt

to make the repairs hampered their efforts to obtain financing to

complete the sale, the undisputed evidence in the record shows that

Hewitt never made the repairs during the option period and Petitioners

did not prevent him from making the repairs. After the option period,

the parties orally agreed that Petitioners would continue monthly

payments while the Hewitts arranged to make the repairs. Before this

could be finalized, Hewitt left his wife and never contacted Petitioners

about the contract. Then the Hewitts allowed the property to be

foreclosed a second time in May 1992. To protect their interest in the

property Petitioners and Mrs. Hewitt modified the contract to so

Petitioners could assume the property “as is” and all its liabilities and

pay the mortgage default. An agreement and deed were executed that

included Hewitt’s name 2nd filed in the county deed records in August

1992 approximately, 17 months before the IRS filed its tax lien. Hewitt

discovered the transaction in September 1992 but never came forward to

protest. It is significant that unlike the buyer in Newnham, Hewitt

never attempted to rescind the contract or invalidate the deed before the

United States sued to collect his delinquent taxes. Therefore, at the

time the government filed its tax lien the contract was complete and no

longer executory.

is only the second circuit to consider the issues in this case.

These two circuits contrast sharply in their assessment of and

response to the United States untenable actions under the

circumstances.

In Newnham, the Ninth Circuit held that:

“Newnham’s interest in property the Government’s

seized was protected by the plain language of the relevant

Internal Revenue statutes. The Ninth Circuit rejected the

government’s contention that the seller’s repudiation of

the executory contract deprived Newnham of her status as

a purchaser. Section 6323 specifically states that

Newnham’s interest under her written executory contract

qualified as a purchaser’s interest provided that the other

Statutory conditions were met.

The statute does not mention the possibility that a

qualifying interest in property created by a written

executory contract to purchase may be converted into a

nonqualifying lien or security interest by virtue of the

seller’s unilateral repudiation of the contract. The

government’s argument has no statutory basis; and it is

equally failing in logic, for an executory contract does not

become less so by one party’s default. It makes no sense

for the government to claim a windfall against the

nondefaulting purchaser simply because a delinquent

taxpayer renounces a contractual obligation.

The Ninth Circuit was astonished by the United States’

unreasonable, yet persistent contentions that Newnham held a lien

interest. The Ninth Circuit reversed the dismissal by the lower

court and awarded Newnham her attorney fees because of “the

government’s unreasonable, yet astonishingly persistent

contentions in this litigation.”

a ai A a a he i a a

seh aes

The Fifth Circuit effectively rejected the Ninth Circuit’s

holding when its dismissed Petitioners case as moot. Especially,

when there existed an articulated remedy for Petitioners if the

decision was in their favor. The pivotal issue presented by

Petitioners was that the District Courts facts and law was

erroneous. Thus, the Fifth Circuit’s “opinion” states that the

foreclosure sale cut off all liens. Clearly, the Fifth Circuit

accepts the argument that Hewitt’s eleventh hour disagreement

with the assumption agreement and deed™ converted Petitioners’

executory and completed contract into a lien against the property

that was junior to the tax lien.

Circuit Judge Kozinski, in a separate concurring opinion,

eloquently expressed the Ninth Circuit’s abhorrence of the

government’s persistence in pursuing its lien in the face of the

clear meaning of the statute invalidating it, as follows:

I write separately to express my _ personal

disappointment with the government lawyers who pursued

this matter on behalf of the United States. Appellant here

is not the taxpayer; whatever tax problems the property’s

former owners had were not of her making.

There are times when statutes, particularly those

involving the collection of revenue, can work serious

hardships. No one can blame government lawyers for

pressing their client’s rights under such circumstances. It

is a wholly different matter, however, for government

lawyers to ignore or bend the words of Congress in

pursuit of an unconscionable result. To inflict the

expense and uncertainty of litigation on citizens on such a

tenuous basis is conduct unbecoming public servants and

officers of the court. I can only hope that this matter will

be brought to the personal attention of the Assistant

Attorney General for the Tax Division, the United States

Attorney for the Central District of California and the

Chief Counsel of the Internal Revenue Service so that

* Hewitt finally conveyed this to Petitioners in his answer in June

1995, about three years after he discovered the existence of the deed.

they may each take appropriate steps to avoid such

overzealousness by their subordinates.

The Assistant Attorney General for the Tax Division, the United

States Attorney for the Western District of Texas, and the Chief

Counsel for the Internal Revenue Service are the same offices

that have brought the present litigation. The Fifth Circuit sends

them the opposite message, however, that it is okay to ignore the

clear and plain meaning of I.R.C. § 6323, and invidious tactics

by public servants and officers of the court are okay.” It is

> When the United States filed its suit to foreclose, they believed

Petitioners held a one-half interest in the property. The Government

cited that this Court’s opinion in United States v. Rodgers, 461 U.S.

677, clearly allowed them to seize the property and pay Petitioners the

value of their one-half interest. In their quest to oppose stay and sell the

property immediately, counsel for the United States attacked Petitioners

personally (see note 14, supra). Counsel for the United States made

representations to both the District Court and Court of Appeals that the

property would be sold and should be sold immediately (see note 14,

supra). Counsel for the United States assured the Fifth Circuit that the

remedy of payment of the value of their interest in the property would

be available to Petitioners if the Fifth Circuit ruled in their favor. The

turning point was the judicial estoppel placed by the Fifth Circuit. As

early as October 1997 the United States expected to sell the property

(see note 18, supra).

Then the United States decided to wait, an action in direct contrast

to its impassioned pleas for swift collection of the taxes and to sell now

and immediately. The United States had direct knowledge that First

Nationwide would eventually foreclose. (See note 18, supra). In their

answer, Lomas (the first lienholder) had even requested permission to

foreclose its mortgage lien in lieu of the tax sale. Furthermore, counsel

for the government knew that the judgment required the first lienholder

to distribute any sales proceeds in accordance with the decree the same

as the government was. Consequently, it was unscrupulous for counsel

for the United States to imply that the sale by First Nationwide settled

all appeal claims simply because there was no challenge to the validity

or superiority of the first lienholder. Considering the hodge-podge of

erroneous facts and questionable legal authority and analysis advanced

by the Government in support of the District Court’s decision, if the

government had any persuasive authority justifying their conclusion,

inconceivable that the Fifth Circuit is not similarly astounded like

the Ninth Circuit at the mercurial nature and tactics of counsel for

the government when they create a situation to their own

detriment. Such an apathetic attitude is dangerous to citizens

trying to litigate against a government with unlimited resources.

The decision below is diametrically opposed to that of the Ninth

Circuit. The Court should grant certiorari to review this import

conflict.

III. The Questions Presented are Important

In its brief, the United States, acknowledges that

1. Petitioners executed a lease contract with the Hewitts in

May 1990, that qualified as a “lease of property” within

the meaning of I.R.C. § 6323(h)(6)(A),

2. Petitioners’ option contained in the lease agreement, and

also executed in May 1990, constituted an option to

purchase within the meaning of I.R.C. § 6323(h)(6)(C),

and

3. Petitioners’ earnest money contract constituted an

executory contract to purchase money within the meaning

of I.R.C. § 6323(h)(6).

If these interests qualify under I.R.C. § 6323, then, by definition,

they were valid against subsequent purchasers under local law

and gave Petitioners the status of “purchasers”. The United

States inquiry would end and Petitioners, by these admissions,

had interests that precluded attachment of the tax lien to

Foxbriar.

surely they would have provided it. Rather, the United States proposes

this dubious legal theory in a letter to the Fifth Circuit promising

supporting authority. To Petitioners’ detriment and the government’s

gain, however, the promised authority never materialized.

To circumvent the plain meaning of the statute however, the

Government, states that Petitioners did not claim under the

contracts (directly contrary to Petitioners’ own statements under

oath and on brief) and the best that the valid contracts gave them

was some “equitable right”.

Though faced with statutory language contrary to its position,

the United States goes beyond this language to make Petitioners

interest something it never was. The Newnham Court

categorically rejects such analysis as a gross overstepping of the

plain meaning of I.R.C. § 6323 and its definition of a

“purchaser” for purposes of the statute. The Fifth Circuit takes

the directly opposite approach accepting the Government’s

argument that the valid interests held by petitioners were merely

lien interests because Hewitt’s negation of the contract terminated

any contractual interests.*° Such a result essentially amounts to

the United States seizing property without just compensation to

innocent parties with valid interest.”’

In sum, the two circuits considering the question are so

diametrically opposed in their interpretation that parties to private

contractual disputes cannot ascertain if the Internal Revenue

Service can enter their dispute, remove what should be a matter

for state court decision into a purely federal realm, and, thereby

circumvent the requirement of Section 6323 that local law

determine the validity of the interest.

* Evidence of acceptance of this theory this comes from the Fifth

Circuit’s Order Denying Stay (App. D, infra) that discusses if

“[Petitioners] had an interest. . . senior to the federal tax lien. In

addition, the Dismissal only speaks of challenges to lien validity. (App.

A, infra, A3). By inference, the Fifth Circuit rejects the theory that

Petitioners acquired a property interest that extirpated the tax lien as to

Foxbriar.

A result that this Court declared would pose significant difficulties

under the Due Process Clause of the Fifth Amendment to the United

States Constitution. See, United States v. Rodgers, 461 U.S. at 697.

This case presents the unique issue™* of whether the United

States can go beyond the inquiry of Section 6323 to change a

qualifying interest in property created by a written executory

contract (or completed contract) into a nonqualifying lien or

security interest by virtue of the sellers unilateral repudiation or

rescission of the contract.

The Ninth Circuit unequivocally says no; the Fifth Circuit

off-handedly implies yes. This case presents a rare opportunity

for this Court to address the disputed issue and bring much

needed certainty and uniformity to this area. Therefore, the

Court should grant the petition.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully Submitted,

Cynthia D. Blanche

Andrew E. Blanche, Jr.

2011 Campbell Parkway

Richardson, TX 75082-4849

(972) 699-8807

Petitioners

38 And the many concurrent sub-issues relative to percent of

ownership, proper damages, attorney fees under I.R.C. § 7430, right to

interest on a judgment, and right of subrogation consistent with

I.R.C. § 6323.

UNITED STATES OF AMERICA,

Plaintiff - Counter Defendant - Appellee,

ANDREW E. BLANCHE, ET AL.., Defendants,

ANDREW E. BLANCHE; CYNTHIA D. BLANCHE,

Defendants - Cross Claimants - Counter Plaintiffs - Appellants,

WILLIAM S. HEWITT,

Defendant - Cross Defendant - Appellee.

No. 97-50482

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

169 F.3d 956; 1999 U.S. App. LEXIS 4018;

83 A.F.T.R.2d (RIA) 1486

March 12, 1999, Decided

SUBSEQUENT HISTORY: Rehearing and Rehearing En Banc

Denied June 11, 1999, Reported at: 1999 U.S. App. LEXIS

16702.

PRIOR HISTORY: [**1] Appeal from the United States District

Court for the Western District of Texas. SA-95-CV-419. Edward

C Prado, US District Judge.

DISPOSITION: DISMISSED appeal as moot.

CORE TERMS: tax lien, first mortgage

COUNSEL: For UNITED STATES OF AMERICA, Plaintiff -

Counter Defendant - Appellee: William S _ Estabrook,

Washington, DC. Sarah Kay Knutson, US Department of Justice,

Washington, DC.

APPENDIX A

For ANDREW E BLANCHE, Defendant - Cross Claimant -

Appellant: Cynthia D Blanche, Richardson, TX.

CYNTHIA D BLANCHE, Pro se, Defendant - Cross Claimant -

Appellant, Richardson, TX.

For WILLIAM S HEWITT, Defendant - Cross Defendant -

Appellee: Gregory Wayne Canfield, San Antonio, TX.

JUDGES: Before DeMOSS, PARKER, and DENNIS, Circuit

Judges.

OPINION:

{*956] BY THE COURT:

This appeal raises for our determination the validity of the

district court's determination that the United States, through the

Internal Revenue Service, had a tax lien against the following

described property:

Lot Number One (1), Block Number One (1), NORTHCLIFF

COUNTRY CLUB [*957] ESTATES COMMUNITY,

SECTION 1, a subdivision in Guadalupe County, Texas,

according to plat recorded in Volume 4, Pages 63-65, Plat

Records, Guadalupe County, Texas.

The district court determined that such tax lien was valid in the

amount of $25,276.20 and ordered the foreclosure of such tax

lien and the distribution of the proceeds from the sale of the

property as described in the final Judgment of the district court

filed on February 28, 1997.

This Court has now been advised that during the pendency of

this appeal, the Federal National Mortgage Association’ as holder

, Sale was actually made by First Nationwide Mortgage

Corporation (“First Nationwide”), successor to Lomas Mortgage,

U.S.A.

of the first mortgage note on the above described property has

exercised its power of sale under the deed of trust securing such

note; and the substitute trustee [**2] under the first deed of trust

has sold such property to third parties at a foreclosure sale on

December 1, 1998.

No party to this appeal has raised any issue as to the validity of

the first mortgage lien; and the foreclosure of such lien

effective’y moots the issues of this appeal.

Accordingly, we DISMISS this appeal as moot.

Shr isn a thle ROM ARs .

Dt A he Alaa Ste MARRS Pa a le nS. eae

ait

SO a TES ERT DS GAT es ee

BRE wn.

UNITED STATES OF AMERICA, Plaintiff,

VS.

ANDREW E. BLANCHE, CYNTHIA D. BLANCHE,

WILLIAM S. HEWITT, HANK WILSON, and

LOMAS MORTGAGE, U:S.A.,

Defendants.

CIVIL ACTION NO. SA-95-CA-0419

UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF TEXAS,

SAN ANTONIO DIVISION

1997 U.S. Dist. LEXIS 3122; 97-1 U.S. Tax Cas. (CCH)

P50,448; 79 A.F.T.R.2d (RIA) 1557

February 28, 1997, FILED

CORE TERMS: repair, earnest money, tax lien, conveyance,

financing, lease, spouse, mortgage, deed, convey, specific

performance, restitution, purchaser, estoppel, community

property, default, dollars, roof, one-half, inspection, unknown,

expired, assumption agreement, unpaid tax, reimbursed,

addendum, expended, monthly, consented, undivided

COUNSEL: [*1] For USA,_plaintiff: Thomas M. Herrin,

Dept. of Justice, Dallas, TX.

For ANDREW E. BLANCHE, defendant: Randall Palmer, III,

Attorney at Law, San Antonio, TX. For CYNTHIA D.

BLANCHE, defendant: Randall Palmer, III, (See above). For

WILLIAM S. HEWITT, defendant: Gregory W. Canfield, Law

Offices of Gregory Canfield, San Antonio, TX. For LOMAS

MORTGAGE, U.S.A., defendant: Jackie Oliver, Dallas, TX.

For ANDREW E. BLANCHE, cross-claimant: Randall Palmer,

Ill, Attorney at Law, San Antonio, TX. For CYNTHIA D.

BLANCHE, cross-claimant: Randall Palmer, III, (See above).

APPENDIX B

For ANDREW E. BLANCHE, counter-plaintiff: Randall

Palmer, II, Attorney at Law, San Antonio, TX. For CYNTHIA

D. BLANCHE, counter-plaintiff: Randall Palmer, III, (See

above).

For USA, counter-defendant: Thomas M. Herrin, Dept. of

Justice, Dallas, TX.

For WILLIAM S. HEWITT, cross-claimant: Gregory W.

Canfield, Law Offices of Gregory Canfield, San Antonio, TX.

For ANDREW E. BLANCHE, cross-defendant: Randall Palmer,

III, Attorney at Law, San Antonio, TX. For CYNTHIA D.

BLANCHE, cross-defendant: Randall Palmer, III, (See above).

JUDGES: EDWARD C. PRADO, UNITED STATES

DISTRICT JUDGE

OPINIONBY: EDWARD C. PRADO

OPINION: [*2]

FINDINGS OF FACT AND CONCLUSIONS OF LAW

On March 5, 1996, a trial before the bench was held in the

above-styled and numbered cause. The case comes to this Court

pursuant to the Internal Revenue Code of 1986, as amended, 26

U.S.C. §§ 7402, 7403 and 28 U.S.C. §§ 1340, 1345.

Plaintiff United States (hereinafter "IRS") seeks to reduce to

judgment a federal income tax assessment against Defendant

William S. Hewitt (Hewitt), to foreclose a federal tax lien on

certain real property, and to receive a judgment for any unpaid

tax liability not satisfied by the sale of the property at issue.

Defendants Andrew E. and Cynthia D. Blanche (the Blanches)

filed a counter-claim against Hewitt for specific performance

under a failed contract for sale of the property. Hewitt filed a

cross-claim against Lomas Mortgage U.S.A. and the Blanches

el Lis | aR Rl BS AN ete IG OS EN E. *.

s # Es he aN ED Beh tad Bile, A es i aa vi

ote Ra SNE BIR ®

alleging a conspiracy to deprive him of his property and seeking

back rental payments for the Blanches’ occupancy.

Immediately prior to trial, the Court was informed that Lomas

Mortgage U.S.A. had filed for bankruptcy. No representative of

Lomas appeared at trial. Consequently, Hewitt's conspiracy claim

against Lomas and the Blanches was severed by the [*3] Court

prior to trial.

Pursuant to Federal Rules of Civil Procedure 52(a) and 58, the

Court hereby enters the following findings of fact and conclusions

of law.

FINDINGS OF FACT

The evidence submitted to the Court in this trial shows as

follows:

(1) On May 27, 1991, the IRS assessed a federal income tax

liability against Defendant William S. Hewitt for the 1990 tax

year. As of March 1, 1996, this tax liability totaled $25,276.20,

and continues to accrue interest and penalties until paid.

(2) At the time of the tax liability assessment, Hewitt and his

wife, Peggy L. Hewitt, were the owners of certain real property

described as:

Lot Number One (1), Block Number One (1), NORTHCLIFF

COUNTRY CLUB ESTATES COMMUNITY, SECT ION 1, a

subdivision in Guadalupe County, Texas, according to plat

recorded in Volume 4, Pages 63-65, Plat Records, Guadalupe

County, Texas.

(hereafter referred to as “the property"). The IRS filed a tax lien

on the property on January 18, 1994, in Guadalupe County,

Texas.

(3) On May 20, 1990, prior to the filing of the tax lien, the

Hewitts entered into an earnest money contract to sell the

property to the Blanches.

(4) Pursuant to the terms of a lease [*4] option addendum in

the Earnest Money Contract, the Blanches began occupying the

property on June 25, 1990, as lessees. The lease option in the

earnest money contract called for monthly payments of $1000.00

for a period of one year beginning July 1, 1990 through June 30,

1991. A portion of that payment, $250.00 per month, would be

credited back to the Blanches at the end of the option, to be

applied to the purchase of the property.

(5) The purchase price of the property at the end of the contract

period was $139,500.00 minus the credit back of $3,000.00. In

addition to the monthly lease payments, the contract called for the

Blanches to tender earnest money of $100.00 with the initial

contract, $2,500.00 on July 1, 1990, and $1,500.00 on January

1, 1991. The earnest money contract further required the

Blanches to secure outside financing for the purchase of the

property.

(6) A standard inspection report on the property completed on

June 19, 1990, by SIDCO Inspection Service, revealed several

needed repairs, including structural problems with the roof. This

report did not include inspection of structural damage to the pool.

(7) All the payments required under the contract were [*5]

made by the Blanches, however, they did not purchase the

property on the closing date of August 31, 1991.

(8) The earnest money contract, including the lease option,

expired by its own terms on June 30, 1991. Thereafter, the

Blanches remained in possession of the property and continued to

make $1000.00 monthly ‘lease’ payments.

(9) The Blanches did not complete their purchase of the

property because they believed that the Hewitts first needed to

aD seat ath

make repairs to the property in order to bring it up to code.

Based on conversations with their broker, it was the Blanches'’

belief that the property did not meet city inspection codes.

(10) The Bianches spoke to two or three mortgage companies.

They were told that it would be impossible for them to secure

financing if the property failed to meet city codes. Based on what

their broker told them, the Blanches decided it would be a waste

of money to actually put in an application for financing before the

repairs were done. Because no application was made, the

Blanches were never given or denied financing.

(11) Hewitt testified that he was unable to make most of the

repairs because he was living outside of the state. Hewitt argued

that even [*6] if he failed to make the repairs as required under

the contract, the Blanches could have made the repairs and they

would have been reimbursed or, alternatively, they could have

opted out of the contract in light of the alleged cost to repair the

property. Nonetheless, Hewitt stated that he spoke with Mr.

Blanche a number of times after receiving correspondence nl

from him regarding the repairs in question and instructed Mr.

Blanche to either send him estimates or make the repairs and he

would reimburse for the cost.

nl A letter dated January 3, 1991, addressed to Mr. and Mrs.

Hewitt in Tacoma, Washington, was submitted into evidence

detailing the findings of the inspection report dated June 19,

1990. Exhibit H. In addition, a letter dated June 4, 1991 from

Mr. Blanche to Hewitt expressed concern about the needed

repairs to be done before the Blanches could secure outside

financing to purchase the property. Defendant's Exhibit D1-18.

(12) Hewitt maintained that most of the needed repairs were

minor except for [*7] the roof, which Allstate Insurance

Company replaced in May of 1991. There is a factual dispute

about the condition of the roof following these repairs. The

Blanches say that Allstate only replaced damaged shingles and did

nothing about the structural problems. Hewitt says he was

assured by the roofer that the roof was in good shape after the

repairs and contends that his obligation was satisfied. No

inspection was done after the Allstate repairs were complete.

(13) The terms of the earnest money contract did not require

Hewitt to make repairs unless or until he was in "receipt of all

loan approvals and inspection reports." n2 The Blanches

proceeded as if all the repairs found on the inspection report were

to be made by the Hewitts regardless of loan approval.

n2 Paragraph 7B of earnest money contract.

(14) According to the earnest money contract, repairs

exceeding $1,500.00 would not be covered by the Hewitts. n3

The addendum to the contract repeats two of the contract

provisions. The addendum specifies that [*8] a licensed

inspector would inspect the property and that te Hewitts would

be responsible for making repairs based on that inspection. There

is nothing in the addendum to indicate that the $1500.00 repair

limit in the main body of the contract would not apply to the

repairs found by the inspection. The addendum merely states that

once the Hewitts' obligations are satisfied, all other repairs would

be up to the Blanches. The roof, in a special provision, had an

additional warranty expiring June 6, 1991.

n3 The Blanches expended approximately $969.00 on plumbing

repairs prior to the lease option expiration date, which falls below

this $1,500.00 limitation.

(15) The Blanches insist that the Hewitts were obligated to

make all the repairs listed by the inspection report,

notwithstanding the $1500.00 contract limitation. Further, the

Blanches appear to have believed that all repairs were to be made

before the Blanches had an obligation to apply for third-party

financing. These contentions are disputed by Hewitt [*9] and

are not consistent with the language of the contract itself.

Rates Males

ener ee eT ae

(16) The Blanches have never tendered the full contract price

for the property and do not do so now. Mr. Blanche testified that

with all the repairs and improvements that have been made, he

believes enough money has been expended. However, the Court

notes that at jgast some of the money went to accommodate the

Blanches' desire for improvements to the property, not merely

repair or replacement.

(17) The Blanches continued making the monthly lease payment

of $1000.00 to the Hewitts after the earnest money contract and

lease option expired. n4 As of September 1991, the checks were

made payable only to Peggy L. Hewitt by her instructions; n5 the

last payment being made on April 10, 1992.

n4 There was a conversation sometime after June 30, 1991,

between Hewitt and Mr. Blanche. Mr. Blanche was upset at

Hewitt because he still had not made the repairs to the property

as promised. Mr. Blanche became even more infuriated because

Hewitt told him that he was thinking of putting the property up

for sale.

n5 Mr. Blanche relied on information he received from Mrs.

Hewitt indicating that Mr. Hewitt had left her, she did not know

his whereabouts, and the lease payments were to be made in her

name only.

[*10]

(18) During the time the Blanches were making the checks

payable to Mrs. Hewitt, they discussed with her the possibility of

purchasing the property by taking the property as is, assuming

the outstanding mortgage, and giving her a $20,000 note in

addition to the earnest money they already paid. However, once

Lomas Mortgage U.S.A. began foreclosure proceedings,

sometime in the early spring of 1992, the Blanches and Mrs.

Hewitt agreed to different terms. In consideration for the

assumption agreement, the Blanches were to take the property as

is, assume the unpaid mortgage balance of $59,703.43 and any

other encumbrances on the property, cure the default with the

mortgage company of $7,269.73, and apply the earnest money

given under the contract that had previously expired.

(19) The Blanches were concerned they would not have good

title to the property without Hewitt's signature. On May 8, 1992,

the Blanches sent a letter to Mrs. Hewitt explaining the need for

power of attorney from Hewitt to convey the property. At this

point, the Blanches did not know whether the Hewitts had

divorced, separated, or even if Mrs. Hewitt was in contact with

her husband.

(20) Once the assumption agreement [*11] and deed were

drafted they were sent via facsimile to Mrs. Hewitt in Tacoma,

Washington, to be signed by both her and Hewitt. When they

were returned via facsimile to the Blanches, the only signature on

the documents was that of Mrs. Hewitt. The documents were

notarized July 2, 1992, as the date the assumption deed and

assumption agreement were executed by Mrs. Hewitt.

(21) After receiving the documents from Mrs. Hewitt, the

Blanches had a conversation with her that led them to believe she

had received approval from her husband regarding the

conveyance of the property. n6 Believing that Hewitt had

consented to the sale, the Blanches sent the assumption deed and

agreement back to Mrs. Hewitt so she could have Hewitt sign

them. However, the Blanches never heard back from Mrs. Hewitt

regarding when Hewitt would sign the papers. The Blanches were

obviously still concerned that Hewitt's signature was not on the

documents. Consistent with this concern, a letter sent by Mrs.

Blanche to Mrs. Hewitt on September 20, 1992, reiterated the

need for Hewitt's signature on the documents.

- n6 The Court sustained an objection to hearsay testimony

about what Mrs. Hewitt said her husband told her. This Court

cannot presume what was actually said or not said by Mrs.

Hewitt or Hewitt but must consider only what was allegedly

relied or not relied upon by the Blanches. The Blanches obviously

Te sete ies

}

{

were under the impression that by assuming and curing the

mortgage default on the property they were not only getting a

good deal, they were also preventing the house from being

foreclosed upon. However unreasonable they may have been, the

Blanches believed Hewitt gave his consent to the assumption in

order to prevent the imminent foreclosure of the property.

However, the Court will not make such a finding because the

only evidentiary support for this assertion is inadmissible hearsay

testimony.

[*12}

(22) After Lomas Mortgage U.S.A. instituted foreclosure

proceedings, the Blanches were able to assume the loan on the

property by curing the default amount. The Blanches filed the

assumption deed, still unsigned by Hewitt, with the County Clerk

of Guadalupe County, Texas on August 24, 1992. Thereafter. the

Blanches began to take steps to repair and improve the property,

all the while believing they were the true owners of the subject

property.

(23) The repairs and/or improvements of items made to the

property by the Blanches, in addition to the $969.00 expended

prior to the expiration of the Lease Option, include the following:

2/25/94: Extensive work on the in-ground pool by Gary Pools to

repair structural damage, install hot tub, and replace various

inoperative items totaling $15,650.00;

3/14/94: Yard clearing by Richard Bosquez for a total of

$293.50;

4/15/94: Water heater replacement by Mr. Rooter Plumbing

totaling $3186.08;

1/26/95: Privacy Fence installation by Arrowhead Fence &

Supply Co., Inc. totaling $637.00;

Date unknown: Electrical work by unknown company for

$580.00;

Date unknown: Heating and [*13] air conditioning work by

unknown company for $600.00;

Date unknown: Garage door & opener work by unknown

company for $750.00.

There are additional itemized costs/expenditures submitted by

the Blanches n7; however, the evidence is unclear whether these

additional costs were merely projections or had been undertaken

at the time of trial. These costs include heating and air

conditioning repairs for $2500.00, roof repairs for $7500.00,

fence repairs for $2000.00 dollars, and ceiling and other

consequential damage repairs stemming from the roof damage for

$2500.00.

- n7 Defendant's Exhibit no. D1-17

(24) Hewitt testified that he and Mrs. Hewitt purchased the

property by way of assumption using combined funds in June of

1988. They lived in the home for approximately one year before

they moved and rented the property out. Hewitt stated that he has

no intention of returning to live and claim the property as his

homestead.

(25) Hewitt testified that he never ratified or consented to the

assumption [*14] of the property by the Blanches. There is no

admissible evidence to contradict this statement. While the Court,

as finder of fact, is entitled to disbelieve Hewitt's testimony,

other evidence leads the Court to believe that Mrs. Hewitt, in

fact, attempted to convey the property without her husband's

consent.

(26) Hewitt separated from his wife in August of 1991 but he

says that Mrs. Hewitt knew how to contact him at any time.

However, he admits that there was no contact between himself

B10

RE MnO i283 ses teal

and Mrs. Hewitt between May 1992 and September 1992. He

testified that he first found out about the foreclosure proceedings

in a conversation with his wife in September of 1992, after she

had already made the attempted conveyance of the property. He

does not admit to approving or ratifying the sale at that time.

Subsequently, he found out about the assumption by the Blanches

from the recorded deed at the Guadalupe County courthouse.

(27) Any findings of fact above should be construed as

conclusions of law to the extent necessary.

CONCLUSIONS OF LAW

(1) The income tax assessment against William S. Own? & is

correct and should be reduced to judgment.

(2) The IRS tax lien is valid and attaches to the [*15]

property in question. However, the lien may be ineffective as to

the Blanches if they qualify as "purchasers" under 26 U.S.C. §

6323(a). A "purchaser" is:

. a person who, for adequate and full consideration in money

Or money's worth, acquires an interest . . . in property which is

valid under local law against subsequent purchasers without

actual notice... .

26 U.S.C. § 6323(h)(6).

(3) If the Blanches have a valid interest in the property, that

interest attached at the time of the assumption deed and the later

filing of the tax lien is ineffective as to that interest. 26 U.S.C. §

6323.

(4) As an initial matter, the question of what rights and/or

interests the Blanches have in the property must first be

determined under applicable Texas law before federal law can be

used to impose and enforce a tax lien on the property at issue.

See Medaris v. United States, 884 F.2d 832, 833 (Sth Cir. 1989);

Bll

26 U.S.C. § 6323(a)(interests must be determined under local

law).

(5) There are no homestead claims to the property. Hewitt

unequivocally stated that he has no intention of returning to live

and claim the homestead exemption guaranteed under the Texas

Constitution [*16] Art. XVI § 50. See e.g., Sims v. Beeson,

545 S.W.2d 262, 263 (Tex.Civ.App.--Tyler 1976, writ ref'd

n.r.e.); Prince v. North State Bank of Amarillo, 484 S.W.2d

405, 409 (Tex.Civ.App.--Amarillo 1972, writ ref'd

n.r.e.)(following well-settled law in Texas that in order to have

abandonment of a homestead right owner must not occupy and

intend to claim as homestead).

(6) The Hewitts acquired the property during their marriage

using combined funds; therefore, it must be characterized as

joint-managed community property under Texas law. See Tex.

Fam. Code §§ 5.01(b), 5.22(c). Section 5.22(c) provides in

relevant part that the community property ". . . is subject to the

joint management, control, and disposition of the spouses, unless

the spouses provide otherwise by power of attorney in writing or

other agreement (emphasis added).” In the instant case, there is

00 admissible evidence to show that Hewitt gave any consent or

authorization to Mrs. Hewitt, either in writing or orally, which

would allow her to control or dispose of the property at any time

either before or after the attempted conveyance of the assumption

deed to the Blanches.

(7) Because it is clear [*17] under Tex. Fam. Code § 5.22(c)

that Mrs. Hewitt alone could not convey the entire property, the

next issue presented is whether Mrs. Hewitt conveyed her

undivided, one-half interest in this joint-managed, non-homestead

community property by entering into an assumption agreement

and assumption deed to convey the property to the Blanches. n8

n8 The IRS states that it is unaware of any law that would

allow for such a conveyance; however, it would nonetheless

Bl2

—

allow a partial conveyance to stand and concede the Blanches'

one-half ownership of the property.

(8) The Texas courts of appeals are split on whether one

spouse may convey his or her undivided interest in joint-managed

community property to a third person without first obtaining the

other spouse's consent. Compare Vallone v. Miller, 663 S.W.2d

97, 98-99 (Tex. App.--Houston [14th Dist.] 1983, writ ref'd

n.r.e.(holding conveyance invalid only because the instrument

purported to convey entire interest not just one-half undivided

interest held by [*18] spouse); n9 Williams v. Portland State

Bank, 514 S.W.2d 124, 127 (Tex.Civ.App.--Beaumont 1974,

writ dism'd)(finding that §§ 5.22 & 5.24 of the Texas Family

Code do not foreclose one spouse from encumbering his or her

one-half, undivided community property interest without first

receiving consent from the other spouse) with Dalton v. Don J.

Jackson, Inc., 691 S.W.2d 765, 768 (Tex. App.--Austin 1985, no

writ)(declining to follow rule that would allow for one spouse to

“unilaterally effect a partition of joint management community

property”).

n9 In fact, although Vallone would apparently allow a partial

conveyance in some circumstances, Vallone would invalidate the

assumption deed in the instant case because it purports to convey

the entire property, not just Mrs. Hewitt's one-half interest.

(9) In light of the fact that the Texas Supreme Court has not

yet spoken on this issue, this Court finds the better rule in

accordance with Texas law to be that from the Dalton court. As

Dalton [*19] points out, § 5.22(c) of the Texas Family Code is

very specific in its language concerning the disposition of joint

management community property. Dalton, 691 S.W.2d at 767

and commentaries cited therein. Section 5.22(c) unequivocally

states that the property must be managed, controlled and disposed

of jointly unless there is written or some other authorization by

either spouse to do otherwise. Furthermore, there are both

constitutional and statutory procedures that must be followed to

partition a community property interest, which would be

B13

circumvented if a partial conveyance by one spouse were allowed

under the law. See Tex. Const. Art. XVI § 15; Tex. Fam. Code

§ 5.54; Dalton, 691 S.W.2d at 768. Accordingly, this Court finds

that the attempted conveyance of the entire property by Mrs.

Hewitt did not transfer her one-half, undivided interest to the

Blanches.

(10) Alternately, the Blanches contend that Mrs. Hewitt could

convey not only her interest but that of her husband because

under unusual circumstances, such as abandonment, Mrs. Hewitt

could manage, control and dispose of the community property as

she saw fit. Tex. Fam. Code § 5.25. This argument, however,

does [*20] not lend itself to the facts of this case. Hewitt gave

uncontradicted testimony to the effect that although he did not

speak to his wife for a period of time, she still knew how to

contact him. Assuming, without deciding, that Hewitt abandoned

his wife, Mrs. Hewitt did not comply with the statutory

procedures of § 5.25 that would have entitled her to the sole

management, control and disposition of the community property

under Texas law. Id. The Court has not found nor has it been

cited any other authority under which Mrs. Hewitt would have

the right to convey the property without her husband's consent

solely on the basis of abandonment.

(11) The Blanches argue that they are entitled to specific

performance in light of Hewitt's failure to meet his obligations

under the earnest money contract. The earnest money contract is

unambiguous on its face. The contract gives the Blanches the

option of leasing before the closing date of August 31, 1991, not

an option to buy. The plain meaning of the contract binds the

Hewitts to sell and the Blanches to buy by the closing date. This

is evidenced by the terms of the agreement requiring that in the

event of default on the buyer's part, the [*21] seller can either

sue for specific performance or take earnest money as liquidated

damages. Texas law is clear that a contract for sale exists when

the buyer has both these remedies. See, e.g., Gala Homes, Inc. v

Fritz, 393 S.W.2d 409, 410 (Tex.Civ.App.--Waco 1965, writ

ref'd n.r.e.)(citing to Paramount Fire Ins. Co v. Aetna, 163 Tex.

Bl4

Sea

ae eT eT Pee eet eee

nS Be CREA IA FDR A IS Lb AS te ait Wt Bit Pr to < ie enbibh

250, 253, 353 S.W.2d 841, 843 (Tex. 1962) and Moss v. Wren,

102 Tex. 567, 570, 113 S.W. 739 (Tex. 1909)); Tabor v. Ragle,

526 S.W.2d 670, 675 (Tex.Civ.App. --Ft. Worth 1975, writ

ref'd n.r.e.); Broady v. Mitchell, 572 S.W.2d 36, 40

(Tex.Civ.App.--Houston [Ist Dist.] 1978, writ ref'd n.r.e.).

(12) Although the Blanches had the remedy of specific

performance under the initial earnest money contract, they

forfeited that right when they did not meet their end of the

bargain to secure outside financing to purchase the property. See

Cowman v. Allen Monuments, Inc, 500 S.W.2d 223, 226

(Tex.Civ.App.--Texarkana 1973, no writ)(ruling that a party who

has materially breached the contract by failing to meet contract

requirement cannot claim specific performance)(recognized in

Hudson v. Wakefield, 645 S.W.2d 427, [*22] 430 (Tex.

1983)). Although the Blanches argue that outside financing was

unavailable, the Blanches merely approached certain mortgage

companies and decided not to apply based on their belief that the

property would not meet city codes. The Court has insufficient

evidence on which to find that the Blanches were prevented from

obtaining financing by Hewitt's failure to repair. Thus, the Court

finds that the Blanches are not entitled to specific performance on

the contract for sale of the property.

(13) Further, as previously discussed, the Blanches have never

offered to perform their part of the earnest money contract by

tendering the contract price. The Blanches are not entitled to

specific performance where they are not willing to abide by the

terms of the contract they seek to enforce. n10

nl0 In fact, the Court finds that the Blanches seek specific

performance, not of the initial earnest money contract, but of the

subsequent assumption agreement to which Hewitt himself was

not a party. Specific performance for a subsequent contract

cannot be based upon a party's default under a prior expired

contract.

[*23]

B15

(14) The Blanches also appear to allege in the alternative that

they should be granted specific performance because Hewitt

refused to recognize their option to purchase the property by way

of the assumption deed and agreement. This contention fails for

two reasons. First, even assuming the initial agreement was an

option contract rather than a contract for sale, the contract failed

or expired by its own terms on June 30, 1991, and therefore had

no continuing effect on the subsequent agreement between the

Blanches and Mrs. Hewitt. Second, assuming the contract could

be construed to allow the Blanches the option of purchasing, as

opposed to leasing, and that option could have been extended past

the expiration date of June 30, 1991, the Blanches would still

have failed to strictly adhere to the conditions of the option under

the contract by failing to securing outside financing or otherwise

tendering the contract price by the ‘option’ date. See Scott v.

Vandor, 671 S.W.2d 79, 84 (Tex.Civ.App.--Houston [Ist. Dist.]

1984, writ ref'd n.r.e)(applying rule that option can only be

accepted if purchaser complies with terms of the agreement).

Thus the Court finds that the Blanches [*24] are not entitled to

specific performance of the contract as an option contract.

(15) The Blanches also make a vague claim of estoppel alleging

that the IRS, through the Hewitts, is estopped from denying them

title to the property because the Blanches detrimentally relied on

the earnest money contract to give them title to the property. In

order to assert equitable estoppel, the party raising this defense

must prove all of the following elements: (1) a false

representation or concealment of material facts (2) made with

knowledge, actual or constructive, of those facts, (3) with the

intention that it should be acted on, (4) to a party without

knowledge, or the means of acquiring knowledge of those facts,

(5) who detrimentally relied upon the misrepresentation. Casa El

Sol-Acapulco, S.A. v. Fontenot, 919 S.W.2d 709, 717 (Tex.

App.--Houston [14th Dist.] 1996, writ dism'd by agr.)(citing

Schroeder v. Texas Iron Works, 813 S.W.2d 483, 489 (Tex.

1991)).

B16

(16) The Blanches' estoppel argument fails because there is no

evidence in the record that Hewitt falsely represented to the

Blanches that they were the owners of the property or that he

concealed material facts leading the [*25] Blanches to believe

that they had acquired title to the property. See Barfield v.

Howard M. Smith Co., 426 S.W.2d 834, 838 (Tex.

1968)(finding that failure to prove one or more of elements is

fatal); see also Heckler v. Community Health Serv., 467 U.S.

51, 59-60, 81 L. Ed. 2d 42, 104 S. Ct. 2218 (1984)(at minimum,

elements of estoppel must be proven). On the contrary, the

evidence supports a finding that the Blanches knew there were

problems in their dealings with Hewitt early on, evidenced by

their admission of Hewitt's comment that he was thinking of

putting the property up for sale in the summer of 1991 and their

admitted failure to make sure that Hewitt consented to the

assumption. Barfield, 426 S.W.2d at 838 (party must use due

diligence to ascertain the truth of matters upon which they rely).

Moreover, if the Blanches relied on the contract to give them

equitable title to the property, their reliance was misplaced and

unreasonable since they did not fulfill the terms of the contract by

obtaining or seeking to obtain outside financing nor did they

tender the full purchase price. See Heckler, 467 U.S. at 59 (using

the defense of equitable estoppel requires [*26] a reasonable

reliance in addition to a change of position which makes the party

worse off).

(17) The Blanches also claim estoppel because the Hewitts

knew and did not object to the investments and valuable

improvements made to the property by the Blanches. Estoppel by

silence maybe a valid defense in cases where one party leads

another to act by the first party's silence; however, there must be

a fiduciary duty or a confidential relationship which gives rise to

a duty to speak. Barfield, 426 S.W.2d at 838; Casa El Sol-

Acapulco, S.A. v. Fontenot, 919 S.W.2d at 719.

(18) The evidence in this case does not support a claim of

estoppel by silence. First, there is no evidence that Hewitt

induced the Blanches by his silence to make improvements or

B17

investments to the property, nor is there evidence that Hewitt

knew such improvements or investments were being made.

Second, no confidential or fiduciary relationship exists in this

case that would warrant such a claim. These parties were dealing

at arms length as purchaser and seller. Therefore, this Court finds

no support for the Blanches' claim of estoppel.

(19) Since this Court finds the property has not been conveyed

nor may specific [*27] performance be compelled, the Blanches

fail as "purchasers" pursuant to 26 U.S.C. § 6323. Under Texas

law, the Blanches have no valid interest in the property which

would have attached before the tax lien was filed.

(20) The Blanches also raise vague affirmative defenses of

laches and waiver against the IRS. The Blanches assert that the

IRS waited too long to file its tax lien on the property. This

contention is not applicable in the context of this case. The tax

lien arises at the time of the assessment. The lien is only notice.

The Tax Code itself provides a kind of laches protection for

persons who acquire an interest in property before the notice

provided by a tax lien is filed. Those persons receive protection

as "purchasers." Here, however, the Blanches did not acquire

any interest in the property. The doctrine of laches does not

provide them with any interest in the property. Similarly, waiver

does not give rise to rights that never existed. The conveyance of

the property was invalid and any delay by the IRS is irrelevant to

the question of whether the Blanches acquired an interest in the

property.

(21) Finally, this Court finds that the doctrine of unjust

enrichment should [*28] be applied in this case. It would be

unconscionable to allow Hewitt to keep his interest in the

property as well as the substantial benefits conferred to him by

the Blanches. The purpose of restitution under this remedy is to

do what justice demands. See generally, RESTATEMENT OF

RESTITUTION, Introductory Matters p.11 (1937). This theory

of recovery provides that "[a] person who has been unjustly

enriched at the expense of another is required to make restitution

to the other." RESTATEMENT OF RESTITUTION § 1. The

doctrine places the person conferring the benefit back to the

position he or she formerly occupied by reimbursing him or her

for the benefit conferred on another. Id. at 12. Although

restitution is given when one "...wrongfully secure[s] a benefit or

has passively received one which would be unconscionable for

him to retain," Barrett v. Ferrell, 550 S.W.2d 138, 143

(Tex.Civ.App.--Tyler 1977, writ ref'd n.r.e.), the remedy does

not depend on whether the person receiving the benefit committed

a wrongful act. Fun Time Centers, Inc. V. Continental Nat'l

Bank, 517 S.W.2d 877, 884 (Tex.Civ.App.--Tyler 1974, writ

ref'd n.r.e.). Recovery under principles [*29] of unjust

enrichment is also appropriate when an agreement is

"...unenforceable, impossible, not fully performed, thwarted by

mutual mistake or void for other legal reasons." Harker Heights

v. Sun Meadows Land, Ltd, 830 S.W.2d 313, 319 (Tex. App.--

Austin 1992, no writ).

(22) The Court cannot find, based upon the minimal admissible

evidence presented at trial, that the Blanches were reasonable in

relying on the assumption deed combined with the representations

from Mrs. Hewitt indicating that her husband consented to the

conveyance. However, the Court finds that the Blanches honestly

and with good faith believed that they were actually purchasing

the property by assumption. The Blanches expended a great deal

of money in fixing the property and making improvements in

order to provide a comfortable and safe home for themselves and

their children. In addition, the Blanches prevented this property

from being foreclosed upon while Hewitt passively let the

situation develop. In the name of equity and fundamental

fairness, this Court, pursuant to Fed. R. Civ. P. 54(c), holds that

the Blanches must be recompensed for the expenditures and

improvements to the property that were done [*30] in reliance

upon the assumption agreement and which have been duly pled in

this action.

(23) As to the amounts that should not be reimbursed to the

Blanches, the money expended as payments under the earnest

money contract are not recompensable since the Blanches failed

to meet their obligations under the sales agreement. The Blanches

did not confer a benefit, nor was Hewitt unjustly enriched, by the

payments under the contract since the Blanches had a contractual

duty to pay under the contract in order to purchase the property

and there was a possibility that those monies would be forfeit if

the Blanches did not meet their other contractual obligations.

Further, the itemized expenses listed in Defendant's Exhibit D1-

17 that are mere projections are not to be reimbursed. Finally,

the Court finds that the monthly payments to Mrs. Hewitt and to

Lomas Mortgage U.S.A. constitute fair rental value for the

Blanches' occupancy of the property after the expiration of the

earnest money contract and during the time they believed they

were assuming the property and will not be reimbursed.

(24) As to amounts that should be reimbursed to the Blanches,

the amount that they expended to cure the [*31] mortgage

default is recoverable since this expenditure was in addition to the

fair market paid lease payments. Additionally, amounts spent to

repair and improve the property constitute an unfair enrichment

of Hewitt as he will retain title to the property with its now

enhanced value. Thus, the Court finds that the Blanches should

recover for the following:

$969.00 (plumbing repair)

$7,269.73 (Lomas Mortgage to cure default)

$15,650.00 (Pool improvements/repairs)

$293.50 (yard clearing/cleaning)

$3,186.08 (water heater replacement)

$637.00 (fence repair/replacement)

$580.00 (electrical repair)

B20

hd tea A Dade

* LAA TOIT B ee MAA sai RIB,

$600.00 (Heating and air conditioning work)

$750.00 (Garage door repair)

Totaling: $29,935.31

(25) The Court further finds that the Blanches' reimbursement

should take priority over the IRS's tax lien because the Blanches'

expenditures were made prior to the notice filing of the tax lien.

(26) Any conclusions of law above should be construed as

findings of fact to the extent necessary.

It is therefore ORDERED that JUDGMENT shall issue as

follows:

(a) the United States shall have judgment against Defendant

William S. Hewitt [*32] in the amount of twenty five thousand

two hundred seventy six and 20/100 dollars ($25,276.20) along

with additional interest and penalties accrued since March 1,

1996;

(b) the tax lien of the United States upon the property described

in this Order and based upon the amount of the judgment

awarded against William S. Hewitt above is valid and may be

foreclosed with proceeds to be distributed as follows:

(i) first, to Lomas Mortgage, U.S.A., any outstanding

mortgage amount owed on the property;

(ii) second, to Andrew E. and Cynthia D. Blanche, twenty nine

thousand nine hundred thirty five and 31/100 doliars

($29,935.31) as restitution for improvements and investments 1n

the property;

(iii) third, to the United States, twenty five thousand two

hundred seventy six and 20/100 dollars ($25,276.20) along with

B21

additional interest and penalties accrued since March 1, 1996, for

the unpaid tax liability of William S. Hewitt; and

(iv) fourth, any remaining excess to William S. and Peggy L.

Hewitt, jointly.

It is further ORDERED that if excess proceeds from the sale of

the property do not satisfy the unpaid tax liability owed to the

United States by William S. Hewitt, the deficiency [*33] may

be collected directly from William S. Hewitt and any other

property which may be subject to liability through him.

It is further ORDERED that the remaining cross-claim by

William S. Hewitt alleging conspiracy by Lomas Mortgage and

Andrew E. and Cynthia D. Blanche is hereby transferred to the

United States Bankruptcy Court that it may be considered in light

of the pending bankruptcy proceeding of Lomas Mortgage,

U.S.A.

SIGNED and ENTERED this 28 day of February 1997.

EDWARD C. PRADO

UNITED STATES DISTRICT JUDGE

JUDGMENT

In accordance with the Findings of Fact and Conclusions of

Law entered by this Court on this same date, it is hereby

ORDERED, ADJUDGED AND DECREED that JUDGMENT is

entered herein as follows:

(a) the United States is GRANTED JUDGMENT against

Defendant William S. Hewitt in the amount of twenty five

thousand two hundred seventy six and 20/100 dollars

($25,276.20) along with additional interest and penalties accrued

since March 1, 1996;

(b) the tax lien of the United States upon the property described

in the Findings of Fact and Conclusions of Law and based upon

B22

the amount of the JUDGMENT awarded against William S.

Hewitt above is valid and [*34] may be foreclosed with

proceeds to be distributed as follows:

(i) first, to Lomas Mortgage U.S.A., any outstanding mortgage

amount owed on the property;

(ii) second, to Andrew E. and Cynthia D. Blanche, twenty nine

thousand nine hundred thirty five and 31/100 dollars

($29,935.31) as restitution for improvements and investments in

the property;

(iii) third, to the United States, twenty five thousand two

hundred seventy six and 20/100 dollars ($25,276.20) along with

additional interest and penalties accrued since March 1, 1996, for

the unpaid tax liability of William S. Hewitt; and

(iv) fourth, any remaining excess to William S. and Peggy L.

Hewitt, jointly.

It is further ORDERED, ADJUDGED AND DECREED that if

excess proceeds from the sale of the property do not satisfy the

unpaid tax liability owed to the United States by William S.

Hewitt, the deficiency may be collected directly from William S.

Hewitt and any other property which may be subject to liability

through him.

It is further ORDERED, ADJUDGED AND DECREED that

each party shall bear its own costs, fees and expenses.

SIGNED and ENTERED this 28th day of February 1997.

EDWARD C. PRADO

UNITED STATES DISTRICT JUDGE

B23

UNITED STATES OF AMERICA,

Plaintiff - Counter Defendant - Appellee,

ANDREW E. BLANCHE, ET AL., Defendants,

ANDREW E. BLANCHE; CYNTHIA D. BLANCHE,

Defendants - Cross Claimants - Counter Plaintiffs - Appellants,

WILLIAM S. HEWITT,

Defendant - Cross Defendant - Appellee.

No. 97-50482

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

1999 U.S. App. LEXIS 16702

June 11, 1999, Filed

NOTICE: [*1] DECISION WITHOUT PUBLISHED OPINION

PRIOR HISTORY: Appeal from the United States District Court

for the Western District of Texas, San Antonio.

Original Opinion of March 12, 1999, Reported at: 1999 U.S.

App. LEXIS 4018.

JUDGES: Before DeMOSS, PARKER, and DENNIS, Circuit

Judges.

OPINIONBY: Harold R. DeMoss

OPINION: ON PETITION FOR REHEARING AND

REHEARING EN BANC

APPENDIX C

PER CURIAM:

The Petition for Rehearing is DENIED and no member of this

panel nor judge in regular active service on the court having

requested that the court be polled on Rehearing En Banc, (FED.

R. APP. P. and 5TH CIR. R. 35) the Petition for Rehearing En

Banc is also DENIED.

ENTERED FOR THE COURT:

Harold R. DeMoss

United States Circuit Judge

UNITED STATES OF AMERICA,

Plaintiff - Counter Defendant - Appellee,

\ f

ANDREW E. BLANCHE, ET AL., Defendants,

ANDREW E. BLANCHE; CYNTHIA D. BLANCHE,

Defendants - Cross Claimants - Counter Plaintiffs - Appellants,

WILLIAM S. HEWITT,

Defendant - Cross Defendant - Appellee.

No. 97-50482

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

July 14 1997, Filed

(CORRECTED)

Appeal from the United States District Court for the

Western District of Texas, San Antonio

Before SMITH, WIENER and BENAVIDES, Circuit Judges.

BY THE COURT:

IT IS ORDERED that the motion of appellants for stay

pending appeal is DENIED.

IT IS FURTHER ORDERED that appellants’ motion for

this court to fix and determine the amount of bond or other such

security if any, that William S. Hewitt and Peggy L. Hewitt may

be required to file or deposit in the District Court to remunerate

appellants is DENIED as moot. We note the concession by the

government at page 8 of its response in opposition to appellants"’

motion for stay, that if this Court ultimately determines that

appellants had an interest in the property senior to the federal tax

lien, they may be made whole by being paid the fair market value

of their interest, which concession we hold to be binding on the

government as a judicial estoppel to oppose or deny payment of

any such amount from the United States Treasury.

APPENDIX D

UNITED STATES OF AMERICA, Plaintiff,

VS.

ANDREW E. BLANCHE, CYNTHIA D. BLANCHE

WILLIAM S. HEWITT, HANK WILSON , and

LOMAS MORTGAGE, U.S.A...

Defendants.

CIVIL ACTION NO. SA-95-CA-0419

UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF TEXAS,

SAN ANTONIO DIVISION

June 6, 1997, FILED

ORDER DENYING MOTION TO COMPEL

AND MOTION FOR STAY

On this date the Court considered the Defendants’

[Blanches}] Motion for Stay of Judgment,' filed May 2, 1997: and

Defendants’ [Blanches] Motion to Compel Deposits to the Court

From the Hewitts,’ filed April 4, 1997. After careful review the

Court finds that the motions should be denied.

The court finds no reason to depart from its previous

ruling that a stay of judgment should not be imposed pending

appeal. Further, the Court is not persuaded that the Hewitts

should be compelled to pay deposits into the registry of the Court

Doc. no. 45.

. Doc. no. 40. The motion to compel was included in the

Blanches’ response to the United States’ response to the Blanches’

motion for reconsideration and was, therefore, inadvertently never

docketed as a separate motion by the Clerk. Additionally, the Court

ruled on the motion for reconsideration on the day that the motion to

compel was filed. Because the motion to compel was included in a

reply to a motion on which the Court had already ruled, the motion to

compel was overlooked by this Court.

APPENDIX E

to protect the alleged interests of the Blanches. Under the

judgment of this Court, the property at issue has been held to be

the property of the Hewitts. They are responsible for its

maintenance. Any further payment by the Blanches is voluntary

and undertaken with full knowledge of the status of the title at

this time.

Accordingly, it is hereby ORDERED that the Motion to

Stay and the Motion to Compel Deposits to the Court From the

Hewitts is DENIED.

SIGNED this 6th day of June, 1997.

EDWARD C. PRADO

UNITED STATES DISTRICT JUDGE

ee te ee ee ee ee

TITLE 26. INTERNAL REVENUE CODE

SUBTITLE F. PROCEDURE AND ADMINISTRATION

CHAPTER 64. COLLECTION

SUBCHAPTER C. LIEN FOR TAXES

PART II. LIENS

26 U.S.C.S. § 6323 (1999)

§ 6323. Validity and priority against certain persons.

(a) Purchasers, holders of security interests, mechanic's lienors,

and judgment lien creditors. The lien imposed by section

6321 shall not be valid as against any purchaser, holder of a

security interest, mechanic's lienor, or judgment lien creditor

until notice thereof which meets the requirements of

subsection (f) has been filed by the Secretary.

(h) Definitions. For purposes of this section and section 6324—

(1) Security interest. The term "security interest" means any

interest in property acquired by contract for the purpose

of securing payment or performance of an obligation or

indemnifying against loss or liability. A security interest

exists at any time (A) if, at such time, the property is in

existence and the interest has become protected under

local law against a subsequent judgment lien arising out

of an unsecured obligation, and (B) to the extent that, at

such time, the holder has parted with money or money's

worth.

(6) Purchaser. The term "purchaser" means a person who,

for adequate and full consideration in money or money's

worth, acquires an interest (other than a lien or security

interest) in property which is valid under local law

against subsequent purchasers without actual notice.

APPENDIX F

In applying the preceding sentence for purposes of

subsection (a) of this section, and for purposes of seetion

6324--

(A) a lease of property,

(B) a written executory contract to purchase or

lease property,

any interest therein, or

(D) an option to renew or extend a lease of

property,

which is not a lien or security interest shall be treated as

an interest in property.

(i) Special rules.

(2) Subrogation. Where, under local law, one person is

subrogated to the rights of another with respect to a lien or

interest, such person shall be subrogated to such rights for

purposes of any lien imposed by section 6321 or 6324.

SAN ANTONIO BOARD OF REALTORS, INC.

9110 IH 10 N.W., PO Box 13340, San Antonio, TX 78213

RESIDENTIAL LEASE

FOR USE WITH BROKER MANAGEMENT SERVICES & IN

CONJUNCTION WITH REAL ESTATE MANAGEMENT CONTRACT

(NOT SUITABLE FOR CONDOMINIUMS)

1. PARTIES: This agreement between WILLIAM S. HEWITT

ETUX PEGGY L. HEWITT hereinafter called Owner,

acting through his agent HOWARD SHELF &

ASSOCIATES, REALTORS hereinafter called Broker and

ANDREW E. BLANCHE, JR., ETUX CYNTHIA D.

BLANCHE hereinafter called Tenant (the Parties), whereby

Owner leases to Tenant and Tenant leases from Owner, the

2. PROPERTY: Address 3325 FOXBRIAR LANE, Lot 1,

Block 1, Subdivision: NORTHCLIFFE COUNTRY CLUB

ESTATES, located within the City of CIBOLO, County of

GUADALUPE, State of Texas, including the following non-

real estate items none listed

OE ied nt OT eh ii ale al

SV i GSR oe

3. TERM: For a period of ONE (1) YEAR, beginning on the

1ST day of JULY, 1990 , and ending on the 30th day of

JUNE, 1991 (Primary Term). This Lease shall automatically

reneéw on a month-to-month basis at the end of the Primary

Term, unless written notice of termination is given by either

of the Parties thirty (30) days or more before the termination

: of the Primary Term or of any extension or renewal of this

4. RENT: In the amount of $1000.00 per month (Rent) made

‘ payable to WILLIAM S HEWITT at 923 VANCE JACKSON

#1107, SAN ANTONIO, TX 78201, in advance without

demand or a grace period, on or before the 1ST day (Due

Date) of each month during the Term of this Lease. Receipt

is acknowledged of the pro-rated Rent in the sum of _$N/A .

for Rent to the first Due Date. Rent paid after Due Date is

APPENDIX G

delinquent, and Default provisions herein shall apply. At the

option of the Broker, Tenant shall additionally pay (i) a late

charge of $ 5.00 per day for payments received after the Due

Date until Rent is paid in full (ii) $ 20.00 for each check |

dishonored by Tenant's bank for any reason (iii) _$ N/A_ per

day charge, payable daily, for any pet the Tenant permits on |

the Property without Broker's written consent. Payment of

Rent shall be an independent covenant, and all monies

received by Broker shall be applied first to non-Rent

obligations of Tenant, then to Rent, regardless of notations on

checks. At Broker's option, Broker may at anytime require

that all Rent and other sums be paid in either cash, money

order, or one monthly check rather than multiple checks.

5. Use OF PROPERTY: The Property shall be used as a single

family private dwelling only, with the total number of adults

and children residing therein not to exceed FOUR (4).

Tenant shall not (i) sublet or assign any part of the Property

(ii) repair any vehicle on the Property without permission in

writing (iii) conduct any business of any type, including child

EERE re ite eae inet

care, on the Property (iv) permit more than FOUR (4)

vehicles (including but not limited to automobiles, trucks, 8

recreational vehicles, trailers, motorcycles and boats) on the ‘

Property unless authorized by Broker in writing. Non- ‘

operative vehicles shall not be stored on the Property.

6. CLEANING CHARGE: Tenant agrees to pay on execution of

this contract a non-refundable cleaning charge of $_N/A_.

The charge does not relieve the Tenant of the responsibility to

maintain and clean the Property as required by Broker.

7. SECURITY DEPOSIT: Tenant agrees to pay on execution of

this contract a security deposit (Deposit) of $ N/A, for the

faithful performance of the terms and conditions of this

contract by Tenant. This Deposit shall not be construed as

Rent, and any, attempt by Tenant to withhold the payment of

- the last month's Rent, on the grounds the Deposit serves as

security for unpaid Rent, is a violation of v1 «A...

10.

Property Code § 92.108. Tenant shall not be entitled to any

interest on the Deposit, and Broker is authorized to place the

Deposit in an interest bearing account with interest accruing

to Broker.

DEPOSIT DEDUCTIONS: There shall be deducted from the

Deposit unpaid sums due under this lease (i) Rent including

late charges (ii) utilities (iii) cleaning, damages and required

repairs to the Property or its contents beyond reasonable wear

and tear (iv) replacing unréturned keys and/or change of

locks (v) cost of removing unauthorized locks (vi) removing,

storing Abandoned property (vii) removing Abandoned or

illegally parked vehicles (viii) cost of pest control if required

by Broker (ix) other charges provided for herein or agreed to

by the Parties. Any balance of the Deposit shall be refunded

to Tenant by mail within thirty (30) days of the date Tenant

Surrenders the Property and keys and delivers Tenant's

forwarding address to Broker in writing in accordance with

State law. Broker shall provide Tenant a written report of

any deductions. If deductions exceed the Deposit, Tenant

agrees to pay Broker the amount due within ten (10) days of

notice to Tenant by Broker.

NOTICE REQUIRED: Tenant agrees to give Broker written

notice of intent to vacate the Property at least thirty (30) days

prior to the expiration of the Term of this Lease or any

extension thereof. Failure to do so shall entitle Broker to

retain the entire amount of the Deposit provided by state law.

HOLDING OVER: If Tenant fails to vacate the Property at

the end of the Term, or on an agreed move out date, Tenant

Shall (i) pay Rent for the holdover period at a rate of

$ nothing listed _ per day to be due and payable daily at the

Broker's designated address (ii) indemnify Broker and

Owner, prospective tenants or purchasers, for damages,

including lost Rents, profits from lost sale, lodging expenses

and attorney's fees.

11.

i2.

13.

14.

ABANDONMENT: If Tenant (i) is absent from the Property

for five (5) consecutive days while in Default of this

agreement (ii) has been evicted by judicial process (iii) leaves

personal property after the termination of the Lease, the

Property and its contents may be deemed by Broker to be

abandoned (Abandoned). Broker or his agents may peaceably

enter the Property and remove its contents in accordance with

V.T.C.A. Property Code § 54.044. Further, Broker or his

agents are authorized to collect a charge for packing,

removing, storage and sale costs of the personal property that

has been removed from the Property and are authorized to

sell or otherwise dispose of the personal property so removed

in accordance with V.T.C.A Property Code § 54.045.

LIEN: A contractual lien to secure payment of unpaid Rent

that is due is hereby granted Broker on all personal property

of Tenant, except that property which is exempted by

V.T.C.A. Property Code § 54.042. Broker or his agents are

authorized to seize such property if same can _be

accomplished without a breach of the peace. Further, Broker

or his agents are authorized to collect a charge for packing,

removing, storage and sale costs of any property seized, and

are authorized to sell or dispose of the property seized in

accordance with V.T.C.A. § 54.045.

RENT ACCELERATION: In the event the Tenant, prior to

the end of the Term of this Lease, or any extension or

renewal thereof, (i) Abandons the Property, or (ii) gives

Owner written or oral notice of intent to move prior to the

end of the Lease Term, or (iii) is judicially evicted, thereupon

all remaining monthly Rent for the full Term of this Lease

shall be accelerated automatically without notice, and shall

immediately become due and payable.

DEFAULT: If Tenant shall default in the prompt payment of

the Rent or any other sums due hereunder, Abandons the

Property, fails to occupy the Property within five (5) days of

the beginning date of this Lease, or violates any of the Terms

of this Lease, all future Rent Shall be accelerated and become

immediately due and payable. and Broker at his option may

terminate Tenant's right of occupancy by giving Tenant a

three (3) day written notice to vacate, delivered either in

person or by first class mail, and shall have the right to file a

Forcible Entry and Detainer Suit in the proper court for

Possession. After giving such notice, or filing suit for

Possession. Broker may accept payment for sums due

hereunder without waiving or diminishing Broker's right to

proceed against Tenant for eviction, property damages, past

or future Rent, or other sums due hereunder, Broker may

report any unpaid sums due hereunder, breaches of this Lease

or property damages, to credit reporting agencies for addition

to Tenant's credit files.

15. RESPONSIBILITY FOR PROPERTY CONDITIONS:

Tenant accepts the Property in its present condition subject to

any conditions discovered which could materially affect the

health and safety of ordinary persons. No implied warranties

have teen made by Broker or his agents regarding the

condition of the Property and no agreements have been made

regarding future repairs unless specified in this Lease.

Broker has provided locks and smoke detector(s) required by

law. Any additional locks or smoke detectors desired by

Tenant may be installed at Tenant's expense only after

written approval of Broker. When installed, any additional

items shall become the property of the Owner.

Tenant shall use reasonable diligence in the care of the

Property and shall be responsible for (i) any cost of

Correcting sewer stoppage caused by his use (ii) supplying

and changing heating and air conditioning filters at monthly

intervals (iii) supplying and replacing light bulbs and smoke

detector batteries (iv) maintaining the yard including the

shrubbery (v) prompt removal of trash from the Property and

any alley (vi) eliminating any conditions that may be

dangerous to health and Safety (vii) damages to doors,

windows, screens or other items not caused by negligence of

16.

Broker/Owner (viii) cost of pest control except for wood-

destroying insects (ix) taking precautions to preclude broken

water pipes due to freezing (x) lost or misplaced keys (xi)

damages resulting from Tenant’s failure to promptly notify

Broker of needed repairs (xii) maintenance of the following in

good working order at Tenant’s expense: SEE EXHIBIT 1.

Tenant shall NOT (i) make any repairs or alterations to the

Property without written permission of Broker (ii) remove

any part of the Property for any purpose (iii) remove, change

or re-key any lock without permission of Broker (iv) make

holes in the woodwork, floors or walls except that a

reasonable number of small nails may be used to hang

pictures in sheetrock walls and grooves of paneling (v) permit

any water furniture in the Property without written

permission of Broker (vi) install new or additional telephone

or cable outlets without written permission of Broker (vii)

paint, refinish, or redecorate any part of the Property without

written permission of Broker.

At the termination of this Lease, Tenant agrees to surrender

the Property in the same condition as when received,

reasonable wear and tear excepted.

OWNERS RESPONSISILITY FOR REPAIRS: All requests

by tenant for repairs to be made by owner must be directed to

Broker in writing except those caused by fire, interruption of

utilities or such other emergency. Broker shall have the right

to temporarily discontinue utilities and the use of any fixtures

or appliances by the Tenant in order to perform repairs or

maintenance or to avoid damage to the Property. Broker

shall act with due diligence but shall not be obligated to make

repairs on other than a business day except in the event of an

emergency. No deductions shall be allowed in the Rent

during reasonable periods of repair to the Property and the

Lease shall remain in full force. If, in the opinion of the

Broker, the property is substantially damaged by fire or other

disaster, the Broker may terminate this Lease upon

™

Oca de CR eine

cn ta Sn OMS Wala ae.

17.

18.

19.

20.

reasonable notice to Tenant. The Rent, in this event, shall be

pro-rated to the date of termination and deposits refunded

unless lawful deduction.

UTILITIES: Unless otherwise specified herein, all charges

and deposits for utilities will be paid by Tenant. Owners

agrees to pay for the following utilities: NONE.

LIABILITY: Owner or Owner's agents shall not be liable to

Tenant, his guests, invitees or other occupants. for any

damages, injuries, or losses to person or property caused by

fire, flood, water leaks, ice, snow, hail. winds, explosion,

smoke, interruption of utilities, theft, burglary, robbery,

assault, vandalism, other persons, condition of the Property,

or other occurrences unless such damage or injury is caused

by the gross negligence of Owner or his agents. Tenant

agrees to notify Broker immediately of any dangerous or

potentially dangerous conditions on or about the Property.

Broker recommends that Tenant Cure insurance coverage

for protection against such liabilities and losses.

MILITARY: If Tenant is or becomes a member of the Armed

Forces on extended active duty and receives permanent

change of station (PCS) orders to leave the County wherein

the Property is located, or is relieved from active duty, then

Tenant may terminate this Lease upon giving thirty (30) days

written notice and attaching a certified copy of the military

orders. Orders permitting base housing do not constitute

grounds for termination.

POSSESSION: This Lease is conditioned upon Broker being

able to secure possession of the Property, and if Broker is

unable to deliver possession of the Property on the agreed

date for any reason, Tenant's right of possession shall be

delayed for not more than 30 days, after which the Lease

Shall be null and void without liability on the part of the

Owner and/or Broker and any Security Deposit will be

promptly refunded. If Tenant's possession is delayed within

21.

22.

y x

24.

y = 3

the allowable period, the Primary Term dates will be changed

accordingly.

RELATED DOCUMENTS: Incorporated into this Lease are

the following documents (if checked): [<] Move-In- Rental

Inspection. All Tenant's statements in the Tenant's Rental

Application are material representations relied upon by

Broker. Any misrepresentations shall constitute a breach of

this Lease and Broker may terminate this Lease,

INSPECTION: Owner, Broker, their agents or other persons

specifically authorized by either of them, may enter the

Property by reasonable means at reasonable times without

notice, to (i) inspect the Property (ii) make repairs (iii) show

the Property to prospective tenants or purchasers (iv) exercise

a contractual lien.

PETS: Tenant shall not permit any pet on the Property, even

temporarily, unless otherwise agreed to by Broker in writing.

NUISANCE: The conduct of Tenant, members of their

family, guests, invitees, or other occupants shall not be

unlawful, disorderly or boisterous or in amy manner create a

nuisance, and shall not disturb the rights of others near the

Property. If provided, Broker's written Rules and

Regulations are hereby made a part of this Lease, and

violation of the Rules and Regulations by Tenant or other

occupants of the Property shall be deemed a violation of this

Lease.

ATTORNEY'S FEES: The Owner's agent and/or any

signatory to this lease agreement who is the prevailing party

in any legal proceeding against any other signatory brought

under or with relation to this Lease or this transaction shall

be additionally entitled to recover court costs, reasonable

attorney fees, and all other out-of-pocket costs of litigation,

including depositions, travel and witness costs, from the

nonprevailing party.

Sea Rae RSD Ec No

26.

27.

28.

NOTICE TO TENANT: In the event Tenant buys the

Property, Broker advises Tenant (Buyer), as required by law,

that Buyer should have the Abstract covering the Property

examined by an attorney of Buyer's selection, or Buyer

Should be furnished with or obtain a Title Policy. If the

Property is situated in a Utility District, Section 50.301 Texas

Water Code requires the Buyer to sign and acknowledge the

Statutory notice from Seller relating to the tax rate and

bonded indebtedness of the District.

SPECIAL PROVISIONS:

Tenant shall have the right and option prior to default to

purchase the property on the terms and conditions set out on

the Earnest Money Contract attached hereto as Attachment

"A" on or before June 30, 1991. Such option shall be

exercised by the delivery by Tenant to the Title Company

named in Attachment "A" of a copy of Attachment "A"

signed by the Tenants and Setting a closing date on or before

June 30,1991.

SAVING CLAUSE: Should any Clause of this instrument be

found invalid by a court of law, the remainder of this

instrument shall not be affected thereby, and all other

provisions of this instrument shall remain valid and

enforceable to the fullest extent permitted by law.

THIS IS INTENDED TO BE A LEGALLY BINDING

CONTRACT. IF NOT UNDERSTOOD, SEEK COMPETENT

ADVICE. THIS PROPERTY IS OFFERED WITHOUT

RESPECT TO RACE, COLOR, CREED, SEX OR NATIONAL

ORIGIN. The Parties hereto agree that this Lease contains all the

agreements between them, that no oral agreements have been

made and this agreement may be altered only by an agreement in

writing signed by all Parties hereto. Tenant acknowledges receipt

of a copy of this Lease and all Related Documents.

Executed in multiple originals this the 20TH day of MAY, 1990.

HOW S SOCIATES, REAL

BROKER

By __/s/ William S. Hewitt _/s/ Peggy L. Hewitt

WILLIAM S. HEWITT/PEGGY L. HEWITT

508 Pat Booker Road UC, TX 78148

Designated address for Broker's notices

/s/Andrew E. Blanche, Jr.

Tenant: ANDREW E. BLANCHE, JR.

/s/ Cynthia D. Blanche

Tenant: CYNTHIA D. BLANCHE

3325 Foxbriar Lane, Cibolo, Tx 78108

Address for Tenant’s notices.

NOTE: This form has been prepared by legal counsel for the San

Antonio Board of Realtors, Inc. (SABOR). Said attorneys, who

are licensed by the State of Texas, have approved this Win for

use by SABOR members in the “a of transaction described in the

title hereof. This form has not been drafted for a specific

transaction.

SABOR Form 402 - Revised 12-10-85 (PREVIOUS EDITIONS ARE

OBSOLETE)

G10

[Residential Lease] .

Exhibit “1”

3325 FOXBRIAR LANE

LEASE OPTION

POD sccidadaebanbdbucasdvdsher. tt $139,500.00

Option Money: 1 July 1990... $2,500.00

I Jan 1991.......... $1,500.00

Period of Option........................ Eff 1 July 1990

SEE ERE Se 30 Jun 199]

Lease Payment.......................... $1,000.00 per month

CREDIT BACK TO PURCHASE OF $250.00 PER MONTH CREDIT FOR

TERM OF OPTION.

HOME WILL BE INSPECTED BY A CERTIFIED REAL ESTATE

INSPECTOR PRIOR TO PURCHASER TAKING POSSESSION.

INSPECTION WILL BE PAID FOR BY PURCHASER. ALL REPAIRS

WILL BE ACCOMPLISHED BY THE SELLER AND/OR HIS

DESIGNATED REPRESENTATIVE. SELLER WARRANTS THE ROOF

UNTIL JUNE 6, 199].

AFTER THE REPAIRS HAVE BEEN COMPLETED TO THE

SATISFACTION OF THE PURCHASER, ALL FUTURE REPAIRS WILL

BE AT THE EXPENSE OF THE PURCHASER.

HOWARD SHELF AND ASSOCIATES, REALTORS WILL RECEIVE A

COMMISSION OF 6% OF THE SALE PRICE UPON CLOSING OF THE

SALE. SUCH COMMISSION TO BE EARNED AND PAID AS FOLLOWS:

$500.00 ON I JULY 1990 AND $500.00 ON 1 JAN 1991: THE

BALANCE OF THE COMMISSION WILL BE DUE AND PAYABLE ON

CLOSING.

THE OPTION MONEY IS EARNED UPON RECEIPT AND WILL BE

CREDITED TO PURCHASER UPON EXECUTION OF THE CONTRACT.

Gll

[Residential Lease}

ATCH [Attachment] “A”

SAN ANTONIO BOARD OF REALTORS, INC.

9110 IH 10 N.W., PO Box 13340, San Antonio, TX 78213

ONE TO FOUR FAMILY RESIDENTIAL EARNEST MONEY

CONTRACT (RESALE) ALL CASH, ASSUMPTION, THIRD PARTY

CONVENTIONAL OR OWNER FINANCED’

(PROMULGATED BY TEXAS REAL ESTATE COMMISSION)

1. PARTIES: WILLIAM S. HEwitT ETUX PEGGY L. HEWITT

(Seller) agrees to sell and convey to ANDREW E. BLANCHE,

JrR., ETUX CYNTHIA D. BLANCHE (Buyer) and Buyer agrees

to buy from seller the property described below.

2. PROPERTY: Lot 1, Block 1, NORTHCLIFF COUNTRY

CLUB ESTATES’ Addition, City of CIBOLO,

GUADALUPE County, Texas, known as 3325 FOXBRIAR

LANE (Address); or as described on attached exhibit,

together with the following items, if any: curtains and rods,

draperies and rods, valances, blinds, window shades. screens,

shutters, awnings, wall-to-wall carpeting, mirfors fixed in

place, ceiling fans, attic fans, mail boxes, television antennas,

permanently installed heating and air conditioning units and

equipment, built-in security and fire detection equipment.

lighting and plumbing fixtures, water softener, trash

compactor, garage door openers with controls, shrubbery and

all other property owned by Seller and attached to the above

described real property. Ail property sold by this contract is

called the "Property".

Some paragraphs of form are “fill-in” so only paragraphs

with completed_items are included for paragraphs | through 14.

The general and special provisions in paragraphs 15 through 22

are included in their entirety.

G12

3. CONTRACT SALES PRICE:

A. Cash payable at closing .................... $ 13,590.00

B. Sum of all financing described

in Paragraph 4 below ...................... $ 125,550.00

C. Sales Price (Sum of A and _ ee $ 139,500.00

4. FINANCING: (Check applicable boxes below)

C. THIRD PARTY FINANCED:

A third party first lien note of $125,550.00, due in full in 15

year(s), payable in initial monthly payments of principal and

interest not exceeding $1,348.63 for the first 15 year(s) of the

loan.

NOTICE TO PARTIES: Before Signing this contract Buyer is

advised to determine the financing options from lenders.

Certain loans have variable rates of interest, some have

monthly payments which may not be sufficient to pay the

accruing interest, and some have interest rate "buydowns"

which reduce the rate of interest for part or all of the loan

term at the expense of one or more of the panics to the

contract.

5. EARNEST MONEY: $ 100.00 is herewith tendered by Buyer

and is to be deposited as Earnest Money with COMMERCIAL

TITLE COMPANY at 1001 PAT BOOKER RD, Uc, Tx

(Address), as Escrow Agent, upon execution of the contract

by both parties.

6. TITLE: Seller shall furnish to Buyer at Seller’s expense

either:

A. Owner’s Policy of Title Insurance (the title Policy) issued

by COMMERCIAL TITLE COMPANY in the amount of the

Sales Price and dated at or after closing

NOTICE TO SELLER AND BUYER: AS REQUIRED BY

LAW, Broker advises Buyer that buyer should have an

Abstract covering the Property examined by an attorney of

Buyer’s selection, or Buyer should be furnished with or

obtain a Title Policy. If a Title Policy is to be obtained,

G13

Buyer should obtain a Commitment for Title Insurance (the

Commitment) which should be examined by an attorney of

Buyer’s choice at or prior to closing. If the Property is

situated in a Utility District, Section 50.301 Texas Water

Code requires the Buyer to sign and acknowledge the

statutory notice from Seller relating to the tax rate and

bonded indebtedness.

PROPERTY CONDITION

On Seller’s receipt of all loan approvals and inspection

reports, Seller shall commence repairs and termite treatment

required of Seller by the contract, any lender and the

Property Condition Addendum, if any, and complete such

repairs prior to closing. Seller’s responsibility for the

repairs, termite treatment and repairs to the termite damage

shall not exceed $1,500.00. If Seller fails to complete such

repairs, Buyer may do so and Seller shall be liable up to the

amount specified and the same paid from the proceeds of the

sale. If the repair costs will exceed the stated amount and

Seller refuses to pay such excess, Buyer may (1) pay the

additional cost or (2) accept the Property with the limited

repairs unless such repairs are required by lender or (3)

Buyer may terminate this contract and the Earnest Money

shall be refunded to Buyer. Buyer shall make his election

within three (3) days after Seller notifies Buyer of Seller’s

refusal to pay such excess. Failure of buyer to make such

election within the time provided shall be deemed to be

Buyer’s election to accept the Property with the limited

repairs, and the sale shall be closed as scheduled; however, if

lender required repairs prohibit Buyer’s acceptance with

limited repairs, this contract shall terminate and Earnest

money shall be refunded to Buyer.

If the repair costs will exceed five (5) percent of the Sales

Price of the Property and Seller agrees to pay the cost of such

repairs, Buyer shall have the option of closing the sale with

the completed repairs, or terminating the sale and the Earnest

Money shall be refunded to Buyer. ‘Buyer shall make this

G14

eile Arte i

RY OP PEN VSO ee OF te Sea

ED SIE ISR GALI E A oe.

ey re

10.

election within three (3) days after Seller notifies Buyer of

Seller’s willingness to pay the cost of such repairs that exceed

(5) percent of the Sales Price. Failure of Buyer to make such

election within the time provided shall be deemed to by

Buyer’s election to close the sale with the completed repairs.

Broker(s) and sales associates have no responsibility or

liability for inspections or repairs made pursuant to this

contract.

BROKER’S FEE: HOWARD SHELF & ASSOCIATES,

REALTORS, Listing Broker, and any Co-Broker represent

Seller unless otherwise specified herein. Seller agrees to pay

Listing Broker the fee specified by separate agreement

between Listing Broker and Seller. Escrow Agent is

authorized and directed to pay Listing broker said fee from

the sale proceeds.

CLOSING: The closing of the sale shall be on or before

31 AUGUST, 1991, or within seven (7) days after objections

to title have been cured, whichever date is later (the Closing

Date); however, if financing or assumption approval has been

obtained pursuant to Paragraph 4, the Closing Date shall be

extended daily up to fifteen ( 15) days if necessary to complete

loan requirements. If either party fails to close this sale by

the Closing date, the non-defaulting party shall be entitled to

exercise the remedies contained in Paragraph 16 immediately

and without notice.

POSSESSION: The Possession of Property shall be delivered

to Buyer on SEE PARA 11 in its present or required

improved condition, Ordinary wear and tear excepted. Any

possession by Buyer prior to or Seller after closing that is not

authorized by the Buyer’s Temporary Residential lease or

Seller’s Temporary Residential Lease Forms promulgated by

the Texas Real Estate Commission shall establish a landlord-

tenant at sufferance relationship between the Parties.

G15

11.

, a.

SPECIAL PROVISIONS: (Insert factual statements and

business details applicable to this sale.)

SEE LEASE OPTION TERMS IN EXHIBIT 1.

SELLER WILL FURNISH BUYERS WITH AN

AMERICAN HOME SHIELD PREMIER PROTECTION

HOME WARRANTY PLAN NOT TO EXCEED $355.00.

SALES EXPENSES TO BE PAID IN CASH AT OR PRIOR

TO CLOSING:

Loan appraisal fee shall be paid by BUYER AT TIME OF

APPLICATION.

The total of the loan discount and any buydown fees shall not

exceed $3,766.50 of which Buyer shall pay the first $-0- and

Seller shall pay the remainder.

Seller’s Expenses: Prepayment penalties on any existing

loans paid at closing, plus cost of releasing such loans and

recording releases; tax statements; 2 of any escrow fee;

preparation of deed; preparation and recording of any deed of

trust to secure assumption; any Texas Veterans’ Housing

Assistance Program Participation Fee; other expenses

stipulated to be paid by Seller under-other provisions of this

contract.

Buyer’s Expense: Application, origination and commitment

fees; private mortgage insurance premiums and any loan

assumption fee; expenses incident to new loan(s); 4 of any

escrow fee; any required premiums for flood and hazard

insurance; any required reserve deposits for insurance

premiums, ad valorem taxes and special governmental

assessments; interest on all monthly installment payment

notes from date of disbursements to one (1) month prior to

dates of first monthly payments; expenses stipulated to be

paid by Buyer under other provision of this contract and any

customary Texas Veterans’ Housing Assistance Program

Loan costs for buyer.

G16

13.

14.

If any sales expenses exceed the maximum amount herein

stipulated to be paid by either party, either party may terming

this contract unless the other parity agrees to pay such excess.

PRORATIONS: Taxes, flood and hazard insurance (at

Buyer’s option), rents, maintenance fees, interest on any

assumed loan and any prepaid unearned mortgage insurance

premium which has not been financed as part of any assumed

loan and which is refundable in whole Or in part at a later

date shall be prorated through the Closing date. If Buyer

elects to continue Seller’s insurance policy, it shall be

transferred at closing.

TITLE APPROVAL:

B. if Title Policy is furnished, the Title Policy shall

guarantee Buyer’s title to be good and indefeasible subject

only to (1) restrictive covenants affecting the Property (2) any

discrepancies, conflicts or Shortages in area or boundary

lines, or any encroachments, or any Overlapping of

improvements (3) taxes of the current and subsequent years

and subsequent assessments for prior years due to a change in

land usage or ‘Ownership (4) existing building and zoning

ordinances (5) rights of Parties in possession (6) liens created

Or assumed as security for the sale consideration (7) utility

easements Common to the platted subdivision of which this

Property is a part and (8) reservations or other exceptions

permitted by the terms of this contract. Exceptions permitted

in the Deed and zoning ordinances shall not be valid

objections to title. If the Title Policy will be subject to

exceptions other than those recited above in sub-paragraphs

(1) through (7) inclusive, Seller shall deliver to Buyer the

Commitment and legible copies of any documents creating

such exceptions that are not recited in sub-paragraphs (1)

through (7) above at least five (5) days prior to closing. If

Buyer ahs objection to any such previously undisclosed

exceptions, Buyer shall have five (5) days after receipt of

such commitment and copies to make written objections to

Seller. If no Title commitment is provided to Buyer at or

15.

prior to closing, it will be conclusively presumed that Seller

represented at closing that the Title Policy would not be

subject to exceptions other than those recited above in sub-

paragraphs (1) through (7).

C. In either instance if title objections are raised, Seller shall

have fifteen (15) days from the date of such objections are

disclosed to cure the same, and the Closing Date shall be

extended accordingly. If the objections are not satisfied by

the extended closing date, this contract shall terminate and

the Earnest Money shall be refunded to Buyer, unless buyer

elects to waive the unsatisfied objections and complete the

purchase.

D. Seller shall furnish tax statements showing no delinquent

taxes, a supplemental Abstract when applicable, showing no

additional title exceptions and a General Warranty Deed

conveying title subject only to liens securing payment of debt

created or assumed as part of the consideration, taxes for the

current year, restrictive covenants and utility easements

common to the platted subdivision of which the Property is a

part and reservations and conditions permitted by this

contract or otherwise acceptable to Buyer. Each note shall be

secured by vendor’s and deed of trust liens. A vendor’s lien

and deed of trust to secure any assumption shall be required

which shall automatically be released on execution and

deliver of a release by noteholder. If Seller is released from

liability on any assumed note, the vendor’s lien and deed of

trust to secure assumption shall not be required. In case of

dispute as to the form of the Deed, note(s), deed of trust or

deed of trust to secure assumption, forms prepared by the

State Bar of Texas shali be used.

CASUALTY LOSS: If any part of Property is damaged or

destroyed by fire or other casualty loss, Seller shall restore

the same to its previous condition as soon as reasonably

possible, but in any event by closing Date. If Seller is unable

G18

16.

17.

18.

to do so without fault, Buyer may terminate this contract and

the Earnest Money shall be refunded to Buyer.

DEFAULT: If Buyer fails to comply herewith, Seller may

either (a) enforce specific performance and seek such other

relief as may be provided by law or (b) terminate this

contract and receive the Earnest Money as liquidated

damages. If Seller is unable without fault, within the time

therein required to (a) make any non-casualty repairs or (b)

deliver the Commitment or (c) deliver the Complete Abstract,

Buyer may either terminate this contract and receive the

Earnest Money as the sole remedy or extend the time for

performance up t fifteen (15) days and the Closing Date shall

be extended pursuant to other provisions of this contract. If

Seller fails to comply herewith for any other reason, Buyer

may either (a) enforce specific performance hereof and seek

such other relief as may be provided by law or (b) terminate

this contract and receive the Earnest Money, thereby

releasing Seller from this contract.

ATTORNEY’S FEES: Any signatory to this contract, Broker

or Escrow Agent who is the prevailing party in any legal

proceeding brought under or with relation to this contract or

transaction shall be additionally entitled to recover court costs

and reasonable attorney fees from the non-prevailing party.

ESCROW: The Earnest Money is deposited with Escrow

Agent with the understanding that Escrow Agent (a) is not a

party to this contract and does not assume or have any

liability for performance or non-performance of any signatory

(b) has the right to require from all signatories a written

release of liability of the Escrow Agent which authorizes the

disbursement of the Earnest Money (c) is not liable for

interest or other charge on the funds held and (d) is not liable

for any losses of escrow funds caused by the failure of any

banking institution in which such funds have been deposited,

unless such banking institution is acting as Escrow Agent. If

any signatory unreasonably fails to deliver promptly the

G19

19.

20.

21.

22.

documents described in (b) above, then such signatory shall

be liable to the other signatories as provided in Paragraph 17,

At closing, the Earnest Money shall be applied first to any

cash down payment required, then to Buyer's closing costs

and any excess refunded to Buyer. Any refund or payment of

the Earnest Money under this contract shall be reduced by the

amount of any actual expenses incurred on behalf of the party

receiving the Earnest Money, and Escrow Agent will pay the

same to the creditors entitled thereto.

REPRESENTATIONS: Seller represents that as of the

Closing Date (a) there will be no unrecorded liens,

assessments or Uniform Commercial Code Security Interests

against any of the Property which will not be satisfied out of

the Sales Price, unless securing payment of any loans

assumed by Buyer and (b) assumed loari(s) will be without

default. If any representation in this contract is whtrie on the

Closing Date, this contract may be termiifated by Buyer and

the Earnest Money shall be refunded i Huyer, All

representations contained in this caoiifael alall survive

closing.

AGREEMENT OF PARTIES: This #iiifael GOniMlie the

entire agreement of the parties and canil(il He changed except

by their written agreement. Texas Red! Hataie Commission

promulgated addenda which are a pari Of (his contract are

(list): - EXHIBIT 1 (LEASE. Option TERMS); EXHIBIT 2

(PROPERTY CONDITION ADDENDUM; RESIDENTIAL LEASE

DATED May 20, 1990)

NOTICES: All notices shall be in writi"g and effective when

delivered at the addresses shown below.

CONSULT YOUR ATTORNEY: The Broker cannot give

you legal advice. This is intended to be @ legally binding

contract. READ IT CAREFULLY. Feeleral law may impose

when any of the signatories is a foreign Pally, OF When any of

G20

the signatories receives certain amounts of U.S, currency in

connection with a real estate closing, If you do not

understand the effect of any part of this contract, consult your

attorney BEFORE signing.

Seller's Attorney: RONALD R. FLAKE

Buyer's Attorney:

EXECUTED in muiti-originals effective the _ day of, 19

(BROKER: FILL IN THE DATE OF FINAL ACCEPTANCE. )

/S/ Andrew E. Blanche, Jr,

Buyer: ANDREW E. BLANCHE, JR,

aul S/ Cynthia D. Blanche

Buyer: CYNTHIA D, BLANCHE

1522 PONBRIAR LANE, CibOLG, TX FALON

Huver's Address (S17) 620-0444 Phane Na

‘S/ William §. Hewitt

Sellers) WILLIAM A. Hewint

(M/ Peaay L. Hewitt

Seller) PROGY L. Hewii)

923 Vance Jackson #1107, Sa, Tx 78201

Seller's Address (512) 733-0343 Phone NO.

HOWARD SHELF & ASSOCIATES, REALTORS

Listing Broker License No, 187931-0

By: /s/ Howard L. Shelf

518 Pat Booker Road, Universal City, TX 78201

Listing Broker's Address (§12)659-5501 Phone No.

Hel

EARNEST MONBY RECEIPT

Receipt of $100.00 Earnest Money is acknowledged in the form

of personal check.

Escrow Agent: COMMERCIAL TITLE

By /s/_K. B. 659-138]

Date: June 22, 1990

The form of this contract has been approved by the 'Texas Real

Estate Commission. Such approval relates to this contract form

only. No representation is made as to the legal validity or

adequacy of any provision in any specific transaction, It is not

suitable for complex transactions, Extensive riders of additions

are Hot to be used, (02-85) TREC NO, 20-0, This form replaces

TREE NOS, be 1, 400 and 6-0,

UNITED STATES OF AMERICA, Plaintiff,

VS,

ANDREW E, BLANCHE, CYNTHIA D, BLANCHE,

WILLIAM S. HEWITT, HANK WILSON, and

LOMAS MORTGAGE, U:.S.A.,

Defendants.

CIVIL ACTION NO. SA-95-CA-0419

UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF TEXAS,

SAN ANTONIO DIVISION

April 4, 1997, FILED

ORDER DENVING MOTION TO RECONSIDER

AND LIFTING STAY OF EXECUTION

On thie date the Cour examined the Detfendarnte

Hianehes’ Maton far Reeonsideration af in the Alternative fas

New Trial, fled Maren 14, 1007) Lined States of America's

Heaparae, Hled Mareh 28, 1907) and United States of Amerioa's

Maton to Set Aside Order Granting Detendanta Blanehes'

Motion for Stay af Execution or eather Proceedings tor

Enforcement, tiled Mareh 27, 1907

Having carefully considered the record and the arguments

of counsel, the Court finds that the Motion to Reconsider should

be denied. The stay pending determination of the motion to

reconsider shall therefore be lifted.

Accordingly, it is hereby ORDERED that the Defendants

Blanches' Motion for Reconsideration or in the Alternative for

New Trial is DENIED.

APPRNDIN HE

It is further ORDERED that the United States of

America’s Motion to Set Aside order Granting Defendants

Blanches' Motion for Stay of Execution or Other Proceedings for

Enforcement is GRANTED such that the stay entered by this

Court on March 19, 1997, is SET ASIDE.

SIGNED this 4th day of April, 1997.

EDWARD C. PRADO

UNITED STATES DISTRICT JUDGE

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.