TEXAS REAL ESTATE LAW 11E
Charles J. Jacobus
Chapter 1
Introduction to the Basic Processes of
Real Estate Law
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The Role of Real Estate Law
• Real estate business is becoming more complex.
• Common-law doctrines controlling real estate law are eroding
• Brokers and lawyers must become more sophisticated in law
• Real estate is a constantly changing subject
• Rapidly becoming a field for true professionals
• Client may have two representatives, his agent and his attorney.
• Can cause conflicts all around
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The Various Laws
• Two sources of statutory law — one state, the other federal
• State law is considered controlling in real estate
• But federal government is now passing lots of real estate law
State
Federal
4
Constitutions
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Constitutions
The U.S. Constitution
• Primary source of law in the United States
• Certain rights that are considered inviolate
• No statute, ordinance, or contract can waive them
• Can only be altered by constitutional amendment
• Federal government has powers within the scope of the Constitution
• In the field of real estate under the interstate commerce clause
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Constitutions
The Texas Constitution
• Contains inalienable rights that apply to residents of Texas.
• These rights include:
Texas homestead laws,
Mechanics’ and materialmen’s lien laws
Community property
• If there is a conflict between the U.S. and Texas Constitutions:
U.S. Constitution controls on federal issues
Texas Constitution controls on state issues
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Statutes
• Affect property rights in greater detail than constitutions
• Created by our state and federal legislatures
• Statutes have the force of law until declared unconstitutional
• Texas laws are in Vernon’s Annotated Texas Statutes
• Federal laws are in the United States Code
• In case of conflict federal law would control in federal issues
• Texas law would control on state issues
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www.capitol.state.tx.us
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http://uscode.house.gov
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Ordinances and Regulations
• Must undergo the same constitutional scrutiny as statutes
• Local ordinances are inferior to state statutes
• Decisions by these agencies have quasi-judicial power
• Considered to have the force of law unless there is a clear abuse
• Various laws are often very broad, often vague, and always confusing
• Each agency passes its own regulations to clarify these laws
• These regulations can be changed at the whim of the agency
• This is how the federal government is gaining more and more power
• May not have been the purpose of the original legislation
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Judicial Interpretation
• Interpretations of law result in decisions made by the court system
• Although sometimes unpredictable, this system is the best in the world
• The basis from which precedents are set and priorities are maintained
• Courts often expose additional questions and interpretations
• These decisions often become the foundation for new law
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Historical Background of the Courts
Law
vs.
Equity
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Courts of Law
• Our present court system arose from a centuries-old system
• An objective third party making fair and just decisions
• Written aspects of a transaction were rigorously adhered to
• A logical approach to setting up an ordered society
• Being a day late with a mortgage payment results in foreclosure
• The agreement is strictly upheld in the courts of law
• Even though circumstances were beyond borrower’s control.
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Courts of Equity
• Courts of equity soften the impact of these strict legal principles
• Particular significance in the area of real estate
• Equity courts have concurrent jurisdiction with courts of law
• Would impose jurisdiction when fairness dictated rules were too strict
• Would allow borrower to make payment late to see justice done
Equity
Fairness
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Courts of Equity
• Courts of equity imposed certain equitable principles
“unjust enrichment”
“unconscionable bargain”
“irreparable harm”
• Equitable maxims used as precedents with no true legal effect
“he who seeks equity must do equity”
“equity does that which ought to be done”
“he who seeks equity must have clean hands”
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Courts of Equity
• Have evolved through courts seeking fair and just results
• It was in these courts that equitable remedies were imposed
• Not conferred by statute or by any other type of codified jurisprudence
• Examples include:
specific performance (to compel action)
rescission and restitution (void contract & return to original condition)
quantum meruit (one party performs and other party must pay)
quasi-contractual recovery (courts impose contractual principles)
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The Current Civil Court Systems
Texas and federal court system has both legal and equitable jurisdiction!
State
Courts
Federal
Courts
Justice of
the Peace
Federal
District
Courts
Municipal
Courts
Circuit
Court of
Appeals
County
Courts
U.S.
Supreme
Court
District
Courts
Courts of
Civil Appeal
Texas
Supreme
Court
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State Courts
Original jurisdiction for:
Justice of
the Peace
Claims of $10,000 or less
Evictions
Small
Claims
Court
Municipal
Courts
Enforcement of deed restrictions
in residential subdivisions
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State Courts
County
Courts
Appeal
judgments
over $250
Appeal
evictions
Probate in
small counties
Title to RE
(with district
courts)
Civil matters
not over
$100,000
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State Courts
State District
Courts
Most
important for
real estate
Suits for title
Enforcement
of liens
Execution,
equestration,
or attachment
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Federal Courts
• Differs primarily in jurisdiction
• Conflict of jurisdiction between individuals or states and an amount in
excess of $10,000 in controversy, or on a question of federal law
• There is only one level of trial courts, the federal district court
• These cases can only be appealed to one of the 13 circuit courts of
appeals
• Texas is in the Fifth Circuit Court of Appeals, located in New Orleans
• Beyond the Fifth Circuit, the only avenue of appeal is to the Supreme
Court of the United States
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Court Procedure
Parties
to suit
• Plaintiff
• Defendant
The
lawyers
• Real estate attorney
• Trial attorney
Deciding
bodies
• Judge (questions of law)
• Jury (questions of fact)
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Court Procedure
• Only points of law can be appealed to the appellate court
• To settle a question of law or incorrect ruling that a trial court made
• There is no jury present beyond the trial court level
• Rule of evidence, procedure, substantive law, or jury charge
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Court Procedure
Considering the attorney’s fees, the emotions, the time, and the
overloaded dockets that litigation promotes, the amount in controversy
generally has to be fairly high before litigation is worthwhile!
Most rules of law are general rules, subject to exceptions and equitable
interpretation. These are the major reasons why it is so difficult to get a
simple answer from an attorney.
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Alternative Dispute Resolution - Mediation
• A neutral third party assists parties in the conflict
• Hopefully arriving at a mutually acceptable solution
• Mediator facilitates communication between the parties
• Does not impose a decision
• Mediator is usually knowledgeable about the subject matter
• Executes a enforceable agreement at the end of the mediation
• A decision doesn’t have to be reached
• Without agreement the dispute proceeds to court
• TREC promulgated forms encourage mediation
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Alternative Dispute Resolution - Arbitration
• A third party acts as judge and jury over the dispute
• Under Texas law arbitration is binding
• Procedure resembles a decision made by a trial judge
• Arbitrator need not support his award with an opinion
• Pretrial discovery is usually rapid and less formal
• Tends to achieve speedy resolution, at a much lower cost
• Award is not appealable unless fraud or conflict of interest
• If you lose, you lose, if you win, you win
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Legal Research
A law library has an almost never-ending supply of legal treatises,
articles, statutes, opinions, and case law reports.
Every case above the district court level is bound in volumes called
Reporters, which, along with statutes, digests, and current treaties, must
constantly be updated.
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Legal Research
Texas cases are reported in the Southwestern Reporter.
Therefore, when searching for a case, one may find it cited as:
Case v. Case, 376 S.W.2d 941 (Tex. App.—Waco, 1936)
if it is a Texas civil appeals court decision
or
Case v. Case, 376 S.W.2d 941 (Tex. 1936)
if it is a Texas Supreme Court decision.
Each of the foregoing examples indicates that the case is found in volume
376, page 941, of the Southwestern Reporter, second series. The material
in parentheses refers to the court and year of decision.
Statutes are normally cited as:
Tex. Rev. Civ. Stat. Ann., Art. 6573a, or V.T.C.A., Property Code, §5.001
which indicates that the statute is located in the Texas civil statutes,
Article 6573a, or the Property Code, Section 5.001.
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Conclusion
• Citations are intended to give you sources for more in-depth study
• The following chapters are more detailed and substantive
• For laymen, it is important to recognize problem areas
• Advice, litigation, or negotiation of a client’s rights should be left to the
attorneys
• Attorney’s job is to relieve real estate agents from this burden
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Resource – the Texas Legislature
www.capitol.state.tx.us
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Resource – State Bar of Texas
www.texasbar.com
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Resource – Texas Real Estate Commission
www.trec.texas.gov
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Resource – Texas Association of Realtors®
www.texasrealtors.com
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Resource – Cengage Learning
www.cengage.com
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Questions for Discussion
1. Explain the difference between “courts of law” and “courts of equity”
and identify which are used in Texas.
2. In Texas the justice of the peace courts have original jurisdiction over
what kind of issues?
3. Explain the role of the judge and jury in a trial proceeding.
4. What are the differences between mediation and arbitration in
alternative dispute resolution?
5. What is the purpose of appellate courts?
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