LAWYERS TITLE INSURANCE CORPORATION, Appellant v. JERRELL J. COSBY, TRUSTEE and J.J. COSBY & ASSOCIATES, INC., Appellees

AFFIRM in part, REVERSE and REMAND in part, and Opinion Filed November 21, 1996
 
 
S
In The
Court of Appeals
Fifth District of Texas at Dallas
............................
No. 05-95-01349-CV
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LAWYERS TITLE INSURANCE CORPORATION, Appellant
V.
JERRELL J. COSBY, TRUSTEE and J.J. COSBY & ASSOCIATES, INC., Appellees
..............................................................
On Appeal from the 193rd Judicial District Court
Dallas County, Texas
Trial Court Cause No. 94-3767-L
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O P I N I O N
Before Justices Chapman, Whittington, and Wright
Opinion By Justice Wright
        Lawyers Title Insurance Corporation appeals from a take-nothing judgment entered in favor of appellees. FN:1 The trial court granted a motion for judgment at the close of plaintiff's case, concluding that Lawyers Title failed to prove that (1) Cosby & Associates breached the general warranty deed, and (2) Cosby, as the record title owner, was personally liable for payment of the paving lien. FN:2 In three points of error, Lawyers Title contends the trial court erred by entering judgment in favor of appellees because the evidence was legally and factually sufficient to prove appellees breached the covenant against encumbrances contained in the general warranty deed. We affirm in part and reverse in part the trial court's judgment.
 
FACTUAL AND PROCEDURAL BACKGROUND
 
        On August 26, 1980, Cosby purchased an undeveloped lot in Arlington. He bought the property intending to build an office building for a group of individuals. Although Cosby "had a pretty good idea who that group of individuals would be," Cosby did not identify the individuals. FN:3
        On October 5, 1982, the City of Arlington adopted a resolution ordering improvements to Copeland Road. The City later filed paving assessment liens pursuant to the resolution. A paving assessment lien was filed on the property pursuant to the resolution on May 29, 1986. The paving assessment lien was recorded in the Tarrant County Deed records.
        On June 30, 1983, Cosby & Associates sold the property to Randol Center I. Cosby & Associates conveyed the property to Randol Center I by general warranty deed without reservation of the paving lien assessment. Neither Cosby nor Cosby & Associates disclosed the unpaid assessment. Randol Center I later conveyed the property to Randol Mill Center II. In connection with the sale of the property to Randol Mill Center II, Lawyers Title issued title insurance to Randol Mill Center II. The policy did not except the paving lien.
        The City advised Randol Mill Center II of the assessment and demanded payment. Randol Mill Center II made a claim to Lawyers Title under their title insurance policy. Lawyers Title paid the City $37,234.16 to obtain a release of the paving assessment lien.
        Lawyers Title then sued Cosby and Cosby & Associates to recover the money paid to obtain the release of the paving lien, alleging (1) Cosby & Associates breached the general warranty deed, and (2) Cosby, as the record title owner, was personally liable for payment of the paving lien. The case proceeded to a bench trial. After Lawyers Title presented its case, the trial court granted appellees' motion for judgment. The trial court filed findings of fact and conclusions of law. Lawyers Title appealed to this Court raising three points of error. Appellees did not file a brief with this Court.
 
Standard of Review
 
        In points of error one and two, Lawyers Title challenges the trial court's conclusion of law, contending the trial court erred in entering judgment in favor of Cosby & Associates because the evidence (1) showed as a matter of law that Cosby & Associates had breached the covenant against encumbrances contained in the general warranty deed, and (2) the trial court's finding that Lawyers Title failed to prove Cosby & Associates was liable to Lawyers Title was against the great weight and preponderance of the evidence. In point of error three, Lawyers Title challenges the trial court's conclusion of law contending the trial court erred in entering judgment in favor of Cosby because the trial court's finding that Lawyers Title failed to prove Cosby was liable to Lawyers Title was against the great weight and preponderance of the evidence.
        In a nonjury trial, the trial court decides both factual and legal issues. See Quantel Business Sys. v. Custom Controls Co., 761 S.W.2d 302, 306 (Tex. 1988) (Gonzalez, J., concurring). When the trial court rules on a motion for judgment, we presume the trial court ruled on both the legal and factual sufficiency of the evidence. See id. at 304-05. Thus, we review the trial court's factual rulings to determine the legal and factual sufficiency of the evidence. Id.
        The trial court's conclusions of law may not be challenged for factual insufficiency. We may, however, review the trial court's conclusions drawn from the facts to determine their correctness. Mercer v. Bludworth, 715 S.W.2d 693, 697 (Tex. App.--Houston [1st Dist.] 1986, writ ref'd n.r.e.), overruled on other grounds by Shumway v. Horizon Credit Corp., 801 S.W.2d 890, 894 (Tex. 1991). We do not reverse conclusions of law unless they are erroneous as a matter of law. See Westech Eng'g Inc. v. Clearwater Constructors, Inc., 835 S.W.2d 190, 196 (Tex. App.--Austin 1992, no writ); Mercer, 715 S.W.2d at 697.
Applicable Law
 
        A general warranty deed promises good clear title to the real property. See City of Beaumont v. Moore, 202 S.W.2d 448, 453 (Tex. 1947). A general warranty includes the covenant of freedom from encumbrances. Id. The covenant against encumbrances warrants that there are no liens or burdens on the property, other than those shown in the deed, which would diminish its value. See id. at 454; Wolff v. Commercial Standard Ins. Co., 345 S.W.2d 565, 568 (Tex. Civ. App.--Houston 1961, writ ref'd n.r.e.). Thus, it is the legal duty of the grantor to pay off and discharge all liens and encumbrances incurred prior to the conveyance which are not specifically assumed by the warrantee. City of Beaumont, 202 S.W.2d at 453.
        A paving lien is an encumbrance on the property. Scott v. Snavely, 394 S.W.2d 42, 44 (Tex. Civ. App.--Austin 1965, writ ref'd n.r.e.). If the paving lien is not shown in the deed, the general warranty is breached upon execution of the deed. Wolff, 345 S.W.2d at 568. The covenant against encumbrances is one of indemnity, therefore, the injury is sustained when the lien is discharged. Id. The injured party is entitled to recover the amount fairly and reasonably paid to remove the encumbrance. Id.
        The governing body of a municipality can order improvements to streets and can provide part of the cost by assessments against the property abutting the improved street. See Act of April 26, 1951, 52nd Leg., R.S., ch. 281, § 1, 1951 Tex. Gen. Laws 454, 454-55, repealed by Act of May 1, 1995, 74th Leg., R.S., ch. 165, § 24(a), 1995 Tex. Gen. Laws 1025, 1235 (current version at Tex. Transp. Code Ann. § 313.042 (Vernon Pamph. 1997)). FN:4 An assessment against abutting property is both (1) a lien on the property, and (2) a personal liability and charge against the owner of the property. Tex. Transp. Code Ann. § 313.042(e) (Vernon 1996). A paving assessment is a first and prior lien on the property which is created from the date the municipality orders the improvement. See Scott, 394 S.W.2d at 44. The date the improvements are ordered is the initial step in the process of an assessment and lien being created on the property, and the date of the assessment relates back to the time the improvements are ordered. See id.
 
Application of Law to Facts
 
1. Cosby & Associates
 
        In points of error one and two, Lawyers Title contends the trial court erred by entering judgment in favor of Cosby & Associates because the evidence shows that Cosby & Associates breached the covenant against encumbrances contained in the general warranty deed. We agree.
        The City ordered improvements to Copeland Road on October 5, 1982. The City filed a paving assessment lien on the property under the resolution which ordered the improvements. The date of a paving assessment lien relates back to the time the improvement was ordered. Thus, the lien was effectively filed on the property on October 5, 1982. On June 30, 1983, several months after the lien was filed, Cosby & Associates conveyed the property by general warranty deed without reservation of the lien. Accordingly, it warranted that there were no liens or burdens on the property. Because the paving assessment lien had been filed on the property on October 5, 1982, Cosby & Associates breached the covenant against encumbrances when it executed the deed to Randol Center I, who later conveyed the property to Randol Mill Center II. Because Lawyers Title discharged the encumbrance under the terms of the title insurance policy issued to Randol Mill Center II, it is entitled to recover the amount fairly and reasonably paid to remove the encumbrance. Therefore, we conclude the trial court erred by concluding Lawyers Title failed to prove by a preponderance of the evidence that Cosby & Associates was not liable to it on any theory raised in its original petition. We sustain points of error one and two.
2. Cosby
 
        In point of error three, Lawyers Title contends the trial court erred by entering a judgment in favor of Cosby because the trial court's finding that Lawyers Title failed to prove Cosby was liable to it on any theory raised in plaintiff's original petition is against the great weight and preponderance of the evidence. FN:5 Lawyers Title argues Cosby was the true owner of the property at the time of assessment and, as trustee, has personal liability for the assessment because he did not disclose the trust on whose behalf he purported to act.
        Lawyers Title argues that because Cosby was the sole officer, director, and shareholder of Cosby & Associates, it is "evident" that Cosby held the property as trustee for his privately-held corporation. Further, Lawyers Title contends that because Cosby refused to disclose the trust on whose behalf he purported to act, this Court should impose personal liability on Cosby. We disagree.
        The evidence shows that Cosby bought the property on August 26, 1980. Cosby bought the property intending to build an office building for a group of individuals. Although Cosby testified he "had a pretty good idea who that group of individuals would be," Cosby did not identify the individuals. The paving assessment lien was filed on October 5, 1982. On June 30, 1983, Cosby & Associates conveyed the property to Randol Center I. The evidence does not provide an explanation for the gap in title between Cosby and Cosby & Associates. Sally A. Sherman, an attorney employed by Lawyers Title, testified that she could not explain the gap in title from Cosby to Cosby & Associates. Because the evidence does not establish the true owner of the property on October 5, 1982, we conclude the trial court did not err by concluding that Lawyers Title failed to establish personal liability against Cosby. We overrule point of error three.
        We conclude the trial court erred by granting appellees' motion for judgment as to Cosby & Associates. We conclude the trial court correctly granted appellees' motion for judgment as to Cosby. Accordingly, we affirm the trial court's judgment as to Cosby. We reverse the trial court's judgment as to Cosby & Associates. Because the trial court entered judgment at the close of plaintiff's case and before defendant had an opportunity to present evidence, we remand the claims of Lawyers Title against Cosby & Associates to the trial court for new trial.
 
 
                                                          
                                                          CAROLYN WRIGHT
                                                          JUSTICE
Do Not Publish
Tex. R. App. P. 90
951349F.U05
 
FN:1 For convenience we will refer to appellees collectively as "appellees," Jerrell J. Cosby, trustee as "Cosby," and J.J. Cosby & Associates, Inc. as "Cosby & Associates."
FN:2 The trial court's single conclusion of law is as follows: "Plaintiff has failed to prove by a preponderance of the evidence that Defendants are liable to them on any theory raised in Plaintiff's Original Petition." Plaintiff's Original Petition alleged (1) Cosby & Associates breached the general warranty deed, and (2) Cosby, as the record title owner, was personally liable for payment of the paving assessment lien.
FN:3 Cosby also testified that he could not recall what trust he was acting on behalf of.
FN:4 For convenience, all future citations will be to the current version unless otherwise noted.
FN:5 Although Lawyers Title challenges the factual sufficiency of the trial court's conclusion, we will review the conclusion for its legal correctness.
File Date[11-21-96]
File Name[951349F]