Texas Causes of Action & Affirmative Defenses

Texas Causes of Action & Affirmative Defenses

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Thursday, May 17, 2012

No wrongful foreclosure claim without actual foreclosure and proof of low selling price

   
ELEMENTS OF Wrongful Foreclosure UNDER TEXAS LAW
  
To succeed on a claim for wrongful foreclosure under Texas law, a plaintiff must show: (1) a defect in the foreclosure sale; (2) a grossly inadequate selling price; and (3) a causal connection between the defect in the sale and the grossly inadequate selling price. Charter Nat'l Bank-Houston v. Stevens, 781 S.W.2d 368, 371 (Tex.App.-Houston [14th Dist.] 1989, writ denied).
 
"A claim for `wrongful foreclosure' is not available based merely on showing a defect in the foreclosure process; it is also necessary that there be an inadequate selling price resulting from the defect. Texas courts have yet to recognize a claim for `attempted wrongful foreclosure'" Biggers v. BAC Home Loans Servicing, LP, 767 F.Supp.2d 725, 729 (N.D. Tex. 2011) (citing Port City State Bank v. Leyco Constr. Co., 561 S.W.2d 546, 547 (Tex.Civ.App. 1977, no writ); Peterson v. Black, 980 S.W.2d 818, 823 (Tex.App. 1998, no pet.). Because an inadequate selling price is a necessary element of a wrongful foreclosure action, "a foreclosure sale is a precondition to recovery." Biggers, 767 F.Supp.2d. at 730.
 
SOURCE:  United States District Court, Northern District of Texas, Dallas Division - May 9, 2012. Civil Action No. 3:11-CV-00603-M (BF) - FINDINGS, CONCLUSIONS, AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE PAUL D. STICKNEY.
  
Here, there is no allegation that a foreclosure sale actually occurred. Instead, Plaintiff alleges a lack of standing on behalf of Defendants to foreclose on her property and defects in the notices of sale and acceleration. Plaintiff is, in fact, still residing at the property which is the subject of this lawsuit. Because Plaintiff only alleges defects in the foreclosure process, and not an actual foreclosure sale, Plaintiff cannot prove a necessary element of wrongful foreclosure. See Biggers, 767 F.Supp.2d at 729-30. Moreover, the Court finds that Defendants do have standing to foreclose on Plaintiff's property, as MERS assigned the Deed of Trust to RFC, and Defendants were acting on behalf of RFC in initiating foreclosure. There is no genuine issue of material fact that exists for trial, and thus, Plaintiff's claim of wrongful foreclosure fails as a matter of law.
  

Another snippet with case law on Civil Claim for Wrongful Foreclosure       
   
The elements of wrongful foreclosure are: (1) a defect in the foreclosure sale proceeding; (2) a grossly inadequate selling price; and (3) a causal connection between the defect and the grossly inadequate selling price. Charter Nat'l Bank-Houston v. Stevens, 781 S.W.2d 368, 371 (Tex.App.-Houston [14th Dist.] 1989, writ denied). A wrongful foreclosure claim does not always require proof of a grossly inadequate selling price if another substantive injury to the mortgagor exists. Id. Under Texas law, "a deed of trust is a mortgage with a power to sell on default." Starcrest Trust v. Berry, 926 S.W.2d 343, 351 (Tex.App.-Austin 1996, no writ) (internal quotation omitted). Mortgages, and therefore deeds of trust, are construed like contracts. Id. at 351-52. "Further, `[t]he note and deed of trust on . . . property should be construed together and effectively regarded as one instrument.'" Id. (quoting Chapa v. Herbster, 653 S.W.2d 594, 600 (Tex.App.-Tyler 1983, no writ)).
  
SOURCE: United States District Court, S.D. Texas, Houston Division. Civil Action H-11-3298. ORDER of GRAY H. MILLER, District Judge, January 9, 2012.
 
The court construes [PLAINTIFF-HOME OWNER’S] arguments to revolve around the ability of MERS to assign the note and the deed of trust. Because, she argues, the assignments were invalid, the note and the deed of trust became "bifurcated," in effect splitting the lien on the property away from the loan. As a result, [PLAINTIFF-HOME OWNER]  asserts that the previously secured loan became unsecured, extinguishing the right of foreclosure under the deed of trust. She offers no authority for her "bifurcation" theory and the court has found none.
  
Arguably, MERS had the right to assign the note to BAC. Texas law dictates that the note and deed of trust should be construed as a single document. The deed of trust expressly grants to MERS, as nominee for the lender (or note holder), all rights the lender had under the deed of trust. It would follow that since the documents are construed as a single document, MERS likely had the right to assign the note.
  
However, even if the note and the deed of trust became somehow separated, that does not affect the rights of the lien-creditor to foreclose based on the deed of trust. Well-established Texas law allows suit to be brought on the nonpayment of the note separate from suit for foreclosure of the lien without precluding a later suit for foreclosure. Stephens v. LPP Mortgage, Ltd., 316 S.W.3d 742, 746 (Tex.App.-Austin 2010, pet. denied) (citing Carter v. Gray, 125 Tex. 219, 81 S.W.2d 647, 648 (1935)). "When a debt is memorialized by a note that is secured by a lien, the note and lien constitute separate obligations." Id. at 747. The holder of a note and the lien-creditor hold different rights, may act at different times, and need not be the same entity. Id.; see also Athey v. Mortg. Elec. Registration Sys., Inc., 314 S.W.3d 161, 165-66 (Tex.App.-Eastland 2010, pet denied) (recognizing a nominee's authority under a deed of trust to authorize a mortgage servicer to proceed with a non-judicial foreclosure sale). MERS expressly held all rights of the Lender on the deed of trust, including the right to assign it. Accordingly, the "bifurcation" premise that is the basis of [PLAINTIFF-HOME OWNER’S] argument fails. 
   
Wrongful Foreclosure - One more case from a federal district court
 
CLAIM OF WRONGFUL FORECLOSURE REJECTED  
  
[PLAINTIFF-HOME OWNER] asserts a claim against these Defendants for wrongful foreclosure. Defendants maintain that summary judgment in their favor is appropriate because no, or insufficient, evidence exists to establish the requisite elements of this claim. (Dkt. No. 49 at 9-11).
  
To prevail on a wrongful foreclosure claim, a plaintiff must be able to establish that (1) there was a defect in the foreclosure proceedings, (2) the selling price at foreclosure was grossly inadequate, and (3) there is a causal connection between the defect in the foreclosure and the grossly inadequate selling price. Sauceda v. GMACMortgage Corp., 268 S.W.3d 135, 139 (Tex.App.-Corpus Christi 2008, no pet.).
  
Initially, [PLAINTIFF-HOME OWNER]  claims that the foreclosure must be set aside because there was a defect in the proceeding — namely, that he did not receive the notice of the sale. The law provides that notice is complete when it addressed to the debtor at that debtor's last known address as shown by the records of the holder of the debt and the notice is deposited in the mail. Tex. Prop. Code § 51.002(e). The evidence before the Court reflects that [PLAINTIFF-HOME OWNER] was sent the requisite notice of the January 5, 2010, foreclosure sale. (Dkt. No. 49, Ex. B). [PLAINTIFF-HOME OWNER]'s claim, therefore, lacks merit.[9] See, Adebo v. Litton Loan Servicing, L.P., No. 01-07-708-CV, 2008 WL 2209703, at * 4 (Tex. App.-Houston [1st Dist.] may 29, 2008, no pet.) (explaining that "[t]he dispositive inquiry under section 51.002(e) . . . is not receipt of notice, but, rather, service of notice.").[10] Nor does the evidence support [PLAINTIFF-HOME OWNER]'s other allegations that any defect existed in the notices.[11]
  
[PLAINTIFF-HOME OWNER] next alleges that the sale was wrongful because the Property was sold at foreclosure for a grossly inadequate price. In an attempt to support this claim, [PLAINTIFF-HOME OWNER] submits the valuation of the Property that was done after he entered into the purchase agreement with Trendmaker in 2006, but before he closed on the Property in February 2007. This is insufficient, however, to establish the value of the Property at the time of the foreclosure in 2010. Baker v. Countrywide Home Loans, Inc., No. 3:08-CV-0916-B, 2009 WL 1810336, at *4 (N.D. Tex. June 24, 2009). [PLAINTIFF-HOME OWNER] also attempts to shoulder his burden by pointing to posting on a website, however this evidence, unauthenticated and hearsay, is not sufficient to establish that the Property was sold at foreclosure in 2010 for a grossly inadequate price.
  
Finally, [PLAINTIFF-HOME OWNER] appears to suggest that the Property was wrongfully foreclosed in violation of Article 16, § 50 of the Texas Constitution. This claim has no merit. This provision in the Texas Constitution safeguards an individual's homestead from foreclosure for debts incurred, but it does not preclude a senior mortgagor from foreclosing on the Property, as was the case here, when the individual defaults on the note that purchased the homestead.

Accordingly, for all the reasons discussed, the Court concludes that Defendants' Motion must be granted on these claims.

SOURCE: United States District Court, S.D. Texas, Galveston Division. Civil Action No. G-10-304.
OPINION AND ORDER of JOHN R. FROESCHNER, Magistrate Judge. January 19, 2012.



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