Foreclosure: Accrual of right to foreclose, applicable statute of limitations, and tolling

DOES DEFAULT TRIGGER THE RUNNING OF LIMITATIONS PERIOD? 

Optional Acceleration Clause 

"Under Texas law, a secured lender must foreclose on its `real property lien not later than four years after . . . the cause of action accrues.'" Rivera, 607 F. Appx. at 360 (citing Tex. Civ. Prac. & Rem. Code § 16.035(a)). "If the `deed of trust secured by real property contains an optional acceleration clause, default does not [of itself] start limitations running on the note. Rather, the action accrues only when the holder actually exercises its option to accelerate.'" Id. (quoting Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 566 (Tex. 2001)).

Tolling may also affect limitations, such as when bankruptcy petition is filed, or foreclosure prevention suit in state court 

 "Section 108(c) of the bankruptcy code . . . affords an extension of state-court deadlines under some circumstances. That section provides, in pertinent part: [I]f applicable nonbankruptcy law . . . fixes a period for commencing or continuing a civil action in a court other than a bankruptcy court on a claim against the debtor . . . and such period has not expired before the date of the filing of the [bankruptcy] petition, then such period does not expire until the later of—(1) the end of such period, including any suspension of such period occurring on or after the commencement of the case; or (2) 30 days after notice of the termination or expiration of the stay under section 362, 922, 1201, or 1301 of this title, as the case may be, with respect to such claim." Id.(emphasis added).

Also see Wells Fargo Bank, N.A. v. Murphy, 458 S.W.3d 912, 915 n.1 (Tex. 2015), reh'g denied (June 5, 2015) (citing Tex. R. Civ. P. 36.11(a)) ("The relevant portion of Rule 736.11(a) states: `A proceeding or order under this rule is automatically stayed if a respondent files a separate, original proceeding in a court of competent jurisdiction that puts in issue any matter related to the origination, servicing, or enforcement of the loan agreement, contract, or lien.'").

HSBC BANK USA, N.A., AS TRUSTEE FOR MERRILL LYNCH MORTGAGE INVESTORS TRUST, MORTGAGE LOAN ASSET-BACKED CERTIFICATES, SERIES 2005-WMCI, Plaintiff/Counter-Defendant,
v.
KENNETH E. CRUM, Defendant/Counter-Plaintiff,

Civil Action No. 3:14-CV-3522-B.

United States District Court, N.D. Texas, Dallas Division.

February 24, 2016.

MEMORANDUM OPINION AND ORDER

JANE J. BOYLE, District Judge.

Before the Court is Plaintiff/Counter-Defendant HSBC Bank USA, N.A., as Trustee for Merrill Lynch Mortgage Investors Trust, Mortgage Loan Asset-Backed Certificates, Series 2005-WMCI's (Plaintiff, HSBC, or the bank) Motion for Summary Judgment (Doc. 38). For the following reasons, HSBC's Motion is DENIED without prejudice pending additional briefing as explained below.

Mitigation in the context of default on real estate note and foreclosure

Mitigation in the foreclosure and breach of real estate note context: Bank not required to accept offer/consent to sale of secured property that would not have covered the entire indebtedness and would have precluded it from enforcing the note and obtain deficiency judgment against debtors

The doctrine of mitigation of damages prevents a party from recovering for damages resulting from a breach of contract that could be avoided by reasonable efforts on the part of the plaintiff. Great Am. Ins. Co. v. N. Austin Mun. Utility Dist. No. 1, 908 S.W.2d 415, 426 (Tex. 1995). In other words, where a party is entitled to the benefits of a contract and can save himself from the damages resulting from its breach at a trifling expense or with reasonable exertions, it is his duty to incur such expense and make such exertions. Id. (quoting Walker v. Salt Flat Water Co., 96 S.W.2d 231, 232 (Tex. 1936)). Although an injured party is required to exercise reasonable efforts to minimize damages, it is not required to mitigate its losses "by accepting an arrangement with the repudiator if that is made conditional on [its] surrender of [its] rights under the repudiated contract." Cook Composites, Inc. v. Westlake Styrene Corp., 15 S.W.3d 124, 135 (Tex. App.-Houston [14th Dist.] 2000, pet. dism'd) (quoting Publicker Chemical Corp. v. Belcher Oil Co., 792 F.2d 482, 488 (5th Cir. 1986)).

Here, the Williams parties, as the breaching parties, had the burden of proving that damages could have been mitigated. See Copenhaver v. Berryman, 602 S.W.2d 540, 544 (Tex. App.-Corpus Christi 1980, writ ref'd n.r.e.). The Williams parties base their failure to mitigate affirmative defense on testimony from Donald Williams, who found a buyer who was willing to pay "approximately $1,400,000" for one of the parcels at issue, but the Bank refused to give Williams its permission for the sale. If the Bank accepted this side arrangement with the Williams parties, it would have required the Bank to surrender its rights and remedies under the promissory notes, as well as the Agreement with regard to this particular parcel. Because the notes were in default, and the Williams parties failed to pay their indebtedness by June 7, 2011, the Bank was not required to mitigate its damages by forgoing its rights and remedies under the notes and the Agreement. See Cook Composites, 15 S.W.3d at 135. Without other evidence that damages could have been mitigated, the Williams parties failed to raise a question of fact on the Bank's failure to mitigate.[3]

ELEMENTS CREDITOR HAS TO PROVE WHEN SUING ON PROMISSORY NOTE

To recover a debt due and owing under a promissory note, a party must establish that it is the legal holder of an existing note, the debtor's execution of the note, and that an outstanding balance is due and owing. Austin v. Countrywide Homes Loans, 261 S.W.3d 68, 72 (Tex. App.-Houston [1st Dist.] 2008, pet. denied).

SOURCE: CORPUS CHRISTI-EDINBURG COURT OF APPEALS - No. 13-12-00704-CV - 1/16/2014 - Williams v. Compass Bank (creditor can't be forced into short sale under duty-to-mitigate-damages doctrine and give up its claim).

Footnote 3: We also note that the Bank had a right under the promissory notes to foreclose on the properties prior to the Agreement reached in 2011 because the Williams parties were in default. The Agreement, by itself, is further conclusive proof of the Bank's attempt to exercise reasonable efforts to minimize damages by forbearing its collection efforts and allowing the Williams parties to pay back its indebtedness.  

Foreclosure under Deed of Trust (DoT) vs lawsuit to enforce the Promissory Note: Is there a difference, and if so, what's difference?

Foreclosure of mortgaged property under a deed of trust and suit to enforce note to obtain money judgment against borrower are separate and distinct creditor remedies 

WHAT IS THE RELATIONSHIP BETWEEN FORECLOSURE AND SUIT ON PROMISSORY NOTE? 

A lien creditor may pursue foreclosure of a lien against real property under the deed of trust independent of whether the creditor pursues personal action against the borrower to collect under the note. See Stephens v. LPP Mortg., Ltd., 316 S.W.3d 742, 747 (Tex. App.-Austin 2010, pet. denied). As a federal district court applying Texas law has explained:

Texas law differentiates between enforcement of a promissory note and foreclosure. Foreclosure is an independent action against the collateral and may be conducted without judicial supervision. Enforcement of the note, on the other hand, is a personal action against the signatory and requires a judicial proceeding (citations omitted).

Reardean v. CitiMortgage, Inc., No. A-11-CA-420-SS, 2011 WL 3268307, at *3 (W.D. Tex. July 25, 2011). Because Wells Fargo was the mortgagee by statute, it was entitled to enforce the deed of trust and, thus, begin nonjudicial foreclosure proceedings. Farkas's second and third issues are overruled. Because Wells Fargo was authorized to enforce the deed of trust, we need not address the fourth issue: whether Wells Fargo was entitled to enforce the note. Similarly, for the same reason, we need not address Farkas's first issue regarding the servicing rights to the loan under the note.

SOURCE: ELEVENTH COURT OF APPEALS IN EASTLAND, TEXAS - 11-12-00024-CV - 1/9/2014

ROLE OF MERS IN REAL ESTATE FINANCE AND SECONDARY MORTGAGE MARKET EXPLAINED 

A federal judicial panel on multidistrict litigation gave the following explanation of how the MERS system purportedly operates:

When a home is purchased, the lender obtains from the borrower a promissory note and a mortgage instrument naming MERS as the mortgagee (as nominee for the lender and its successors and assigns). In the mortgage, the borrower assigns his right, title, and interest in the property to MERS, and the mortgage instrument is then recorded in the local land records with MERS as the named mortgagee. When the promissory note is sold (and possibly re-sold) in the secondary mortgage market, the MERS database tracks that transfer. As long as the parties involved in the sale are MERS members, MERS remains the mortgagee of record (thereby avoiding recording and other transfer fees that are otherwise associated with the sale) and continues to act as an agent for the new owner of the promissory note.

In re Mortg. Elec. Registration Sys. (MERS) Litig., 659 F. Supp. 2d 1368, 1370 n.6 (J.P.M.L. 2009).

DEED OF TRUST AND STATUS OF MORTGAGEE 

If Wells Fargo was the mortgagee, then it was entitled to exercise the powers that Farkas granted in the deed of trust. The Property Code authorizes a mortgagee to sell real property under a "power of sale conferred by a deed of trust." PROP. § 51.002. The statutory definition of a mortgagee includes: (1) the grantee, beneficiary, owner, or holder of a security instrument; (2) a book entry system, which acts as a nominee for the grantee, beneficiary, owner, or holder of a security instrument and its successors and assigns; and (3) the last person to whom the security interest has been assigned of record. See id. § 51.0001(1), (4).

Here, the summary judgment evidence shows that Wells Fargo was the last person to whom the instrument had been assigned. According to the terms of the deed of trust, MERS was the beneficiary and the nominee for the lender (Jefferson Mortgage Services) and its successors and assignees. Thus, MERS was a mortgagee as defined in the Property Code. When MERS executed the assignment to Wells Fargo Bank, N.A. on December 1, 2009, Wells Fargo obtained all of MERS's rights and interest in the deed of trust (originating from the lender, Jefferson Mortgage Services), including the "right to foreclose and sell the Property." See Athey v. Mortg. Elec. Registration Sys., Inc., 314 S.W.3d 161, 166 (Tex. App.-Eastland 2010, pet. denied).

Farkas contends that Wells Fargo is not the mortgagee because "[t]he purported assignment of the Deed of Trust is ineffective to transfer the security interest to Wells Fargo as a matter of law" because "Wells Fargo does not hold the subject debt." Essentially, Farkas argues that Wells Fargo was not the holder of the note and, thus, could not exercise the powers granted by him under the deed of trust. Farkas seems to conflate the foreclosure with enforcing the note against the borrower.

SOURCE:  EASTLAND COURT OF APPEALS - 11-12-00024-CV - 1/9/2014

EXCERPT FROM RECENT FEDERAL DISTRICT COURT IN TEXAS OPINION / ORDER

Texas law differentiates between enforcement of a promissory note and a deed of trust. "Where there is a debt secured by a note, which is, in turn, secured by a lien, the lien and the note constitute separate obligations." Aguero v. Ramirez, 70 S.W.3d 372, 374 (Tex. App. 2002). Thus, the right to recover on the promissory note and the right to foreclose may be enforced separately. See Stephens v. LPP Mortg., 316 S.W.3d 742, 747 (Tex. App. 2010) (finding that the promissory note and the lien which secures it are "separate legal obligations" that "may be litigated in separate lawsuits"); Carter v. Gray, 125 Tex. 219, 81 S.W.2d 647, 648 (Tex. 1935) ("It is so well settled as not to be controverted that the right to recover a personal judgment for a debt secured by a lien on land and the right to have a foreclosure of lien are severable, and a plaintiff may elect to seek a personal judgment without foreclosing the lien, and even without a waiver of the lien.").
 
Foreclosure is an independent action against the collateral and may be conducted without judicial supervision. Bierwirth v. BAC Home Loans Servicing, L.P., No. 03-11-00644-CV, 2012 WL 3793190, at *4 (Tex. App. Aug. 30, 2012) (citing Reardean v. CitiMortgage, Inc., No. A-11-CA-420, 2011 WL 3268307, at *3 (W.D. Tex. July 25, 2011)). Enforcement of the promissory note, on the other hand, is a personal action against the signatory and requires a judicial proceeding. Id.

Chapter 51 of the Texas Property Code, which governs non-judicial foreclosures, authorizes either a mortgagee or a mortgage servicer acting on behalf of a mortgagee to sell real property under a "power of sale conferred by a deed of trust." See Tex. Prop. Code. §§ 51.002, 51.0025. The Property Code defines a "mortgagee" as "(A) the grantee, beneficiary, owner, or holder of a security instrument; (B) a book entry system;[3] or (C) if the security interest has been assigned of record, the last person to whom the security interest has been assigned of record." Tex. Prop. Code § 51.0001(4). Under Texas law, therefore, Defendant need not hold the Note in order to foreclose; it need only have the right to foreclose under the Deed of Trust.

SOURCE: Rodriguez v. Bank of America, NA, Dist. Court, WD Texas 2013 United States District Court, W.D. Texas, San Antonio Division. April 25, 2013.

LEGAL VS EQUITABLE TITLE IN RELATION TO MORTGAGED PROPERTY 

 "When a mortgagor executes a deed of trust the legal and equitable estates in the property are severed. The mortgagor retains the legal title and the mortgagee holds the equitable title. Texas has always followed this lien theory of mortgages." Green v. McKay, 376 S.W.3d 891, 899 n.9 (Tex. App.-Dallas 2012, pet. denied) (quoting Flag-Redfern Oil v. Humble Exploration Co., 744 S.W.2d 6, 8 (Tex. 1987)).

See Lighthouse Church of Cloverleaf v. Tex. Bank, 889 S.W.2d 595, 603 (Tex. App.-Houston [14th Dist.] 1994, writ denied) (stating that "[f]oreclosure transfers title from the debtor to another party").

Forcible Detainer ... Huh? What?

What do lawyers and landlords mean by "forcible detainer"?

It's what leads to eviction; -- the failure to move out when the renter or previous owner no longer has the right to be in the house or in the apartment ("premises"), and denies the rightful owner the right to have control over it ("possession"). A forcible detainer action is an eviction suit, whose purpose is to get a justice of the peace to order the occupant(s) out of the habitation. The landlord or property manager will typically also ask for any unpaid rent.   

Forcible detainer occurs when a person, who is a tenant at sufferance, refuses to surrender possession of real property after his right to possession has ceased. See TEX. PROP. CODE ANN. § 24.002; ICM Mortg. Corp. v. Jacob, 902 S.W.2d 527, 530 (Tex. App.-El Paso 1994, writ denied).

A forcible detainer action is "a summary, speedy, and inexpensive" procedure for determining the right to immediate possession of real property where no claim of unlawful entry exists. Williams v. Bank of N.Y. Mellon, 315 S.W.3d 925, 926-27 (Tex. App.-Dallas 2010, no pet.). To maintain the intended simplicity, the applicable rule of civil procedure, rule 746, provides that "the only issue shall be as to the right to actual possession; and the merits of the title shall not be adjudicated."[5] TEX. R. CIV. P. 746; Williams, 315 S.W.3d at 927. In other words, entitlement to possession of premises is decided "without resorting to an action upon the title." Rice v. Pinney, 51 S.W.3d 705, 710 (Tex. App.-Dallas 2001, no pet.) (quoting Scott v. Hewitt, 127 Tex. 31, 35, 90 S.W.2d 816, 818-19 (Tex. 1936)). Proof of the existence of a landlord-tenant relationship establishes a plaintiff's entitlement to possession. Pinney, 51 S.W.3d at 712. 

SOURCE: DALLAS COURT OF APPEALS - 05-12-00899-CV - 7/10/2013

Application of Law to Facts

[Former home owner's] issue on appeal mirrors his argument to the trial court. He does not dispute that (1) he defaulted on the loan, (2) the property was sold at foreclosure, (3) GMAC purchased the property at the foreclosure sale and subsequently conveyed it to FNMA, (4) he did not surrender possession of the property upon demand, and (5) the home equity agreement provided that, upon sale of the property and his failure to surrender, a tenancy at sufferance was created, which established a landlord-tenant relationship, and which established FNMA's entitlement to possession. See id. Rather, he disputes the validity of the foreclosure sale in light of the automatic bankruptcy stay, which addresses the merits of the title. Because [former home owner's] issue as to the merits of the title may not be raised in a forcible detainer action, we resolve his sole issue against him. See Williams, 315 S.W.3d at 927.  

Deficiency claim: Fair Market Value vs. Sales Price at Foreclosures Sale

Statutory right to a judicial determination of the fair market value of the properties sold at foreclosure can be waived; no set-off if sales proceeds are lower than fair market value when waiver applies.
 
DIFFERENCE BETWEEN FAIR MARKET VALUE AND AMOUNT FOR WHICH PROPERTY ACTUALLY SELLS MAY NOT MAKE A DIFFERENCE FOR PURPOSES OF DETERMINING DEFICIENCY AMOUNT

Debtor and Guarantors argue the trial court failed to determine the fair market value of the properties sold at foreclosure and then failed to calculate the deficiency using the fair market value of the properties sold. See Tex. Prop. Code Ann. § 51.003(b), (c) (West 2007).[2]

[2] With respect to a foreclosure involving real property, section 51.003 of the Texas Property Code allows a lender to seek a deficiency judgment calculated by using the foreclosure sales price. See Tex. Prop. Code Ann. § 51.003 (West 2007). In proceedings governed by section 51.003, the borrower may request the trial court to determine the fair market value of the real property as of the date of foreclosure. Id. § 51.003(b). If the fair market value exceeds the sales price at the foreclosure sale, the borrower is entitled to an offset of the excess of the fair market value against the deficiency. Id.§ 51.003(c). If no competent evidence of fair market value is introduced, or if no request to determine the fair market value is made, the sales price at the foreclosure sale shall be used to compute the deficiency. Id.

Lender contends that the loan documents governing the 2009 note contain provisions that waive the right that Debtor and Guarantors claim they had to a statutory fair market value determination and offset of their deficiency.

The February 2009 Deed of Trust[3] includes the following provision:

7.8 WAIVER OF DEFICIENCY STATUTE.

(a) In the event an interest in any of the mortgaged property is foreclosed upon pursuant to a judicial or nonjudicial foreclosure sale, grantor agrees as follows, notwithstanding the provisions of sections 51.003, 51.004, and 51.005 of the Texas Property Code (as the same may be amended from time to time), and to the extent permitted by law, grantor agrees that beneficiary shall be entitled to seek a deficiency judgment from grantor and any other party obligated on the note equal to the difference between the amount owing on the note and the amount for which the mortgaged property was sold pursuant to judicial or nonjudicial foreclosure sale. Grantor expressly recognizes that this section constitutes a waiver of the above-cited provisions of the Texas Property Code which would otherwise permit grantor and other persons against whom recovery of deficiencies is sought or guarantor independently (even absent the initiation of deficiency proceedings against them) to present competent evidence of the fair market value of the mortgaged property as of the date of the foreclosure sale and offset against any deficiency the amount by which the foreclosure sale price is determined to be less than such fair market value. Grantor further recognizes and agrees that this waiver creates an irrebuttable presumption that the foreclosure sale price is equal to the fair market value of the mortgaged property for purposes of calculating deficiencies owed by grantor, guarantor, and others against whom recovery of a deficiency is sought.

The Guaranty Agreements at issue also contain provisions stating that Guarantors waived, "any and all rights under Sections 51.003, 51.004 and 51.005 of the Texas Property Code and any amendments, recodifications, supplements, or any successor statute or law of or to any such statute or law."

In several appeals challenging deficiency judgments, our sister courts have enforced provisions contained in loan documents as a waiver of the debtor's right to a judicial determination of a property's fair market value, a right granted by the Property Code. See Interstate 35/Chisam Rd., L.P. v. Moayedi, 377 S.W.3d 791, 795-802 (Tex. App.-Dallas 2012, pet. filed); Tran v. Compass Bank, No. 02-11-00189-CV, 2012 Tex. App. LEXIS 323, **2-7 (Tex. App.-Fort Worth Jan. 12, 2012, no pet.) (mem. op.); Kelly v. First State Bank Cent. Tex., No. 03-10-00460-CV, 2011 Tex. App. LEXIS 10241, **21-27, *32 (Tex. App.-Austin Dec. 30, 2011, pet. granted, judgm't vacated w.r.m.); Segal v. Emmes Capital, L.L.C., 155 S.W.3d 267, 277-81 (Tex. App.-Houston [1st Dist.] 2004, pet. dism'd).

Although the Debtor's and Guarantors' response to Lender's motion for summary judgment asserts a right to a judicial determination of the fair market value in assessing their deficiency, they do not address the provisions of their respective contracts waiving those rights. Also, Debtor's and Guarantors' brief fails to address why the waiver provisions should not be enforced.

Although Debtor and Guarantors argue the deficiency judgment failed to account for the fair market value of the properties sold at foreclosure, if the sale was legally and fairly made, a claim that the consideration received was inadequate is generally not sufficient to justify a decision to set aside a trustee's sale. See Am. Sav. & Loan Ass'n v. Musick, 531 S.W.2d 581, 587 (Tex. 1975). Neither Debtor nor Guarantors question Lender's power or right to foreclose, nor do they suggest any irregularity in the foreclosure proceedings. Additionally, if the sale is conducted fairly and in accord with the deed of trust, a mortgagee may purchase the property at the sale. See Donaldson v. Mansel, 615 S.W.2d 799, 802 (Tex. Civ. App.-Houston [1st Dist.] 1980, writ ref'd n.r.e.); Skeen v. Glenn Justice Mortg. Co., Inc., 526 S.W.2d 252, 256 (Tex. Civ. App.-Dallas 1975, no writ). The deeds of trust at issue allowed Lender to purchase the properties at issue.

Because Debtor and Guarantors waived their statutory right to a judicial determination of the fair market value of the properties sold at foreclosure, the deficiency "is calculated by subtracting the foreclosure sale price, not the fair market value, from the amount owed under the note." See Provident Nat'l Assurance Co. v. Stephens, 910 S.W.2d 926, 929 (Tex. 1995). Debtor and Guarantors waived their statutory appraisal rights; thus, they were not entitled to a judicial determination of the fair market value of the properties sold at foreclosure. We overrule issue one.

SOURCE: BEAUMONT COURT OF APPEALS - No. 09-12-00073-CV  - 2/21/2013

Texas Property Code addresses deficiency judgments.

Subsection (a) of 51.003 of the Property Code defines a deficiency suit as an "action brought to recover the deficiency" between the bid price at a foreclosure sale and the amount of the debt owed on a note. TEX. PROP. CODE ANN. § 51.003(a) (West 20007). Subsection (b) specifically provides that requesting a court to determine fair market value is a defense for reducing liability for a deficiency judgment, stating:

Any person against whom such a recovery is sought by motion may request that the court in which the action is pending determine the fair market value of the real property as of the date of the foreclosure sale.

Id. 

CASES:

Interstate 35/Chisam Rd., L.P. v. Moayedi, 377 S.W.3d 791, 797 (Tex. App.-Dallas 2012, pet. filed) ("Section 51.003 was designed to protect borrowers and guarantors in deficiency suits brought following the non-judicial foreclosure on realty."); Comiskey v. FH Partners, LLC, 373 S.W.3d 620, 643 (Tex. App.-Houston [14th Dist] 2012, pet. denied) (declining to apply section 51.003 to a declaratory judgment action).

SOURCE: DALLAS COURT OF APPEALS - No. 05-12-00653-CV – 2/21/2013

Eviction Suit after Foreclosure – Does the tenant have any protection, rights?

   
FORCIBLE DETAINER ACTIONS – SUIT FOR POSSESSION OF PROPERTY [not suit over title or to resolve dispute over ownership interests]

   

A forcible detainer action is a procedure to determine the right to immediate possession of real property where there was no unlawful entry. Rice v. Pinney, 51 S.W.3d 705, 709 (Tex. App.-Dallas 2001, no pet.). It is intended to be a speedy, simple, and inexpensive means to obtain possession without resort to an action on the title. Scott v. Hewitt, 90 S.W.2d 816, 818-19 (Tex. 1936); Rice, 51 S.W.3d at 709. To maintain simplicity, the applicable rule of procedure provides that “the only issue shall be as to the right to actual possession; and the merits of the title shall not be adjudicated.” Tex. R. Civ. P. 746.

  

Accordingly, the only issue in a forcible detainer action is which party has the right to immediate possession of the property. Rice, 51 S.W.3d at 709. Whether a sale of property under a deed of trust is invalid may not be determined in a forcible detainer action but must be brought in a separate suit. Scott, 90 S.W.2d at 818; Rice, 51 S.W.3d at 710 (quoting Scott).

   

The Protecting Tenants at Foreclosure Act of 2009. See Pub. L. No. 111-22, 123 Stat. 1632, sec. 702 provides that, following a foreclosure, the immediate successor in interest pursuant to the foreclosure sale has the right demand that the tenant vacate the residence with ninety days' notice. Id

  

Any defects in the foreclosure process or with appellee's title to the property may not be considered in a forcible detainer action. Shutter, 318 S.W.3d at 471; Williams, 315 S.W.3d at 927.
  

SOURCE: DALLAS COURT OF APPEALS - 05-11-00067-CV – 4/11/12    
  

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Elements of Wrongful Foreclosure Tort in Texas (updated)

 
CAUSE OF ACTION FOR WRONGFUL FORECLOSURE 
 
Elements of 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: Helms v. Mortgage Electronic Registration Systems, Inc., Dist. Court, SD Texas 2012

The elements for wrongful foreclosure when the plaintiff seeks to set aside the sale are (1) a defect in the foreclosure sale proceedings; (2) a grossly inadequate selling price; and (3) a causal connection between the defect and the grossly inadequate selling price. See Charter Nat’l Bank-Houston v. Stevens, 781 S.W.2d 368, 371 (Tex. App.—Houston [14th Dist.] 1989, writ denied).

SOURCE: Houston Court of Appeals 01-09-00269-CV 4/28/11 (dissenting opinion)

RELATED LEGAL TERMS: Wrongful foreclosure, irregularity in foreclosure sale proceeding, eviction, ownership and right to possession