Wrongful foreclosure claim in Texas

ELEMENTS OF CAUSE OF ACTION FOR WRONGFUL FORECLOSURE 

The elements of a wrongful foreclosure claim are: (1) a defect in the foreclosure sale proceedings; (2) an inadequate selling price; and (3) a causal connection between the defect and the 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).

The elements of a wrongful-foreclosure claim 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. Sauceda v. GMAC Mortg. Corp., 268 S.W.3d 135, 139 (Tex. App.-Corpus Christi 2008, no pet.). 

The elements of a wrongful foreclosure claim are: (1) a defect in the foreclosure-sale proceedings; (2) an inadequate selling price; and (3) a causal connection between the defect and the inadequate selling price. See Estate of Broughton v. Financial Freedom Senior Funding Corp., No. 13-14-00091-CV, 2016 WL 2955058, at *3 (Tex. App.-Corpus Christi, May 19, 2016, pet. filed) (mem. op.); Buchanan v. Compass Bank, No. 02-14-00034-CV, 2015 WL 222143, at *5 (Tex. App.-Fort Worth Jan. 15, 2015, pet. denied) (mem. op.); Charter Nat'l Bank-Houston v. Stevens, 781 S.W.2d 368, 371 (Tex. App.-Houston [14th Dist.] 1989, writ denied).

REMEDIES 

The proper remedy for wrongful foreclosure is either: (1) damages equal to the difference between the value of the property and the indebtedness; or (2) the setting aside of the foreclosure sale. See Pinnacle Premier Prop., Inc. v. Breton, 447 S.W.3d 558, 565 (Tex. App.-Houston [14th Dist.] 2014, no pet.); Wells Fargo Bank, N.A. v. Robinson, 391 S.W.3d 590, 593-94 (Tex. App.-Dallas 2012, no pet.). A plaintiff seeking damages for wrongful foreclosure must show that (1) there was an irregularity in the foreclosure sale and (2) the irregularity caused the plaintiff damages. See University Sav. Ass'n v. Springwoods Shopping Ctr., 644 S.W.2d 705, 706 (Tex. 1982); Houston Omni USA Co. v. Southtrust Bank Corp., N.A., No. 01-07-00433-CV, 2009 WL 1161860, at *6 (Tex. App.-Houston [1st Dist.] Apr. 30, 2009, no pet.) (mem. op.).

See recent case opinions below:

Elements of proof in wrongful foreclosure case and measure of damages

ELEMENTS OF CAUSE OF ACTION FOR WRONGFUL FORECLOSURE  

The elements of a wrongful-foreclosure claim 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. Sauceda v. GMAC Mortg. Corp., 268 S.W.3d 135, 139 (Tex. App.-Corpus Christi 2008, no pet.).

SOURCE: FORT WORTH COURT OF APPEALS - 02-14-00034-CV - 2/15/2015 

Under Texas law, a claim for wrongful foreclosure generally requires: (1) "a defect in the foreclosure sale proceedings;" (2) "a grossly inadequate selling price;" and (3) "a causal connection between the defect and grossly inadequate selling price." Miller v. BAC Home Loans Servicing, L.P., 726 F.3d 717, 726 (5th Cir. 2013) (citing Sauceda v. GMAC Mortg. Corp., 268 S.W.3d 135, 139 (Tex. App.—Corpus Christi 2008, no pet.)).

SOURCE: FIFTH CIRCUIT: Guajardo v. JP Morgan Chase Bank, NA, Court of Appeals, 5th Circuit Jan 12, 2015

MEASURE OF DAMAGES IN WRONGFUL FORECLOSURE SUIT 

"A plaintiff seeking damages for wrongful foreclosure must show that (1) an irregularity in the foreclosure sale (2) caused the plaintiff damages." Houston Omni USA Co. v. Southtrust Bank Corp., No. 01-07-00433-CV, 2009 WL 1161860, at *6 (Tex. App.-Houston [1st Dist.] Apr. 30, 2009, no pet.) (mem. op.) (citing Univ. Sav. Ass'n v. Springwoods Shopping Ctr., 644 S.W.2d 705, 706 (Tex. 1982)). The "correct measure of damages" for wrongful foreclosure is "the difference between the value of the property in question at the date of foreclosure and the remaining balance due on the indebtedness." C & K Invs. v. Fiesta Grp., Inc., 248 S.W.3d 234, 254 (Tex. App.-Houston [1st Dist.] 2007, no pet.) (citing Farrell v. Hunt, 714 S.W.2d 298, 299 (Tex. 1986)).

SOURCE: HOUSTON COURT OF APPEALS - 01-13-00855-CV – 12/30/2014  

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.
  

Wrongful Foreclosure Claim - Dismissal of Claim Reversed by the Fifth Circuit in 2015

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.

Forcible Detainer Action vs. Litigating title disputes and wrongful foreclosure

  
FORCIBLE DETAINER (EVICTION PROCEEDING) IN JUSTICE COURT
VS. LITIGATION OF TITLE ISSUES AND CLAIM OF WRONGFUL FORECLOSURE IN DISTRICT COURTS

Jurisdiction to hear forcible detainer actions is vested in justice courts, and on appeal, to county courts for trial de novo. Dormady v. Dinero Land & Cattle Co., L.C., 61 S.W.3d 555, 557 (Tex. App.—San Antonio 2001, pet. dis’m w.oj.) (op. on reh’g). A forcible detainer action is a procedure to determine the right to immediate possession of real property where there was no unlawful entry. Mekeel v. U.S. Bank Nat’l Ass’n, No. 08-10-00122-CV, — S.W.3d —, 2011 WL 3715936, at *2 (Tex. App.—El Paso Aug. 24, 2011, no pet. h.); Shutter v. Wells Fargo Bank, N.A., 318 S.W.3d 467, 470 (Tex. App.—Dallas 2010, pet. dism’d w.o.j.).

A forcible detainer action is intended to be a speedy, simple, and inexpensive means to obtain possession without resort to an action on title. Marshall v. Hous. Auth. of San Antonio, 198 S.W.3d 782, 787 (Tex. 2006); Shutter, 318 3 S.W.3d at 470. To maintain simplicity, Rule 746 provides that, ―[i]n case of forcible entry or of forcible detainer . . . , 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; see also Marshall, 198 S.W.3d at 785; Elwell v. Countrywide Home Loans, Inc., 267 S.W.3d 566, 568 (Tex. App.—Dallas 2008, pet. dism’d w.o.j.). To prevail, it is not necessary for the plaintiff to prove title to the property; rather, the plaintiff is only required to present sufficient evidence of ownership to demonstrate a superior right to immediate possession. Terra XXI, Ltd. v. AG Acceptance Corp., 280 S.W.3d 414, 417 (Tex. App.—Amarillo 2008, pet. denied); Villalon v. Bank One, 176 S.W.3d 66, 70 (Tex. App.—Houston [1st Dist.] 2004, pet. denied); Goggins v. Leo, 849 S.W.2d 373, 377 (Tex. App.—Houston [14th Dist.] 1993, no writ).

However, when the issue of immediate possession requires resolution of a title dispute, neither the justice court nor the county court at law have jurisdiction to render a judgment for possession. Elwell, 267 S.W.3d at 568; Dormady, 61 S.W.3d at 557. Specifically, if the question of title is so intertwined with the issue of possession, then possession may not be adjudicated without first determining title. Villalon, 176 S.W.3d at 70; Dormady, 61 S.W.3d at 557.
  

In a forcible detainer action pursuant to section 24.002 of the Texas Property Code, the plaintiff is required to show that (1) it owned the property by virtue of a deed; (2) the defendant became a tenant-at-sufferance when the property was sold; (3) it gave proper notice to the defendant requiring him to vacate the premises; and (4) the defendant refused to vacate the premises. See Elwell, 267 S.W.3d at 568–69 (citing T
EX. PROP. CODE ANN. § 24.002 (West 2000)).
  

SOURCE: HOUSTON COURT OF APPEALS - 14-10-00698-CV - 10/11/11 Robert Bittinger v. Wells Fargo as Trustee for the Certificate Holders of Soundview Home Loan Trust 2007-OPT1, Asset-Backed Certificates Series 2007-OPT1--Appeal from County Civil Courtt at Law No 1 of Harris County (Judge R. Jack Cagle)
 

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