George West 59 Investment, Inc. v. Williams (In re George West 59 Investment, Inc.)
George West 59 Investment, Inc. v. Williams (In re George West 59 Investment, Inc.)
Opinion of the Court
MEMORANDUM OPINION
The above-referenced adversary proceeding (the “Adversary Proceeding”) was filed on October 18, 2013 — soon after the entity known as George West 59 Investment, Inc. (“George West” or “PlaintiffDebtor”) filed a voluntary Chapter 11 bankruptcy case (the “Bankruptcy Case”) on September 19, 2013. The Adversary Proceeding seeks to resolve ownership disputes and controversies regarding certain real property operated as a truck stop and convenience store at 101 S. Nueces St., in the town of George West, Live Oak County, Texas (the “Real Property”). It is undisputed that the Plaintiff/Debtor has, at all relevant times, had legal title to the Real Property and controlled it as its primary asset.
Now pending before the Court are Motions for Summary Judgment filed by the Plaintiff/Debtor, by Defendant/Chang, and by Defendant/AFNB (collectively, the “Movants”). The three Motions for Summary Judgment
For the reasons articulated below, the Court concludes, based on the undisputed summary judgment evidence, that a lawful foreclosure sale never, in fact, occurred— due to the fact that the name and address of the individual who is alleged by DefendanVWilliams to have conducted said foreclosure sale (ie., an individual named Jorge Gonzalez, III — who was an alleged substitute trustee that was appointed the day before the sale) did not appear on the face of any notice of sale that was served, posted and tiled in accordance with sections 51.002 and 51.0075(e) of the Texas Property Code.
I. JURISDICTION
Bankruptcy subject matter jurisdiction exists in this Adversary Proceeding, pursuant to 28 U.S.C. § 1334(b). The bankruptcy judges in this district are generally granted authority to exercise bankruptcy subject matter jurisdiction, pursuant to 28 U.S.C. § 157(a) and the Standing Order of Reference of Bankruptcy Cases and Proceedings (Misc. Rule No. 33), for the Northern District of Texas, dated August 3, 1984. Count 1 of the Adversary Proceeding (which is the subject of the pending Motions for Summary Judgment) implicates noncore, “related to” matters. Specifically, the issues in Count 1 involve state law (foreclosure law). However, the outcome of Count 1 of the Adversary Proceeding could conceivably have an impact upon the bankruptcy estate being administered,
II. THE UNDISPUTED SUMMARY JUDGMENT EVIDENCE
1. The Plaintiff/Debtor presently holds (and at all relevant times has held) legal
2. The Plaintiff/Debtor is the obligor on a promissory note (the “Note”) dated January 3, 2007, which was secured by a Deed of Trust (the “Deed of Trust”) on the Real Property, of the same date.
3. Prior to Defendant/Chang acquiring the Note and Deed of Trust from Defendant/AFNB, the Plaintiff/Debtor defaulted on its obligations to pay the Note, and Defendant/AFNB began collections efforts and ultimately sought to foreclose on the Real Property.
4. On March 8, 2012, a Notice of Substitute Trustee’s Sale was mailed to the Plaintiff/Debtor by an individual named Walter A. Schroeder, attorney for Defendant/AFNB,
5.On March 30, 2012 — some 21 days later and just four days prior to the scheduled foreclosure sale — the Note and Deed of Trust were purchased by Defendant/Chang from Defendant/AFNB, and an Assignment of Note and Liens was duly executed, with Defendant/Chang paying Defendant/AFNB more than $288,000.
6. About 1 o’clock on April 3, 2012, Defendant/Williams arrived at the Live Oak County Courthouse, in George West, Texas (which was across the street from his title company) to bid on the Real Property.
7. Defendant/Williams met Mr. Gonzalez (apparently by happenstance, while waiting around) and discovered that they were both there concerning the same Real Property; in fact, Mr. Gonzalez showed Defendant/Williams the Gonzalez Appointment, purportedly naming him as a new substitute trustee on the Real Property.
8.On September 27, 2012, Defendant/Williams filed a state court suit to enforce the alleged oral contract he asserts
9. On September 19, 2013, the Plaintifi/Debtor filed a voluntary petition for bankruptcy relief pursuant to Chapter 11 of the Bankruptcy Code.
10. On November 15, 2013, the Plaintiff/Debtor filed the Adversary Proceeding.
11. All parties in this Adversary Proceeding except Defendant/Williams take the position that no valid foreclosure sale took place.
III.SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate whenever a movant establishes that the pleadings, affidavits, and other evidence available to the court demonstrate that no genuine issue of material fact exists, and the movant is, thus, entitled to judgment as a matter of law.
IV.ANALYSIS
As stated above, the Movants have sought summary judgment on Count 1 of the Amended Complaint, and ask that the Court declare, as a matter of law, that no valid non-judicial foreclosure sale of the Real Property occurred on April 3, 2012, and that Defendant/Williams has no interest in the Real Property. The primary legal basis asserted is that the alleged
a. Did Mr. Gonzalez Have Authority to Conduct the Foreclosure Sale, Pursuant to the Deed of Trust and Sections 51.002 and 51.0075(e) of the Texas Property Code?
The power of a trustee to sell property for a party is derived solely from the applicable deed of trust and can only be exercised in strict compliance with it and Texas law.
Trustee. In addition to the rights and remedies set forth above, with respect to all or any part of the Property, the Trustee shall have the right to foreclose by notice and sale ... in accordance with and to the full extent provided by applicable law.
Substitute Trustee. Lender, at Lender’s option, from time to time, and more than once, may appoint in writing a successor or substitute trustee, with or . without cause, including the resignation, absence, death, inability, refusal or failure to act of the Trustee. The successor or substitute trustee may be appointed without ever requiring the resignation of the former trustee and without any formality except for the execution and acknowledgement of the appointment by the beneficiary of this Deed of Trust. The successor or substitute trustee shall then succeed to all rights, obligations, and duties of the Trustee. This appointment may be made on the Lender’s behalf by the President, any Vice President, Secretary, or Cashier of Lender....51
Looking at this language, it appears that Defendant/Chang had the right to appoint a substitute trustee at any time upon becoming the assignee of the Note and Deed of Trust; thus, the appointment of Mr. Gonzalez was wholly permissible and did not violate any of the provisions in the Deed of Trust. However, Defen
Section 51.002 of the Texas Property Code provides:
(a) A sale of real property under a power of sale conferred by a deed of trust or other contract lien must be a public sale at auction held between 10 a.m. and 4 p.m. of the first Tuesday of a month. Except as provided by Subsection (h), the sale must take- place at the county courthouse in the county in which the land is located, or if the property is located in more than one county, the sale may be made at the courthouse in any county in which the property is located. The commissioners court shall designate the area at the courthouse where the sales are to take place and shall record the designation in the real property records of the county. The sale must occur in the designated area. If no area is designated by the commissioners court, the notice of sale must designate the area where the sale covered by that notice is to take place, and the sale must occur in that area.
(b) Except as provided by Subsection (b-1), notice of the sale, which must include a statement of the earliest time at which the sale will begin, must be given at least 21 days before the date of the sale by:
(1) posting at the courthouse door of each county in which the property is located a written notice designating the county in which the property will be sold;
(2) filing in the office of the county clerk of each county in which the property is located a copy of the notice posted under Subdivision (1); and (S) serving written notice of the sale by certified mail on each debtor who, according to the records of the mortgage servicer of the debt, is obligated to pay the debt.
(b-1) If the courthouse or county clerk’s office is closed because of inclement weather, natural disaster, or other act of God, a notice required to be posted at the courthouse under Subsection (b)(1) or filed with the county clerk under Subsection (b)(2) may be posted or filed, as appropriate, up to 48 hours after the courthouse or county clerk’s office reopens for business, as applicable.52
Moreover, subsection (e) of section 51.0075 of the. Texas Property Code, which was enacted in 2005, provides that:
(e) The name and a street address for a trustee or substitute trustees shall be disclosed on the notice required by Section 51.002(b).
Here, the unrefuted summary judgment evidence demonstrates that the March 9, 2012 Notice of Sale only listed the names and addresses of Walter A. Schroeder and/or Tony Y. Kuo as substitute trasteéis). There is no mention of Mr. Gonzalez in the March 9, 2012 Notice of Sale. In fact, Mr. Gonzalez was not “in the picture” on that date. The only written documentation evidencing the existence of Mr. Gonzalez as a substitute trustee was in the Gonzalez Appointment, dated April 2, 2012, just one day before the scheduled foreclosure sale. Moreover, it is undisputed that the Gonzalez Appointment was never
Despite the fact that the March 9, 2012 Notice of Sale did not list Mr. Gonzalez as a substitute trustee, Defendant/Williams has argued that there has, nevertheless, been compliance with the strict notice requirements of the Texas Property Code, because a lien holder is permitted to appoint a substitute trustee at any time prior to a foreclosure sale, without filing and serving a new notice of sale. In other words, Defendant/Williams has argued that, as long as the March 9, 2012 Notice of Sale was in compliance with the notice provisions of the Texas Property Code— by listing the name and address of a substitute trustee, and by having been served on the Plaintiff/Debtor, and recorded and posted at the Live Oak County, Texas courthouse — Defendant/Chang could have appointed a new substitute trustee, at any point in time prior to the scheduled foreclosure sale, without having to re-notice the sale for a later date. In support of this position, Defendant/Williams has cited to several cases that pre-date the enactment of sections 51.002 and 51.0075 of the Texas Property Code, which stand for the proposition that a substitute trustee may be appointed at any time prior to the foreclosure sale, without the necessity to re-notice the sale.
Bankruptcy Judge Tony Davis, in In re AMRCO, Inc., held that the failure to include a substitute trustee’s address on the face of a notice of a non-judicial foreclosure sale, as required by section 51.0075(e) of the Texas Property Code, rendered a foreclosure sale invalid.
AMRCO argued that the foreclosure sale was invalid because Kruger Carson’s address was not included on the face of the Notice of Foreclosure Sale, as required by Section 51.0075(e) of the Texas Property Code.
Another recent case which has explored the stricter notice requirements prescribed by sections 51.002(b) and 51.0075(e) of the Texas Property Code is Pelayo v. Wells Fargo Bank, N.A.
In summary, both AMRCO and Pelayo recognized the necessity of a lienholder to strictly comply with the notice requirements prescribed under the Texas Property Code. Like those courts, this Court believes that it is mandatory, under sections 51.002 and 51.0075(e) of the Texas Property Code, that a notice of foreclosure sale, identifying the name and address of the trustees/substitute trustee, be served by mail on all debtors, and posted and recorded at least 21 days before the foreclosure sale.
Having found that the April 3, 2012 alleged foreclosure sale was void, the Court need not address the additional alternative arguments made by the Movants, which they contend would also render any alleged sale of the Real Property to Defendants/Williams invalid, including Defendant/Williams’ failure to properly tender payment for the Real Property, and whether the statute of frauds barred Defendants/Williams’ claim for equitable title in the Real Property. Such arguments would only be relevant if Mr. Gonzalez had authority to conduct the foreclosure sale in the first instance, and the Court has found as a matter of law that he did not.
lb. Are Movants Equitably Estopped From Asserting Defects in the Purported Foreclosure Sale?
Finally, Defendant/Williams has asserted that any attempt by the Movants to assert that the foreclosure sale was invalid, because it did not “strictly comply” with the relevant foreclosure statutes, is barred under the affirmative defense of equitable estoppel.
Defendant/Williams’ equitable estoppel defense can be summarized as follows. Ken Mok, the individual who prepared and notarized the Gonzalez Appointment, appears to have been acting as the agent for both the Plaintiff/Debtor and the Defendant/Chang.
What the Court does know is that the undisputed facts indicate that there was a eoziness between the Plaintiff/Debtor and Defendant/Chang, including familial ties, and Ken Mok was right in the middle of these relationships. A common sense inference from the undisputed facts is that Ken Mok orchestrated a situation where a party friendly to the Plaintiff/Debtor would buy the Note and Deed of Trust from Defendanf/AFNB in late March 2012, and there would next be a friendly foreclosure by the new Noteholder, Defendant/Chang, in April 2012. Undoubtedly, Plaintiff/Debtor and Defendant/Chang thought the Real Property was worth more than the underlying debt and that it was worth saving.
The four traditional elements of equitable estoppel are: (1) the party to be estopped was aware of the facts; (2) the party to be estopped intended his act or omission to be acted upon; (3) the party asserting estoppel did not have knowledge of the facts; and (4) the party asserting estoppel reasonably relied on the conduct of the other to his substantial injury.
Defendant/Williams has cited two Texas cases in support of his equitable estoppel defense: Rogers v. Boykin, 298 S.W.2d 199 (Tex.Civ.App.-Eastland 1956, writ ref d n.r.e.) and Busbice v. Hunt, 430 S.W.2d 291 (Tex.Civ.App.-Tyler 1968, writ ref d n.r.e.). This Court does not find that authority to be persuasive, and does not believe it should allow an equitable estoppel defense to override the Texas Property Code. The notice requirements for a nonjudicial foreclosure sale under Sections 51.002 and 51.0075(e) of the Texas Property Code are to be strictly enforced “for the method of enforcing the collection through such deeds is a harsh one.”
The Court concludes that the Rogers and Busbice cases cited by Defendant/Williams in support of his equitable estoppel defense are distinguishable and should be read narrowly. There, the issue was whether a party who had appointed a substitute trustee and attended a foreclosure sale, without making any objection, waived any irregularity in the sale and was, therefore, estopped from asserting that all of the parties who held an interest in the deed of trust did not join in the appointment of the substitute trustee. In the case at bar, the Movants have not raised an issue regarding whether or not all parties who held an interest in the Note and Deed of Trust joined in the appointment of the substitute trustee, but, rather, whether or not the March 9, 2012 Notice of Sale complied with the strict notice requirements of the Texas Property Code. The Court finds that the error made in the case at bar (ie., failure to give the debtor and the public a full 21 days’ notice of the name and address of a newly appointed substitute trustee) cannot be negated by an equitable estoppel defense. Because Mr. Gonzalez did not have authority to conduct a foreclosure sale of the Real Property on April 3, 2012, the alleged foreclosure sale to Defendant/Williams was void as a matter of law, and the doctrine of equitable estoppel cannot.be used to revive the void foreclosure sale.
V. CONCLUSION
Matthew Bacon, an influential eighteenth century legal commentator, stated the following: “A thing is void which was done against Law at the very Time of the doing it, and no Person is bound by such an Act.”
Summary judgment is GRANTED to the Plaintiff/Debtor, Defendant/Chang, and Defendant/AFNB as to Count 1 of the Amended Complaint, and it is declared that the Debtor/Plaintiff is the owner of the Real Property (subject to DefendanVChang’s lien) and that Defendant/Williams has no claim to the Real Property.
The granting of summary judgment on Count 1 makes Count 2 moot. Thus Count 2 is DISMISSED as moot.
SO ORDERED.
. The Court takes judicial notice that the Real Property was listed on PlaintiffiDebtor’s Bankruptcy Schedule A filed in the Bankruptcy Case as having a value of $750,000 and was shown to be subject to secured debt in the amount of $290,641.23; additionally, the PlaintiffDebtor’s Schedule G indicated that
. References to "DE #_ in the Adversary Proceeding" herein refer to the docket entry number at which a pleading appears in the docket maintained by the Bankruptcy Court Clerk in the Adversary Proceeding.
. 11 U.S.C. § 548.
. Tex. Bus. & Com.Code § 24.005.
. To be clear, Defendant/Chang filed his Motion for Summary Judgment, Brief and Appendix in Support [DE ## 41 & 42 in the Adversary Proceeding] on March 13, 2014. On that same day, Defendant/AFNB also filed a separate Motion for Summary and Brief in Support, which incorporates and adopts Defendant/Chang’s Motion for Summary Judgment [DE ## 44 & 45 in the Adversary Proceeding], Finally, the Plaintiff/Debtor filed its Motion for Summary Judgment and Brief in Support on March 17, 2014, which also incorporates and adopts Defendant/Chang’s Motion for Summary Judgment [DE ## 47 & 48 in the Adversary Proceeding]. The Court will refer to these collectively as the "Motions for Summary Judgment.”
.With regard to the Motions for Summary Judgment, the Court specifically refers to:
• Defendant/Chang's Motion for Summary Judgment [DE # 41 in the Adversary Proceeding], Brief in Support [DE # 42 in the Adver*653 sary Proceeding], and Appendix [DE # 41-1 iri the Adversary Proceeding]; Defendant/AFNB’s Motion for Summary Judgment [DE # 44 in the Adversary Proceeding] and Brief in Support [DE # 45 in the Adversary Proceeding]; and Plaintiff/Debtor’s Motion for Summary Judgment [DE # 47 in the Adversary Proceeding] and Brief in Support [DE
• 48 in the Adversary Proceeding].
• Defendanl/Williams' Response to Defendant/Chang’s Motion for Summary Judgment [DE # 82 in the Adversary Proceeding], Brief in Support [DE # 83 in the Adversary Proceeding], and Appendix [DE # 84 in the Adversary Proceeding]; Defendanl/Williams’ Response to Defendanl/AFNB’s Motion for Summary Judgment [DE # 86 in the Adversary Proceeding]; and Defendant/Williams' Response to Debtor/Plaintiff's Motion for Summary Judgment [DE # 85 in the Adversary Proceeding].
• Defendanl/Chang’s Reply [DE # 95 in the Adversary Proceeding]; Defendant/AFNB's Reply, Brief in Support and Appendix [DE # 94 in the Adversary Proceeding]; Debt- or/Plaintiff’s Reply [DE # 96 in the Adversary Proceeding]; and Defendanl/AFNB's Supplemental Reply Brief [DE #102 in the Adversary Proceeding].
The bankruptcy court also allowed submission of additional letter briefs after the hearing on the Motions for Summary Judgment. See DE # 105, 106, 107 & 108 in the Adversary Proceeding.
. See Tex. Prop. Code §§ 51.002(b), 51.0075(3).
. In re AMRCO, Inc., 496 B.R. 442, 447-49 (Bankr.W.D.Tex. 2013); G4 Trust v. Consol. Gasoline, No. 02-1000404-CV, 2011 WL 3835656, at *3 (Tex.App.-Fort Worth, Aug. 31, 2011, pet. denied).
. See Wood v. Wood (In re Wood), 825 F.2d 90, 93 (5th Cir. 1987).
. The Debtor is actually now at a post-confirmation stage. However, there is still "related to” subject matter jurisdiction, even at this post-confirmation stage, since the outcome of the Adversary Proceeding bears upon the implementation and execution of the plan being administered. Bank of La. v. Craig’s Stores of Tex., Inc. (In re Craig’s Stores of Tex., Inc.), 266 F.3d 388, 391 (5th Cir. 2001); U.S. Brass Corp. v. Travelers Ins. Group, Inc. (In re U.S. Brass Corp.), 301 F.3d 296, 304-05 (5th Cir. 2002). See also Newby v. Enron Corp. (In re Enron Corp. Sec. Derivative & ERISA Litig. MDL-1446), 535 F.3d 325, 335 (5th Cir. 2008).
. 28 U.S.C. § 157(b)(2)(H); see also 28 U.S.C. § 157(b)(2)(A) & (O).
. Stern v. Marshall, — U.S. - 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011).
. Exec. Benefits Ins. Agency v. Arkison, - U.S. -, 134 S.Ct. 2165, 189 L.Ed.2d 83 (2014).
. At the current time in the Fifth Circuit, consent no longer would seem to matter with regard to a bankruptcy court adjudicating either noncore matters or matters that may be statutorily core but involve state law, private rights (which would likely be present in this case). BP RE, L.P. v. RML Waxahachie Dodge, L.L.C. (In re BP RE, L.P.), 735 F.3d 279 (5th Cir. 2013), reh’g denied, 744 F.3d 1371 (5th Cir. 2014); Frazin v. Haynes & Boone, L.L.P. (In re Frazin), 732 F.3d 313 (5th Cir. 2013).
. DE # 56 in the Adversary Proceeding.
. DE # 61 in the Adversary Proceeding.
. The Court will refer to: (1) Defendant/Chang’s Appendix as "Chang App. at
. See DE # 14 & 93 in the Adversary Proceeding (the Amended Complaint and DefendanVWilliams’ Amended Answer).
. Chang App. at 5-13.
. Id. at 3-13 & 18-20.
. Id. at 3.
. Id. at 14-17.
. Id. at 67; Williams’ App. at 30-31.
. Chang App. at 14-17.
. Id. at 15.
. Id. at 3-4 & 18-21.
. Williams’ App. at 21-22 & 59-60.
. Id. at 59.
. Id. at 22-24.
. Id. at 32.
. Id. at 32-34.
. Id. at 36.
. Id.
. Id. at 39-40; Chang App. at 77-78.
. Id. at 69-72; Williams' App. at 40. Note, at the hearing on the Motions for Summary Judgment held on September 10, 2014, the Movants (the Plaintiff/Debtor, Defendant/AFNB, and Defendant/Chang) stated that, while disputed facts existed regarding what actually occurred or did not occur at the purported foreclosure sale of April 3, 2012, and that such facts would need to be decided if there were a trial, for purposes of ruling on the Motions for Summary Judgment, the Movants would not dispute that Defendant/Williams made a $300,000 bid on the Real Property, that the bid was accepted by Mr. Gonzalez (with the condition that Defendant/Williams return by 4:00 p.m. with a cashier's check for $300,000), that Defendant/Williams returned by 4 p.m. with a $300,000 cashier's check made payable to “Walter Schroeder, Trustee,” and that Williams was then ready, willing and able to purchase the Real Property.
.Chang App. at 80-81.
. Id. at 22-31.
. Id. at 32-65.
. Fed.R.Civ.P. 56(a); Piazza's Seafood World, LLC v. Odom, 448 F.3d 744, 752 (5th Cir. 2006); Lockett v. Wal-Mart Stores, Inc., 337 F.Supp.2d 887, 891 (E.D.Tex. 2004).
. Piazza's Seafood World, LLC, 448 F.3d, at 752 (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).
. Wyatt v. Hunt Plywood Co., Inc., 297 F.3d 405, 409 (5th Cir. 2002), cert. denied, 537 U.S. 1188, 123 S.Ct. 1254, 154 L.Ed.2d 1020 (2003).
. Piazza’s Seafood World, LLC, 448 F.3d at 752; Lockett, 337 F.Supp.2d at 891.
. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).
. Lockett, 337 F.Supp.2d at 891; see also Ashe v. Corley, 992 F.2d 540, 543 (5th Cir. 1993).
. Lockett, 337 F.Supp.2d at 891.
. Fed.R.Civ.P. 56(c)(1); Piazza’s Seafood World, LLC, 448 F.3d at 752; Lockett, 337 F.Supp.2d at 891.
. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
. Tex. Prop.Code §§ 51.002, 51.0075.
. Movants appear to argue that any oral agreement by Mr. Gonzalez to give Defendant/Williams until 4:00 p.m. to deliver the funds to purchase the Real Property was a contract for the sale of real property and, therefore, had to be in writing under the statute of frauds.
. Michael v. Crawford, 108 Tex. 352, 193 S.W. 1070, 1070-71 (1917); Conversion Props., L.L.C. v. Kessler, 994 S.W.2d 810, 813 (Tex.App.Dallas 1999, pet. denied); Bonilla v. Roberson, 918 S.W.2d 17, 21 (Tex.App.Corpus Christi 1996, no pet.).
. See Chang App. 10 (emphasis added).
. Tex. Prop.Code § 51.002 (emphasis added).
. Tex. Prop.Code § 51.0075(e) (emphasis added).
. See, e.g., Tarrant Sav. Ass’n v. Lucky Homes, Inc., 390 S.W.2d 473 (Tex. 1965); Loomis Land & Cattle Co. v. Diversified Mortg. Investors, 533 S.W.2d 420 (Tex.Civ.App.-Tyler 1976, writ ref'd n.r.e.); Koehler v. Pioneer Am. Ins. Co., 425 S.W.2d 889, 891 (Tex.Civ.App.Fort Worth 1968, no writ).
. See William H. Locke, Jr., et al., Texas Foreclosure Manual, § 11.5 (3rd ed. 2014) ("Conventional wisdom, based on case law, is that there is no necessity to report and send new notices of the scheduled foreclosure sale date if a new trustee is appointed after the original notice of sale was mailed to the obligor of the debt, filed with the county clerk, and posted at the courthouse.... However, under Texas Property Code section 51.0075(e), failure to provide the borrower with twenty-one days’ notice of the name and address of the newly appointed trustee who will conduct the sale may create an unwanted litigation risk ... To prevent litigation risks, new foreclosure sale notices with the name and address of the newly appointed trustee should be mailed and reposted so as to give the borrower twenty-one days’ notice of the newly appointed trustee.”)
. See, e.g., In re AMRCO, Inc., 496 B.R. 442 (Bankr.W.D.Tex. 2013); Pelayo v. Wells Fargo Bank, N.A., No. SA-13-CV-1019-DAE, 2014 WL 3513207, at *1 (W.D.Tex. July 14, 2014).
. AMRCO, Inc., 496 B.R. at 449.
. Id. at 443.
. Id.
. Id.
. Id.
. Id. at 444.
. Id.
. Id. at 445. AMRCO also argued that the foreclosure was invalid because (1) Mr. Kruger’s firm, not Mr. Kruger, was appointed as substitute trustee, and therefore, he had no right to act as the substitute trustee under Texas law; and (2) the foreclosure sale was conducted unfairly and with irregularities, such that there was a gross shortfall in the price attained at the sale. Judge Davis swiftly held such arguments to have no merit. Id.
. Id. at 447.
. Id.
. G4 Trust v. Consolidated Gasoline, Inc.,No. 02-10-00404-CV, 2011 WL 3835656, at *3 (Tex.App.-Fort Worth Aug. 31, 2011, pet. denied).
. Id. at 448.
. Id.
. Pelayo v. Wells Fargo Bank, N.A., No. SA-13-CV-l019-DAE, 2014 WL 3513207, at *1 (W.D.Tex. July 14, 2014).
. Id.
. Id.
. Id.
. Id.
. Id.
. Id.
. Id. at *2.
. Id.
. Id.
. Id.
. Id. at *3-4.
. Id. at *4. The court further noted that, even if the timing issue on substituting the trustee did constitute a defect in the foreclosure proceedings, the Pelayos still failed to state a claim for wrongful foreclosure because they did not allege any facts to support the second and third elements of a wrongful foreclosure claim — namely, a grossly inadequate selling price and a causal connection between the defect and the grossly inadequate selling price. Id.
. Like the AMRCO court, this Court will note and distinguish the Texas Supreme Court case of Kourosh Hemyari v. Stephens, 355 S.W.3d 623, 628 (Tex. 2012). After stating that "the terms of a deed of trust must be strictly followed,” the Texas Supreme Court went on to state that "minor defects in an otherwise valid foreclosure sale do not void it.” In the Stephens case, the "minor defect” that was urged and rejected as a basis for setting aside a foreclosure sale was not a genuine complaint that the notice and conduct of the foreclosure sale did not comply with the terms of a deed of trust or with the Texas Property Code. There, the Deed of Trust showed the grantor as "Gary Ben Stephens, General Partner of Stephens Group, L.P., and Stephens Group II, L.P.,” but the signature line on the same document only listed "Gary Ben Stephens” without listing his capacity as general partner. The Stephens Group entities asked the court to void a foreclosure sale on the basis that Gary Ben Stephens’ capacity was omitted from the signature line of the Deed of Trust and, thus, the Deed of Trust was internally inconsistent and confusing. The court overruled this argument, indicating that there was nothing about the Deed of Trust that was confusing and the omission of this capacity information on the signature line of the Deed of Trust was harmless. The court stated that "No reasonable bidder would have turned away from the foreclosure sale on that basis.” Id. at 628. Like Judge Davis in AMRCO, this Court will not read the Stephens case to mean that the Texas Supreme Court has changed its stance on requiring foreclosure sales to strictly follow the terms of deeds of trust and the Texas Property Code. In the Stephens case, there had, in fact, been strict compliance with the Deed of Trust and the Texas Property Code. There was an omission on the signature line that the Texas Supreme Court found not to be confusing and harmless.
. See Williams’ App. at 58.
. The Court notes that Defendant/Williams actually asserts this defense against both Defendant/Chang and the Plaintifl/Debtor. He does not assert the defense against Defendant/AFNB. See DE # 83 in the Adversary Proceeding.
. See Plaintiff/Debtor’s Voluntary Petition [DE # 1 in the Bankruptcy Case] & Plaintiff/Debtor’s Statement of Financial Affairs, Question 19 [DE # 3 in the Bankruptcy Case].
. See Plaintiff/Debtor’s Statement of Financial Affairs, Question 21 [DE # 3 in the Bankruptcy Case].
. See Williams’ App. at 7, 8, 11, 12, 15, 17, 19, and 20-22.
. Id. at 7.
. See Plaintiff/Debtor’s Voluntary Petition [DE # 1 in the Bankruptcy Case],
. See Plaintifl/Debtor’s Statement of Financial Affairs, Question 21 [DE # 3 in the Bankruptcy Case],
. See Plaintifi/Debtor’s Schedule A [DE # 2 in the Bankruptcy Case].
.Taylor v. U.S. Treasury Dept., 127 F.3d 470, 474 (5th Cir. 1997). See also Johnson v. Seacor Marine Corp., 404 F.3d 871, 878 (5th Cir. 2005) (describing the elements of equitable estoppel as a representation by conduct or word, justifiably relied upon by a party who changed his position to his detriment because of that reliance).
. Houston First Am. Sav. v. Musick, 650 S.W.2d 764, 768 (Tex. 1983) (and citations therein).
. Jasper Fed. Sav. & Loan Ass’n v. Reddell, 730 S.W.2d 672, 674-75 (Tex. 1987) (emphasis added).
. Perhaps some would argue that any reasonably diligent potential bidder would likely have no problem locating the correct substitute trustee in most foreclosure-day situations. This Court does not think that this matters. Strict compliance with the Texas Property Code is necessary. This Court does not believe that the Texas Legislature intended for courts to disregard the statutory requirements for non-judicial foreclosure sales in the Texas Property Code on a case by case basis, based on individual circumstances or equities.
. See also In re AMRCO, Inc., 496 B.R. 442, 448 (Bankr.W.D.Tex. 2013) (Judge Davis noted that certain equitable arguments made regarding the (lack of) harm to the defaulting debtor by a notice defect in the otherwise lawful foreclosure process would not be considered where there was not strict compliance with the relevant notice provisions of the Texas Property Code).
. Matthew Bacon, A New Abridgment of the Law, 337 (His Majesty's Law Printers, 1766).
Reference
- Full Case Name
- In re GEORGE WEST 59 INVESTMENT, INC., Debtor. George West 59 Investment, Inc. v. James Russell Williams, Ming Chu Chang, and American First National Bank
- Cited By
- 2 cases
- Status
- Published