Summary
concluding that the Legislature intended section 51.002(d) to apply only to real property currently used as the debtor's residence
Summary of this case from Kingman Holdings, L.L.C. v. U.S. Bank TrustOpinion
No. 14-03-00215-CV.
Memorandum Opinion filed April 15, 2004.
On Appeal from the 10th District Court Galveston County, Texas, Trial Court Cause No. 01CV0634.
Affirmed.
Panel consists of Justices YATES, HUDSON, and FOWLER.
MEMORANDUM OPINION
Appellant sued appellees for wrongful foreclosure of real property. The jury found in favor of appellees and the trial court entered a take-nothing judgment. In two points of error, appellant contends: (1) the trial court erred in holding that written notice of default was not required before foreclosure of property formerly used as a residence, and (2) there was no evidence to support the jury's finding that the foreclosure was not wrongful. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
On July 2, 1998, appellant and her husband entered into a contract with appellees for the purchase of a house for $59,000. Appellant and her husband paid a $12,000 down payment and appellees financed the remaining $47,000. A real estate lien note and deed of trust were prepared but were not signed at that time by appellant and her husband
In July of 1998, appellant and her husband moved into the house. Appellant's husband died in December of 1998. In approximately April of 1999, appellant moved out of the house and never again occupied it.
During 2000, appellant repeatedly failed to make timely payments on the note. In July of 2000, she sued appellees to compel them to execute and deliver the closing documents for the sale of the house. The suit was settled. Pursuant to the settlement, appellant paid the money she owed for late payments and insurance reimbursement.
On July 31, 2000, appellant signed a real estate lien note and deed of trust drafted by her attorney. Appellees did not execute the note until September 21, 2000.
On October 5, 2000, appellant's insurance company sent appellees a notice that appellant's insurance would be cancelled on October 16, 2000. Appellees paid the amount necessary to keep the insurance in effect. Appellant never reimbursed appellees for that amount.
On October 12, 2000, appellees sent appellant a notice of default and intent to accelerate. The notice stated that appellant was in default due to a failure to make payment and cancellation of the insurance. Appellees also retained an attorney who acted as a substitute trustee.
On November 10, 2000, appellees sent appellant a notice of foreclosure demanding full payment of the amount due. The notice stated that a foreclosure sale would be held on December 5, 2000 if the full amount was not paid.
On November 27, 2000, appellant provided the trustee with copies of cashier's checks which had been tendered in payment of the amounts due for August through October of 2000.
On December 4, 2000, the trustee responded in a letter that the October of 2000 payment had not been received until after the notice of foreclosure had been sent, and that the cashier's check had been returned to appellant by certified mail. The letter also stated that appellant was in default for failure to make the November of 2000 payment, failure to maintain casualty insurance, and failure to obtain flood insurance.
The foreclosure sale scheduled for December 5, 2000 was not held because the trustee was uncertain whether appellees had kept one of the payments supposedly returned to appellant.
On December 11, 2000, the trustee sent another notice of foreclosure sale. The notice stated that appellant was in default for failure to make the November of 2000 payment, failure to obtain flood insurance, and failure to pay property taxes when due. The foreclosure sale was scheduled for January 2, 2001.
On January 2, 2000, the foreclosure sale was held and appellees purchased the property.
ANALYSIS
I. Section 51.002(d) of the Texas Property Code.
In her first issue, appellant contends the trial court erred in ruling that section 51.002(d) of the Texas Property Code did not apply to property that was previously, but not currently, used as the debtor's residence. The code provides that "the holder of the debt shall serve a debtor in default under a deed of trust or other contract lien on property used as the debtor's residence with written notice by certified mail stating that the debtor is in default under the deed of trust or other contract and giving the debtor at least 20 days to cure the default. . . ." TEX. PROP. CODE § 51.002(d) (emphasis added). It is undisputed that appellant did not reside on the property at the time of foreclosure but that she had previously resided on the property.
Effective January 1, 2004, section 51.002(d) of the Texas Property Code was modified to read "the mortgage servicer of the debt shall serve a debtor in default under a deed of trust or other contract lien on real property used as the debtor's residence with written notice by certified mail stating that the debtor is in default under the deed of trust or other contract lien and giving the debtor at least 20 days to cure the default. . . ." Although we apply the language in effect at the time, we note that the change in language does not affect our determination.
Statutory construction is a legal question, which we review de novo. State Dep't of Highways Pub. Transp. v. Gonzalez, 82 S.W.3d 322, 327 (Tex. 2002). In construing a statute, our objective is to determine and give effect to the Legislature's intent. See Nat'l Liab. Fire Ins. Co. v. Allen, 15 S.W.3d 525, 527 (Tex. 2000). We presume that the Legislature intended the plain meaning of its words. Id. If possible, we must ascertain the Legislature's intent from the language it used in the statute and not look to extraneous matters for an intent the statute does not state. Id. When interpreting a statute, we consider the entire act, its nature and object, and the consequences that would follow from each construction. Atascosa County v. Atascosa County Appraisal Dist., 990 S.W.2d 255, 258 (Tex. 1999). We must reject any statutory interpretation that defeats the legislative purpose. Id.
Appellant argues that if the Legislature had intended section 51.002(d) to apply only to current residences, it could have used language such as "property being used as the debtor's residence" or "property used as the debtor's residence at the time of the default." Although such language would have been clearer, it does not render unreasonable the interpretation that the statute only applies to current residences. The Legislature could have as easily used language such as "property previously used as the debtor's residence" if it had intended appellant's construction. We must therefore determine which interpretation the Legislature intended. See City of San Antonio, 111 S.W.3d at 25.
The decisions by two of our sister courts demonstrate that it is reasonable that the language "used as the debtor's residence" refers only to a current residence. See Dickey v. McComb Dev. Corp., 115 S.W.3d 42 (Tex. App.-San Antonio 2003, no pet.); Malnar v. Mechell, 91 S.W.3d 924 (Tex. App.-Amarillo 2002, no pet.). Both courts addressed former section 5.061 of the Texas Property Code, which concerned "real property used or to be used as the purchaser's residence." Dickey, 115 S.W.3d at 45; Malnar, 91 S.W.3d at 928. The properties in both cases had previously been used as the purchasers' residences. Dickey, 115 S.W.3d at 44; Malnar, 91 S.W.3d at 929. But the courts did not hold that the debtors were entitled to the additional cure period. See Dickey, 115 S.W.3d at 45-46; Malnar, 91 S.W.3d at 928-29.
Only one case has construed section 51.002(d), but, unfortunately, it is inconclusive on the question before us. See Mills v. Haggard, 58 S.W.3d 164 (Tex. App.-Waco 2001, no pet.). In Mills, two debtors signed a note for a home-improvement loan. Id. at 165. One of the debtors died. Id. The remaining debtor defaulted on the loan payments. Id. The requisite notice was sent to the wrong address for the remaining debtor, and no notice was sent to the heirs of the deceased debtor. Id. at 165, 167. The court held the failure to send the notice to the proper address defeated the notice of foreclosure. Id. at 167. The court also noted that the failure to send any notice to the deceased debtor was an alternate ground for defeating the notice of foreclosure. Id. Although the court in Mills required notice to be sent to the heirs of a debtor who had previously resided on the property, the statute was still interpreted to protect a debtor currently residing on the property. The case can thus support either interpretation of the statute.
Based on the effect of the statute, it appears that the Legislature only intended it to apply to current residences. The statute provides that certain debtors are to be afforded additional notice, presumably to allow them additional opportunity to cure the default. There is a clear benefit to providing additional protection to the current residence of a debtor. Cf. TEX. CONST. art. 16, § 50 (providing protection from the forced sale of a homestead); Lot 39, Section C v. State, 85 S.W.3d 429, 432 (Tex. App.-Eastland 2002, pet. denied) (stating that one of the purposes of the homestead exemption is to "to provide the debtor with a home"). By contrast, there does there appear to be any compelling reason for special protection to be afforded a prior residence.
The consequences of each interpretation also indicate that the Legislature only intended the statute to apply to current residences. Because the Legislature only provided for additional notice to some debtors, the Legislature must have weighed the burden imposed on the holders of debts and the benefit to the debtors. The Legislature obviously determined that the burden would outweigh the benefit at least to debtors who had never resided on the property; otherwise it would have required notice to all debtors. As noted above, we can find no compelling distinction between debtors who previously resided on the property and debtors who have never resided on the property. Nonetheless, appellant's interpretation of the statute would impose a much greater burden on the holders of debts — determining whether the debtor had ever resided on the property, instead of determining whether the debtor currently resides on the property — in order to provide notice. Because a heavier burden would be imposed for at best a marginal benefit, we again determine the Legislature intended section 51.002(d) to apply only to current residences.
Appellant cites three other statutes she claims demonstrate the Legislature would have been more specific if it had intended to restrict the phrase "real property used as the debtor's residence" to current residences. The first statute defines a "home" as "a dwelling in this state in which a professional educator intends to reside as the professional educator's principal residence." Tex. Gov't Code § 2306.562(a)(1) (emphasis added). The second statute defines a "residence homestead" as a structure that, along with other requirements, " is used as a residence; and is occupied as his principal residence. . . ." Tex. Tax Code § 11.13(j)(1)(C)-(D) (emphasis added). That the Legislature has used clearer language in other statutes does not compel us to agree with appellant in this case, however, especially in light of the fact that the Legislature could have more clearly written section 51.002(d) to support appellant's interpretation.
The third statute cited by appellant actually supports our determination because it illustrates the fact that the Legislature sometimes neglects to specifically state that "residence" only applies to current residence. The statute concerns the "foreclosure sale of a single-family dwelling occupied by the borrower as the principal residence of the borrower." TEX. INS. CODE art. 21.50, § 1A(c). Although appellant emphasized the Legislature's language that the statute applies only to the "principal residence," the Legislature neglected to qualify "occupied" to limit the term to only dwellings "being occupied" or "currently occupied." Id. Construing the statute consistent with appellant's urged construction of section 51.002(d) would yield the nonsensical result that a debtor could have multiple principal residences under the statute.
We therefore hold that section 51.002(d) of the Texas Property Code applies only to real property currently used as the debtor's residence. Appellant's first point of error is overruled.
II. Wrongful foreclosure.
In her second issue, appellant contends that there was no evidence to support the jury's findings that appellees did not wrongfully foreclose on the property and that appellees did not fail to comply with the terms of the deed of trust.
When a party challenges the legal sufficiency of a finding on which she has the burden of proof, she must demonstrate that the evidence establishes all vital facts in support of the issue as a matter of law. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001). In reviewing the challenge, the reviewing court must first determine whether any evidence supports the finding. Id. If there is no evidence to support the finding, the reviewing court must then determine whether the contrary position was established as a matter of law. Id. Only if the contrary position was established as a matter of law should the reviewing court sustain the challenge. Id.
In order to be effective, acceleration requires both notice of intent to accelerate and notice of acceleration. Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 566 (Tex. 2001). Both notices may be contractually waived. Shumway v. Horizon Credit Corp., 801 S.W.2d 890, 892-93 (Tex. 1991). Because acceleration of a note is a harsh remedy, any notice or waiver thereof must be "clear and unequivocal." Holy Cross, 44 S.W.3d at 566; Shumway, 801 S.W.2d at 893.
The real estate lien note provides, "Maker and each surety, endorser, and guarantor waive all . . . notices of intention to accelerate maturity." The note did not contain any language purporting to waive notice of acceleration.
The trustee's letter of December 11, 2000, serves as notice of acceleration, however. The letter stated that "[d]efaults have occurred in the payment of the indebtedness" and that "[d]emand is hereby made that you pay the noteholder the indebtedness now owed that is secured by the deed of trust." This language clearly indicates that the note was being accelerated. Although the letter incorrectly calculated the sum owed as $43,652.60, the letter also stated that appellant should "contact [the trustee's] office at the letterhead address to obtain a complete statement of the balance owed on your debt to the noteholder and to arrange payment of this debt." This irregularity does not render the foreclosure invalid. See Sanders v. Shelton, 970 S.W.2d 721, 726 (Tex. App.-Austin 1998, pet. denied) (holding that "the Trustee owed no duty to appellants to provide information regarding the payoff amount of the underlying obligation").
Appellant argues that foreclosure was nonetheless invalid because she was in compliance with the note at the time of foreclosure. When a debtor is not in default at the time of foreclosure, the foreclosure sale is void. Bradford v. Thompson, 470 S.W.2d 633, 635 (Tex. 1971); Slaughter v. Qualls, 162 S.W.2d 671, 675 (Tex. 1942).
There was some evidence to support a finding that appellant was not in compliance with the note at the time of foreclosure. Appellant testified herself that she made no effort to make the November of 2000 payment and that she never obtained flood insurance. Mrs. Kitchen testified that she paid the 1999 taxes and that she was never reimbursed by appellant. This is sufficient evidence to support the jury's findings. See Dow Chem., 46 S.W.3d at 241.
Appellant also argues that the trial court instructed the jury that appellees were estopped from claiming she was not in compliance after October of 2000. The court actually stated, "You are instructed that if [appellant] was permitted to satisfy her obligations to [appellees] in a manner acceptable to [appellees], [appellees] cannot later demand strict compliance contrary to their prior allowance without first giving [appellant] notice of their withdrawal of their prior allowance and their intent to require strict compliance of her obligations." Under this instruction, appellant could still be held to strict compliance if appellees rejected her prior non-complying attempts to satisfy her obligations or if appellees gave notice of withdrawal of any allowance.
There is some evidence that appellees both rejected appellant's prior non-complying attempts to satisfy her obligations and gave notice of withdrawal of any allowance. Mrs. Kitchen testified that she returned appellant's September of 2000 and October of 2000 payments because they were late, and that the letter of October 12, 2000 was intended to provide notice that no more late payments would be accepted. Further, even if late payments were acceptable, appellant never attempted to make the November of 2000 or December of 2000 payments. Because this is some evidence in support of the jury's findings, we need not determine whether appellant's position was established as a matter of law. See Dow Chem., 46 S.W.3d at 241. Appellant's second point of error is overruled.
The judgment of the trial court is affirmed.