Opinion
No. 05-15-01225-CV
05-30-2017
JANOS FARKAS, Appellant v. AURORA LOAN SERVICES, L.L.C., AURORA BANK FSB, FEDERAL NATIONAL BANK ASSOCIATION, AND JINNI GONZALEZ, Appellees
On Appeal from the 134th Judicial District Court Dallas County, Texas
Trial Court Cause No. DC-11-02053
MEMORANDUM OPINION
Before Justices Lang, Brown, and Whitehill
Opinion by Justice Lang
Janos Farkas, pro se, appeals the trial court's final take-nothing judgment on his claims for wrongful foreclosure, suit to quiet title, and violation of section 12.002 of the Texas Civil Practice and Remedies Code in favor of Aurora Loan Services, L.L.C., Aurora Bank FSB (collectively Aurora), Federal National Mortgage Association (commonly known as Fannie Mae), and Jinni Gonzalez. Farkas raises six issues on appeal, arguing the evidence is legally and factually insufficient to support the trial court's findings of fact and the trial court erred when it made conclusions of law that: (1) the pre-foreclosure notices satisfied the deed of trust and section 51.002(d) of the Texas Property Code as to his claim for wrongful foreclosure against Aurora; (2) the notice of default in Joint Exhibit No. 11 satisfied all of the requirements of the deed of trust and section 51.002 of the Texas Property Code as to his wrongful-foreclosure claim against Aurora; (3) Aurora conducted a legal and valid non-judicial foreclosure as to his claim for wrongful foreclosure against Aurora; (4) Gonzalez proved her affirmative defense that she was a bona fide purchaser as to the suit to quiet title against her; (5) Farkas has no legal or equitable interest in the property and he is not entitled to a suit to quiet title against Aurora, Fannie Mae, and Gonzalez; and (6) Fannie Mae did not violate section 12.002 of the Texas Civil Practice and Remedies Code.
We conclude the evidence is legally and factually sufficient to support the trial court's findings of fact. Also, we conclude the trial court did not err in its conclusions of law. The trial court's final take-nothing judgment is affirmed.
I. FACTUAL AND PROCEDURAL CONTEXT
On January 2, 2007, Farkas purchased condominium Unit 608 located at 122 Jackson Street, Dallas, Texas 75202. Farkas funded his purchase of Unit 608 by executing a promissory note, specifying WR Starkey Mortgage as the lender. The note obligated Farkas to pay monthly principal and interest on the first day of each month beginning February 1, 2007 through the maturity date of January 1, 2037. To secure the note, Farkas also executed a deed of trust identifying WR Starkey as the lender.
On January 31, 2007, WR Starkey sold and transferred the Unit 608 loan to Aurora Bank. Then, Aurora Bank sold the Unit 608 loan to Fannie Mae by way of a standing purchase sale agreement and amendment. On February 9, 2009, the servicing rights relating to the Unit 608 loan were "assigned, transferred, or sold" to Aurora Loan Services, which sale became effective on March 1, 2007. These servicing rights included the right to collect payments and foreclose on Unit 608.
On June 17, 2010, Aurora Loan Services mailed a letter to Farkas notifying him that the loan was in default for the payment due on May 1, 2010. Farkas received the June 17, 2010 letter, but made no payment on the Unit 608 loan in June 2010. However, on July 16, 2010, Farkas made a payment on the loan, which was credited to the monthly installment that was due on May 1, 2010.
On July 22, 2010, Aurora Loan Services mailed Farkas a second notice of default, relating to the payment due on June 1, 2010. Farkas received the July 22, 2010 letter. On August 11, 2010, Farkas made another payment on the loan, which was credited to the monthly installment due on June 1, 2010.
On August 19, 2010, Aurora Loan Services mailed Farkas a third notice of default, relating to the payment due on July 1, 2010. Farkas received the August 19, 2010 letter. On September 13, 2010, Farkas made another payment on the loan, which was credited to the monthly installment due on July 1, 2010.
On September 16, 2010, Aurora Loan Services mailed Farkas a fourth notice of default, relating to the payment due on August 1, 2010. Again, Farkas received the September 16, 2010 notice of default. On October 29, 2010, Farkas made another payment on the loan, which was credited to the monthly installment due on August 1, 2010.
On November 2, 2010, Aurora Loan Services mailed Farkas a fifth notice of default, relating to the payment due on September 1, 2010. Farkas did not pay the monthly installment due for September 1, 2010 or any of the monthly installments due afterward.
On December 31, 2010, Mann & Stevens, P.C., sent Farkas a demand letter, which Farkas received. On January 27, 2011, McCarthy, Holthus & Ackerman, L.L.P., sent Farkas a letter notifying him that it had been retained by Aurora Loan Services to initiate foreclosure proceedings. Farkas received the January 27, 2011 letter. Then, on February 7, 2011, McCarthy, Holthus & Ackerman sent Farkas a letter that was accompanied by a notice of substitute trustee sale, which notified Farkas that a foreclosure sale on Unit 608 was scheduled for March 1, 2011. Farkas received the February 7, 2011 letter and the notice of substitute trustee sale for March 1, 2011 was recorded with the County Clerk, Dallas County, Texas on February 8, 2011. On February 14, 2011 and February 21, 2011, Farkas sent letters to McCarthy, Holthus & Ackerman. Also, on February 24, 2011, Farkas, pro se, filed his original petition against Aurora Loan Services seeking a declaratory judgment and a temporary restraining order. On February 28, 2011, the trial court granted Farkas's application for a temporary restraining order. As a result, the March 1, 2011 foreclosure sale did not occur. The temporary restraining order expired by its terms on March 10, 2011.
On May 12, 2011, McCarthy, Holthus & Ackerman sent Farkas a letter, acknowledging receipt of Farkas's letters, stating that Aurora Loan Services determined the balances due are accurate, and advising Farkas that it had been instructed by Aurora Loan Services to proceed with foreclosure. Farkas received the May 12, 2011 letter.
On May 13, 2011, McCarthy, Holthus & Ackerman sent Farkas another notice of substitute trustee sale, which notified Farkas that a foreclosure sale on Unit 608 was scheduled for June 7, 2011. Farkas received the May 13, 2011 notice, which was subsequently recorded with the Dallas County Clerk on May 16, 2011.
On June 7, 2011, a foreclosure sale was held on Unit 608. Aurora Loan Services was the winning bidder with a credit bid of $168,479.03, which represented the entire amount of the indebtedness Farkas owed on the Unit 608 note at the time of the sale. At the time of foreclosure, the appraised value of the property was $94,790. On June 16, 2011, the substitute trustee's deed and corresponding affidavit were filed in the real property records of Dallas County. On June 17, 2011, Aurora Loan Services executed a special warranty deed naming Fannie Mae as grantee, which was also filed in the real property records of Dallas County.
The record before us does not show when, but at some point, Farkas amended his pro se petition to allege claims against Aurora Bank and Fannie Mae as well as Aurora Loan Services and to allege the additional claims of verification of debt, violations of the Texas Civil Practice and Remedies Code, violations of the Texas Debt Collection Act, violations of the Texas Deceptive Trade Practices Act, wrongful foreclosure, and a suit to quiet title. See Farkas v. Aurora Loan Servs., L.L.C., No. 05-12-01095-CV, 2013 WL 6198344, at *1 (Tex. App.—Dallas Nov. 26, 2013, pet. denied) (mem. op.). Aurora and Fannie Mae answered the lawsuit and asserted counterclaims for breach of contract, defamation and business disparagement, and malicious prosecution, which were subsequently dismissed without prejudice by nonsuit. Aurora and Fannie Mae filed a joint no-evidence and traditional motion for summary judgment, which the trial court granted. See Farkas, 2013 WL 6198344, at *1. On appeal, this Court reversed the trial court's summary judgment on Farkas's claims for wrongful foreclosure and suit to quiet title, remanding those claims to the trial court for further proceedings, and affirmed the remainder of the trial court's summary judgment. See Farkas, 2013 WL 6198344, at *5.
In 2013, Gonzalez agreed to purchase Unit 608 from Fannie Mae for $137,000. Before purchasing Unit 608, Gonzalez was aware that it had been previously sold at a foreclosure sale. After purchasing the condominium, Gonzalez has occupied Unit 608 as her primary residence.
After the remand, on December 2, 2014, Farkas filed his sixth amended petition adding Gonzalez as a party to the lawsuit, abandoning his claim for wrongful foreclosure, and asserting a suit to quiet title against Aurora Loan Services, Fannie Mae, and Gonzalez, and a claim for violation of Texas Civil Practice and Remedies Code section 12.002 against Fannie Mae. Although Farkas's sixth amended petition continued to name Aurora Bank as a party, he did not assert any claims against Aurora Bank. Gonzalez answered and asserted the affirmative defense that she was a bona fide purchaser.
Fannie Mae did not assert the prior judgment barred any of Farkas's claims for violations of the Texas Civil Practices and Remedies Code. See Farkas, 2013 WL 6198344 (reversing trial court's summary judgment on Farkas's claims for wrongful foreclosure and his suit to quiet title, and affirming remainder of summary judgment, which included claim for violations of Texas Civil Practice and Remedies Code).
On July 1, 2015, a bench trial was held. Farkas, Aurora Loan Services, Aurora Bank, Fannie Mae, and Gonzalez all appeared. During the trial, the parties offered into evidence several joint exhibits. One of the joint exhibits was the parties' joint stipulations of fact and agreed propositions of law. On July 8, 2015, the trial court signed a take-nothing judgment on all of Farkas's claims and specifically noted that "'Farkas's claims for wrongful foreclosure and suit to quiet title' have been tried." On August 26, 2015, the trial court signed it's written findings of fact and conclusions of law. This appeal followed.
II. LEGAL AND FACTUAL SUFFICIENCY
In issues one through six, Farkas challenges the legal and factual sufficiency of the evidence to support the trial court's findings of fact and argues the trial court erred when it made conclusions of law as to his wrongful-foreclosure claim, suit to quiet title, and claim for violation of section 12.002 of the Texas Civil Practice and Remedies Code.
A. Standard of Review
1. Legal and Factual Sufficiency of the Trial Court's Findings of Fact
In an appeal from a bench trial, findings of fact have the same weight as a jury's verdict. See Speer v. Presbyterian Children's Home & Serv. Agency, 847 S.W.2d 227, 233 n.4 (Tex. 1993); Anderson v. City of Seven Points, 806 S.W.2d 791, 794 (Tex. 1991); Sheetz v. Slaughter, 503 S.W.3d 495, 502 (Tex. App.—Dallas 2016, no pet.); Fulgham v. Fischer, 349 S.W.3d 153, 157 (Tex. App.—Dallas 2011, no pet.). The trial court's findings of fact are reviewable for legal and factual sufficiency of the evidence by the same standards that are applied in reviewing the evidence supporting a jury's answer. See BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002); Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex. 1996) (per curiam); Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994); Sheetz, 503 S.W.3d at 502. When the appellate record contains a reporter's record, findings of fact are not conclusive and are binding only if supported by the evidence. See Sheetz, 503 S.W.3d at 502; Fulgham, 349 S.W.3d at 157. An appellate court defers to unchallenged findings of fact that are supported by some evidence. See Tenaska Energy, Inc. v. Ponderosa Pine Energy, L.L.C., 437 S.W.3d 518, 524 (Tex. 2014); Third Party Anesthesia Adm'rs, L.L.C. v. Staff Care, Inc., No. 05-03-01561-CV, 2015 WL 3894603, at *3 (Tex. App.—Dallas June 24, 2015, no pet.); Inwood Nat'l Bank v. Wells Fargo Bank, N.A., 463 S.W.3d 228, 235 (Tex. App.—Dallas 2015 no pet.). In other words, the trial court's findings of fact are binding on the appellate court unless challenged on appeal. See Brown v. Pennington, No. 05-14-01349-CV, 2015 WL 3958618, at *4 (Tex. App.—Dallas June 30, 2015, no pet.) (mem. op.); Lombardo v. Bhattacharyya, 437 S.W.3d 658, 668 (Tex. App.—Dallas 2014, pet. denied).
When a party attacks the legal sufficiency of an adverse finding on which it had the burden of proof, it must demonstrate on appeal that the evidence establishes, as a matter of law, all vital facts in support of the issue. See Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001); Khorshid, Inc. v. Christian, 257 S.W.3d 748, 762 (Tex. App.—Dallas 2008, no pet.). When reviewing the record, an appellate court determines whether any evidence supports the challenged finding of fact. See Sheetz, 503 S.W.3d at 502; Fulgham, 349 S.W.3d at 157. If more than a scintilla of evidence exists to support the finding of fact, the legal sufficiency challenge fails. See Graham Central Station, Inc. v. Pena, 442 S.W.3d 261, 263 (Tex. 2014); Sheetz, 503 S.W.3d at 502; Fulgham, 349 S.W.3d at 157; see also Farkas v. Fed. Nat'l Mortg. Ass'n, No. 05-11-01416-CV, 2012 WL 5351262, at *2 (Tex. App.—Dallas Oct. 31, 2012, no pet.) (mem. op.).
When a party attacks the factual sufficiency of an adverse finding on an issue on which he has the burden of proof, the party must demonstrate that the adverse finding is against the great weight and preponderance of the evidence. See Dow Chem. Co., 46 S.W.3d at 242; Khorshid, 257 S.W.3d at 762. When an appellant challenges the factual sufficiency of the evidence on an issue, an appellate court considers all the evidence supporting and contradicting the finding of fact. See Plas-Tex, Inc. v. U.S. Steel Corp., 772 S.W.2d 442, 445 (Tex. 1989); Sheetz, 503 S.W.3d at 502; Fulgham, 349 S.W.3d at 157. An appellate court sets aside findings of fact for factual insufficiency only if the finding is so contrary to the evidence as to be clearly wrong and manifestly unjust. See Ortiz, 917 S.W.2d at 772; Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986) (per curiam); Sheetz, 503 S.W.3d at 502; Fulgham, 349 S.W.3d at 157. In a bench trial, the trial court, as factfinder, is the sole judge of the credibility of the witnesses. See Sheetz, 503 S.W.3d at 502; Fulgham, 349 S.W.3d at 157. As long as the evidence falls "within the zone of reasonable disagreement," an appellate court will not substitute its judgment for that of the factfinder. See City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005); Sheetz, 503 S.W.3d at 502; Fulgham, 349 S.W.3d at 157.
2. Review of the Trial Court's Conclusions of Law
An appellate court reviews the trial court's conclusions of law de novo. See BMC Software, 83 S.W.3d at 794; Sheetz, 503 S.W.3d at 502. An appellant may not challenge the trial court's conclusions of law for factual insufficiency, but it may review the legal conclusions drawn from the facts to determine their correctness. See BMC Software, 83 S.W.3d at 794; Reisler v. Reisler, 439 S.W.3d 615, 619 (Tex. App.—Dallas 2014, no pet.). Further, a trial court's conclusions of law are not reviewable on the basis that there is legally insufficient evidence to support them. See Aldrich v. State ex rel. Cox, 658 S.W.2d 323, 327 (Tex. App.—Tyler 1983, no pet.); cf. Douglas-Peters v. Cho, No. 05-15-01538-CV, 2017 WL 836848, at 14 (Tex. App.—Dallas Mar. 3, 2017, no pet.). If an appellate court determines that a conclusion of law is erroneous, but the trial court nevertheless rendered the proper judgment, the error does not require reversal. See BMC Software, 83 S.W.3d at 794; Sheetz, 503 S.W.3d at 502; Reisler, 439 S.W.3d at 619-20; Fulgham, 349 S.W.3d at 157-58.
B. Wrongful Foreclosure
In issues one, two, and three, Farkas argues the evidence is legally and factually insufficient to support the following findings of fact and the trial court erred when it made the following conclusions of law relating to his wrongful-foreclosure claim against Aurora: (1) the pre-foreclosure notices satisfied the deed of trust and section 51.002(d) of the Texas Property Code; (2) the notice of default in Joint Exhibit No. 11 satisfied all of the requirements of the Deed of Trust and section 51.002 of the Texas Property Code; and (3) Aurora conducted a legal and valid non-judicial foreclosure. Aurora responds that there was no defect in the foreclosure proceedings. It claims that Farkas stipulated to the five notices sent and that he received the first four of those notices. Further, Aurora contends that Farkas did not prove a grossly inadequate selling price or a causal connection between the alleged defect in the foreclosure sale proceeding and the grossly inadequate selling price.
1. Applicable Law
To establish a wrongful foreclosure, a plaintiff must prove: (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. See Porterfield v. Cenlar FSB, No. 05-14-00663-CV, 2016 WL 1019359, at *6 (Tex. App.—Dallas March 15, 2016, no pet.) (mem. op.); Bayview Loan Servicing, L.L.C. v. Martinez, No. 05-14-00835-CV, 2016 WL 825670, at *3 (Tex. App.—Dallas March 3, 2016, no pet.) (mem. op.); Wells Fargo Bank, N.A. v. Robinson, 391 S.W.3d 590, 593 (Tex. App.—Dallas 2012, no pet.).
To prevail on a common law wrongful-disclosure claim, a plaintiff must show that the foreclosing lender failed to comply with either statutory or contractual conditions governing the foreclosure. In other words, an irregularity exists if a trustee does not comply with the statutory prerequisites governing foreclosure and any conditions of the deed of trust. See D&R Constructors, Inc. v. Tex. Gulf Energy, Inc., No. 01-15-00604-CV, 2016 WL 4536959, at *7 (Tex. App.—Houston [1st Dist.] Aug. 20, 2016, pet. denied) (mem. op.). However, mere irregularities in the foreclosure process do not give rise to a wrongful foreclosure claim. See Charter Nat'l Bank-Houston v. Stevens, 781 S.W.2d 368, 371 (Tex. App.—Houston [14th Dist.] 1989, writ denied). Further, technical irregularities, standing alone, are not sufficient to support a wrongful-foreclosure claim. See Apex Fin. Corp. v. Brown, 7 S.W.3d 820, 827 (Tex. App.—Texarkana 1999, no pet.).
Because a grossly inadequate selling price is a requisite element, a claim for wrongful foreclosure does not arise until there has been a foreclosure sale. See Porterfield, 2016 WL 1019359, at *6. The particular facts of each case will determine whether the sale price was grossly inadequate. See Apex Fin., 7 S.W.3d at 829 (citing House v. Robertson, 89 Tex. 681, 36 S.W. 251 (1896)). However, inadequacy of price alone is not sufficient to support a wrongful-foreclosure claim. See Roquemore v. Kellogg, 656 S.W.2d 646, 650 (Tex. App.—Dallas 1983, no writ); Apex, 7 S.W.3d at 827-28 ("[A]n otherwise valid sheriff's sale will not generally be set aside for inadequacy of price alone").
To maintain a suit for wrongful foreclosure, there must be evidence that the defect in the foreclosure sale proceeding, however slight, caused or contributed to cause the property to be sold for a grossly inadequate price. See American Sav. & Loan Ass'n v. Musick, 531 S.W.2d 581, 587 (Tex. 1975); Grapevine Diamond, L.P. v. City Bank, No. 05-14-00260-CV, 2015 WL 8013401, at *7-8 (Tex. App.—Dallas Dec. 7, 2015, pet. denied) (mem. op.); Wells Fargo, 391 S.W.3d at 594; Hunt v. Jefferson Sav. & Loan Ass'n, 756 S.W.2d 762, 764 (Tex. App.—Dallas 1988, writ denied); Sparkman v. McWhirter, 263 S.W.2d 832, 837 (Tex. Civ. App.—Dallas 1953, writ ref'd). In other words, evidence showing that a better price would have resulted if the sale was conducted in a different manner is required. See Hunt 756 S.W.2d at 764.
The proper remedy for wrongful foreclosure is either: (1) damages equal to the difference between the value of the property at the date of foreclosure and the remaining balance due on the indebtedness; or (2) the setting aside of the foreclosure sale. See Farrell v. Hunt, 714 S.W.2d 298, 299 (Tex. 1986); Wells Fargo, 391 S.W.3d at 593; Long v. Southwest Funding, L.P., 03-15-00020-CV, 2017 WL 672445, at *3 (Tex. App.—Austin Feb. 16, 2017, no pet. h.) (mem. op.); Pinnacle Premier Prop., Inc. v. Breton, 447 S.W.3d 558, 565 (Tex. App.—Houston [14th Dist.] 2014, no pet.). The recovery of damages is appropriate when title has passed to a third party and the plaintiff's possession of the property has been materially disturbed. See Wells Fargo, 391 S.W.3d at 594. However, when the note holder obtains title to the property at the foreclosure sale and the plaintiff retains possession, the proper remedy is to set aside the trustee's deed and to restore the plaintiff's title, subject to the note holder's right to establish the debt owed and foreclose its lien. See Wells Fargo, 391 S.W.3d at 594. The reason for this is that the law undertakes to award just compensation, no more or no less, for the injuries sustained. See Wells Fargo, 391 S.W.3d at 594.
2. Application of the Law to the Facts
Farkas expressly challenges the following findings of fact made by the trial court as to his claim for wrongful foreclosure against Aurora:
3. Aurora [] served the letters dated June 17, 2010, July 22, 2010, August 19, 2010, September 16, 2010, and November 2, 2010, (Joint Exhibits 5, 6, 7, 8, 9) at least thirty days before prior to accelerating the Unit 608 Loan in compliance with the Unit 608 Deed of Trust and the Texas Property Code.
4. The language in the letters dated June 17, 2010, July 22, 2010, August 19, 2010, September 16, 2010, and November 2, 2010 (Joint Exhibits 5, 6, 7, 8, 9) satisfy the requirements of the Unit 608 Deed of Trust and [s]ection 51.002(d) of the Texas Property Code.
7. The language in the letters dated February 7, 2011, and May 13, 2011, and accompanying Notices of Substitute Trustee Sale (Joint Exhibits 12 and 16) satisfy the requirements for notice of sale under the Unit 608 Deed of Trust and [s]ection 51.002(b) of the Texas Property Code.
9. Aurora satisfied all requirements of the Unit 608 Deed of Trust and [s]ection 51.002 of the Texas Property Code prior to foreclosing Unit 608 on June 7, 2011.
Also, Farkas expressly challenges the following conclusions of law made by the trial court as to his claim for wrongful foreclosure against Aurora:
3. The Court concludes that the letters dated June 17, 2010, July 22, 2010, August 19, 2010, September 16, 2010, and November 2, 2010 (Joint Exhibits 5, 6, 7, 8, 9) represent Notices of Default a/k/a Notices of Intent to Accelerate and Opportunity to Cure under the Unit 608 Deed of Trust and [s]ection 51.002(d) of the Texas Property Code.
4. The Court concludes that the language in the letters dated June 17, 2010, July 22, 2010, August 19, 2010, September 16, 2010, and November 2, 2010 Letters [sic] (Joint Exhibits 5, 6, 7, 8, 9) satisfy the requirements of the Unit 608 Deed of Trust and [s]ection 51.002(d) of the Texas Property Code.
5. The Court concludes that the letters dated February 7, 2011 and May 13, 2011 and accompanying Notices of the Substitute Trustee Sale (Joint Exhibits 12 and 16) represent Notices of Acceleration and Notices of Sale under the Unit 608 Deed of Trust and [s]ection 51.002 of the Texas Property Code.
6. The Court concludes that the language in the letters dated February 7, 2011, and May 13, 2011, and accompanying Notices of Substitute Trustee Sale (Joint Exhibits 12 and 16) satisfy the requirements for notice of sale under the Unit 608 Deed of Trust and [s]ection 51.002(b) of the Texas Property Code.
7. The Court concludes that Aurora satisfied all requirements of the Unit 608 Deed of Trust and [s]ection 51.002 of the Texas Property Code prior to foreclosing Unit 608 on June 7, 2011.
10. The Court concludes that Aurora did not violate the Unit 608 Deed of Trust or Section 51.002 of the Texas Property [Code] when Aurora foreclosed Unit 608 on June 7, 2011.
All of the challenged findings of fact and conclusions of law relating to Farkas's wrongful-foreclosure claim relate to the first element, that is, there is a defect in the foreclosure sale proceeding. It was Farkas's burden to prove all three elements of his wrongful-foreclosure claim. See Porterfield, 2016 WL 1019359, at *6; Bayview, 2016 WL 825670, at *3; Wells Fargo, 391 S.W.3d at 593. However, in the parties' joint stipulations, which were admitted into evidence, Farkas stipulated to the following facts related to the first element of his wrongful-foreclosure claim, admitting: (1) he received letters from Aurora dated June 17, 2010, July 22, 2010, August 19, 2010, and September 16, 2010; (2) Aurora sent him a letter dated November 2, 2010; (3) he received a letter from Mann & Stevens dated December 31, 2010; (4) he received letters from McCarthy, Holthus & Ackerman, LLP, dated January 27, 2011, February 7, 2011, May 12, 2011, and May 13, 2011; and (5) on February 8, 2011, the notice of substitute trustee foreclosure sale for March 1, 2011 was filed with the county clerk, on February 24, 2011 the appointment of the substitute trustee was filed in Dallas County, and on May 16, 2011, the notice of substitute trustee foreclosure sale for June 7, 2011 was recorded with the county clerk.
Nevertheless, even if we were to agree with Farkas that there were defects in the foreclosure sale proceeding, mere irregularities in the foreclosure process, standing alone, are not sufficient to support a wrongful-foreclosure claim. See Apex Fin., 7 S.W.3d at 827; Charter Nat'l Bank, 781 S.W.2d at 371. Further, we note that, in the appeal before remand, this Court has already affirmed, in part, the trial court's summary judgment in favor of Aurora on Farkas's claim seeking a declaratory judgment because Aurora had the authority to foreclose on Farkas's property. See Farkas, 2013 WL 6198344, at *1-4.
As to the second and third elements of a wrongful-foreclosure claim, which require a grossly inadequate selling price and a causal connection between the defect and the grossly inadequate selling price, we note that the trial court did not make express findings of fact and conclusions of law addressing those elements. However, as to the availability of any remedy for wrongful foreclosure, the trial court made the following express finding of fact:
Farkas did not challenge finding of fact no. 13 as to his wrongful-foreclosure claim. However, we note that Farkas did expressly challenge this finding of fact in issue six as it relates to his claim that Fannie Mae violated of section 12.002 of the Texas Civil Practice and Remedies Code.
13. Farkas did not suffer any damages as a result of any actions by the Defendants.As to Farkas's wrongful-foreclosure claim, this unchallenged finding of fact is binding on appeal. See Brown, 2015 WL 3958618, at *4; Lombardo, 437 S.W.3d at 668. In addition, in the parties' joint stipulations, which were admitted into evidence, Farkas stipulated the following as to damages on his wrongful-foreclosure claim:
64. A foreclosure sale on Unit 608 was held on June 7, 2011, at 11:27 a[.]m[.], and Aurora [] was the winning bidder with a credit bid of $168,479.03, which represented the entire amount of indebtedness that Farkas owed on the Unit 608 Note at that time, $150,158.00 of which was principal.As a result of the sale of the property to Gonzales, the only remedy available to Farkas for his wrongful-foreclosure claim was damages equal to the difference between the value of the property on the date of foreclosure and the remaining balance due on the indebtedness. He was not entitled to set aside the foreclosure sale. See Wells Fargo, 391 S.W.3d at 594. The stipulated facts show that the value of the property at the time of foreclosure was $94,790.00 and the remaining balance due on the indebtedness was $168,479.03. Accordingly, based on this measure, Farkas had no damages because the amount that he owed on the loan exceeded the value of Unit 608 by $73,689.03.
66. The appraised value of Unit 608 according to the Dallas County Appraisal District at the time of foreclosure was $94,790.00.
67. The consideration given by Aurora [] for Unit 608 exceeded Unit 608's appraised value.
71. In 2013, Fannie Mae and [] Gonzalez [] entered into a Residential Condominium Contrast [] whereby Gonzalez agreed to purchase Unit 608 for $137,000.
77. Gonzalez paid $137,000.00 for Unit 608 in good faith.
79. Since purchasing Unit 608, Gonzalez has occupied the property as her principal residence.
We conclude the evidence was legally and factually sufficient to support the trial court's findings of fact on Farkas's wrongful-foreclosure claim against Aurora. Also, we conclude the trial court did not err in its conclusion of law on Farkas's wrongful-foreclosure claim against Aurora. Issues one, two, and three are decided against Farkas.
C. Suit to Quiet Title
In issues four and five, Farkas argues the trial court erred when it made conclusions of law that: (1) Gonzalez proved her affirmative defense that she was a bona fide purchaser as to the suit to quiet title against her; and (2) Farkas has no legal or equitable interest in the property and he is not entitled to a suit to quiet title claims against Aurora, Fannie Mae, and Gonzalez. Aurora and Fannie Mae respond that Farkas did not tender the debt owed on Unit 608 and therefore has no interest in the property. Gonzales responds that she was a bona fide purchaser and her testimony regarding her good faith and lack of notice was unrebutted.
1. Applicable Law
A suit to quiet title or clear title, also known as a suit to remove cloud from title, is a suit for a specific, equitable remedy. See Ellis v. Waldrop, 656 S.W.2d 902, 905 (Tex. 1983) (citing Thomson v. Locke, 66 Tex. 383, 1 S.W. 112, 115 (1886)). The goal of a suit to quiet title is to clear the title to property from clouds or encumbrances. See Thomson, 1 S.W. at 115 cited in In re Puig, 351 S.W.3d 301, 305 (Tex. 2011) (orig. proceeding) (per curiam). It exists "to enable the holder of the feeblest equity to remove from his way to legal title any unlawful hindrance having the appearance of better right." Thomson, 1 S.W. at 115; see also Montenegro v. Ocwen Loan Servicing, L.L.C., 419 S.W.3d 561, 567 (Tex. App.—Amarillo 2013, pet. denied); Hahn v. Love, 394 S.W.3d 14, 33 (Tex. App.—Houston [1st Dist.] 2012, pet. denied); Vernon v. Perrien, 390 S.W.3d 47, 61 (Tex. App.—El Paso 2012, pet. denied); Florey v. Estate of McConnell, 212 S.W.3d 439, 448 (Tex. App.—Austin 2006, pet. denied); Wright v. Matthews, 26 S.W.3d 575, 578 (Tex. App.—Beaumont 2000, pet. denied); Bell v. Ott, 606 S.W.2d 942, 952 (Tex. Civ. App.—Waco 1980, writ ref'd n.r.e.). In other words:
The object of [a] suit [to quiet title] is not to divest the defendants of rights; it is for the purpose of quieting the plaintiff's title, and presupposes its validity, but that he is disquieted and his title disturbed by the alleged unconscientious claims and pretensions of the defendants. His purpose is to have those claims judicially declared to be unfounded.Howard v. Davis, 6 Tex. 174, 185 (1851); see also Garces v. Hernandez, No. 13-13-00242-CV, 2016 WL 2970686, at *5 n.8 (Tex. App.—Corpus Christi 2016, no pet.) (mem. op.); Ballard v. Allen, No. 12-03-00370-CV, 2005 WL 1037514, at *3 (Tex. App.—Tyler May 4, 2005, no pet.) (mem. op.); Texan Dev. Co. v. Hodges, 237 S.W.2d 436, 440 (Tex. Civ. App.—Amarillo 1951, no writ); Temple Trust Co. v. Logan, 82 S.W.2d 1017, 1019 (Tex. Civ. App.—Amarillo 1935, no writ). The effect of a suit to quiet title is to declare invalid or ineffective the defendant's claim to title. See McCann v. Spencer Plantation Inv., Ltd., No. 01-16-00098-CV, 2017 WL 769895, at *3 (Tex. App.—Houston [1st Dist.] Feb. 28, 2017, no pet. h.) (mem. op.); Essex Crane Rental Corp. v. Carter, 371 S.W.3d 366, 388 (Tex. App.—Houston [1st Dist.] 2012, pet. denied).
To prevail in a suit to quiet title, a claimant must prove: (1) he has an interest in a specific property; (2) title to the property is affected by a claim of the defendant; and (3) the defendant's claim, although facially valid, is invalid or unenforceable. See McKinney Ave. Props. No. 2, Ltd. v. Branch Bank & Trust Co., 05-14-00206-CV, 2015 WL 3549877, at *7 (Tex. App.—Dallas June 5, 2015, no pet.) (mem. op.); see also Vernon, 390 S.W.3d at 61. The plaintiff has the burden of supplying the proof necessary to establish his superior equity and right to relief. See McCann, 2017 WL 769895, at *3; Hahn, 394 S.W.3d at 33; Hahn v. Love, 321 S.W.3d 517, 531 (Tex. App.—Houston [1st Dist.] 2009, pet. denied).
A plaintiff in a suit to quiet title has the burden to establish, as an element of his claim, that he owns an interest in specific property. See Heirs of Garcia v. Parr, 04-12-00767-CV, 2014 WL 3928602, at *8 (Tex. App.—San Antonio Aug. 13, 2014, pet. denied) (mem. op.). Although suit to quiet title relies on the invalidity of the defendant's claim, a plaintiff in a suit to quiet title must prove and recover on the strength of his own title, not the weakness of the defendant's title. See DTND Sierra Inv., L.L.C. v. Deutsche Bank Nat'l Trust Co., No. 04-12-00817-CV, 2013 WL 4483436, at *3 (Tex. App.—San Antonio Aug. 21, 2013, pet. denied) (mem. op.); In re Slusser, 136 S.W.3d 245, 248 (Tex. App.—San Antonio 2004, orig. proceeding); Fricks v. Hancock, 45 S.W.3d 322, 327 (Tex. App.—Corpus Christi 2011, no pet.). A take-nothing judgment on a related trespass to try title or wrongful foreclosure action conclusively forecloses a plaintiff from establishing in a suit to quiet title the element that he owns an interest in the specific property as a matter of law because he lacks title. See generally, Heirs of Garcia, 2014 WL 3928602, at *8 (trespass to try title); Montenegro, 419 S.W.3d at 572-73 (wrongful foreclosure).
The principle issue in a suit to quiet title is the existence of a cloud that equity will remove. See Hahn, 321 S.W.3d at 531. A "cloud" on legal title includes any deed, contract, judgment lien, or other instrument, not void on its face, which purports to convey an interest in or makes any charge upon the land of the true owner, the invalidity of which would require proof. See Airvantage, L.L.C. v. TBAN Props. #1, Ltd., 269 S.W.3d 254, 258 (Tex. App.—Dallas 2008, no pet.). A suit to quiet title relies on the invalidity of the defendant's claim to the property. See McCann, 2017 WL 769895, at *3; Vernon, 390 S.W.3d at 61.
However, status as a bona fide purchaser is an affirmative defense to a title dispute. See Madison v. Gordon, 39 S.W.3d 604, 606 (Tex. 2001) (per curiam); McKinney Ave. Props., 2015 WL 3549877, at *7. To qualify as a bona fide purchaser, a party must acquire property in good faith, for value, and without notice of any third-party claim or interest. See Madison, 39 S.W.3d at 606; McKinney Ave. Props., 2015 WL 3549877, at *7; Hahn, 321 S.W.3d at 531. Notice may be constructive or actual. See Madison, 39 S.W.3d at 606; McKinney Ave. Props., 2015 WL 3549877, at *7. Actual notice rests on personal information or knowledge. See Madison, 39 S.W.3d at 606; McKinney Ave. Props., 2015 WL 3549877, at *7. Constructive notice is notice the law imputes to a person not having personal information or knowledge. See Madison, 39 S.W.3d at 606; McKinney Ave. Props., 2015 WL 3549877, at *7.
2. Equitable Interest in the Property
In issue five, Farkas expressly challenges the following conclusions of law made by the trial court as to his suit to quiet title against Aurora, Fannie Mae, and Gonzalez:
11. The Court concludes that [t]he Substitute Trustee's Deed [] is not void or voidable but is instead valid in all respects.
13. The Court concludes that Farkas has no legal or equitable interest in Unit 608.
14. The Court concludes that Farkas's Suit to Quiet Title fails because he failed to tender the amount of his indebtedness under the Unit 608 Deed of Trust before foreclosure or at any time thereafter.
19. The Court concludes that Farkas is not entitled to recover any damages from [Aurora, Fannie Mae, or Gonzalez].
This Court has already concluded the evidence is legally and factually sufficient to support the trial court's findings of fact and the trial court did not err in its conclusions of law against Farkas on his wrongful-foreclosure claim against Aurora. The take-nothing judgment on Farkas's wrongful-foreclosure claim conclusively forecloses Farkas's ability to establish in his suit to quiet title the element that he owns an interest in Unit 608, as a matter of law, because Farkas lacks title. See generally, Heirs of Garcia, 2014 WL 3928602, at *8 (trespass to try title); Montenegro, 419 S.W.3d at 572-73 (wrongful foreclosure). Also, in the parties' joint stipulations, which were admitted into evidence, Farkas stipulated that:
39. Farkas has never paid the amounts dues as set forth in the September 16, 2010 Letter.
42. Farkas has never paid the amount that was due as set forth in the November 2, 2010 Letter.
80. Farkas failed to pay the monthly principal and interest installment on the Unit 608 Loan due for September 1, 2010 and all monthly installments due thereafter.
81. Farkas defaulted on his obligations arising from the Unit 608 Loan by failing to pay the installment due for September 1, 2010 and all installments due thereafter.
82. Farkas did not tender the amount owed on the Unit 608 Loan prior to the June 7, 2011, foreclosure sale on Unit 608 or at any time before trial of this case.
Further, we note that, in the appeal before remand, this Court has already affirmed, in part, the trial court's summary judgment in favor of Aurora on Farkas's claim seeking a declaratory judgment because Aurora had the authority to foreclose on Farkas's property. See Farkas, 2013 WL 6198344, at *1-4.
In addition, as to his ability to recover damages from Aurora, Fannie Mae, and Gonzalez on his suit to quiet title, the trial court made the following express finding of fact:
Farkas did not challenge finding of fact no. 13 as to his suit to quiet title. However, as noted above, Farkas did expressly challenge this finding of fact in issue six as it relates to his claim that Fannie Mae violated of section 12.002 of the Texas Civil Practice and Remedies Code. See supra n.2.
13. Farkas did not suffer any damages as a result of any actions by the Defendants.As to Farkas's suit to quiet title, this unchallenged finding of fact is binding on appeal. See Brown, 2015 WL 3958618, at *4; Lombardo, 437 S.W.3d at 668.
We conclude the trial court did not err when it concluded Farkas has no legal or equitable interest in the property and he is not entitled to a suit to quiet title claims against Aurora, Fannie Mae, and Gonzalez. Issue five is decided against Farkas.
3. Bona Fide Purchaser
In issue four, Farkas expressly challenges the following conclusions of law made by the trial court as to his suit to quiet title against Gonzalez:
12. The Court concludes that Gonzalez has title in fee simple to Unit 608 free from any and all legal or equitable claims by Farkas.However, based on our resolution of issue five, concluding that the trial court did not err when it concluded Farkas has no legal or equitable interest in the property and he is not entitled to a suit to quiet title claims against Aurora, Fannie Mae, and Gonzalez, we need not address whether the trial court erred when it concluded Gonzalez was bona fide purchaser.
15. The Court concludes that Gonzalez was a bona fide purchaser for value who took title to Unit 608 free and clear of any legal or equitable interest held by Farkas.
Issue four is decided against Farkas.
D. Violation of Section 12 .002 of the Texas Civil Practice and Remedies Code
In issue six, Farkas argues the evidence is legally and factually insufficient to support the trial court's findings of fact and the trial court erred in its conclusions of law that Fannie Mae did not violate section 12.002 of the Texas Civil Practice and Remedies Code. He claims that Fannie Mae is a professional entitiy and should have known that it is liable for the acts of Aurora, the Substitute Trustee Deed was void, and it did not have the power to convey the property to Gonzalez. Farkas also argues that Fannie Mae intended to give the "violating document . . . legal effect as a valid claim" and intended to cause harm to Farkas. Fannie Mae responds that Farkas's claim is premised on his argument that the notices of default were defective, so his claim fails because the notices complied with the note, the deed of trust, and the Texas Property Code.
1. Applicable Law
A claim for violation of section 12.002 of the Texas Civil Practice and Remedies Code or use of a fraudulent lien requires proof of the following elements: (1) a person made, presented, or used a document purporting to create a lien; (2) knowing that the lien was fraudulent; (3) with intent that the fraudulent lien be given legal effect; and (4) with intent to cause another person to suffer physical injury, financial injury, mental anguish, or emotional distress. TEX. CIV. PRAC. & REM. CODE ANN. § 12.002(a) (West Supp. 2016); see Napoleon v. Strategic Dealer Servs., L.P., No. 05-15-01454-CV, 2017 WL 894540, at *5 (Tex. App.—Dallas Mar. 6, 2017, no pet.) (mem. op.); Aland v. Martin, 271 S.W.3d 424, 430 (Tex. App.—Dallas 2008, no pet.); see also Farkas v. Wells Fargo Bank, N.A., No. 03-14-00716-CV, 2016 WL 7187476, at *11 (Tex. App.—Austin Dec. 8, 2016, no pet.) (mem. op.). A person proving his claim under the statute is entitled to statutory damages of $10,000. CIV. PRAC. & REM. CODE § 12.002(b); see Gordon v. W. Houston Trees, Ltd., 352 S.W.3d 32, 46 (Tex. App.—Houston [1st Dist.] 2011, no pet.).
A person asserting a claim for violations of section 12.002 of the Texas Civil Practice and Remedies Code has the burden to prove the requisite elements of the statute. See Aland, 271 S.W.3d at 430. One of the essential elements of a section 12.002 claim is that the defendant used a document or record despite knowing that it reflected a fraudulent lien or claim against real property. See Salomon v. Lesay, 369 S.W.3d 540, 549-50 (Tex. App.—Houston [1st Dist.] 2012, no pet.). However, if the lender was authorized to sell the real property under the terms of the deed of trust, a claim that the foreclosure documents that were filed were fraudulent will not prevail. See generally, Farkas v. Elec. Registration Sys., Inc., No. 11-12-00024-CV, 2014 WL 97293, at *3 (Tex. App.—Eastland Jan. 9, 2014, pet. denied) (mem. op.).
2. Application of the Law to the Facts
Farkas expressly challenges the following findings of fact made by the trial court as to his claim for violations of the section 12.002 of the Texas Civil Practice and Remedies Code against Fannie Mae:
11. Fannie Mae had no knowledge that any document in the record was a fraudulent lien or claim against Unit 608 or an interest in Unit 608.
12. There is no evidence that Fannie Mae intended to cause [] Farkas physical injury, financial injury, or mental anguish or emotional distress.
13. Farkas did not suffer any damages as a result of any actions by [Aurora, Fannie Mae, or Gonzalez].
Also, Farkas expressly challenges the following conclusions of law made by the trial court as to his claim for violations of the section 12.002 of the Texas Civil Practice and Remedies Code against Fannie Mae:
17. The Court concludes that No [sic] document in the record represents a fraudulent lien or claim against Unit 608 or an interest in Unit 608.
18. The Court concludes that Fannie Mae did not violate [s]ection 12.002 of the Texas Civil Practice and Remedies Code.
This Court has already concluded the evidence is legally and factually sufficient to support the trial court's findings of fact and the trial court did not err when it made conclusions of law against Farkas on his wrongful-foreclosure claim against Aurora. Further, we note that, in the appeal before remand, this Court has already affirmed, in part, the trial court's summary judgment in favor of Aurora on Farkas's claim seeking a declaratory judgment because Aurora had the authority to foreclose on Farkas's property. See Farkas, 2013 WL 6198344, at *1-4. Because Aurora was authorized to foreclose on the property under the terms of the deed of trust, Farkas's claim that Fannie Mae violated section 12.002 of the Texas Civil Practice and Remedies Code by knowingly using a fraudulent lien fails. See generally, Farkas, 2014 WL 97293, at *3.
We conclude the evidence is legally and factually sufficient to support the trial court's findings of fact on Farkas's claim against Fannie Mae for violation of section 12.002 of the Texas Civil Practice and Remedies Code. Also, we conclude the trial court did not err when it made conclusions of law on Farkas's claim against Fannie Mae for violation of section 12.002 of the Texas Civil Practice and Remedies Code. Issue six is decided against Farkas.
III. CONCLUSION
The evidence is legally and factually sufficient to support the trial court's findings of fact. Also, the trial court did not err in its conclusions of law.
The trial court's final take-nothing judgment is affirmed.
/Douglas S. Lang/
DOUGLAS S. LANG
JUSTICE 151225F.P05
JUDGMENT
On Appeal from the 134th Judicial District Court, Dallas County, Texas
Trial Court Cause No. DC-11-02053.
Opinion delivered by Justice Lang. Justices Fillmore and Schenck participating.
In accordance with this Court's opinion of this date, the judgment of the trial court is AFFIRMED.
It is ORDERED that appellees AURORA LOAN SERVICES, L.L.C., AURORA BANK FSB, FEDERAL NATIONAL BANK ASSOCIATION, and JINNI GONZALEZ recover their costs of this appeal from appellant JANOS FARKAS. Judgment entered this 30th day of May, 2017.