Summary
explaining issues concerning both title and possession may be litigated in separate proceedings in different courts with appropriate jurisdiction
Summary of this case from Hardaway v. Deutsche Bank Nat'l Tr. Co.Opinion
NO. 14-17-00220-CV
05-31-2018
JELINIS, LLC, Appellant v. S. Bruce HIRAN and Hung N. Yi, Appellees
Robert C. Vilt, Houston, TX, for Appellees. Keith Allen Wolfshohl, Anna Clement Sewart, Austin R. DuBois, Houston, TX, for Appellant.
Robert C. Vilt, Houston, TX, for Appellees.
Keith Allen Wolfshohl, Anna Clement Sewart, Austin R. DuBois, Houston, TX, for Appellant.
Panel consists of Chief Justice Frost and Justices Boyce and Jewell
William J. Boyce, Justice
Jelinis, LLC appeals a temporary injunction order in favor of appellees S. Bruce Hiran and Hung N. Yi. Jelinis argues that the trial court erred by enjoining it from (1) evicting Hiran and Yi because they pleaded no cause of action against Jelinis; and (2) taking legal action in the justice court to evict Hiran and Yi because they failed to show that "the justice court was without jurisdiction to determine possession." We reverse and render in part and affirm in part.
BACKGROUND
Hiran signed a Texas Home Equity Note on June 6, 2006, in the amount of $800,000 payable to Long Beach Mortgage Company. On the same day, Hiran and his wife Yi signed a Texas Home Equity Security Instrument confirming that the loan was secured by residential real property located at 4132 Lehigh Avenue in Houston, Texas. The note and deed of trust were later transferred to Deutsche Bank National Trust Company. Select Portfolio Servicing, Inc. acted as the loan servicer.
Appellees defaulted on their loan in October 2012. Select Portfolio sent notices of default in December 2012 and May 2013. Appellees ignored the notices Select Portfolio sent them. Deutsche Bank, as trustee, in trust for registered holders of Long Beach Mortgage Loan Trust 2006-10, filed an Application for Home Equity Foreclosure Order pursuant to Texas Rule of Civil Procedure 736 on January 22, 2014. Deutsche Bank nonsuited the action and filed suit in the 270th District Court on September 8, 2014, seeking a declaratory judgment and an order authorizing foreclosure.
Deutsche Bank filed a traditional summary judgment motion, contending that (1) it is entitled to a declaration of its right to foreclose on appellees' home and to an order authorizing foreclosure because its summary judgment evidence established that a debt exists, the debt is secured by a lien for a home equity loan, a default under the note and deed of trust exists, and the requisite notices to cure the default have been provided to appellees; and (2) appellees should not be allowed to deny executing the loan documents because Hiran refused to testify at his deposition regarding "any issues relating to whether he signed the applicable loan documents and refused to provide any handwriting exemplars, based on his assertion of the Fifth Amendment."
The 270th District Court granted Deutsche Bank’s summary judgment motion and signed a Final Judgment for Declaratory Relief and Order Authorizing Foreclosure on December 3, 2015. This judgment (1) disposed of all claims; (2) awarded "an in rem Judgment" against appellees authorizing a non-judicial foreclosure sale of appellees' home "pursuant to the terms and conditions of the subject Texas Home Equity Security Instrument and TEX. PROP CODE § 51.002 ;" and (3) ordered that the final judgment "serves as an Order of Foreclosure of a Home Equity Lien."
Deutsche Bank sold the home at a foreclosure sale to Jelinis on December 6, 2016. Jelinis filed a forcible detainer suit regarding the home on January 12, 2017.
Appellees filed suit in the 151st District Court on January 30, 2017, naming as parties Long Beach Mortgage Company, Deutsche Bank, and Jelinis, and alleging that the "actions committed by Long Beach Mortgage Company" constitute statutory fraud and breach of contract, and that the "actions committed by Deutsche Bank" constitute common law fraud and breach of contract. Appellees alleged that, "although their signatures appear to be valid, certain pages of the Note and Deed of Trust must have been switched by representatives of Long Beach Mortgage Company ... because [appellees]' Home Equity Loan was a fixed rate of 2% interest and, instead, the Note and Deed of Trust attached as exhibits to the Foreclosure Lawsuit are purported to be an adjustable rate note at 7.975% interest."
Appellees further alleged that "the exhibits which are the legal basis for Deutsche Bank’s being awarded a judgment authorizing them [sic] to sell [appellees]' Property at a foreclosure sale are fraudulent; therefore, the foreclosure sale of [appellees]' Property should be deemed void and rescinded. Moreover, [appellees] allege[d] that the Home Equity Loan itself was fraudulent as a result of Long Beach Mortgage’s representatives switching the loan documents unbeknownst to [appellees]; therefore, [appellees]' home equity loan should be deemed void ab initio."
Appellees requested that the trial court (1) issue a temporary restraining order and then a temporary injunction enjoining Jelinis from selling appellees' home "as well as from taking any legal action to evict [appellees];" (2) enter a judgment in favor of appellees "to rescind the foreclosure sale of" appellees' home and "to declare the home equity loan dated June 06, 2006 between [appellees] as well as Long Beach Mortgage Company as void ab initio;" and (3) enter a judgment against Long Beach Mortgage Company and Deutsche Bank for actual and exemplary damages and attorney’s fees.
Attached to appellees' petition was Hiran’s affidavit in which he stated in pertinent part:
2. The subject matter of this lawsuit is the real property and the improvements thereon located at 4132 Lehigh Avenue, Houston, TX 77005 (the "Property").
3. The Property was owned by my wife Hung N. Yi and I on June 06, 2006 on which date we entered into a Home Equity Loan. During the process of entering into the Home Equity Loan, we executed a Texas Home Equity Note ("Note") in the amount of $800,000 which was payable to Long Beach Mortgage Company ("Long Beach"). In addition, we executed a Texas Home Equity Security Instrument ("Deed of Trust").
4. ... the Note and Deed of Trust were subsequently transferred to Deutsche Bank National Trust....
5. During the term of the Note, we began to receive notices that we were past due on the payments of the Note. We did not understand how that could be true since we were making our payments on the Note in full and in a timely manner. Accordingly, we expected that the notices must be a clerical error which will be remedied in due course. As such, we ignored the delinquency notices which we received from SPS.
6. Due to the nature and extent of Plaintiffs' perceived delinquency, Deutsche Bank filed an Application for Home Equity Foreclosure ... [i]n the 270th Judicial District Court of Harris County, Texas (the "Foreclosure Lawsuit").
7. The Foreclosure Lawsuit culminated in a Final Judgment for Declaratory Relief and Order Authorizing Foreclosure and the Property was sold by Deutsche Bank to Jelinis, LLC ("Jelinis") at a foreclosure sale on December 06, 2016.
8. During the course of investigating this lawsuit, I informed my legal counsel that we did not execute the Note and Deed of Trust which were attached as exhibits to the Foreclosure Lawsuit. Instead, I assert that, although our signatures appear to be valid, certain pages of the Note and Deed of Trust must have been switched by representatives of Long
Beach Mortgage Company ("Long Beach Mortgage") because our Home Equity Loan was a fixed rate of 2% interest and, instead, the Note and Deed of Trust attached as exhibits to the Foreclosure Lawsuit are purported to be an adjustable rate note at 7.975% interest.
The trial court granted appellees' request for a temporary restraining order and set a hearing on appellees' temporary injunction request. Appellees nonsuited their claims against Deutsche Bank without prejudice on February 22, 2017.
Jelinis filed an Objection to Plaintiff’s Request for Temporary Injunction on February 23, 2017, arguing that the trial court should not enjoin the justice court from exercising its jurisdiction to hear Jelinis’s forcible detainer suit. Jelinis argued that the justice court only loses jurisdiction if "the right to possession is so interrelated with title so as to make a determination of title necessary before a determination of possession can be made." According to Jelinis "there is a way to determine the issue of possession without reaching the merits of title" because the "foreclosed deed of trust created a tenancy-at-sufferance upon foreclosure" and appellees as tenants at sufferance "may be removed by a writ of possession."
The trial court held a hearing on February 24, 2017. Hiran testified that the note and deed of trust introduced at the hearing and in the 270th District Court proceeding were not the documents he signed because the documents reference an adjustable interest rate of 7.975 percent and his home equity loan was for a fixed interest rate of 2.25 percent. Hiran, who is an attorney, testified that it is "typical that a contract that was entered into as a fraudulent transaction would be deemed void in [his] legal opinion." Hiran also stated that, in his legal opinion, he believed appellees are in "imminent danger of irreparable harm as the result of the forceful detainer lawsuit that’s currently pending in JP court." But Hiran acknowledged that the signature on the documents "appears to be" his signature and that he did not have a copy of the note and deed of trust he and his wife signed at closing in 2006.
At the conclusion of the hearing, the trial court instructed the parties to file briefs addressing the issue of res judicata "in conjunction with the element of a temporary injunction that is the likelihood of success on the merits," so that the court could "take a look at what actually happened in the 270th, what the proceedings were and whether they do have preclusive effect at all in this lawsuit and, if so, to what extent." Jelinis filed a Brief in Opposition to Temporary Injunction as requested by the trial court. In its brief, Jelinis argued that appellees' claims in "this lawsuit were compulsory counterclaims arising out of the same subject matter as the lawsuit brought by Deutsche Bank on September 8, 2014," and, therefore, are barred by res judicata.
The trial court signed an order granting a temporary injunction on March 10, 2017, enjoining Jelinis from selling appellees' home and from taking any legal action to evict appellees, including pursuing Jelinis’s forcible detainer suit in justice court. The court also stated in its order that it "finds that the final relief granted in the lawsuit in the 270th District Court was only in rem pursuant to TRCP 735 and therefore likely does not have preclusive effect on [appellees'] claims in this suit as a matter of law." Jelinis filed a timely interlocutory appeal. ANALYSIS
Section 51.014(a)(4) of the Civil Practices and Remedies Code specifically provides for an interlocutory appeal from an order granting a temporary injunction. Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(4) (Vernon 2017) ("A person may appeal from an interlocutory order of a district court, county court at law, statutory probate court, or county court that ... grants or refuses a temporary injunction....").
Jelinis argues in two issues that the trial court erred by enjoining it from (1) evicting appellees because they pleaded no cause of action against Jelinis; and (2) taking legal action in the justice court to evict appellees because they failed to show that "the justice court was without jurisdiction to determine possession."
I. Standard of Review
A temporary injunction is an extraordinary remedy and does not issue as a matter of right. Butnaru v. Ford Motor Co. , 84 S.W.3d 198, 204 (Tex. 2002) (op. on reh'g). To obtain a temporary injunction, an applicant must plead and prove three specific elements: (1) a cause of action against the defendant; (2) a probable right on final trial to the relief sought; and (3) a probable, imminent, and irreparable injury in the interim. Id.
We generally review a district court’s grant of a temporary injunction for an abuse of discretion. Pinnacle Premier Props., Inc. v. Breton , 447 S.W.3d 558, 562 (Tex. App.—Houston [14th Dist.] 2014, no pet.) (op. on reh'g) (citing McGlothlin v. Kliebert , 672 S.W.2d 231, 232 (Tex. 1984) ). When consideration of evidence is required, we view it in the light most favorable to the trial court’s order, indulging every reasonable inference in favor of the trial court’s determination. LasikPlus of Tex., P.C. v. Mattioli , 418 S.W.3d 210, 216 (Tex. App.—Houston [14th Dist.] 2013, no pet.).
"Although an abuse of discretion does not occur when the trial court heard conflicting evidence and substantive, probative evidence reasonably supports the trial court’s decision, we will apply a de novo standard of review when the issue turns on a pure question of law." Pinnacle Premier Props., Inc. , 447 S.W.3d at 562. Subject matter jurisdiction is a question of law. Espinoza v. Lopez , 468 S.W.3d 692, 695 (Tex. App.—Houston [14th Dist.] 2015, no pet) ; Maxwell v. U.S. Bank Nat'l Ass'n , No. 14-12-00209-CV, 2013 WL 3580621, at *2 (Tex. App.—Houston [14th Dist.] July 11, 2013, pet. dism'd w.o.j.) (mem. op.).
II. Waiver
Before we analyze Jelinis’s challenge of the trial court’s temporary injunction order, we address appellees' request to strike Jelinis’s appellate brief because the "brief lacks a section pertaining to the Issue Presented or Presentment of the Issues" as required in Texas Rule of Appellate Procedure 38.1(f).
Appellees do not cite any case in which a court has struck an appellate brief because a party failed to include an "Issues Presented" section in its brief. Instead, appellees rely on White v. Harvest Credit Management V , No. 14-04-00349-CV, 2004 WL 2297367 (Tex. App.—Houston [14th Dist.] Oct. 14, 2004, no pet.) (per curiam) (mem. op.), to support their request to strike. But White is inapplicable.
In White , this court struck appellant’s brief only after (1) appellant failed to timely file a brief pursuant to Texas Rule of Appellate Procedure 38.6 ; (2) appellant failed to file a motion for extension of time; (3) this court informed appellant that it would dismiss his appeal for want of prosecution unless he filed a brief; (4) appellant filed a letter with this court explaining that he had filed a brief in the trial court and also "attached a copy of the document he refer[ed] to as a brief that he filed" in the trial court; (5) this court informed appellant that his "letter d[id] not comply with the requirements for briefs contained in the Texas Rules of Appellate Procedure" 9.4 and 38.1 and granted appellant an extension of time to file a brief that conforms to the rules; (6) "appellant tendered a brief that did not comply with the Texas Rules of Appellate Procedure;" (7) this court returned the brief to appellant for correction; (8) "appellant submitted another nonconforming brief, which was also returned for correction;" and (9) appellant then filed a brief that complied with the rules of form but failed to comply with the briefing requirements set forth in Rule 38.1, and "[m]ost significantly, appellant ... failed to make any legal arguments to support reversal of the judgment, and the brief contain[ed] no citations to the record or to legal authorities." Id. at *1.
Here, Jelinis’s brief contains every section listed in Rule 38.1, except for an "Issues Presented" section. Jelinis presented in the body of its brief "a clear and concise argument for the contentions made, with appropriate citations to authorities and to the record." See Tex. R. App. P. 38.1(i).
We deny appellees' request to strike Jelinis’s appellate brief for failure to include an "Issues Presented" section in its appellate brief. See Weeks Marine, Inc. v. Garza , 371 S.W.3d 157, 162 (Tex. 2012) ; Perry v. Cohen , 272 S.W.3d 585, 587 (Tex. 2008) (per curiam); Verburgt v. Dorner , 959 S.W.2d 615, 616-17 (Tex. 1997).
Having rejected appellees' request to strike Jelinis’s brief, we now turn to Jelinis’s arguments challenging the trial court’s order enjoining Jelinis from taking legal action in the justice court via a forcible detainer suit to evict appellees.
III. Justice Court Jurisdiction
We begin by addressing Jelinis’s contention in its second issue that the "trial court erred in enjoining [Jelinis] when there was no showing that the justice court was without jurisdiction to determine possession."
Jelinis contends that the justice court has jurisdiction over its forcible detainer case and a district court may not enjoin a justice court from hearing a forcible detainer case if the justice court does not have to make a determination regarding title. According to Jelinis, the justice court can determine possession without determining title because the foreclosed deed of trust created a tenancy-at-sufferance upon foreclosure.
Jurisdiction to hear a forcible detainer action is expressly given to the justice court of the precinct where the property is located. Pinnacle Premier Props., Inc. , 447 S.W.3d at 562 ; see Tex. Prop. Code Ann. § 24.004 (Vernon 2000). A justice court has exclusive jurisdiction to decide the issue of immediate possession, which may not be infringed upon as long as the justice court determines only possession. Pinnacle Premier Props., Inc. , 447 S.W.3d at 562 ; Rice v. Pinney , 51 S.W.3d 705, 713 (Tex. App.—Dallas 2001, no pet.). Although a justice court has exclusive jurisdiction to hear a forcible detainer action, a district court may enjoin the exercise of the justice court’s jurisdiction in a forcible detainer action when there is a showing that the justice court is without jurisdiction to proceed in the cause or the defendant has no adequate remedy at law. McGlothlin , 672 S.W.2d at 232 ; Pinnacle Premier Props., Inc. , 447 S.W.3d at 562.
The only issue to be resolved in a forcible detainer action is the right to immediate possession of property; the merits of title are not adjudicated. Espinoza , 468 S.W.3d at 695 ; Yarbrough v. Household Fin. Corp. III , 455 S.W.3d 277, 280 (Tex. App.—Houston [14th Dist.] 2015, no pet.). Justice courts lack jurisdiction to adjudicate title disputes or determine who has title to land. Espinoza , 468 S.W.3d at 695 ; Yarbrough , 455 S.W.3d at 280.
When there are issues concerning both title and possession, the issues may be litigated in separate proceedings in different courts with appropriate jurisdiction. Espinoza , 468 S.W.3d at 695 ; Yarbrough , 455 S.W.3d at 280. But when a forcible detainer action presents a genuine issue of title so intertwined with the issue of possession that a trial court would be required to determine title before awarding possession, then a justice court lacks jurisdiction to resolve the matter. Yarbrough , 455 S.W.3d at 280 ; see Pinnacle Premier Props., Inc. , 447 S.W.3d at 563. Thus, a justice court is not deprived of jurisdiction merely by the existence of a title dispute; it is deprived of jurisdiction only if resolution of a title dispute is a prerequisite to determination of the right to immediate possession. Espinoza , 468 S.W.3d at 695-96 ; Yarbrough , 455 S.W.3d at 280.
A forcible detainer action requires proof of a landlord-tenant relationship. Yarbrough , 455 S.W.3d at 280. Although such a relationship is not a prerequisite to jurisdiction, the lack of such a relationship indicates that the case may present a title issue. Id. ; Pinnacle Premier Props., Inc. , 447 S.W.3d at 564 n.9.
The deed of trust in this case contained the following tenancy-at-sufferance clause: "If the Property is sold pursuant to [a foreclosure sale], Borrower or any person holding possession of the Property through Borrower shall immediately surrender possession of the Property to the purchaser at that sale. If possession is not surrendered, Borrower or such person shall be a tenant at sufferance and may be removed by writ of possession."
"Tenant-at-sufferance clauses separate the issue of possession from the issue of title." Pinnacle Premier Props., Inc. , 447 S.W.3d at 564. "Under these provisions, a foreclosure sale transforms the borrower into a tenant at sufferance who must immediately relinquish possession to the foreclosure-sale purchaser." Id. In essence, a tenancy-at-sufferance clause creates a landlord-tenant relationship when the property is foreclosed. See Yarbrough , 455 S.W.3d at 280.
Appellees contend that "the issue of title is so intertwined with the issue of possession as to preclude jurisdiction in the justice court." Appellees state that they "do not dispute" the deed of trust contains a tenancy-at-sufferance clause. Instead, they contend that the "fraudulent practice by Long Beach Mortgage" of secretly switching certain pages in the loan documents made the home equity loan, the related deed of trust, the foreclosure sale, and substitute trustee’s deed void. Therefore, according to appellees, "there can be no landlord-tenant relationship between the parties" based on the tenancy-at-sufferance clause when the clause is part of the void deed of trust.
Appellees rely on Yarbrough v. Household Finance Corporation III to support their contentions. This reliance is misplaced.
In Yarbrough , Household Finance filed a forcible detainer suit in justice court to evict the Yarbroughs from their home. Id. at 278. The justice court record contained a deed of trust allegedly signed by the Yarbroughs, as borrowers, as security for a loan from Ameriquest Mortgage Company. Id. The deed of trust allowed the trustee to foreclose on the property in the event of a default, and if that occurred, the Yarbroughs were required to surrender possession under a tenancy-at-sufferance clause. Id. at 278, 280. When Household Finance purchased the property at a foreclosure sale and acquired a substitute trustee’s deed conveying the property, it initiated a forcible detainer action to gain possession of the property from the Yarbroughs. Id. at 278. The justice court signed a judgment in favor of Household Finance, which the Yarbroughs appealed to the county court at law. Id. at 278-79.
The Yarbroughs filed a plea to the jurisdiction and an amended plea alleging that the foreclosure sale was void because the deed of trust was forged and void. Id. at 279. The Yarbroughs filed an affidavit, in which Ruby Yarbrough stated, "The deed of trust on which the purported foreclosure sale was based and that led to the eviction lawsuit was not signed by my husband or me, and was a forgery.... I understand that the people associated with Ameriquest Mortgage forged signatures on many loans, and the Deed of Trust on which the foreclosure sale was based leading to this eviction would be one of them." Id. The county court at law denied the pleas and the Yarbroughs' affirmative defense of forgery, entering a final summary judgment awarding Household Finance possession of the property. Id.
On appeal, we noted that, "[l]ike the Ameriquest deed of trust here, a deed of trust may include a tenancy-at-sufferance clause that creates a landlord-tenant relationship when the property is foreclosed." Id. at 280. We also noted that the Yarbroughs did not challenge defects in the foreclosure process, which generally do not require a justice court to resolve a title dispute before determining the right to possession, but the Yarbroughs challenged the validity of the original deed establishing the tenancy-at-sufferance relationship. Id. at 281. We stated that, because the Yarbroughs argued that Household Finance’s claim of a tenancy relationship cannot be sustained on a forged deed of trust they never signed because such a deed is void ab initio and passes no title, this case is "more akin to those in which the parties disputed the existence of a landlord-tenant relationship." Id. at 282. We concluded that, "[b]ecause the Yarbroughs contend the deed of trust and resulting substitute trustee’s deed are void due to forgery, they have raised a genuine issue of title so intertwined with the issue of possession as to preclude jurisdiction in the justice court. A prerequisite to determining the immediate right to possession will be resolution of the Yarbroughs' title dispute concerning forgery of the deed of trust."
Here, appellees allege that the home equity loan and deed of trust are void because Long Beach Mortgage switched certain pages in the loan documents without appellees' knowledge to reflect an adjustable interest rate of 7.975 percent instead of a 2 percent fixed interest rate. This is a different allegation than the one at issue in Yarbrough because the homeowners in Yarbrough did not claim that some information or terms of their loan or the deed of trust were forged; they offered evidence that they never signed the deed of trust on which the foreclosure sale was based and that their signatures were forged, so that a tenancy relationship could not be sustained based on a forged deed of trust because the deed was void. See id. at 279, 282.
Here, appellees do not deny that they signed loan documents including the note containing the adjustable interest rate, the deed of trust containing the tenancy-at-sufferance clause, and the adjustable rate rider. This rider contains provisions allowing for changes in the interest rate and monthly payments and states that it is "deemed to amend and supplement the [d]eed of [t]rust." Appellees also do not deny that the deed of trust contained a checked box for "Texas Home Equity Adjustable Rate Rider" on the same page on which appellees signed the deed of trust. This rider contained a "Limits on Interest Rate Changes" clause that provided: "The interest rate I am required to pay at the first Change Date will not be greater than 9.975% or less than 7.975%."
Appellees have not claimed that the pages of the deed of trust and adjustable rate rider containing their signatures have been switched or somehow falsified; these pages contain language indicating an adjustable interest rate. Appellees also have not denied that they entered into an agreement with Long Beach Mortgage to borrow $800,000 and that they used their home to secure the loan from Long Beach Mortgage. Appellees did not dispute that they agreed to the tenancy-at-sufferance clause contained in the deed of trust they signed. Nor have appellees alleged that their signatures acknowledging the terms and conditions within the loan documents were forged. Unlike the forgery allegations made in Yarbrough , appellees' claim that the mortgage company allegedly switched certain pages in the loan documents to change the interest rate terms did not raise "a genuine issue of title so intertwined with the issue of possession as to preclude jurisdiction in the justice court."
The circumstances in this case are more akin to those in Wade v. Household Finance Corporation III , No. 06-15-00074-CV, 2016 WL 741872 (Tex. App.—Texarkana Feb. 25, 2016, no pet.) (mem. op.).
In Wade , Don Wade and his wife borrowed $57,999.72 from Household Finance to buy two mobile homes that were located on their real property. Id. at *1. To secure the loan, the Wades executed a first lien and deed of trust giving the real property to Household Finance as security for the loan. Id. The deed of trust contained a tenancy-at-sufferance clause. Id. When the Wades defaulted on the loan, Household Finance accelerated the loan and later bought the real property at a foreclosure sale. Id. Household Finance sent Wade a notice to vacate the real property and filed a forcible detainer suit in justice court when Wade failed to do so. Id. at *2. Wade responded by filing a plea to the jurisdiction, arguing, among other things, that he pledged only a little over three acres of collateral at the time of the loan and that the justice court lacked subject matter jurisdiction. Id. The justice court awarded possession of the real property to Household Finance. Id. On appeal to the county court at law, the court denied Wade’s plea to the jurisdiction and ordered "Wade to be removed from the property." Id.
Wade claimed on appeal that the description of the real property pledged as security for repayment of the loan attached to the deed of trust wrongly reflected 90 acres of land, and his affidavit showed that he only owned 34.69 acres, after selling parcels out of his original 90-acre property. Wade claimed he agreed with Household Finance "to allow a lien of 10% of the remaining acreage, 3.4 acres, together with a lien" on the two mobile homes to be financed. Id. at *3, 5. Wade argued the justice court lacked jurisdiction to decide the issue of possession to 90 acres because Household Finance "fraudulently falsified the amount of acreage described within the deed of trust, thereby making it void, and that the resolution of title was a necessary prerequisite to determining the identity of which party had the immediate right of possession." Id. at *5-6.
The court of appeals rejected Wade’s argument. Id. at *7. It analyzed Wade’s contentions and held that the Yarbrough case was inapplicable. Id. at *6-7. The court noted that Wade did not deny entering into an agreement with Household Finance to borrow the amount stated in the loan documents; Wade did not challenge the validity of the tenancy-at-sufferance clause in the deed of trust; and "whether Wade had title to ninety acres or 34.69 acres ..., Wade has never claimed that his signature verifying the information contained within any of the documents was a forgery." Id. at *7. The court held that Wade’s alleged title dispute was not so intertwined with the right to possession that it divested the justice court of jurisdiction to determine who had superior right of possession to the property. Id.
Having considered the evidence and arguments, we conclude that the present case is distinguishable from Yarbrough and similar to Wade . We hold that appellees are subject to the tenancy-at-sufferance clause contained in the deed of trust; the questions of possession and title are not intertwined; and the justice court had jurisdiction over the issue of possession.
IV. Adequate Remedy at Law
Appellees argue that they will suffer irreparable harm and do not have an adequate remedy at law because real estate is unique. But the cases appellees cite to support their argument all involved injunctions to stop foreclosures. Here, the foreclosure already has occurred. Appellees' available remedies are money damages or rescission of the foreclosure sale. See Pinnacle Premier Props., Inc. , 447 S.W.3d at 565. Therefore, under the facts of this case, appellees have an adequate remedy at law through rescission of the sale if the claims they brought in district court are meritorious. See id.
CONCLUSION
The trial court erred in enjoining Jelinis from pursuing its forcible detainer suit in justice court to evict appellees. The justice court had jurisdiction in this case over the question of possession because the issues of title and possession were not so intertwined that a trial court would be required to determine title before awarding possession, and appellees have an adequate remedy at law if their claims in district court are meritorious. We sustain Jelinis’s second issue. And, in light of our disposition of Jelinis’s second issue, we need not reach its first issue.
Accordingly, we reverse the trial court’s temporary injunction insofar as it enjoins Jelinis from pursuing its forcible detainer suit in justice court to evict appellees and we render judgment denying appellees' request for a temporary injunction. Because Jelinis does not challenge the trial court’s temporary injunction order in any other respects, we affirm the remainder of the order.
( Frost, C.J., concurring).
CONCURRING OPINION
Kem Thompson Frost, Chief Justice
The trial court enjoined the purchaser of real property at a foreclosure sale from taking action in the justice court to evict the former owners and current occupants of the premises, who claimed that fraudulent alterations of the promissory note they signed to purchase the property rendered the loan documents void and unenforceable. The occupants relied on our recent precedent in Yarbrough v. Household Fin. Corp. III , to argue that the intertwining of issues of title and possession deprived the justice court of jurisdiction to conduct eviction proceedings.
455 S.W.3d 277, 283 (Tex. App.—Houston [14th Dist.] 2015, no pet.).
In concluding that the trial court abused its discretion in issuing the temporary injunction, the majority declines to find intertwining issues and declines to apply the Yarbrough precedent. Unlike the Yarbrough court, the majority does not analyze the effect of the fraud allegations. Nor does the majority consider the legal consequences of fraudulent alterations on the validity and enforceability of the instruments. Instead, the majority reasons that the occupants do not deny signing an instrument containing a tenancy-at-sufferance clause. But, if the occupants are correct that the note and deed of trust are void and unenforceable, and the note and the deed of trust create the tenancy-at-sufferance relationship, then the issues of title and possession still would be intertwined. The occupants challenge the entirety of the loan documents, yet the majority concludes that the occupants have failed to challenge the tenancy-at-sufferance clause. The majority then reasons that the occupants' failure to challenge the tenancy-at-sufferance clause means the issues of title and possession are not intertwined. Both the reasoning and approach are out of step with Yarbrough.
The better course would be to conclude that the occupants' allegations do not show intertwining of title and possession issues because the occupants have not alleged or proved that the purchaser at the foreclosure sale would be unable to enforce the terms of the original note and deed of trust, including the tenancy-at-sufferance clause.
Factual and procedural background
Appellee Bruce Hiran signed a Texas Home Equity Note payable to Long Beach Mortgage Company. Hiran and his wife Hung N. Yi secured the debt by giving Long Beach Mortgage Company a deed-of-trust lien on their property at 4132 Lehigh. Long Beach Mortgage Company later transferred the note and deed of trust to Deutsche National Bank, as trustee, in trust for registered holders of Long Beach Mortgage Loan Trust 2006-10. When Hiran defaulted on the note, Deutsche National Bank foreclosed on the deed-of-trust lien and sold the property to appellant Jelinis, LLC at a foreclosure sale. Hiran and Yi, who occupied the property, filed an action in the trial court seeking various forms of relief, including a temporary injunction enjoining Jelinis from obtaining relief in the justice court to evict them from the property. On appeal, Hiran and Yi assert that they were entitled to a temporary injunction because the justice court lacked jurisdiction over the forcible detainer action due to intertwining issues of title and possession.
Though the note and deed of trust would create a tenancy-at-sufferance relationship between Hiran and Yi and the purchaser of the property at a foreclosure sale, Hiran and Yi assert that fraudulent alterations of the note and deed of trust render the instruments void. Thus, according to Hiran and Yi, the justice court lacks jurisdiction because whether the note and deed of trust are void relates to both title and possession. The trial court granted Hiran and Yi’s request for a temporary injunction. Jelinis now challenges that ruling on appeal.
Standards governing relief
To get a temporary injunction, Hiran and Yi had to prove (1) a claim against Jelinis, (2) a probable right on final trial to the relief sought, and (3) a probable, imminent, and irreparable injury in the interim. In granting the temporary injunction, the trial court determined that Hiran and Yi have a probable right to the relief they seek—dismissal of the forcible detainer case from the justice court for lack of jurisdiction. Analysis
See Butnaru v. Ford Motor Co. , 84 S.W.3d 198, 204 (Tex. 2002) (op. on reh'g).
Though justice courts have jurisdiction over forcible-detainer actions, they lack subject-matter jurisdiction to resolve title disputes. The only issue in a forcible-detainer action is who has the right to immediate possession of the premises. The justice court lacks jurisdiction over a forcible-detainer action if the question of title is so intertwined with the issue of possession that possession cannot be adjudicated without first determining title. When there is a basis for determining immediate possession independent from title, the justice court has jurisdiction to hear the forcible-detainer action.
Laguan v. U.S. Bank Trust , No. 14-14-00577-CV, 2016 WL 750172, at *3 (Tex. App.—Houston [14th Dist.] Feb. 25, 2016, no pet.) (mem. op.).
See Shields Limited P’ship v. Bradberry , 526 S.W.3d 471, 478 (Tex. 2017).
See Reynoso v. Dibs, US, Inc. , 541 S.W.3d 331, 337 (Tex. App.—Houston [14th Dist.] 2017, no pet.).
See id.
To establish a forcible detainer, a plaintiff must prove that a person who refuses to surrender possession of the real property on demand is a tenant or subtenant who falls within one of three statutory categories. If a trustee’s deed purports to convey real property to a person who was the highest bidder at the foreclosure sale on a deed-of-trust lien and if the person pursues a forcible-detainer action against the former owners of the property, a tenancy-at-sufferance clause in the deed of trust allows the person to prove the tenancy status of the former owners and to prove superior right to possession without proving the validity of the person’s title to the real property.
See Tex. Prop. Code Ann. § 24.002 (West, Westlaw through 2017 1st C.S.) (stating that a person who refuses to surrender possession of real property on demand commits a forcible detainer if the person: (1) is a tenant or a subtenant wilfully and without force holding over after the termination of the tenant's right of possession; (2) is a tenant at will or by sufferance, including an occupant at the time of foreclosure of a lien superior to the tenant’s lease; or (3) is a tenant of a person who acquired possession by forcible entry).
A tenancy-at-sufferance clause provides that in the event of a foreclosure sale, the grantor in the deed of trust will become a tenant at sufferance. See Reynoso , 541 S.W.3d at 337.
See id.
Hiran and Yi do not allege that their signatures were forged. Hiran does not deny that the signature page of the note bears his signature. Hiran and Yi do not deny that the signature page of the deed of trust contains each of their signatures. However, Hiran and Yi assert that Long Beach Mortgage fraudulently switched pages in the note and deed of trust after their execution of the instruments. They allege that Hiran signed a note with a fixed 2% interest rate and to secure the note, Hiran and Yi signed a deed of trust. According to Hiran and Yi, Long Beach Mortgage must have changed the pages so that the fraudulent versions of the note and deed of trust showed a 7.975% adjustable-interest rate. Hiran and Yi assert that this action made the note and deed of trust void.
If the note and deed of trust are void, as Hiran and Yi allege, then Deutsche National Bank would have lacked title to the property and so could not have transferred the title to Jelinis at the foreclosure sale. In addition, if the note and deed of trust are void, then Jelinis cannot rely on the tenancy-at-sufferance clause in the deed of trust to establish a forcible detainer. Thus, if Long Beach Mortgage’s alleged fraud in switching out some of the pages in the note and deed of trust would make these instruments void, then that allegation would bear upon Jelinis’s ability to prove a superior right to possession as well as Jelinis’s title to the premises.
See Tex. Prop. Code Ann. § 24.002 ; Reynoso , 541 S.W.3d at 337.
See Tex. Prop. Code Ann. § 24.002 ; Reynoso , 541 S.W.3d at 337.
Embracing the Sixth Court of Appeals’s opinion in Wade v. Household Finance Corp. III , the majority concludes that Hiran and Yi have not shown the issues of possession and title are intertwined because they neither dispute signing a deed of trust nor dispute that the deed of trust they signed contained a tenancy-at-sufferance clause. In adopting the Wade rationale, the majority effectively enforces a portion of an allegedly fraudulent document, reasoning that Hiran and Yi admit to having signed a similar document.
No. 06-15-00074-CV, 2016 WL 741872 (Tex. App.—Texarkana Feb. 25, 2016, no pet.) (mem. op.)
See ante at 15–16.
See id.
In Wade , the maker of the note/occupant of the premises claimed the note holder falsified parts of the deed of trust, making the deed of trust void. The maker/occupant in Wade asserted that if the deed of trust were void, then the note holder would not have proper title to the property or a superior right to possession, and the intertwined issue of title would deprive the justice court of jurisdiction. The Wade court concluded that when the parties do not dispute that they signed a document creating a landlord-tenant relationship, then the justice court has jurisdiction over the forcible-detainer action. In Yarbrough, this court took a different approach.
Wade , 2016 WL 741872, at *5.
See id.
See id. at *7.
The Yarbrough court held that when a party asserts facts that, if true, would make void the deed of trust containing the tenancy-at-sufferance clause, the issue of title is intertwined with the issue of possession. In Yarbrough , the occupants asserted that the deed of trust was forged, which, if true, would have made the deed of trust and its tenancy-at-sufferance clause void ab initio. The Wade court and the majority seize on language in Yarbrough stating that, "when there is no dispute that the parties agreed to a tenancy relationship in the event of foreclosure, the tenancy relationship provides an independent basis for resolving the issue of possession." But, in Wade and in today’s case, even though the occupants do not deny signing a deed of trust that contained a tenancy-at-sufferance clause, they challenge the existence of the landlord-tenant relationship by alleging that the contract creating the relationship is void and unenforceable due to fraud.
See Yarbrough v. Household Fin. Corp.III , 455 S.W.3d 277, 283 (Tex. App.—Houston [14th Dist.] 2015, no pet.).
Id. at 281–82.
Id. at 282. See ante at 15–16.
The majority asserts that neither the occupant in Wade nor Hiran and Yi challenged the validity of the tenancy-at-sufferance clause. But, if the note and deed of trust are void, as Hiran and Yi allege, then the tenancy-at-sufferance clause is also void and there is no basis for Jelinis to establish a forcible detainer. The allegation that the note and deed and trust are void due to the allegedly fraudulent acts of Long Beach Mortgage Company is a challenge to the existence of the tenancy-at-sufferance clause contained in the deed of trust. The majority does not explain how the issues of possession and title can be separate if both possession and title turn on the validity of the allegedly void instruments.
See ante at 15–16.
See Reynoso , 541 S.W.3d at 337 ; Yarbrough , 455 S.W.3d at 282.
See ante at 11–16.
Material alterations under section Uniform Commercial Code section 3.407
Texas’s version of the Uniform Commercial Code, embodied in Texas Business and Commerce Code, speaks to the effect of alterations on negotiable instruments after execution. Section 3.407, entitled "Alteration," provides:
See Tex. Bus. & Comm. Code Ann. § 3.407 (West, Westlaw through 2017 1st C.S.).
(a) "Alteration" means:
(1) an unauthorized change in an instrument that purports to modify in any respect the obligation of a party; or
(2) an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party.
(b) Except as provided in Subsection (c), an alteration fraudulently made discharges a party whose obligation is affected by the alteration unless that party assents or is precluded from asserting the alteration. No other alteration discharges a party, and the instrument may be enforced according to its original terms.
(c) A payor bank or drawee paying a fraudulently altered instrument or a person taking it for value, in good faith and without notice of the alteration, may enforce rights with respect to the instrument:
(1) according to its original terms; or
(2) in the case of an incomplete instrument altered by unauthorized completion, according to its terms as completed.
Under section 3.407, a fraudulent alteration of an instrument does not discharge the obligation of a party whose obligation is affected by the alteration vis-à-vis a payor bank or drawee paying a fraudulently altered instrument or a person taking it for value, in good faith and without notice of the alteration.
See id.
Hiran and Yi allege that Long Beach Mortgage Company altered the note and deed of trust after they signed these loan documents. Under the principles set forth in section 3.407, if the allegations are true, Long Beach Mortgage Company’s alteration of the note and deed of trust would discharge Hiran’s and Yi’s obligations under the note and deed of trust unless Hiran and Yi are precluded from asserting the alteration or the party seeking to enforce its rights with respect to the note and deed of trust is a payor bank or drawee paying a fraudulently altered instrument or a person taking it for value, in good faith, and without notice of the alteration. Under section 3.407(c), one taking the altered instrument for value, in good faith, and without notice of the alteration may enforce rights with respect to the instrument according to its original terms. So, if Deutsche National Bank took the allegedly altered instruments for value, in good faith, and without notice of the alleged alterations, then Deutsche National Bank would be entitled to enforce the instruments according to their original terms. Both sides agree that the original terms included a tenancy-at-sufferance clause.
See id.
See id.
To allege a title issue based on the alterations of the instruments, Hiran and Yi needed to raise allegations that would show the law barred Deutsche National Bank from foreclosing on the deed-of-trust lien because of the alleged alterations of the instruments. But, Hiran and Yi made no such allegations. They did not allege that Deutsche National Bank did not take the note for value, in good faith, and without notice of the alleged alterations, nor did they put on any proof that Deutsche National Bank did not take the note for value, in good faith, and without notice of the alleged alterations. Absent such proof, Deutsche National Bank would be entitled to enforce the note and deed of trust according to the instruments' original terms. Because Hiran and Yi agreed the original terms of the instruments included a tenancy-at-sufferance clause, to deprive the justice court of jurisdiction, they needed to have alleged that the alterations prevented Deutsche National Bank from enforcing the tenancy-at-sufferance clause.
See id.
The Yarborough court analyzed the intertwining-of-title-and-possession issue by evaluating the legal consequences of the alleged act that rendered the loan documents void (in that case, forgery). The Yarborough court reasoned that the forgery allegation, if true, would render the deed of trust, including the tenancy-at sufferance clause void, so the court found the requisite entanglement of the title and possession issues. In analyzing today’s case, the majority abandons Yarborough’s analytical framework. The majority does not address whether the legal remedy for one harmed by the fraudulent switching of pages in the note and deed of trust would be to declare the instruments void. Neither the majority nor the occupants cite to any case so holding. If the law would enforce the parties' true agreement rather than declare the instruments void, then despite the switching-pages allegations, the issues of title and possession would not be intertwined.
See Yarbrough , 455 S.W.3d at 283.
See ante at 11–16.
The court should follow Yarbrough’s approach rather than looking to Wade. Though I concur in the court’s judgment, I respectfully decline to join in the majority’s reasoning.