Wells Fargo Bank, N.A. as Trustee v. Robinson, Ray ( 2012 )

RVFRSE and IWNI)ER; Opinion issued December 11,2012
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No. 05-1 1-00700-CV
WELLS FARGO BANK, N.A., AS TRUSTEE, Appellant
RAY ROBINSON, Appellee
On Appeal from the 296th Judicial District Court
Collin County, Texas
Trial Court Cause No. 296-02231-2008
OPINION
Before Justices Morris, Francis, and Murphy
Opinion By Justice Morris
In this appeal following a trial to the court without ajury, Wells Fargo Bank. N .A. challenges
the trial courts judgment in favor of Ray Robinson on his claims for wrongful foreclosure and
breach of contract. In three issues. Wells Fargo contends the evidence is legally and factually
insufficient to support the trial court’s award of damages under either theory of recovery asserted by
Robinson and there is no proper basis to support the award of attorney’s fees. Robinson brings a
cross-appeal contending the trial court erred in failing to order Wells Fargo to lhrfeit all of the
principal and interest collected on his home equity note. After reviewing the evidence and applicable
law. we conclude the trial court erred in awarding Robinson damages and attorneys fees. We further
conclude Robinson is not entitled to a foiteiture of the principal and interest paid on his note We
reverse the trial courts judgment and render judgment that Robinson take nothing by his claims.
On May 24. 1 999. Ray Robinson executed a home equity note in the principal amount of
$71800. The note was secured h a deed of trust on the property. It is undisputed that Robinson
defaulted under the terins of the note by failing to make his monthly payments. As a result, Wells
Fargo accelerated the note and it became due and payable. Although Robinson stated at trial that he
made some payments on the note through 2007 pursuant to a bankruptcy court proceeding. he
conceded that he did not make all the necessary payments and had not made any payments on the
note for more than three years before trial despite the fact that he was still living on the property.
Wells Fargo filed an application with the trial court for an expedited Ibreclosure under rule
736 of the Texas Rules of Civil Procedure. Robinson did not contest the hanLs right to foreclose.
hut requested additional time to try to sell the house. The parties later reached an agreement and.
on March 12, 2008, the trial court signed an agreed order stating that Wells Fargo was authorized
to proceed with a foreclosure and directed the hank to “post [the] property on or before April 14.
2008 for the May 6. foreclosure sale.’ Contrary to the order, the substitute trustee for Wells Fargo
did not post the property fbr sale until May 12. 2008 and did not conduct the foreclosure until June
3. Wells Fargo purchased the property at the June 3 foreclosure sale.
Approximately two months after the sale. Robinson brought this suit contending Wells Fargo
was not authorized to foreclose on his property because it did not comply with the agreed court
order. Robinson asserted claims including wrongful foreclosure and breach of contract as well as
requesting declaratory relieI A trial was conducted before the court without ajury. Based on the
evidence presented. the trial court stated in its findings of fact and conclusions of law that the
foreclosure on June 3, 2008 was wrongful and in breach of the deed of trust because Wells Fargo’s
substitute trustee did not have a valid court order to kreclose on the property on the date the
hueclosurc occurred. The judgment awarded Robinson S47.007.37 in damaucs represcntine the
difference between the fair market value of the property on the foreclosure date and the unpaid
balance of the note. The judgment also awarded attorney’s fees and additional fees in the event of
appeals. All other relief was denied. This appeal ensued.
II.
In its first two points of error, Wells Fargo contends the evidence is legally and factually
insufficient to support the damages awarded by the trial court. Wells Fargo argues there is no
evidence of a causal connection between the alleged wrongful foreclosure or the alleged breach of
the deed of trust and the monetary damages asserted by Robinson. According to Wells Fargo.
Robinson suffered neither prejudice nor harm as a result of the delay in the foreclosure sale.
Robinson responds that he is entitled to damages based solely on the fact that the sale was conducted
in violation of both the deed of trust and the Texas Constitution. We disagree with Robinson.
Article 16. Section 50(a)(6) of the Texas Constitution sets forth the requirements for an
extension of credit secured by a lien on the borrower’s homestead. TEx. CoxsT. art XVI. S 50(a)(6).
Among these is the requirement that the lien may be foreclosed upon only by a court order. id. §
50(a)(6)(D). The deed of trust signed by the parties incorporated this requirement by stating that
Wells Fargo must obtain a court order before foreclosing on the property. The court order in this
case authorized Wells Fargo to foreclose on the property only on May 6. 2008. Because the
foreclosure sale was conducted on a different date. it was not authorized by a court order and,
therefore, violated the constitutional requirement set forth in the deed of trust.
A foreclosure sale not conducted in accordance with the terms of the deed of trust gives rise
to a cause of action to set aside the sale and the resulting trustees deed. See University Says. Ass ‘a
v. Soringivoacl.s Shopping ( ‘ir. 644 S.\V.2d 705. 706 ( [cx. 1983). I’hc trial court did not set aside
.
the trustee’s deed however. hut instead awarded damages. For a party to recover damages lbr
wrongful toreclosure and breach of the deed ol trust. he must show that he has suttered a loss or
material injury as the result of an irregularity in the foreclosure sale. .S’ee Id.; see also Gainesville
Oil & Gas Co., Inc. v, Farm Credit Bank of Tex., 847 S.W.2d 655, 659 (Tex. App.—Texarkana
1993. no writ). In general, this is shown where the actions of the lender or note holder have caused
the property to be sold for a grossly inadequate price. See American Says. & Loan Assoc, v. 4iusick.
531 S.W.2d 581. 587 (Tex. 1975). in such a case, the damages are measured by the difference
between the market value of the land and the remaining balance on the outstanding mortgage debt.
See John Hancock Mu!. Life Ins. Co. v, Howard, 85 S.W.2d 986, 988-89 (Tex. Civ. App.—Waco
1981, writ refd).
The recovery of damages is not appropriate, however, where title to the property has not
passed to a third party and the borrower’s possession of the property has not been materially
disturbed. See .Janes i’. CPR Corp..623 S.W.2d 733. 738 (Tex. App-—Houston [1° Dist.] 1982. writ
ref d n.r.c.): see also Peterson v. Black, 980 S.W.2d XIX, 823 (Tex. App.—San Antonio 1998, no
pet.). Where the note holder obtains title to the property at the foreclosure sale and the borrower
retains possession. the proper remedy is to set aside the trustee’s deed and to restore the borrower’s
title. subject to the note holder’s right to establish the debt owed and foreclose its lien. See Jones,
623 S.W.2d at 738. The reason for this is that ‘the law undertakes to award just compensation — no
more and no less — for the injuries sustained.” See Howard. 85 S.W.2d at 989. If the borrower’s
possession has not been disturbed and no third party rights to the property have been created, the
Although Robinson’s petition seeks reliefincluding quiet title to the property and a ‘declaration” that the substitute trustee’s deed be canceled,
the petition does not directly requestthat the foreclosure sale be set aside. To the extentthe petition can he read to request this reliek the trial court
did not order the deed set aside and Robinson does not appeal from such ruling.
borrower has sufThred no compensable injury. See Peterson. 980 S.W.2d at 823.
In this case. Robinson presented no evidence that the property it iSSUe was sold for an
inadcqtiate price or that he as other\ ise harmed by the delay in the foreclosure sale. lurthermure,
it is undisputed that Wells Fargo purchased the property at the foreclosure and, as ol the date of trial,
Robinson continued to occupy the premises. l3ased on the record hethre us. we conclude Robinson
failed to present any evidence of a compensable injury. The trial court erred, therefore, in awarding
Robinson monetary damages under either his wrongful foreclosure or his breach of contract cause
olaction. We resolve Wells Fargo’s Iirst two issues in its favor.
In its third issue, Wells Fargo contends the trial court erred in awarding Robinson attorney’s
fees. Robinson responds that he is entitled to recover the fees under the [‘exas Uniform Declaratory
Judgment Act. An examination of the trial court’s judgment, however, shows that Robinson was
not awarded any declaratory relief. The judgment merely ordered that Robinson recover monetary
damages. fees, and Wells Fargo. All relief not specifically granted in the judgment was
denied.
Furthermore. Robinson’s request for declaratory reliefis merely duplicative of his claims for
wrongful foreclosure and breach of contract. A plaintiff may not use the declaratory judgment act
to recover attorney’s fees that are not otherwise available by simply seeking a declaratory judgment
on issues already before the court as part of the oher claims asserted. See MBM Fin. Corp. v.
If oodlands Operating Co., L.P., 292 S.W.3d 660, 669 (Tex. 2009). As the Texas Supreme Court
has stated. “[iif repleading a claim as a declaratory judgment could justify a fee award, attorney’s
fees would be available for all parties in all cases.”
Robinson’s petition requested the trial court to declare that Wells Fargo did not have a valid
court order authorizing it to foreclose on the property on June 3, 2008 and that its foreclosure was
wrongltil and a breach of the deed of trust. lhese requests are nothing more than a reassertion of the
issues underlying Robinson’s claims for wrongful foreclosure and breach of contract. All of the
relief sought tinder Robinson s declaratory judgment action could have been sought in connection
with his other claims. The only apparent benefit to Robinson of the declaratory judgment action was
to provide a basis for an award of attorney’s fees. As such, an award of attorney’s les under the
declaratory judgment act is improper. 5cc Elan Indus, Inc. i’. Lch,nunn. 359 S.W.3d 620. 624 (Fex.
2011). We resolve Wells Fargo’s third issue in its favor.
Finally, we address Robinson’s cross-appeal contending the trial court erred in failing to
order Wells Fargo to forfeit all principal and interest collected on his home equity note. Robinson
bases his argument on Article 16, section 50(a)(6)(Q)(x) of the Texas Constitution that states if a
lender Ihils to comply with the requirements for an extension of credit found in section 50(a)(6). the
lender forfits all principal and interest of the loan. See TEx. CONST. art. XVI. § 50(a)(6)(Q)(x): see
also Vincent v. Bunk ofAm., NA., 109 S.W.3d 856, 862 (Tex. App.—Dallas 2003. pet. denied). But,
as this Court has held, so long as the loan agreement originally entered into by the parties complies
with the constitutional requirements. forfeiture is not an appropriate remedy. See Vincent. 109
S.W.3d at 862. A borrower’s recourse for a lender’s failure to abide by the terms of his loan
agreement is to assert traditional tort and breach of contract causes of action, not constitutionally
mandated forfeiture. See id.
As stated above, section 50(a)(6)(D) requires that a home equity note be secured by a lien that
may only be foreclosed upon by court order. The deed of trust at issue here required a court order
for foreclosure. Because the loan agreement entered into by the parties complied with the
constitutional requirements, the trial court did not err in denying forfeiture. We resolve Robinson’s
sole issue against him.
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Base on the foregoing, we conclude there is no evidence to support the award of monetary
damages and attornevs tees to Robinson based on his claims [or wrongful foreclosure and breach
of contract. We further conclude the trial court did not err in denying Robinsons request for
forfeiture. Accordingly. we reverse the trial court’s judgment and render judgment that Robinson
take nothing by his claims.
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JUDGMENT
WELL FARGO E3ANK. N.A., AS Appeal from the 296
th
Judicial District Court
TRUSTEE, Appellant of Collin County, Texas. (Tr.Ct.No, 296-
02231-2008).
No. 05-1 1-00700-CV V. Opinion delivered by Justice Morris,
Justices Francis and Murphy participating.
RAY ROBINSON, Appellee
In accordance with this Court’s opinion of this date, the judgment of the trial court is
REVERSED and judgment is RENDERED that Ray Robinson take nothing by his claims. It is
ORDERED that appellant Well Fargo Bank, N.A., as Trustee recover its costs of this appeal
from appellee Ray Robinson.
Judgment entered December 11, 2012.