NITI Properties, LLC v. James P. Arthur, Mary Arthur and All Other Occupants ( 2023 )

Affirmed and Memorandum Opinion filed May 2, 2023.
In The
Fourteenth Court of Appeals
NO. 14-22-00588-CV
NITI PROPERTIES, LLC, Appellant
V.
JAMES P. ARTHUR, MARY ARTHUR AND ALL OTHER OCCUPANTS,
Appellees
On Appeal from the County Civil Court at Law No. 3
Harris County, Texas
Trial Court Cause No. 1152397
MEMORANDUM OPINION
In this forcible detainer action appellant Niti Properties challenges the trial
court’s judgment dismissing its action for lack of subject-matter jurisdiction. In two
issues Niti Properties asserts the trial court erred in determining (1) the issues of title
and possession were inextricably intertwined; and (2) the settlement agreement
between the Arthurs and their lender invalidated the deed of trust. Concluding that
the issues of title and possession are inextricably intertwined, we affirm.
BACKGROUND
In 2006, appellees James Arthur and Mary Arthur, along with the entity Arthur
Holdings, LP, were the borrowers or guarantors of a loan by Blackburne & Brown
Mortgage Fund I, secured by a deed of trust and assignment of rents on property at
7639 Beechnut St., Houston, Texas 77074 (the Property). These loan documents,
and amendments thereto, were the subject of a 2016 lawsuit brought in the 11th
District Court in Harris County against Blackburne by the Arthurs and five of their
affiliated entities. Arthur v. Blackburne & Brown Mortgage Fund I, No. 14-21-
00396-CV, 2023 WL 2711379, at *1 (Tex. App.—Houston [14th Dist.] Mar. 30,
2023, no pet. h.). In this forcible detainer action, the Arthurs are appellees.
The 2016 lawsuit concluded with a Settlement Agreement in which the
Arthurs agreed to make scheduled payments on specified dates. Id. Blackburne and
the Arthurs also agreed to the terms of an Agreed Final Judgment to be filed in the
event that any of the scheduled payments were not timely made. Id. The Agreed
Final Judgment would order foreclosure of the Property on the first available date.
Id.The Settlement Agreement called for the Arthurs to make a payment of
$60,000.00 on June 26, 2016. The Arthurs did not make the payment, and in July
2017, Blackburne filed the Agreed Final Judgment, which the District Court judge
signed on August 24, 2017.
On November 5, 2019, Blackburne foreclosed and sold the property to
appellant Niti Properties at a trustee’s sale. Niti Properties acquired title to the
Property pursuant to a Substitute Trustee’s Deed executed November 27, 2019.
Thereafter, Niti Properties provided notice to the Arthurs to vacate the
property. In response to those efforts, the Arthurs sought and obtained a temporary
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restraining order in a separate proceeding in Harris County District Court, which
sought to enforce an agreed judgment entered in yet another matter involving the
same property. See generally Paradise Living, Inc. v. Blackburne & Brown
Mortgage Fund I, No. 01-18-00194-CV, 2019 WL 2426168, at *1-3 (Tex. App.—
Houston [1st Dist.] June 11, 2019, no pet.) (mem. op.) (recounting several years of
litigation and a settlement agreement leading to the Agreed Final Judgment between
the Arthurs and Blackburne). The TRO ordered Blackburne to refrain from
foreclosure, eviction, or other action affecting the occupancy of the Property.
The Arthurs failed to vacate the Property, and Niti Properties filed its forcible
detainer petition in justice court. Pursuant to the deed of trust Niti Properties asserted
a superior right to possession of the property. The justice court rendered judgment
in favor of Niti Properties, and the Arthurs appealed to the county court at law. See
Tex. Civ. Prac. & Rem. Code § 51.001 (permitting a party to a final judgment in
justice court to appeal to the county court at law). The county court at law reversed
the justice court’s judgment and awarded possession to the Arthurs. Niti Properties
appealed and this court reversed and remanded to the county court for the court to
conduct a trial de novo on appeal from the justice court. See Niti Properties LLC v.
Arthur, No. 14-20-00770-CV, 2022 WL 220209, at *5 (Tex. App.—Houston [14th
Dist.] Jan. 25, 2022, no pet.) (mem. op.).
On remand the county court determined that it lacked subject-matter
jurisdiction because the issue of title was inextricably intertwined with the issue of
possession. This appeal followed.
ANALYSIS
In two issues Niti Properties challenges the county court’s judgment of
dismissal. In Niti Properties’ first issue it asserts the county court erred in
determining that the issues of title and possession are inextricably intertwined.
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I. The county court did not err in determining it lacked jurisdiction.
A. Standard of Review
Whether a trial court has subject matter jurisdiction is a question of law we
review de novo. Yarbrough v. Household Fin. Corp. III, 455 S.W.3d 277, 279 (Tex.
App.—Houston [14th Dist.] 2015, no pet.) (citing Salaymeh v. Plaza Centro, LLC,
264 S.W.3d 431, 435 (Tex. App.—Houston [14th Dist.] 2008, no pet.) and Tex.
Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004)). “[D]ue to
the special jurisdictional limitations imposed on justice courts, a plea to the
jurisdiction in an eviction case may be based on an affirmative defense raised in the
defendant’s pleadings that the trial court cannot resolve apart from determining
title.” Id. (quoting Gibson v. Dynegy Midstream Servs., L.P., 138 S.W.3d 518, 522,
524 (Tex. App.—Fort Worth 2004, no pet.) (defendant raised issue of adverse
possession in defensive pleading, and thus, issue of title was so integrally linked that
the justice court could not have decided possession without first deciding title).
B. Jurisdiction in Forcible Detainer Actions
An action for forcible detainer is a “summary, speedy, and inexpensive
remedy for the determination of who is entitled to the possession of premises.” Scott
v. Hewitt, 90 S.W.2d 816, 818 (Tex. 1936); see also Marshall v. Hous. Auth. of City
of San Antonio, 198 S.W.3d 782, 787 (Tex. 2006). The only issue to be resolved in
a forcible detainer action is the right to immediate possession of the property; the
merits of title are not adjudicated. Salaymeh, 264 S.W.3d at 435. Justice courts do
not have jurisdiction to determine or adjudicate title to land, and neither does a
county court exercising appellate jurisdiction in a forcible detainer action. Id.When there are issues concerning both title and possession, the issues may be
litigated in separate proceedings in different courts with appropriate jurisdiction. Id.4
at 436. However, 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. See Pinnacle Premier Props., Inc. v. Breton, 447 S.W.3d 558,
564 (Tex. App.—Houston [14th Dist.] 2014, no pet.). “Accordingly, 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.” Salaymeh, 264 S.W.3d at 435.
C. Landlord–Tenant Relationship and Deed of Trust
A forcible detainer action requires proof of a landlord-tenant relationship.
Espinoza v. Lopez, 468 S.W.3d 692, 695 (Tex. App.—Houston [14th Dist.] 2015, no
pet.). 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. See Yarbrough,
455 S.W.3d at 280.
Like the deed of trust in this case, a deed of trust may include a tenancy-at-
sufferance clause that creates a landlord-tenant relationship when the property is
foreclosed. See Pinnacle Premier Props., 447 S.W.3d at 564–65. Under these
circumstances, a defendant’s complaints about defects in the foreclosure process
generally do not require a justice court to resolve a title dispute before determining
the right to immediate possession, and the justice court has jurisdiction. See id. at
564.
In this case Niti Properties asserts a right to possession pursuant to the deed
of trust, which created a tenancy-at-sufferance in the event of foreclosure:
3.22 Possession After Sale. If the Property is sold pursuant to this
Article, Grantor or any person holding possession of the Property
through Grantor shall immediately surrender possession of the Property
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to the purchaser at such sale upon the purchaser’s written demand. If
possession is not surrendered upon the purchaser’s written demand,
Grantor or such person shall be a tenant at sufferance and may be
removed by writ of possession or by an action for forcible entry and
detainer.
The Arthurs assert, however, that the Agreed Final Judgment superseded the
deed of trust. Because Niti Properties purchased the property pursuant to foreclosure
authorized by the Agreed Final Judgment, the Arthurs argue, no landlord-tenant
relationship was created.
D. The Agreed Final Judgment and the Necessity of Resolving Title
The Yarbrough court held that when a party challenges the validity of the deed
of trust containing the tenancy-at-sufferance clause, the issue of title is intertwined
with the issue of possession. See Yarbrough, 455 S.W.3d at 283. In Yarbrough, the
foreclosure buyer initiated a forcible detainer action in justice court. 455 S.W.3d at
278. The Yarbroughs, who defaulted on the note, instituted a concurrent lawsuit in
district court, asserting that the original deed of trust had been forged and, as a result,
was invalid. Id. at 279. If the deed of trust was invalid, the Yarbroughs argued, then
the tenancy-at-sufferance clause conferring jurisdiction on the justice court was also
invalid. Id. Therefore, resolution of the title dispute, in which the Yarbroughs argued
that the deed was deficient as forged, was a prerequisite to resolution of the matter
of immediate possession in the forcible detainer suit. Id. This court agreed with the
Yarbroughs and held that the justice court lacked jurisdiction. Id. at 283.
In this case the Arthurs assert that the deed of trust cannot establish a tenancy-
at-sufferance relationship between the Arthurs and Niti Properties because the
Agreed Final Judgment replaced the deed of trust. This case, therefore, like
Yarbrough, is more akin to those in which the parties disputed the existence of a
landlord-tenant relationship. See Espinoza, 468 S.W.3d at 696 (intertwined title issue
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when parties claimed they were purchasing property, not renting); Yarbrough, 455
S.W.3d at 282 (intertwined title issue when party asserted the deed of trust was
forged); Mitchell v. Armstrong Capital Corp., 911 S.W.2d 169, 171 (Tex. App.—
Houston [1st Dist.] 1995, writ denied) (intertwined title issue when the defendant
claimed the substitute trustee’s deed was void and had brought suit in district court
to set aside the non-judicial foreclosure sale).
Because the Arthurs contend the Agreed Final Judgment superseded the deed
of trust, they have raised a genuine issue of title so intertwined with the issue of
possession as to preclude jurisdiction in the justice court. See Yarbrough, 455
S.W.3d at 282. Accordingly, the justice court and county court lacked subject-matter
jurisdiction. The county court therefore did not err in dismissing for lack of
jurisdiction. We overrule Niti Properties’ first issue.
II. The county court lacked jurisdiction to interpret the Settlement
Agreement.
In Niti Properties’ second issue it asserts the trial court erred in determining
that the Settlement Agreement invalidated the deed of trust secured by the property.
Niti Properties contends the Settlement Agreement on which the Agreed Final
Judgment was based “expressly incorporated the Loan Documents, which included
the Deed of Trust containing the tenant at sufferance clause.” Niti Properties asserts
the trial court erred in “examining the title to the Property and concluding that [Niti
Properties] did not have an independent basis for possession of the Property.”
To the contrary, the county court determined it lacked jurisdiction to examine
title to the property when it dismissed for lack of jurisdiction. Therefore, the county
court did not rule on the title issue raised by the Arthurs. The county court lacked
jurisdiction to “examine title” as Niti Properties asserts. We therefore overrule Niti
Properties’ second issue.
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CONCLUSION
Having overruled Niti Properties’ issues on appeal we affirm the trial court’s
judgment of dismissal.
/s/ Jerry Zimmerer
Justice
Panel consists of Chief Justice Christopher and Justices Zimmerer and Wilson.
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