In the Court of Appeals Second Appellate District of Texas at Fort Worth ___________________________
No. 02-17-00427-CV ___________________________
JUDY DE LA GARZA AND THOMAS M. DE LA GARZA, Appellants
v.
THE BANK OF NEW YORK MELLON, F/K/A THE BANK OF NEW YORK, AS TRUSTEE FOR THE HOLDERS OF THE CERTIFICATES, FIRST HORIZON MORTGAGE PASS-THROUGH CERTIFICATES (FHASI 2006-3); FIRST TENNESSEE BANK NATIONAL ASSOCIATION, D/B/A FIRST HORIZON HOME LOANS; AND NATIONSTAR MORTGAGE, LLC, Appellees
On Appeal from the 367th District Court Denton County, Texas Trial Court No. 14-04892-367
Before Sudderth, C.J.; Gabriel and Pittman, JJ. Memorandum Opinion by Chief Justice Sudderth MEMORANDUM OPINION
I. Introduction
This appeal arises out of a home-equity loan dispute involving Appellants Judy
De La Garza and Thomas M. De La Garza and Appellees The Bank of New York
Mellon, f/k/a The Bank of New York, as Trustee for the Holders of the Certificates,
First Horizon Mortgage Pass-Through Certificates (FHASI 2006-3) (BNYM); First
Tennessee Bank National Association, d/b/a First Horizon Home Loans (FHHL); and
Nationstar Mortgage, LLC (Nationstar), in which the trial court granted Appellees’ no-
evidence and traditional motions for summary judgment on the De La Garzas’ claims
and granted BNYM’s traditional motion for summary judgment on its counterclaims
for judicial foreclosure and a writ of possession. The De La Garzas raise one point
contending that the trial court erred by granting summary judgment because genuine
issues of material fact existed on all of their claims and BNYM’s counterclaims. We
affirm in part and reverse in part.
II. Factual and Procedural Background
The De La Garzas’ home (the Property) is located in Denton County. On
August 26, 2006, Judy executed a Texas Home Equity Note (the Note), which governed
the terms of Judy’s obligation to repay a $750,000 home-equity loan to First Horizon
Home Loan Corporation (FHHLC). On the same day, Judy and Thomas executed a
Texas Home Equity Security Instrument (Security Instrument or Deed of Trust), which
granted FHHLC a lien on the Property and a power-of-sale provision. The Security
2 Instrument named Mortgage Electronic Registration Systems, Inc. (MERS) as the
“beneficiary” solely as “nominee” for the lender, FHHLC. In November 2008, the
De La Garzas defaulted on the loan.
On May 1, 2009, MERS executed an “Assignment of Note and Deed of Trust”
to FHHL, and on October 18, 2011, FHHL, through its agent Nationstar, assigned the
Deed of Trust to BNYM.
In September 2013, BNYM filed an application in the 211th District Court of
Denton County, seeking an expedited order for foreclosure under Texas Rule of Civil
Procedure 736 (the rule 736 application). See Tex. R. Civ. P. 736.1. On January 10,
2014, the 211th District Court signed an order granting BNYM’s rule 736 application.
See Tex. R. Civ. P. 736.8.
Half a year later, the De La Garzas filed the underlying lawsuit in the 367th
District Court of Denton County, which automatically stayed the proceedings in the
211th District Court, vacated the foreclosure order, and stayed the nonjudicial
foreclosure sale scheduled to take place the next day. See Tex. R. Civ. P. 736.11(a), (c).
The De La Garzas asserted claims for wrongful foreclosure, breach of contract, and
violations of the Texas Debt Collection Practices Act (TDCPA), all premised on
BNYM’s rule 736 application and its attachments thereto.1 BNYM filed a counterclaim
1 The De La Garzas asked the trial court to declare that Appellees’ actions violated the TDCPA, see Tex. Fin. Code Ann. §§ 392.001–.404 (West 2016); enjoin Appellees’ actions that violated the TDCPA; declare the lien void; enter judgment in their favor for statutory damages, costs, and attorney’s fees as provided by the TDCPA; prohibit any further attempted foreclosure sale or related acts by Appellees or Appellees’
3 seeking a judgment for judicial foreclosure and a writ of possession pursuant to rules
309 and 310 of the Texas Rules of Civil Procedure. See Tex. R. Civ. P. 309, 310.
Appellees subsequently filed traditional and no-evidence motions for summary
judgment on the De La Garzas’ claims and a traditional motion for summary judgment
on BNYM’s counterclaims. In the no-evidence motion, Appellees argued that
• as to the De La Garzas’ breach-of-contract claim, there was no evidence that the De La Garzas had performed or tendered performance of their obligations under the loan documents;
• as to the De La Garzas’ wrongful foreclosure claim: o there was no evidence that the Property was ever sold at foreclosure, o there was no evidence that the De La Garzas had ever tendered or were able to tender the amounts due on the loan, and o Texas does not recognize a claim for attempted wrongful foreclosure; and
• as to the De La Garzas’ TDCPA claims: o there was no evidence of a wrongful act violating the statute with regard to misrepresenting the character, extent, or amount of a consumer debt, o there was no evidence that Appellees had used any false representation or deceptive means to collect the debt,
affiliates, agents, successors, or assigns, with respect to the Property; award them compensatory and exemplary damages as allowed by law; award them their reasonable and necessary attorney’s fees, costs, and pre-judgment and post-judgment interest as allowed by law; issue an order quieting title to the Property; and enjoin any action to interfere with the De La Garzas’ exclusive use and possession of the Property pending resolution of this case.
4 o there was no evidence of a wrongful act against the De La Garzas, and o there was no evidence that the De La Garzas had been injured as a result of a wrongful act. In the traditional motion for summary judgment on the De La Garzas’ claims,
Appellees’ arguments paralleled their no-evidence arguments:
• that the De La Garzas could not recover for wrongful foreclosure because they were still in possession of the Property;
• that Texas does not recognize a claim for attempted wrongful foreclosure;
• that their trustee had fully complied with the rule 736 requirements in the prior suit;
• that the De La Garzas lacked standing to challenge the assignments’ validity; and
• that because the De La Garzas’ breach-of-contract claim was based on the same allegations supporting their TDCPA and wrongful foreclosure claims, the breach-of-contract claim failed for the same reasons. With regard to Appellees’ motion for traditional summary judgment on BNYM’s
counterclaims, Appellees argued that
• there was a valid lien on the Property;
• there was an uncured default on the debt and Security Instrument; and
• Appellees were the proper parties to foreclose under property code chapter 51 based on the recorded instruments and were entitled to judicial foreclosure under rule of civil procedure 309 and, accordingly, were also entitled to a writ of possession under rule of civil procedure 310. Appellees attached over 160 pages of summary judgment evidence to their traditional
motion.
5 The De La Garzas filed a single response to both motions. They attached no
evidence to their response but merely stated that fact issues precluded the granting of
summary judgment:
The summary judgment evidence available to the Court establishes fact questions that should be settled at trial. The judicially admitted matters and discovery responses set out in Defendants’ Motions demonstrate that there was an attempted foreclosure, and that there was wrongful activity by Defendants in seeking foreclosure authority without complying with the applicable Rules of Civil Procedure, hence there was a breach of contract by Defendants to Plaintiffs’ detriment.
The De La Garzas’ response also cited and referenced several of Appellees’ summary
judgment exhibits to show that there were disputed material facts concerning all of the
parties’ claims. After a hearing, the trial court signed orders granting all of Appellees’
summary judgment motions.
III. Discussion
The De La Garzas raise one point, challenging the trial court’s summary
judgments based on disputed issues of material facts on all of the parties’ claims. See
Malooly Bros. v. Napier, 461 S.W.2d 119, 121 (Tex. 1970).
A. No-evidence Summary Judgment
After an adequate time for discovery, the party without the burden of proof may,
without presenting evidence, move for summary judgment on the ground that there is
no evidence to support an essential element of the nonmovant’s claim or defense. Tex.
R. Civ. P. 166a(i). The motion must specifically state the elements for which there is
no evidence. Id.; Timpte Indus., Inc. v. Gish, 286 S.W.3d 306, 310 (Tex. 2009). The trial
6 court must grant the motion unless the nonmovant produces summary judgment
evidence that raises a genuine issue of material fact. See Tex. R. Civ. P. 166a(i) & cmt.;
Hamilton v. Wilson, 249 S.W.3d 425, 426 (Tex. 2008). That is, once a no-evidence motion
has been filed in accordance with rule of civil procedure 166a(i), the burden shifts to
the nonmovant to bring forth evidence that raises a fact issue on the challenged
evidence.2 See Macias v. Fiesta Mart, Inc., 988 S.W.2d 316, 317 (Tex. App.—Houston [1st
Dist.] 1999, no pet.).
Appellees contend that the trial court properly granted the no-evidence summary
judgment because the De La Garzas did not attach evidence to their response and only
referenced certain evidence attached to Appellees’ traditional motion for summary
judgment.3
We addressed this issue six years ago in Dyer v. Accredited Home Lenders, Inc.,
No. 02-11-00046-CV, 2012 WL 335858, at *3 (Tex. App.—Fort Worth Feb. 2, 2012,
pet. denied) (mem. op.), in which we held that, pursuant to the plain language of rule
166a(i) and the accompanying comment, a no-evidence summary judgment should be
2 When a party moves for summary judgment under both rules of civil procedure 166a(c) and 166a(i), we will first review the trial court’s judgment under the standards of rule 166a(i). Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 600 (Tex. 2004). If the appellant failed to produce more than a scintilla of evidence under that burden, then there is no need to analyze whether the appellee’s summary judgment proof satisfied the rule 166a(c) burden. Id.
Specifically, the De La Garzas asserted in their response that their TDCPA 3
claims “are supported by the pleadings and Summary Judgment evidence of the Defendants’ Motions for Summary Judgment.” They then referred to various exhibits Appellees attached to their traditional motion.
7 granted “unless the nonmovant produces summary judgment evidence raising a genuine
issue of material fact” and “point[s] out to the trial court the evidence that raises a fact
issue.” We explained that “even though evidence is before the trial court that, if
produced by the nonmovant, would require the court to deny the no-evidence summary
judgment,” that evidence must be ignored if “it was not pointed out to the trial court
by the nonmovant.”4 Id.
Appellees’ no-evidence motion for summary judgment challenged the
De La Garzas to produce evidence of various specific elements of their claims. The
De La Garzas produced no evidence in response to the breach-of-contract no-evidence
ground regarding whether they had performed or tendered performance of their
obligations under the loan documents,5 and they did not direct the trial court to any of
4 We recognize that in Lance v. Robinson, the Supreme Court of Texas recently rejected the argument that a summary judgment movant’s failure to attach evidence to its motion “creates a complete absence of evidence” requiring denial of the motion. 543 S.W.3d 723, 732–33 (Tex. 2018). Thus, the court held that a movant’s failure to attach evidence to its traditional motion for summary judgment was not fatal because Texas Rule of Civil Procedure 166a(c) expressly “require[s] a trial court to grant a summary judgment motion if the evidence ‘on file at the time of the hearing, or filed thereafter and before judgment with permission of the court,’ establishes that the movant is ‘entitled to judgment as a matter of law.’” Id. at 732 (quoting Tex. R. Civ. P. 166a(c)). This holding is inapplicable here because the rule governing no-evidence motions for summary judgment does not contain a provision allowing trial courts to consider documents merely “on file at the time of the hearing,” and instead places the burden on the nonmovant to produce evidence in response to the no-evidence motion: “The court must grant the motion unless the respondent produces summary judgment evidence raising a genuine issue of material fact.” Tex. R. Civ. P. 166a(i) (emphasis added).
With regard to proving a breach of contract, in addition to the defendant’s 5
breach, the essential elements are the existence of a valid contract, performance or tendered performance by the plaintiff, and damages sustained as a result of the breach.
8 Appellees’ exhibits as to this ground. See id. Accordingly, the trial court did not err by
granting the no-evidence summary judgment on this ground, and we overrule this
portion of the De La Garzas’ sole point. See Villanova v. Fed. Deposit Ins. Corp., 511
S.W.3d 88, 103 (Tex. App.—El Paso 2014, no pet.) (affirming no-evidence summary
judgment on breach-of-contract claim in wrongful-foreclosure case when borrower
failed to set forth evidence in response to lender’s contention that “there was no
evidence [borrower] performed the contract and [lender] breached the contract”).
The De La Garzas likewise produced no evidence, and directed the trial court to
none of Appellees’ exhibits, in response to the wrongful-foreclosure no-evidence
grounds regarding whether the Property was ever sold at foreclosure or whether they
had ever tendered or were able to tender the amounts due on the loan.6 To the contrary,
in their summary judgment response, the De La Garzas asserted that the Property
“remains Plaintiffs’ permanent residential homestead.” Accordingly, the trial court did
not err by granting the no-evidence summary judgment on this ground, and we overrule
this portion of the De La Garzas’ sole point. And although the De La Garzas
contended in response to the no-evidence motion that attempted wrongful foreclosure
Chalker v. Nationstar Mortg., LLC, No. 02-17-00250-CV, 2018 WL 4140739, at *3 (Tex. App.—Fort Worth Aug. 30, 2018, no pet. h.) (mem. op.). 6 With regard to proving wrongful foreclosure, the essential elements of the claim are a defect in the foreclosure-sale proceedings, a grossly inadequate selling price, and a causal connection between the defect and the grossly inadequate selling price. Buchanan v. Compass Bank, No. 02-14-00034-CV, 2015 WL 222143, at *5 (Tex. App.— Fort Worth Jan. 15, 2015, pet. denied) (mem. op.).
9 was “a Legitimate Variation of the Cause of Action for Wrongful Foreclosure,” they
merely referenced a footnote in a Fifth Circuit opinion to support this assertion.7 As
none of our sister courts have recognized that cause of action, and we can find no
authority or support for the proposition that such cause of action exists in the law, we
decline to recognize a cause of action for attempted wrongful foreclosure.8
Accordingly, the trial court did not err by granting the no-evidence summary judgment
on this ground, and we overrule this portion of the De La Garzas’ sole point.
Finally, as to the De La Garzas’ TDCPA claims, among other no-evidence
grounds, Appellees argued that there was no evidence that the De La Garzas had been
7 The De La Garzas cited McCaig v. Wells Fargo Bank (Tex.), N.A., 788 F.3d 463, 478 n.6 (5th Cir. 2015), to support this assertion, but that case did not recognize a cause of action; rather, the court noted in an aside that the defendant in that case had labeled its own conduct “attempted wrongful foreclosure.” The dissenting judge in that case noted, “in Texas, there has been no cause of action for ‘attempted wrongful foreclosure.’” Id. at 486 (Jones, J., dissenting). 8 See In re PlainsCapital Bank, No. 13-16-00592-CV, 2017 WL 1131092, at *5 (Tex. App.—Corpus Christi Mar. 27, 2017, orig. proceeding) (mem. op.) (“[T]here is no cause of action in Texas for attempted wrongful foreclosure.”); Anderson v. Baxter, Schwartz & Shapiro, LLP, No. 14-11-00021-CV, 2012 WL 50622, at *4 (Tex. App.—Houston [14th Dist.] Jan. 10, 2012, no pet.) (mem. op.) (“Anderson cannot recover for damages allegedly caused by an attempted wrongful [foreclosure] because such a cause of action is not recognized.”); Peterson v. Black, 980 S.W.2d 818, 823 (Tex. App.—San Antonio 1998, no pet.) (observing that wrongful-foreclosure recovery is conditioned on the disturbance of the mortgagor’s possession based on the theory that the mortgagee must have committed a wrong similar to the conversion of personal property); Port City State Bank v. Leyco Constr. Co., 561 S.W.2d 546, 547 (Tex. Civ. App.—Beaumont 1977, no writ) (“[P]laintiff has cited to us no authority supporting the existence of a cause of action for ‘attempted wrongful foreclosure’ and our research has not developed authorities showing the existence of any such cause of action.”).
10 injured as a result of a wrongful act. See Shellnut v. Wells Fargo Bank, N.A., No. 02-15-
00204-CV, 2017 WL 1538166, at *15 (Tex. App.—Fort Worth Apr. 27, 2017, pet. filed)
(mem. op.) (holding that threatening foreclosure when a borrower has defaulted under
the loan documents is not prohibited by the TDCPA and stating that such a claim “is
nothing but a recast breach of contract claim”); see also Tex. Fin. Code Ann.
§ 392.403(a)(2) (setting out as a TDCPA element “actual damages sustained as a result
of a violation of this chapter”). The De La Garzas produced no evidence and directed
the trial court to none of Appellees’ summary judgment exhibits to support their
damages under the TDCPA. Accordingly, the trial court did not err by granting the no-
evidence summary judgment on this ground, and we overrule this portion of the
De La Garzas’ sole point. See Dyer, 2012 WL 335858, at *3; see also Tex. R. Civ. P. 166a(i)
(“The court must[9] grant the motion unless the respondent produces summary
judgment evidence raising a genuine issue of material fact.”); Kutner v. Wells Fargo Bank,
N.A., No. 02-14-00238, 2015 WL 3523156, at *1–2 (Tex. App.—Fort Worth June 4,
2015, no pet.) (mem. op.) (“Unless a procedural defect precludes the granting of a no-
evidence motion for summary judgment, the trial court must grant the no-evidence
portion of a summary judgment motion unless the nonmovant produces summary judgment
evidence raising a genuine issue of material fact and points out such evidence to the trial
court.” (emphasis added) (footnote omitted)).
9 Cf. Tex. R. Civ. P. 166a(i) cmt. (West 1997) (“The denial of a motion under paragraph (i) is no more reviewable by appeal or mandamus than the denial of a motion under paragraph (c).”).
11 Because the trial court did not err by granting the no-evidence summary
judgment on the above grounds, we need not review the traditional grounds on the
same claims. See Ford Motor Co., 135 S.W.3d at 600; see also Tex. R. App. P. 47.1.
B. Traditional Summary Judgment on BNYM’s Counterclaims
In reviewing de novo Appellees’ traditional summary judgment on BNYM’s
counterclaims for judicial foreclosure and a writ of possession, we must determine
whether they met their summary judgment burden by establishing that no genuine
issues of material fact exist and that they are entitled to judgment as a matter of law.
Tex. R. Civ. P. 166a(c); Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d
844, 848 (Tex. 2009); see Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010). In
this de novo review, we take as true all evidence favorable to the nonmovant, and we
indulge every reasonable inference and resolve any doubts in the nonmovant’s favor.
20801, Inc. v. Parker, 249 S.W.3d 392, 399 (Tex. 2008); Provident Life & Accident Ins. Co.
v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). We consider the evidence presented in the
light most favorable to the nonmovant, crediting evidence favorable to the nonmovant
if reasonable jurors could and disregarding evidence contrary to the nonmovant unless
reasonable jurors could not. Mann Frankfort, 289 S.W.3d at 848. We must consider
whether reasonable and fair-minded jurors could differ in their conclusions in light of
12 all of the evidence presented. See Wal-Mart Stores, Inc. v. Spates, 186 S.W.3d 566, 568
(Tex. 2006); City of Keller v. Wilson, 168 S.W.3d 802, 822–24 (Tex. 2005).
The summary judgment will be affirmed only if the record establishes that the
movant has conclusively proved all essential elements of the movant’s cause of action
or defense as a matter of law. City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671,
678 (Tex. 1979).
On appeal, although the De La Garzas generally argue that there “were
outstanding fact issues (conflicting evidence) on each element of each outstanding
claim,” they do not brief the discrete elements of BNYM’s counterclaims. However,
the tenor of their summary-judgment-response challenge on appeal is that BNYM—
the party seeking to foreclose—was not authorized to do so because the documents
attached to BNYM’s rule 736 application and motion for summary judgment do not
support that the Note was assigned or transferred to BNYM.10 Thus, we analyze the
De La Garzas’ argument as challenging BNYM’s standing to obtain a judicial
foreclosure. See Tex. R. App. P. 38.9; Vazquez v. Deutsche Bank Nat’l Tr. Co., N.A., 441
S.W.3d 783, 786 (Tex. App.—Houston [1st Dist.] 2014, no pet.) (“If foreclosure on a
home is initiated by a person or entity whose right to foreclose is contingent upon the
validity of an assignment, the homeowner has standing to attack the assignment and
thereby seek to stop or reverse the foreclosure.”).
10 Appellees also construe the De La Garzas’ argument as “challeng[ing] BNYM’s authority to foreclose based on the copy of the Note attached to the traditional motion for summary judgment.”
13 1. Foreclosure of the Home-Equity-Loan Lien
a. Applicable Law
“A suit to foreclose on real property . . . is a legal proceeding seeking the
satisfaction of a debt through foreclosure of [a] lien on real property.” Mark v. Household
Fin. Corp. III, 296 S.W.3d 838, 839 (Tex. App.—Fort Worth 2009, no pet.). “The basis
of such an action is a promissory note secured by a deed of trust or security instrument.”
Id. (emphasis added). “A lien securing repayment of a home-equity note may only be
foreclosed upon by a court order.” Grady v. Nationstar Mortg., LLC, No. 02-16-00481-
CV, 2017 WL 5618690, at *1 n.2 (Tex. App.—Fort Worth Nov. 22, 2017, pet. denied)
(mem. op.) (citing Tex. Const. art. XVI, § 50(a)(6)(D)); see Wells Fargo Bank, N.A. v.
Robinson, 391 S.W.3d 590, 593 (Tex. App.—Dallas 2012, no pet.).
When, as here, the security instrument as part of a home-equity loan contains a
power-of-sale provision, the lender may file a claim for judicial foreclosure or use rule
of civil procedure 736 to obtain an order allowing it to proceed with nonjudicial
foreclosure.11 See Steptoe v. JPMorgan Chase Bank, N.A., 464 S.W.3d 429, 432–33 (Tex.
In the case of a nonjudicial foreclosure, chapter 51 of the property code 11
supplies the statutory requirements, in addition to the those in the deed of trust, that must be followed to effectuate a valid sale. See Tex. Prop. Code Ann. § 51.002 (West Supp. 2018) (“Sale of Real Property Under Contract Lien”); Morrison v. Christie, 266 S.W.3d 89, 92 (Tex. App.—Fort Worth 2008, no pet.) (“Section 51.002 regulates nonjudicial foreclosures, that is, the sale of real property after default by the debtor under a power of sale conferred by deed of trust or other contract lien.”). The sale under rule 309 is similar to a trustee’s sale as described by section 51.002, but under rule 309, a sheriff rather than trustee conducts the sale. See Brown v. EMC Mortg. Corp., 326 S.W.3d 648, 654 (Tex. App.—Dallas 2010, pet. denied) (holding reversible error when
14 App.—Houston [1st Dist.] 2015, no pet.); see also Tex. R. Civ. P. 735.1(a) (stating that
rule 736 provides the procedure for obtaining a court order to allow foreclosure of a
home-equity loan containing a power of sale in the security instrument); Tex. R. Civ. P.
735.3 (stating that a rule 736 order is not a substitute for a judgment for judicial
foreclosure); 27 Stephen G. Cochran, Texas Practice Series: Consumer Rights & Remedies
§ 7.14 (3d ed. 2017) (stating that a party seeking to foreclose a home-equity loan “may
file suit seeking judicial foreclosure, file a suit or counterclaim seeking a final judgment
which includes an order allowing foreclosure under [section 51.002 of] the Texas
Property Code, or file an application under Rule 736” (footnotes omitted)).
Rule 309’s requirement that the judgment allow the foreclosing party to recover
his debt dictates that the party seeking judicial foreclosure establishes the existence of
the debt and that he is entitled to recover it. See Tex. R. Civ. P. 309 (providing that
judgments for the “foreclosure of mortgages and other liens shall be that the plaintiff
recover his debt . . . with a foreclosure of the plaintiff’s lien” (emphasis added)); Mark, 296
S.W.3d at 839 (explaining that the basis of a suit to foreclose on real property is a
rule 309 judgment for judicial foreclosure ordered mortgagee rather than sheriff to sell property at public auction).
Although a holder of a secured note may also choose to pursue an action to recover a personal judgment against the debtor without resorting to the security interest, see, e.g., Maupin v. Chaney, 163 S.W.2d 380, 382 (Tex. 1942), a secured home-equity-loan lender may seek payment of the home-equity loan only from the collateral and cannot seek a deficiency judgment against the borrower personally. See Tex. Const. art. XVI § 50(a)(6)(C) (requiring that to be foreclosure-eligible, Texas home-equity loans must be nonrecourse); Wells Fargo Bank, N.A. v. Murphy, 458 S.W.3d 912, 917 (Tex. 2015).
15 promissory note secured by a deed of trust on real property); Bonilla v. Roberson, 918
S.W.2d 17, 21 (Tex. App.—Corpus Christi 1996, no writ) (explaining that to be entitled
to a judicial foreclosure, the party seeking to foreclose must provide proof “establishing
the debt and fixing the lien”); Morris Plan Life Ins. Co. v. Gross, 429 S.W.2d 561, 567 (Tex.
Civ. App.—Dallas 1968, writ ref’d n.r.e.) (“[O]f course, if Morris Plan Life is not the
owner of the note and liens it has no right now to maintain this suit for foreclosure.”);
Cunningham v. Buel, 287 S.W. 683, 686 (Tex. Civ. App.—San Antonio 1926, no writ)
(explaining that in a suit to recover on notes and foreclose a lien, “[t]he notes sued on
constitute the very basis of the suit”); see also Rinard v. Bank of Am., 349 S.W.3d 148, 152
(Tex. App.—El Paso 2011, no pet.) (“To obtain a judicial foreclosure, Bank of America
was required to demonstrate that the note was a purchase money note, that some part
of the purchase money is due and unpaid, and that the property subject to the lien is
the same property on which it seeks to enforce the lien.”); 30 Tex. Jur. 3d Deeds of Trust
and Mortgages § 209 (2018) (“[O]ne who is not the owner of the note and liens involved
has no right to maintain suit for foreclosure.” (emphasis added)); 2 James N. Johnson, Texas
Practice Guide Real Estate Transactions § 10:232 (2018 ed.) (“Promissory notes that are
secured by a mortgage or trust deed constitute the very basis of a suit for judicial
foreclosure . . . .”). But see Kyle v. Countrywide Home Loans, Inc., 232 S.W.3d 355, 362 (Tex.
App.—Dallas 2007, pet. denied) (affirming summary judgment for judicial foreclosure
despite movant’s failure to include the note in the summary judgment record because
16 “[t]he express terms of the deed of trust gave [movant] the right to seek judicial
foreclosure in the event of a default”).
A mortgage debt is established through a promissory note, see Bradford v. McElroy,
746 S.W.2d 294, 298 n.3 (Tex. App.—Austin 1988, no writ) (explaining the note is
evidence of a debt), even though the party seeking a judgment for judicial foreclosure
does so pursuant to the deed of trust lien and not as a judgment on the note.12
Accordingly, to be entitled to summary judgment for a judicial foreclosure under rule
309, a movant must prove (1) the existence of and some privity to a financial
obligation—i.e., the note; (2) the existence of and some privity to the lien securing it—
i.e., the deed of trust or security instrument; and (3) a default on the loan. See Tex. R.
Civ. P. 309; 17 William V. Dorsaneo III et al., Texas Litigation Guide § 255.03[3][a] (2008
ed.) (“Judicial foreclosure is initiated when the creditor files an action alleging the
existence of the indebtedness, default by the debtor, and the existence of the deed of
trust or vendor’s lien.”).
12 However, the mortgagee seeking judicial foreclosure is not required to set forth evidence of the original, wet-ink note. See Vince Poscente Int’l, Inc. v. Compass Bank, 460 S.W.3d 211, 216 (Tex. App.—Dallas 2015, no pet.) (“A photocopy of a promissory note, attached to an affidavit in which the affiant swears that the photocopy is a true and correct copy of the original note . . . establishes the existence of the note.”). And the foreclosure of a deed of trust should not be conflated to that of a suit on the note, which are a secured creditor’s severable rights under Texas law. Carter v. Gray, 81 S.W.2d 647, 648 (Tex. 1935).
17 b. Analysis
The De La Garzas contend that BNYM has not established its authority to
foreclose under rule 309 because the assignments conflict with the Note, which
contains no indorsement or allonge that reflects these assignments. BNYM, in contrast,
asserts that it has standing to pursue its counterclaim for judicial foreclosure because it
is the mortgagee as defined by chapter 51 of the property code. See Tex. Prop. Code
Ann. § 51.0001(4) (West 2014) (A “mortgagee” refers to either “(A) the grantee,
beneficiary, owner, or holder of a security instrument; (B) a book entry system; or (C) if
the security interest has been assigned of record, the last person to whom the security
interest has been assigned of record.”).13 BNYM further directs us to a Fifth Circuit
case, arguing that the De La Garzas’ argument is simply a variance of the “split-the-
note theory” that federal courts have rejected. See Martins v. BAC Home Loans Servicing,
L.P., 722 F.3d 249, 254–55 (5th Cir. 2013).14 Thus, BNYM contends that “a person
may have authority to foreclose even if it is not the note holder.”
As an initial matter, Martins and other authorities concerning the split-the-note
theory are inapposite to the instant case because they concern nonjudicial foreclosure
13 BNYM attached two recorded assignments of the Security Instrument—the first from MERS to FHHL and the second from FHHL to BNYM—to its application for order of home-equity foreclosure, which it also attached to its traditional summary judgment motion, and these assignments qualify BNYM as a mortgagee under section 51.0001(4)(A) and (C) of the property code. See Tex. Prop. Code Ann. § 51.0001(4)(A), (C). 14 This court has “agree[d] with the federal court’s reasoning in Martins” and held that a party only in privity with the deed of trust and not the note is still permitted to
18 under a power-of-sale or court order conducted by a trustee pursuant to chapter 51 of
the property code. Although a nonjudicially foreclosing mortgagee need not
demonstrate ownership of a note in order to defeat a mortgagor’s standing challenge
and although BNYM may have established that it is the mortgagee under chapter 51
for purposes of a nonjudicial foreclosure, this does not necessarily entitle BNYM to a
rule 309 judgment for a judicial foreclosure. See generally Alan M. White, Losing the
Paper—Mortgage Assignments, Note Transfers and Consumer Protection, 24 Loy. Consumer L.
Rev. 468, 479–80 (2012) (explaining the “critical difference” in the requirements of
pleading and proof concerning the note when a mortgagor challenges a mortgagee’s
standing to nonjudicially foreclose as opposed to when a mortgagee brings an
independent claim for judicial foreclosure—“In a judicial foreclosure, as the plaintiff,
the foreclosing party must come forward with evidence that it is the proper transferee
of the note”); cf. EverBank, N.A. v. Seedergy Ventures, Inc., 499 S.W.3d 534, 538 (Tex.
App.—Houston [14th Dist.] 2016, no pet.) (“Under the Texas Property Code, a party
has standing to initiate a nonjudicial foreclosure sale if the party is a mortgagee.” (emphasis
added)); Morlock, L.L.C. v. Nationstar Mortg., L.L.C., 447 S.W.3d 42, 47 (Tex. App.—
Houston [14th Dist.] 2014, pet. denied) (“Morlock’s allegation that Nationstar is not
the owner or holder of the Note is irrelevant with respect to Nationstar’s right to enforce the
Deed of Trust through non-judicial foreclosure under Texas law.” (emphasis added)).
foreclose. Weeks v. Bank of Am., N.A., No. 02-13-00039-CV, 2014 WL 345633, at *3 (Tex. App.—Fort Worth Jan. 30, 2014, no pet.) (mem. op.).
19 BNYM initially filed a rule 736 application and obtained an order for foreclosure,
but when the De La Garzas filed this lawsuit, the proceeding was automatically stayed
and the order vacated. See Tex. R. Civ. P. 736.11(a) (stating that an order under rule 736
is automatically stayed if a respondent files a separate, original proceeding “that puts in
issue any matter related to the origination, servicing, or enforcement of the” lien sought
to be foreclosed “prior to 5:00 p.m. on the Monday before the scheduled foreclosure
sale”), 736.11(c) (stating that if suit is filed per subsection (a) and “[i]f an order has been
signed, the court must vacate the Rule 736 order”).
In response to the De La Garzas’ lawsuit, BNYM filed a counterclaim for judicial
foreclosure under rule of civil procedure 309. Therefore, the arguments and authorities
that address rule 736 applications, as well as the pleading and proof required in a
rule 736 proceeding, are inapplicable with regard to whether BNYM satisfied its
summary judgment burden on its claim for judicial foreclosure. See Steptoe, 464 S.W.3d
at 432–33 (explaining that “a Rule 736 proceeding cannot be brought as a counterclaim
in a borrower’s suit against the lender” because “it is a special, expedited proceeding
with a unique procedural mechanism that is not compatible with the administration of
a suit brought by a borrower to challenge the propriety of a loan agreement”); see also
Tex. R. Civ. P. 735.3.
Further, because BNYM sought and obtained a rule 309 judgment for judicial
foreclosure rather than an order allowing a nonjudicial foreclosure and trustee’s sale
under chapter 51 of the property code, the provisions of chapter 51 that govern
20 nonjudicial foreclosure proceedings—as well as the cases interpreting said provisions—
are also inapplicable. See Brown, 326 S.W.3d at 654 (explaining that “chapter 51
distinguishes between foreclosure sales conducted under the chapter and those
conducted under a court judgment foreclosing the lien”); 17 William V. Dorsaneo III
et al., Texas Litigation Guide § 255.03[4][a] (2018 ed.) (“Chapter 51 of the Property Code
governs the nonjudicial foreclosure of real property security interests created by
contract.”). Indeed, BNYM recognizes in its appellate briefing that “by its express
terms, Section 51.002 does not apply to a claim for judicial foreclosure.” We have heard
no compelling argument and find no authority to expand the application of rule 736
and chapter 51 and the cases interpreting them beyond proceedings concerning
nonjudicial foreclosures.15
In summary, then, as set out above, a rule 309 judgment for judicial foreclosure
contemplates a distinct proceeding with different pleading and proof requirements
from a rule 736 application, and the requirements governing nonjudicial foreclosures
provided by chapter 51 of the property code do not apply to an action for a rule 309
judgment for judicial foreclosure. Accordingly, we review BNYM’s summary judgment
evidence to determine whether there is a genuine issue of material fact with regard to
the Note and BNYM’s privity to it that precludes summary judgment for a rule 309
judicial foreclosure.
Property code sections 51.004 and 51.005 expressly address judicial 15
foreclosures but concern post-foreclosure deficiencies, which are inapplicable to these facts. See Tex. Prop. Code Ann. §§ 51.004–.005 (West 2014).
21 BNYM’s summary judgment evidence included: (1) the rule 736 application;
(2) two affidavits from Nationstar’s employees; (3) a copy of the Note signed by Judy
without any indorsements (blank or special); (4) a copy of the Security Instrument;
(5) two assignments—one of the Note and Deed of Trust from MERS to FHHL, and
one of the Deed of Trust from FHHL to BNYM; and (6) a 2012 written notification of
default for nonpayment. The summary judgment evidence supporting BNYM’s privity
to the Note is (1) an affidavit attached to BNYM’s rule 736 application, which was
attached to Appellees’ traditional motion for summary judgment, in which Jaclyn
Holloway, a limited vice president of Nationstar stated that BNYM is the holder of the
Note and attached a photocopy of the Note; and (2) an affidavit from A.J. Loll, a vice
president of Nationstar, who stated that “[BNYM] is the current holder of the Note
and Security Instrument.”16 Thus, we must review this evidence in the light most
favorable to the De La Garzas to determine if BNYM conclusively established the
elements of its counterclaim for judicial foreclosure.
Testimony in an affidavit that an entity owns a note is sufficient to conclusively
establish ownership even absent supporting documentation if there is no controverting
summary judgment evidence. First Gibraltar Bank v. Farley, 895 S.W.2d 425, 428 (Tex.
App.—San Antonio 1995, writ denied). And, a photocopy of a note attached to the
16 BNYM’s counterclaim alleges that “[t]he original Note is indorsed in blank by FHHLC and is currently in B[]NYM’s possession. [Nationstar] is the mortgage servicer of the Loan for B[]NYM.” However, “pleadings are not competent summary judgment evidence, even if sworn or verified.” Sher v. Fun Travel World, Inc., 118 S.W.3d 500, 502 (Tex. App.—Dallas 2003, no pet.).
22 affidavit of a holder who swears it is a true and correct copy is sufficient to prove the
status of owner and holder of a note if there is no controverting summary judgment
evidence. Id. However, an issue of material fact is present regarding ownership of a
note when the summary judgment evidence presents an unexplained gap in the chain
of title. Id. at 428–29.
Holloway’s and Loll’s statements that BNYM is the holder of the Note are
inconsistent with the attached documents because the only copy of the Note in the
record before us contains no indorsement indicating BNYM is the payee or holder of
the Note and because none of the six pages of attachments include an assignment of
the Note to BNYM (the second assignment assigns only the Deed of Trust to BNYM).
Put differently, BNYM’s summary judgment evidence presents an unexplained gap in
BNYM’s chain of title because it appears that title to the Note stopped in FHHL. See
FFP Mktg. Co., Inc. v. Long Lane Master Tr. IV, 169 S.W.3d 402, 410 (Tex. App.—Fort
Worth 2005, no pet.) (reversing summary judgment when movant’s affidavit and
attachments were “internally inconsistent” regarding the movant’s ownership interest
in the note); First Gibraltar Bank, 895 S.W.2d at 428–29 (concluding bank agent’s
affidavit testimony stating that the bank was the holder of the attached note without
explaining or showing how title to the note passed to the bank created “internal
inconsistencies” and a fact issue concerning ownership of the note, which precluded
summary judgment); Scott v. U.S. Bank, N.A., No. 02-12-00230-CV, 2014 WL 3535724,
at *4 (Tex. App.—Fort Worth July 17, 2014, no pet.) (mem. op.) (explaining U.S. Bank’s
23 summary judgment affidavit stating an attached assignment demonstrated the loan was
transferred to U.S. Bank “who is the current owner and holder of the loan” was
internally inconsistent because no documentation corroborated the assertion, so
“standing alone, the affidavit fails to establish the chain of title to U.S. Bank as a matter
of law”); see also Deutsche Bank Nat’l Tr. Co. v. Burke, No. 4:11-CV-01658, 2014 WL
4649879, at *2–3 (S.D. Tex. Sept. 16, 2014) (denying motion for summary judgment for
judicial foreclosure and recognizing that “[i]f there is a potential gap in ownership of a
note based on an affiant’s testimony, the affidavit will not permit summary judgment”).
Therefore, based on our de novo review of the summary judgment evidence in
the light most favorable to the De La Garzas, we hold that BNYM failed to meet its
burden concerning the debt and financial obligation on its counterclaim for judicial
foreclosure to conclusively establish that BNYM has standing to foreclose vis-à-vis the
Note because there is an unexplained gap in the chain of title. Accordingly, we sustain
this portion of the De La Garzas’ sole point.
2. Writ of Possession
Texas Rule of Civil Procedure 310 provides that a party seeking to foreclose on
a property “is entitled to a writ of possession” once the court renders a judgment of
foreclosure. See Tex. R. Civ. P. 310; see also King v. Deutsche Bank Nat’l Tr. Co., No. 1:14-
CV-0740-LY, 2016 WL 3221172, at *2 (W.D. Tex. Apr. 12, 2016) (citing Tex. R. Civ.
P. 310). Because we held the trial court erred by granting summary judgment for judicial
foreclosure, we likewise hold that the trial court erred by granting BNYM’s request for
24 a judgment of writ of possession and sustain this portion of the De La Garzas’ point in
part.
IV. Conclusion
Having overruled in part and sustained in part the De La Garzas’ sole point, we
affirm the trial court’s no-evidence summary judgment as to the De La Garzas’ claims,
reverse the traditional summary judgment as to BNYM’s counterclaims, and remand
this case to the trial court for further proceedings not inconsistent with this opinion.
/s/ Bonnie Sudderth
Bonnie Sudderth Chief Justice
Delivered: November 1, 2018