Clarence Glen Love, Jr., as Independent Executor of the Estate of Clarence Glen Love, Deceased v. Mills County State Bank--Appeal from 35th District Court of Mills County

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-97-00022-CV
John Dee Sanders and Jeff Fisher, Appellants
v.
Zellena P. Shelton; Leo E. Foust, Trustee; and W. G. Tingley, Jr.,
Substitute Trustee, Appellees
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 331ST JUDICIAL DISTRICT
NO. 92-01288-A, HONORABLE JOHN K. DIETZ, JUDGE PRESIDING
Zellena P. Shelton, Leo E. Foust, and W. G. Tingley, Jr., recovered summary judgment that John Dee Sanders and Jeff Fisher take nothing on certain of their causes of action (1) arising from a sale of real property by a trustee acting under a power of sale given in a deed of trust. Sanders and Fisher appeal. We will affirm the summary judgment.
THE CONTROVERSY

Donald Shelton executed and delivered a deed of trust to secure his $9000 debt to his former wife Zellena Shelton. The deed of trust describes certain real property belonging to Donald Shelton, designates Leo E. Foust trustee, and requires that the trustee "shall give notice of [any] foreclosure sale as provided by the Texas Property Code as then amended." Donald Shelton defaulted on his obligation. W. G. Tingley, a substitute trustee, gave notice that he would sell the property at the Travis County Courthouse "between the hours of ten o'clock a.m. and four o'clock p.m. on the first Tuesday in January next."

Just before ten o'clock a.m. on the day of the sale, John Sanders and Jeff Fisher purchased the property from Donald Shelton for $1000 and received Shelton's conveyance of the property purportedly "free and clear of any mortgage liens."

In the summary judgment documents, Sanders and Fisher swore they (and others) arrived at the courthouse by ten o'clock a.m. on the day of the trustee's sale, remained there until four o'clock p.m., and were never able to locate the sale. The summary-judgment evidence indicates that Tingley sold the property on the east steps of the courthouse at 10:58 a.m. on January 7, 1992 to Zellena Shelton for $9000.

Sanders and Fisher sued Zellena Shelton, Leo E. Foust, and W. G. Tingley, Jr., alleging that the trustee's sale was invalid for various reasons. (2) Sanders contended, among other things, that the trustee violated terms of the deed of trust, that appellees conspired to prevent them from bidding at the sale, that appellees intentionally chilled bidding at the sale, and that a grossly inadequate sales price coupled with irregularities at the sale made the sale voidable. Sanders requested compensatory damages and asked the court to set aside the sale. Shelton denied the allegations and filed a motion for summary judgment requesting that Sanders take nothing by his lawsuit. Sanders then filed a cross-motion for summary judgment, requesting in the motion that the court set aside the foreclosure sale and declare Sanders and Fisher the owners of the property.

The trial court rendered partial summary judgment in favor of Shelton with regard to these two particular claims by Sanders: (1) that the trustee's sale should be set aside because the trustee's notice of sale did not comply with the requirements of the deed of trust and underlying state law; and (2) that the sale was voidable because irregularities in the sale contributed to a grossly inadequate sales price. The remaining claims were severed making this a final judgment from which Sanders appeals.

Sanders brings two points of error. In his first point of error, he contends the trial court erred by granting Shelton's summary judgment because (1) the trustee's notice of sale did not comply with the terms of the deed of trust and Texas Property Code section 51.002, rendering the sale fatally defective and void, see Slaughter v. Qualls, 162 S.W.2d 671, 674-75 (Tex. 1942) (foreclosure sale ineffective unless trustee complies strictly with terms of deed of trust); Durkay v. Madco Oil Co., 862 S.W.2d 14, 17 (Tex. App.--Corpus Christi 1993, writ denied); and (2) Shelton failed to negate Sanders's contention that irregularities at the sale contributed to a grossly inadequate sales price. See American Sav. & Loan Ass'n v. Musick, 531 S.W.2d 581, 587 (Tex. 1975); Pentad Joint Venture v. First Nat'l Bank, 797 S.W.2d 92, 96 (Tex. App.--Austin 1990, writ denied) (irregularities at sale coupled with grossly inadequate sales price constitute grounds for setting aside sale).

In his second point of error, Sanders contends the trial court erroneously denied his cross-motion for summary judgment because he established as a matter of law that the sale should be set aside.

 
STANDARD OF REVIEW

The movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that she is entitled to judgment as a matter of law. In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the nonmovant will be taken as true. Every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in his favor. Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex. 1985).

 
DISCUSSION AND HOLDINGS

Texas law recognizes that a mortgagee is under a duty to avoid affirmatively deterring third party bids by acts or statements made before or during the foreclosure sale, but is under no duty to take affirmative action, beyond that required by statute or deed of trust, to secure a fair sale. See Pentad, 797 S.W.2d at 96-97 (citing Tarrant Sav. Ass'n v. Lucky Homes, Inc., 390 S.W.2d 473, 476 (Tex. 1965) and Biddle v. National Old Line Ins. Co., 513 S.W.2d 135, 138 (Tex. Civ. App.--Dallas 1974, writ ref'd n.r.e.)).

 

Statutory Provisions

Before 1889, a trustee's sale under a power of sale given in a deed of trust were apparently not regulated save by provisions in the instrument itself. In that year, the legislature acted to regulate such sales in several particulars. One requirement was that the mortgaged property be sold, in the county where the property was located, "between the hours of 10 o'clock a.m. and 4 o'clock p.m. of the first Tuesday in any month." The second requirement was that the trustee give advance notice of the "time and place" of the proposed sale, as had been previously required for judicial sales. Act approved March 21, 1889, ch. 118, Tex. Gen. Laws 1889, 1171; Tex. Rev. Civ. Stat. Ann. arts. 2303, 2309 (West 1979).

The Texas Property Code was amended in 1988 to add new requirements as indicated by the italicized language below:

 

(a) A sale of real property under a power of sale conferred by a deed of trust . . . must be a public sale at auction held between 10 a.m. and 4 p.m. of the first Tuesday of a month.

 

(b) Notice of the sale, which must include a statement of the earliest time at which the sale will occur, must be given at least 21 days before the date of the sale.

 

(c) The sale must begin at the time stated in the notice of sale or not later than three hours after that time.

 

Act of May 15, 1987, 70th Leg., R.S., ch. 540, 1, 1987 Tex. Gen. Laws 2174, 2174 (codified at Tex. Prop. Code Ann. 51.002 (West 1995) (emphasis added)).

 

Inadequate Notice

In the present case, the trustee's notice stated that this sale would occur "between the hours of ten o'clock a.m. and four o'clock p.m." We are asked to decide if the trustee sufficiently identified the time of the proposed foreclosure sale under the amended Property Code.

Appellants supplied legislative history suggesting that the intent of the legislature was to facilitate prospective bidders' ease of access to foreclosure sales. The amendments accomplished this by shortening from six hours to three hours the "window" during which a potential sale may occur. No longer must a buyer stake out the courthouse steps for six hours to locate a foreclosure sale. Although all sales must still occur sometime between ten o'clock a.m. and four o'clock p.m., the new three-hour window means that ten o'clock may not always be the earliest hour at which a sale may occur. All sales must begin not later than three hours after the earliest time stated in the notice. Some might begin at eleven o'clock a.m., others at noon and still others at one o'clock p.m. The amendment provides that the notice of sale shall state the earliest time at which the sale will occur, so a prospective buyer knows when to arrive. What the amendment fails to do is to require notice be given of the new three-hour window.

Before the 1988 amendments, the trustee's notice sufficiently identified the "time" of the proposed sale merely by stating that the sale would take place on a particular Tuesday "between ten o'clock a.m. and four o'clock p.m.," the statutory period of time during which the sale might lawfully take place; and "[i]t was not necessary that the trustee's notice of sale specify an exact hour when the sale would be held." Mabry v. Abbott, 471 S.W.2d 442, 445 (Tex. Civ. App.--Waco 1971, writ ref'd n.r.e.).

Sanders asserts more is required after the 1988 amendments to the Texas Property Code. Sanders and the dissent interpret section 51.002(b) as amended to require a verbatim statement that a designated hour is "the earliest time this sale will occur." Although the sufficiency of a foreclosure notice is frequently litigated, no court has addressed the change in notice, if any, effected by the 1988 amendments to section 51.002(b) & (c).

We decline to read the statute as literally as the dissent. The notice given here makes it perfectly clear that the sale will not occur before 10 o'clock a.m. No more is required. Magical language need not be inserted to accomplish the amendment's purpose of informing the public of the earliest hour the sale will begin. This does not undermine the change effected by the 1988 amendment, which now requires the sale to occur within three hours of the earliest time stated in the notice of sale. In the instant cause if this sale had occurred after one p.m., it would not have met the statutory requirement of newly added section 51.002(c). But that section does not require the notice to state that the sale must begin within three hours of the time announced in the notice; it only requires that the sale actually begin not later than three hours after the earliest time stated. Admittedly the better practice would be to give notice of the "three-hour window." (3) A cautious trustee might add the statutory language, "ten o'clock a.m. is the earliest time that the sale will occur," but these words would give prospective bidders no more information about the beginning time of the sale than the notice actually given here.

In First State Bank v. Keilman, 851 S.W.2d 914 (Tex. App.--Austin 1993, writ denied), the debtor alleged the notice failed to sufficiently inform prospective bidders on several grounds--listing legal description rather than street address and obscuring phone number and address of seller. The notice of sale stated that the sale would occur "between ten o'clock a.m. and one o'clock p.m." There was no explicit statement in the notice that ten o'clock is the earliest time at which the sale will occur. Admittedly section 51.002(b) was not the focus of Keilman's complaint, but this Court held the notice given there sufficient under Texas law although the deed of trust did not have an explicit statement of "the earliest time the sale would begin." We declined to impose additional requirements on the mortgagee. Keilman, 851 S.W.2d at 923.

The dissent asserts that the legislature intended by its amendments to require a more specific time period in which a foreclosure is to be conducted. We respond that this was effected by the "three-hour window" requirement of section 51.002(c). If it was also the intent of the legislature to require notice of this more specific time period, this was not accomplished by either section 51.002(b) or (c). Read separately or together, they do not require that notice be given of the three-hour window. This would have been the best way to effectuate the legislature's intent, but the plain language of the amendment fails to require such notice. Certainly a statement of the "earliest hour at which a sale will occur" does not define a more specific time period. It adds nothing to the notice that was actually given here.

In the present case, the notice stated that the sale would occur between ten a.m. and four p.m., and the sale actually occurred at 10:58 a.m. Sanders does not allege that he was lulled into showing up late by the "defective" notice; the summary judgment evidence includes sworn testimony that appellees were present at 10:00 a.m. but could not locate the sale. We hold the notice and the sale substantially complied with sections 51.002(b) and (c) as amended. Therefore, we overrule part A of point of error one regarding inadequacy of the notice.

 

Inadequate Price and Other Irregularities

Inadequacy of consideration alone does not render a foreclosure sale void if the sale was "legally and fairly made." Musick, 531 S.W.2d at 587; Tarrant Sav. Ass'n, 390 S.W.2d at 475. There must also be evidence of some irregularity, though slight, that caused or contributed to a sale for a grossly inadequate price. See Pentad, 797 S.W.2d at 96, (citing Musick, 531 S.W.2d at 587).

The foreclosure sale price was $9000. Sanders offered the affidavit of Steven E. Becker who testified that the fair market value of the property on the date of foreclosure was $59,000. Appellants allege that because Shelton failed to offer any summary-judgment proof to controvert their summary-judgment evidence of value, she failed to negate this element of their second cause of action for wrongful foreclosure.

Shelton avers that appellants are estopped from claiming the sales price of $9000 was "grossly inadequate" by judicial pleadings they filed in Donald Shelton's bankruptcy proceeding. To counter the trustee's challenge of Shelton's transfer of this property for inadequate consideration, Sanders and Fisher filed responses that they paid "value of at least $11,864.62" which was "reasonably equivalent value" for the property. Shelton argues that Sanders's admission in bankruptcy court that somewhat less than $12,000 is a reasonably equivalent value for this property estops his claim that $9000 is a "grossly inadequate" sales price.

Shelton is entitled to summary judgment if she can negate either element of Sanders's cause of action: a grossly inadequate sales price or any irregularity in the sale. We need not determine if Shelton has negated the element of a "grossly inadequate sales price" as a matter of law because we hold that she has negated as a matter of law all five irregularities alleged in appellants' pleadings.

Sanders alleges the following irregularities: (1) that the trustee refused to disclose to appellants the pay-off required to satisfy Shelton's debt; (2) the substitution of trustees was not disclosed; (3) the trustee failed to advise appellants of the time of sale; (4) the Trustee conducted the sale in such a manner that the appellants could not locate the sale on the courthouse steps at the appointed hour; and (5) the Trustee was instructed by Shelton to insure that she was the highest bidder.

As to the first "irregularity," we hold that the Trustee owed no duty to appellants to provide information regarding the payoff amount of the underlying obligation. Section 51.002 does not require that a debtor receive notification of the payoff amount prior to foreclosure. In re Davis Chevrolet, Inc., 135 B.R. 29, 32 (N.D. Tex. 1992). Sanders was not even the debtor here, and the trustee owed him no such duty as a matter of law. Second, the power to appoint a substitute trustee arises through the express authority of the deed of trust; Sanders does not allege that Shelton failed to comply with the requirement of the deed of trust in substituting trustees. Neither the deed of trust nor the statute grants the debtor the right to be informed of a substitution of trustees. Sanders as a stranger to the underlying transaction had no such right. As to the third complaint, in overruling Part A of this point of error, we have held that there was no irregularity in the notice regarding the time of the sale. Fourth, Sanders's failure to locate the sale on the courthouse steps does not present any specific irregularity in light of the uncontradicted summary judgment evidence that the sale occurred at 10:58 a.m. on the east courthouse steps on the day noticed for the sale. (4) When the property is sold on the courthouse steps, the trustee is only charged with following the provisions of the deed of trust and section 51.003 of the Property Code. He need not wait until he is the only seller; he need not postpone the sale until the mortgagor is present, much less await the appearance of some stranger to the transaction. Keilman, 851 S.W.2d at 924. Finally, even if it is true that Shelton instructed Turman, her agent, to be the highest bidder at the sale, this is not an irregularity. In Lucky Homes, the supreme court held that an instruction from an employee of the mortgagee to attend the sale and bid a specific sum did not constitute an irregularity. 390 S.W.2d at 476; see also Charter Nat'l Bank v. Steves, 781 S.W.2d 368, 371-74 (Tex. App.--Houston [14th Dist.] 1989, writ denied). In light of our holding in Keilman, that the trustee is under no duty to take affirmative action beyond that required by statute or the deed of trust to ensure a fair sale, we conclude as a matter of law that the summary-judgment record contains no evidence of an irregularity that would void this foreclosure sale. We overrule Part B of the first point of error.

 

Objections and Special Exceptions

In the final part of his first point of error, Sanders alleges the trial court erred in overruling his special exceptions and objections to Shelton's summary-judgment evidence. The admission or exclusion of evidence rests with the sound discretion of the trial court. New Braunfels Factory Outlet Ctr., Inc. v. IHOP Realty Corp., 872 S.W.2d 303, 310 (Tex. App.--Austin 1994, no writ). To obtain a reversal of the judgment, appellant must first show that the trial court did in fact commit error, and second that the error was reasonably calculated to cause and probably did cause the rendition of an improper verdict. Gee v. Liberty Mut. Fire Ins. Co., 765 S.W.2d 394, 396 (Tex. 1989). There is no reversible error if the evidence in question is cumulative or is not controlling on a material issue dispositive of the case. Id.

In the trial court, Sanders raised nine special exceptions or objections. (5) However, on appeal the only complaints of error alleged are that without the improperly admitted evidence there would be no competent summary-judgment evidence that (1) Tingley completed the foreclosure or (2) that Sanders never tendered an offer of cure. Sanders's pleadings do not raise the complaint that the foreclosure never occurred, and there is competent summary judgment evidence in the form of the foreclosure deed signed by Tingley that it did occur. Indeed, if the foreclosure sale had not occurred Zellena Shelton would never have sought to evict Donald Shelton and Donald Shelton would never have sought to temporarily enjoin his eviction, two earlier actions in this cause. The issue of cure is not dispositive of any complaint determined by this partial summary judgment, which is limited to the issues of alleged defect in the notice of sale and the alleged inadequate sales price coupled with an irregularity. We hold that the appellant has failed to meet his burden of showing that any error in admitting the summary-judgment evidence complained of was reasonably calculated to and probably did cause the rendition of an improper judgment in this cause. (6) See Gee, 765 S.W.2d at 396.

Having rejected all the complaints raised, we overrule the first point of error complaining of the trial court's error in granting Shelton's motion for partial summary judgment.

Because we conclude that the trial court properly granted partial summary judgment in favor of Shelton, we overrule point of error two complaining of the trial court's denial of Sanders's opposing motion for summary judgment asking that the sale be set aside and appellants be declared owners of the property.

 
CONCLUSION

We affirm the trial court's order granting partial summary judgment in favor of Shelton on Sanders's claim of wrongful foreclosure due to defective notice or gross inadequacy of sales price coupled with irregularities in the sale, and affirm its order denying Sanders's cross- motion for summary judgment.

 

Bea Ann Smith, Justice

Before Justices Powers, Aboussie and B. A. Smith

Affirmed

Filed: May 29, 1998

Publish

1. The trial court granted partial summary judgment on two of the plaintiffs' causes; the remaining claims were severed.

2. For convenience, we will refer to appellants collectively as "Sanders" and appellees collectively as "Shelton."

3. Appellants do not complain of that failure in their points of error.

4. The affidavits of various individuals stating they were unable to locate Leo Foust, who they mistakenly believed was conducting the sale, do not directly contradict the summary-judgment evidence that the sale occurred on the courthouse steps on the date and at the time specified.

5. Sanders excepted and objected to the affidavits of William Turman and W.G. Tingley in whole as statements of interested parties, not otherwise credible and free from contradictions and inconsistencies. Sanders raised the same objections to the affidavit of Leo Foust. Sanders objected in particular to Tingley's statement that a caller made no tender of payment of the note from Donald Shelton to Zellena Shelton, claiming it was vague and a legal conclusion. Additionally Sanders objected that Tingley was not competent to make the conclusory statement that he completed the foreclosure. Sanders excepted and objected to particular statements in Foust's affidavit that the substitution of trustees was not done for an illicit purpose, that Foust did not take steps to prevent any party from properly purchasing the property through normal foreclosure procedures, and that no party made a formal written tender of the amount due under the Shelton note, claiming all of these were mere conclusory statements. Additionally, Sanders objected to particular statements in the Foust affidavit that no caller ever advised him that he represented Donald Shelton or intended to cure the defects or ever tendered an offer of cure, alleging these were conclusory and vague. And Sanders raised a hearsay objection to the statement that Sanders's attorney represented that his client would use up to $40,000 to pursue the property in question.

6. We note that evidence regarding the tender of an offer of cure may be relevant to other causes of action severed from this partial summary judgment.

se. The issue of cure is not dispositive of any complaint determined by this partial summary judgment, which is limited to the issues of alleged defect in the notice of sale and the alleged inadequate sales price coupled with an irregularity. We hold that the appellant has failed to meet his burden of showing that any error in admitting the summary-judgment evidence complained of was reasonably calculated to and probably did cause the rendition of an improper judgment in this cause. (6) See