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Farkas v. Aurora Loan Services, L.L.C.

Court of Appeals of Texas, Fifth District, Dallas

May 30, 2017

JANOS FARKAS, Appellant
v.
AURORA LOAN SERVICES, L.L.C., AURORA BANK FSB, FEDERAL NATIONAL BANK ASSOCIATION, AND JINNI GONZALEZ, Appellees

         On Appeal from the 134th Judicial District Court Dallas County, Texas Trial Court Cause No. DC-11-02053

          Before Justices Lang, Brown, and Whitehill

          MEMORANDUM OPINION

          DOUGLAS S. LANG, JUSTICE

         Janos Farkas, pro se, appeals the trial court's final take-nothing judgment on his claims for wrongful foreclosure, suit to quiet title, and violation of section 12.002 of the Texas Civil Practice and Remedies Code in favor of Aurora Loan Services, L.L.C., Aurora Bank FSB (collectively Aurora), Federal National Mortgage Association (commonly known as Fannie Mae), and Jinni Gonzalez. Farkas raises six issues on appeal, arguing the evidence is legally and factually insufficient to support the trial court's findings of fact and the trial court erred when it made conclusions of law that: (1) the pre-foreclosure notices satisfied the deed of trust and section 51.002(d) of the Texas Property Code as to his claim for wrongful foreclosure against Aurora; (2) the notice of default in Joint Exhibit No. 11 satisfied all of the requirements of the deed of trust and section 51.002 of the Texas Property Code as to his wrongful-foreclosure claim against Aurora; (3) Aurora conducted a legal and valid non-judicial foreclosure as to his claim for wrongful foreclosure against Aurora; (4) Gonzalez proved her affirmative defense that she was a bona fide purchaser as to the suit to quiet title against her; (5) Farkas has no legal or equitable interest in the property and he is not entitled to a suit to quiet title against Aurora, Fannie Mae, and Gonzalez; and (6) Fannie Mae did not violate section 12.002 of the Texas Civil Practice and Remedies Code.

         We conclude the evidence is legally and factually sufficient to support the trial court's findings of fact. Also, we conclude the trial court did not err in its conclusions of law. The trial court's final take-nothing judgment is affirmed.

         I. FACTUAL AND PROCEDURAL CONTEXT

         On January 2, 2007, Farkas purchased condominium Unit 608 located at 122 Jackson Street, Dallas, Texas 75202. Farkas funded his purchase of Unit 608 by executing a promissory note, specifying WR Starkey Mortgage as the lender. The note obligated Farkas to pay monthly principal and interest on the first day of each month beginning February 1, 2007 through the maturity date of January 1, 2037. To secure the note, Farkas also executed a deed of trust identifying WR Starkey as the lender.

         On January 31, 2007, WR Starkey sold and transferred the Unit 608 loan to Aurora Bank. Then, Aurora Bank sold the Unit 608 loan to Fannie Mae by way of a standing purchase sale agreement and amendment. On February 9, 2009, the servicing rights relating to the Unit 608 loan were "assigned, transferred, or sold" to Aurora Loan Services, which sale became effective on March 1, 2007. These servicing rights included the right to collect payments and foreclose on Unit 608.

         On June 17, 2010, Aurora Loan Services mailed a letter to Farkas notifying him that the loan was in default for the payment due on May 1, 2010. Farkas received the June 17, 2010 letter, but made no payment on the Unit 608 loan in June 2010. However, on July 16, 2010, Farkas made a payment on the loan, which was credited to the monthly installment that was due on May 1, 2010.

         On July 22, 2010, Aurora Loan Services mailed Farkas a second notice of default, relating to the payment due on June 1, 2010. Farkas received the July 22, 2010 letter. On August 11, 2010, Farkas made another payment on the loan, which was credited to the monthly installment due on June 1, 2010.

         On August 19, 2010, Aurora Loan Services mailed Farkas a third notice of default, relating to the payment due on July 1, 2010. Farkas received the August 19, 2010 letter. On September 13, 2010, Farkas made another payment on the loan, which was credited to the monthly installment due on July 1, 2010.

         On September 16, 2010, Aurora Loan Services mailed Farkas a fourth notice of default, relating to the payment due on August 1, 2010. Again, Farkas received the September 16, 2010 notice of default. On October 29, 2010, Farkas made another payment on the loan, which was credited to the monthly installment due on August 1, 2010.

         On November 2, 2010, Aurora Loan Services mailed Farkas a fifth notice of default, relating to the payment due on September 1, 2010. Farkas did not pay the monthly installment due for September 1, 2010 or any of the monthly installments due afterward.

         On December 31, 2010, Mann & Stevens, P.C., sent Farkas a demand letter, which Farkas received. On January 27, 2011, McCarthy, Holthus & Ackerman, L.L.P., sent Farkas a letter notifying him that it had been retained by Aurora Loan Services to initiate foreclosure proceedings. Farkas received the January 27, 2011 letter. Then, on February 7, 2011, McCarthy, Holthus & Ackerman sent Farkas a letter that was accompanied by a notice of substitute trustee sale, which notified Farkas that a foreclosure sale on Unit 608 was scheduled for March 1, 2011. Farkas received the February 7, 2011 letter and the notice of substitute trustee sale for March 1, 2011 was recorded with the County Clerk, Dallas County, Texas on February 8, 2011. On February 14, 2011 and February 21, 2011, Farkas sent letters to McCarthy, Holthus & Ackerman. Also, on February 24, 2011, Farkas, pro se, filed his original petition against Aurora Loan Services seeking a declaratory judgment and a temporary restraining order. On February 28, 2011, the trial court granted Farkas's application for a temporary restraining order. As a result, the March 1, 2011 foreclosure sale did not occur. The temporary restraining order expired by its terms on March 10, 2011.

         On May 12, 2011, McCarthy, Holthus & Ackerman sent Farkas a letter, acknowledging receipt of Farkas's letters, stating that Aurora Loan Services determined the balances due are accurate, and advising Farkas that it had been instructed by Aurora Loan Services to proceed with foreclosure. Farkas received the May 12, 2011 letter.

         On May 13, 2011, McCarthy, Holthus & Ackerman sent Farkas another notice of substitute trustee sale, which notified Farkas that a foreclosure sale on Unit 608 was scheduled for June 7, 2011. Farkas received the May 13, 2011 notice, which was subsequently recorded with the Dallas County Clerk on May 16, 2011.

         On June 7, 2011, a foreclosure sale was held on Unit 608. Aurora Loan Services was the winning bidder with a credit bid of $168, 479.03, which represented the entire amount of the indebtedness Farkas owed on the Unit 608 note at the time of the sale. At the time of foreclosure, the appraised value of the property was $94, 790. On June 16, 2011, the substitute trustee's deed and corresponding affidavit were filed in the real property records of Dallas County. On June 17, 2011, Aurora Loan Services executed a special warranty deed naming Fannie Mae as grantee, which was also filed in the real property records of Dallas County.

         The record before us does not show when, but at some point, Farkas amended his pro se petition to allege claims against Aurora Bank and Fannie Mae as well as Aurora Loan Services and to allege the additional claims of verification of debt, violations of the Texas Civil Practice and Remedies Code, violations of the Texas Debt Collection Act, violations of the Texas Deceptive Trade Practices Act, wrongful foreclosure, and a suit to quiet title. See Farkas v. Aurora Loan Servs., L.L.C., No. 05-12-01095-CV, 2013 WL 6198344, at *1 (Tex. App.-Dallas Nov. 26, 2013, pet. denied) (mem. op.). Aurora and Fannie Mae answered the lawsuit and asserted counterclaims for breach of contract, defamation and business disparagement, and malicious prosecution, which were subsequently dismissed without prejudice by nonsuit. Aurora and Fannie Mae filed a joint no-evidence and traditional motion for summary judgment, which the trial court granted. See Farkas, 2013 WL 6198344, at *1. On appeal, this Court reversed the trial court's summary judgment on Farkas's claims for wrongful foreclosure and suit to quiet title, remanding those claims to the trial court for further proceedings, and affirmed the remainder of the trial court's summary judgment. See Farkas, 2013 WL 6198344, at *5.

         In 2013, Gonzalez agreed to purchase Unit 608 from Fannie Mae for $137, 000. Before purchasing Unit 608, Gonzalez was aware that it had been previously sold at a foreclosure sale. After purchasing the condominium, Gonzalez has occupied Unit 608 as her primary residence.

         After the remand, on December 2, 2014, Farkas filed his sixth amended petition adding Gonzalez as a party to the lawsuit, abandoning his claim for wrongful foreclosure, and asserting a suit to quiet title against Aurora Loan Services, Fannie Mae, and Gonzalez, and a claim for violation of Texas Civil Practice and Remedies Code section 12.002 against Fannie Mae.[1]Although Farkas's sixth amended petition continued to name Aurora Bank as a party, he did not assert any claims against Aurora Bank. Gonzalez answered and asserted the affirmative defense that she was a bona fide purchaser.

         On July 1, 2015, a bench trial was held. Farkas, Aurora Loan Services, Aurora Bank, Fannie Mae, and Gonzalez all appeared. During the trial, the parties offered into evidence several joint exhibits. One of the joint exhibits was the parties' joint stipulations of fact and agreed propositions of law. On July 8, 2015, the trial court signed a take-nothing judgment on all of Farkas's claims and specifically noted that "'Farkas's claims for wrongful foreclosure and suit to quiet title' have been tried." On August 26, 2015, the trial court signed it's written findings of fact and conclusions of law. This appeal followed.

         II. LEGAL AND FACTUAL SUFFICIENCY

         In issues one through six, Farkas challenges the legal and factual sufficiency of the evidence to support the trial court's findings of fact and argues the trial court erred when it made conclusions of law as to his wrongful-foreclosure claim, suit to quiet title, and claim for violation of section 12.002 of the Texas Civil Practice and Remedies Code.

         A. Standard of Review

         1. Legal and Factual Sufficiency of the Trial Court's Findings of Fact

         In an appeal from a bench trial, findings of fact have the same weight as a jury's verdict. See Speer v. Presbyterian Children's Home & Serv. Agency, 847 S.W.2d 227, 233 n.4 (Tex. 1993); Anderson v. City of Seven Points, 806 S.W.2d 791, 794 (Tex. 1991); Sheetz v. Slaughter, 503 S.W.3d 495, 502 (Tex. App.-Dallas 2016, no pet.); Fulgham v. Fischer, 349 S.W.3d 153, 157 (Tex. App.-Dallas 2011, no pet.). The trial court's findings of fact are reviewable for legal and factual sufficiency of the evidence by the same standards that are applied in reviewing the evidence supporting a jury's answer. See BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002); Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex. 1996) (per curiam); Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994); Sheetz, 503 S.W.3d at 502. When the appellate record contains a reporter's record, findings of fact are not conclusive and are binding only if supported by the evidence. See Sheetz, 503 S.W.3d at 502; Fulgham, 349 S.W.3d at 157. An appellate court defers to unchallenged findings of fact that are supported by some evidence. See Tenaska Energy, Inc. v. Ponderosa Pine Energy, L.L.C., 437 S.W.3d 518, 524 (Tex. 2014); Third Party Anesthesia Adm'rs, L.L.C. v. Staff Care, Inc., No. 05-03-01561-CV, 2015 WL 3894603, at *3 (Tex. App.-Dallas June 24, 2015, no pet.); Inwood Nat'l Bank v. Wells Fargo Bank, N.A., 463 S.W.3d 228, 235 (Tex. App.-Dallas 2015 no pet.). In other words, the trial court's findings of fact are binding on the appellate court unless challenged on appeal. See Brown v. Pennington, No. 05-14-01349-CV, 2015 WL 3958618, at *4 (Tex. App.-Dallas June 30, 2015, no pet.) (mem. op.); Lombardo v. Bhattacharyya, 437 S.W.3d 658, 668 (Tex. App.-Dallas 2014, pet. denied).

         When a party attacks the legal sufficiency of an adverse finding on which it had the burden of proof, it must demonstrate on appeal that the evidence establishes, as a matter of law, all vital facts in support of the issue. See Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001); Khorshid, Inc. v. Christian, 257 S.W.3d 748, 762 (Tex. App.-Dallas 2008, no pet.). When reviewing the record, an appellate court determines whether any evidence supports the challenged finding of fact. See Sheetz, 503 S.W.3d at 502; Fulgham, 349 S.W.3d at 157. If more than a scintilla of evidence exists to support the finding of fact, the legal sufficiency challenge fails. See Graham Central Station, Inc. v. Pena, 442 S.W.3d 261, 263 (Tex. 2014); Sheetz, 503 S.W.3d at 502; Fulgham, 349 S.W.3d at 157; see also Farkas v. Fed. Nat'l Mortg. Ass'n, No. 05-11-01416-CV, 2012 WL 5351262, at *2 (Tex. App.-Dallas Oct. 31, 2012, no pet.) (mem. op.).

         When a party attacks the factual sufficiency of an adverse finding on an issue on which he has the burden of proof, the party must demonstrate that the adverse finding is against the great weight and preponderance of the evidence. See Dow Chem. Co., 46 S.W.3d at 242; Khorshid, 257 S.W.3d at 762. When an appellant challenges the factual sufficiency of the evidence on an issue, an appellate court considers all the evidence supporting and contradicting the finding of fact. See Plas-Tex, Inc. v. U.S. Steel Corp., 772 S.W.2d 442, 445 (Tex. 1989); Sheetz, 503 S.W.3d at 502; Fulgham, 349 S.W.3d at 157. An appellate court sets aside findings of fact for factual insufficiency only if the finding is so contrary to the evidence as to be clearly wrong and manifestly unjust. See Ortiz, 917 S.W.2d at 772; Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986) (per curiam); Sheetz, 503 S.W.3d at 502; Fulgham, 349 S.W.3d at 157. In a bench trial, the trial court, as factfinder, is the sole judge of the credibility of the witnesses. See Sheetz, 503 S.W.3d at 502; Fulgham, 349 S.W.3d at 157. As long as the evidence falls "within the zone of reasonable disagreement, " an appellate court will not substitute its judgment for that of the factfinder. See City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005); Sheetz, 503 S.W.3d at 502; Fulgham, 349 S.W.3d at 157.

         2. Review of the Trial Court's Conclusions of Law

         An appellate court reviews the trial court's conclusions of law de novo. See BMC Software, 83 S.W.3d at 794; Sheetz, 503 S.W.3d at 502. An appellant may not challenge the trial court's conclusions of law for factual insufficiency, but it may review the legal conclusions drawn from the facts to determine their correctness. See BMC Software, 83 S.W.3d at 794; Reisler v. Reisler, 439 S.W.3d 615, 619 (Tex. App.-Dallas 2014, no pet.). Further, a trial court's conclusions of law are not reviewable on the basis that there is legally insufficient evidence to support them. See Aldrich v. State ex rel. Cox, 658 S.W.2d 323, 327 (Tex. App.- Tyler 1983, no pet.); cf. Douglas-Peters v. Cho, No. 05-15-01538-CV, 2017 WL 836848, at 14 (Tex. App.-Dallas Mar. 3, 2017, no pet.). If an appellate court determines that a conclusion of law is erroneous, but the trial court nevertheless rendered the proper judgment, the error does not require reversal. See BMC Software, 83 S.W.3d at 794; Sheetz, 503 S.W.3d at 502; Reisler, 439 S.W.3d at 619-20; Fulgham, 349 S.W.3d at 157-58.

         B. Wrongful Foreclosure

         In issues one, two, and three, Farkas argues the evidence is legally and factually insufficient to support the following findings of fact and the trial court erred when it made the following conclusions of law relating to his wrongful-foreclosure claim against Aurora: (1) the pre-foreclosure notices satisfied the deed of trust and section 51.002(d) of the Texas Property Code; (2) the notice of default in Joint Exhibit No. 11 satisfied all of the requirements of the Deed of Trust and section 51.002 of the Texas Property Code; and (3) Aurora conducted a legal and valid non-judicial foreclosure. Aurora responds that there was no defect in the foreclosure proceedings. It claims that Farkas stipulated to the five notices sent and that he received the first four of those notices. Further, Aurora contends that Farkas did not prove a grossly inadequate selling price or a causal connection between the alleged defect in the foreclosure sale proceeding and the grossly inadequate selling price.

         1. Applicable Law

         To establish a wrongful foreclosure, a plaintiff must prove: (1) a defect in the foreclosure sale proceeding; (2) a grossly inadequate selling price; and (3) a causal connection between the defect and the grossly inadequate selling price. See Porterfield v. Cenlar FSB, No. 05-14-00663-CV, 2016 WL 1019359, at *6 (Tex. App.-Dallas March 15, 2016, no pet.) (mem. op.); Bayview Loan Servicing, L.L.C. v. Martinez, No. 05-14-00835-CV, 2016 WL 825670, at *3 (Tex. App.- Dallas March 3, 2016, no pet.) (mem. op.); Wells Fargo Bank, N.A. v. Robinson, 391 S.W.3d 590, 593 (Tex. App.-Dallas 2012, no pet.).

          To prevail on a common law wrongful-disclosure claim, a plaintiff must show that the foreclosing lender failed to comply with either statutory or contractual conditions governing the foreclosure. In other words, an irregularity exists if a trustee does not comply with the statutory prerequisites governing foreclosure and any conditions of the deed of trust. See D&R Constructors, Inc. v. Tex. Gulf Energy, Inc., No. 01-15-00604-CV, 2016 WL 4536959, at *7 (Tex. App.-Houston [1st Dist.] Aug. 20, 2016, pet. denied) (mem. op.). However, mere irregularities in the foreclosure process do not give rise to a wrongful foreclosure claim. See Charter Nat'l Bank-Houston v. Stevens, 781 S.W.2d 368, 371 (Tex. App.-Houston [14th Dist.] 1989, writ denied). Further, technical irregularities, standing alone, are not sufficient to support a wrongful-foreclosure claim. See Apex Fin. Corp. v. Brown, 7 S.W.3d 820, 827 (Tex. App.- Texarkana 1999, no pet.).

         Because a grossly inadequate selling price is a requisite element, a claim for wrongful foreclosure does not arise until there has been a foreclosure sale. See Porterfield, 2016 WL 1019359, at *6. The particular facts of each case will determine whether the sale price was grossly inadequate. See Apex Fin., 7 S.W.3d at 829 (citing House v. Robertson, 89 Tex. 681, 36 S.W. 251 (1896)). However, inadequacy of price alone is not sufficient to support a wrongful-foreclosure claim. See Roquemore v. Kellogg, 656 S.W.2d 646, 650 (Tex. App.-Dallas 1983, no writ); Apex, 7 S.W.3d at 827-28 ("[A]n otherwise valid sheriff's sale will not generally be set aside for inadequacy of price alone").

         To maintain a suit for wrongful foreclosure, there must be evidence that the defect in the foreclosure sale proceeding, however slight, caused or contributed to cause the property to be sold for a grossly inadequate price. See American Sav. & Loan Ass'n v. Musick, 531 S.W.2d 581, 587 (Tex. 1975); Grapevine Diamond, L.P. v. City Bank, No. 05-14-00260-CV, 2015 WL 8013401, at *7-8 (Tex. App.-Dallas Dec. 7, 2015, pet. denied) (mem. op.); Wells Fargo, 391 S.W.3d at 594; Hunt v. Jefferson Sav. & Loan Ass'n, 756 S.W.2d 762, 764 (Tex. App.-Dallas 1988, writ denied); Sparkman v. McWhirter, 263 S.W.2d 832, 837 (Tex. Civ. App.-Dallas 1953, writ ...


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