On
Appeal from the 366th Judicial District Court Collin County,
Texas Trial Court Cause No. 366-00155-2015
Before
Justices Whitehill, Partida-Kipness, and Pedersen, III
MEMORANDUM OPINION
BILL
WHITEHILL JUSTICE.
This is
an equitable subrogation case involving a home equity loan
lien in which property owned by a deceased husband and wife
was sold at a subordinate lienholder's foreclosure sale
for far in excess of the junior creditor's debt amount.
The excess proceeds were deposited in the court's
registry. An investor later bought out the senior home equity
loan position and claimed entitlement to those excess prior
sale proceeds.
The
main question is who gets the excess sales proceeds: (i) the
investor asserting equitable subrogation rights to stand in
the home equity loan lender's shoes or (ii) the prior
homeowners' heirs claiming through their parents who were
the home equity loan borrowers. The trial court rendered
summary judgment for the investor, which we affirm primarily
because the excess proceeds represented equity in the home
and were thus subject to the home equity lien's reach.
More
specifically, Chrysanthi Avinger, bought the home at a home
owners' association foreclosure sale by paying
substantially more than the owners' debt to the
association. Avinger then paid a bank's superior home
equity loan lien on the property and claimed the excess sale
proceeds in the court's registry. Kelly Pope Worley and
Kevin Pope (the Pope Children), purported heirs of the
deceased couple, also claimed entitlement to those funds. The
trial court granted summary judgment awarding Avinger the
registry funds.
In four
issues with multiple subparts, the Pope Children challenge
the summary judgment arguing that: (i) Avinger's interest
is in the real property and the registry funds are
personality to which she is not entitled; (ii) the funds are
the Pope Children's exclusive personal property because
they are the Popes' heirs, Avinger has no standing to
claim the excess proceeds, and even if she did, her claim is
time-barred; (iii) the bank's foreclosure suit had
nothing to do with Avinger's and the Pope Children's
property rights in the registry funds; and (iv) awarding
Avinger the registry funds provides her with "an unjust
and impermissible windfall." The Pope Children's
fifth issue argues that fatally defective substituted service
on the deceased couple in the underlying suit renders that
judgment (and hence this judgment) void.
As
discussed below, we conclude that Avinger established as a
matter of law that she is entitled to the registry funds. We
further conclude that the Pope Children did not meet their
burden to show that the judgment is void because of defective
service. We thus affirm the trial court's judgment.
I.
Background
Allen
and Coeriene Pope were husband and wife. In 2002, the Popes
purchased property in Eldorado Heights in McKinney (the
Property).
In
2005, the Popes secured a $132, 000 home equity loan from
First Franklin (the Bank). The loan was secured by a lien on
the Property.
Coeriene
died on June 7, 2009, and Allen died roughly three years
later. Neither estate was administered.
In
January 2015, the Eldorado Heights Homeowners'
Association sued the Popes to recover unpaid assessments due
regarding the Property. When personal service on the Popes
was (not surprisingly) unsuccessful, the Homeowners'
Association's counsel moved for substituted service, and
the court authorized such service. After substituted service,
the Popes still did not answer so the court entered a default
judgment against them for $4, 949.32 in delinquent
assessments, $4, 000 in attorneys' fees and interest on
the judgment.
The
Property subsequently sold at a Constable's sale on May
15, 2015. Avinger purchased the Property for $75, 000, and
the Property was conveyed to her by Constable's Deed. And
$61, 232.32 in excess sale proceeds (the difference between
the amount due to the Homeowners' Association and the
purchase price) was deposited into the court's registry.
At the
time of the Constable's sale, however, the Popes'
home equity loan had an outstanding balance. The Bank filed a
Rule 737 application seeking judicial foreclosure of the loan
(the Bank Suit). See Tex. R. Civ. P. 737.
The
Bank Suit, filed and maintained under a separate cause
number, named the Popes' unknown heirs as defendants, and
they were served by publication. Although the Popes'
heirs did not appear in the Bank Suit, an ad litem was
appointed to represent their interests. Avinger and the
Homeowners' Association were also named defendants and
were served and appeared.
The
Bank Suit final judgment orders that:
• The Bank's lien is superior to the Homeowners'
Association's lien;
• The Bank's lien is unaffected by the foreclosure
of the Homeowners' Associations' subordinate lien;
• The Popes' heirs were immediately vested with the
Popes' interest in the Property when Mr. Pope died;
• The "statutory probate lien" in favor of the
Bank would be enforced by a nonjudicial foreclosure sale; and
• "One of the effects of the non-judicial
foreclosure shall be that [the heirs] are divested and the
purchaser of the Property at the non-judicial foreclosure
sale is vested with all right, title, and interest to the
Property.
After
the court entered judgment for the Bank, Avinger paid the
amounts due under the Popes' home equity loan. The record
is not specific, but Avinger swore that the amount paid
exceeded the amount held in the registry of the
court.[1]
Then,
the Pope Children intervened in this case requesting that the
$61, 232.32 in the court's registry be disbursed to them.
Avinger subsequently intervened, ...