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Worley v. Avinger

Court of Appeals of Texas, Fifth District, Dallas

August 8, 2019


          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



         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, ...

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