the Estate of Sandra Broughton, Gary T. Weimer, Individually and as Independent Co-Executor of the Estate of Sandra Broughton, Greg Weimer, Individually and as Independent Co-Executor of the Estate of Sandra Broughton v. Financial Freedom Senior Funding Corporation Financial Freedom Acquisition, LLC And Federal National Mortgage Association A/K/A Fannie Mae ( 2016 )

NUMBER 13-14-00091-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
THE ESTATE OF SANDRA BROUGHTON,
DECEASED; GARY T. WEIMER, INDIVIDUALLY
AND AS INDEPENDENT CO-EXECUTOR OF THE
ESTATE OF SANDRA BROUGHTON, DECEASED;
GREG WEIMER, INDIVIDUALLY AND AS
INDEPENDENT CO-EXECUTOR OF THE
ESTATE OF SANDRA BROUGHTON; ET AL., Appellants,
v.
FINANCIAL FREEDOM SENIOR FUNDING
CORPORATION; FINANCIAL FREEDOM
ACQUISITION, LLC; AND FEDERAL NATIONAL
MORTGAGE ASSOCIATION A/K/A FANNIE MAE, Appellees.
On appeal from the 368th District Court
of Williamson County, Texas.
MEMORANDUM OPINION
Before Chief Justice Valdez and Justices Rodriguez and Wittig
Memorandum Opinion by Justice Wittig1
This is an appeal of a summary judgment on a claim of wrongful foreclosure of a
reverse mortgage.2 Appellants include the Estate of Sandra Broughton, Deceased; Gary
T. Weimer, Individually and as Independent Co-Executor of the Estate of Sandra
Broughton, Deceased; Greg Weimer, Individually and as Independent Co-Executor of the
Estate of Sandra Broughton, Deceased; Jere Bob Bowden; and Bonnie Zamora,
(collectively “Broughtons”). Appellees are Financial Freedom Senior Funding
Corporation (“FFSFC”), Financial Freedom Acquisition, LLC, (“FFA”), and Federal
National Mortgage Association (“Fannie Mae”).
The Broughtons argue that irregularities caused a wrongful foreclosure with
resulting inadequate consideration and that the entity that foreclosed the property did not
have legal authority to do so. By memorandum opinion issued on March 3, 2016, we
affirmed the summary judgment in part and reversed and remanded in part. See Estate
of Broughton v. Fin. Freedom Senior Funding Corp., No. 13-14-00091-CV, 2016 WL
836834, at *1 (Tex. App.—Corpus Christi Mar. 3, 2016, no. pet. h.) (mem. op.). Appellees
have subsequently filed a motion for rehearing in this cause. Without changing our
previous disposition, we deny the motion for rehearing, withdraw our earlier opinion and
associated judgment, and issue this memorandum opinion and related judgment in their
stead.
1 Retired Fourteenth Court of Appeals Justice Don Wittig was assigned to this Court by the Chief
Justice of the Supreme Court of Texas pursuant to the government code. See TEX. GOV'T CODE ANN. §
74.003 (West, Westlaw through 2015 R.S.).
2This case is before the Court on transfer from the Third Court of Appeals in Austin pursuant to an
order issued by the Supreme Court of Texas. See TEX. GOV'T CODE ANN. § 73.001 (West, Westlaw through
2015 R.S.).
2
We affirm in part and reverse and remand in part.3
I. BACKGROUND
In 2006, Sandra and her husband Donald Broughton entered into a reverse
mortgage loan on their homestead located at 190 Oakwood Trail, Leander, Williamson
County, Texas with FFSFC. The original note was for $300,240.00. FFSFC, a subsidiary
of Indymac Bank, was placed into FDIC receivership in July 2009. Certain assets of
FFSFC presumably including the property in question were sold to FFA, including the
mortgage servicing rights. However, conflicting summary judgment proof showed a prior
sale of the same mortgage assets from FFA to Fannie Mae on July 23, 2007. The original
Broughton note and deed of trust contained an acceleration clause requiring payment on
the death of all borrowers. Sandra Broughton survived her husband, but died December
24, 2009. There was a delay in executing letters testamentary due to the loss of the
original will. The letters were finally granted August 23, 2010, with Greg and Gary Weimer
as co-executors of the estate.
Summary judgment proof showed that neither executor received FFA’s notice
letter dated January 26, 2010 because the letter was not sent to the debtor’s address.
Instead it was sent to the deceased Broughtons’ former Oakwood Trail address. Nor had
letters testamentary been issued at that time. On November 22, 2010, FFA sent a notice
of foreclosure intended for Gary Weimer; the notice was again to the Oakwood Trail
address, not to his mailing address. On February 15, 2011, FFA sent a notice of lien and
election of preferred lien status stating that the estimated payoff for the loan was
$162,095.18. On April 4, 2011, FFA (but not the lender) sent the executors a notice of
3 Appellees recently filed a motion to set this cause for hearing by submission “on the soonest
available date.” We grant appellees’ motion and issue this opinion accordingly.
3
substitute trustee sale. Although additional extensions were requested, they were denied.
The property was listed for sale by the Weimers for the estimated value of $610,000.00.
The property was foreclosed on May 3, 2011, and the underlying lawsuit for wrongful
foreclosure was filed in August of 2011.
II. STANDARD OF REVIEW
Summary judgments are reviewed de novo. Valence Operating Co. v. Dorsett,
164 S.W.3d 656, 661 (Tex. 2005). We apply the following standards in reviewing a
traditional summary judgment: (1) the movant has the burden of showing that there is no
genuine issue of material fact and that it is entitled to judgment as a matter of law; (2) in
deciding whether there is a disputed material fact issue precluding summary judgment,
evidence favorable to the nonmovant will be taken as true; and (3) every reasonable
inference must be indulged in favor of the nonmovant and any doubts must be resolved
in favor of the nonmovant. Am. Tobacco Co. v. Grinnell, 951 S.W.2d 420, 425 (Tex. 1997)
(citing Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548–49 (Tex. 1985)).
A no-evidence motion for summary judgment is similar to a motion for a pretrial
directed verdict. See Merrell Dow Pharms, Inc. v. Havner, 953 S.W.2d 706, 711 (Tex.
1997). In a no-evidence summary judgment motion, the movant contends there is no
evidence of one or more essential elements of the claims for which the non-movant would
bear the burden of proof at trial. TEX. R. CIV. P. 166a(i); Hamilton v. Wilson, 249 S.W.3d
425, 426 (Tex. 2008). Once the motion is filed, the burden shifts to the non-movant to
present evidence raising an issue of material fact as to the elements specified in the
motion. See Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006). The trial
court must grant the motion unless the non-movant produces more than a scintilla of
4
evidence raising a genuine issue of material fact on the challenged elements. See
Wilson, 249 S.W.3d at 426. However, the non-moving party is not required to marshal its
proof; its response need only point out evidence that raises a fact issue on the challenged
elements. TEX.R. CIV. P. 166a(i), Notes and Comments (1997); Wilson, 249 S.W.3d at
426. We review a no-evidence summary judgment for evidence that would enable
reasonable and fair-minded jurors to differ in their conclusions. See City of Keller v.
Wilson, 168 S.W.3d 802, 827 (Tex. 2005). A no-evidence motion that only generally
challenges the sufficiency of the non-movant's case and fails to state the specific
elements that the movant contends lack supporting evidence is fundamentally defective
and cannot support summary judgment as a matter of law. Jose Fuentes Co. v. Alfaro,
418 S.W.3d 280, 283 (Tex. App—Dallas 2013, pet. denied).
III. UNFAIR PRICE
The elements of a wrongful foreclosure claim are: (1) a defect in the foreclosure
sale proceedings; (2) an inadequate selling price; and (3) a causal connection between
the defect and the inadequate selling price. See Charter Nat'l Bank–Houston v. Stevens,
781 S.W.2d 368, 371 (Tex. App.—Houston [14th Dist.] 1989, writ denied).4 We first
examine the adequacy of the sales price.
The Broughtons contend irregularities in the foreclosure sale caused or contributed
to cause the property to be sold for an inadequate or grossly inadequate price, citing as
authority American Sav. & Loan Ass'n of Houston v. Musick, 531 S.W.2d 581, 587 (Tex.
4 As we discuss below, various courts have used different language to reflect the price inadequacy
necessary depending on the circumstances. The Stevens Court uses the term “grossly” inadequate sales
price while at the same time holding that the jury question about the fairness of the price was correct. See
Charter Nat'l Bank–Houston v. Stevens, 781 S.W.2d 368, 371 (Tex. App—Houston [14th Dist.] 1989, writ
denied).
5
1975). The property sold at foreclosure for $173,365.40, while the estimated value of the
property was $610,000.00. FFA’s own appraisal shortly before foreclosure placed the
value at $340,000.00,5 and the property had been listed by appellants in 2010 for
$585,000.00. The Broughtons also argue that, depending on the degree of price
inadequacy, there may be a presumption that an irregularity in the sale caused the low
price. See Apex Fin. Corp. v. Brown, 7 S.W.3d 820, 828–29 (Tex. App.—Texarkana
1999, no pet.). “The particular facts of each case will determine whether the sale price
was so grossly inadequate as to warrant the setting aside of the sheriff's sale.” Id. (citing
House v. Robertson, 36 S.W. 251 (Tex. 1896); Rio Delta Land Co. v. Johnson, 566
S.W.2d 710, 712 (Tex. Civ. App.—Corpus Christi 1978, writ ref'd n.r.e.)).
Appellees counter, citing Richardson v. Kent, which held that a sales price must
fall so far short of the real value as to shock a correct mind (thereby raising a presumption
that fraud attended the purchase). See 47 S.W.2d 420, 425 (Tex. Civ. App—Dallas 1932,
no writ). Appellees also argue that a price of more than fifty percent of property value is
not grossly inadequate as a matter of law. See Terra XXI, Ltd. v. Harmon, 279 S.W.3d
781, 788 (Tex. App.—Dallas 2007, pet denied). The Terra court relied upon Kent as sole
support for this proposition—and in Kent the court more accurately stated that they could
find no case that held a sales price of more than fifty percent was grossly inadequate as
a matter of law. Compare id. with Kent, 47 S.W.2d at 425 (“Therefore it appears that the
consideration paid and to be paid by Richardson was approximately 50 per cent of the
then value of the land, as found by the jury. We know of no case holding that, when
property at a forced sale brings fifty per cent of its value, the consideration paid by the
5 Appellees argue that appellants “judicially admit” a market value of $340,000 but context shows
both in the underlying pleadings and their brief, appellants are referencing FAA’s own estimate of value.
6
purchaser is decreed as a matter of law, to be grossly inadequate; hence no presumption
of fraud can be indulged in respect to this sale. . . .” (emphasis added)).
We reject appellees’ argument that a sale price of approximately fifty percent of
the value is adequate as a matter of law. See id. In any event, and more to the point,
the significant disparity between the sales price of $173,365.40 and the opinion of market
value of $610,000.00, greatly exceeds fifty percent and in fact is over three hundred and
fifty percent. Cf. Stevens, 781 S.W.2d at 370–75 (finding approximately eighty-four
percent of $430,000.00 fair market value to be inadequate and a proper cohort of
damages).
Some courts have rejected the language that a foreclosure selling price be “grossly
inadequate.” See id. at 371. In Stevens, the relevant jury question was whether the
“fairness” of the foreclosure price was affected by the failure of the mortgagee to notify,
as promised, a person interested in purchasing the property. Id. In Stevens, it should
also be noted that the fair market value of the property was $430,000.00 and the sale
price was $355,000.00, a difference of $54,315.00. Id. 370–71. The trial court and
appellate court rejected a proposed jury question that asked whether $355,000.00 was a
“grossly inadequate bid price.” Id. at 371. Rather than the sometimes-used test of
“grossly inadequate bid price”, the correct inquiry is the inadequacy of consideration. See
id. at 373–74. Furthermore, whether or not irregularities of a sale had any influence upon
the consideration paid in the sale is a question of fact. Id. at 374 (citing Allen v. Pierson,
60 Tex. 604, 605–06 (1884) (stating that where the price is grossly inadequate, slight
additional facts showing fraud, irregularity, or other circumstances calculated to prevent
7
the property from bringing something like its reasonable value, might be sufficient to avoid
the sale.)
Given the significant disparity between the sale price of $173,365.40, appellees’
own appraisal of $340,000.00, and an appraised value of $610,000.00, we conclude
appellants raised a fact issue thus preventing a summary judgment on this element. Id.;
Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 756 (Tex. 2007); Apex Fin.
Corp., 7 S.W.3d at 829.
IV. NOTICE
On January 26, 2010, FFA sent correspondence addressed to the Estate of
Broughton at 190 Oakwood Tr., Leander, Texas, 78641, stating a future threat to
foreclose if any deficiencies were not cured within thirty days. Gary Weimer filed a
summary judgment affidavit stating he did not receive the letter and the stated address
was not his address. In his affidavit, Gary Weimer unequivocally stated he did not receive
this correspondence and had not and did not reside at that address. We previously held
a similar affidavit by the homeowner regarding lack of service constitutes some evidence
of a defect in the foreclosure sale proceedings. Sauceda v. GMAC Mortg. Corp., 268
S.W.3d 135, 139–40 (Tex. App.—Corpus Christ 2008, no pet.). Thus, a fact issue
remained as to whether the Saucedas were served with the notice that section
51.002(b)(3) of the property code required. See TEX. PROP. CODE ANN. § 51.002(b)(3),
(West, Westlaw through 2015 R.S.); Sauceda, 268 S.W.3d at 140. Furthermore,
8
appellees fail to show that the 190 Oakwood Trail address is the last known address of
the “debtor,” given the demise of Mrs. Broughton, the last survivor of the couple.6
Appellants contend impliedly that the deed of trust notice requirements trump the
property code requirements. The deed of trust apparently allows notice to be sent to the
property address, presumably vacant after the death of Mrs. Broughton. This contrasts
with section 51.002(b)(3) & (e) requiring written notice to each debtor at the debtor’s last
known address.7 Furthermore, section 51.002(d) provides:
Notwithstanding any agreement to the contrary, the mortgage servicer of
the debt shall serve a debtor in default under a deed of trust or other contract
lien on real property used as the debtor's residence with written notice by
certified mail stating that the debtor is in default under the deed of trust or
other contract lien and giving the debtor at least 20 days to cure the default
before notice of sale can be given under Subsection (b). The entire
calendar day on which the notice . . . is given, regardless of the time of day
at which the notice is given, is included in computing the 20–day notice
period . . ., and the entire calendar day on which notice of sale is given
under Subsection (b) is excluded in computing the 20–day notice period.
TEX. PROP. CODE ANN. § 51.002(d) (emphasis added).
Appellants contend that there is no proper summary judgment proof as to the
holder of the note and the mortgagee on the deed of trust. The deposition testimony of
Gail Funkhauser, who claimed to be the person most knowledgeable of the details of the
transaction, testified that Fannie Mae had purchased the note and owned it throughout
the transaction. Fannie Mae was the holder of the note, and perhaps the mortgagee, but
did not foreclose the note. Fannie Mae was also the purchaser and sole bidder at the
6Section 51.002(b)(3) of the property code also required notice of sale to each debtor. See TEX.
PROP. CODE ANN. § 51.002(b)(3). While there is some evidence that Mrs. Broughton lived at the address
during her lifetime, there is no proof anyone lived there after her death.
7 Section (e) provides that notice by certified mail is complete when deposited in the US mail,
postage prepaid and addressed to the debtor at the debtor’s last known address. In any event, even if an
affidavit was submitted to the effect that service was completed, such evidence is only prima facie and
could be controverted as was done here.
9
foreclosure “sale.”8 Nor is the record clear that FFA had specific authority from Fannie
Mae to foreclose. It appears that at one time the deed of trust was assigned from FFSFC
to Mortgage Electronic Registration Systems, Inc. (“MERS”) as nominee for FFA. Other
proof suggests that Fannie Mae was the mortgage holder and owner of the note.
Nevertheless, we agree with appellees that FFA as servicer of the deed of trust had
authority to act on behalf of the lender, subject to statutory, contract, and constitutional
restrictions. See Aguero v. Ramirez, 70 S.W.3d 372, 374 (Tex. App.—Corpus Christi
2002, pet. denied) (explaining that a deed of trust may be enforced by the mortgagee,
regardless of whether the mortgagee also holds the note).
Appellants contend that section 51.0025 allows a mortgage servicer to foreclose
on behalf of a mortgagee if the servicer and mortgagee have entered into an agreement
to foreclose and the required notices under section 51.002(b) disclose that the servicer is
representing the mortgagee under the servicing agreement and the name of the
mortgagee. See TEX. PROP. CODE ANN. §§ 51.0025, 51.002(b)(3). Appellees argue that
where there is a debt secured by a note, which is, in turn, secured by a lien, the note and
lien constitute separate obligations. See Aguero, 70 S.W.3d at 374. We agree. However,
appellants are correct that the FFA did not disclose that it acted under an agreement with
Fannie Mae to service the note. These too are separate obligations. Appellants counter
that they were the mortgagee, not the noteholder, and accordingly did not need to disclose
their principals and were empowered to foreclose.
8 According to the testimony of Funkhauser, Fannie Mae did not actually bid at a “sale.” “It’s a
paper transaction. If there is no third party sale, it reverts back to the note holder for the amount of the
debt.” Thus, another irregularity is at issue because it appears there was some evidence that there was no
public sale as required under section 51.002(a). See TEX. PROP. CODE ANN. § 51.002(a) (West Westlaw
through 2015 R.S.).
10
In their brief, appellees admit and argue that their notice of substitute trustee sale
shows the address of FFA and stated that FFA was acting as both the mortgagee and
mortgage servicer. Indeed, this notice shows FFSFC, a subsidiary of Indy Mac Bank, as
the original mortgagee, and FFA as “current” mortgagee and mortgage servicer.9 Yet the
summary judgment proof is in conflict as to the mortgagee note holder. Indeed FFA
conveyed multiple mortgages to Fannie Mae, presumably including the Broughton
mortgage/deed of trust in question.
FFA did not disclose it was acting on behalf of Fannie Mae. No copy of the note
was produced. There is no showing of a complete chain of title between FFSFC and
Fannie Mae. Further, there was no showing appellees had an agreement between FFA
and Fannie Mae giving FFA authority to service the note and foreclose on behalf of Fannie
Mae. The notice stated FFA was acting as the mortgage servicer for FFA, not that it was
the lender.
Even assuming that FFA notices were properly originated, appellants failed to give
the proper notice when the loan became due.10 Under the deed of trust, the “Lender shall
notify the secretary and borrower whenever the loan becomes due and payable under
Paragraph 9.” While FFA (or FFSFC) was the original lender, according to some
summary judgment proof, the note and mortgage were apparently sold to Fannie Mae.
The Texas Constitution also required notice from the lender. Subsection 10 “does not
permit the lender to commence foreclosure until the lender gives notice to the borrower.
9 Appellees go on to argue at page 5 of their response, FFA as mortgagee was not required to
disclose it had any servicing agreement with FNMA or anyone else.
10 Appellants note the lender to be the beneficiary under the deed of trust.
11
. . .” TEX. CONST. art. XLI § 50(k)(10). The lender’s notice must provide that a ground for
foreclosure exists, giving the borrower at least thirty11 days to remedy the condition, pay
the debt, or convey the homestead property. Id. The failure of the lender to notify is
cumulative of the fact that the executors were not initially notified and did not live at the
Oakwood Trail address. Furthermore, Fannie Mae did not actually bid at the “sale” which,
according to Funkhauser, amounted to a paper transaction with the note and property
reverting back to Fannie Mae for the amount of the debt with no other bidders.
In our de novo review of a trial court's summary judgment, we consider all the
evidence in the light most favorable to the nonmovant, crediting evidence favorable to the
nonmovant if reasonable jurors could, and disregarding contrary evidence unless
reasonable jurors could not. Tamez, 206 S.W.3d at 582. Every reasonable inference
must be indulged in favor of the nonmovant and any doubts must be resolved in favor of
the nonmovant. Am. Tobacco Co., 951 S.W.2d at 425. Here, the proof does not
unequivocally establish that FFA was the authorized mortgage servicer of Fannie Mae.
Issues of fact foreclose the availability of summary judgment under these circumstances.
We hold that there is some evidence of irregularity of the sale pertaining to required
notices under the constitution, applicable statutes, and the deed of trust. There is more
than ample evidence on the lack of sufficient consideration paid and some evidence of
the likelihood of this causal connection between the defects and the inadequate selling
price. See Sauceda, 268 S.W.3d at 139; Apex Fin. Corp., 7 S.W.3d at 828–29.
Furthermore, under our system, it is a question of fact to be determined from the evidence
whether or not the irregularity had any influence upon the consideration for which the
11 Or at least twenty days under certain conditions not applicable here.
12
property sold. Prudential Corp. v. Bazaman, 512 S.W.2d 85, 90 (Tex. Civ. App.—Corpus
Christi, 1974, no writ) (citing Allen v. Pierson, 60 Tex. 604 (1884) (“It is not a matter of
law to be assumed by the court.”)).
V. BREACH OF CONTRACT CLAIMS
Appellees point out that the Broughtons did not respond to the no-evidence motion
for summary judgment on the breach of contract claims. The trial court must grant the
motion unless the non-movant produces more than a scintilla of evidence raising a
genuine issue of material fact on the challenged elements. See Wilson, 249 S.W.3d at
426. We accordingly affirm in part the trial court’s summary judgment dealing with the
breach of contract claims.
VI. CONCLUSION
The portion of the summary judgment dealing with the breach of contract claims is
affirmed. The remainder of the summary judgment is reversed and remanded.
/s/ Don Wittig
DON WITTIG
Assigned Judge
Delivered and filed this the
19th day of May, 2016.
13