Melissa Ford Bierwirth v. Ah4r I Tx, Llc ( 2014 )

Opinion issued October 30, 2014.
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-13-00459-CV
———————————
MELISSA FORD BIERWIRTH, Appellant
V.
AH4R I TX, LLC, Appellee
On Appeal from the County Civil Court at Law No. 2
Harris County, Texas
Trial Court Case No. 1027657
MEMORANDUM OPINION
Melissa Ford Bierwirth appeals the county court’s final judgment granting
AH4R I TX, LLC, possession of a residential property in Katy, Texas, after a
bench trial. We affirm.
Background
In 2005, Bierwirth, then known as Melissa Ford, executed a promissory note
and deed of trust granting Fieldstone Mortgage Company a security interest in a
property located in Katy, Texas. The deed of trust provides that, in the event of a
foreclosure sale, Bierwirth must surrender possession of the property:
If the Property is sold pursuant to this Section 22, Borrower or any
person holding possession of the Property through Borrower shall
immediately surrender possession of the Property to the purchaser at
that sale. If possession is not surrendered, Borrower or such person
shall be a tenant at sufferance and may be removed by writ of
possession or other court proceeding.
In the deed of trust, Fieldstone appointed a nominee, Mortgage Electronic
Registration Systems, Inc., to act on its behalf. MERS then assigned Fieldstone’s
rights under the deed of trust to HSBC Mortgage Services, Inc.
Bierwirth defaulted on the loan, and HSBC appointed a substitute trustee.
AH4R purchased the property in a foreclosure auction on November 6, 2013.
Bierwirth contends that she did not receive timely notice of the sale, although
AH4R produced an affidavit stating that it mailed notice to Bierwirth at least 21
days before the sale.
Bierwirth filed suit against Fieldstone, HSBC, MERS, and AH4R in district
court, alleging wrongful foreclosure and seeking to quiet title. Meanwhile, AH4R
demanded in writing that Bierwirth surrender the property. When she failed to do
so, AH4R filed a forcible detainer action in justice court to evict Bierwirth. The
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justice court awarded possession to AH4R. Bierwirth appealed to the county court,
arguing that the justice court lacked jurisdiction over the forcible detainer action
due to the pending trespass to try title action. The county court held a de novo
bench trial and entered judgment in favor of AH4R. This appeal followed.
Bierwirth raises seven arguments on appeal. She first argues that the county
court should have abated the forcible detainer action pending the outcome of the
trespass to try title action because the foreclosure was conducted improperly.
Second, she argues that the county court should have abated the forcible detainer
action as a matter of logic because the title issues should be resolved first. Third,
she asserts that HSBC could not sell the property because it did not satisfy all
requirements imposed on foreclosure sales by the Texas Property Code. Fourth,
she argues that the lien was improperly assigned and that HSBC fabricated the
deed of trust, rendering that document unenforceable. Fifth, she argues that the
affidavit attached to the Substitute Trustee’s Deed was deficient and contained
inadmissible hearsay. Sixth, she contends that she did not receive sufficient notice
of AH4R’s business records affidavit under Texas Rule of Evidence 902. Finally,
Bierwirth suggests that, because Fieldstone is not registered with the Secretary of
State of Texas and because MERS has never been so registered, AH4R lacks
standing to bring its forcible detainer action under the Business and Organizations
Code.
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Because standing is a jurisdictional issue and therefore a prerequisite to our
consideration of the merits of the case, we address Bierwirth’s last argument first.
Douglas v. Delp, 987 S.W.2d 879, 883 (Tex. 1999).
Standing
Bierwirth’s seventh argument is that AH4R lacks standing to bring a forcible
detainer suit because neither Fieldstone nor MERS, Fieldstone’s nominee, is
currently registered with the Secretary of State of Texas, as an entity must be to
maintain an action in a Texas court. See TEX. BUS. ORGS. CODE ANN. § 9.051(b)
(West 2012). It is undisputed that AH4R itself is registered with the Secretary of
State. Bierwirth, however, explains that MERS, acting for Fieldstone, assigned the
mortgage to HSBC, which sold the property to AH4R. Because Fieldstone and
MERS are not registered with the Secretary of State, Bierwirth reasons that they
could not make this assignment to HSBC and therefore AH4R lacks standing to
bring suit in Texas. She concludes that AH4R “obtained its interest from HSBC,
and because HSBC got its authority from foreign entities not registered to conduct
business in Texas the ensuing judgment is void as a matter of law.”
A. Standard of review
“Whether a party has standing to maintain a suit is a question of law, which
we review de novo.” Hobbs v. Van Stavern, 249 S.W.3d 1, 3 (Tex. App.—
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Houston [1st Dist.] 2006, pet. denied) (citing Tex. Dep’t of Transp. v. City of
Sunset Valley, 146 S.W.3d 637, 646 (Tex. 2004)).
“Standing is a prerequisite to subject-matter jurisdiction, and subject-matter
jurisdiction is essential to a court’s power to decide a case.” Bland Indep. Sch.
Dist. v. Blue, 34 S.W.3d 547, 553–54 (Tex. 2000) (citation omitted). “In order for
any person to maintain a suit it is necessary that he have standing to litigate the
matters in issue.” Hunt v. Bass, 664 S.W.2d 323, 324 (Tex. 1984). “Standing
consists of some interest peculiar to the person individually and not as a member of
the general public.” Id. Standing may be raised by a party for the first time on
appeal or may be considered by the court sua sponte. Tex. Ass’n of Bus. v. Tex. Air
Control Bd., 852 S.W.2d 440, 445–46 (Tex. 1993). Standing cannot be waived or
conferred by agreement. Id.; Green Tree Servicing, LLC v. Woods, 388 S.W.3d
785, 790 (Tex. App.—Houston [1st Dist.] 2012, no pet.).
B. AH4R has standing
Bierwirth argues that either AH4R’s interest in the property is derivative of
the interest originally held by Fieldstone and assigned to HSBC by MERS or
AH4R sought relief on behalf of one of those other entities. She concludes that
AH4R can maintain its suit only if its predecessors in interest could do so. We
disagree, for at least two reasons.
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First, the interest that AH4R asserts is not derivative, nor does AH4R assert
it on behalf of any other entity. AH4R sued Bierwirth in its own name as the
owner of the property itself, not in a representative capacity or as the owner of
Fieldstone’s or HSBC’s security interest in the property under the mortgage note.
Indeed, Fieldstone, MERS, and HSBC no longer claim any right to the property.
Rather, all such rights were conveyed to AH4R when it purchased the property.
Texas courts look at “the nature of the wrong and to whom the relief should go” in
determining the capacity in which the plaintiff brought its claims, as well as
whether a cause of action is direct or derivative. Shirvanian v. DeFrates, 161
S.W.3d 102, 110 (Tex. App.—Houston [14th Dist.] 2004, pet. denied) (distinction
between direct and derivative claims); see also Rodarte v. Investeco Grp., L.L.C.,
299 S.W.3d 400, 413 (Tex. App.—Houston [14th Dist.] 2009, no pet.) (Frost, J.,
concurring) (discussing how courts determine capacity). AH4R has not sought
relief on behalf of any other entity, but seeks to possess the property itself.
Bierwirth does not articulate any argument regarding why AH4R’s claim should be
treated as derivative or representative, rather than direct. We hold that AH4R has
asserted a direct, not derivative, claim, and the standing of its predecessors to
maintain an action in Texas is irrelevant to its forcible detainer action.
Second, even if AH4R’s interest were somehow derivative of an interest
held by Fieldstone or MERS, Section 9.051(b) of the Business Organizations Code
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does not apply to (1) holders in due course of negotiable instruments, such as the
mortgage note, or (2) bona fide purchasers for value of negotiable instruments.
TEX. BUS. ORGS. CODE ANN. § 9.051(b); see also Bierwirth v. Fed. Nat’l Mortg.
Ass’n, No. 03-13-00076-CV, 2014 WL 902541, at *1 (Tex. App.—Austin Mar. 6,
2014, no pet. h.) (mem. op.) (enforcement of right to possession of property
through forcible detainer action does not constitute “transaction of business” under
Business Organizations Code). Thus, if Fieldstone had still held the note when
Bierwirth defaulted, Fieldstone could have enforced the loan without registering in
Texas. See Bierwirth, 2014 WL 902541, at *1 (enforcing rights under mortgage
does not constitute “transaction of business” requiring registration with Secretary
of State); TEX. BUS. ORGS. CODE ANN. §§ 9.051(b), 9.251(12)(C) (West 2012)
(same). Even if we were to treat AH4R’s interest in the property as somehow
derivative of the interest held by Fieldstone and later by HSBC, Section 9.051
would not deprive AH4R of standing.
We overrule Bierwirth’s seventh issue.
Abatement and Alleged Defects in Title
Bierwirth’s first five issues all turn on alleged defects in the foreclosure
proceedings. Specifically, in her first and second issues, Bierwirth argues that the
county court erred by not abating the forcible detainer proceeding until the
resolution of the district court action to quiet title. First, she argues that the
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foreclosure sale was improperly conducted, that AH4R cannot take possession of
the property because the sale itself was defective, and that she is therefore entitled
to an abatement of the forcible detainer action. Next, she argues that the title
dispute and the dispute over possession are so inextricably intertwined that
abatement was mandatory.
Her third through fifth issues are direct attacks on AH4R’s title. In the third
issue, Bierwirth argues that HSBC failed to satisfy all conditions of the Texas
Property Code before selling the property. Fourth, she contends that HSBC
fabricated the deed of trust upon which it relied in foreclosing on the property.
Finally, she contends that the affidavit attached to the Substitute Trustee’s Deed
contains inadmissible hearsay, rendering the foreclosure sale void.
For the reasons that follow, we reject all of these arguments.
A. Standard of review
“The only issue in a forcible detainer action is the right to actual possession
of the premises,” and the trial court may not consider whether the foreclosure and
ensuing sale were proper. Marshall v. Hous. Auth. of San Antonio, 198 S.W.3d
782, 785 (Tex. 2006); Bierwirth, 2014 WL 902541, at *1 (in forcible detainer
action, trial court cannot determine validity of sale under deed of trust); Fontaine v.
Deutsche Bank Nat’l Trust Co., 372 S.W.3d 257, 259 (Tex. App.—Dallas 2012,
pet. dism’d w.o.j.) (“Whether a sale of property under a deed of trust is invalid may
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not be determined in a forcible detainer action . . . .”); see also Bierwirth v. Fed.
Nat’l Mortg. Ass’n, No. 03-12-00271-CV, 2014 WL 858677, at *3 (Tex. App.—
Austin Feb. 27, 2014, no pet. h.) (mem. op.) (in forcible detainer action, trial court
cannot determine validity of sale).
But “a justice court or county court at law is not deprived of jurisdiction
[over a forcible detainer claim] merely by the existence of a title dispute.” Rice v.
Pinney, 51 S.W.3d 705, 713 (Tex. App.—Dallas 2001, no pet.); see also
McGlothlin v. Kliebert, 672 S.W.2d 231, 232 (Tex. 1984); Girard v. AH4R I TX
DFW, LLC, No. 02-13-00112-CV, 2014 WL 670198, at *2 (Tex. App.—Fort
Worth Feb. 20, 2014, no pet.) (mem. op.); Chinyere v. Wells Fargo Bank, N.A., 01-
11-00304-CV, 2012 WL 2923189, at *2–3 (Tex. App.—Houston [1st Dist.] Jul.
12, 2012, no pet.); H.K. Dev., Inc. v. Nguyen, 229 S.W.3d 415, 444 (Tex. App.—
Houston [1st Dist.] 2007, no pet.). The justice court—and, on appeal, the county
court—may proceed with the forcible detainer action even if a district court has
entered an interlocutory order determining the parties’ immediate rights to
possession and even if the question of ultimate possession might be decided
differently. Nguyen, 229 S.W.3d at 444.
“However, if the question of title is so intertwined with the issue of
possession, then possession may not be adjudicated without first determining title.”
Dormady v. Dinero Land & Cattle Co., L.C., 61 S.W.3d 555, 557 (Tex. App.—San
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Antonio 2001, pet. dism’d w.o.j.). “In such a case involving a genuine issue of
title, neither the justice court, nor the county court on appeal, has jurisdiction.” Id.
at 558; see also Mitchell v. Armstrong Capital Corp., 911 S.W.2d 169, 171 (Tex.
App.—Houston [1st Dist.] 1995, writ denied). “Whether a trial court has subject-
matter jurisdiction is a question of law subject to de novo review.” Tex. Natural
Res. Conservation Comm’n v. IT–Davy, 74 S.W.3d 849, 855 (Tex. 2002); see also
Mayhew v. Town of Sunnyvale, 964 S.W.2d 922, 928 (Tex. 1998).
B. The county court had jurisdiction over the forcible detainer suit
Bierwirth’s first, third, fourth, and fifth issues all directly address the
ultimate question of title, not immediate possession. The justice court and, on
appeal, the county court could not consider those issues. Fontaine, 372 S.W.3d at
259; see also Gardocki v. Fed. Nat’l Mortg. Ass’n, No. 14-12-00921-CV, 2013
WL 6568765, at *4 (Tex. App.—Houston [14th Dist.] Dec. 12, 2013, no pet.)
(“Justice courts are expressly denied jurisdiction to determine or adjudicate title to
land. . . . [But t]he mere existence of a title dispute will not deprive the justice
court of its jurisdiction.”). Because those issues were not before the county court,
we cannot find that it erred in refusing to consider them. Prudential Ins. Co. of
Am. v. J.R. Franclen, Inc., 710 S.W.2d 568, 569 (Tex. 1986) (“An appellate court
is not authorized to reverse a trial court’s judgment in the absence of properly
assigned error.”); see also TEX. R. APP. P. 33.1(a) (as prerequisite to appeal, party
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must present complaint to trial court and obtain ruling or refusal to rule); Tex.-Ohio
Gas., Inc. v. Mecom, 28 S.W.3d 129, 140 (Tex. App.—Texarkana 2000, no pet.)
(trial court errs if it bases order on issues not before the court at the time of its
order). Accordingly, we overrule Bierwirth’s first, third, fourth, and fifth issues.
But, as Bierwirth argues in her second issue, “if the question of title is so
intertwined with the issue of possession, then possession may not be adjudicated
without first determining title.” Dormady, 61 S.W.3d at 557. If the issues are so
intertwined, then neither the justice court nor the county court on appeal had
jurisdiction over AH4R’s forcible detainer claim. Id.; see also Mitchell, 911
S.W.2d at 171.
“Whether an existing title dispute in another court deprives the justice and
county courts of jurisdiction to adjudicate possession in forcible-detainer actions
generally turns on whether there is a basis—independent of the claimed right to
title—for the plaintiff’s claim of superior possession rights in the property.”
Chinyere, 2012 WL 2923189, at *3. Among other ways, AH4R could establish
such an independent basis by showing the existence of a landlord-tenant
relationship. Morris v. Am. Home Mortg. Servicing, Inc., 360 S.W.3d 32, 34 (Tex.
App.—Houston [1st Dist.] 2011, no pet.) (“The existence of a landlord-tenant
relationship provides a basis for the court to determine the right to immediate
possession without resolving the question of title.”); see also Gardocki, 2013 WL
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6568765, at *4 (“So long as the landlord–tenant relationship is established in the
deed of trust, the county court can determine the issue of immediate possession
without inquiring into the merits of the title.”); Chinyere, 2012 WL 2923189, at
*4–5 (courts consistently hold that trial court may determine issue of possession
when deed of trust establishes landlord–tenant relationship).
A plaintiff in a forcible detainer action “is not required to prove title, but is
only required to show sufficient evidence of ownership to demonstrate a superior
right to immediate possession.” Morris, 360 S.W.3d at 34. Under well-settled
law, a deed of trust that establishes a landlord-tenant relationship between the
borrower and the purchaser of the property at the foreclosure sale demonstrates
such a superior right to possession. Id. at 34–35; Villalon v. Bank One, 176
S.W.3d 66, 71 (Tex. App.—Houston [1st Dist.] 2004, pet. denied) (“The landlord–
tenant relationship established in the deed of trust provided a basis for the county
court to determine that [the bank] had the right to immediate possession without
resolving whether [the bank] wrongfully foreclosed on the property, an issue
relating directly to who has title to the property.”); Dormady, 61 S.W.3d at 559
(“The landlord–tenant relationship [in the deed of trust] provides a basis for
determining the right to immediate possession without resolving the ultimate issue
of title to the property.”); Bruce v. Fed. Nat’l Mortg. Ass’n, 352 S.W.3d 891, 893
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(Tex. App.—Dallas 2011, pet. denied) (same holding); Rice, 51 S.W.3d at 712
(same holding).
The deed of trust makes Bierwirth a tenant at sufferance in the event of
foreclosure if she fails to surrender possession of the property. Although Bierwirth
disputes the propriety of the foreclosure, there is no dispute that HSBC did
foreclose and that Bierwirth failed to surrender the property. Thus, Bierwirth
became a tenant at sufferance, and this landlord-tenant relationship gives AH4R a
basis for its forcible detainer action independent of its claim to title in the property.
Gardocki, 2013 WL 6568765, at *3 (“[W]here a deed of trust provides that in the
event of foreclosure, the previous owner will become a tenant at sufferance if he
does not surrender possession, the trial court can resolve possession without resort
to title.”); Chinyere, 2012 WL 2923189, at *4–5; Morris, 360 S.W.3d at 34. The
justice court and county court therefore did not need to determine whether HSBC
satisfied all conditions precedent to the tenancy-at-sufferance clause or properly
executed the foreclosure sale. See Gardocki, 2013 WL 6568765, at *4 & n.3
(holding same and collecting cases).
We overrule Bierwirth’s second issue.
Notice of Business Records Affidavit
In her sixth and sole remaining issue, Bierwirth argues that the county court
erred in failing to rule on her objection that AH4R failed to serve its business
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records affidavit in a timely manner. Specifically, she argues that Texas Rule of
Evidence 902(10) entitles her to notice that AH4R intended to use the affidavit at
least fourteen days before trial, but that she had only eleven days’ notice. In its
form at the time of the bench trial, Rule 902(10) provided, in relevant part:
Any record or set of records . . . which would be admissible under
Rule 803(6) or (7) shall be admissible in evidence in any court in this
state upon . . . affidavit . . . provided further, that such record or
records along with such affidavit are filed with the clerk of the court
for inclusion with the papers in the cause . . . at least fourteen days
prior to the day upon which trial of said cause commences, and
provided the other parties to said cause are given prompt notice by the
party filing same of the filing of such record or records and
affidavit . . . .
TEX. R. EVID. 902(10). 1 AH4R filed the affidavit in March 2013, more than two
months before the May 2013 trial. Bierwirth argues, however, that AH4R did not
timely serve the affidavit, thus she did not receive timely notice.
Bierwirth also argues that the affidavit contains substantive defects, namely
that the affiant did not demonstrate her personal knowledge of the facts therein and
did not properly authenticate the documents as certified copies of public records.
See TEX. R. EVID. 902(4) (public records are self-authenticating, as are
compilations of data from public records certified as correct by an authorized
person). Finally, she implies that the records themselves were not made and kept
1
Rule 902(10) has been amended during the pendency of this appeal. See Tex. Sup.
Ct. Misc. Docket No. 14-9080 (amending Rule 902(10) effective Sept. 1, 2014).
The amendments, however, have no retroactive effect and would not affect our
analysis of this appeal.
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in the course of a regularly conducted business activity and therefore constitute
hearsay not covered by the business records exception to the hearsay rule. See
TEX. R. EVID. 802 (“Hearsay is not admissible except as provided by statute or
these rules . . . .”), 803(6) (records made and kept in course of regularly conducted
business activities not excluded by hearsay rule).
Although Bierwirth filed a motion to strike the affidavit on the day of trial,
she failed to obtain a ruling on the motion. Moreover, the record does not reflect
that she ever objected to the affidavit on substantive grounds, much less obtained a
ruling.
As a prerequisite to presenting a complaint for appellate review, the
record must show that: (1) the complaint was made to the trial court
by a timely request, objection, or motion . . . and (2) the trial court:
(A) ruled on the request, objection, or motion, either expressly or
implicitly; or (B) refused to rule on the request, objection, or motion,
and the complaining party objected to the refusal.
TEX. R. APP. P. 33.1(a). The record shows only that Bierwirth filed a motion to
strike the affidavit the morning of trial, asking the trial court to strike the affidavit
“for undue and unnecessary surprise.” It does not show that she obtained a ruling
on the motion or that the county court refused to rule on the motion. Further,
because there is no reporter’s record in this case, the record is silent as to whether
AH4R actually relied upon the business records affidavit at trial. We therefore
cannot say that the county court implicitly denied the motion. Thus, nothing in the
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record indicates that Bierwirth has preserved her complaints regarding the business
records affidavit for appeal.
Because Bierwirth failed to preserve her sixth issue for appeal, we overrule
it.
Conclusion
Because we have found no error in the county court’s judgment, we affirm.
Harvey Brown
Justice
Panel consists of Justices Massengale, Brown, and Huddle.
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