Ruby Yarbrough and Wilburn E. Yarbrough v. Household Finance Corporation III , 455 S.W.3d 277 ( 2015 )

Reversed and Remanded and Opinion filed January 13, 2015.
In The
Fourteenth Court of Appeals
NO. 14-13-00932-CV
RUBY YARBROUGH AND WILBURN E. YARBROUGH, Appellants
V.
HOUSEHOLD FINANCE CORPORATION III, Appellee
On Appeal from the County Court at Law No. 2
Galveston County, Texas
Trial Court Cause No. CV-0069412
OPINION
In an issue of first impression, we must decide whether an affirmative
defense of forgery, supported by an affidavit alleging that the defendants’
signatures on a deed of trust were forged, raises a genuine issue of title intertwined
with the issue of possession sufficient to deprive a justice court of jurisdiction in a
forcible detainer action. We hold that it does. The courts below lacked
jurisdiction in this forcible detainer action because determining the right to
possession necessarily required the resolution of a title dispute. We reverse the
trial court’s judgment and remand with instructions to dismiss the action for lack of
jurisdiction.
I. BACKGROUND
Household Finance Corporation III filed a complaint for forcible detainer
and original petition in justice court to evict Ruby and Wilburn Yarbrough from
their home. The justice court record contains a deed of trust purportedly signed by
the Yarbroughs, as borrowers, to secure a loan from Ameriquest Mortgage
Company. The deed of trust allows the trustee to foreclose on the real property
that is the subject of this lawsuit, and if so, the borrowers are required to surrender
possession. According to the deed of trust, “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.”
Household Finance purchased the property at a non-judicial foreclosure sale
and obtained a substitute trustee’s deed conveying the property to Household
Finance. Household Finance initiated this forcible detainer action to obtain
possession of the property from the Yarbroughs. The justice court signed a
judgment awarding possession to Household Finance, and the Yarbroughs
appealed to the county court.
The Yarbroughs filed a plea to the jurisdiction and an amended plea alleging
that the foreclosure sale was void because the deed of trust was forged and void.
The Yarbroughs filed an affidavit from Ruby, in which she testified, “The deed of
trust on which the purported foreclosure sale was based and that led to this eviction
lawsuit, was not signed by my husband or me, and was a forgery.” She testified
further, “I understand that people associated with Ameriquest Mortgage forged
signatures on many loans, and the Deed of Trust on which the foreclosure sale was
based leading to this eviction would be one of them.” Finally, she reiterated that
2
the deed of trust “was not signed by me or my husband.” The Yarbroughs also
filed with their amended plea a copy of their petition in a Texas district court,
where the Yarbroughs alleged that the deed of trust was forged. The Yarbroughs
sought damages for wrongful eviction, slander of title, and other causes of action,
and they sought a judgment for title to the property.
The county court denied the pleas, and the Yarbroughs amended their
answer to assert an affirmative defense of forgery. Ultimately, the county court
signed a final summary judgment awarding Household Finance possession of the
property. The court granted the Yarbroughs’ request to set a supersedeas bond,
and this appeal followed.
II. JURISDICTION
In their first issue, the Yarbroughs contend the justice and county courts
lacked jurisdiction in this forcible detainer action because there was a genuine
issue regarding title intertwined with the issue of possession. The title issue
concerns whether a tenancy was created by the deed of trust and associated
foreclosure sale when the deed of trust was allegedly void due to forgery.
Household Finance contends the deed of trust creates a tenancy at sufferance,
which generally supports jurisdiction in a forcible detainer action, but Household
Finance does not address the merits of the Yarbroughs’ forgery argument. 1
A. Standard of Review
Whether a trial court has subject matter jurisdiction is a question of law we
review de novo. Salaymeh v. Plaza Centro, LLC, 264 S.W.3d 431, 435 (Tex.
1
Responding to the Yarbroughs’ second issue concerning summary judgment, Household
Finance claims that the Yarbroughs “presented no signed affidavit or documentary evidence to
support [their] affirmative defense of forgery.” However, Ruby’s signed affidavit was filed with
the amended plea to the jurisdiction.
3
App.—Houston [14th Dist.] 2008, no pet.) (citing Tex. Dep’t of Parks & Wildlife v.
Miranda, 133 S.W.3d 217, 226 (Tex. 2004)). The issue is fundamental and may be
raised for the first time on appeal. Id. If a plea to the jurisdiction challenges the
existence of jurisdictional facts, we consider relevant evidence submitted by the
parties when necessary to resolve the jurisdictional issues raised, as the trial court
is required to do. Miranda, 133 S.W.3d at 227. “[D]ue to the special jurisdictional
limitations imposed on justice courts, a plea to the jurisdiction in an eviction case
may be based on an affirmative defense raised in the defendant’s pleadings that the
trial court cannot resolve apart from determining title.” Gibson v. Dynegy
Midstream Servs., L.P., 138 S.W.3d 518, 522, 524 (Tex. App.—Fort Worth 2004,
no pet.) (defendant raised issue of adverse possession in defensive pleading, and
thus, issue of title was so integrally linked that the justice court could not have
decided possession without first deciding title).
B. Jurisdiction in Forcible Detainer Actions
An action for forcible detainer is a “summary, speedy, and inexpensive
remedy for the determination of who is entitled to the possession of premises.”
Scott v. Hewitt, 90 S.W.2d 816 (Tex. 1936); see also Marshall v. Hous. Auth. of
City of San Antonio, 198 S.W.3d 782, 787 (Tex. 2006). The only issue to be
resolved in a forcible detainer action is the right to immediate possession of the
property; the merits of title are not adjudicated. Salaymeh, 264 S.W.3d at 435.
Justice courts do not have jurisdiction to determine or adjudicate title to land, and
neither does a county court exercising appellate jurisdiction in a forcible detainer
action. Id.
When there are issues concerning both title and possession, the issues may
be litigated in separate proceedings in different courts with appropriate jurisdiction.
Id. at 436. However, when a forcible detainer action presents a genuine issue of
4
title so intertwined with the issue of possession that a trial court would be required
to determine title before awarding possession, then a justice court lacks jurisdiction
to resolve the matter. See Pinnacle Premier Props., Inc. v. Breton, No. 14-14-
00194-CV, — S.W.3d —, 2014 WL 5791549, at *3 (Tex. App.—Houston [14th
Dist.] Nov. 6, 2014, no pet. h.) (op. on reh’g); Bittinger v. Wells Fargo, N.A., No.
14-10-00698-CV, 2011 WL 4793828, at *2 (Tex. App.—Houston [14th Dist.] Oct.
11, 2011, no pet.) (mem. op.); see also Mitchell v. Armstrong Capital Corp., 911
S.W.2d 169, 171 (Tex. App.—Houston [1st Dist.] 1995, writ denied).
“Accordingly, a justice court is not deprived of jurisdiction merely by the existence
of a title dispute; it is deprived of jurisdiction only if resolution of a title dispute is
a prerequisite to determination of the right to immediate possession.” Salaymeh,
264 S.W.3d at 435.
C. Landlord-Tenant Relationships and Deeds of Trust
A forcible detainer action requires proof of a landlord-tenant relationship.
Haith v. Drake, 596 S.W.2d 194, 196 (Tex. App.—Houston [1st Dist.] 1980, writ
ref’d n.r.e.); Dent v. Pines, 394 S.W.2d 266, 268 (Tex. Civ. App.—Houston 1965,
no writ). Although such a relationship is not a prerequisite to jurisdiction, see
Academy Corp. v. Sunwest N.O.P., Inc., 853 S.W.2d 833, 834 (Tex. App.—
Houston [14th Dist.] 1993, writ denied), the lack of such a relationship indicates
that the case may present a title issue. See, e.g., Pinnacle Premier Props., 2014
WL 5791549, at *3 n.9.
Like the Ameriquest deed of trust here, a deed of trust may include a
tenancy-at-sufferance clause that creates a landlord-tenant relationship when the
property is foreclosed. See id. at *3–4. 2 Under these circumstances, a defendant’s
2
Household Finance agrees that it must ultimately prove in a forcible detainer action that
“the deed of trust signed by [the Yarbroughs] established a landlord-tenant relationship between”
5
complaints about defects in the foreclosure process generally do not require a
justice court to resolve a title dispute before determining the right to immediate
possession, and the justice court has jurisdiction. See, e.g., id. at *3; Glapion v.
AH4R I TX, LLC, No. 14-13-00705-CV, 2014 WL 2158161, at *2 (Tex. App.—
Houston [14th Dist.] May 22, 2014, no pet.) (mem. op.); Maxwell v. U.S. Bank
Nat’l Ass’n, No. 14-12-00209-CV, 2013 WL 3580621, at *2–3 (Tex. App.—
Houston [14th Dist.] July 11, 2013, pet. dism’d w.o.j.) (mem. op.).
D. Forgery and the Necessity of Resolving Title
Household Finance relies on the familiar principle that a deed of trust’s
tenancy-at-sufferance clause allows a justice court to resolve the issue of
possession independent of title issues. However, in every deed-of-trust case this
court has reviewed, including those cited by Household Finance, the defendants
did not challenge the validity of the original deed of trust establishing the tenancy-
at-sufferance relationship. The defendants challenged defects related to the
foreclosure sale and conditions precedent contained within the deed of trust, but
the evidence was undisputed regarding (1) the existence of a deed of trust
containing a tenancy-at-sufferance clause, and (2) the occurrence of a foreclosure
sale, which triggered the tenancy-at-sufferance clause. See, e.g., Pinnacle Premier
Props., 2014 WL 5791549, at *3 (no intertwined title issue when the defendants’
title dispute was based entirely on contentions that the foreclosure sale was
conducted improperly and that the lender had assigned the note to another bank);
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.) (mem. op.) (no
the parties. See U.S. Bank Nat’l Ass’n v. Freeney, 266 S.W.3d 623, 625 (Tex. App.—Dallas
2008, no pet.), cited in Maxwell v. U.S. Bank Nat’l Ass’n, No. 14-12-00209-CV, 2013 WL
3580621, at *2–3 (Tex. App.—Houston [14th Dist.] July 11, 2013, pet. dism’d w.o.j.) (mem.
op.).
6
intertwined title issue when the defendant alleged that conditions precedent to the
foreclosure were not satisfied, such as the plaintiff’s failure to provide notice of the
foreclosure and a demand to vacate, or the holder’s failure to indorse an insurance
check); Maxwell, 2013 WL 3580621, at *2–3 (no intertwined title issue when the
defendant alleged that he was excused from paying the note because the bank had
breached certain conditions of the deed of trust, and the foreclosing party was not
entitled to enforce the note; “Regardless of whether the bank adhered to the deed
of trust before Maxwell defaulted, it is undisputed that the bank foreclosed.
Regardless of who could technically enforce Maxwell’s note, it is undisputed that
the bank bought the property at a foreclosure sale.”); Woodfork v. Bank of Am., No.
14-12-00927-CV, 2013 WL 5637751, at *2 (Tex. App.—Houston [14th Dist.] Oct.
15, 2013, no pet.) (mem. op.) (right to possession could be adjudicated without
resolving whether the underlying note was usurious or whether the lender’s
acceleration was proper); Trotter v. Bank of N.Y. Mellon, No. 14-12-00431-CV,
2013 WL 1928776, at *3 (Tex. App.—Houston [14th Dist.] May 9, 2013, no pet.)
(mem. op.) (no intertwined title issue when the defendant alleged “invalid
assignments and other improprieties” related to the foreclosure process); Bittinger,
2011 WL 4793828, at *2–3 (no intertwined title issue when the defendant alleged
defects regarding the foreclosure sale such as the bank’s lack of authority to
foreclose). 3
3
Household Finance cites the following cases in support of its jurisdictional argument,
but all have distinguishing facts: Mortg. Elec. Registration Sys., Inc. v. Knight, No. 09-04-
00452-CV, 2006 WL 510338, at *3–4 & n.4 (Tex. App.—Beaumont Mar. 2, 2006, no pet.)
(mem. op.) (rendering judgment in favor of the lender because there was undisputed evidence
that the defendants signed a deed of trust with a tenancy-at-sufferance clause); Villalon v. Bank
One, 176 S.W.3d 66, 68–71 (Tex. App.—Houston [1st Dist.] 2005, pet. denied) (no intertwined
title issue when the defendant alleged violations of the Fair Debt Collection Practices Act; the
defendant “stipulated” that he financed the purchase of the property with a promissory note
secured by a deed of trust, the bank foreclosed and purchased the property, and “the deed of trust
provided that [the defendant] and all other occupants of the property became tenants in
7
When there is no dispute that the parties agreed to a tenancy relationship in
the event of foreclosure, the tenancy relationship provides an independent basis for
resolving the issue of possession. See, e.g., Rice, 51 S.W.3d at 712. But here, the
Yarbroughs contend that Household Finance’s claim of a tenancy relationship
cannot be sustained on a forged deed of trust because such a deed is void ab initio,
a nullity, and passes no title. See Johnson v. Coppel, No. 01-09-00392-CV, 2012
WL 344757, at *6–7 (Tex. App.—Houston [1st Dist.] 2012, no pet.) (mem. op.)
(forged deed of trust is void and passes no title); Commonwealth Land Title Ins.
Co. v. Nelson, 889 S.W.2d 312, 318 (Tex. App.—Houston [14th Dist.] 1994, writ
denied) (“A forged deed is void ab initio and inoperative. . . . Thus, when a
document is void or void ab initio, it is as if it did not exist because it has no effect
from the outset.”); 1st Coppell Bank v. Smith, 742 S.W.2d 454, 457 (Tex. App.—
Dallas 1987, no pet.) (“A forged deed, or deed of trust, is void, and does not pass
title to land.”), overruled on other grounds by Fortune Prod. Co. v. Conoco, Inc.,
52 S.W.3d 671, 678 (Tex. 2000).
Accordingly, the Yarbroughs argue that a forged deed of trust cannot
establish a tenancy-at-sufferance relationship between the Yarbroughs and
Household Finance. This case, therefore, is more akin to those in which the parties
sufferance following a foreclosure sale”); Dormady v. Dinero Land & Cattle Co., L.C., 61
S.W.3d 555, 556–58 (Tex. App.—San Antonio 2001, pet. dism’d w.o.j.) (no intertwined title
issue when it was undisputed the defendant executed a deed of trust with a tenancy-at-sufferance
clause, and she alleged a lack of proper notice of the foreclosure and a lack of a proper
opportunity to cure any default; these were mere “foreclosure irregularities”); Rice v. Pinney, 51
S.W.3d 705, 711–12 (Tex. App.—Dallas 2001, no pet.) (no intertwined title issue based on mere
fact that the defendants brought a separate suit in district court; “[I]n this case the [defendants]
agreed that a foreclosure pursuant to the deed of trust established a landlord and tenant-at-
sufferance relationship between the [parties].”); Haith v. Drake, 596 S.W.2d 194, 196–97 (Tex.
Civ. App.—Houston [1st Dist.] 1980, writ ref’d n.r.e.) (no title issue when it was undisputed that
a buyer would not obtain title until payment in full of the purchase price, and the buyer had not
fully performed); see also Scott, 90 S.W.2d at 818–19 (defendants could not challenge the
validity of the foreclosure sale, but “[n]o contention is made that the vendor’s lien notes are not
valid and binding”).
8
disputed the existence of a landlord-tenant relationship. Cf. Valdez v. Gonzalez
Equities, Ltd., No. 04-12-00466-CV, 2013 WL 3871063, at *2–3 (Tex. App.—San
Antonio July 24, 2013, no pet.) (mem. op.) (intertwined title issue when the parties
agreed that they signed a contract for deed but disputed whether the defendant was
a purchaser under the contract or became a tenant-at-will at some point); Hopes v.
Buckey Retirement Co., No. 13-07-00058-CV, 2009 WL 866794, at *4–5 (Tex.
App.—Corpus Christi Apr. 2, 2009, no pet.) (mem. op.) (intertwined title issue
when the parties disputed the enforceability of a contract purportedly creating a
lien and deed of trust for the defendants’ property; the plaintiff foreclosed,
obtained a substitute trustee’s deed, and claimed a tenancy relationship, but failed
to introduce the deed of trust into evidence); Gibson, 138 S.W.3d at 522–24
(intertwined title issue when the plaintiff claimed that the defendant entered her
property pursuant to a written rental agreement and occupied the property as a
tenant at sufferance, but the defendant asserted that it acquired title by adverse
possession); see also Yarto v. Gilliland, 287 S.W.3d 83, 89 (Tex. App.—Corpus
Christi 2009, no pet.) (intertwined title issue when the parties disputed whether a
landlord-tenant or buyer-seller relationship existed). Similarly, in In re Gallegos,
the Corpus Christi Court of Appeals held that there was an intertwined title issue
when the defendant claimed that the transaction creating the tenancy relationship
was void under the Texas Constitution. See No. 13-13-00504-CV, 2013 WL
6056666, at *5 (Tex. App.—Corpus Christi Nov. 13, 2013, orig. proceeding)
(mem. op.); see also Mitchell, 911 S.W.2d at 171 (intertwined title issue when the
defendant claimed the substitute trustee’s deed was void and had brought suit in
district court to set aside the non-judicial foreclosure sale).
9
Regarding forgery in particular, in Dass, Inc. v. Smith, the Dallas Court of
Appeals upheld the district court’s temporary injunction of a forcible detainer
action because the action required the resolution of a title dispute. 206 S.W.3d
197, 201 (Tex. App.—Dallas 2006, no pet.). There was undisputed evidence that
Falcon Transit had leased real property from Dass for several years, but the parties
disputed the nature of the relationship thereafter. Id. at 199. The terms of the lease
provided that the tenancy would continue month-to-month at the expiration of the
lease, but Falcon Transit’s owner claimed that he purchased the property from
Dass and introduced into evidence a document purportedly signed by the parties
establishing a sale of the property. Id. Dass’s representative testified that he did
not sign the sales agreement and that his signature was a forgery. Id. Because the
parties disputed the existence of a landlord-tenant relationship and a fact finder
would need to resolve whether the purported sales agreement passing title was
forged, the determination of the right to immediate possession necessarily required
resolution of a title dispute. See id. at 201. The justice court lacked jurisdiction.
See id.
Because the Yarbroughs contend the deed of trust and resulting substitute
trustee’s deed are void due to forgery, they have raised a genuine issue of title so
intertwined with the issue of possession as to preclude jurisdiction in the justice
court. A prerequisite to determining the immediate right to possession will be
resolution of the Yarbroughs’ title dispute concerning forgery of the deed of trust.
Accordingly, the justice and county courts lacked jurisdiction.
The Yarbroughs’ first issue is sustained.
10
III. CONCLUSION
Having sustained the Yarbroughs’ first issue, we reverse the trial court’s
judgment and remand with instructions to dismiss the action for lack of
jurisdiction.
/s/ Sharon McCally
Justice
Panel consists of Justices Boyce, Jamison, and McCally.
11