Forcible Detainer, Equitable Mortgage, Lack Of Jurisdiction, Mandamus: Fighting Off An Ongoing Eviction While Trying To Recharacterize A Sale Leaseback Transaction As A Secured Loan
A 2013 ruling from a Texas Court of Appeals (In re: Gallegos, No. 13-13-00504-CV (Tex. App. 13th Dist., Corpus Christi, Edinburg, 2013)) may be helpful to those who, in the process of attempting to undo a foreclosure rescue transaction involving a sale/leaseback w/ repurchase option and before a resolution is reached, find themselves having to fight off an ongoing eviction action ordered by a court in a separate proceeding brought by the buyer/lessor in an effort to boot the seller/lessee.
An oversimplified summary of the background facts follows. While the transaction in this case involved a sale/leaseback, the context did not specifically involve a foreclosure rescue. The legal principles set forth by the Texas appeals court are nevertheless applicable. The reader is referred to the entire ruling for the specific details of the background facts.
- The relationship between the opposite sides in this case evolved out of a sale and contemporaneous leaseback of real estate, coupled with an option to repurchase the premises, that was consummated over ten years before the legal dispute arose.
- The case itself involves the use of a forcible detainer action filed by the buyer/lessor ("Vela") to boot the successor-in-interest ("Gallegos") of the original owner/seller/lessee of the subject premises ("Pyle").
- The initial ruling in the eviction action, which Vela had filed and lost in a justice court, was subsequently appealed in a county court ("a justice court is expressly deprived of jurisdiction to determine or adjudicate title to land. ... The appellate jurisdiction of the county court is confined to the jurisdictional limits of the justice court.").
- While the forcible detainer appellate proceeding was pending in county court, Gallegos filed a separate suit to quiet title in a court of general jurisdiction (ie. district court) alleging that the warranty deed and note agreement used to effect the sale leaseback of the premises (for the reasons which Gallegos alleged, and which are set forth in more detail in the court's opinion) were void and illegal.
- Gallegos then filed a motion to dismiss the county court appellate proceeding on grounds that the county court lacked jurisdiction, alleging that the title dispute in the district court had to be resolved before the issue of possession in the county court could be addressed.
- The county court denied the motion to dismiss and granted Vela a writ of possession.
- Gallegos filed a petition for writ of mandamus and motion for emergency stay with the Texas appeals court. The motion for emergency stay was granted, thereby temporarily slamming the brakes on the eviction until the court considered the merits of Gallegos claims that the county court lacked jurisdiction to issue a writ of possession and allow the eviction to go forward.
On the availability of mandamus relief, generally, the court stated:
- Gallegos contends that the county court's order is void because it lacks jurisdiction over the case. Mandamus is proper if a trial court issues an order beyond its jurisdiction. See In re Dickason, 987 S.W.2d 570, 571 (Tex. 1998) (orig. proceeding); Bd. of Disciplinary App. v. McFall, 888 S.W.2d 471, 472 (Tex. 1994) (orig. proceeding).
Mandamus is available to correct a void order even if the order was appealable and the party requesting relief failed to pursue an appeal. Dikeman v. Snell, 490 S.W.2d 183, 186 (Tex. 1973) (orig. proceeding). Where an order is void, the relator need not show it did not have an adequate appellate remedy and mandamus relief is appropriate. See In re Sw. Bell Tel. Co., 35 S.W.3d 602, 605 (Tex. 2000) (orig. proceeding); In re Union Pac. Res., Co., 969 S.W.2d 427, 428 (Tex. 1998) (orig. proceeding).
- The forcible detainer action is the procedural vehicle by which the right to immediate possession of real property is determined. Ward v. Malone, 115 S.W.3d 267, 270 (Tex. App.-Corpus Christi 2003, pet. denied). Such an action is intended to be a speedy and inexpensive means for resolving the question of who is entitled to immediate possession of property without resorting to an action upon title. Harrell v. Citizens Bank & Trust Co., 296 S.W.3d 321, 325 (Tex. App.-Texarkana 2009, pet. dism'd); Falcon v. Ensignia, 976 S.W.2d 336, 338 (Tex. App.-Corpus Christi 1998, no pet.). The only issue in a forcible detainer action is the right to actual possession of the premises. Marshall v. Hous. Auth., 198 S.W.3d 782, 785-86 (Tex. 2006); see TEX. R. CIV. P. 746.
In cases of forcible entry or forcible detainer, the "merits of the title shall not be adjudicated." TEX. R. CIV. P. 746; Hong Kong Dev., Inc. v. Nguyen, 229 S.W.3d 415, 434 (Tex. App.-Houston [1st Dist.] 2007, no pet.). In keeping with the foregoing prohibition against the adjudication of title in a forcible detainer action, a justice court is expressly deprived of jurisdiction to determine or adjudicate title to land. See TEX. GOV'T CODE ANN. § 27.031(b)(4) (West Supp. 2013).
By statute, a justice court has jurisdiction over a forcible detainer action. See TEX. PROP. CODE ANN. § 24.004 (West Supp. 2013). From the justice court, a forcible detainer suit may be appealed to the county court for a de novo review. See TEX. R. CIV. P. 749; Hong Kong Dev., Inc., 229 S.W.3d at 433-34. The appellate jurisdiction of the county court is confined to the jurisdictional limits of the justice court. Salaymeh v. Plaza Centro, LLC, 264 S.W.3d 431, 435 (Tex. App.-Houston [14th Dist.] 2008, no pet.); Hong Kong Dev., Inc., 229 S.W.3d at 434. Therefore, neither the justice court nor a county court on appeal can resolve questions of title beyond the immediate right to possession. See Bacon v. Jordan, 763 S.W.2d 395, 396 (Tex. 1988).
A forcible detainer action is cumulative, not exclusive, of other remedies a party may have in the courts of this State, including a suit to try title. Salaymeh, 264 S.W.3d at 435-36; Rice v. Pinney, 51 S.W.3d 705, 709 (Tex. App.-Dallas 2001, no pet.); see Scott v. Hewitt, 90 S.W.2d 816, 818-19 (Tex. 1936). The displaced party is entitled to bring a separate suit in the district court to determine questions of title. Salaymeh, 264 S.W.3d at 435-36. Accordingly, forcible detainer suits in justice court may run concurrently with an action in another court even if the other action involves adjudication of matters that could result in a different determination of possession from the decision rendered in the forcible detainer suit. Id.; Hong Kong Dev. Inc., 229 S.W.3d at 437. However, where the right to immediate possession necessarily requires resolution of a title dispute, a justice court has no jurisdiction to enter a judgment. Rice, 51 S.W.3d at 709. In other words, a justice court is not deprived of jurisdiction because there is 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. See id.
Whether an existing title dispute 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. See Villalon v. Bank One, 176 S.W.3d 66, 71 (Tex. App.-Houston [1st Dist.] 2004, no pet.); see also Chinyere v. Wells Fargo Bank, N.A., No. 01-11-00304-CV, 2012 WL 2923189, at *3 (Tex. App.-Houston [1st Dist.] July 12, 2012, no pet.) (op.).
Courts have concluded that several different factual scenarios generally require the resolution of title as a prerequisite to determination of possession.
Familial disputes over property rights generally require the initial resolution of title. See, e.g., Pina v. Pina, 371 S.W.3d 361, 365-66 (Tex. App.-Houston [1st Dist]. 2012, no pet.) (explaining that the district court had jurisdiction over the determination of the right to immediate possession of property between four siblings, where their mother had deeded the property to two of the four children, because the issue necessarily required a resolution of the title dispute between the children); Geldard v. Watson, 214 S.W.3d 202, 208-09 (Tex. App.-Texarkana 2007, no pet.) (holding that the justice court lacked jurisdiction over a forcible detainer suit because the disagreement over the right of possession, which arose from a familial dispute over homestead rights in property, "necessarily required an adjudication of the merits of title").
Similarly, claims regarding adverse possession typically involve the preliminary determination of title disputes. See, e.g., Gibson v. Dynegy Midstream Servs., L.P., 138 S.W.3d 518, 524 (Tex. App.-Fort Worth 2004, no pet.) (concluding that the issue of title raised by a party's claims of adverse possession was "integrally linked" to the issue of possession); Gentry v. Marburger, 596 S.W.2d 201, 203 (Tex. Civ. App.-Houston [1st Dist.] 1980, writ ref'd n.r.e.) (holding that the justice court lacked subject-matter jurisdiction over a forcible detainer suit where the pleadings raised the issue of title by adverse possession and thus "title to premises was directly involved").
The resolution of the issue regarding whether a forcible detainer case can proceed concurrently with a title dispute or whether title has to be resolved as a preliminary matter is more complicated in situations regarding the purchase and sale or lease of a property.
In general, cases have held that where the relationship between the parties in a forcible detainer suit is that of buyer and seller only, the determination of the right to immediate possession of the property necessarily requires resolution of the title dispute. See, e.g., Dass, Inc. v. Smith, 206 S.W.3d 197, 200-01 (Tex. App.-Dallas 2006, no pet.) (concluding that the determination of the right to immediate possession of property necessarily required a resolution of a title dispute, and jurisdiction properly belonged in the district court, where there was evidence that a landlord-tenant relationship had ended and a buyer-seller relationship had begun); see also Chinyere, 2012 WL 2923189, at *5 (holding that the justice and county court lacked subject matter jurisdiction where the claim for possession of property rested solely on the claim to title based on the sale of the property).
In contrast, where the relationship between the purchaser and seller of real property encompasses the landlord and tenant relationship, even where such a relationship occurs in the context of a sale of property, the issue of immediate possession can typically be determined without first necessarily determining the issue of title. See, e.g., Morris v. Am. Home Mortg. Serv., 360 S.W.3d 32, 35 (Tex. App.-Houston [1st Dist.] 2011, no pet.) (holding that a deed of trust containing language establishing a landlord-tenant relationship between the borrower and the purchaser provided a basis to resolve competing claims to possession without resolving the title dispute between the parties); Bruce v. Fed. Nat. Mortg. Ass'n, 352 S.W.3d 891, 893 (Tex. App.-Dallas 2011, pet. denied) ("Here, the Deed of Trust contains a provision that creates a landlord-tenant relationship, and this relationship `provides an independent basis on which the trial court could determine the issue of immediate possession without resolving the issue of title to the property.'"); see also Black v. Washington Mut. Bank, 318 S.W.3d 414, 418 (Tex. App.-Houston [1st Dist.] 2010, pet. dism'd w.o.j.); Yarto & DTRJ Invs., L.P. v. Gilliland, 287 S.W.3d 83, 89 (Tex. App.-Corpus Christi 2009, no pet.); Elwell v. Countywide Home Loans, Inc., 267 S.W.3d 566, 569 (Tex. App.-Dallas 2008, pet. dism'd w.o.j.); Villalon, 176 S.W.3d at 71; Rice, 51 S.W.3d at 712-13; see also Weatherbee v. GMAC Mortgage, LLC, No. 01-11-00546-CV, 2012 WL 1454494, at *3 (Tex. App.-Houston [1st Dist.] Apr. 26, 2012, pet. dism'd w.o.j.) (mem. op.).
The analysis and application of Texas law as above stated by the court to the facts at bar, and its ruling, follow:
- IV. ANALYSIS
Gallegos contends that the county court did not have jurisdiction over Vela's forcible detainer cause of action because of the pending title dispute in district court. As stated previously, the county court is deprived of jurisdiction if resolution of a title dispute is a prerequisite to the determination of the right to immediate possession. See Rice, 51 S.W.3d at 709.
In contrast, Vela asserts that the leasehold relationship between the parties provided an independent basis for the trial court to determine the right to immediate possession without resolution of the title issues.
While we agree with Vela that a leasehold relationship typically establishes an independent basis for the county court to determine possession without the prerequisite resolution of a title dispute, we disagree with Vela's assertion that the resolution of this case is controlled by that doctrine. The facts and argument presented here render this proceeding distinguishable from those cases concluding that a landlord-tenant relationship provides an independent basis to determine possession. Specifically, the alleged landlord-tenant relationship between Vela and Pyle does not provide an independent basis for determination of possession because Gallegos contends that the transaction itself was void. According to Gallegos, Pyle's transfer of the property in exchange for a loan to Vela, with a right to buy back the real property on repayment, is prohibited by the Texas Constitution and the pretended sale of the homestead was void. See TEX. CONST. art. XVI, § 50(c); Johnson v. Cherry, 726 S.W.2d 4, 6 (Tex. 1987).
Agreements executed at the same time, for the same purpose, and in the course of the same transaction are to be construed together. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135 (Tex. 2004) (orig. proceeding); Jim Walter Homes, Inc. v. Schuenemann, 668 S.W.2d 324, 327 (Tex.1984) (citing Jones v. Kelley, 614 S.W.2d 95 (Tex. 1981)); Nevels v. Harris, 102 S.W.2d 1046, 1048 (Tex. 1937) (stating that a deed of trust and notes for principal and interest should be treated as one contract because the borrowers executed the documents at the same time and for the same purpose of obtaining a loan secured by the real property); Nat'l City Bank of Indiana v. Ortiz, 401 S.W.3d 867, 884 (Tex. App.-Houston [14th Dist.] 2013, no pet.).
In this case, the real estate note agreement, the warranty deed, and the lease were all allegedly executed on August 19, 1999. The real estate note agreement, which underlies the transfer of title and Vela's right to "foreclose" on the property, included provisions allegedly establishing the lease between Vela and Pyle. The lease at issue in this case contains provisions that clearly implicate the transfer of title. Under the lease, Pyle retained the option to "buy back the house," Vela had the right to declare the lease forfeited and to repossess the premises if Pyle defaulted in his obligations, Vela would have "clear title" to the property, the "sole purpose for [Vela] to hold the deed of said property is to borrow the said monies," and "upon final payment on bank note the house will be return[ed] to the lessee."
In short, there is no leasehold that is independent of the claimed right to title that would buttress Vela's claim of superior possession rights in the property. As part of the same transaction, the lease would also be necessarily void under Gallegos's claims. Vela's claims for possession cannot be separated into claims based on his alleged disparate positions as both lessor and owner of the property.
Thus, we agree with Gallegos that the right to immediate possession of the property necessarily required a resolution of the title dispute. Accordingly, the forcible detainer suit and the title suit could not proceed concomitantly. See, e.g., Dass, Inc., 206 S.W.3d at 200-01; Rice, 51 S.W.3d at 709; see also Chinyere, 2012 WL 2923189, at **4-6. Because the right to immediate possession of the property necessarily required resolution of the title dispute, the county court had no jurisdiction to enter a judgment regarding the right to possession. See Rice, 51 S.W.3d at 709. The trial court's order of September 19, 2013, denying Gallegos's plea and granting a writ of possession in favor of Vela, was void. See id. We sustain Gallegos's first issue. Having sustained her first issue, we need not address her second issue regarding the deficiency of the notice of the hearing on possession. See TEX. R. APP. P. 47.4.
The Court, having examined and fully considered the petition for writ of mandamus, the response, the reply, and the applicable law, is of the opinion that Gallegos has met her burden to obtain mandamus relief. Accordingly, the stay previously imposed by this Court is lifted. See TEX. R. APP. P. 52.10(b) ("Unless vacated or modified, an order granting temporary relief is effective until the case is finally decided."). We conditionally grant Gallegos's petition for writ of mandamus. We are confident that the trial court will withdraw its order. The writ will issue only if the trial court fails to comply with this opinion.