Lisle Patton & Barrett Daffin Frappier Turner & Engel v. Collin D. Porterfield
2013 Tex. App. LEXIS 11272
| Tex. App. | 2013Background
- Porterfield borrowed to buy a homestead in 2003, granting a purchase-money deed of trust (first lien) and later (2005) executed a home-equity note secured by a home-equity security instrument (second lien). Servicers: Cenlar (first lien) and America’s Servicing (home-equity).
- Payoff amounts before sale: ~ $733,558 (first lien) and ~ $293,424 (home-equity). Substitute trustee Patton conducted a nonjudicial foreclosure of the first lien and sold the property for $1,102,000.
- Trustee and law firm paid the first-lien payoff, paid the home-equity servicer $293,424.27, reimbursed sale costs and fees, and remitted $70,375.33 to Porterfield.
- Porterfield sued Patton and Barrett Daffin alleging breach of contract (and other claims later dropped), arguing the trustee should have paid him the excess proceeds rather than the home-equity servicer.
- Parties tried the case on an agreed statement of facts. Trial court ruled for Porterfield and awarded him the amount paid to the home-equity servicer. Defendants appealed.
Issues
| Issue | Plaintiff's Argument (Porterfield) | Defendant's Argument (Patton / Barrett Daffin) | Held |
|---|---|---|---|
| Whether appellate court has jurisdiction | Appeal lacks jurisdiction because home-equity servicer did not obtain a court order under Tex. Const. art. XVI §50(a)(6)(D) | Judgment is final and appealable; trial court resolved the sole agreed issue | Court had jurisdiction and appeal proceeds |
| Whether a junior home-equity lien may be paid from excess proceeds of a senior nonjudicial foreclosure | Home-equity liens are foreclosable only by court order and therefore cannot collect excess proceeds absent a §50(a)(6)(D) order; home-equity lien does not attach to excess cash proceeds | Common-law foreclosure priorities and distribution of proceeds apply; the deed of trust required excess be paid to persons legally entitled to it, which included the junior servicer | Court held rules requiring a court order apply only to foreclosing the home-equity lien itself; the junior servicer could receive excess proceeds without a §50 order |
| Whether the constitutionally mandated nonrecourse character of a home-equity loan prevents applying proceeds to satisfy the loan | Nonrecourse status turns proceeds into non-homestead personal property; thus proceeds cannot be used to satisfy the home-equity note | Nonrecourse merely limits personal liability; a nonrecourse note is payable from collateral (the homestead) and its sale proceeds | Court held nonrecourse status does not bar applying sale proceeds to satisfy the junior home-equity debt |
| Whether §50(a)(6)(H) (loan secured only by homestead) prohibits junior lien attaching to cash proceeds | The home-equity lien is limited to the homestead and does not extend to post-sale cash proceeds | Sale proceeds stand in place of the foreclosed homestead; the junior lien may be satisfied from those proceeds under common-law principles | Court held proceeds retain the character of the homestead for lien-satisfaction purposes; paying the junior from excess proceeds does not violate §50(a)(6)(H) |
Key Cases Cited
- Stringer v. Cendant Mortg. Corp., 23 S.W.3d 353 (Tex. 2000) (interpretation of Texas Constitution language for home-equity law)
- LaSalle Bank N.A. v. White, 246 S.W.3d 616 (Tex. 2007) (constitutional provision did not displace common-law equitable subrogation absent express language)
- AMC Mortgage Servs., Inc. v. Watts, 260 S.W.3d 582 (Tex. App.—Dallas 2008) (foreclosure of senior lien extinguishes junior liens not satisfied from proceeds)
- Fein v. R.P.H., Inc., 68 S.W.3d 260 (Tex. App.—Houston [14th Dist.] 2002) (discussion of nonrecourse note as payable only from collateral)
- Panther Creek Ventures, Ltd. v. Collin Cent. Appraisal Dist., 234 S.W.3d 809 (Tex. App.—Dallas 2007) (agreed statement of facts limits appellate review to legal application)
- Lehmann v. Har-Con Corp., 39 S.W.3d 191 (Tex. 2001) (final-judgment rule for appellate jurisdiction)