Overview of the Bankruptcy Process for Landlords

Bankruptcy law is federal and bankruptcies are filed and litigated in federal court. Texas landlords who are accustomed to waltzing down to their local justice of the peace court to evict their tenants can be shocked and intimidated by the complexity and difficulty of dealing with a tenant who files for federal bankruptcy protection. As soon as that federal bankruptcy petition is filed, the Texas state courts no longer have jurisdiction to hear an eviction suit until either the bankruptcy stay is lifted or the bankruptcy case is dismissed. Many landlords handle simple evictions in Texas without an attorney, but generally no landlord should try to handle a bankruptcy case, or perform any collections activities against a tenant in bankruptcy, without an attorney.

Generally No Automatic Stay if Eviction Judgment Obtained Before Bankruptcy Filing Date. Generally, if the landlord obtains the eviction judgment, on residential property, before the bankruptcy filing date, then the eviction can proceed. 11 U.S.C. 362(b)(22) and (l). In Texas, the tenant cannot file a non-bankruptcy cure certificate under 11 U.S.C. 632(l), and so, the bankruptcy stay should not apply if the eviction judgment occurred before the filing of the bankruptcy petition.

Property endangerment or illegal use of controlled substances. Under 11 U.S.C. 362(b)(23), the landlord can file a certification that the tenant has endangered the property or used controlled substances on the property and the stay does not apply fifteen (15) days after the date that the certification is filed. 11 U.S.C. 362(b)(23), (m). If the debtor files an objection to the certification, then the stay does apply, but the Court must set the objection for hearing within ten (10) days from the tenant’s objection. 11 U.S.C. 362(m)(2)(B).

My Tenant Filed Bankruptcy, Now What? If none of the above rules apply, then the landlord needs to find out whether the tenant will assume or reject the lease. Outside of Chapter 7 (liquidation bankruptcy), the tenant can choose to assume or reject the lease up till the plan confirmation date. 11 U.S.C. § 365(d)(2). In Chapter 7, residential leases are deemed rejected after sixty (60) days of the filing of the bankruptcy petition. 11 U.S.C. § 365(d)(1). For nonresidential property, the deadline is the earlier of the confirmation date or 120 days from the bankruptcy filing date. 11 U.S.C. § 365(d)(4). If the tenant wants to assume the lease, then the tenant can do so regardless of ipso facto clauses, which attempt to draft around the bankruptcy rules. 11 U.S.C. § 365(b)(2). The tenant who wants to assume the lease must cure any default, other than unenforceable ipso facto defaults. 11 U.S.C. 365(b). The tenant may also need to compensate the landlord for any losses due to the default and provide adequate assurance that the lease will be performed in the future. Id. The tenant’s cure must be “prompt.” 11 U.S.C. § 365(b)(1)(A). The landlord’s idea of “prompt” and the bankruptcy court’s idea of “prompt” are probably different since bankruptcy courts have been known to allow tenants to cure pre-petition arrearages over six months.

Post-Petition Rent. The tenant is required to pay post-petition rent under 11 U.S.C. § 365(d)(3). If the tenant fails to pay post-petition rent, then the landlord should file a motion to lift stay or a motion to compel rejection of the lease. Section 365(d)(2) of the Bankruptcy Code allows the court, on the request of any party to the lease, to request that the lease be assumed or rejected within a “specified period of time,” probably ten (10) days from the date of the court’s order on the motion. On a motion to compel rejection of lease, the landlord should show breach (either pre-petition or post-petition, preferably both), undue delay by debtor in deciding to assume or reject, and prejudice to landlord caused by the delay. In re Physician Health Corp., 262 B.R. 290, 295 (Bankr. D. Del. 2001).

Automatic Stay Lifts Upon Rejection of Contract. If a lease is rejected or not timely assumed, then “the leased property is no longer property of the estate and the stay under section 362(a) is automatically terminated.” 11 U.S.C. § 365(p)(1).

Copyright 2017, Ian Ghrist, All Rights Reserved.

Disclaimer: This blog is for informational purposes only. Do not rely on any part of this blog as legal advice. Instead, seek out the advice of a licensed attorney. Also, this information may be out-of-date.

Probate Court Jurisdiction in Texas (Its a Mess)

Texas probate court jurisdiction is mind-boggling and yet eminently important. You can go all the way through a trial and have the judgment vacated solely because the Court of Appeals finds that the Trial Court did not have jurisdiction. “Subject matter jurisdiction exists by operation of law and cannot be conferred on a court by consent or waiver.” See Dubai Petroleum Co. v. Kazi, 12 S.W.3d 71, 76 (Tex. 2000). Lack of subject matter jurisdiction renders a judgment void rather than merely voidable. Mapco, Inc. v. Forrest, 795 S.W.2d 700, 703 (Tex. 1990).” Jeter v. McGraw, 218 S.W.3d 850, 853 (Tex. App.—Beaumont 2007) (court of appeals vacated the district court’s judgment on a partition lawsuit and dismissed the case because the case should have been brought in the probate court). The last thing that you want to happen is to win a big case in district or county court only to find out that your judgment is invalid because the case should have been tried in the probate court, or vice-versa.

Subject matter jurisdiction in probate and estate administration matters in Texas can be especially confusing and tricky. A major cause for confusion is that, in Texas, jurisdiction over probate and estate administration matters varies from county to county, which means that detailed research into the rules governing the particular county is necessary to determine jurisdictional issues for that county. You should not call the courts or the county clerk for advice. They are not likely to answer your questions. Even if they do answer your questions, you are still ultimately responsible for figuring these issues out on your own and you are not entitled to rely on any legal advice given by the county clerk’s office or any court staff.

Statutory Probate Courts, County Courts at Law Exercising Probate Jurisdiction (aka County Courts at Law with probate jurisdiction), and Constitutional County Courts (aka County Courts). As if the rules were not complicated enough already, the Texas Legislature has even named the probate courts in a highly confusing manner. For example, County Courts at Law are the same thing as Statutory County Courts, but not the same thing as Statutory Probate Courts, and Constitutional County Courts are also called simply County Courts, which means that a County Court is a completely different court from a County Court at Law. Under Tex. Gov’t Code § 25.0003, any statutory county court (aka “county court at law”) has original probate jurisdiction unless otherwise provided. You will want to check Subchapter C, Chapter 25 of the Texas Government Code for any potential exceptions to the general rule that county courts at law have original probate jurisdiction. Also, you can generally check Subchapter C, Chapter 25 of the Texas Government Code to see if your county has any statutory county courts or not. You can also generally use Subchapter C, Chapter 25 of the Texas Government Code to find out whether your county has statutory probate courts or not. Every county in Texas has a constitutional county court (aka “county court”). See Tex. Gov’t Code § 21.009(1); Tex. Const. Art. 5 § 15; Tex. Gov’t Code § 26.041 et. seq. Each county has one County Judge who presides over the county court aka constitutional county court as well as the County Commissioners Court and the county itself. Tex. Const. art. 5 §§ 15, 16, 18.

With that out of the way, you can figure out probate jurisdictional issues by looking at whether (1) your county has a statutory probate court, (2) your county has no statutory probate court or county court at law exercising probate jurisdiction, or (3) your county has no statutory probate court, but does have a county court at law exercising probate jurisdiction. As explained above, most county courts at law do have probate jurisdiction, but you still have to check each county for any exceptions to this general rule.

(1) Your County Has a Statutory Probate Court. In this case, the statutory probate court generally has original and exclusive jurisdiction over any probate proceeding, except for the matters listed in Texas Estates Code § 32.007, which the district courts will have concurrent jurisdiction over. Tex. Estates Code § 32.005. The presence of concurrent jurisdiction can result in disputes over whether the statutory probate court or the district court has dominant jurisdiction. In re J.B. Hunt Transp., Inc., 492 S.W.3d 287, 294 (Tex. 2016) (generally the “court in which suit is first filed” has dominant jurisdiction and the other suit should be abated). The dominant jurisdiction rule applies when inherent interrelation of the subject matter exists in two pending lawsuits. Wyatt v. Shaw Plumbing Co., 760 S.W.2d 245, 247 (Tex. 1988). “It is not required that the exact issues and all the parties be included in the first action before the second is filed, provided that the claim in the first suit may be amended to bring in all necessary and proper parties and issues.” Id. In determining whether suits are inherently interrelated, a court should look at the feasibility of joinder (Tex. R. Civ. P. 39) and the compulsory counterclaim rule (Tex. R. Civ. P. 97(a)). Id. If there is a probate proceeding pending, then the district court generally should not interfere despite having coordinate jurisdiction. Hurtado v. De Jesus Gamez, No. 13-11-00354-CV, 2012 Tex. App. LEXIS 4510, at *10 (App.—Corpus Christi June 7, 2012). Matters related to a probate proceeding must be brought in the statutory probate court unless there is concurrent jurisdiction. Tex. Estates Code § 32.005.

(2) Your County Has No Statutory Probate Court or County Court at Law Exercising Probate Jurisdiction. Some small counties do not even have one county court at law, in which case there is probably no statutory probate court either, which leaves only the constitutional county court with probate jurisdiction. See Tex. Estates Code § 32.002. In this situation, the constitutional county court can refer contested cases to the local district court or request assignment of a probate judge under Tex. Gov’t Code § 25.0022, but you still have to first file your case in the constitutional county court before it can be transferred.

(3) Your County Has No Statutory Probate Court, But Does Have a County Court at Law Exercising Probate Jurisdiction. In this case, the county court at law and the county court have concurrent original jurisdiction of probate proceedings, unless otherwise provided by law. Tex. Estates Code § 32.002(b). In these counties, the county court or county court at law also has jurisdiction over the matters related to a probate proceeding listed in Tex. Estates Code § 31.002(b).

Definition of “Probate Proceeding” and “Matters Related to a Probate Proceeding.” The term “probate proceeding” as used in the Texas Estates Code is defined in Section 31.001 of the Code. Matters related to a probate proceeding include the matters listed in Section 31.002 of the Texas Estates Code.

Original Probate Jurisdiction and Jurisdiction Over Matters Related to the Probate Proceeding Rules. All probate proceedings must be filed an heard in a court exercising original probate jurisdiction. Tex. Estates Code § 32.001. The court exercising original probate jurisdiction also has jurisdiction of all matters related to the probate proceeding as specified in Section 31.002 of the Estates Code for that type of court. Id. Also, the court can exercise pendent and ancillary jurisdiction as necessary. Id. Finally, “The administration of the estate of a decedent, from the filing of the application for probate and administration, or for administration, until the decree of final distribution and the discharge of the last personal representative, shall be considered as one proceeding for purposes of jurisdiction” and the “entire proceeding is in rem.” Tex. Estates Code § 32.001(d). The original probate jurisdiction rules are found in Tex. Estates Code § 32.002.

Copyright 2017, Ian Ghrist, All Rights Reserved.

Disclaimer: This blog is for informational purposes only. Do not rely on any part of this blog as legal advice. Instead, seek out the advice of a licensed attorney. Also, this information may be out-of-date.

Memorandum of Contract

When a buyer in a real estate sales contract starts to think that the seller is getting cold feet, the buyer may want to file a “Memorandum of Contract” or “Memorandum of Agreement” in the county deed records to cloud title, put subsequent purchasers on constructive notice of the buyer’s equitable title, and ensure that the seller does not try to sell to another buyer. Tex. Prop. Code § 13.002; 12.001. The buyer can claim equitable title through the contract. See Johnson v. Wood, 138 Tex. 106, 157 S.W.2d 146 (1941). A good memorandum should “contain all of the essential elements of the agreement.” Crowder v. Tri-C Res., 821 S.W.2d 393, 396 (Tex. App.—Houston[1st Dist.] 1991). At a minimum, the memorandum should contain the names of the parties to the contract, a description of the property, the sales price, the date of the contract, and a clause referring to the contract. Because the goal is to put subsequent buyers on constructive notice, the memorandum should contain as much information as possible, however, most people do not want to record the contract itself due to privacy considerations.

The buyer should file the memorandum of contract at his or her own risk. If the buyer and seller become embroiled in a dispute related to the sales contract and the buyer loses the dispute in Court, then the buyer could be liable for attorney’s fees, double and treble damages under the Texas Deceptive Trade Practices Act (“DTPA”) (if the property is the owner’s home), mental anguish, and any actual damages suffered by the seller. The buyer could also be looking at an Action on Fraudulent Lien or Claim under Chapter 12 of the Texas Civil Practices and Remedies Code and criminal liability if the memorandum is not filed in good faith or is not released in a timely manner when release becomes appropriate. Bowles v. State, 2006 Tex. App. LEXIS 7341, *2-3 (Tex. App.—Houston 1st Dist. Aug. 17, 2006). The buyer could also lose the corporate liability shield by filing a wrongful memorandum of contract because “A corporate agent is personally liable for his own fraudulent or tortious acts. The plain language of the DTPA is in harmony with this rule.” Miller v. Keyser, 90 S.W.3d 712 (Tex. 2002). The DTPA strangely defines “goods” as “tangible chattles or real property purchased or leased,” which makes the DTPA available in residential real estate cases.

Copyright 2017, Ian Ghrist, All Rights Reserved.

Disclaimer: This blog is for informational purposes only. Do not rely on any part of this blog as legal advice. Instead, seek out the advice of a licensed attorney. Also, this information may be out-of-date.

Overview of the Eviction Suit Process in Texas

Eviction suits in Texas are governed by Rule 510 of the Texas Rules of Civil Procedure and by Chapter 24 of the Texas Property Code. Most of the important laws governing eviction suits exist in either Tex. R. Civ. P. 510 or Tex. Prop. Code § 24.001 to 24.011. The Texas legislature enacted these rules “to provide a speedy and inexpensive remedy for the determination of who is entitled to possession of property.” Johnson v. Fellowship Baptist Church, 627 S.W.2d 203, 204 (Tex. App. Corpus Christi 1981).

In Texas, your local Justice of the Peace Court (frequently known as “JP court,” “justice court,” the “people’s court,” or “small claims court”) has exclusive jurisdiction over eviction suits, known in Texas as forcible entry and detainer suits. In layman’s terms, this means that Texans must file their eviction suits at the local JP court. Usually, the district and county courts will all be located downtown at the largest city in your county, while there will be several justice court subcourthouses spread throughout the county, often sharing office space with your local city hall or the local branch of the tax collector’s office. In 2013, the Texas legislature abolished small claims courts and gave jurisdiction over small claims cases to the JP courts. See Act of June 29, 2011, 82nd Leg., 1st C.S., ch. 3, § 5.07 (repealing former Tex. Gov’t Code ch. 28, governing small claims courts, effective May 1, 2013); Act of April 2, 2013, 83rd Leg., R.S., ch. 2, § 2 (delaying abolition of small claims courts from May 1, 2013 to August 31, 2013); see Misc. Docket No. 13-9049 (Tex. April 15, 2013), ¶ 1. So, the JP courts also function as small claims courts in Texas for claims of under $10,000.00 in monetary damages.

Because the Texas Rules of Civil Procedure and the Texas Rules of Evidence do not apply in justice court (See Tex. R. Civ. P. 500.3(e)), Texans are supposed to be capable of adequately representing themselves without the help of a licensed attorney in justice court and they frequently do so. Consequently, many, if not most, eviction suits are filed at the local JP court subcourthouse without the help of an attorney.

Eviction suits in Texas are called “forcible detainer” suits, probably because the tenant to be evicted is forcibly detaining themselves in the property after the lease expired or their lender foreclosed on the property. “The sole issue in a forcible detainer suit is who has the right to immediate possession of the premises.” Aguilar v. Weber, 72 S.W.3d 729, 732 (Tex. App.—Waco 2002). “To prevail in a forcible detainer action, a plaintiff is not required to prove title, but is only required to show sufficient evidence of ownership to demonstrate a superior right to immediate possession.” Id. So, most disputes over the right to possession of real estate in Texas happen in the local JP subcourthouse for the constable precinct that the property is located in. There are, however, other causes of action (lawsuits) over the right to possession of real estate, which can be filed in a county or district court (usually district court for jurisdictional reasons).

Other Possessory Causes of Action and Where to File Them. Trespass to Try Title is an example of a possessory cause of action that must be brought in district court rather than justice court. It’s the Berrys, LLC v. Edom Corner, LLC, 271 S.W.3d 765, 770 (Tex. App. Amarillo 2008). Title suits generally need to be filed in a Texas district court, and not a county court or JP court. Escobar v. Garcia, 2014 Tex. App. LEXIS 5157, *9 (Tex. App. Corpus Christi—May 15, 2014) (county courts generally have no subject matter jurisdiction over title disputes); but see Tex. Gov’t Code § 25.0592 (county courts in Dallas County have concurrent jurisdiction with the district court in civil cases regardless of the amount in controversy and subject matter jurisdictional problems can be cured by retroactive assignment to district court).

Genuine Title Disputes Deprive the Justice of the Peace Courts of Jurisdiction. A title dispute between the landlord and tenant can deprive the JP court of jurisdiction over the eviction case. For a title dispute to deprive the justice of the peace court of jurisdiction, the title dispute must be “genuine.” Padilla v. NCJ Dev., Inc., 218 S.W.3d 811, 815 (Tex. App.—El Paso 2007) (receipt without material elements of transaction and unsigned sales contract not enough to raise a genuine title dispute). A genuine title dispute requires “specific evidence of a title dispute.” Id. Moreover, “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.” Espinoza v. Lopez, 468 S.W.3d 692, 695 (Tex. App.—Houston [14th Dist.] 2015). “To prevail in a forcible detainer action, the plaintiff must present sufficient evidence of ownership to demonstrate a superior right to immediate possession. Ordinarily, a forcible detainer action requires proof of a landlord-tenant relationship. Although such a relationship is not a prerequisite to jurisdiction, the lack of such a relationship indicates that the case may present a title issue. Id. at 695-96.

Even if you wanted to file your eviction suit in county or district court, you cannot do so. Aguilar v. Weber, 72 S.W.3d 729, 731 (Tex. App.—Waco 2002) (“Jurisdiction of forcible detainer actions is expressly given to the justice court of the precinct where the property is located and, on appeal, to county courts for a trial de novo.”); It’s the Berrys, LLC v. Edom Corner, LLC, 271 S.W.3d 765, 769–772 (Tex. App.—Amarillo 2008, no pet.) (justice court has exclusive jurisdiction over the issue of the right to immediate possession). Also, “The appellate jurisdiction of a statutory county court is confined to the jurisdictional limits of the justice court, and the county court has no jurisdiction over an appeal unless the justice court had jurisdiction.” Aguilar at 731. So, even if your county court at law is one of the few in the State of Texas that shares jurisdiction with the district courts over title disputes, then that county court still lacks jurisdiction over the title dispute if the county court is hearing the case on appeal from a justice of the peace court.

Notice to Vacate. A three-day Notice to Vacate must be sent to the tenant before the eviction suit is filed. Tex. Prop. Code § 24.005. At the eviction hearing, the Judge will ask for proof that the Notice to Vacate was given.  Many, if not most, landowners send the Notice to Vacate by mail or by affixing it to the front door of the property. Surprisingly, both of these methods are wrong or potentially ineffective, despite being the most common methods. Even if the Notice to Vacate is sent by certified and regular mail, the tenant can claim not to have received it and, unless the landowner has the signed green return card, the Judge may or may not agree that the notice was effective.  Gore v. Homecomings Fin. Network, No. 05-06-01701-CV, 2008 Tex. App. LEXIS 640, at *6, 2008 WL 256830 (App.—Dallas Jan. 31, 2008) (mem. op., not designed for publication) (Notice to Vacate sent by regular and certified mail, but both envelopes had notations indicating that they were returned unclaimed—court ruled in favor of the tenant on the grounds that the evidence did not establish that the tenant received the notice); Brittingham v. Fed. Home Loan Mortg. Corp., No. 02-12-00416-CV, 2013 Tex. App. LEXIS 10624, at *6, 2013 WL 4506787 (App.—Fort Worth Aug. 22, 2013) (court ruled in favor of landowner even though the main distinctions from the Gore case were that there was a business records affidavit to go along with the regular and certified letters and that only the certified letter was marked unclaimed). The Notice to Vacate does not have to be received by any particular person, but rather must be sent “to the premises.” Trimble v. Fannie Mae, No. 01-15-00921-CV, 2016 Tex. App. LEXIS 13482, at *13 (App.—Houston [1st Dist.] Dec. 20, 2016). “When a letter containing notice is properly addressed and mailed with prepaid postage, a presumption exists that the notice was received by the addressee. Thomas v. Ray, 889 S.W.2d 237, 238 (Tex. 1994).” Id. at *11. Addressing the notice to “all occupants” and mailing it is sufficient to raise the presumption that the notice was delivered to the property. Id. In at least one case, the court held that whether the tenant “received the notice is not determinative of whether notice was given.” U.S. Bank, N.A. v. Khan, No. 05-14-00903-CV, 2015 Tex. App. LEXIS 8388, at *6, 2015 WL 4736839 (App.—Dallas Aug. 11, 2015). If the tenant testifies that the tenant did not receive the notice, then the court is not required to accept the tenant’s testimony. Kaldis v. U.S. Bank Nat’l Ass’n, 2012 Tex. App. LEXIS 6609, 2012 WL 3229135, at *3 (Tex. App.—Houston [14th Dist.] Aug. 9, 2012, pet. dism’d w.o.j.) (mem. op.).

To be fair regarding Notices to Vacate, most of the time, regular or certified mail works just fine and the landlord does not lose the case due to the tenant claiming not to have received the Notice to Vacate. However, going through a JP court eviction trial and then a county court de novo trial on appeal, just to find out that the landlord’s suit is dismissed due to insufficient evidence of tenant’s receipt of a notice that is no more than a technicality since the tenant clearly knows that the tenant has been sued for eviction and has been litigating the issue for several months is kind of ridiculous. To make it worse, since most landlords handle the JP eviction suit without an attorney, the attorney who gets involved at the county court appeal level is not able to go back and correct any deficiencies in the manner of delivery of the notice to vacate. Clearly, there should be an opportunity to cure any defects in the notice to vacate before the county court appeal trial occurs, but there is not. Under Tex. Prop. Code § 24.005, the Notice to Vacate can be affixed to the “inside of the main entry door.” This has to be one of the worst laws on the books. No sane landlord who is involved in a dispute with a tenant, or even a squatter, wants to open the resident’s front door and risk getting shot. Texas has “castle doctrine,” which means that if someone enters your habitation, then you can, generally and subject to some exceptions, use deadly force against them. Tex. Penal Code § 9.31–.32. This requirement to post notice to vacate on the inside of the main entry door is horribly unsafe and should be repealed immediately. There is a procedure in Tex. Prop. Code § 24.005(f-1) that is an alternative to posting notice on the inside of the front door if the “landlord reasonably believes that harm to any person would result from . . . affixing the notice to the inside of the main entry door,” but the procedure is rarely used, probably because it is so complex that no one seems to understand the procedure or be capable of performing it correctly, primarily because the vast majority of evictions are handled without the assistance of an attorney.

Appeal of Eviction Suit. Whoever loses the JP court eviction suit can appeal to the county court at law. Because JP courts do not employ court reporters to keep a record of their proceedings and because the Texas rules of procedure and evidence do not apply (See Tex. R. Civ. P. 500.3(e)), no record exists for the county court to review on appeal. Consequently, the county court conducts a trial de novo, which means a brand new trial. Whatever evidence the landlord or tenant offered in the JP court case is gone and irrelevant. The judge of the county court, in fact, will know nothing about what happened in the JP court other than the outcome as expressed in the final order signed by the JP court judge, but the county court judge must decide the new case based solely on the new trial, and so most, if not all, county court judges could not care less about what happened in the JP court. In county court at law, the landlord/plaintiff generally does need an attorney because the rules of evidence and procedure apply in full regardless of whether the landlord knows and understands them. The landlord/plaintiff who wins in JP court can easily lose in county court on some technicality that the landlord did not understand. Also, if the landlord is a corporation, then the landlord’s suit will be dismissed if the landlord appears for the county court appeal trial without a licensed attorney. See Wuxi Taihu Tractor Co. v. York Grp., Inc., No. 01-13-00016-CV, 2014 Tex. App. LEXIS 12888, at *21, 2014 WL 6792019 (App.—Houston [1st Dist.] Dec. 2, 2014).

Equitable Title. A claim of equitable title can prevent the justice court from having jurisdiction over an eviction suit. “Upon payment of the purchase price and full performance of a contract for sale of real property, a party becomes vested with an equitable title in the land sufficient to enable him to maintain an action for trespass to try title.” Brown v. Davila, 807 S.W.2d 12, 14 (Tex. App.—Corpus Christi 1991, no writ); Also see Johnson v. Wood, 138 Tex. 106, 110, 157 S.W.2d 146, 148 (1941) (performance of a contract for conveyance of title grants equitable title upon the performer). Even an allegation of oral contract for conveyance of property can defeat the jurisdiction of the JP court if an exception the statute of frauds is satisfactorily alleged.  Jennifer Yarto & DTRJ Invs., L.P. v. Gilliland, 287 S.W.3d 83, 94 (Tex. App.—Corpus Christi 2009). The Statute of Frauds is a rule that, in general, requires contracts for conveyance of real estate to be in writing. Tex. Bus. & Com. Code § 26.01(b)(4).

Wrongful Foreclosure Generally Not a Defense to Eviction. Claiming that a foreclosure was wrongful due to defects in the foreclosure process, regardless of whether those claims are filed in a separate district court lawsuit, generally does not constitute a sufficient defense to a post-foreclosure eviction suit. Pinnacle Premier Props. v. Breton, 447 S.W.3d 558, 565 (Tex. App.—Houston [14th Dist.] 2014); Home Sav. Asso. v. Ramirez, 600 S.W.2d 911, 914 (Tex. Civ. App.—Corpus Christi 1980). Generally, a claim of wrongful foreclosure, and a request to rescind the foreclosure sale and restore ownership of the property to the borrower, may be considered to be a title dispute, but it is not a title dispute that deprives the justice court of jurisdiction because the issue of immediate right to possession of the premises is not dependent on the outcome of the title dispute. Id. If the deed of trust and substitute trustee’s deed do not contain a tenancy-at-sufferance clause and there is no other basis for a landlord-tenant relationship, then a wrongful foreclosure suit claim may constitute a title dispute sufficient to deprive the justice court of jurisdiction over the eviction. Chinyere v. Wells Fargo Bank, N.A., 440 S.W.3d 80, 85 (Tex. App.—Houston [1st Dist.] 2012). In a situation, like the Chinyere case, where the justice court lacks jurisdiction over the eviction, the foreclosure sale purchaser would need to file suit in district court and either obtain a trial setting as soon as possible (which will probably be at least five times longer than it would take to get a trial setting in JP court) or set an injunction hearing, prove an imminent, irreparable injury; for which no adequate remedy at law exists (i.e., monetary damages are inadequate); a probable right of recovery and likelihood of success on the merits; and post an injunction bond.

Contracts for Deed. Generally, the justice court does not have jurisdiction over a contract for deed case (also known as an executory contract for conveyance governed by the extensive regulations of Subchapter D of Chapter 5 of the Texas Property Code), but if the contract for deed expressly states that it creates a landlord-tenant relationship, then the JP court might have jurisdiction. Ward v. Malone, 115 S.W.3d 267, 271 (Tex. App.—Corpus Christi 2003); Aguilar v. Weber, 72 S.W.3d 729, 735 (Tex. App.—Waco 2002) (justice court lacked jurisdiction over contract for deed, among other reasons, “because no landlord-tenant relationship was set forth in the contract . . . .”). So, based on the caselaw, if there was an express landlord-tenant relationship in the contract, then justice court jurisdiction may exist. However, if there is a contract for deed and the and the purchaser/tenant has paid “40 percent or more of the amount due or the equivalent of 48 monthly payments,” or if the contract is recorded (which is actually required by Tex. Prop. Code § 5.076, though, the damages for violation are only $500.00 per year), then the seller must perform a foreclosure on the property just as if the transaction were a “deed with a vendor’s lien.” Tex. Prop. Code §§ 5.079; 5.066. At the foreclosure sale, the seller must convey fee simple title and warrant that the property is free from any encumbrance. Tex. Prop. Code § 5.066(d). This tends to be a virtually insurmountable problem for contract for deed sellers that violate Tex. Prop. Code § 5.085 (Fee Simple Title Required) by selling property subject to a pre-existing lien. Unfortunately, many if not most, contracts for deed violate Tex. Prop. Code § 5.085 (Fee Simple Title Required) because one of the primary reasons for selling the property on a contract for deed basis was to avoid recording the contract and, thus, alerting the bank holding the first lien that the due-on-sale clause of the lien note has been violated.

Landlord Gets a Mulligan Due to Lack of Res Judicata. If the landlord makes a mistake and fails to win the eviction suit, then the landlord can, for the most part, simply file the suit again and start the process from scratch. Res judicata, which is a doctrine holding that once a case is resolved, the case cannot be re-litigated again for a different result, does not generally apply to eviction suits. Puentes v. Fannie Mae, 350 S.W.3d 732, 738–739 (Tex. App.—El Paso 2011, pet. dism’d); Fed. Home Loan Mortg. Corp. v. Pham, 449 S.W.3d 230, 235–238 (Tex. App.—Houston [14th Dist.] 2014, no pet.).

The Misnomer Rule and Serving the Correct Parties. Because many eviction suits occur in justice of the peace court without an attorney, people involved often fail to recognize the misnomer rule. The misnomer rule provides that misspellings or even incorrect names do not matter as long as the defendant is not mislead regarding who was sued or the intention to sue the defendant who was actually served with citation was apparent from the pleadings and process. Dezso v. Harwood, 926 S.W.2d 371, 374 (Tex. App.—Austin 1996). Eviction suits are generally made out against a particular defendant “and all occupants.” Pinnacle Premier Props. v. Breton, 447 S.W.3d 558, 561 (Tex. App.—Houston [14th Dist.] 2014). Because the Notice to Vacate rules allow for service upon the property itself, the “all occupants” language can effectively evict anyone occupying the property as long as the notice and citation are served pursuant to the rules. Tex. Prop. Code § 24.005. The big exception to the use of “all occupants” language is Tex. R. Civ. P. 510.3(c), which provides that any tenants listed on a written lease must be named and served with citation.

Verification Requirement. Eviction petitions must be “sworn to by the plaintfiff.” Tex. R. Civ. P. 510.3(a). However, an agent or attorney for the plaintiff can verify the petition. Norvelle v. PNC Mortg., 472 S.W.3d 444, 446–449 (Tex. App.—Fort Worth 2015, no pet.).

Further Appeal. Effective January 1st, 2016, the issue of possession is non-appealable, after the county court at law appeal, in commercial property cases. Tex. Prop. Code § 24.007; 2015 Bill Text TX H.B. 3364 (84th Legislature, As Reported by Committee May 1, 2015). The courts of appeal lack jurisdiction over an appeal on the issue of possession on commercial property. Volume Millwork, Inc. v. W. Hous. Airport Corp., 218 S.W.3d 722, 726 (Tex. App.—Houston [1st Dist.] 2006). Accordingly, a writ of possession should issue after county court at law commercial eviction trial regardless of whether a supersedeas bond is posted. If the property is residential, then appeal can be taken from the county court at law, and the supersedeas bond to stop the eviction should take “into consideration the value of rents likely to accrue during appeal, damages which may occur as a result of the stay during appeal, and other damages or amounts as the court may deem appropriate.” Tex. Prop. Code § 24.007.

Post Tax Foreclosure Suit Evictions. Do not bother filing an eviction suit after a delinquent property tax sale. Under Section 33.51 of the Texas Tax Code, the tax sale buyer can simply order a writ of possession from the tax sale court. There is no need to file a separate eviction case.

Payment of Rent During County Court at Law Appeal. The tenant needs to pay rent into the court’s registry during the appeal. The tenant can appeal by filing an appeal bond within five days after the date that the judgment is signed. Tex. R. Civ. P 510.9(a), (b). The tenant can also appeal by filing a pauper’s affidavit within the same time period. Tex. R. Civ. P. 510.9(a), (c)(1), (f); Tex. Prop. Code § 24.0052. The tenant must pay one month of rent into the court’s registry within five days of the filing of the pauper’s affidavit. Tex. Prop. Code § 24.0053(a-2), 24.0054. If the rent is not paid timely, then the landlord can get a writ of possession from the justice court. Tex. Prop. Code § 24.0053(a-2), 24.0054(a), (a-2); Tex. R. Civ. P. 510.9(c)(5)(B)(i). On a sworn motion and hearing, the landlord can get a writ of possession from the county court if the tenant fails to pay rent into the court’s registry during the pendancy of the appeal. Tex. R. Civ. P. 510.9(c)(5)(B)(iv); 24.0054(a-4)(b)(c).

Default on Appeal for Failure to File Written Answer. If the defendant does not file a written answer in the justice court, then the tenant must file a written answer within eight days of the transcript being filed in the county court, and if the defendant does not do so, then the plaintiff may take a default judgment. Tex. R. Civ. P. 510.12. A pauper’s affidavit counts as a written answer. Hughes v. Habitat Apartments, 860 S.W.2d 872, 872-73 (Tex. 1993).

Corporate Party Must Have Attorney on Appeal. A corporation or other business entity must have an attorney to represent it in county court on appeal in an eviction suit. McClane v. New Caney Oaks Apts, 416 S.W.3d 115, 120-21 (Tex. App.–Beaumont 2013, no pet.). There is a statutory exception for sworn motions for dismissal or eviction due to non-payment of rent during appeal. Tex. Prop. Code § 24.0054(e).

No Counterclaims or Third-Party Joinder. The only issue in an eviction suit is the right to immediate possession of the property. Tex. R. Civ. P. 510.3(e). No counterclaims can be raised. Id. No third-parties can be joined. Id. Because of this rule, the compulsory counterclaim rule generally does not apply to eviction suits. Id.

Copyright 2017, Ian Ghrist, All Rights Reserved.

Disclaimer: This blog is for informational purposes only. Do not rely on any part of this blog as legal advice. Instead, seek out the advice of a licensed attorney. Also, this information may be out-of-date.

Suit for Accounting in Texas and Appointment of Auditor

Often, when a suit for accounting is filed, the appointment of an auditor under Tex. R. Civ. P. 172 can make the case much easier to handle. The auditor’s report is admissible into evidence under Tex. R. Civ. P. 706. The auditor’s fees should be paid by the parties and are generally taxed as a cost against the losing party. Tex. R. Civ. P. 172, 131, 141. However, the Court has discretion to apportion the cost otherwise if the Court has good cause, stated on the record. Tex. R. Civ. P. 141; Villiers v. Republic Financial Services, Inc., 602 S.W.2d 566, 571 (Tex. Civ. App.—Texarkana 1980, writ ref’d n.r.e.) (Court had discretion to tax one-half of the auditor’s fee to each party when the Court stated appropriate reasons for doing so in the Court’s order).

Disclaimer: This blog is for informational purposes only. Do not rely on any part of this blog as legal advice. Instead, seek out the advice of a licensed attorney. Also, this information may be out-of-date.

Related Case Pleadings in Dallas, TX, a Potential Pitfall for Temporary Restraining Orders (TRO)

Local Rule 1.06-1.08 of the Dallas County Civil Courts local rules adopted January 15th, 2014 provides a related-case requirement that can potentially prevent a Temporary Restraining Order from being granted. Under Rule 1.06, the Judge in the earliest case filed of any related cases has the option of consolidating the later-filed cases into the earliest case. Rule 1.07 defines later cases and the definition is quite broad. Rule 1.08 requires the filing attorney to make a detailed disclosure of the related case in the pleadings. Rule 1.08 requires the answering attorney to point out any failure of the filing attorney to make this disclosure in the pleadings. Moreover, both filing and answering attorneys, by failing to properly disclose related cases, certified that there are no prior related cases.

In the event that a party files for a Temporary Restraining Order (TRO), either ex parte or otherwise, and fails to make the proper related case disclosure for an eviction case, title dispute, or other applicable related case, then the TRO may be denied on the grounds of failure to include the related case in the pleadings. Due to the certification by nondisclosure rule, the failure to disclose the related cases could result in parties waiving rights to contest transfers or failures to transfer.

Disclaimer: This blog is for informational purposes only. Do not rely on any part of this blog as legal advice. Instead, seek out the advice of a licensed attorney. Also, this information may be out-of-date.

Investment Fraud Recovery – Ponzi-Type Schemes

When an investment promoter pays your investment returns to you using newly-invested money from other investors, the essential characteristic of a Ponzi scheme is present. The beauty of this scheme is that as long as the promoter continually adds new investors, the scheme can look like a successful business indefinitely. As long as the scheme grows, the scheme can go on without investors becoming suspicious. The key to a Ponzi scheme’s success lies in the investor’s principal remaining invested. If too many investors try to make principal withdrawals, then the fact that the principal does not exist will become known.

These characteristics can cause Ponzi schemes to balloon out of control because the scheme must perpetuate itself through continual growth or it will die. Thus, the promoter of the Ponzi scheme must grow the scheme at all times and at all costs. Bernard Madoff targeted charities, hedge funds, banks, wealthy individuals, and universities because these entities rarely sought to withdraw principal while good returns were being paid. For these reasons, schemes like Charles Ponzi’s international reply coupon arbitrage in the 1920s and Bernard Madoff’s arbitrage and stock option scheme from 1991 to 2009 tend to grow to monstrous proportions.

If you have been promised returns that seem “too good to be true” based on the underlying investments, then you may have invested in a Ponzi-type scheme. If the scheme is growing faster than it should, then you may have invested in a Ponzi-type scheme.

Perhaps most importantly, if you have invested in a Ponzi-type scheme, then you need to consult with an attorney who can recover assets due to investment fraud. Time is of the essence in such a situation. Once the scheme is uncovered, it will unravel fast, and those who do not act quickly will be the ones left “holding the bag.”

Copyright 2017, Ian Ghrist, All Rights Reserved.

Disclaimer: This blog is for informational purposes only. Do not rely on any part of this blog as legal advice. Instead, seek out the advice of a licensed attorney. Also, this information may be out-of-date.

Reimbursement of Your Attorney’s Fees When You Win Your Case

The so-called “American Rule” provides that, in most of the United States—Texas included, each side to a lawsuit, Plaintiff and Defendant, must pay its own attorney’s fees. While we inherited most of our legal system from the British common law, we do not generally follow the “English Rule,” which states that the losing side pays the other side’s attorney’s fees. In Texas, however, there are countless exceptions to the American Rule. For example, attorney’s fees are recoverable from the losing side in breach of contract cases, cases involving a declaratory judgment, Uniform Fraudulent Transfers Act claims, etcetera.

What the general public rarely understands is that reimbursement of your attorney’s fees when you win your case is hardly automatic. Attorneys will rarely (probably never) accept a breach of contract case for a plaintiff and simply bill the defendant for the legal work. The reason is that when the trial ends, together with all of the appeals (if a supersedeas bond has been posted), the winning party does not actually receive payment for the legal fees. Instead, the winning party receives a monetary judgment against the losing party for the attorney’s fees. That monetary judgment can then be enforced using all of the post-judgment collections procedures that are available under Texas law. This generally means recording an abstract of judgment in counties where the judgment debtor owns real estate and filing for a writ of execution against any non-exempt property owned by the judgment debtor, but there are other collections methods as well, like garnishment, receivership, or turnover proceedings. The amount of legal work that is necessary to collect on a monetary judgment can be quite substantial and no one wants to perform all of the legal work necessary to complete a trial, only to create more post-judgment legal work for themselves, unless the prospects for recovery are high. Also, the attorney’s fees incurred in performing the post-judgment collections activities are generally non-recoverable. So, you may get a judgment for your attorney’s fees, and still have to pay your attorney to go collect on that judgment.

To make things more complex, the winning side does not receive a judgment for attorney’s fees actually “incurred.” See Sloan v. Owners Ass’n of Westfield, Inc., 167 S.W.3d 401, 405 (Tex. App. San Antonio 2005) (“The terms of the fee agreement between the [Defendant] and its counsel are irrelevant to the [Defendant’s] right to recover reasonable and necessary attorney’s fees from the [Plaintiff].”) Instead, the winning party generally receives a judgment for “reasonable and necessary” attorney’s fees, which may be completely different from the fees that the party actually incurred. Interestingly enough, the terms of the party’s contract with his or her attorney may be completely irrelevant to the amount of fees that will be awarded at trial. Moreover, an attorney representing himself or his law firm can probably recover attorney’s fees for his or her own time spent on the case. McLeod, Alexander, Powel & Apffel, P.C. v. Quarles, 894 F.2d 1482, 1488 (5th Cir. Tex. 1990).

Contingency Fees:

When an attorney accepts a case based on a contingency fee, the contingency fee may be determined by the Court to be “reasonable and necessary.” Sloan v. Owners Ass’n of Westfield, Inc., 167 S.W.3d 401 (Tex. App. San Antonio 2005). Generally, “the fact that attorney’s fees are based on a contingent fee agreement does not make the fees requested or awarded unreasonable.” Cooper v. Cochran, 288 S.W.3d 522, 537 (Tex. App. Dallas 2009).

Winning on Some Claims and Losing on Other Claims:

If you prevail on some claims for which attorney’s fees are available, yet lose on other claims, then the attorney’s fee award gets very tricky. If your attorney provides detailed, itemized billing sheets and proves those sheets up in Court, then the sheets may be enough evidence for the Judge to break out the recoverable fees from the non-recoverable fees. Even if the bill sheets do not exist because it is a contingency fee case, your attorney should “reconstruct” the work to “provide the trial court with sufficient information to allow the court to perform a meaningful review of the fee.”
Long v. Griffin, 442 S.W.3d 253, 256 (Tex. 2014).

Copyright 2017, Ian Ghrist, All Rights Reserved.

Disclaimer: This blog is for informational purposes only. Do not rely on any part of this blog as legal advice. Instead, seek out the advice of a licensed attorney. Also, this information may be out-of-date.

Monetary Damages in Texas Eviction Suits

In Texas, if you ask for too much in your eviction suit, then you could end up with nothing. Landlords typically ask the Court to evict the tenant and award money damages to the landlord for all amounts owed by the tenant. In addition to delinquent rent, landlords often ask the Court to award penalties, late fees, parking fees, unauthorized pet fees, fines for community rule violations, and even monetary damages for unrelated causes of action. The landlord typically feels entitled to all of this money and does not understand that, by pleading for too much, the landlord could lose all of it.1

In Texas, your local Justice of the Peace Court (“JP court” or “justice court”) has exclusive jurisdiction over forcible entry and detainer suits. In layman’s terms, this means that Texans must file their eviction suits at the local JP court. Usually, the district and county courts will all be located downtown at the largest city in your county, while there will be several justice court subcourthouses spread throughout the county, often sharing office space with your local city hall or the local branch of the tax collector’s office. In 2013, the Texas legislature abolished small claims courts and gave jurisdiction over small claims cases to the JP courts. So, the JP courts also function as small claims courts.

Even if you wanted to file your eviction suit in county or district court, you cannot do so. There are, however, other causes of action that are possessory in nature, which can be filed in a county or district court (usually district court for jurisdictional reasons).2 Trespass to try title, for example, is a possessory cause of action that must be brought in district court rather than justice court. It’s the Berrys, LLC v. Edom Corner, LLC, 271 S.W.3d 765, 770 (Tex. App. Amarillo 2008).

Because the Texas Rules of Civil Procedure and the Texas Rules of Evidence do not apply in justice court,3 Texans are supposed to be capable of adequately representing themselves without the help of a licensed attorney in justice court and they frequently do so. Consequently, many, if not most, eviction suits are filed at the local JP court subcourthouse without the help of an attorney.

Most landlords filing these cases do not know two critical rules: (1) if you ask for more than $10,000.00 in back rent, or if the Court thinks that more than $10,000.00 in back rent is actually owed, then the JP court will refuse to award anything at all for back rent, and (2) the landlord can only ask for back rent, nothing else—no late fees, no penalties, no fines for unauthorized pets or parking in the wrong spot, etcetera, just back rent, except that, in some instances, amounts owed that are not quite rent may be recoverable if they are “within the nature of rent.”4 Courts differ on what constitutes “within the nature of rent,” and so, in some JP courts, late fees or unauthorized pet fines may be recoverable, but for the most part, those types of monetary obligations are probably not recoverable. Now, on appeal, the rules change and you can amend your pleadings to ask the Court for any damages relating to possession of the property during the pendency of the appeal, and those damages may exceed $10,000.00, but the damages must arise between the date of the JP court judgment and the county court trial date in order to be recoverable in excess of $10,000.00.

Under Tex. R. Civ. P. 510.3(d), an eviction suit can include a claim for back rent, but only if the claim is “within the justice court’s jurisdiction.” Because justice courts have small claims jurisdiction, the justice court has no jurisdiction over suits where the amount in controversy is over $10,000.00. Tex. Gov’t Code § 26.042(a). Hence, back rent claims can be no more than $10,000.00. Also, Tex. R. Civ. P. 500.3(d) makes clear that “A claim for rent may be joined with an eviction case if the amount of rent due and unpaid is not more than $10,000.00, excluding statutory interest and court costs, but including attorney’s fees, if any.”

Whoever loses the JP court eviction suit can appeal to the county court. Because JP courts do not employ court reporters to keep a record of their proceedings and because the Texas rules of procedure and evidence do not apply, no record exists for the county court to review on appeal. Consequently, the county court conducts a trial de novo, which means a brand new trial. Whatever evidence the landlord or tenant offered in the JP court case is gone and irrelevant. The judge of the county court, in fact, will know nothing about what happened in the JP court other than the outcome as expressed in the final order signed by the JP court judge, but the county court judge must decide the new case based solely on the new trial, and so most, if not all, county court judges could not care less about what happened in the JP court.

Now, the county courts normally have jurisdiction up to $200,000.00,5 unless the Texas Government Code provides something different for that particular county. Under Tex. R. Civ. P. 510.11, the landlord can seek damages in a county court eviction appeal for anything “suffered for withholding or defending possession of the premises during the pendency of the appeal.” Courts have construed this broadly to allow damages that are in any way related to maintaining and obtaining possession of the subject property during the pendency of the appeal. See Serrano v. Ramos, 2015 Tex. App. LEXIS 6139, *7-9 (Tex. App. Corpus Christi June 18, 2015); Hanks v. Lake Towne Apartments, 812 S.W.2d 625, 626 (Tex. App.—Dallas 1991, writ denied); Krull v. Somoza, 879 S.W.2d 320, 322 (Tex. App.—Houston [14th Dist.] 1994, writ denied).

At the end of the day, the rule for monetary damages in an eviction suit in Texas is that the landlord can get back rent from the justice court as long as less than $10,000.00 is owed at the time of the filing of the petition. If additional rent coming due before trial brings the total rent owed to more than $10,000.00, then the justice court does not lose jurisdiction because the damages for additional rent accrued “because of the passage of time.”6 For liquidated claims, the plaintiff cannot arbitrarily reduce the amount of the claim to bring it within the jurisdictional limits of the court.7 For unliquidated claims, the plaintiff can reduce the damages to an amount within the court’s jurisdictional limit if the plaintiff pleads in good faith.8 Rent is most likely going to be considered a “liquidated” claim, and consequently, the landlord probably cannot arbitrarily lower the amount of rent due in order to avoid filing a separate suit in county or district court for the rent owed.

If the Judge finds the amount in controversy to be in excess of $10,000.00, then the proper remedy is to sever the forcible detainer cause of action and dismiss the cause of action for rent. It’s the Berrys, LLC v. Edom Corner, LLC, 271 S.W.3d 765, 772 (Tex. App. Amarillo 2008). In other words, if more than $10,000.00 in back rent is owed when the eviction suit is filed, then the landlord gets zero monetary damages. But, pursuant to Tex. R. Civ. P. 510.3(e), any claims not asserted because they cannot be brought “can be brought in a separate suit in a court of proper jurisdiction.” In other words, rent arises out of the same transaction, or subject matter, as possession of the premises and so, normally, a landlord who sued for possession only would be barred by res judicata from bringing a separate suit for the unpaid rent.9 However, if back rent owed is more than $10,000.00 at the time of the filing of the eviction suit or if the court finds that it lacks jurisdiction over the rent, then the landlord must bring a separate suit for the rent. So, the landlord would have one suit in justice court for possession of the property and another, separate suit in county or district court for rent.

No one in their right mind who is not a lawyer would guess that the law requires two separate lawsuits for a simple eviction suit when back rent exceeds $10,000.00, making this a stupid and counter-intuitive law. The two separate suits are highly impractical because the results can differ, the legal work must be duplicated and, at the end of day, the issues are far too simple to justify two separate lawsuits, even if one of them is in JP court, particularly given that the JP side of the suit will eventually wind up in county court on appeal. At least in 2007, the amount in controversy was raised from $5,000.00 to $10,000.00 to provide some alleviation for this problem, but it is still a ridiculous situation.

To sum up, the back rent owed at the time of the eviction suit filing in justice court cannot be more than $10,000.00, excluding statutory interest and court costs, but including attorney’s fees. Attorney’s fees and any damages accruing after the justice court suit is appealed; like property taxes, unauthorized pet fees, parking fees, damages done to the property by the tenant, etcetera; can be recovered in the county court on appeal, even if they cause the amount in controversy to exceed $10,000.00, but only if the damages accrued while the appeal was pending.

Frankly, the rules governing evictions are unbelievably complex, considering that the Texas legislature enacted the rules “to provide a speedy and inexpensive remedy for the determination of who is entitled to possession of property.” Johnson v. Fellowship Baptist Church, 627 S.W.2d 203, 204 (Tex. App. Corpus Christi 1981). In Texas, evictions can be fairly expedient and can be fairly simple, on occasion, but the rules governing evictions are not simple at all,10 and a lot can get in the way of simplicity and expediency.

1Technically, the landlord who asks for too much does not lose his or her entitlement to monetary damages altogether, but rather is forced to accept zero monetary damages in the eviction suit, and then must bring a separate lawsuit in district or county court for all monetary damages owed. See Bybee v. Fireman’s Fund Ins. Co., 160 Tex. 429, 331 S.W.2d 910, 913 (1960) (If the petition shows that part of the damages, such as a claim for attorney’s fees, is not allowed by law, that part of the claim is disregarded for jurisdictional purposes); It’s the Berrys, LLC v. Edom Corner, LLC, 271 S.W.3d 765, 772 (Tex. App. Amarillo 2008) (If the Judge finds the amount in controversy to be in excess of $10,000.00, then the proper remedy is to sever the forcible detainer cause of action and dismiss the cause of action for rent). Most landlords are so frustrated by the eviction process that they have no interest in prosecuting an entirely separate lawsuit against their tenant for the sole purpose of recovering a monetary judgment against the tenant. So, the landlord who fails to obtain a money judgment against his or her tenant in the eviction suit typically fails to obtain a money judgment at all.
2 Escobar v. Garcia, 2014 Tex. App. LEXIS 5157, *9 (Tex. App. Corpus Christi—May 15, 2014) (county courts generally have no subject matter jurisdiction over title disputes); but see Tex. Gov’t Code § 25.0592 (county courts in Dallas County have concurrent jurisdiction with the district court in civil cases regardless of the amount in controversy and subject matter jurisdictional problems can be cured by retroactive assignment to district court).
3 Tex. R. Civ. P. 500.3(e).
4 Carlson’s Hill Country Bev., L.C. v. Westinghouse Rd. Joint Venture, 957 S.W.2d 951, 955 (Tex. App. Austin 1997).
5 Tex. Gov’t Code § 25.0003.
6 Continental Coffee Prods. Co. v. Cazarez, 937 S.W.2d 444, 449 (Tex. 1996).
7 Failing v. Equity Management Corp., 674 S.W.2d 906, 909 (Tex. App. Houston 1st Dist. 1984).
8 French v. Moore, 169 S.W.3d 1, 8 (Tex. App. Houston 1st Dist. 2004).
9 See Barr v. Resolution Trust Corp., 837 S.W.2d 627, 631 (Tex. 1992) (claims arising out of the same transaction or subject matter as claims previously litigated are barred by res judicata; Texas has adopted the “transactional” approach to res judicata law).
10 For example, the eviction rules are found in a strange combination of Chapter 24 of the Texas Property Code and Rule 510 of the Texas Rules of Civil Procedure. There are a few important eviction rules that everyone should learn and that are fairly well developed by the caselaw, many of which are explained by this blog post. However, there are many more eviction rules that rarely, if ever, come up and are hardly understood at all by the litigants, including the attorneys and judges.

Copyright 2017, Ian Ghrist, All Rights Reserved.

Disclaimer: This blog is for informational purposes only. Do not rely on any part of this blog as legal advice. Instead, seek out the advice of a licensed attorney. Also, this information may be out-of-date.

Global Mutual Liability Releases

Sometimes, at the end of a lawsuit, in the final draft of a settlement agreement that has been months or years in the making, one of the parties will casually throw in a global mutual liability release that is not limited to the transactions or occurrences that are the subject of the litigation. Sometimes, this clause is non-negotiable and sometimes, the party inserting the clause waits until the last possible moment to add the clause to the draft, knowing that the other side will probably sign it rather than throw away months or years of negotiations. The clause is inserted when the settlement momentum is at its peak.

When so much work has been done to reach a resolution and the end is in sight, a firm desire arises to simply sign to the clause now and litigate over it later if it becomes a problem. Since the released claims are often unknown or speculative, it is easy to assume that you cannot possibly release something that you do not know about regardless of what the settlement paperwork says.

In California, at least, this is true. You cannot settle claims that a “creditor does not know or suspect to exist in his or her favor at the time of executing the release.” Cal. Civ. Code § 1542. California courts have, however, held that Civil Code Section 1542 is waivable, which sort of defeats the purpose of the statute. Mundy v. Lenc, 203 Cal. App. 4th 1401, 1405 (Cal. App. 2d Dist. 2012); Perez v. Uline, Inc. 157 Cal App 4th 953 (2007, 4th Dist.).

At least in some states, you may not be able to prospectively release liability. “[P]rovisions for release from liability for personal injury which may be caused by future acts of negligence are prohibited ‘universally.’” Hiett v. Lake Barcroft Community Ass’n, 244 Va. 191, 195 (Va. 1992).

A release of a negligence claim can be contested on the grounds of fraud, ambiguity, mistake, or fair notice (“express negligence” and conspicuousness). Newman v. Tropical Visions, Inc., 891 S.W.2d 713, 720 (Tex. App. San Antonio 1994). The express negligence doctrine states that a party seeking indemnity from the consequences of that party’s own negligence must express that intent in specific terms within the four corners of the contract. Dresser Indus. v. Page Petroleum, 853 S.W.2d 505, 508 (Tex. 1993).

A release of gross negligence or intentional misconduct is probably unenforceable on public policy grounds. See Restatement (Second) of Contracts § 195 (1979) (“A term exempting a party from tort liability for harm caused intentionally or recklessly is unenforceable on grounds of public policy.”); but see Newman v. Tropical Visions, Inc., 891 S.W.2d 713, 721 (Tex. App. San Antonio 1994) (gross negligence sometimes is not separable from regular negligence such that a waiver of regular negligence, in some cases, may also waive gross negligence).

It also bears mentioning that, in Texas, waivers of Deceptive Trade Practices Act claims are enforceable only if the consumer is not in a significantly disparate bargaining position, is represented by legal counsel, and waived rights under an express provision signed by both consumer and consumer’s attorney. Tex. Bus. & Comm. Code Ann. § 17.42(a).

Escaping a liability release based on unilateral mistake is tough. In Texas, you must show four factors: “(1) whether the mistake is of so great a consequence that enforcement of the contract as made would be unconscionable; (2) the mistake relates to a material aspect of the contract; (3) the mistake was made regardless of the exercise of ordinary care; and (4) the parties can be placed in the status quo.” Torres v. Monumental Life Ins. Co., 1998 U.S. Dist. LEXIS 12145, *10-11 (E.D.N.Y. Aug. 5, 1998).

Mutual mistake, meanwhile, is easier. However, “[u]nilateral mistake by one party, and knowledge of that mistake by the other party, is equivalent to mutual mistake.” Givens v. Ward, 272 S.W.3d 63, 71 (Tex. App.–Waco 2008). “The question of mutual mistake is determined not by self-serving subjective statements of the parties’ intent, which would necessitate trial to a jury in all such cases, but rather solely by objective circumstances surrounding execution of the release, such as the knowledge of the parties at the time of signing concerning the injury, the amount of consideration paid, the extent of negotiations and discussions as to personal injuries, and the haste or lack thereof in obtaining the release. See Restatement (Second) of Torts § 152 comment f (1981).” Williams v. Glash, 789 S.W.2d 261, 264 (Tex. 1990). In Texas, under certain circumstances parties may release future personal injury claims. See, e.g., Williams v. Glash, 789 S.W.2d 261, 264 (Tex. 1990); Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex. 1996). If causes of action are never discussed by the parties in the mediation or settlement process, then the lack of discussion constitutes some evidence that the parties may not have intended those claims to be released. Bolle, Inc. v. Am. Greetings Corp., 109 S.W.3d 827, 834 (Tex. App. Dallas 2003). In any situation where a cause of action is not specifically released, the aggrieved party should consider raising mutual mistake allegations and providing evidence of whether the parties “mutually agreed to a release agreement which differed from the one which was ultimately reduced to writing.” Matlock v. National Union Fire Ins. Co., 925 F. Supp. 468, 475 (E.D. Tex. 1996). “If it can be established that a release sets out a bargain that was never made, it will be invalidated.” Williams v. Glash, 789 S.W.2d 261, 265 (Tex. 1990). “Pursuant to the doctrine of mutual mistake, when parties to an agreement have contracted under a misconception or ignorance of a material fact, the agreement will be voided.” Holmes v. Graham Mortg. Corp., 449 S.W.3d 257, 265 (Tex. App. Dallas 2014). “Even if certain claims exist when the release is executed, claims not clearly within the subject matter of the release are not discharged.” City of Brownsville v. AEP Tex. Cent. Co., 348 S.W.3d 348, 354 (Tex. App. Dallas 2011). “This court has held that a trial court may properly refuse to enforce an [Mediated Settlement Agreement (MSA)] that otherwise complies with the statute if a party procures the agreement by intentionally failing to disclose material information, and other courts have held that a trial court need not enforce an MSA that is illegal or that was obtained through fraud, duress, coercion or other dishonest methods. Additionally, the Dallas Court of Appeals has appeared to recognize that the absence of a meeting of the minds would justify a trial court’s rejection of an MSA, which is logical, given that a meeting of the minds is a required element of a valid contract.” Milner v. Milner, 360 S.W.3d 519, 523-524 (Tex. App. Fort Worth 2010).

To avoid a release based on unconscionability and adhesion, there must be a showing of both procedural and substantive unconscionability. Doing so is difficult. See Ramirez v. 24 Hour Fitness United States, Inc., 2013 U.S. Dist. LEXIS 69451, *15 (S.D. Tex. May 16, 2013).

Copyright 2017, Ian Ghrist, All Rights Reserved.


Disclaimer
: This blog is for informational purposes only. Do not rely on any part of this blog as legal advice. Instead, seek out the advice of a licensed attorney. Also, this information may be out-of-date.