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.).

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.”

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).

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.

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. “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).


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.

Due-on-Sale Clauses

Most attorneys, myself included, are shocked and appalled when they find out that their clients have been doing business, sometimes for several decades, as sole proprietors. When I find this out, I beg and plead with my client to please register a corporate entity to do business under, typically a limited liability company or LLC.

As many of my clients are real estate investors or entrepreneurs, merely opening an LLC is not enough. Whatever assets are owned must then be placed into the LLC by deeding the property from the individual or sole proprietorship to the LLC. The clients are generally surprised, however, to find that they cannot also transfer their homestead and any property with FHA or conventional loans into the LLC. Instead, those properties are generally going to be put into a family trust, though there are other options to look at depending on the circumstances.

The reason that the client cannot simply transfer all properties into an LLC or LLCs is what is called the “due-on-sale clause.” This is a clause typically found in most mortgage agreements. An example of a due-on-sale clause is the following:

“If all or any part of the Property or any Interest in the Property is sold or transferred (or if Borrower is not a natural person and a beneficial interest in Borrower is sold or transferred) without Lender’s prior written consent, Lender may require immediate payment in full of all sums secured by this Security Instrument. However, this option shall not be exercised by Lender if such exercise is prohibited by Applicable Law.”

Given that lenders freely assign their mortgages to and from each other, and also sever the ownership of the note from the servicing rights, making it difficult for borrowers to keep track of or even know who their noteholder is, the fact that borrowers do not enjoy a similar ability to freely assign their ownership rights in the house seems unfair, particularly given that the lien would follow any assignment AND the borrower would remain personally liable for repayment of the debt. Regardless, due-on-sale clauses are generally enforceable. Fidelity Fed. Sav. & Loan Ass’n v. De la Cuesta, 458 U.S. 141, 159, 167, 102 S. Ct. 3014, 73 L. Ed. 2d 664 (1982).

Even if you cannot transfer your properties to your LLC without violating or potentially violating the due-on-sale clause, there exists a federal law that preempts all state laws, which allows you to transfer your property to a “inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupany in the property” without triggering the due-on-sale clause. 12 USCS § 1701j-3.

Consequently, the properties that you own outright or through non-FHA or conventional financing can go into your LLC while the rest should generally go into a family trust.

Please note that this article only contains rules of thumb. Every person’s situation is different and you should not take any action based on this blog post before consulting with a licensed attorney in your state with whom you have shared all relevant details of your assets, liabilities, and other factors.

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.

Texas Tools for Recovering Assets on Behalf of Defrauded Investors

Financial Record Requests/Subpoenas:

In my experience, the financial record request is one of the most powerful tools for finding assets on behalf of defrauded investors. Section 30.007 of the Texas Civil Practice and Remedies Code provides that these requests are governed by Section 59.006 of the Texas Finance Code. In Texas Finance Code Section 59.006, you can find many rules regarding how the process works, but the key feature of this statute, in my opinion, is the burden placement. The statute places the burden on the party resisting discovery to obtain relief from the Court. That typically means filing a motion, drafting an affidavit, setting it for hearing, filing notice of hearing, dealing with scheduling conflicts, waiting through a long docket call, arguing the motion, possibly offering testimony, and finally obtaining a ruling. That is a lot of work. Consequently, the party resisting the discovery rarely puts up as much of a fight as they will when they are simply resisting discovery responses.

Resisting traditional discovery, like a Request for Production under Tex. R. Civ. P. 196, is much easier. For the most part, your attorney will simply pick one of the innumerable form objections that exist, write it down, state what is being produced and what is not being produced, and send it to opposing counsel. Then, the burden is on opposing counsel to file a Motion to Compel Discovery Responses, set it for hearing, deal with scheduling conflicts, wait through a long docket call, argue the motion, and obtain an order. Then, once the order has been obtained, there is the inevitable subsequent battle over the scope of the order. Again, the burden is on the one wanting the discovery to prosecute this. The bank, however, does not have a dog in the fight, so to speak, so the bank will typically produce more or less exactly what the bank has been asked to produce without raising countless objections and necessitating potentially expensive and time-consuming pre-trial hearings over the matter.

I am planning on adding more sections to this post in the future. Reading an article on these tools can be helpful, but using them to achieve your goals takes some finesse.

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.

Applying the Rule of Capture to Residential Subdivions in the DFW Area

Applying current Texas Oil and Gas Law to micro-tract owners in urban areas ripe for horizontal drilling is often like attempting to put a square peg into a round hole. The Law was written with vertical drills and large and small, but not micro-sized, rural tracts in mind. Inside large metropolitan areas where tracts often consist of a mere tenth of an acre, application of current law may result in a taking of private property even if only in small amounts.

With modern horizontal drilling and hydraulic fracturing techniques for natural gas extraction, a single pad site located in an urban area can be used to drill ten or more lateral wells miles beneath the surface each extending for thousands of feet in different directions. In the Barnett Shale, in an area like Fort Worth, Texas, hundreds of houses often lie on top of the surface of the drilling area.

The Texas Supreme Court held in Coastal Oil and Gas Corp. v. Garza[1] that ­subsurface fracking of unleased property does not constitute trespass and further than no compensation for taken minerals must be given when four conditions exist. Each of these conditions serves to ensure that the property rights of the unleased landowner are adequately protected.

In urban areas, often only one of the four conditions exists, and even then, the last remaining condition likely only offers partial protection. This partial protection may result in a taking of property.

The four conditions are as follows: (1) if the unleased landowner can drill his own well, then his only remedy for drainage is to do so (this is the basic Rule of Capture), (2) if the landowner leased and his lessee negligently fails to drill an offset well, then the landowner can sue the lessee for damages, (3) the Railroad Commission can regulate production to prevent drainage, and (4) if none of the other remedies are available, then the aggrieved landowner can use the Mineral Interest Pooling Act (“MIPA”) to force pool her interest. For the urban landowner on less than an acre with a house taking up much of the surface area, drilling an offset well is both legally and practically impossible, which cancels out the first two conditions. The third condition offers no relief because regardless of how production is regulated, the unleased landowner will be subjected to uncompensated drainage. The fourth condition does potentially offer relief, but even if the micro-tract urban landowner can clear all of MIPA’s hurdles, relief is almost certainly not available as of the date that drainage began.

The Supreme Court of the United States has held that even slight physical occupation of property is a taking “to the extent of the occupation.”[2] Consequently, MIPA cases involving unleased urban micro-tract owners subject to Rule 37 spacing exceptions could result in a confiscation claim for (a) drainage occurring between the time that drainage began and entry of the Railroad Commission’s interim escrow order, or (b) for drainage that goes uncompensated due to inadequate protection under Texas’s anachronistic forced-pooling act.

In the current environment where the rights of unleased, urban, micro-tract owners are unclear, offers are generally made to lease and sometimes to participate as a working interest owner. Often, however, no significant competitive market exists once an operator has filed a courthouse unit, and been designated as operator of the urban unit. Offers are sometimes made with take-or-leave-it, adhesion-basis terms possibly because the urban, micro-tract landowners are thought to lack the sophistication and leverage to bargain for their rights, unlike their rural, small-tract counterparts who have grown savvy over many decades of rural development.

[1] Coastal Oil & Gas Corp. v. Garza Energy Trust, 268 S.W.3d 1 (2008).

[2] Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 434–35 (1982).

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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.