Contested Eviction

Aurora Borunda mortgaged her property with Financial Freedom Senior Funding Corp. in 2007, granting a $117,000 Deed of Trust. Financial Freedom had the right to accelerate the debt upon Borunda’s death – a typical event of default in most mortgages.

The Deed of Trust also stated that if the property is sold at foreclosure, any person holding possession shall immediately surrender the property to the buyer at the foreclosure sale. And if they do not surrender it, that person is a “tenant at sufferance” and may be removed by writ of possession.

Those are also typical provisions in virtually all Texas mortgages.

Aurora Borunda died on September 21, 2011. The property was sold at foreclosure to The Federal National Mortgage Association on January 8, 2013. You know TFNMA as Fannie Mae.

Aurora’s daughter Linda Borunda continued to reside at the property. So Fannie Mae sent Linda a written demand for possession on January 25, 2013, and then filed an eviction lawsuit on February 8.

The Justice Court granted Judgment for the Plaintiff Fannie Mae. Linda appealed.

At a new trial in El Paso, the County Court also granted Judgment for Fannie. Linda Borunda appealed. Again.

Linda claimed that the El Paso County Court lacked jurisdiction because of a title dispute and as a consequence, the Deed of Trust’s tenancy-at-sufferance clause is unenforceable against her. Specifically, Linda claimed that Financial Freedom violated the terms of the Deed of Trust by failing to provide her with adequate notice of the foreclosure sale.

As a result of the inadequate notice and according to Linda, Financial Freedom had no right to conduct the foreclosure sale. If Linda was correct in her assertion, then Fannie Mae’s interest is void and it had no authority to cause Linda to be evicted because only property owners and their managers may evict.

The Court readily admitted that Linda might have raised a legitimate title issue. However, defects in the foreclosure process are not relevant to eviction claims. Such defects must be raised separately. In another lawsuit. In District Court.

Fannie Mae’s Deed granted by Financial Freedom at the foreclosure sale is sufficient evidence of ownership for purposes of an eviction case. Title defects in the foreclosure sale as between Financial Freedom and Fannie Mae are not recognizable in the limited eviction proceeding as between Linda and deed-holder Fannie Mae.

Fannie Mae bought the property at a foreclosure sale. The underlying Deed of Trust had a tenant-at-sufferance clause that could allow a Justice Court to determine the right of immediate possession independently of title.

Fannie Mae wins. Again.

Linda Borunda loses. Again.

See Borunda v. Federal National Mortgage Association; Cause No. 08-13-00331-CV; Texas Court of Appeals; 8^th District; December 8, 2015.

Lessons learned:

1.      We handle many tenant evictions at my Firm. This El Paso Court easily ruled for the Landlord / property purchaser. However, I have seen other courts struggle with this issue and this is why it is a favored strategy of tenants to claim a title defect in an eviction lawsuit.

2.      In order to avoid a lawsuit over a possession issue that could take years to resolve, our smart landlord-clients offer “cash for keys” to some tenants who are particularly difficult. This can work well to expedite a tenant’s exit from the property.

Happy New Year to all my faithful readers!!                                                                                   S

Stuart A. Lautin, Esq.*

*Board Certified, Commercial (1989) and Residential (1988) Real Estate Law,
Texas Board of Legal Specialization

Licensed in the States of Texas and New York

Higier Allen & Lautin, PC
2711 N. Haskell Avenue, Suite 2400
Dallas Texas 75204
P: 972.716.1888
E: slautin@higierallen.com
W: www.higierallen.com


Reprinted with the permission of the North Texas Commercial Association of REALTORS®, Inc. 

CONDITIONAL RENTAL PAYMENTS ARE A GOOD IDEA-NOT!

In September 2007, Llyasah Dupree dba 360 Degree Beauty Academy leased commercial property from Boniuk Interests, Ltd. in northwest Houston, to use as a beauty and cosmetology school. The Lease included a provision allowing Dupree an ample opportunity to tender monthly rental payments before Boniuk could consider the failure to be an event of default.

Dupree struggled to pay the rent installments which varied from $700 to $6,000 per month plus triple net expenses, making sporadic payments in 2010 but no payments in March, May, July, November and December. Some of Dupree’s checks in that period included a note, asking Boniuk to hold the checks without deposit for several weeks and Dupree would call Boniuk when the checks would clear.

In January 2011 Boniuk had enough, and sent Dupree a notice of default. Boniuk changed the door locks in March 2011.

Dupree obtained a Writ of Re-Entry from the JP Court 10 days later. At the hearing convened two days after, the JP determined that Boniuk had permissibly locked Dupree out of the premises.

So Dupree sued Boniuk in 2013, asserting claims for breach of the Lease, wrongful eviction, retaliatory eviction, fraud and violations of the Texas Deceptive Trade Practices – Consumer Protection Act. Boniuk filed a counterclaim for breach of the Lease and other related matters.

The trial court awarded Boniuk almost $120,000 in damages, interest, $15,000 in attorney’s fees and court costs. Dupree appealed.

On appeal, Dupree claimed that she had timely paid rental by tendering payment checks and Boniuk had the authority under the Lease to deposit the checks. Dupree further argued that Boniuk’s failure to deposit the tendered checks meant that Boniuk lacked the evidence that the checks were not adequately funded.

And, consequently, no evidence of NSF checks meant Dupree was not in Lease default and Boniuk had no right to evict.

The Court of Appeals determined that the notes attached to each check converted an unconditional offer to pay an amount due on a specified debt to a conditional offer. As such, the rental payment funds were not made immediately available to Boniuk.

Rental payments, as stipulated in the Lease, must be unconditional.

The Court of Appeals further found that Boniuk was not required to undertake special efforts to acquire possession of the rent funds. Placing restrictive notes on the checks improperly burdened Boniuk, and was sufficient evidence of a Lease default.

Boniuk Interests, having proven various Lease defaults, wins again; Llyasah Dupree lost once more. See Llysah Dupree dba 360 Degree Beauty Academy v. Boniuk Interests, Ltd.; No. 01-14-00864-CV; Texas Court of Appeals, 1^st District; August 4, 2015.

Lesson learned: If you are a property owner or represent landlords as a property manager or agent, do not accept checks with restrictive endorsements or payment instructions. Although you may ultimately prevail, it may also take you two or three years of litigation to prove your point.

 Reprinted with the permission of North Texas Commercial Association of REALTORS®, Inc.

                                                                                   

How Not to Evict

Jessica Briones was a tenant at Brazos Bend Villa Apartments, Richmond, Texas (has Richmond been subsumed by Houston yet?). She had occupied her unit since January 2007. Jessica’s lease obligated Brazos to furnish her 10 days notice to discuss with Brazos a possible breach or allegation of lease termination, before Brazos could take any action adverse to her possession.

Evidently Brazos was concerned that Jessica was using or possessing marijuana in her apartment, so on April 30, 2012, Brazos furnished Jessica notice of lease termination coupled with a written statement that she had the right to meet with a property manager within 10 days to discuss the termination. The notice also demanded that she vacate by June 1, 2012. Jessica did not go gentle into that good night (that’s from a famous villanelle written by Dylan Thomas a century ago . . . oh never mind).

Consequently, on June 6, 2012, Brazos filed a lawsuit for eviction in JP Court in Fort Bend County. Brazos won so Jessica appealed.

The appeal was heard in Fort Bend County Court At Law, where according to Texas procedural rules both parties were granted an entirely new trial. A full-on mulligan. Brazos again won a Judgment for exclusive possession, plus attorneys’ fees of $2,950 through trial, and $10,000 for an appeal to the next level.

Brazos then obtained a Writ of Possession placing Brazos in possession of Jessica’s apartment. Regardless of the fact that Jessica was now on the outside of the apartment community, she again appealed claiming that Brazos failed to furnish her proper notice.

Basically, Jessica’s position was that Brazos was required to furnish her 10 days in which to discuss any alleged breach with Brazos before demanding that she vacate. And that the notice given, being a lease termination coupled with a statement that she could discuss the termination with a manager within the next following 10 days, did not comport with the Lease she had signed and both parties had honored in the previous five years.

The appellate court agreed with Jessica. Brazos was required to furnish Jessica at least two written notices. The first should have given her 10 days to discuss the proposed breach or lease termination with a property manager. The second should have given Jessica notice that her lease was terminated and she needed to vacate if she wanted to avoid legal proceedings.

Jessica won; Brazos lost. See Jessica Briones v. Brazos Bend Villa Apartments; No. 14-12-01125-CV; Texas Court of Appeals; 14^th District; September 9, 2014.

Lessons learned:

1.      Even when tenants have been removed from the premises – voluntarily or involuntarily – they may still litigate and if they lose, then they may appeal. It’s an interesting dichotomy in law that protects rights of tenants. And if you consider it, there can be no other logical way as appeals take years to conclude. This one was completed in a bit more than two years, but a further appeal to the Texas Supreme Court would have added two more years.

2.      We handle many tenant evictions here. It is a rarity that the notices furnished to the tenants 100% comply with the lease and laws. Property managers use preprinted eviction forms and they work well for normal evictions where the tenant doesn’t pay rent. However, those same notices often are insufficient when the lease obligates the Landlord to furnish notices and opportunities to cure defaults before the lease can be terminated. Or when tenant’s breach is not related to the failure to pay rent, but is something unusual instead.

3.      Read your form lease. Do it now. Find all the ways the tenant can breach and make a list. Is it complete? Then review the lease to determine what steps the landlord must take before terminating the lease. Another list. After that – one more task – find out exactly what type of notice must be furnished before you can terminate a lease, to whom it must be given, by whom, how it is to be posted / mailed / delivered, at what address must it be posted, delivered or sent, and at what timing interval. Then, compare it to Texas laws. And make a final list.

Are you satisfied?

See http://law.onecle.com/texas/property/92.0081.00.html for residential self-help rules.
See http://law.onecle.com/texas/property/93.002.00.html for commercial self-help rules.
See http//law.onecle.com/texas/property/91.001.00.html, http://www.statutes.legis.state.tx.us/Docs/PR/htm/PR.24.htm and https://www.supreme.courts.state.tx.us/rules/trcp/trcp_part_5.pdf for Texas rules that apply to both residential and commercial judicial evictions.

Reprinted with the permission of North Texas Commercial Association of REALTORS®, Inc.

Beware the Mob

Recently I had an opportunity to look, again, at a Texas Landlord’s obligation to mitigate its damages when a Tenant breaches a Lease. It’s hard to believe we have had this law since 1997 – almost 15 years now. And before that date we had appellate case decisions that led to Texas Property Code 91.006.

In September 2005, MOB 90 of Texas, LP, leased commercial property to Nejemie Alter MD’s professional association. The property was in the Corpus Christi area, intended to be used as a medical office for five years. Alter personally guaranteed the lease obligation. Virtually no rent was paid during 2006, so MOB filed an eviction lawsuit against Alter.

Alter vacated in January 2007, and claimed that he only owed rental through that date. MOB had a different theory in mind, and claimed that Alter owed rental through the date of trial. The monthly rent was $4,677. Rental owing through the date that Alter vacated was $36,782, and that amount was not in dispute.

MOB requested judgment for $93,220. Alter contested that amount, claiming that MOB failed to properly mitigate damages, as required by the Texas law.

Alter testified that as he passed by the MOB property there were no signs posted that the property was available to lease. To his knowledge, there were no visible efforts undertaken by MOB to re-lease the premises. Alter further testified that after he defaulted he attempted to negotiate a deal with MOB involving lesser space. Alter claimed that he was willing to pay weekly amounts.

At trial MOB’s counsel called the property manager as a witness. Jean Shivers testified that typically for-lease signage was not used in medical office building settings. Shivers stated she had shown the premises three times since Alter was evicted, and that she had not leased any space in MOB’s building since January 2007 – the date that Alter vacated.

Shivers also testified that she listed the premises on both Loopnet and Costar, kept in contact with personnel at Doctor’s Regional Hospital, and that it was hardly unusual for it to take an extended period of time to re-lease commercial premises.

In any event, the Nueces County trial court entered judgment for MOB, but only for $36,782. MOB appealed.

The Corpus Christi Court of Appeals, citing a landmark 1997 Texas Supreme Court decision, discussed the duty of a Texas landlord to take objectively reasonable efforts to mitigate damages and find a suitable replacement tenant, when the tenant breaches a lease and abandons the property. A Texas landlord is not required to take all known efforts or accept an unsuitable tenant.

The trial court was of the view that MOB failed to adequately mitigate because MOB refused to work with Alter, who had defaulted on the Lease. The trial court also concluded that MOB’s efforts to mitigate by online listings, showing the property to those who expressed an interest and contacting the hospital administrators were insufficient.

The Court of Appeals disagreed, finding that since Alter did not prove that MOB’s failure to mitigate damaged Alter in any way, the trial court made a mistake and MOB was owed $93,220 in back rent through the date of trial. The Court of Appeals also saw no duty of a Texas landlord to renegotiate its lease with a defaulting tenant. See MOB 90 of Texas, LP v. Nejemie Alter MD, PA (Texas Court of Appeals – Corpus Christi-Edinburg 2009).

MOB wins, Dr. Alter loses.

Bottom line:

1. Texas landlords must mitigate their damages. When practical I recommend signage, in addition to other objectively reasonable efforts. In that manner tenants can at least observe some of your efforts.

2. There is nothing in this case or the mitigation law which precludes Texas landlords from clearly defining their mitigation burden in the lease. Note, however, that Texas landlords may not force or allow a tenant to waive the landlord’s burden of mitigation.

3. Beware the MOB.

Reprinted with the permission of North Texas Commercial Association of REALTORS®, Inc.