In The
Court of Appeals
Sixth Appellate District of Texas at Texarkana
______________________________
No. 06-11-00012-CV
______________________________
GREGG WILLIAMS, Appellant
V.
NATIONSTAR MORTGAGE, LLC, Appellee
On Appeal from the County Court at Law No. 2
Gregg County, Texas
Trial Court No. 2009-1576-CCL2
Before Morriss, C.J., Carter and Moseley, JJ.
Opinion by Justice Carter
OPINION
I. Facts and Procedural Background
Gregg Williams, bidding $9,000, was the high bidder at a trustee’s foreclosure sale.
Unknown to him, the property was encumbered by an alleged first lien of $148,800 also held by
the same mortgagee, Nationstar Mortgage, LLC. Litigation ensued.
This saga began when Russell Bird and his wife, Shay Bird, purchased a .547-acre tract of
real property with a house in Gregg County through a warranty deed with vendor’s lien dated
March 14, 2007. The deed retained a vendor’s lien in favor of Nationstar Mortgage, LLC,
securing the payment of two purchase money promissory notes—one for $148,800 and another for
$37,200—both payable to Nationstar. The Birds also executed two deeds of trust, both dated
March 14, 2007, each securing one of the notes. The warranty deed with vendor’s lien and both
deeds of trust were each recorded, apparently simultaneously, in the records of Gregg County,
Texas, on March 22, 2007, at 4:36:37 p.m.
On March 11, 2008, a notice of trustee’s sale was posted by a substitute trustee referencing
the $37,200 lien. The notice did not reference the $148,800 note or its deed of trust. On April 1,
2008, the substitute trustee conducted a foreclosure sale, sold the property to Gregg Williams for
$9,000, and conveyed the property without any reservation or mention of the other note or deed of
trust. Williams later discovered the existence of the $148,800 note and deed of trust on the
property. He demanded that Nationstar release the lien, but Nationstar refused and commenced
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nonjudicial foreclosure under the $148,800 deed of trust. Williams filed suit to quiet title, arguing
that he purchased the property free of all other liens, while Nationstar contended that the $148,800
deed of trust had priority over the foreclosed note. After a bench trial, the trial court agreed with
Nationstar, and found that the $148,800 lien had priority and remained on the property.
Accordingly, the trial court entered a take-nothing judgment in favor of Nationstar.
Williams argues that the trial court erred because: (1) the evidence supporting the trial
court’s finding of priority was legally and factually insufficient; (2) the trustee’s deed to Williams
conveyed all of Nationstar’s rights to the property; and (3) Nationstar’s nonjudicial foreclosure of
one of the notes discharged the lien against the property on the second note.1
We affirm the trial court’s judgment.
II. Legal and Factual Sufficiency of Lien Priority
The trial court found that the $148,800 deed of trust was superior to the $37,200 deed of
trust. In support of that finding, the trial court noted that:
the deed of trust recorded . . . at 200706505 securing a promissory note in the
amount of $37,200.00 was a second lien and was inferior to the deed of trust
recorded at 200706504 securing a promissory note in the amount of $148,000.00
[sic]. Though both deeds of trust were issued to secure the repayment of purchase
money on the same subject real property, the deed of trust recorded at 200706505
was recorded second in time and was printed upon a Second Mortgage form.
1
In his brief, Williams also argued that the trial court’s prejudgment letter did not constitute findings of fact and
conclusions of law. During oral argument, Williams explicitly abandoned that argument, and therefore, we do not
address it.
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The court also pointed out that the warranty deed conveying the property to the Birds specifically
referenced the $148,800 promissory note as the ―First Note‖ and the $37,200 promissory note as
the ―Second Note.‖ In his first two points of error, Williams contends that the evidence
supporting the trial court’s finding of priority was legally and factually insufficient.
Findings of fact entered in a case tried to the court are of the same force and dignity as a
jury’s answers to jury questions. Anderson v. City of Seven Points, 806 S.W.2d 791, 794 (Tex.
1991). The trial court’s findings of fact are reviewable for legal and factual sufficiency of the
evidence to support them by the same standards that are applied in reviewing the legal or factual
sufficiency of the evidence supporting a jury’s answer to a jury question. Ortiz v. Jones, 917
S.W.2d 770, 772 (Tex. 1996); Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994).
In determining legal sufficiency, we analyze ―whether the evidence at trial would enable
reasonable and fair-minded people to reach the verdict under review.‖ City of Keller v. Wilson,
168 S.W.3d 802, 827 (Tex. 2005); see also Walker & Assocs. Surveying, Inc. v. Austin, 301
S.W.3d 909, 916 n.4 (Tex. App.––Texarkana 2009, no pet.). We credit favorable evidence if a
reasonable jury could, and disregard contrary evidence unless a reasonable jury could not.
Wilson, 168 S.W.3d at 827. As long as the evidence falls within the zone of reasonable
disagreement, we may not substitute our judgment for that of the jury. Id. at 822. In this case,
the judge was the sole judge of witness credibility and the weight given to their testimony. Id. at
819. Although we consider the evidence in a light most favorable to the verdict, indulging every
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reasonable inference that supports it, we may not disregard evidence that allows only one
inference. Id. at 822.
In our factual sufficiency review, we consider and weigh all the evidence, and will set aside
the verdict only if the evidence is so weak or the finding is so against the great weight and
preponderance of the evidence that it is clearly wrong and unjust. Walker, 301 S.W.3d at 916 n.4.
Generally, different liens upon the same property have priority according to the order in
which they are created. World Help v. Leisure Lifestyles, Inc., 977 S.W.2d 662, 668 (Tex.
App.—Fort Worth 1998, pet. denied). This rule is known as ―first in time is first in right.‖ See
AMC Mortgage Servs., Inc. v. Watts, 260 S.W.3d 582, 585 (Tex. App.––Dallas 2008, no pet.);
Windham v. Citizens Nat’l Bank, 105 S.W.2d 348, 351 (Tex. Civ. App.––Austin 1937, writ
dism’d).
In this case, we are faced with the unique fact that the two competing deeds of trust
securing the two purchase money promissory notes, as well as the warranty deed retaining a
vendor’s lien, were recorded in the Gregg County clerk’s office on the same day at exactly the
same hour, minute, and second.2 However, the three documents were filed in specific order and
received different recording page numbers. The warranty deed was recorded at page number
200706503, the $148,800 deed of trust was recorded at page number 200706504, and the $37,200
deed of trust was recorded at page number 200706505. The $37,200 deed of trust is printed on a
2
Nothing in the record indicates exactly how this is possible. Similarly, there is nothing in the record indicating that
the Gregg County clerk’s office is equipped with a flux capacitor or other time-altering device.
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―second mortgage‖ form, and the warranty deed specifically names the $148,800 promissory note
the ―First Note‖ and the $37,200 promissory note the ―Second Note.‖
Though there is no guiding caselaw regarding these unusual factual circumstances, after
considering all the evidence, we find that the evidence supporting the trial court’s judgment is
within the zone of reasonable disagreement and is not so weak as to be manifestly wrong.
Accordingly, we overrule this point of error.
II. Williams Takes Title Subject to the Prior Lien
In his second point of error, Williams contends that he owns the property free of any lien
held by Nationstar because: (1) Nationstar’s lien is invalid because the trustee’s deed contains
warranties of title, and therefore, the deed conveyed all of Nationstar’s rights to the property,
including its rights under the $148,800 lien; and (2) under Puntney v. Moseley,3 foreclosing one
deed of trust without reserving interest in the other divests Nationstar of all title and interest in the
property and vests it in Williams.
The validity of a lien on real property is a question of law. Florey v. Estate of McConnell,
212 S.W.3d 439 (Tex. App.––Austin 2006, pet. denied). We review de novo questions of law.
In re Humphrey, 880 S.W.2d 402, 404 (Tex. 1994) (―[Q]uestions of law are always subject to
de novo review.‖).
On March 11, 2008, a notice of trustee’s sale was posted by the substitute trustee
referencing the $37,200 lien. The notice did not reference any other note, lien, or deed of trust
3
237 S.W. 1116 (Tex. Civ. App.––Amarillo 1922, writ dism’d).
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related to the property. On April 1, 2008, the foreclosure sale was conducted, Williams was the
winning bidder at $9,000, and the substitute trustee conveyed the property to Williams through a
substitute trustee’s deed. The deed states, in relevant part:
hereby bargain, sell and convey unto the said Grantee the said hereinbefore
described land and premises, together with all and singular the rights and
appurtenances to the same in anywise belonging.
TO HAVE AND TO HOLD the said property unto the said Grantee, its successors
and assigns forever, in fee simple, and I, the said Substitute Trustee, acting in the
capacity and manner aforesaid, by virtue of the power vested in me under the terms
of said Deed of Trust, do hereby bind and obligate the said mortgagor, his/her heirs,
assigns, executors and administrators to warrant and forever defend all and singular
the right and title to said property unto the said Grantee . . . .
The deed failed to reference any other note, lien, or deed of trust related to the property, and also
failed to reserve any interest on Nationstar’s behalf.
A. The Warranty is From the Birds Rather than Nationstar
Williams contends that because the deed contained warranty language, it conveyed all of
Nationstar’s interests in the property to Williams. While the trustee’s deed contains warranty
language, both the trustee’s deed and the deed of trust make clear that the warranties are made by
the Birds rather than Nationstar. The trustee’s deed states that it binds and obligates the
―mortgagor . . . to warrant and forever defend . . . the right and title to said property unto
[Williams] . . . .‖ The deed of trust states that in the event of foreclosure sale, the ―[t]rustee shall
deliver to the purchaser Trustee’s deed . . . with convenants of general warranty from Borrower.‖
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When a borrower executes a deed of trust, the legal and equitable estates in the property are
severed. Flag-Redfern Oil Co. v. Humble Exploration Co., 744 S.W.2d 6, 8 (Tex. 1987). As the
borrower, the Birds retained the property’s legal title, and the lender, Nationstar, held two
equitable title interests in the property, one for each deed of trust. Id. Because the warranty is
from the Birds, who hold only legal title, the warranty language has no bearing on Nationstar’s
equitable title interests in the property.
B. Puntney Is Distinguishable From the Present Case
Williams also argues that because Nationstar held two deeds of trust on the property and
only foreclosed one, without reserving interest in the other, the trustee’s deed conveyed all of
Nationstar’s interest in the property to Williams, including its interest under the $148,800 deed of
trust.
A purchaser at a foreclosure sale obtains that title and interest which the trustee has
authority to convey. First So. Props., Inc. v. Vallone, 533 S.W.2d 339, 341 (Tex. 1976); Bonilla
v. Roberson, 918 S.W.2d 17, 21 (Tex. App.––Corpus Christi 1996, no writ) (citing Durkay v.
Madco Oil Co., 862 S.W.2d 14, 17 (Tex. App.––Corpus Christi 1993, writ denied)). A trustee’s
authority to sell the debtor’s property interests is strictly limited to the powers and means
enumerated in the deed of trust and those conveyed and required by statute. Winters v. Slover,
251 S.W.2d 726 (Tex. 1952); Olivares v. Nix Trust, 126 S.W.3d 242 (Tex. App.––San Antonio
2003, pet. denied).
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In support of his argument, Williams relies on Puntney, 237 S.W. 1116, for the proposition
that ―a trustee’s deed has the effect of divesting the title of the mortgagor and vesting it in the
purchaser.‖
In Puntney, when Bean failed to pay a lien against the property, Moseley, the holder of the
note and deed of trust, foreclosed and sold the property through a trustee, Muse. Id. at 1117. The
purchaser, Puntney, paid with a check, and received a trustee’s deed. Id. However, the check
was refused for insufficient funds, and the owner and trustee filed suit against Puntney, claiming
that a vendor’s lien arose at the time of sale and that they were entitled to foreclose on the original
deed of trust lien as well as the amount of Puntney’s check. Id. at 1118. In response to Puntney’s
claims on appeal that Bean was a ―necessary party to a foreclosure of the lien to secure payment of
the check,‖ the trial court held that a vendor’s lien arose at the foreclosure sale, that Moseley or
Muse could foreclose on said vendor’s lien, and that Bean was not a necessary party because the
trustee’s sale had the effect to ―divest the title to the land out of Bean and vest it in Puntney, and to
pay Bean’s obligation‖ on the original debt because the trustee’s sale was, in effect, a sale by
Bean’s agent. Id.
Puntney does not support Williams’ argument because the Puntney creditor only held one
deed of trust securing one debt and another lien arose at the time of the foreclosure sale. Here, the
mortgagee holds two separate notes and two deeds of trust and it foreclosed on only one of them.
In Puntney, the remedies through the vendor’s lien extinguished Bean’s obligations under the
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original deed of trust because the vendor’s lien arose from the foreclosure sale of the original deed
of trust. See id.
Foreclosure does not terminate interests in the foreclosed real estate that are senior to the
mortgage being foreclosed. Conversion Props. v. Kessler, 994 S.W.2d 810, 813 (Tex.
App.––Dallas 1999, pet. denied) (citing RESTATEMENT (THIRD) OF PROPERTY: Mortgages § 7.1
(1997)). In fact, the general rule is that the successful bidder at a junior lien foreclosure takes title
subject to the prior liens. Id. (citing W. MIKE BAGGETT, TEXAS FORECLOSURE LAW & PRACTICE
§ 2.69 (1984); 59 C.J.S. Mortgages § 549 (1998); 59A C.J.S. Mortgages § 601 (1998)). The
purchaser takes the property charged with the primary liability for the payment of the prior
mortgage and must therefore service the prior liens to prevent loss of the property by foreclosure of
the prior liens. Id. at 813.
As per our rulings above, the $148,800 deed of trust is a superior lien. It is undisputed that
the deed to the Birds, mentioning two liens, and the $148,800 deed of trust were both of record at
the time of the foreclosure sale and that Williams failed to perform any title search whatsoever.
Therefore, Williams placed his bid at the foreclosure sale with constructive notice of a superior
lien. We overrule this point of error.
III. Foreclosure of Second Lien Did Not Extinguish the First Lien
In his final point of error, Williams argues that the trial court erred by failing to find that the
nonjudicial foreclosure sale of one note discharged the second note’s lien against the property. In
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support of this argument, Williams relies upon Vieno v. Gibson, and its progeny. That line of
cases is distinguishable.
In Vieno v. Gibson, Yoakam sold a tract of land to Gibson and Rose, who executed two
promissory notes payable to Yoakam or the bearer, secured by a single vendor’s lien retained in the
deed. Vieno v. Gibson, 20 S.W. 717, 718 (Tex. Civ. App. 1892). Yoakam transferred the notes
to Vieno. Id. When the debtors failed to pay the first note, Vieno filed for, and received, a
judgment, and he foreclosed his vendor’s lien on the real property. By court order, the property
was sold at a judicial foreclosure sale. Later, Vieno attempted to foreclose his vendor’s lien on
the second note. Id. The Texas Court of Civil Appeals held that where two notes are of ―equal
dignity‖ and held by the same party, there could be only one foreclosure sale because the creditor
abandoned the lien on the second note by failing to take measures to reserve it. Id.
In Brown v. Canterbury, the Texas Supreme Court cited and applied Vieno. Brown v.
Canterbury, 104 S.W. 1055 (Tex. 1907). A vendor’s lien was foreclosed on and the property sold
through a judicial sale, and the court held that the purchaser took the title of the original debtors as
well as the legal title held by the creditor even though the original debtors had conveyed and
encumbered part of the land prior thereto.
In Alston v. Piper, 79 S.W. 357 (Tex. Civ. App. 1904), the court cited Vieno, and expanded
the ruling somewhat. Alston was the owner and holder of two notes, one note was secured by a
deed of trust, and the other note was secured by a vendor’s lien. Id. at 359. Alston brought
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separate suits on these notes in the district court, and prosecuted both to final judgment, together
with a foreclosure of the respective liens given to secure the notes. A foreclosure sale was held
―under the first or prior lien.‖ Id. at 360. When Alston attempted to later foreclose on another
lien he held on the same property, the court noted that ―[i]n ascertaining the character of property
and the interest therein to be sold, [the purchaser at the foreclosure sale] was not required to look
beyond the judgment and order of sale under which he bought,‖ and held that:
when a person holds two claims secured by liens on the same land, and a
foreclosure of one of said liens is obtained by him, and the property sold
thereunder, the purchaser takes the land discharged of the other lien, and acquires
the title of both plaintiff and defendant in the judgment. This is true, although the
purchaser pays less than the actual value of the land, and has notice at the time of
his purchase of the existence of such other outstanding lien in favor of the judgment
creditor, at whose instance the sale is made.
Id. at 358 (citations omitted).
In Vieno and Brown, the debt or debts were secured by a single vendor’s lien, and absent
any reservation of other debt interests, foreclosure of the lien extinguished, or rendered unsecured,
any remaining obligations. Here, each promissory note is secured by a separate, recorded deed of
trust, and only one of them was foreclosed, leaving the $148,800 lien still secured by the remaining
deed of trust. The creditor in Alston foreclosed on a prior, superior lien, thereby abandoning or
extinguishing the secondary liens. This case is distinguishable from Alston because, as per our
ruling in this case, Nationstar foreclosed on the inferior lien, leaving the superior lien intact.
Further, the Vieno cases are all foreclosures through judicial sale, where an election of remedies
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must occur, while in this case, the sale was via nonjudicial sale. Therefore, we overrule this point
of error.
We affirm the judgment of the trial court.
Jack Carter
Justice
Date Submitted: July 27, 2011
Date Decided: September 1, 2011
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