Texas Judicial Foreclosure Process, Jurisdiction & Venue

In order to obtain the relief of judicial foreclosure from a District Court, the lien holder must: (i) allege execution and delivery of a secured debt instrument, (ii) allege ownership of the debt instrument, (iii) provide a description of the property secured by the lien, (iv) allege the execution and delivery of the lien instrument (an exception is an abstract of judgment), (v) allege the amount of the unpaid debt, and (vi) allege a default by the maker of the debt instrument. See generally Graves v. Drane, 1 S.W. 905 (Tex. 1886); and Shaw v. American Life Ins. Co., 60 S.W.2d 1110, 1111 (Tex. Civ. App. – Fort Worth 1933, writ dism’d). The prayer for relief in the petition should pray for the foreclosure of the lien along with a judgment against the debtor for the amount of the debt. The lien holder may recover attorney fees if recovery of attorney fees is: (a) provided for in the lien instrument and/or debt instrument, Tex. Jur. 3d Deeds of Trust and Mortgages § 207 (citing Jeffreys v. McGlamery, 96 S.W.2d 572 (Tex. Civ. App. – Amarillo 1936, no writ). and (b) pled for in the petition.

A valid judgment foreclosing the lien must be obtained from the District Court, which should include: (i) an award of the debt owed to the lien holder, (ii) court costs and attorney fees (if provided for in the lien or debt instrument), (iii) a decretal paragraph ordering the foreclosure of the lien, (iv) and a decretal paragraph directing a sheriff or constable to seize and sell the collateral of the lien in satisfaction of the debt, and (v) a decretal paragraph instructing the sheriff or constable that if the collateral does not sell for an amount sufficient to satisfy the debt that the sheriff or constable should proceed to execute on other property of the defendant as in ordinary judgment execution. Tex. R. Civ. P. 309.  Once a valid judgment foreclosing the lien has been entered by the District Court, a sale must be held in order to pass the title to a subsequent purchaser. Warnecke v. Broad, 161 S.W.2d 453, 454 (Tex. 1942). The writ of sale should be directed to the sheriff or constable in the county in which the property is located. De Guerra v. De Gonzalez, 232 S.W. 896, 899 (Tex. Civ. App. 1921, no writ).

The clerk of the District Court will issue the writ of sale upon the application of the successful party in a suit thirty (30) days after the judgment is rendered. Tex. R. Civ. P. 627. The writ of sale must particularly describe the property, and shall direct the sheriff to give public notice of the sale. Tex. R. Civ. P. 630. The sale of the real property will be held at the courthouse door of the county, unless the court orders that such sale shall be at the place where the real property is situated. Tex. R. Civ. P. 646.  The sale of the real property shall occur on the first Tuesday of the month, between the hours of ten o’clock, a.m. and four o’clock p.m. The sheriff must give notice of the sale in a newspaper in the county (in English) once a week for three consecutive weeks preceding the sale, the first of said notices must be published not less than twenty (20) days immediately preceding the day of sale. Tex. R. Civ. P. 647. The notice must contain a statement of the authority by virtue of which the sale is to be made, the time of levy, the time and place of sale, a brief description of the property to be sold, the number of acres, the original survey, locality in the county, and the name by which the land is most generally known. Proceeds from the sale are applied first to the sheriff’s/constable’s cost of the sale, then to the indebtedness of the suit, and then to junior lien holders who were parties to the suit, and then the property owner.

While a judicial foreclosure sale will prevent a borrower from asserting a wrongful foreclosure based upon defects in the lien or debt instrument, a sheriff’s sale may be set aside with proof of (i) an irregularity in the sale calculated to affect the sale, (ii) a grossly inadequate sales price, and (iii) a causal connection between the irregularity and the selling price. Apex Financial Corp. v. Brown, 7 S.W.3d 820, 827-28 (Tex. App. – Texarkana 1999, no pet.)(citing McKennon v. McGown, 11 S.W. 532, 533 (Tex. 1889) and Kaufman & Runge v. Morris, 60 Tex. 119 (Tex. 1883). Guarantors and borrowers have a statutory right to have the District Court in the county in which the property is located determine the fair market value of the property within ninety (90) days after the date of the date of the sale or (applicable only to guarantors) ninety (90) days after the guarantor received notice of the sale. Tex. Prop. Code §§ 51.004 and 51.005 (Vernon August 2005). This right is independent of whether the lien holder brings an action for collection of the deficiency amount. Note that a mortgagee must file suit for deficiency within two years after the foreclosure sale. Lighthouse Church of Cloverleaf v. Texas Bank, 889 S.W.2d 595 (Tex. App. – Houston [14th Dist.] 1994, writ denied).