Diversified, Inc. v. Gibraltar Sav. Ass'n

• Decision Date: 22 September 1988
• Docket Number: No. A14-87-044-CV,A14-87-044-CV
• Citation: 762 S.W.2d 620
• Parties: DIVERSIFIED, INC., Appellant, v. GIBRALTAR SAVINGS ASSOCIATION, et al., Appellees. (14th Dist.)
• Court: Texas Court of Appeals

Page 620

762 S.W.2d 620

DIVERSIFIED, INC., Appellant, v. GIBRALTAR SAVINGS ASSOCIATION, et al., Appellees.

No. A14-87-044-CV.

Court of Appeals of Texas,

Houston (14th Dist.).

Sept. 22, 1988.

Harriet Hubacker, Houston, for appellant.

Larry Huelbig, Houston, for appellees.

Before PAUL PRESSLER, MURPHY and ELLIS, JJ.

OPINION

MURPHY, Justice.

This is an appeal from an order of summary judgment precluding the appellant, Diversified, Inc. ("Diversified"), from all but one of its purported causes of action. Diversified, the purchaser at a void foreclosure sale, sued Gibraltar Savings Association ("Gibraltar"), the lien holder, Diane Smith, the substitute trustee who conducted the foreclosure sale, and Lapin, Totz & Mayer, alleging breach of express and implied warranties, breach of contract, statutory and common law fraud, negligence and negligent misrepresentation, and violations under the Texas Deceptive Trade Practices--Consumer Protection Act, TEX.BUS. & COM.CODE ANN. § 17.41 et seq. (Vernon 1987). We affirm in part and reverse and remand as to appellant's asserted cause of action under the DPTA.

Gibraltar was the lienholder, pursuant to a Deed of Trust, of certain real property owned and possessed by Andrew and Rebecca Johnson. When the Johnsons became delinquent in their payments in early 1985, Gibraltar gave them notice of default, acceleration and foreclosure sale. Accordingly, Diane Smith, of Lapin, Totz & Mayer was appointed Substitute Trustee by Gibraltar, with instructions to sell the subject real property at foreclosure sale. The sale was scheduled for May 7, 1985.

On or about April 26, 1985, as a result of Gibraltar's prior demands, the Johnsons paid the note balance in full. At that time the Johnsons were advised that no further action would be taken by Gibraltar upon its scheduled foreclosure. However, according to Bret Maxwell, foreclosure Manager/Mortgage Officer of Gibraltar, "due to an administrative error" Gibraltar failed to advise Diane Smith, the Substitute Trustee, that the loan balance had been paid and the lien had been released. Consequently, on the appointed day, May 7, 1985, Smith conducted a foreclosure sale on the subject real property at the Harris County Courthouse. Diversified, the successful bidder, gave the Substitute Trustee a cashier's check for $2,732.00. On May 8, Smith executed and delivered a Substitute Trustee's Deed purportedly conveying the subject real property to Diversified.

It appears from the record that Gibraltar discovered the "administrative error" the day following the foreclosure sale. On May 8, 1985, Gibraltar informed Linda Henderson, a legal assistant at Lapin, Totz & Mayer, that the subject foreclosure was in error. Reportedly, Henderson immediately attempted to contact a representative of Diversified by telephone. Unable to reach anyone at Diversified, Henderson prepared a letter, delivered the following day, informing Diversified that the subject foreclosure was invalid and that accordingly, they should contact her. From a correspondence attached to Henderson's affidavit, it appears that several days later Elliott Sluskey, President of Diversified, called Henderson in response to her letter and requested a schedule reflecting the sequence of events leading up to the invalid foreclosure. On June 27, 1985, Mark Stout, an attorney with Lapin, Totz & Mayer, attempted to return or tender by enclosing in a letter, the same cashier's check issued by Diversified for payment on the subject real property and given to Diane Smith, Substitute Trustee. In order to clear title, Stout's letter also asked Diversified to reconvey any interest it may have on the property to the Johnsons by executing a deed Stout had enclosed.

On July 2, 1985, in response to legal proceedings initiated by Diversified to remove the Johnsons from the subject property, Stout, again by letter, advised Diversified it had no legal interest in the subject property. On July 3, 1985, Gibraltar joined by the Johnsons filed suit against Diversified for cancellation of the Substitute Trustee's Deed to Diversified. In May of 1986, Diversified effectively cleared the title on the Johnsons' property by conveying to them a special warranty deed in consideration for the Johnsons' assignment of their right, title, interest, and claim to all possible causes of action against Gibraltar; Diane Smith, Substitute Trustee; and Lapin, Totz & Mayer. The trial court then granted Diversified's motion to realign the parties reflecting Diversified and the Johnsons as the plaintiffs and Gibraltar, Diane Smith, Substitute Trustee, and Lapin, Totz & Mayer as the defendants. Subsequent to realignment, the trial court granted defendants' motion for summary judgment dismissing all of Diversified's causes of action except for the issue of whether Gibraltar made a valid tender of the consideration paid by Diversified at the purported foreclosure.

Appellant's second, third, and fourth points of error assert the trial court erred in dismissing Diversified's causes of action for breach of contract and warranty, common law fraud, and fraud in the sale of real estate pursuant to TEX.BUS. & COM.CODE ANN. § 27.01 (Vernon 1987), and negligence and negligent misrepresentation. We concur with the holding in Diversified, Inc. v. Walker, 702 S.W.2d 717 (Tex.App.--Houston [1st Dist.] 1985, writ ref'd n.r.e.), in which Diversified, again the purchaser of real property at a void foreclosure sale, asserted most of the same allegations as in this case. In Walker the court stated in regard to Diversified's warranty claims:

We conclude that there is no precedent in the law that would support any theory of warranty on the part of the noteholder ... One who bids on property at a foreclosure sale does so 'at his own peril.'

Id. at 723. Similarly, the court dismissed appellant's arguments asserting statutory fraud under TEX.BUS. & COM.CODE § 27.01 and negligence. Pointing out the less demanding nature of § 27.01 as opposed to common law fraud, the court remarked that:

We remain unconvinced that appellant has alleged or proved the necessary facts in this case to establish a 27.01 fraud. Without supporting authority, we, as an intermediate appellate court, decline to sustain this argument.

702 S.W.2d at 723.

Appellant's attempts to distinguish this case from Walker are, at best, not persuasive. Indeed, the facts in this case are less supportive of common law or statutory fraud claims than in Walker, where no explanation was given for conducting the void foreclosure sale. Here, administrative error was asserted, which appellant does not deny but does assert that such constitutes "a reckless disregard of the rights of others and the failure of the system." Because we are unmoved by this argument and because we still find no supporting authority for appellant's...