Goswami v. Metropolitan Sav. and Loan Ass'n
| Decision Date | 11 May 1988 |
| Docket Number | No. C-5632,C-5632 |
| Citation | 751 S.W.2d 487 |
| Parties | Amiya Kumar GOSWAMI, Petitioner, v. METROPOLITAN SAVINGS AND LOAN ASSOCIATION, and Bob Baylis, Respondents. |
| Court | Texas Supreme Court |
This is an appeal from a summary judgment. Suit was brought by Amiya Kumar Goswami to set aside a foreclosure sale and to recover damages for wrongful foreclosure and quantum meruit. The trial court rendered summary judgment in favor of Metropolitan Savings and Loan Association. The court of appeals affirmed the judgment of the trial court. 713 S.W.2d 127. We reverse the judgment of the court of appeals and remand this cause to the trial court.
Mal Yerasi, who is not a party to this cause, owned the King Manor Apartments located in Dallas, Texas. The property was subject to a deed of trust lien in favor of Metropolitan. Some time prior to March 1982, Yerasi filed for protection in California under Chapter 11 of the Bankruptcy Code. On March 24, 1982 the bankruptcy court ordered that Yerasi would be able to keep the property provided that all back payments in the amount of $10,451.30 were paid to Metropolitan by March 29, 1982. The court also ordered that the entire balance secured by the deed of trust be paid to Metropolitan or that the property be repaired to a condition satisfactory to Metropolitan by August 9, 1982. In addition, Yerasi was ordered to comply with all of the provisions of the deed of trust. In the event that any of the conditions set by the bankruptcy court were not satisfied, the automatic stay would be terminated so as to permit foreclosure of Metropolitan's deed of trust.
On May 19, 1982, Yerasi and Goswami signed a "Lease-Option Agreement." The agreement provided that Goswami was to lease and refurbish the property. This agreement also gave him an option to buy the property. Goswami made monthly mortgage payments to Metropolitan and made extensive repairs to the property. Metropolitan subsequently decided that the repairs were not satisfactory and scheduled foreclosure of the property on September 7, 1982. Yerasi petitioned the bankruptcy court for a temporary restraining order to prevent foreclosure of the property. The bankruptcy court denied the application and Yerasi appealed to a bankruptcy appellate panel.
On September 3, 1982, the United States Bankruptcy Appellate Panel of the Ninth Circuit issued a temporary stay through September 8, 1982 "to allow the panel to consider [Yerasi's] emergency motion for stay pending appeal." Notwithstanding the stay order, Metropolitan went ahead with the foreclosure sale on September 7, 1982. The property was purchased by Bob Baylis. Goswami recorded the lease-option agreement thereby creating a cloud on Baylis' title. On September 9, 1982, the bankruptcy appellate panel denied the emergency motion for stay pending appeal.
Goswami sued Metropolitan to set aside the foreclosure sale and to recover damages for wrongful foreclosure. Goswami later filed an amended petition wherein he sought to recover the monies spent on refurbishing the property on a theory of quantum meruit. Baylis intervened to clear his title.
Metropolitan maintains that Goswami lacks standing to contest the validity of the foreclosure sale. This is based upon the contention that Goswami is a "stranger" to the title of the property.
The issue of identifying who properly has standing to contest a foreclosure sale in Texas is well settled. As a general rule, only the mortgagor or a party who is in privity with the mortgagor has standing to contest the validity of a foreclosure sale pursuant to the mortgagor's deed of trust. Estelle v. Hart, 55 S.W.2d 510, 513 (Tex.Comm'n.App.1932, opinion adopted); Mercer v. Bludworth, 715 S.W.2d 693, 698 (Tex.App.--Houston [1st Dist.] 1986, writ ref'd n.r.e.). However, when the third party has a property interest, whether legal or equitable, that will be affected by such a sale, the third party has standing to challenge such a sale to the extent that its rights will be affected by the sale. American Savings & Loan Assoc. v. Musick, 531 S.W.2d 581, 586 (Tex.1976); Estelle v. Hart, 55 S.W.2d at 513.
It is not clear from the record whether a trustee was assigned by the bankruptcy court to administer the estate of Yerasi. In the event that a trustee was not assigned, Yerasi had the right to perform all of the functions and duties of a Chapter 11 trustee. 11 U.S.C. §§ 1107, 1303 (1987). The trustee or Yerasi was empowered to use, sell or lease the property, other than in the ordinary course of business, after notice and hearing. 11 U.S.C. § 363(b)(1) (1987).
Prior to the signing of the lease-option agreement a hearing was conducted before the bankruptcy court with Metropolitan in attendance. Metropolitan made no objection in the bankruptcy court to the lease-option agreement. Instead, Metropolitan accepted mortgage payments from Goswami pursuant to the lease-option agreement.
When no objection is made to a proposed sale of property from the estate of a bankrupt, other than in the ordinary course of business, the sale is tacitly authorized by the bankruptcy court without its further involvement. 11 U.S.C. § 102(1) Notes of Committee on the Judiciary (1987); In re Robert L. Hallamore Corp., 40 B.R. 181, 183 (Bankr.Mass.1984); Collier on Bankruptcy, p 363.01 (15th ed.) 1986. Since no objection to the lease-option agreement was made by Metropolitan, Goswami acquired an equitable interest to the property which was affected by the sale. Thus, Goswami had standing to contest the validity of the sale.
It is undisputed that the foreclosure sale took place during the period of time covered by the temporary stay order. A bankruptcy court may annul a stay to validate actions taken during that time, Claude Regis Vargo Enters. v. Bararisse, 578 S.W.2d 524, 527 (Tex.Civ.App.--Houston [14th Dist.] 1979, writ ref'd n.r.e.) or take some action to recognize the invalidity of the stay order. Mid City Management Corp. v. Loewi Realty Corp., 643 F.2d 386 388 (5th Cir.1981); Lawson v. Gibbs, 591 S.W.2d 292, 295 (Tex.Civ.App.--Houston [14th Dist.] 1979, writ ref'd n.r.e.). The record is silent as to whether the bankruptcy court took either action. The bankruptcy appellate panel simply declined to enter another order for temporary stay during the pendency of the appeal. Consequently, the subsequent termination of the stay did not have the effect of automatically validating the foreclosure sale which had been conducted during the period of the stay.
Goswami argues that the court of appeals erred in affirming the trial court's summary judgment against his claim for quantum meruit because his summary judgment proof raised a fact issue to defeat the motion. Metropolitan, however, asserts that Goswami's summary judgment evidence cannot be considered because there are no underlying pleadings to support it. The court of appeals held that since the trial court granted summary judgment denying recovery on the wrongful foreclosure claim, the filing of the amended petition was immaterial. 713 S.W.2d at 129. We disagree.
Goswami filed an amended petition alleging unjust enrichment four days before the date of the summary judgement hearing. Metropolitan also asserts that since the record does...
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