Bomar v. West
1894 Tex. LEXIS 459, 87 Tex. 299, 28 S.W. 519 (1894)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under a deed of trust securing multiple promissory notes that are subsequently transferred to different owners, a provision authorizing a sale upon default at the request of 'the legal holder of said notes' requires the consent of all note holders, not just the holder of a single defaulted note.
Facts:
- One Skinner executed a deed of trust on a tract of land to secure the payment of five promissory notes made payable to D. T. Bomar.
- The deed of trust provided that in case of default on any note, a foreclosure sale could be had at the instance of 'said D. T. Bomar or the legal holder of said notes.'
- Bomar transferred the first of the five notes to the West Publishing Company.
- Subsequently, Bomar transferred the remaining four notes to one Callahan.
- Skinner failed to pay the first note held by the West Publishing Company when it matured.
- At the request of the West Publishing Company alone, the trustee advertised and sold the land at a public sale.
- S. B. West purchased the land at this trustee's sale.
- At the time of the sale, the other four notes held by Callahan were not yet due.
Procedural Posture:
- S. B. West (plaintiff) sued A. W. Raht and D. T. Bomar (defendants) in the District Court (trial court) to recover a tract of land.
- The cause was tried before the court without a jury upon an agreed statement of facts.
- The trial court rendered judgment in favor of the plaintiff, S. B. West.
- The defendants (appellants) appealed to the Court of Civil Appeals (intermediate appellate court).
- The Court of Civil Appeals granted a motion by the appellee (West) to strike the statement of facts from the record.
- Lacking a statement of facts to review, the Court of Civil Appeals affirmed the trial court's judgment.
- The defendants (plaintiffs in error) secured a writ of error from the Supreme Court of Texas (highest court) to review the decision.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a provision in a deed of trust, which secures multiple notes held by different owners, authorizing a foreclosure sale upon default at the request of 'the legal holder of said notes,' permit a sale at the request of the holder of only one of the defaulted notes without the consent of the other note holders?
Opinions:
Majority - Chief Justice Gaines
No. A sale requested by the holder of only one of several notes secured by a deed of trust is invalid where the instrument requires the request of 'the legal holder of said notes.' The court first addressed a procedural matter, holding that the Court of Civil Appeals erred in striking the agreed statement of facts, as it was properly part of the record. On the substantive issue, the court interpreted the phrase 'the holder of the notes' to mean either the single entity holding all notes or, potentially, all holders acting jointly. It does not permit the holder of a single note, among several, to unilaterally compel a foreclosure sale without the consent of the other note holders. The power of a trustee must be exercised in strict compliance with the limitations imposed by the deed of trust. Because the instrument did not expressly grant the holder of 'any one' note the right to demand a sale, the trustee acted without authority, and the resulting sale passed no title to the purchaser, S. B. West.
Analysis:
This decision establishes a crucial default rule of interpretation for deeds of trust where secured notes are held by multiple parties. It underscores the principle that a trustee's powers in a non-judicial foreclosure are strictly construed according to the precise language of the governing instrument. The ruling protects the security interests of all note holders, as well as the debtor, by preventing one creditor from forcing a premature or disadvantageous sale. Following this case, drafters of such instruments must use explicit language, such as 'the holder of any one or more of said notes,' if the intent is to allow a single note holder to initiate foreclosure.
