Farrell v. Hunt
29 Tex. Sup. Ct. J. 425, 714 S.W.2d 298, 1986 Tex. LEXIS 545 (1986)
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Rule of Law:
In a wrongful foreclosure action, the measure of damages is the difference between the market value of the property at the time of foreclosure and the remaining balance of the indebtedness; the plaintiff bears the burden of proving both of these elements to establish actual damages.
Facts:
- In June 1974, Joe C. Farrell purchased 15 acres of land in Blanco County from Cliff and Roberta Hunt.
- The purchase agreement required Farrell to make a down payment, assume an existing note to a previous owner named Kolodzie, and execute a new note to Hunt.
- The sum of the monthly installments on both notes was $136.82.
- Farrell sent a single monthly payment to Ja Wahrmund, a real estate agent, who would then distribute the funds to each note holder, Kolodzie and Hunt.
- On July 1, 1980, Hunt foreclosed on the property.
Procedural Posture:
- Joe C. Farrell sued Cliff and Roberta Hunt in a Texas trial court for wrongful foreclosure and violations of the Deceptive Trade Practices Act.
- A jury found that Farrell was not in default and that Hunt's conduct was unconscionable, awarding Farrell damages based on the property's market value of $23,665.00.
- Hunt filed a motion for judgment, arguing Farrell had failed to prove damages because no evidence of the total indebtedness was submitted.
- The trial court granted Hunt's motion and rendered a take-nothing judgment against Farrell.
- Farrell, as appellant, appealed to the court of appeals.
- The court of appeals affirmed the trial court's judgment in favor of Hunt, the appellee.
- Farrell, as petitioner, sought review from the Supreme Court of Texas.
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Issue:
In a wrongful foreclosure action, is a plaintiff entitled to recover damages when they establish the property's market value but fail to submit evidence of the total remaining indebtedness on the property?
Opinions:
Majority - Wallace, J.
No, a plaintiff is not entitled to recover damages without proving the total remaining indebtedness. To recover for wrongful foreclosure, a plaintiff must prove actual damages, which at common law is the difference between the property's market value and the remaining debt. Farrell proved the market value of the property but failed to introduce any evidence of the amount remaining on the Kolodzie note. Because he failed to prove a necessary component of the damage calculation, he failed to prove any actual damages as a matter of law and therefore cannot recover under either a common law wrongful foreclosure claim or the Deceptive Trade Practices Act (DTPA), which also requires proof of actual damages.
Dissenting - Kilgarlin, J.
Yes, Farrell proved damages and is entitled to recovery. The majority's holding is unjust and misstates the law. Hunt's right to foreclose arose only from the Hunt deed of trust, which secured only the Hunt note, not the Kolodzie note. Therefore, Farrell only needed to prove the remaining balance on the Hunt note, which was established. Alternatively, even if Farrell had to prove the entire debt, he should not be completely denied recovery for failing to prove the exact amount of his payments, a failure of proof that only benefits Hunt by reducing his liability. This result allows Hunt to wrongfully foreclose on a property, keep all prior payments, and resell the property for a profit, which is an absurd and inequitable outcome.
Analysis:
This case solidifies the strict burden of proof placed on plaintiffs in Texas wrongful foreclosure actions. The court's holding clarifies that a plaintiff must affirmatively prove every element of the damage formula, including the total outstanding indebtedness on the property. A failure to present evidence on any part of this calculation is fatal to the claim, resulting in zero recovery, even if the foreclosure itself is proven to be wrongful. This precedent underscores the importance of meticulous evidence gathering for plaintiffs and provides a strong defense for lenders if the borrower cannot produce complete financial records.
