Unreported / Non-Citable
Background
Juanita Burch signed a promissory note and deed of trust in 2007 to purchase the Burches’ homestead. After the Burches stopped making payments in 2018, the then-holder, Nationstar Mortgage, sent notices of default and acceleration in 2019. MCLP Asset Company acquired the loan in 2022, Selene Finance began servicing it, and MCLP later abandoned Nationstar’s acceleration.
Selene sent notices of acceleration in August 2023 and January 2024, and the property was sold at a nonjudicial foreclosure auction to Homestar Group in February 2024. The Burches sued to set aside the sale, alleging that MCLP and Selene had not provided the statutory and contractual notices of default required before acceleration and foreclosure. A jury found that the required notices had been given, and the trial court entered a take-nothing judgment.
The Court’s Holding
The Second Court of Appeals held that legally insufficient evidence supported the jury’s finding that MCLP and Selene gave the Burches the contractual notice of default required by the deed of trust. The record contained no notice identifying the default, explaining how to cure it, allowing at least 30 days to cure, and warning that failure to cure would result in acceleration and sale. The appellees’ representative also testified that she was unaware of any such notice sent by either Selene or MCLP.
Because the notices of acceleration were not preceded by the required notice of default and intent to accelerate, the acceleration was ineffective. Strict compliance with the deed of trust’s notice requirements was a prerequisite to exercising the power of sale, so the foreclosure and trustee’s deed were void as a matter of law.
The court reversed the take-nothing judgment and rendered judgment setting aside the foreclosure sale. It did not reach the Burches’ remaining appellate issues and emphasized that its ruling did not prevent MCLP from pursuing a later foreclosure after providing proper notices of default and acceleration.
Key Takeaways
- A lender must give clear and unequivocal notice of intent to accelerate, including an opportunity to cure, before sending notice of acceleration.
- Evidence that a lender sent notices of acceleration does not establish that it previously sent the distinct contractual notice of default required by the deed of trust.
- When required pre-foreclosure notice is absent, a borrower seeking rescission may obtain an order setting aside the sale without proving a grossly inadequate sale price.
Why It Matters
The decision underscores that contractual foreclosure-notice provisions are conditions on a trustee’s power of sale, not technicalities that can be excused merely because the borrower was in default. Mortgage holders and servicers must preserve evidence showing that each required notice was sent in the proper sequence.
The ruling also distinguishes a request to set aside a void foreclosure from a damages claim based on an inadequate sale price. Although the sale was set aside, the debt remains outstanding, and the parties return to their positions as borrower and lender.