The Rice v. Pinney Myth

By: E. Jason Billick

7/27/2014

If you ask any attorney who handles forcible detainer actions in Texas, chances are they’ve come across the infamous Rice v. Pinney decision. The case has become Plaintiff’s first line of defense when a defendant homeowner cries “title.” When a defendant raises a title issue, the court is then tasked with determining whether a landlord-tenant relationship exists. A landlord-tenant relationship is usually created through a lease, by agreement, or created through the conditional language found within homeowner’s deed of trust (usually paragraph 18 or 22). The existence of a landlord-tenant relationship provides a basis for the court to determine the right to immediate possession without resolving the question of title. See Villalon v. Bank One, 176 S.W.3d 66, 71 (Tex. App.—Houston [1st Dist.] 2004, no pet.).

Plaintiffs, i.e. banks and investors, are quick to cite Rice for the proposition that the court retains jurisdiction regardless of whether a title dispute is pending in district court. See Rice v. Pinney, 51 S.W.3d 705, 711-713 (Tex. App. – Dallas 2001, no pet.) (justice court and county court did not err in exercising jurisdiction over forcible detainer action despite pending title dispute action in district court, because issues of title and possession may be separately resolved).

The parties are quick to direct the court’s attention to the language found within the homeowner’s deed of trust. Rice is often used to convince the judge or jury that the plain language in the homeowner’s deed of trust automatically creates the landlord-tenant relationship. It is precisely this lie that has caused the proverbial train to get off the tracks. Worst yet, the courts buy into it and have done so for over ten years.

“Evidence presented in the county court also established that the original deed of trust contained language establishing a landlord-tenant relationship between the borrower and the purchaser…Because the evidence in the county court showed…there was a landlord tenant-relationship between [homeowner] and [bank] the county court could determine possession without quieting title.” Morris v. Am. Home Mortg. Servicing, Inc., 360 S.W.3d 32, 35 (Tex. App. Houston 1st Dist. 2011) (relying on Rice).

“[Homeowner] contends that a landlord and tenant-at-sufferance relationship is created under the deed of trust only when there is strict and full compliance with the contractual requirements in the deed of trust for conducting the foreclosure. Because the existence of a landlord and tenant-at-sufferance relationship is necessary to establish a forcible detainer, [Homeowner] asserts that the title issue presented in his district court suit is intertwined with the issue of possession in [Bank]’s forcible-detainer suit”

“The deed of trust contained the following landlord-tenant provision: ‘If the Property is sold pursuant to this paragraph 18 [regarding foreclosure procedure], Borrower or any person holding possession of the Property through Borrower shall immediately surrender possession of the Property to the purchaser at that sale. If possession is not surrendered, Borrower or such person shall be a tenant at sufferance and may be removed by writ of possession.”

“This Court has recently rejected this same argument in cases involving deeds of trust containing almost identical landlord-tenant provisions. See Wilder v. Citicorp Trust Bank, F.S.B., No. 03-13-00324-CV, 2014 Tex. App. LEXIS 2941, 2014 WL 1207979, at *2 (Tex. App.—Austin Mar. 18, 2014, no pet. h.) (mem. op.); Jaimes v. Federal Nat’l Mortg. Ass’n, No. 03-13-00290-CV, 2013 Tex. App. LEXIS 14615, at 3-4 (Tex. App.—Austin Dec. 4, 2013, no pet.) Killebrew v. BKE Invs., Inc., 2014 Tex. App. LEXIS 7291 (Tex. App. Austin June 30, 2014).”

It’s important to note that the Wilder and Jaimes decisions cited above relied on the faulty Rice premise that the homeowner’s deed of trust automatically creates the landlord-tenant relationship. For over eleven years there’s been a faulty assumption that the Rices’ deed of trust was either identical or vastly similar to the deeds of trusts that exist in today’s cases. A careful examination of the Rices’ deed of trust reveals just how sui generis the case really is.

The Rice Trust Deed states, in relevant part (emphasis added):

“The maturity of indebtedness secured hereby may, at the option of the holder of same, be accelerated upon the happening of any of the following defaults:

(a)    If default be made in the payment of any monthly installment on said note or any part thereof and such default continues for a period of two months; or

(b)   If for a period of two months default be made in the repayment to the holder of said note of any sum advanced for on behalf of undersigned which undersigned was obligated hereunder to pay, with interest accruing thereon as hereinabove stipulated; or

(c)    If for a period of two months default be made in the performance of any other covenant, agreement or condition in this deed of trust; or

(d)   If there should be any loss or damage to the improvements or any part thereof on said property from fire, tornado, or hail, in any amount, whether compensated by insurance or not; or

(e)    If the undersigned, or any assignee of the undersigned, sells or conveys all or any party of the mortgage real property without having the purchaser or grantee expressly assume in writing, of record, the payment of the indebtedness secured hereby; and if the said assumption transfer fee is not paid.

Whereupon the entire principal, unpaid interest and attorney’s fees, if any, and all sums then remaining unpaid, with interest, as hereupon specified, shall become immediately due and payable.  Trustee, at the request of any holder of the said indebtedness, or any part thereof, after same shall mature, either by its terms or by acceleration on account of any default are hereby expressly authorized to take immediate possession of the premises and, with or without such possession, proceed to sell the mortgaged property or any part thereof at public venue to the highest bidder for cash, at the court-house door in the county where the said mortgaged properties are situated, between the hours of ten o’clock A.M. and four o’clock P.M. on the first Tuesday in any month, after giving notice of the time, place and terms of sale and the property to be sold by posting written notice thereof for three consecutive weeks prior to the date of sale at three public places in said county at which real estate is to be sold, one of which shall be at the court-house door in said county…”

Yup. You read it right. The Rices didn’t even have to be foreclosed upon to lose possession. Or, as Judge David Phillips, apparently the only judge in Texas to have looked at the Rice Trust Deed since 2001, recently said: “They could just send over Black Bart with six-shooters and come in with, You-all get out of this place.”

The Rice decision has played a big role in determining jurisdiction in forcible detainer actions. To date, the decision has been followed in 34 cases and cited in over 160 decisions, most of which find against the homeowner. Today, homeowner’s attorneys have a difficult job ahead of them: debunking the Rice v. Pinney myth.