When a new law affects a bank’s right to foreclose, the bank may argue that the law, applied retroactively infringes a vested right to foreclose. Of course generally banks have the right to foreclose, so let’s be clear: none of this reasoning applies, unless a new law prohibits foreclosure of a previously signed deed of trust or mortgage.
Assuming arguendo, that Plaintiff is attempting to apply the law retroactively, the Texas Constitution’s prohibition of retroactive application does not extend to “remedial” statutes that do not disturb vested rights. Subaru of Am., Inc. v. David McDavid Nissan, Inc., 84 S.W.3d 212, 219 (Tex. 2002); Rey v. Acosta, 860 S.W.2d 654, 657 (Tex.App.-El Paso 1993, no writ). Remedial laws are laws intended to correct defects, mistakes, and omissions in the laws of the State. Id. When a law is remedial, it may apply retroactively, if it does not violate vested rights. Robinson v. Crown Cork & Seal Co., Inc., 335 S.W.3d 126, 139 (Tex. 2010)(“In DeCordova, Chief Justice Hemphill wrote that ‘[l]aws are deemed retrospective and within the constitutional prohibition, which by retrospective operation, destroy or impair, vested rights’”).
Banks may say that Plaintiff’s interpretation of a law is unconstitutional because it would impair its right to foreclose, contrary to the constitution, but the remedy of foreclosures does not appear to be a vested right.
Instead foreclosure is a remedy which is not constitutionally protected. “[A]pplying the prohibition against retroactivity, a law that impairs a remedy does not impair a right, except sometimes.” Robinson at 139. “It is the settled law that a litigant has no vested right in a remedy.”(Pratt v. Story, 530 S.W.2d 325, 329 (Tex. Civ. App.—Tyler 1975, no writ)(citing Phil H. Pierce Co. v. Watkins, 114 Tex. 153, 263 S.W. 905 (1924).
Foreclosure is a remedy. Blackwell v. Barnett, 52 Tex. 326, 333 (1879), overruled in part by Goldfrank, Frank & Co. v. Young, 64 Tex. 432 (1885)(“The power of sale given to a trustee or mortgagee affects the remedy only, and is intended to give to the creditor a speedy mode of foreclosure, without the delay and expense of a suit.”); Steptoe v. JPMorgan Chase Bank, N.A., 464 S.W.3d 429, 432 (Tex. App.—Houston [1st Dist.] 2015, no pet.)(characterizing foreclosures as remedies); Stephens v. LPP Mortgage, Ltd., 316 S.W.3d 742, 746 (Tex. App.—Austin 2010, pet. denied)(referring to the remedy of foreclosure); Rutledge v. Leonard, 10-07-00376-CV, 2009 WL 1412859, at *2 (Tex. App.—Waco May 20, 2009, no pet.)(“Judicial foreclosure is a remedy.”). The bank had no vested rights in a foreclosure because foreclosure is a mere remedy. See Id.
Courts will sometimes find a vested right where a party wishing to rely on such an argument speedily attempts to enforce those rights after the law is passed. “In three of these five cases, DeCordova, Wright, and Likes, it was important that, as it happened, the people involved had ample opportunity after the change in the law to protect their interests: four years to sue in DeCordova, seven years to resume pumping water in Wright, and two months to sue in Likes.” Robinson v. Crown Cork & Seal Co., Inc., 335 S.W.3d 126, 141 (Tex. 2010)(emphasis added).
In Nix, a lien holder argued that a statute, Section 7, Article 7065 (a), R.C.S, violated Article 1, Section 16, Constitution of Texas. State v. Nix, 138 S.W.2d 924, 926 (Tex. Civ. App.—Fort Worth 1940), rev’d and remanded sub nom on other grounds. United States v. State of Tex., 314 U.S. 480, 62 S. Ct. 350, 86 L. Ed. 356 (1941). That law gave priority to state liens over private liens, and the private lien holder argued that the law was unconstitutional, apparently raising the ex-post facto or contracts clause, much like the bank in this case. Id. While the reasoning is less than clear, what is clear is that the Court found that Texas’ lien should take priority, even though, “there will be nothing left in the fund for payment to any other party.” Id.
The reasoning, however, was more clear in Lester, when the court, again, construed a statute that arguably affected vested rights to be in conformity with the constitution. The arguments by the bank were similar to the arguments in this case, in that, “section 51.003 [Tex. Prop. Code] when applied to a deed of trust executed prior to the statute’s effective date, violates the contract clause of the Texas Constitution.” Lester v. First Am. Bank, Bryan, Tex., 866 S.W.2d 361, 362 (Tex. App.—Waco 1993, writ denied). The issue was whether the law that permitted a defendant in a suit for deficiency judgment to determine whether the property’s fair market value at the date of its foreclosure exceeded its sales price at the foreclosure sale. Id. The bank argued that the constitution forbade its application to the case, because the deed of trust was signed prior to the effective date of the law. Id.
The Court noted the similarities between the federal and state constitutional language and noted:
[s]peaking unanimously in each [of three] opinion[s], the United States Supreme Court held that the statute did not violate the contract clause of the federal constitution because the statute merely affected the remedy for enforcing the pre-existing mortgage…To hold that mortgagees are entitled under the contract clause to retain the advantages of a forced sale would be to dignify into a constitutionally protected property right their chance to get more than the amount of their contracts.
Id at 366. The Court held that an impairment of a deed of trust right held by a bank is not a violation of the contracts clause because it only affects the remedy and not an obligation of a contract.
Finally, in City of Laredo, the state legislature passed a law putting a time limit on which a mortgagee could foreclose. City of Laredo v. Salinas, 191 S.W. 190, 191 (Tex. Civ. App. 1916, writ ref’d). In that case, the mortgage matured on April 1, 1909. However, the state passed Article 5694, which was effective on June 30, 1913. Id. Article 5694 fixed the statute of limitations to four years after the maturity date, plus one year after the effective date of the maturity, requiring the foreclosing party to file suit no later than June 30, 1914. The foreclosing party did not file suit until June 16, 1915. Id. The foreclosing party argued that the law abrogated its vested rights, contrary to the Texas Constitution. However, the Court found that these laws “are acts of limitation, which prescribe the time in which to seek the remedy, and they do not take away vested rights or impair obligation of contract.” Id.
Finally, a bank’s contractual obligations are not impaired at all, since its right to sue for a money judgment is well-preserved.