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Two Year Statute of Limitations On Tort-Based Claims for Wrongful Foreclosure

Author: John Lynch

In an issue of first impression, SettlePou attorneys successfully argued that wrongful foreclosure claims should be subject to a two year statute of limitations when the alleged defect in the sale arises outside of the contract. Previously, the general rule had been that claims for Wrongful Foreclosure are governed by the four-year statute of limitations that is implicated by claims that sound in contract. But in Jackson v. Deutsche Bank National Trust Co., 2015 WL 6907507, *4 (N.D. Tex. Oct. 14, 2015) (rec. adopted, 2015 WL 6866112, *1 (N.D. Tex. Nov. 9, 2015), Magistrate Judge David L. Horan agreed that where the alleged defect in the foreclosure sale sounds in tort, a two year statute of limitations should apply.

Courts traditionally apply a four-year statute of limitations to wrongful foreclosure actions, often citing what had become the landmark case on point, Gonzales v. Lockwood Lumber Co., 668 S.W.2d 813, 815 (Tex. App. 1984), writ refused NRE (July 18, 1984).[1] But the Gonzales court did not hold that the four-year statute of limitations applies to all wrongful foreclosure actions. Rather, the court concluded that the four-year limitations period applied to the action at hand because the specific facts indicated that it sounded in contract.[2]

In Jackson, the only claimed “defect” in the foreclosure proceedings was an alleged oral statement that the scheduled foreclosure sale would not take place.[3] In other words, the wrongful foreclosure claim sounded entirely in tort. Magistrate Judge Horan acknowledged that “it is far from clear that an alleged misrepresentation can, as a matter of law, constitute a defect in the foreclosure sale proceedings for purposes of a wrongful foreclosure claim under Texas law.” Jackson, 2015 WL 6907507, *4.

Nonetheless, Magistrate Judge Horan concluded that assuming, arguendo, that such an allegation can give rise to a claim for wrongful foreclosure, the claim would be governed by the two year statute of limitations for tort claims. As the court explained, “[w]hile Plaintiff is alleging wrongful foreclosure of the Property, which was secured by a deed of trust, the allegedly actionable defect sounds in tort based on an alleged breach of duty imposed by law, not by the contract itself.”

Magistrate Judge Horan’s Findings, Conclusions, and Recommendation were adopted by District Judge David C. Godbey less than a month later.

For more information regarding this case or any related issues, please contact John M. Lynch at jlynch@settlepou.com or Grace Ann Gannon at ggannon@settlepou.com.


[1]See Bessant v. Wells Fargo Bank, Nat'l Ass'n, No. 4:13CV306, 2014 WL 2996276, at *3 (E.D. Tex. July 3, 2014); Jatoi v. Guar. Fed. Bank, F.S.B., No. CIV.A.3:97-CV-3095 L, 1999 WL 202541, at *3 (N.D. Tex. Mar. 31, 1999); Martin v. Cadle Co., 133 S.W.3d 897, 905 (Tex. App. 2004).[2] See Gonzales, 668 S.W.2d at 815.[3] See Pl.’s First Am. Compl. at 5, ¶ 22.[1]See Bessant v. Wells Fargo Bank, Nat'l Ass'n, No. 4:13CV306, 2014 WL 2996276, at *3 (E.D. Tex. July 3, 2014); Jatoi v. Guar. Fed. Bank, F.S.B., No. CIV.A.3:97-CV-3095 L, 1999 WL 202541, at *3 (N.D. Tex. Mar. 31, 1999); Martin v. Cadle Co., 133 S.W.3d 897, 905 (Tex. App. 2004).[1] See Gonzales, 668 S.W.2d at 815.[1] See Pl.’s First Am. Compl. at 5, ¶ 22.