Texas AG Opinion Affirms Corporate Entity Can Be Security Instrument Trustee

The Texas Attorney General recently released an Opinion affirming that a corporate entity may serve as a trustee or substitute trustee for a deed of trust under Texas law. 

The Opinion was requested to clarify whether a corporate entity may serve as a substitute trustee for purposes of conducting a mortgage foreclosure sale under Texas Property Code Chapter 51, which relates to enforcement of a deed of trust creating a lien against real property.  As outlined in the Opinion, the Property Code authorizes a trustee or a substitute trustee to conduct a foreclosure sale but defines both terms using the word “person,” which is not defined in Chapter 51 of the Property Code.

The Texas Government Code defines “person” to include a corporation, organization, and any other legal entity.  Under the Code Construction Act, this definition applies to the construction of provisions in the Property Code unless application is expressly limited.  Because there is no language limiting “person” in Property Code Chapter 51, the Opinion determined that a court would likely utilize the Government Code definition to define “person” for purposes of the chapter.  Accordingly, a court would likely conclude that a corporate entity is a “person” and thus may serve as a substitute trustee for purposes of conducting a mortgage foreclosure sale.

This interpretation is supported by a 2013 bankruptcy court case, In re AMRCO, Inc., which considered the issue of whether only natural persons can be appointed as trustee or substitute trustee in a foreclosure sale and concluded that an artificial person may serve as trustee or substitute trustee under Texas law.