Wood v. HSBC Bank USA, N.A.

Decision Date31 July 2014
Docket NumberNo. 14–13–00389–CV.,14–13–00389–CV.
PartiesAlice M. WOOD and Daniel L. Wood, Appellants v. HSBC BANK USA, N.A. and Ocwen Loan Servicing, L.L.C., Appellees.
CourtTexas Court of Appeals

Russell S. Post, Anh Dinh, Constance H. Pfeiffer, Robert Petersen, Robert C. Lane, Houston, for Appellants.

Valerie Anne Henderson, Houston, for Appellees.

Panel consists of Justices BOYCE, CHRISTOPHER, and BROWN.

OPINION

MARC W. BROWN, Justice.

This case arises out of a home-equity loan obtained by appellants Alice M. Wood and Daniel L. Wood in 2004 that encumbered their homestead with a lien. The Woods appeal the summary judgment granted in favor of appellees HSBC Bank USA, N.A. and Ocwen Loan Servicing, L.L.C. The Woods presented a single issue on appeal, which we address in two separate sub-issues:

(1) Whether the Texas Civil Practice and Remedies Code section 16.051 four-year statute of limitations bars the Woods' claims for monetary and declaratory relief based on HSBC's and Ocwen's alleged violations of the home-equity lending protections found in article XVI, section 50(a)(6), of the Texas Constitution.
(2) Whether the section 16.051 statute of limitations bars the Woods' claim for monetary relief based on HSBC's and Ocwen's alleged breach of the security instrument creating the home-equity lien.

Because we conclude that the Woods' claims are barred by limitations, we affirm.

I. Facts and Procedural Background

On July 2, 2004, the Woods obtained a home-equity loan of $76,000 from Fremont Investment & Loan, secured by a first lien on their homestead located in Fresno, Fort Bend County, Texas. On March 16, 2012, the Woods sent HSBC, the current holder of the lien, a “Notice of Request to Cure.” The Notice alleged that the home-equity lien violated seven provisions of article XVI, section 50(a)(6), of the Texas Constitution and demanded that HSBC cure the alleged violations. HSBC did not respond to the Woods' letter.

On July 9, 2012, the Woods sued HSBC, Ocwen, Ameriapraise, Inc., and Joel Brock seeking forfeiture of principal and interest for the constitutional violations, damages for breach of contract, damages for fraud, and a declaratory judgment that (1) the loan and accompanying home-equity lien were void, (2) HSBC failed to cure the constitutional defects, and (3) HSBC must forfeit all principal and interest paid on the loan. HSBC and Ocwen answered on August 10, 2012. HSBC filed a counterclaim on February 28, 2013, seeking a declaration that it was equitably subrogated to the rights of the prior lienholders.

On January 3, 2013, the Woods filed a motion for summary judgment on their claim that the fees exceeded three percent of the loan amount. On February 7, 2013, HSBC and Ocwen filed a hybrid traditional and no-evidence motion for summary judgment. In their motion, HSBC and Ocwen asserted that all of the Woods' claims were barred by limitations, that no tolling rule delayed the accrual of the Woods' claims, that the constitutional claims failed as a matter of law, that the Woods' breach of contract claim failed as a matter of law, and that no evidence supported the Woods' fraud claim.1 On April 4, 2013, the trial court granted HSBC's traditional and no- evidence motions and denied the Woods' motion for summary judgment. The Woods then nonsuited defendants Ameriapraise, Inc. and Joel Brock, and HSBC nonsuited its counterclaim for equitable subrogation against the Woods. The Woods timely appealed.

II. Summary Judgment Standard of Review

We review the trial court's granting of summary judgment de novo. Mid–Century Ins. Co. of Tex. v. Ademaj, 243 S.W.3d 618, 621 (Tex.2007). To prevail on a traditional motion for summary judgment, the movant must carry the burden of showing that there is no genuine issue of material fact and that judgment should be granted as a matter of law. Tex.R. Civ. P. 166a(c) ; KPMG Peat Marwick v. Harrison Cty. Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex.1999). When reviewing a traditional summary judgment granted in favor of the defendant, we determine whether the defendant conclusively disproved at least one element of the plaintiff's claim or conclusively proved every element of an affirmative defense. Am. Tobacco Co. v. Grinnell, 951 S.W.2d 420, 425 (Tex.1997).

A defendant moving for summary judgment on the affirmative defense of limitations ... must (1) conclusively prove when the cause of action accrued, and (2) negate the discovery rule, if it applies and has been pleaded or otherwise raised, by proving as a matter of law that there is no genuine issue of material fact about when the plaintiff discovered, or in the exercise of reasonable diligence should have discovered the nature of its injury. If the movant establishes that the statute of limitations bars the action, the nonmovant must then adduce summary judgment proof raising a fact issue in avoidance of the statute of limitations.

KPMG Peat Marwick, 988 S.W.2d at 748 (footnotes omitted). A matter is conclusively established if reasonable people could not differ as to the conclusion to be drawn from the evidence. Farmers Ins. Exch. v. Rodriguez, 366 S.W.3d 216, 221 (Tex.App.-Houston [14th Dist.] 2012, pet. denied). In deciding whether a disputed material fact issue exists precluding summary judgment, we must take evidence favorable to the non-movant as true, and we must indulge every reasonable inference and resolve any doubts in favor of the non-movant. Sysco Food Servs., Inc. v. Trapnell, 890 S.W.2d 796, 800 (Tex.1994). We will affirm the summary judgment if any of the theories presented to the trial court and preserved for appellate review are meritorious. Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 216 (Tex.2003).

III. Discussion
A. The Woods' claims for monetary and declaratory relief under Texas Constitution article XVI, section 50 (a)(6), are barred by the section 16.051 four-year statute of limitations.

The Woods alleged in their petition that the home-equity lien on their residence violated article XVI, sections 50(a)(6)(B), 50(a)(6)(E), 50(a)(6)(Q)(v), and 50(a)(6)(Q)(viii), of the Texas Constitution. The Woods contend that their home-equity lien is void because of section 50(c), which states, “No mortgage, trust deed, or other lien on the homestead shall ever be valid unless it secures a debt described by this section ....” Tex. Const. art. XVI, § 50 (c). The Woods assert that section 50 (c) renders “void but curable” any home-equity lien that does not strictly comply with a provision of section 50 (a)(6). Consequently, because an action to remove a cloud on title is not subject to the four-year residual statute of limitations if a lien is void, see Ford v. Exxon Mobil Chem. Co., 235 S.W.3d 615, 618 (Tex.2007), the Woods argue that the trial court erred in granting summary judgment in favor of HSBC.

HSBC and Ocwen respond that the Woods' constitutional claims are barred by the four-year residual statute of limitations. Relying on the Dallas Court of Appeals' decision in Williams v. Wachovia Mortg. Corp., 407 S.W.3d 391 (Tex.App.-Dallas 2013, pet. denied), and the Fifth Circuit Court of Appeals' decision in Priester v. JP Morgan Chase Bank, N.A., 708 F.3d 667 (5th Cir.2013), cert. denied, ––– U.S. ––––, 134 S.Ct. 196, 187 L.Ed.2d 256 (2013), they contend a lien that violates section 50 (a)(6) is voidable. They further assert that section 50 (a)(6)(Q)(x) allows a lender to cure a lien that would otherwise be invalid. HSBC argues that the trial court properly granted summary judgment on limitations grounds because a voidable lien is subject to limitations and the Woods did not file suit until eight years after closing the transaction.

1. Home-equity liens that do not comply with section 50(a)(6) are voidable.

The fundamental question we face today is whether a home-equity lien that violates section 50(a)(6) of the Texas Constitution is void or voidable. Two courts have recently concluded that constitutionally noncompliant homestead liens are voidable. First, like the Woods, the plaintiffs in Priester obtained a home-equity loan that did not comply with the constitutional requirements. 708 F.3d at 671. Five years after the transaction closed, the plaintiffs sent a letter to the defendant, which had acquired the loan from the original lender, requesting cure under section 50(a)(6)(Q)(x).Id. The defendant took no action to cure the perceived infirmities. Id. The plaintiffs then sued the defendants for a declaratory judgment that the loan and lien on their home were void ab initio, that the defendants had failed to cure, and that the defendants were required to forfeit all principal and interest. Id. In deciding whether a statute of limitations applied to the plaintiffs' claims, the Priester court reasoned:

The decision in Doody v. Ameriquest Mortgage Co., 49 S.W.3d 342 (Tex.2001), offers indirect support for the applicability of limitations. The court responded to a question certified by this court on the issue of cure, explaining that a lien cured under Section 50 (a)(6)(Q) became valid even if it was “invalid” before the cure. Id. at 347. Discussing forfeiture, the court stated that “if a lien that secures such a loan is voided,” the lender loses all rights to recovery. Id. at 346. That language suggests that the Texas Supreme Court considers liens created in violation of Section 50 (a)(6) to be voidable rather than void—a “void” lien could not be “voided” by future action.

708 F.3d at 674. The Priester court further noted that [b]ecause a cure provision exists in Section 50(a)(6)(Q), liens that are contrary to the requirements of § 50 (a) are voidable rather than void from the start.” Id. at 674 n. 4.2

Second, after the Priester decision was issued, the Dallas Court of Appeals faced a similar question in Williams. In that case, the plaintiff's husband took out a loan on the couple's residence and represented himself to be an unmarried man. Williams, 407 S.W.3d at 392. Six years after she discovered the...

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