Callan v. Deutsche Bank Trust Co. Am.

• Decision Date: 21 March 2015
• Docket Number: Civil Action No. 4:13–CV–247.
• Citation: 93 F.Supp.3d 725
• Parties: Elizabeth CALLAN, Plaintiff, v. DEUTSCHE BANK TRUST COMPANY AMERICAS, Defendant.
• Court: U.S. District Court — Southern District of Texas

93 F.Supp.3d 725

Elizabeth CALLAN, Plaintiff

v.DEUTSCHE BANK TRUST COMPANY AMERICAS, Defendant.

Civil Action No. 4:13–CV–247.

United States District Court, S.D. Texas, Houston Division.

Signed March 21, 2015.

Ira D. Joffe, Attorney at Law, Bellaire, TX, for Plaintiff.

Steven A. Leyh, Leyh, Payne & Mallia, PLLC, Houston, TX, for Defendant.

OPINION AND ORDER

MELINDA HARMON, District Judge.

Pending before the Court is Defendant Deutsche Bank National Trust Company Americas, as Trustee for the Certificateholders of Dover Mortgage Capital 2005–A Corporation, Grantor Trust Certificate Series 2005–A's (“Deutsche”) Motion to Alter or Amend Judgment. Doc. 25. Having considered the motion and response, the facts in the record, and the applicable law, the Court concludes Defendant's motion should be granted.

I. Background

This is a foreclosure suit removed from state court, challenging a foreclosure action which Plaintiff Elizabeth Callan alleges is barred by the statute of limitations. In August 2004, Callan obtained a home equity loan (the “Loan”) from Deutsche's predecessor in interest, Bank of America, which was secured by her property at 4818 Bayou Vista Drive, Houston, Texas 77091 (“the Property”). Original Pet., Doc. 1–3 ¶¶ 4, 11; Note, Doc. 12–1 at 10–12; Deed of Trust, Doc. 12–1 at 13–19. Plaintiff failed to remit her monthly payment due August 2006, and the Loan has been in arrears since that date. Doc. 1–3 ¶ 23; Notice of Default, Doc. 12–1 at 23.

On November 6, 2007, Deutsche sent Callan notice that it had elected to accelerate the maturity of the Loan.2007 Notice of Acceleration, Doc. 12–1 at 25–26. Deutsche sent a second formal notice of acceleration on July 8, 2008. 2008 Notice of Acceleration, Doc. 12–1 at 27–28. On July 24, 2008, Deutsche filed an application for foreclosure in the 295th District Court of Harris County, Texas, Cause No. 2008–44989. Doc. 1–3 ¶ 12; Verified Tex. Rule Civ. P. 736 Appl. for Home Equity Foreclosure Order, Doc. 12–1 at 1–9. For reasons not explained in the record, Deutsche filed a motion to dismiss the application which was granted on November 5, 2008. Doc. 1–3 ¶ 18.

Deutsche filed a second application for foreclosure in the same court on February 4, 2009, Cause No. 2009–07482. Doc. 1–3 ¶ 19. The court granted the application on April 13, 2009, thereby giving Deutsche authority to foreclose the Property. Again, for reasons that are not explained in the record, Defendant did not proceed with the foreclosure. On August 2, 2010, Callan filed for Chapter 13 bankruptcy. Doc. 11–1 ¶ 19. The proceeding was dismissed two months and 16 days later on October 18, 2010.Id.; Order of Dismissal, Doc. 6–4.

On November 3, 2011, Deutsche sent Callan a notice of rescission of acceleration of Loan maturity stating:

Mortgagee under the Deed of Trust referenced below hereby rescinds the notice of acceleration dated December 17, 2008 and all prior notices of acceleration. Mortgagee further agrees that Borrower may continue to pay the indebtedness due Mortgagee pursuant to the terms of the debt secured by the Deed of Trust.

Notice of Rescission, Doc. 15–1. On August 27, 2012, Defendant filed a third application for foreclosure, Cause No. 2012–49290, which was granted. Doc. 1–3 ¶ 21.

On January 2, 2013, Callan filed suit in Texas state court for a declaratory judgment that more than four years had elapsed since the Deutsche's cause of action accrued and that the lien and power of sale had expired. Id. ¶ 10. She also requested costs and attorney's fees under § 37.009 of the Texas Civil Practice and Remedies Code. Id. ¶ 33–35. Defendant timely removed the case to this Court on the basis of diversity jurisdiction. Notice of Removal, Doc. 1.

On January 27, 2014, United States Magistrate Judge Frances Stacy issued a Memorandum and Recommendation (M & R) (Doc. 20) recommending Defendant's motion for summary judgment be granted and Plaintiff's motion for leave to file an amended complaint and cross-motion for summary judgment be denied. Plaintiff filed objections to the M & R (Doc. 21) and Defendant filed a response thereto. Doc. 22. On March 27, 2014, this Court declined to adopt the Magistrate Judge's M & R, granted Plaintiff's motion for leave to file an amendment complaint, denied Defendant's motion for summary judgment, and granted Plaintiff's cross-motion for summary judgment. Doc. 23.

II. Legal Standard

“A motion to alter or amend the judgment under Rule 59(e) must clearly establish either a manifest error of law or fact or must present newly discovered evidence and cannot be used to raise arguments which could, and should, have been made before the judgment issued.” Rosenblatt v. United Way of Greater Hous., 607 F.3d 413, 419 (5th Cir.2010) (internal citations omitted).

III. Applicable Law

The seminal case on abandonment of acceleration is San Antonio Real–Estate Bldg. & Loan Ass'n v. Stewart,

94 Tex. 441, 61 S.W. 386 (1901), in which the Texas Supreme Court held abandonment could be “inferred from the conduct and declarations of the parties as well as evidenced by their express stipulations.” Id. at 389. Sister courts have held “the conduct and declarations of the parties” (plural) include notices of rescission. Clawson v. GMAC Mortg. LLC, 3:12–CV–00212, 2013 WL 1948128, at *4 (S.D.Tex. May 9, 2013) ; Rosas v. America's Servicing Company, et al., 5:12–cv–00819–FB, Doc. 23 at 7 (August 23, 2013); DTND Sierra Investments LLC v. Bank of New York Mellon Trust Co., N.A., 958 F.Supp.2d 738, 750 (W.D.Tex.2013), appeal dismissed (Dec. 20, 2013); Leonard v. Ocwen Loan Servicing, LLC, CIV.A. H–13–3019, 2014 WL 4161769, at *4, *6 (S.D.Tex. Aug. 19, 2014) ; Gowing v. Seterus, Inc., 4:13–CV–2977, Doc. 29 at 1; Doc. 38, 2014 WL 4167498 at *2 (S.D.Tex. Aug. 20, 2014) ; Boren v. U.S. Nat. Bank Ass'n, CIV.A. H–13–2160, 2014 WL 5486100, at *1 (S.D.Tex. Oct. 29, 2014) ; but see In re Rosas, 520 B.R. 534, 543–44 (W.D.Tex.2014) (acknowledging this Court's Order (Doc. 23) but finding abandonment on other grounds).

Certain language in Stewart appears to prohibit unilateral abandonment by the lender. Id. at 388 (“It is not in the power of the creditor by his acts alone to change the rights of the parties resulting from the maturity of the debt.”). The issue of unilateral abandonment, however, was not before the court. The court found abandonment based on the fact that the debtor “paid off at different times twenty-nine of the seventy-two notes.... Both parties acted in connection with the notes as though no default had taken place....” Id. at 444, 61 S.W. 386 (emphasis added). The court nonetheless remanded for a factual determination of the issue,¹ noting that “mere delay in suing, or acceptance of partial payment of what is due, or other act of the creditor, alone will not take away his right to sue,” whereas the plaintiff lender's acceptance² of partial payment on the basis of numerous “verbal promises” created a fact question. Id. at 447, 61 S.W. 386 (emphasis added). Of course, “mere acceptance” by the lender is necessarily accompanied by tender of payment, which was undisputed. Given actual tender, it is not clear whether the debtor's verbal promises to pay made any difference to the court in establishing the debtor's agreement to abandon. But a genuine fact question remained as to the lender's intent in regard to the continued payment, e.g. whether the lender intended to apply continued payments to the accelerated balance or to unaccelerated installments. The court concluded unilateral acts of the creditor, as well as inaction, do not sufficiently show the lender's intent to abandon acceleration, nor give the borrower adequate notice of intent to abandon.³ Stressing the point, the court said the lender does not have the “power” to impliedly waive his express rights provided in the acceleration clause. Whether the lender has the power to abandon those rights expressly is another question, which was not under consideration by the court.

A more explicit reason Stewart does not reach unilateral abandonment is the particular acceleration clause at issue was automatic upon default, rather than optional as in subsequent cases and in Deutsche's loan and most contemporary loans. The court held, under an automatic clause, unilateral actions by the lender by himself are insufficient to show abandonment:

When the proposition is established that the failure to pay an installment ipso facto gives rise to the cause of action upon the whole debt [i.e., under an automatic clause], it necessarily follows that mere delay in suing, or acceptance of part of what is due, or other act of the creditor, alone will not take away his right to sue, and, if that right continues, limitation runs against it.

The court acknowledged courts examining optional acceleration clauses reached opposite results:

Authorities⁴ holding that by acceptance of payment of overdue installments, or extension of time upon an installment, and other like acts, the creditor waives the default, are relied upon, but those are decisions in which the contract is regarded as only giving to the creditor the right of election.

Id. at 388. The preceding passages appear to exclude the issue of unilateral rescission under an optional acceleration clause from the scope of the opinion. The court goes on, however, in an oft-quoted but oblique passage, to make a general pronouncement against unilateral abandonment:

It is not in the power of the creditor by his acts alone to change the rights of the parties resulting from the maturity of the debt.... But, aside from this, while neither party by his separate action or nonaction could impair the rights of the other, each could waive his own rights as they accrued from the default in payment of an installment so as to estop him from relying upon such default. To accomplish this, it would only be necessary that each should so act as to justify the other in believing and acting upon the belief that the effect of the failure to pay an installment was to be

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