Chase Manhattan Mortg. Corp. v. Cook

• Decision Date: 17 June 2004
• Docket Number: No. 11-03-00182-CV.,11-03-00182-CV.
• Citation: 141 S.W.3d 709
• Parties: CHASE MANHATTAN MORTGAGE CORPORATION and Mortgage Electronic Registration Systems, Inc., Appellants, v. Stephanie Robin COOK, Appellee.
• Court: Texas Court of Appeals

141 S.W.3d 709

CHASE MANHATTAN MORTGAGE CORPORATION and Mortgage Electronic Registration Systems, Inc., Appellants, v. Stephanie Robin COOK, Appellee.

No. 11-03-00182-CV.

Court of Appeals of Texas, Eastland.

June 17, 2004.

Appeal from the 104th District Court, Taylor County, Lee Hamilton, J.

Craig A. Harris, David S. Morris, Winstead Sechrest & Minick, P.C., Dallas, Christopher M. Cammack, Cammack & Trana, Houston, for appellants.

Billy W. Boone, Abilene, for appellee.

Panel consists of: ARNOT, C.J., and WRIGHT, J., and McCALL, J.

Opinion

TERRY McCALL, Justice.

Stephanie Robin Cook brought this declaratory judgment action against Chase Manhattan Mortgage Corporation and Mortgage Electronic Registration Systems, Inc. (collectively Chase). Appellee Cook sought a declaratory judgment: (1) that a December 17, 1999, deed of trust was invalid because it contained an insufficient property description and (2) that the December 17, 1999, deed of trust was void and unenforceable as a lien against her homestead. She also sought to recover damages and attorney's fees. Chase contended that the deed of trust contained a sufficient property description. Alternatively, Chase sought reformation of the property description on the ground of mutual mistake. Chase also contended that the deed of trust created an enforceable lien against Appellee Cook's homestead. Following a nonjury trial, the trial court entered judgment: (1) granting Chase reformation of the property description in the deed of trust and (2) declaring that the deed of trust was void and unenforceable as a lien against Appellee Cook's homestead. The trial court awarded Appellee Cook damages in the amount of $7,266.92 and attorney's fees in the amount of $15,750.00. Chase appeals. We affirm.

Background Facts

Appellee Cook is the surviving spouse of Gilbert C. Cook, Jr. The Cooks were married in 1998. In 1992, Mr. Cook purchased property, consisting of two lots, in Taylor County. Later that year, Mr. Cook had a Jim Walter home constructed on the property. The Jim Walter home was the Cooks' homestead after they were married and remains Appellee Cook's homestead. In 1999, Mr. Cook obtained a $54,900.00 loan from Irwin Mortgage Corporation. On December 17, 1999, Mr. Cook signed a note payable to Irwin Mortgage Corporation in connection with the loan. On the same day, Mr. Cook and Appellee Cook signed a deed of trust in favor of Irwin Mortgage Corporation securing payment of the loan. This deed of trust is the subject matter of this cause. Irwin Mortgage Corporation assigned the note and deed of trust to Chase.

The Property Description Issue

The deed of trust provided that it covered the following described property: "See Exhibit `A' attached hereto and made a part hereof for all purposes." However, there was no Exhibit "A" attached to the deed of trust. The deed of trust provided that the street address of the property was "161 New York Hills, Merkel, Texas 79536." The trial court reformed the deed of trust to describe the property as follows:

A one (1) acre tract, being the North one (1) acre of Lot 5, Block B, New York Hills Estate, out of a 73.06 acre tract out of the D.B. Corley Survey No. 4, Taylor County, Texas.

Appellee Cook raised four cross-points in her brief contending that the trial court erred in reforming the property description. Appellee Cook withdrew her cross-points during oral argument. Therefore, the property description issue is not before this court for review.

The Homestead Issue

The deed of trust contained the following renewal and extension provision:

28. Purchase Money; Vendor's Lien; Renewal and Extension. [Complete as appropriate] The Note secured hereby is in renewal and extension, but not in extinguishment, of that certain indebtedness described on the Renewal And Extension Rider attached hereto and made a part hereof for all purposes.

The renewal and extension rider described the earlier indebtedness as follows:

Deed of Trust dated June 30, 1992, securing $57,600.00, executed by Gilbert C. Cook, Jr., in favor of Security State Bank as recorded in Volume 1861, Page 107, Official Public Records of Taylor County, Texas.

Appellee Cook presented the following evidence: (1) that Mr. Cook never obtained a $57,600.00 loan from Security State Bank; (2) that the deed of trust recorded in Volume 1861, Page 107, of the Official Public Records of Taylor County was not a deed of trust from Mr. Cook to Security State Bank; (3) that, in 1992, Mr. Cook had borrowed $5,760.00 from Security State Bank for the purpose of purchasing the two lots in Taylor County; (4) that Mr. Cook signed a deed of trust in favor of Security State Bank securing payment of the $5,760.00 note and providing Security State Bank with a vendor's lien on the two lots; (5) that Mr. Cook paid off the $5,760.00 Security State Bank note in 1996; and (6) that, on August 23, 1996, Security State Bank executed a release of its lien providing that the note had been paid in full. Based on this evidence, Appellee Cook contended that the December 17, 1999, deed of trust did not create a valid lien against her homestead because Mr. Cook's earlier indebtedness to Security State Bank had been extinguished in 1996.

After the evidence was concluded, Chase requested leave to file a trial amendment. Chase sought to allege a reformation claim based on an alleged mutual mistake in the renewal and extension rider of the deed of trust. Chase contended that the Cooks and Irwin Mortgage Corporation had intended to renew the indebtedness secured by the 1992 mechanic's lien instead of the Security State Bank note. Chase relied on a number of exhibits to support its reformation claim, including: (1) a December 2, 1992, mechanic's lien contract between Mr. Cook and Jim Walter Homes, Inc., covering one acre of property and providing to Jim Walter Homes, Inc., a purchase money security interest, described as a contractual mechanic's lien, on the home that was to be constructed on the property; (2) a December 17, 1999, settlement statement identifying the borrower as Mr. Cook, identifying the lender as Irwin Mortgage Corporation, providing for a loan amount of $54,900.00, and providing that $49,960.69 of the loan proceeds were to be used to "Payoff of 1st Lien Mid States Mortgage"; and (3) a January 25, 2000, release of the December 2, 1992, Jim Walter Homes, Inc. mechanic's lien, executed on behalf of First Union National Bank, by Mid-State Homes, Inc., its attorney-in-fact. However, no one from Irwin Mortgage Corporation testified about the loan to Mr. Cook, and Chase did not offer any testimony to explain the relationship, if any, among Jim Walter Homes, Inc., Mid States Mortgage, Mid-State Homes, Inc., and First Union National Bank.

The trial court denied Chase's request for a trial amendment, finding that the amendment was prejudicial to Appellee Cook. The trial court also found that the deed of trust was void and unenforceable as a lien against Appellee Cook's homestead.

Chase's Retention-of-Benefits Defense

Chase contended that the retention-of-benefits rule prevented Appellee Cook from repu-diating the deed of trust while, at the same time, retaining the benefits of the Irwin Mortgage Corporation loan. The trial court found that, because Chase could seek to enforce the Irwin Mortgage Corporation note against Mr. Cook's estate, the retention-of-benefits rule did not apply.

Issues Presented

Chase presents five issues for review. In its first issue, Chase complains that the trial court erred in holding that the retention-of-benefits rule did not apply. In its second issue, Chase contends that the trial court erred in denying its request for a trial amendment on the issue of the mutual mistake in the renewal and extension rider. In its third issue, Chase asserts that the trial court erred in holding that the deed of trust was void and unenforceable as a lien against Appellee Cook's homestead. In its fourth and fifth issues, Chase asserts that, if it prevails on its first, second, or third issue, then the trial court erred: (1) in awarding Appellee Cook attorney's fees and (2) in ordering that Chase return to Appellee Cook $6,666.92 in mortgage payments.

Issue of Validity of Deed of Trust

Chase's third issue raises the issue of whether the December 17, 1999, deed of trust created a lien against Appellee Cook's homestead. Chase argues that the trial court erred in finding that the deed of trust was void and unenforceable as a lien against Appellee Cook's homestead because Appellee Cook failed to allege specific facts showing that the lien created by the deed of trust was not valid and enforceable against her homestead under the Texas Constitution. Chase also contends that the deed of trust created an enforceable lien against Appellee Cook's homestead under the doctrine of subrogation.

TEX. CONST. art. XVI, § 50(a) provides that homesteads are protected from forced sale for the payment of debts except for certain specifically enumerated debts, including: (1) purchase money; (2) ad valorem taxes; (3) an owelty partition order or agreement; (4) a refinanced lien against the homestead; (5) a lien used for construction improvements; or (6) a credit extension. The party claiming a homestead exemption has the burden to prove that the property constituted a homestead at the time the deed of trust was executed. Burk Royalty Company v. Riley, 475 S.W.2d 566, 568 (Tex.1972); Gregory v. Sunbelt Savings, F.S.B., 835 S.W.2d 155, 158 (Tex.App.-Dallas 1992, writ den'd); Lifemark Corporation v. Merritt, 655 S.W.2d 310, 313 (Tex.App.-Houston [14th Dist.] 1983, writ ref'd n.r.e.). If the debtor meets this burden, then the creditor has the burden to prove that the debt falls within one of the excepted debts listed in Article XVI, section 50(a). Lifemark Corporation v. Merritt, supra at 314. The parties may renew and extend a lien against a homestead that was created by an earlier deed of trust....