EMC Mortgage Corporation v. Jones, No. 05-06-00419-CV (Tex. App. 8/30/2007)

Decision Date30 August 2007
Docket NumberNo. 05-06-00419-CV.,05-06-00419-CV.
CourtCourt of Appeals of Texas

Page 1

No. 05-06-00419-CV.
Court of Appeals of Texas, Fifth District, Dallas.
Opinion Filed August 30, 2007.

On Appeal from the 382nd Judicial District Court, Rockwall County, Texas, Trial Court Cause No. 1-04-288.

VACATE and REVERSE and REMAND in part, AFFIRM in part.



Opinion By Justice RICHTER.

EMC Mortgage Corporation (EMC) challenges a jury verdict awarding Mark and Patricia Jones actual and punitive damages for violations of the Deceptive Trade Practices-Consumer Protection Act ("DTPA"), the Texas Debt Collection Practices Act ("DCPA"), common law unreasonable collection efforts, breach of escrow, and negligent misrepresentation. In ten issues, EMC contends there is no evidence to support the jury's liability and damage findings on these claims. EMC further asserts the trial court abused its discretion when it extended an agreed temporary injunction through appeal. We will vacate the portion of the judgment extending the temporary injunction, affirm in part, reverse and render in part, and remand in part.


A. Factual Background

In July 2001, Mark and Patricia Jones purchased a home in Rockwall, Texas, and enjoyed a credit rating that allowed them to complete the purchase with no down payment. The $360,000 purchase price was financed in part with a thirty-year mortgage for $252,000 from the North American Mortgage Company. Because the Joneses desired to make certain improvements to the property, they also entered into a separate escrow agreement. The escrow agreement provided that $50,000 of the North American loan would be held in escrow for the construction of a swimming pool, a fence, and landscaping. Funds were to be disbursed from the escrow account upon the lender's receipt of written authorization from the Joneses. The remainder of the property's purchase price was financed with a second fifteen-year mortgage from International Bank of Commerce. The North American mortgage was subsequently transferred to Washington Mutual for servicing.

A little more than a year after the Joneses purchased their home, Mark Jones was laid off from his job as a pharmacist and was unemployed for several months. The Joneses fell behind on their mortgage payments and were in default under the terms of the first mortgage. By December 2002, Washington Mutual had scheduled a foreclosure sale for May 6, 2003.

The Joneses began working with the homeowner's assistance program at Washington Mutual. The parties agreed that if the Joneses would make three monthly payments that were higher than the regularly scheduled payment, Washington Mutual would then evaluate whether to enter into a loan modification agreement that would bring the mortgage current. Because of the potential loan modification, Washington Mutual directed that the May foreclosure sale be postponed until June 3, 2003.

The Joneses made the higher monthly payments, and Washington Mutual approved the loan modification. While the Joneses were waiting for Washington Mutual to send them the loan modification documents, they learned that the mortgage would be transferred to EMC.

Shortly after the mortgage was transferred, Mark Jones (Jones) contacted EMC to verify that the loan modification was in order. Jones spoke with Joanne Jaime, an EMC employee. According to Jones, Jaime assured him that EMC would honor the loan modification. Throughout the month of May, Jones waited for EMC to send the modification paperwork. He would contact Jaime periodically to check on the progress. Each time he called, Jaime assured him that the paperwork was being processed and would be mailed soon.

On June 11, 2003, Jones contacted Jaime again. Once again, Jaime advised that everything was fine, and Jones should just be patient. Jones also testified that Jaime assured him that the June foreclosure date and all future foreclosure dates had been blocked.

The next evening, a "very large, intimidating man" appeared on the Joneses' doorstep, pounding on the front door. When Jones answered the door, the man stated that he was there on behalf of EMC, and made his way into the foyer of the house. The large man began yelling and screaming, demanded the keys to the house, and told the Jones family to get out. When Jones told the man that there had been some mistake, the man told Jones that he no longer owned the house because it had been sold at a foreclosure sale. The man told the Jones family to immediately remove their furniture and possessions from the home, and threatened to throw it all on the front lawn if they did not comply.

After the large man left the Jones residence, Jones frantically attempted to contact Jaime. He left numerous voice mail messages that evening and throughout the next day. He also left voice mail messages for another EMC employee with whom he had spoken in the past. No one from EMC returned his calls. Jones never heard from Jaime again.

As of June 16, 2003, Jones had yet to hear from EMC, so he sent a letter to the president of EMC requesting an explanation. EMC responded by sending Jones the first in a series of form letters promising a response within sixty days. At some point in this time frame, the Joneses also received a letter from a law firm dated June 13, 2003, giving the Joneses three days to vacate the property or sign an agreed judgment.

When Jones was finally able to reach EMC by telephone, EMC admitted that a foreclosure sale had inadvertently occurred and should be rescinded. EMC assured Jones that it would take immediate action, and that the loan modification process would be completed. EMC's records also reflect that EMC informed Jones once again that the loan modification documents would be mailed to him. The promised documents were never sent.

When it was time for Jones to begin making payments under the yet unexecuted modification agreement, he had still not received any of the documentation from EMC. Nonetheless, Jones hand-delivered to EMC three cashier's checks for three monthly mortgage payments. The checks were drafted in the amount of the increased monthly payment that was to be required under the modified loan. Each month thereafter, Jones continued to hand-deliver the increased monthly mortgage payment to EMC.

By letter dated July 18, 2003, EMC advised Jones that the foreclosure sale had been rescinded as a result of Washington Mutual's approval of the loan modification. At the time of the letter, however, the sale had not actually been rescinded. EMC did not complete this process until October 20, 2003-four months after representing that it had been done. In the interim, EMC continued to report the account as a foreclosure on the Joneses credit report, and the property remained titled to EMC. Jones later learned that at the time EMC foreclosed on the property it had not received an assignment of the deed of trust from Washington Mutual.

When EMC foreclosed on the property, it also inadvertently sent a letter to the Joneses' insurance company, causing the cancellation of the hazard insurance on the property. Apparently failing to recognize that it caused the cancellation, EMC sent a letter to Jones stating that the new insurance policy had not been received, and threatened to put forced-placed insurance on the property. By the time EMC received a refund from the insurance company for the cancelled insurance, it had already acknowledged that the foreclosure had occurred in error. Nonetheless, the funds were not used to immediately reinstate coverage. Despite Jones urging that EMC return the funds to the insurance company to reinstate coverage, it took EMC six months to rectify this error. During this time, the Jones residence was without insurance coverage.

In addition, when EMC foreclosed on the property, it added the attorney's fees it incurred in foreclosure to the balance of the loan. Although Jones disputed the addition of this amount to the account balance, it remains part of the balance EMC claims to be due.

EMC was also presented with a judgment for $10,000 entered against the Joneses in favor of the company that constructed a fence on the property. It is undisputed that EMC paid the $ 10,000, releasing the funds from the escrow account without obtaining the Joneses' consent.

Jones continued to correspond with EMC, endeavoring to complete the loan modification and to address the difficulties resulting from EMC's foreclosure. On numerous occasions, EMC's only response was the sixty-day form letter. Each letter indicated that EMC was in the process of attempting to collect a debt.

EMC admits that until November 2003, the loan modification process was ongoing. The payments the Joneses were making, however, were not being applied to principal or interest on the loan. Instead, EMC held the funds in a suspense account, and reported the account as delinquent. No interest accrued on the funds held in this account, although interest continued to accrue on the mortgage loan.

In November 2003, Jones received a telephone call from an EMC employee, Michelle Barton. Jones testified that Barton yelled, screamed, and was generally rude, so he hung up on her. According to EMC's records, Barton advised Jones that he would need to obtain a subordination agreement from International Bank of Commerce (the second lien holder) before a loan modification could be completed. EMC's records further indicate that when the call concluded, Barton made a note in the file that Jones was uncooperative. She then terminated the loan modification process and sent the file to foreclosure. The property was scheduled for foreclosure in May 2004, and this lawsuit ensued.

B. Procedural Background

The Joneses initiated this lawsuit and included a claim for wrongful foreclosure. Consequently, the trial court signed a temporary restraining order enjoining EMC's foreclosure on the property. On...

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