In re Estate of Hardesty

• Decision Date: 18 November 2014
• Docket Number: No. 06–13–00048–CV.,06–13–00048–CV.
• Citation: 449 S.W.3d 895
• Parties: In re The ESTATE OF Carolyn C. HARDESTY, Deceased.
• Court: Texas Court of Appeals

449 S.W.3d 895

In re The ESTATE OF Carolyn C. HARDESTY, Deceased.

No. 06–13–00048–CV.

Court of Appeals of Texas, Texarkana.

Submitted Sept. 10, 2014.

Decided Nov. 18, 2014.

James C. Mosser, Alexis F. Steinberg, Mosser Law, PLLC, Dallas, TX, for appellant.

Joseph P. Regan, Winstead PC, Fort Worth, TX, Brian T. Morris, Winstead PC, David M. O'Dens, SettlePou, Dallas, TX, for appellee.

Before MORRISS, C.J., CARTER and MOSELEY, JJ.

OPINION

Opinion by Justice MOSELEY.

This is the appeal by Kenneth Hardesty (Hardesty) of his lawsuit against PrimeLending, a PlainsCapital Company (PrimeLending), and CitiMortgage, Inc. (CitiMortgage), for declaratory relief and fraud in connection with the foreclosure of a $500,000.00 home equity loan secured by real property owned by his mother, Carolyn C. Hardesty, deceased. We affirm the trial court's judgment because, even though Hardesty had standing to bring the declaratory judgment action, (1) the probate court had jurisdiction to enter the foreclosure order and adjudicate the constitutional claims that were raised, (2) Hardesty's claim that the lien is invalid is barred by limitations, (3) the statute of frauds bars Hardesty's fraud claim against CitiMortgage, and (4) the trial court acted within its discretion to award attorney fees to CitiMortgage.

I. Factual and Procedural Background

In July 2004, Carolyn took out a $500,000.00 loan in favor of PrimeLending secured by a home equity lien, classified as an extension of credit as defined by Article XVI, Section 50(a)(6)(A) of the Texas Constitution. The loan was secured by a deed of trust on Carolyn's home, located at 914 Parkview Lane in Southlake, Tarrant County, Texas (the Property).¹ At the time of closing, Carolyn (a single woman who occupied the Property as her homestead) executed a sworn fair market value agreement, indicating the property securing the loan was valued at $625,000.00. Although Hardesty assisted Carolyn in acquiring the home equity loan, he was not a party to the underlying loan transaction with PrimeLending.² CitiMortgage took over servicing of the loan effective October 2005.³

In November 2007, Carolyn passed away, devising the Property to Hardesty in her will. Following Carolyn's death, CitiMortgage and Hardesty entered into an alleged oral agreement whereby CitiMortgage would pay the ad valorem taxes assessed against the Property if Hardesty would pay the monthly mortgage payments. This agreement would continue until Hardesty “could get title to the Property.” Ten days after Hardesty obtained title, he was to repay CitiMortgage for the tax payments it had paid on the Property. Thereafter, Hardesty paid the monthly mortgage payments on the Property for more than two years after Carolyn's death. CitiMortgage paid taxes on the Property for the years 2007 through 2011.

In July 2010, CitiMortgage initiated a foreclosure proceeding by filing an application for foreclosure of real property pursuant to Section 306(e)(3) of the Texas Probate Code.⁴ The Estate allowed the claim in full as a valid preferred debt and lien against the Property, to be paid according to the terms and conditions of the loan agreement. After a hearing, the trial court issued an order in December 2010 authorizing foreclosure of the lien. CitiMortgage posted a notice of trustee's sale for February 1, 2011.⁵ In January 2011, Hardesty notified PrimeLending and CitiMortgage in writing that he believed the home equity loan and deed of trust were violative of the Texas Constitution and invited them to cure the defect within the time allowed by law. No action was taken to cure the alleged defect.

On the date of the scheduled foreclosure sale, Hardesty obtained a temporary restraining order (TRO) in a District Court of Tarrant County to prevent CitiMortgage from foreclosing on the Property. The TRO was issued in conjunction with a petition filed by Hardesty for a declaratory judgment that the home equity loan violated Article XVI, Section 50(a)(6)(B) of the Texas Constitution because the loan amount exceeded eighty percent of the value of the home. In making this allegation, Hardesty relied on the Tarrant County Appraisal District's records, which indicated that the Property carried an appraised market value on its rolls of $474,500.00 from 2003 through 2006. Hardesty claimed that the $500.000.00 loan thus exceeded the constitutionally-prescribed eighty percent loan-to-value ratio maximum. Hardesty further alleged that notice of this defect was provided to PrimeLending and CitiMortgage in accord with Article XVI, Section 50(a)(6)(Q)(x) of the Texas Constitution. Hardesty's petition requested judgment declaring the lien to be void and (in the event the defendants failed to correct this defect within sixty days of such notice) sought forfeiture of all principal and interest under the note.

PrimeLending filed a general denial answer, further affirmatively pleading that Hardesty lacked standing to bring the declaratory judgment action and that his claims were barred the applicable statute of limitations.⁶ CitiMortgage alleged that Hardesty's claims that were based on the allegation that the loan and its securing lien were made in violation of the Texas Constitution were barred by limitations. It further alleged that Hardesty was barred from asserting the alleged constitutional violation, stating that it was entitled to conclusively rely on the written sworn acknowledgement of the Property's fair market value as signed by Carolyn at the time of the institution of the home equity loan in accord with Article XVI, Section 50(h) of the Texas Constitution. Finally, CitiMortgage contended that Hardesty's fraud claim based on CitiMortgage's alleged breach of its oral agreement to pay taxes on the Property and to forbear from foreclosing was barred by the statute of frauds, res judicata, and/or collateral estoppel. In an amended petition, Hardesty alleged that both PrimeLending and CitiMortgage were guilty of fraudulently inducing Carolyn to sign the note by falsely representing the Property's fair market value to be greater than it actually was.

In February 2011, CitiMortgage filed a motion to transfer, asking the probate court to transfer Hardesty's declaratory judgment action from the district court to the probate court where Carolyn's estate was pending. This motion invoked Section 4F of the Probate Code, which granted exclusive jurisdiction to the statutory probate court of a cause of action related to the probate proceeding, as its authority. See Tex. Prob.Code Ann. § 4F.

In response, Hardesty filed an anti-suit injunction in the district court, asking the district court to enjoin CitiMortgage from seeking a transfer of the district court case to Tarrant County Probate Court No. 2. Hardesty claimed the probate court had no jurisdiction for two reasons: (1) the district court case involved the constitutionality of CitiMortgage's lien and issues regarding the constitutionality of a lien cannot be determined by a statutory probate court and (2) a foreclosure application for a home equity loan must (according to the 2010 version of Rule 736 of the Texas Rules of Civil Procedure which was then in force and effect) be filed in the district court. See Tex.R. Civ. P. 736, 61 Tex. B.J. 226 (1998, amended 2000).

The district court denied Hardesty's anti-suit injunction. The probate court thereafter granted CitiMortgage's motion to transfer the district court case to the Probate Court No. 2 of Tarrant County.

The Probate Code specifically provided that a statutory probate court possessed the power to transfer to itself a cause of action “related to” a probate proceeding pending in the probate court. Tex. Prob.Code Ann. § 5B(a). In addition, a probate court was permitted under the Probate Code to “exercise pendent and ancillary jurisdiction as necessary to promote judicial efficiency and economy.” Tex. Prob.Code Ann. § 4A(b). Accordingly, the probate court possessed the power to transfer the pending district court case to itself.

Once it was settled between the two courts that the matter would be tried in the probate court, CitiMortgage and PrimeLending began their offensive. PrimeLending led the attack with its motion for partial summary judgment, which primarily focused on its allegation that Hardesty lacked standing to bring suit on behalf of Carolyn's estate. While PrimeLending did not contest Hardesty's status as an heir to Carolyn's estate and further acknowledged Hardesty's ownership of the Property, it nevertheless contended that Hardesty lacked standing to sue on behalf of the estate, maintaining that the personal representative of the estate had the exclusive right to bring such suits. PrimeLending further attacked Hardesty's standing to contest the validity of the loan on the basis that Hardesty was a stranger to the loan transaction. PrimeLending argued that in the absence of a survival claim, Hardesty had no relationship with the proceedings and had no justiciable interest in its outcome.

A secondary argument for summary judgment included the statute of limitations, which PrimeLending claimed had run on each of Hardesty's causes of action. It claimed that the statute of limitations for a declaratory judgment action—in regard to the constitutionality of the lien—is four years. See Tex. Civ. Prac. & Rem.Code Ann. § 16.051 (West 2008). Moreover, the statute of limitations applicable to an action for fraud is four years. See Tex. Civ. Prac. & Rem.Code Ann. § 16.004 (West 2002). PrimeLending argued that these limitations periods expired well before Hardesty filed his action, as the loan closing date was July 23, 2004. PrimeLending also argued Hardesty knew of the alleged misrepresentations regarding the loan-to-value ratio at the time of closing. Hardesty's petition was not filed until February 1, 2011.

Hardesty responded, claiming that as the rightful owner of the Property and holder of the deed, he was entitled to all of the rights and obligations associated with...