Nat'l City Bank of Ind. v. Ortiz

• Decision Date: 19 July 2013
• Docket Number: Nos. 14–10–01125–CV, 14–10–01262–CV.,s. 14–10–01125–CV, 14–10–01262–CV.
• Citation: 401 S.W.3d 867
• Parties: NATIONAL CITY BANK OF INDIANA and National City Home Loan Services, Inc., Appellants/Cross–Appellees v. Albert ORTIZ, Appellee/Cross–Appellant. In re Albert Ortiz, Relator.
• Court: Texas Court of Appeals

401 S.W.3d 867

NATIONAL CITY BANK OF INDIANA and National City Home Loan Services, Inc., Appellants/Cross–Appellees

v. Albert ORTIZ, Appellee/Cross–Appellant.In re Albert Ortiz, Relator.

Nos. 14–10–01125–CV, 14–10–01262–CV.

Court of Appeals of Texas, Houston (14th Dist.).

May 16, 2013.

Rehearing Overruled July 19, 2013.

Stephanie Laird Tolson, Houston, for Appellants in No. 14-10-01125-CV.

Robert T. Owen, Martin J. Siegel, Michael C. Donovan, Levon G. Hovnatanian, Houston, for Appellee in No. 14-10-01125-CV.

Michael C. Donovan, Houston, for Relator in No. 14-10-01262-CV.Kari Lynn Robinson, Kristen Brauchle, Joel W. Mohrman, Houston, for Real Parties In Interest.

Panel consists of Justices FROST, BROWN, and CHRISTOPHER.

OPINION ON REHEARING

TRACY CHRISTOPHER, Justice.

We withdraw our opinion and vacate our judgment of November 20, 2012; grant appellee's amended motion for rehearing in part and deny it in part; deny appellants' motion for rehearing as moot; and on rehearing, issue this opinion and its accompanying judgment.

In this opinion on rehearing, we address cross-appeals and a mandamus petition arising out of the foreclosure of a residential property. The borrower, Albert Ortiz, sued the bank and its mortgage servicer for a variety of claims including wrongful foreclosure, breach of contract, negligence, trespass to real property, trespass to personalty, and conversion. The bank counterclaimed to recover on the note and to judicially foreclosure the deed-of-trust lien, and the borrower responded that the bank's representative had signed letter agreements waiving and releasing the bank's claims. The trial court granted summary judgment in favor of the borrower on his wrongful-foreclosure claim, set aside the foreclosure sale, and restored title in the property to the borrower. The trial court also granted partial summary judgments allowing the bank to pursue claims under the deed of trust, but not to pursue claims arising from the promissory note. After a jury trial, the trial court rendered judgment in the borrower's favor on his claims for breach of contract, trespass to personalty, and gross negligence, and ruled against the bank and mortgage servicer on all of their claims, instead declaring that the borrower had no further obligations under the note and deed of trust.

The effect of the trial court's judgment was to award the home to the borrower free and clear of all debt on this loan (on which he had repaid none of the $472,000 principal) and to additionally award him damages and attorney's fees in the amount of $497,600.

We conclude that the trial court erred in (a) granting summary judgment in Ortiz's favor on his argument that the bank waived or released its claims, and in incorporating the erroneous interlocutory rulings into the final judgment; (b) denying the bank's claim for judicial foreclosure; and (c) declaring that the note and deed of trust are “fully, completely and finally satisfied and no past, present, or further obligations or sums are or shall become due and owing.” The trial court did not err, however, in (d) applying the one-satisfaction rule to limit the damages awarded to Ortiz, (e) failing to render judgment that the bank's judicial-foreclosure claim was time-barred, or (f) denying Ortiz's motion to expunge the notice of lis pendens. In light of our disposition of these issues, we deny Ortiz's petition for a writ of mandamus, affirm the judgment in part, reverse it in part, and remand the case for retrial of the bank's claim for judicial foreclosure, which we conclude is not time-barred, and the breach-of-contract claims between the bank and Ortiz.

I. Factual and Procedural Background

On March 15, 2004, Albert Ortiz, the plaintiff below, purchased a house (“the Birdsall Property” or “the Property”), and financed it by executing a promissory note (“the Note”) secured by a deed of trust (“the Deed of Trust”). At all material times, defendant National City Bank of Indiana (“National City”) was the owner and holder of the Note and the beneficiary of the Deed of Trust, and defendant National City Home Loan Services, Inc. (“HLS”) was the mortgage servicer.¹

Under the terms of the Deed of the Trust, Ortiz was required to maintain insurance on the home. If he failed to do so, then National City was permitted to insure the Property and treat the amounts expended for insurance as additional secured debt. Although Ortiz's privately purchased insurance was still in effect at this time, HLS sent a notice to Ortiz on September 1, 2004 that it had insured the Property and charged his escrow account for the annual premium shown on the policy it enclosed with the notice; however, HLS sent the letter to the wrong address. The premium on the policy enclosed with the letter was $10,903.00; with taxes and surcharges, the total amount charged was $11,442.70. As Ortiz later testified, HLS (a) applied Ortiz's mortgage payments to this insurance purchase, and in a telephone conversation with Ortiz, demanded that he make additional payments to cover the resulting deficiencies; (b) made a negative report to a credit bureau based on the erroneous conclusion that Ortiz had not paid all that was due; and (c) learned of its mistake and agreed to correct the negative report to the credit bureau, but failed to do so.

Ortiz consistently paid late or missed payments. On November 1, 2005, HLS mailed Ortiz a notice of its intent to accelerate the loan, and on December 21, 2005, HLS notified Ortiz by mail that it had accelerated the loan, but these letters also were misaddressed. During this same time period, HLS caused the locks at the home on the Property to be changed, and although Ortiz did not reside there, he kept personal property there that was never returned to him.

At the request of Ortiz's attorney, HLS faxed the misaddressed documents concerning acceleration of the loan to Ortiz's attorney on January 13, 2006. By that time, a foreclosure sale had been scheduled for February 7, 2006. Although that sale did not take place, Ortiz continued to miss payments, and the Property was posted for a foreclosure sale to occur on June 6, 2006. That morning, Ortiz filed a lawsuit against National City and HLS (collectively, the “Bank Parties”) to enjoin the sale. The trial court denied Ortiz's request for a temporary restraining order, and National City purchased the Property.

Less than three weeks later, Ortiz's attorney Michael Donovan bypassed HLS's counsel and contacted an HLS employee directly, asking the employee to execute a proposed letter agreement that Donovan had drafted. The employee was not an attorney, and he forwarded the letter to another non-attorney employee who signed the letter agreement as an “Authorized Representative” of HLS and of National City's predecessor. Two weeks later, Donovan again bypassed HLS's attorney and sent a proposed amendment to the letter agreement to the employee who had signed the first letter. The employee signed and returned the amendment as the authorized representative of National City. In these two letters (“the Letter Agreements”), National City stated that it “releases and waives any and all actual and potential demands and claims regarding any obligations or liabilities of [Ortiz], in connection with the [Property], including the note and deed of trust associated with such property.”

Two months later, Ortiz filed another suit against the Bank Parties. Over the course of the litigation, he amended his petition eight times to add more parties and causes of action. As relevant to the issues presented here, he ultimately asserted that National City was liable to him for wrongful foreclosure and breach of the Deed of Trust, and that both of the Bank Parties were liable for negligence, conversion, trespass to realty, and trespass to personalty. Ortiz also requested a declaratory judgment that (a) he owes no further debt whatsoever to National City under the Note, the Deed of Trust, or otherwise, even if the trial court were to set aside the foreclosure sale; (b) through the Letter Agreements, National City waived or released its claims against Ortiz concerning his indebtedness under the Note and the Deed of Trust; and (c) the Letter Agreements do not fail for lack of consideration. In response to Ortiz's allegations regarding the Letter Agreements, National City raised the affirmative defense that the purported agreements were unsupported by consideration. National City also asserted counterclaims for breach of the Note and for judicial foreclosure of its lien on the Birdsall Property. In addition, National City asked for declaratory judgment that (a) the Letter Agreements are void because Ortiz's counsel obtained them by directly contacting a party that he knew was represented by counsel, thereby violating Texas Disciplinary Rule of Professional Conduct 4.02; and (b) if the foreclosure sale is void, then National City's deed-of-trust lien is valid, the debt is revived, and National City may proceed with a new foreclosure.

The trial court granted a partial summary judgment in Ortiz's favor as to his wrongful-foreclosure claim. In an order signed October 28, 2008, the trial court set aside the trustee's deed conveying title in the Property to National City and ordered title in the Property restored to Ortiz. That ruling is not challenged in these proceedings.

In a number of different explicit and implicit rulings, the trial court addressed the parties' arguments about the validity and effect of the Letter Agreements. In April 2009, the trial court granted Ortiz's motion for partial summary judgment on “Defendants' counterclaims” concerning the Letter Agreements. In June 2010, the trial court ruled again on the same summary-judgment motion and on an additional summary-judgment motion concerning Ortiz's claims and affirmative defenses on the same subject. In the June 2010 ruling, the trial court stated “findings” that the Letter Agreements (a) “lack...