Acceleration

Criminal Foreclosure Mills in Texas: The Loan Was Accelerated. No, Take that Back, It Wasn’t.

Invisible foreclosure mill lawyer Mark Hopkins is joined by Shelley Hopkins and more recently Bradley Attorney Lembke in PNC Bank v Howard.

IN THE SUPREME COURT OF TEXAS

PNC MORTGAGE, A DIVISION OF PNC BANK, N.A. SUCCESSOR TO NATIONALCITY BANK AND NATIONAL CITY MORTGAGE, A DIVISION OF NATIONAL CITY BANK OF INDIANA,

v.

JOHN HOWARD AND AMY HOWARD

AMENDED RESPONSE TO PETITION FOR REVIEW

Petitioners’ description of the nature and procedural history of this case is mostly accurate, except for the most important aspect in the extant proceeding – namely, that Petitioners have previously argued2 (and even stipulated) in the lower courts that the Note at issue herein was properly accelerated on June 19, 2009 and have never once asserted in any pre-trial pleading that said acceleration was “abandoned,” which they now contend in their petition for review.

As such, they are barred from presenting the point as an avoidance to the statute of limitations as they failed to affirmatively set forth same in any of their trial pleadings as required by Rule 94 of the Texas Rules of Civil Procedure.3

They are likewise barred from presenting the abandonment argument under the doctrine of judicial estoppel as they have previously been awarded a judgment in this matter on the Note in question while contending precisely the opposite by arguing that the Note was properly accelerated and not abandoned.4

2 Petitioners have repeatedly asserted that they satisfied all conditions precedent to their right to recover on the Note, which necessarily included a proper and unabandoned acceleration of the loan. See, inter alia, Appellants’ Brief in the court of appeals, dated 6.01.18, at p. 41.

3 In the trial court(s), Petitioners filed multiple answers and claims for affirmative relief and never once asserted the alleged “abandonment” as an avoidance to the statute of limitations.

See CR 29-30 (original answer, 199th Dist. Court),

152-167 (First Amended Answer, Counterclaims, and Request for Disclosure, 199th Dist. Court),

788-797 (Defendant’s Third Amended Answer and Counterclaims, 199th Dist. Court),

940-949 (Original Petition and Request for Disclosure, 417th Dist. Court),

954-964 (First Amended Petition).

Respondents, on the other hand, affirmatively presented limitations as a bar to Petitioners’ claims in each of the following pleadings:

See CR 521-528 (Plaintiffs/Counter-Defendants’ Supplemental Affirmative Defenses to Counterclaims, 199th Dist. Court),

769-787 (Fourth Amended Petition…and Affirmative Defenses, 199th Dist. Court),

950-953 (Defendants’ Original Answer, Affirmative Defenses and Request for Disclosures, 417th Dist. Court).

4 In its original opinion in this case, the Court of Appeals rendered judgment in favor of Petitioners on the Note in question.

PNC Mortg. v. Howard (Howard I), 618 S.W.3d 75, 85 – 87 (Tex. App.— Dallas 2019).

It should go without saying that Petitioners would not be entitled to said judgment under any circumstance unless the Note had been properly accelerated and never abandoned as judgment.

As such,

Petitioners take a position that is in irreconcilable conflict with a prior position which they have not only consistently asserted but have relied upon in obtaining a judgment.

STATEMENT OF JURISDICTION (RESPONSE)

Respondents respectfully disagree with Petitioners’ asserted basis for jurisdiction under Tex. Gov’t Code §22.001(a).

Respondents disagree that the Court of Appeals committed any predicate error of law allowing for discretionary review, in that the Court’s opinion is consistent with the existing pertinent case law, much of which consists of or is based on the Dallas Court of Appeals’ own rulings in other cases,5 and provides ample guidance for future litigants.

5 As discussed infra, the Dallas Court of Appeals makes clear in its most recent opinion that many of the cases cited by Petitioners as being in conflict with the holding at bar are premised upon a misinterpretation of the Dallas Court’s own rulings.

PNC Mortg. v. Howard (Howard II), No. 05- 17-01484-CV, 2021 Tex. App. LEXIS 7976 at **6-9 (Tex. App. Dallas, Sept. 17, 2021)(pet. filed).

Respondents further disagree with Petitioners’ assertion that this case is “important” to the jurisdiction of this state because, at its core, this case now consists of nothing more than a common limitations case arising from the failure of Petitioners’ trial counsel to conservatively calendar the probable limitations date.

In this case, however, the trial errors are compounded by Petitioners’ attempt in this proceeding to avoid the statute of limitations with the “defense” of abandonment of the underlying acceleration of the Note, despite having never affirmatively asserted same in their trial pleadings as required by Rule 946 of the Texas Rules of Civil Procedure. 7

Petitioners are further precluded from presenting the abandonment defense because they have previously asserted the opposite position in seeking and obtaining a judgment on the Note.

As such, this case is notable only for Petitioners’ multiple errors at both the trial and appellate stages in failing to timely file Petitioners’ claims and thereafter trying to raise on appeal matters that are barred by Rule 94 and the doctrine of judicial estoppel.8

Though certainly remarkable, such

6 Rule 94 provides, in pertinent part, that any “matter constituting an avoidance” must be “set forth affirmatively” in the party’s pleadings. Tex. R. Civ. P. 94.

7 Petitioners’ first mention of its “abandonment” theory was presented, over proper objection, at the trial of this cause. (RR vol. 3 at 19 – 20). The first mention in writing did not occur until a post-trial brief dated April 21, 2017 (CR 806 – 817). Such untimely references are not an adequate substitute for compliance with Rule 94’s mandate that such matters be affirmatively asserted in a defensive pleading.

8In its original opinion in this case, the Court of Appeals rendered judgment in favor of Petitioners on the Note in question. PNC Mortg. v. Howard (Howard I), 618 S.W.3d 75, 85 – 87 (Tex. App.— Dallas 2019). It should go without saying that Petitioners would not be entitled to said judgment under any circumstance unless the Note had been properly accelerated and never abandoned as the Note would otherwise remain unmatured and therefore an improper subject for such a suit and judgment. As such, Petitioners take a position that is in irreconcilable conflict with a prior position which they have not only consistently asserted but have relied upon in obtaining a judgment.

errors are not a proper basis for discretionary review by this Court at the urging of the party responsible for those errors. 910

ISSUE PRESENTED (RESTATED)

The Court of Appeals did not err in finding that Petitioners’ equitable subrogation claim had accrued by June 19, 2009 and was barred by limitations.

STATEMENT OF PERTINENT FACTS

In 2003, Respondents John and Amy Howard purchased a home with two (2) purchase money mortgages. (CR 799, 4) Approximately two (2) years later, the Howards refinanced the original mortgages and executed a new note and new deed of trust on the property.

The Howards then used the refinance proceeds to pay off

9 As such, Petitioners have not only acknowledged the propriety of the June 19, 2009 acceleration (which served as the event triggering the statute of limitations at issue herein) in an Agreed Statement of Facts (CR 801), but also in each and every one of their pleadings in the trial court by attesting that all “conditions precedent” to their right to collect on the note had been satisfied, including proper acceleration.

10 In addition to the foregoing, Petitioners argue that there is no “operative” acceleration of the Note now in place due to the alleged “abandonment of the June 19, 2009 acceleration. This is remarkable in several dubious respects, most notably because, again, it flies in the face of Petitioners’ prior arguments that the June 19, 2009 acceleration was not only “proper,” as stipulated by the parties in the Agreed Statement of Facts, but sufficient to support the existing judgment in favor of Petitioners on the Note. Simply put, Petitioners cannot have their cake and eat it, too. They have elected to accept the benefits of a finding that the Note was properly accelerated and not abandoned in order to obtain a judgment on the Note, and they are therefore judicially estopped from claiming the contrary in the extant proceeding.

the existing mortgages.

(Id. at ¶5.)

The new note and deed of trust were later assigned to National City Bank.

(CR 800, 7, 8).

The Howards ceased making payments on the note during the financial crisis of 2008.

(CR 80, 14).

Thereafter, National City Bank notified the Howards of their default and advised that the maturity date of the loan would be accelerated unless the default was cured.

(Id. at ¶15).

The note was then accelerated on June 19, 2009.

(Id. at 17)

In November of 2009, PNC became the owner and holder of the Note. By filed stipulations of fact, all parties agreed that the June 19, 2009 acceleration was in all respects proper.

(CR 801, ¶19).

Pursuant to the June 19, 2009 acceleration notice, the property was sold at foreclosure auction on or about April 6, 2010 by the wrong bank.

(CR 802, ¶9).

Respondent Amy Howard filed for personal bankruptcy protection during the interim between the June 19, 2009 acceleration and the actual sale of the property on April 6, 2010.

(CR 801, ¶22).

The parties stipulate that Amy’s bankruptcy was dismissed on or about February 11, 2010 – approximately two (2) months prior to the foreclosure sale.

(CR 802, ¶ 27).

On April 16, 2010, Respondents filed their Original Petition in this action (CR 22-28), wherein the Howards asserted, inter alia, that the foreclosure sale was conducted on behalf of the wrong banking entity and therefore void.

On January 8, 2015 – more than five (5) years after the Note was fully matured by virtue of its “proper” acceleration on June 19, 2009 — Petitioners filed their First Amended Answer and Counterclaims, which included for the first time Petitioners’ claim for equitable subrogation.

(CR 152; 804, ¶33).11

The Howards responded by asserting the four (4) year statute of limitations as a bar to Petitioners’ claim, further arguing that the cause of action accrued at the time of the June 19,, 2009 acceleration.

(CR 520-523).

Petitioners would also bring suit on the Note itself in a separate filing that was later consolidated in Respondents’ suit.

(CR 1308).

Following a complicated procedural history, the Court of Appeals ultimately concluded that Petitioners were entitled to recover on the Note, as that cause of action was governed by the six (6) year statute of limitations pertaining to negotiable instruments and was therefore timely filed.

PNC Mortg. v. Howard (Howard I), 618 S.W.3d 75, 87 (Tex. App. – Dallas 2019).

The Court further held, however, that the equitable subrogation claim was governed by the four (4) year limitations period prescribed by section 16.035 of the Texas Civil Practice and Remedies Code and was time barred.

PNC Mortg. v. Howard (Howard II), No. 05-17-01484-CV, 2021 Tex. App. LEXIS 7696 at **11-12 (Tex. App. Dallas, Sept. 17, 2021) (pet. filed).

11 The parties have stipulated that the January 8, 2015, filing was the first instance in which Petitioners asserted any claim for affirmative relief. (CR 804).

In so holding, the Court of Appeals specifically held that Petitioners’ equitable subrogation claim accrued on June 19, 2009, the date the Note was properly accelerated as stipulated by the parties.

The Court of Appeals reasoned that

“The Statute of Limitations on foreclosures would be rendered meaningless if lenders could always avoid it simply by claiming equitable subrogation.”

Howard II, 2021 Tex. App. LEXIS at **9, 11-12.

It is from this holding that the present proceeding arises.

Petitioners’ contentions throughout the complicated history of this case have varied from moment to moment and brief to brief.

In the proceedings in the Court of Appeals, for example, Petitioners argued that its equitable subrogation claim was timely as it was governed by the six (6) year limitation period prescribed for the enforcement of negotiable instrument.

(Appellants’ Supp. Brief 3-5, 6-10).

Realizing the folly of this position, Petitioners now offer an even more incredulous argument by asserting that the June 19, 2009 acceleration was “abandoned” by virtue of Amy Howard’s bankruptcy filing on August 31, 2009, thereby effectively rescinding the June 19, 2009 acceleration.

(Pet. for Review 3-7)

From this, Petitioners argue that no “operative” acceleration of the Note exists and that they would even be justified in asserting its claims anew under a new acceleration notice should they so choose.

Id. at 6, fn 2).

What Petitioners do not explain, however, is how they can now contend that no operative acceleration of the Note exists when they have already obtained a judgment on the Note under their prior argument that the June 19, 2009 acceleration was in all respects proper and never “abandoned.”

As discussed at length below, Petitioners’ eleventh-hour assertion of abandonment as an avoidance to the statute of limitations is improper, untimely, misplaced, and just plain wrong from both a procedural and substantive standpoint.

On the procedural side, Petitioner’s abandonment argument is doomed because it constitutes an “avoidance” to the statute of limitations that was never affirmatively asserted in any of Petitioners’ pre-trial pleadings as required by Rule 94 of the Texas Rules of Civil Procedure.

Furthermore, Petitioners are judicially estopped from asserting the abandonment theory because they have previously taken the exact opposite position by seeking and obtaining a judgment on the Note under the theory that the June 19th acceleration was proper and in full force and effect at all times pertinent herein.12

On the substantive side, Petitioners’ argument would fail even if abandonment had been properly asserted as Amy Howard’s bankruptcy was dismissed prior to the foreclosure sale of Respondent’s home.

As discussed below, the pertinent law is clear that the dismissal of the bankruptcy returned the parties to the status quo ante with the acceleration in full force and effect.

12 The conflict between the two positions could not be more clear as there simply can be no viable suit on an unmatured, unaccelerated Note.

Proper acceleration is, without question, a condition precedent, which Petitioners allege they complied with, in any Note collection case.

SUMMARY OF THE ARGUMENT

Discretionary review should not be granted in this case for myriad reasons.

First, review should be denied because Petitioners’ argument is largely based on an abandonment theory that has not been properly asserted in prior proceedings and which they are judicially estopped from presenting in the present proceeding.

Review should also not be granted on conflict grounds as the Court of Appeals’ opinion clearly distinguishes the cases upon which Petitioners rely, virtually all of which have no direct bearing on the issues in this case, thereby providing ample guidance for future litigants in analogous circumstances.

ARGUMENT AND AUTHORITIES

I. This Court Should Not Consider Petitioners’ Improperly Asserted “Abandonment” Theory

A. Petitioners’ Abandonment Argument is Not Properly Before the Court

Although of questionable significance to the task at hand, Petitioners spend virtually the entire first half of their petition for review arguing that the statute of limitations presents no barrier to their claims in this case because the June 19, 2009, acceleration of the Note was purportedly “abandoned” by virtue of Respondent Amy Howard’s bankruptcy filing in August of 2009.

This, Petitioners argue, had the effect of nullifying the acceleration and effectively precluded the limitations period from continuing to run.

As such, Petitioners seek to use the alleged “abandonment” as an avoidance to the statute of limitations. 13

Unfortunately for Petitioners, they base the foregoing on a premise unasserted in any of their pre-trial pleadings.

Indeed, a review of Petitioners’ relevant pleadings reveals not a single reference to this so-called abandonment theory.

As such, Petitioners’ failure to affirmatively plead the matter as required by Rule 94 of the Texas Rules of Civil Procedure constitutes a waiver of any right to present the argument in these proceedings.

As stated by this Court, in Woods v. William M. Mercer, Inc., 769 S.W.2d 515 (Tex. 1988),

“A defendant who has established that the suit is barred cannot be expected to anticipate the plaintiff’s defenses to that bar. A matter in avoidance of the statute of limitations that is not raised affirmatively by the pleadings will, therefore, be deemed waived.”

Id. at 518 (citing Tex. R. Civ. P. 94; B.L. Nelson & Assoc. v. City of Argyle, 535 S.W.2d 906, 911 (Tex. Civ. App. — Fort Worth 1976, writ ref’d n.r.e.)).

Accordingly, it is respectfully submitted that this Court should not even consider Petitioners’ abandonment theory in its deliberations on the petition for review.

B. Judicial Estoppel Precludes Consideration of Abandonment

13 Petitioners find themselves in the same circumstances as a party asserting the discovery rule as an avoidance to the statute of limitations: they must affirmatively raise the point in their pleadings or their right to argue same is waived.

See Woods, 769 S.W.2d at 517–518.

Petitioners conspicuously decline to advise the Court that they have previously sought and obtained a judgment on the Note itself in this matter and were only able to do so by arguing that the Note in question was in fact properly accelerated on June 19, 2009 and that same was not abandoned.14

They now, of course, argue the inverse from a defensive posture.

This is exactly the type of scenario that the doctrine of judicial estoppel is designed to prevent.

Judicial estoppel precludes a party who successfully maintains a position in one proceeding from afterwards adopting a clearly inconsistent position in another proceeding to obtain an unfair advantage.

Ferguson v. Bldg Materials Corp. of Am., 295 S.W.3d 642, 643 (Tex. 2009);

Pleasant Glade Assembly of God v. Schubert, 264 S.W.3d 1, 6-7 (Tex. 2008).

This rule is designed not to punish inadvertent omissions, but instead to “prevent parties from playing fast and loose with the judicial system for their own benefit.”

Id.

Simply put, there could be no clearer example of a litigant playing “fast and loose” and “both sides of the table” than the one presented here.

Under the authorities just cited, and many others, a party simply cannot argue that an acceleration has been “abandoned” when attempting to avoid a limitations defense after having first obtained a judgment premised upon the inverse of that argument.

Because that is exactly what Petitioners attempt to do, the doctrine of judicial estoppel clearly precludes consideration of Petitioners’

14 Had the Note been abandoned, it would remain “unmatured” under Petitioners’ theory, thereby depriving Petitioners of any basis for bringing suit on the Note.

abandonment “defense” in the present matter or any others that may follow.

They simply cannot be allowed to have their cake and eat it, too.

C. Petitioners’ Abandonment Argument Would Fail Even if Properly Presented

As previously noted, Petitioners’ equitable subrogation claim accrued on June 19, 2009, when, pursuant to the parties’ stipulation, the Note was “properly” accelerated.

(CR 801).

Despite this stipulation, Petitioners now argue that the Note was “unaccelerated” or “abandoned” by Amy Howard’s 2009 Bankruptcy filing.

That simply is not the law in Texas.

In Khan v. GBAK Properties, Inc., 371 S.W.3d 347 (Tex. App. – Houston [1st Dist.] 2012, no pet.), the court concluded that the dismissal of a bankruptcy (as opposed to a discharge) “has the effect of returning the parties to the status quo before the bankruptcy was commenced.”

Id. at 355 (citing 11 U.S.C. § 349(b)(3) (2008)).

Going even further, the Khan court quoted with approval the holding in In re Keener, 268 B.R. 912, 920 (Bankr. N.D. Tex. 2001) that the “effect of an order of dismissal is to restore the status quo ante…as though the bankruptcy case had never been brought.”

371 S.W.3d at 355.

In the present case, the parties have stipulated that the Amy Howard Bankruptcy was dismissed.

Accordingly, the parties were immediately restored to the status quo ante, with no effect on the June 19, 2009 acceleration of the Note.

That this is recognized even by Petitioners is made abundantly clear in their own trial court pleadings.

In both its First Amended Petition filed in the 417th District Court and its Third Amended Answer and Counterclaims filed in the 199th District Court – each representing the last pre-trial pleading filed by Petitioners in the respective courts – there is no mention of any deceleration or abandonment of the June 19, 2009 acceleration.

Why Petitioners now attempt to assert the argument as a last ditch “Hail Mary” is unknown.

What is known is that under the foregoing authorities, Petitioners’ abandonment argument would fail even if it had been properly and timely asserted in the trial court pleadings.

As such, the argument presents no basis for discretionary review by this Court.15

II. The Court of Appeals Correctly Identified the Accrual Date of Petitioners’ Equitable Subrogation Claim

As previously noted, Petitioners’ contentions in this matter have varied from moment to moment, brief to brief, and court to court.

In their most recent briefing in the Court of Appeals, Petitioners argued that their equitable subrogation claim should be governed by the six (6) year statute of limitations for suits on negotiable instruments as set forth at TEX. CIV. PRAC. & REM. CODE § 3.118.

In the extant proceeding, Petitioners go even further by arguing that

15 Petitioners’ desperation is made further evident through their completely disingenuous assertion that the Howards actually paid the sum of $1,012.50 during the pendency of Amy Howard’s bankruptcy in partial satisfaction of the lien at issue herein.

In reality, as is well known to Petitioners, the evidence at trial made clear that the payment in question was made on a second lien, much smaller lien held by Petitioners that is in no way involved in this proceeding.

The evidence on this point was undisputed at trial.

(RR Vol. 3, 84:13-88:19.

See also Trial Exhibit 20, which clearly shows that the $1,012.50 payment was made in regard to a second, much smaller home equity loan. That Petitioners would resort to such a patently false argument speaks volumes about the “strength” of their position in this proceeding.

the statutory limitations period has not even begun to run on their equitable subrogation claim because the cause of action purportedly does not accrue until the stated maturity date – or the maturity date at origination — of the original loan.

In other words, in the case of a thirty (30) year mortgage, a party claiming equitable subrogation would have thirty (30) years plus an additional four (4) years — or six (6) years, depending upon which argument Petitioners rely at a given point in time – in which to timely assert a claim for equitable subrogation, with that apparently being the case even if the subrogee subsequently accelerates the underlying Note (or subsequent Note) and thereafter fails to bring suit to enforce its claim within the four (4) year limitations period (or any other limitations period) following acceleration of the debt.

The clock would only begin to run on the successor entity once the original or contractual maturity date arrives.

This makes absolutely no sense as it would effectively inure to the subrogee rights greater than its predecessor, a result expressly rejected by this Court in Mid-Continent Ins. Co. v. Liberty Mut. Ins. Co., 236 S.W.3d 765, 774 (Tex. 2007).

And yet under Petitioners’ theory, the original lien holder would not be allowed to wait to file suit until the original or contractual maturity date once the underlying debt or note was accelerated. Instead, the original lienholder would be required to file suit on the lien within four (4) years of the acceleration date pursuant to section 16.035 of the Texas Civil Practice and Remedies Code.

Again, this makes no sense in view of the black letter rule that a subrogee cannot acquire rights greater than that of its subrogor.16

What makes perfect sense, on the other hand, is the Court of Appeals’ conclusion that the subrogee acquires only those rights which could have been lawfully exercised by the original lienholder under like circumstances, which, again, would be to bring suit on the lien within four (4) years of acceleration.

That is the only burden imposed by the ruling of the Court of Appeals and it is not an unreasonable burden.

As such, it is respectfully submitted that this Court should conclude that the Court of Appeals did in fact correctly identify the date of acceleration of the underlying note as the date of accrual for an equitable subrogation claim and deny the petition for review.

The alleged conflicts between the holding of the Court of Appeals and the opinions of other Texas courts is mostly (and probably entirely) a figment of the overactive imagination of a desperate litigant.

In crafting this argument, Petitioners have essentially stepped into the shoes of Dr. Frankenstein and attempted to stitch together cherry-picked quotations from the cited opinions in the hope of creating a truly monstrous rule of law that does not currently exist in this state.

16 Petitioners appear blind to the nightmare that a different rule would create for Title Insurers and the complications it would create in the refinance market, thereby negatively impacting Texas homeowners wishing to refinance.

In point of fact, Petitioners’ reliance on the cases cited in their petition is almost completely misplaced.

By way of example, PNC’s reliance on Swoboda v. Ocwen Loan Servicing, LLC, 579 S.W.3d 628, 638 (Tex. App.—Houston [14th Dist.] 2019), and its previous
reliance on Uhlhorn v. Reid, 398 S.W.2d 169, 175 (Tex. App.—San Antonio, 1965, writ ref’d, n.r.e.) in the Court of Appeals, does not aid its argument.

The statement in Swoboda that,

“[A] claim for equitable subrogation may exist even after a contractual lien has been invalidated,” does not, simply by use of the word “after,” extend the statute of limitations.

Swoboda, 579 S.W.3d at 638.

In addition, Swoboda is not applicable because PNC’s subrogation case does not involve an invalidation of a contractual lien.

To the contrary, it involves an attempt to enforce a contractual lien.

Uhlhorn, which was asserted by Petitioners in the Court of Appeals, likewise does not support their position as it involved a materialmen’s lien, so it is hard to understand why Petitioners ever thought it had application.

Uhlhorn, 398 S.W.2d at 175.

Petitioners likewise omit from its petition for review several other cases they relied upon in the Court of Appeals for the simple reason that they know those cases are not on point and do not support the propositions for which they were cited.

Although Petitioners have relied on Brown v. Zimmerman, 160 S.W.3d 695 (Tex. App. – Dallas 2005, no pet.) at all prior stages of this matter, it is notably absent from the cases cited in the petition for review.

Why?

Because in Zimmerman, the Court denied a claim that a note and deed of trust foreclosure suit following a second financing was governed by the two-year statute of limitations for actions for the detention of personal property.

Id. at 695.

The Court also reiterated that a suit for the recovery of real property under a real property lien is governed by the four-year statute of limitations found in §16.035.

Zimmerman, 160 S.W.3d at 701.

As such, Zimmerman not only fails to support Petitioners’ theory, but also militates against adoption of that theory by making clear that, as Respondents contend, the four (4) year limitations period of §16.035 applies in cases even remotely similar to the present even after a refinance of the underlying debt.

The omission of the foregoing cases, and several others, in the petition for review is yet another example of the moving target presented by Petitioners’ ever-changing argument and the complete lack of any coherent thesis.

In the end, they simply want this Court to close its eyes and say its okay to knowingly blow a statute of limitations that is in all probability known and observed by every home mortgage lender in this state as evidenced by the complete absence of any case truly analogous to the facts of this case.

The simple fact of the matter is the Dallas Court of Appeals’ opinion in this case is a virtual “stand-alone” opinion, thus dispelling any reasonable contention that said opinion presents an “important” conflict with the holdings of other courts in this state.

Moreover, the Court of Appeals’ opinion does an excellent job of distinguishing the cases cited by Petitioners,17 thereby eliminating any true concern that practitioners in this State will be confused by a purported conflict of authority on the question of when an equitable subrogation claim accrues under facts similar to those at bar.

The reality is that no reasonably competent practitioner could possibly read the cases cited by Petitioners alongside a reading of the Court of Appeals’ opinion and conclude anything other than the reality that they had better file any suit for equitable subrogation within four (4) years of the date of a proper acceleration of the underlying debt or note.

As such, there is no viable basis nor any reason for a grant of discretionary review in this case.

III. Petitioners Misconstrue Zepeda

This Court’s decision in of Federal Home Loan Mortgage Corp. v. Zepeda, 601 S.W. 3d 763 (Tex. 2020) is repeatedly cited by Petitioners for a proposition it does not support.

Although Zepeda does provide that it is possible, under some circumstances, for a refinancing lender to attempt enforcement of a lien through

17See Howard II, 2021 Tex. App. LEXIS 7976 at **6-9.

The Court of Appeals also noted that difficulties for both parties will arise if, as urged by Petitioners, if the accrual date is tied to the original maturity date.

Such an approach would be problematic for Lenders, because “if a borrower defaults on a refinancing loan more than four years after the maturity date of the original loan, the refinancing lender no longer has a viable subrogation lien claim.

This would severely limit the purpose of equitable subrogation.”

Id. at *9.

Borrowers, on the other hand, “could arguably be subjected to a subrogation claim many years after the loan became due” if the maturity date of the original debt is well beyond the maturity date of the refinancing loan.

Id.

These and a veritable pandora’s box of other problems are not just possibilities but certainties if the rule urged by Petitioners is accepted.

equitable subrogation even if that lender failed to preserve its contractual rights through its own negligence, the case does not state that the equitable right enlarges the legal or contractual right or in any way gives the subrogated party greater rights than its predecessor.

This is the missing piece of the puzzle that dooms Petitioners’ argument as neither Zepeda nor any other case cited by Petitioners provides that a refinancing lender can properly enforce a lien in circumstances in which that claim would be barred by limitations even if brought by the original lender.

The simple reality remains that if the original lender had filed suit more than four (4) years after acceleration, that claim would be time barred.

Accordingly, because Petitioners stand in the same shoes as the original lender, their claims are likewise barred because they did in fact wait more than four (4) years after acceleration to bring suit.

IV. The Court of Appeals’ Decision Protects Borrowers’ Rights

PNC attempts to convince the Court that this is a case of significant importance and that the Court of Appeals’ decision somehow harms the mortgage lending industry in Texas.

(Petitioner’s Brief at 1-3)

To the contrary, a reversal of the decision would severely harm the other end of the mortgage industry in Texas – the customer who needs to take out a mortgage to purchase or refinance a home.

If a borrower can be subjected to a longer statute of limitations for collection every time one lender is replaced by another either through refinancing or the now near-constant selling of loans by one lender to another, this will significantly chill a borrower’s willingness to purchase or refinance a home.

On the other hand, upholding the decision of the Court of Appeals will require only that which the pertinent statutes already clearly mandate – namely, that a party seeking to enforce a lien on real property commence suit to do so within four (4) years of acceleration.

Again, this simply is not a hardship and Petitioners’ protests to the contrary ring hollow and contrived.

V. Decisions Have Consequences

Petitioners argue that they should have no consequences for its improvident decision to wait more than five (5) years after accrual to file suit, and they likewise argue they should be excused from having moved to foreclose under the wrong entity name.

As such, the gravamen of Petitioners’ argument is,

“We’re a mortgage company and the Howards will get a free house if you punish us for our errors.”

Of course, the Howards are not getting a “free” house.

They have paid hundreds of thousands of dollars in legal fees to defend themselves against PNC’s errors.

Petitioners’ attitude is particularly offensive because they were informed by the Howards of its mistake with plenty of time for it to correct it within the statute of limitations.

(RR, vol. 3 at 10:13-11:20).

It failed to do so, yet it believes this Court should ignore that additional mistake and decide the case in a way that allows such behavior to be rewarded in future foreclosure mistake cases.

That simply cannot be the policy of this State, because, as every litigant knows, decisions have consequences, and the consequence for Petitioners’ decision to wait more than five (5) years after acceleration to assert their claims is the reality that those claims are barred by the four (4) year statute of limitations which began to run at the time of acceleration.

VI. The Original Loan Matured in 2005

Another puzzling piece of Petitioners’ argument is their failure to recognize that the same result obtains even should this Court hold that limitations does not begin to run until the original loan matures.

More specifically, the parties have stipulated that the original loan was paid off in March 2005 and appropriate releases filed during the following months.

(CR 800, pars. 9, 10, & 11).

Although Petitioners clearly understand that the date of maturity begins the running of the statute of limitations, they do not even attempt to explain how a loan that has been paid off is not yet mature.

As such, under Petitioners’ own argument, the original loan matured, and the statute of limitations began to run, all the way back in 2005. An absurd notion, to be sure, but that is exactly the notion proffered by Petitioners.

PRAYER

WHEREFORE, Respondents respectfully pray that the Petition for Review be DENIED, and that Respondents further receive all such other and additional relief, both general and special, at law or in equity, to which they may show themselves to be justly entitled.

Respectfully submitted,

/s/ J. Neal Prevost
J. Neal Prevost
sonya@psmclaw.com
State Bar. No. 00788222

PREVOST. SHAFF, MASON & CARNES, PLLC
5560 Tennyson Pkwy
Suite 260
Plano, Texas 75024
Tel.: 972-239-6200
Fax: 972-239-6205

Julia F. Pendery
Texas Bar No. 15744050
jpendery@cowlesthompson.com

COWLES & THOMPSON, P.C.
901 Main Street, Suite 3900
Dallas, Texas 75202
214-672-2142 (Tel.)

ATTORNEY FOR RESPONDENTS

CERTIFICATE OF SERVICE

The undersigned hereby certifies that a true and correct copy of the foregoing instrument has been forwarded on this 10th day of March, 2021, to all counsel of record via electronic filing and service in accordance with the applicable rules of procedure

J. Neal Prevost
Julia F. Pendery
/J. Neal Prevost

CERTIFICATE OF COMPLIANCE

The undersigned hereby certifies that this brief complies with the requirements of Tex. R. App. P. 9.4(i) and that the foregoing Response to Petition for Review contains 4,487 words.

/s/ J. Neal Prevost
Julia F. Pendery
/J. Neal Prevost

Automated Certificate of eService

This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below:

Jon Prevost on behalf of Jon Prevost Bar No. 788222

neal@psmclaw.com Envelope ID: 62515063

Status as of 3/11/2022 7:56 AM CST

Case Contacts

Name BarNumber Email TimestampSubmitted Status
Mark DHopkins mark@hopkinslawtexas.com 3/10/2022 11:10:14 PM SENT
Jon Neal Prevost 788222 neal@psmclaw.com 3/10/2022 11:10:14 PM SENT
Julia Fields Pendery 15744050 jpendery@cowlesthompson.com 3/10/2022 11:10:14 PM SENT
Gutierrez Lupe lgutierrez@cowlesthompson.com 3/10/2022 11:10:14 PM SENT
Shelley Hopkins shelley@hopkinslawtexas.com 3/10/2022 11:10:14 PM SENT
Matthew Lembke mlembke@bradley.com 3/10/2022 11:10:14 PM SENT
Sonya Clements sonya@psmclaw.com 3/10/2022 11:10:14 PM SENT

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