Martha Burg’s Non-Payment of $270,000 Mortgage Isn’t an Obstacle to Obtaining Judicial Release of Debt

MEMORANDUM OPINION

Residential Credit Solutions, Inc. (RCS) appeals from a final summary judgment in favor of appellee, Martha Burg, in Burg’s declaratory judgment action.

In a single issue, RCS contends that the trial court erred in holding that the deed of trust lien was void and granting summary judgment in Burg’s favor.

We affirm the trial court’s judgment.

Background

On March 30, 2007, Burg purchased a home in Houston, Texas, and executed a promissory note (the Note) and security instrument giving Dallas Home Loans, Inc.1 a security interest in the property with an option to accelerate the Note on default (the Security Instrument).

The Note’s original principal sum was $270,000.

Burg became delinquent in the payment of the Note by failing to pay the installment due on June 1, 2008, and all installments due after that date.

The parties agree that Saxon Mortgage Services, Inc. (Saxon), the prior mortgage servicer for the Note, exercised its option to accelerate the Note on August 12, 2008.

In July 2009, Saxon sent Burg two proposed Stipulation Agreements.

The first Stipulation Agreement, dated July 20, 2009, was signed only by Saxon, and the second Stipulation Agreement, dated July 30, 2009, was signed only by Burg.

Aside from differing dates and payment schedules, the terms of the Stipulation Agreements are identical.

1   Dallas Home Loans, Inc. subsequently assigned the Security Instrument to Option One Mortgage Corporation.

Sand Canyon Corporation fka Option One Mortgage Corporation assigned the Security Instrument to Saxon Mortgage Services, Inc., and Saxon assigned the Security Instrument to RCS.

Under the terms of both agreements, Burg was to bring the Note current by making five separate “forbearance payments” between August and December 2009 in order to pay the defaulted amount, approximately $39,000.

If Burg made all of the payments on time, then her “scheduled monthly payments” would resume the following month.

Under the terms of the agreement, Saxon “is entitled to continually postpone the foreclosure action or sale . . . or take any action reasonably necessary to maintain the pending foreclosure action.”

Moreover, “[f]ailure by [Burg] to make any of the payments outlined [in the agreement] on or before the due date of the Forbearance Payment shall immediately result in this Agreement becoming null and void and shall permit [Saxon] to immediately proceed with its remedies, without further notice, including foreclosure of its Security Instrument in [Burg’s property].”

The agreement also contains a “No Waiver” clause stating that “the forbearances provided herein shall be without prejudice to [Saxon’s] right to exercise its power of sale or exercise any other rights and remedies under the Note and Security Instrument.”

It is undisputed that Burg never made any of the forbearance payments anticipated by the two documents.

On October 1, 2009, Burg executed a Home Affordable Modification Trial Period Plan (the Modification Plan) and made an initial payment of $1,747.03 to Saxon, which Saxon accepted.

Paragraph 2(e) of the Modification Plan states that:

When Lender accepts and posts a payment during the Trial Period it will be without prejudice to, and will not be deemed a waiver of, the acceleration of the loan or foreclosure action and related activities and shall not constitute a cure of any default under the Loan Documents unless such payments are sufficient to completely cure [Burg’s] entire default under the Loan Documents.

Burg did not make the required payments in November and December 2009.

As a result, Saxon terminated the Modification Plan on February 26, 2010.

On February 19, 2013, RCS mailed another Notice of Default and letter of intent to accelerate the Note to Burg.

On April 26, 2013, RCS mailed a Notice of Acceleration to Burg.

On May 10, 2013, RCS filed an Application for Expedited Foreclosure Proceeding seeking an order allowing it to foreclose on its security interest in the property.

RCS dismissed that lawsuit after Burg filed a declaratory judgment against RCS on August 12, 2013, seeking a declaration “that the Deed of Trust lien and power of sale therein sought to be foreclosed by [RCS] are void.”

RCS answered and filed a counterclaim against Burg for judicial foreclosure.

Burg filed a hybrid traditional and no-evidence motion for summary judgment on July 11, 2014, in which she argued that Saxon had accelerated the note on August 12, 2008, and there was no evidence that RCS or Saxon had abandoned Saxon’s acceleration.

Therefore, she argues, the four-year statute of limitations applicable to this action expired on August 12, 2012, and RCS’s lien on the property was void when RCS initiated foreclosure proceedings in 2013.

RCS argued that there is a question of material fact as to whether Saxon abandoned acceleration in October 2009 when it accepted Burg’s one-time payment under the Modification Plan, and there is some evidence that the August 2008 acceleration was abandoned and, therefore, the lien was valid when RSC commenced its foreclosure proceedings.

After holding a hearing on Burg’s motion, the trial court entered a final summary judgment in Burg’s favor which stated that, “the lien sought to be foreclosed by [RCS] [is] void pursuant to [TEX. CIV. PRAC. & REM. CODE ANN. § 16.035(d) (West 2002)].”

The court “further ordered, adjudged, and decreed that [RCS] take nothing on its counterclaims.”

On October 10, 2014, RCS filed a motion for new trial, which was subsequently overruled by operation of law. This appeal followed.

Abandonment of Acceleration

In a single issue on appeal, RCS contends that the trial court erred in granting summary judgment in Burg’s favor and declaring the lien against Burg’s property void because the evidence demonstrates that Saxon or RCS “clearly and unequivocally abandoned” acceleration of the Note.

RCS further contends that this evidence of abandonment demonstrates that the lien was valid when RCS initiated its foreclosure proceedings, and therefore, the court erred in granting summary judgment on its counterclaim for judicial foreclosure.

A.               Standard of Review

Declaratory judgments rendered by summary judgment are reviewed under the same standards that govern summary judgments generally.

Hourani v. Katzen, 305 S.W.3d 239, 248 (Tex. App.—Houston [1st Dist.] 2009, pet. denied).

We review the trial court’s grant of a summary judgment de novo. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009).

To prevail on a traditional summary-judgment motion, asserted under Rule 166a(c), a movant must prove that there is no genuine issue regarding any material fact and that it is entitled to judgment as a matter of law.

See TEX. R. CIV. P. 166a(c); Little v. Tex. Dep’t of Criminal Justice, 148 S.W.3d 374, 381 (Tex. 2004).

It is an affirmative defense to assert that a claim is barred by the statute of limitations.

TEX. R. CIV. P. 94.

The party moving for summary judgment based on the statute of limitations carries the burden of establishing as a matter of law that the limitations period had expired on the relevant claims.

Burns v. Thomas, 786 S.W.2d 266, 267 (Tex. 1990).

A party moving for no-evidence summary judgment under Rule 166a(i) must assert that “no evidence supports one or more essential elements of a claim for which the nonmovant would bear the burden of proof at trial.”

KCM Fin. LLC v. Bradshaw, 457 S.W.3d 70, 79 (Tex. 2015) (citing TEX. R. CIV. P. 166a(i)).

“The trial court must grant the motion unless the nonmovant raises a genuine issue of material fact on each challenged element.” Id.

To determine if there is a fact issue, we consider all the evidence in the light most favorable to the nonmovant, crediting evidence favorable to the nonmovant if a reasonable factfinder could, and disregarding contrary evidence unless a reasonable factfinder could not.

See Fielding, 289 S.W.3d at 848 (citing City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005));

Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006).

Questions of contract construction are reviewed in much the same way as questions of statutory construction. As with statutory construction, the construction of an unambiguous contract presents a question of law subject to de novo review.

Tawes v. Barnes, 340 S.W.3d 419, 425 (Tex. 2011).

Our primary concern in interpreting a contract is to ascertain and to give effect to the intentions of the parties as expressed in the instrument.

J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003).

We examine and consider the entire writing in an effort to harmonize and give effect to all provisions of the contract, so that none will be rendered meaningless. Id.

B.                Applicable Law

“A sale of real property under a power of sale in a mortgage or deed of trust that creates a real property lien must be made not later than four years after the day the cause of action accrues.”

TEX. CIV. PRAC. & REM. CODE ANN. § 16.035(b) (West Supp. 2015).

“When this four-year period expires, the real-property lien and the power of sale to enforce the lien become void.”

Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 567 (Tex. 2001).

If the note or deed of trust contains an optional acceleration clause, the cause of action accrues (and the statute of limitations begins to run) when the holder “actually exercises” its option to accelerate.

Id. at 566; Khan v. GBAK Props., Inc., 371 S.W.3d 347, 353 (Tex. App.—Houston [1st Dist.] 2012, no pet.).

A noteholder who exercises its option to accelerate may abandon that acceleration. Acceleration can be abandoned by agreement or other action of the parties.

Holy Cross, 44 S.W.3d at 567; Khan, 371 S.W.3d at 353.

One action that can constitute abandonment is “if the holder continues to accept payments without exacting any remedies available to it upon declared maturity.”

Khan, 371 S.W.3d at 353 (quoting Holy Cross, 44 S.W.3d at 566).

Abandonment of acceleration has the effect of restoring the contract to its original condition, including the note’s original maturity date.

See Holy Cross, 44 S.W.3d at 567; Khan, 371 S.W.3d at 353.

Whether a party has abandoned acceleration is generally a question of fact.

See Khan, 371 S.W.3d at 356 (holding evidence raised material fact issue as to abandonment of acceleration of note, thereby precluding summary judgment based on statute of limitations);

see generally Holy Cross, 44 S.W.3d at 568 (stating that while accrual is legal question, whether holder has accelerated note is fact question).

C.               Analysis

RCS argues that although Saxon accelerated the balance due on the Note in August 2008, Saxon abandoned acceleration less than a year later when it sent Burg the Stipulation Agreements because Saxon was only demanding the defaulted amount (approximately $39,000), as opposed to the full amount of the loan.

Citing to unpublished federal cases, RCS argues that the Stipulation Agreements are evidence of Saxon’s abandonment of acceleration.

See Leonard v. Ocwen Loan Servicing, LLC, CIV. A. H-13-3019, 2014 WL 4161769, *5 (S.D. Tex. Aug. 19, 2014).

After considering each Stipulation Agreement as a whole, we conclude that neither agreement constitutes evidence that Saxon abandoned its prior acceleration of the Note.

On the contrary, these agreements entitle Saxon to “take any action reasonably necessary to maintain the pending foreclosure action” and unambiguously reflect that Saxon will abandon acceleration only if Burg makes all of the required payments under the agreement and brings the Note current.

Burg never made a payment under either Stipulation Agreement which, in the plain language of the agreements, renders them “null and void.”

Saxon’s abandonment of acceleration and its obligation to allow Burg to resume making regular payments on the Note never materialized.

Saxon always retained the option to continue with foreclosure proceedings, pursuant to the notice that accelerated the Note and made it due and owing, if Burg defaulted on the agreements, which she did.

In other words, the debt is due and owing because it was accelerated and it will remain due and owing unless Burg made all payments under the agreement. She did not do so and the Note remained accelerated, due and owing, and available for Saxon to foreclose.

The acceleration was not abandoned.

RCS argues that Burg’s payment in October 2009 pursuant to the Modification Plan, and Saxon’s acceptance of the payment, are evidence that Saxon abandoned acceleration at that time.

A payment made pursuant to the Modification Plan, however, is insufficient to abandon acceleration because the agreement expressly states that receipt of payments under the agreement does not affect acceleration.

Hardy v. Wells Fargo Bank, N.A. is instructive. No. 01-12-00945-CV, 2014 WL 7473762 (Tex. App.—Houston [1st Dist.] Dec. 30, 2014, no pet.) (mem. op.).

In that case, the Hardys appealed a take-nothing judgment in a wrongful foreclosure suit against Wells Fargo. Id. at *1.

The Hardys claimed, among other things, that Wells Fargo had foreclosed on the note more than four years after acceleration.

Id.

Wells Fargo denied that claim, asserting that it had abandoned the acceleration.

Id. at *4.

The Hardys and Wells Fargo entered into two agreements to avoid foreclosure, similar to the agreements between Saxon and Burg, which stated that the agreements “will not be deemed to affect the acceleration of the Note” if all payments are not made under the agreements and “the remainder of the accelerated loan balance shall remain due and owing.”

Id. at *2 (emphasis added).

The agreement between Saxon and Burg similarly states that a payment made under the agreement “will not be deemed a waiver of the acceleration of the loan” unless the payments are “sufficient to completely cure [Burg’s] entire default.”

The Hardys made one payment to Wells Fargo under their agreements and Wells Fargo claimed that its acceptance of this payment demonstrated that it had abandoned the acceleration.

Id.

However, this Court found that, despite the accepted payment, the Hardys had defaulted under the agreements, the acceleration remained in effect, and the notes remained due and owing.

Id. at *5.

In this case, as in Hardy, the acceptance of payments did not have the effect of abandoning the acceleration because Burg defaulted on the payment agreements and the note remained accelerated and available for foreclosure if Saxon wished to proceed.

The acceleration of the note was not abandoned.

RCS also argues that abandonment of acceleration is further evidenced by the fact that RCS sent Burg new notices of default and intent to accelerate in February 2013 and April 2013.

Both of these notices, however, were sent after the limitations period expired in August 2012.

After considering all the evidence in the light most favorable to RCS, we conclude that Burg established as a matter of law that the statute of limitations expired prior to RCS’s commencement of foreclosure proceedings in 2013 because there is no evidence that Saxon or RCS abandoned Saxon’s August 12, 2008 acceleration of the Note prior to August 12, 2012.

See Fielding, 289 S.W.3d at 848; City of Keller, 168 S.W.3d at 827.

We overrule RCS’s sole issue.2

Conclusion

We affirm the trial court’s judgment.

Russell Lloyd Justice

Panel consists of Justices Higley, Huddle, and Lloyd.

2  Burg filed a motion asking the court to award her damages based on RCS’s “frivolous appeal.”

See TEX. R. APP. P. 45 (damages for frivolous appeals in civil cases). After considering the record, briefs, and other papers filed, we may award a prevailing party “just damages” if we objectively determine that an appeal is frivolous.

Id.; Smith v. Brown, 51 S.W.3d 376, 381 (Tex. App.—Houston [1st Dist.] 2001, pet. denied).

The decision to award damages pursuant to Rule 45 is a matter of discretion that an appellate court exercises with prudence and caution.

See Smith, 51 S.W.3d at 381.

After reviewing the record and briefing, we deny Burg’s motion for damages.