Tina Alexander v. Wells Fargo Bank, N.A. , 867 F.3d 593 ( 2017 )

Case: 16-20500 Document: 00514117180 Page: 1 Date Filed: 08/15/2017
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 16-20500 FILED
August 15, 2017
Lyle W. Cayce
TINA ALEXANDER, Clerk
Plaintiff - Appellant
v.
WELLS FARGO BANK, N.A., formerly known as WACHOVIA MORTGAGE,
FSB, formerly known as WORLD SAVINGS BANK F.S.B, its successors
and/or assigns; DOES 1-10,
Defendants - Appellees
Appeal from the United States District Court
for the Southern District of Texas
Before STEWART, Chief Judge, and HIGGINBOTHAM and COSTA, Circuit
Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
Wells Fargo’s predecessor in interest extended a loan to Tina Alexander,
secured by a deed of trust on her homestead, as permitted under the Texas
Constitution Article XVI, Section 50. Alexander fell into default and Wells
Fargo initiated foreclosure. Alexander then brought this action, alleging
nonconformity with the requirements for foreclosing home equity loans in
Section 50(a)(6) and seeking (1) a permanent injunction preventing foreclosure
and (2) forfeiture of the note’s remaining principal and interest. The district
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court, relying on our decision in Preister, 1 held that Alexander’s suit was time
barred and dismissed under Rule 12(b)(6). Thereafter, the Texas Supreme
Court issued two opinions, Wood 2 and Garofolo, 3 in light of which Alexander
argues that the district court erred in failing to amend its judgment to
reinstate her claims.
We hold that Wood and Garofolo constitute intervening changes in law
sufficient to justify post-judgment relief for Alexander on her claim to preclude
foreclosure but not on her claim for forfeiture. We affirm in part, reverse in
part, and remand for further proceedings.
I.
As this case reaches us on dismissal for failure to state a claim under
Rule 12(b)(6), we treat the complaint’s factual allegations and its attached
documents as true. 4 In 1998, Alexander received a home equity loan from Wells
Fargo, secured by a deed of trust on her home. Four years later, Alexander
discovered that her copy of the loan documents did not contain an
Acknowledgment of Fair Market Value signed by both parties at the time the
loan was issued, as required by Article XVI, Section 50 of the Texas
Constitution. 5 She requested a copy from Wells Fargo, but Wells Fargo never
responded. By 2005, Alexander had fallen into default, and on June 8, 2006,
Wells Fargo sent Alexander the first of several Notices of Acceleration.
Alexander responded by filing for Chapter 13 bankruptcy protection.
Less than two months later, the bankruptcy was dismissed and Wells Fargo
was permitted to move forward with foreclosure. On September 7, 2007, Wells
1 Preister v. JP Morgan Chase Bank, N.A., 708 F.3d 667 (5th Cir. 2013).
2 Wood v. HSBC Bank USA, N.A., 505 S.W.3d 542 (Tex. 2016).
3 Garofolo v. Ocwen Loan Servicing, L.L.C., 497 S.W.3d 474 (Tex. 2016).
4 See Neiman v. Bulmahn, No. 15-31094, 2017 WL 1423321, at *2 (5th Cir. Apr. 21,
2017) (quoting Local 731 I.B. of T. Excavators & Pavers Pension Trust Fund v. Diodes, Inc.,
810 F.3d 951, 956 (5th Cir. 2016)).
5 TEX. CONST. art. XVI § 50(a)(6)(Q)(ix).
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Fargo sent Alexander a second Notice of Acceleration. Shortly thereafter, Wells
Fargo sent Alexander a “Reinstatement Quote,” requiring payment of
$105,440.15 by September 25, 2007 to reinstate the loan. On September 28,
2007, three days after the deadline to tender the reinstatement amount,
Alexander wired $106,000.00 to Wells Fargo. 6 Wells Fargo responded via a
letter dated October 3, 2007 that it had “received and processed the funds to
reinstate” and “the loan is now due for the October 01, 2007 payment in the
amount of $2,561.12.”
The complaint next details a series of communications over the following
two months, with Wells Fargo demanding payment and then—in response to
inquiries by Alexander—either explicitly disclaiming that amount as
requested in error or implicitly disclaiming that amount by sending another
communication requesting a different amount. On December 11, 2007,
Alexander received a notice of intent to foreclose from Wells Fargo, dated
December 4, 2007, demanding a payment of $14,182.97 by January 3, 2008 or
else the loan would be accelerated.
On April 25, 2008, Wells Fargo sent Alexander another Notice of
Acceleration. Wells Fargo applied for judicial foreclosure in May before, nearly
a year later, sending Alexander an “Escrow Breakdown” that showed no trace
of the $106,000 payment she had made to reinstate the loan. In October 2009,
Alexander and Wells Fargo attended a Texas state court hearing where the
court ordered Alexander to make three monthly payments of $2,120. Wells
Fargo demanded that Alexander make those payments through its counsel of
record, which she did, but the IRS Form 1098 Mortgage Interest Statement
6 Alexander avers that the excess amount was intended to cover any interest due for
the three-day post-deadline period.
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she received in January 2010 showed that Wells Fargo had not credited any of
her payments against the principal balance on the note.
The complaint is silent as to the events that followed until November
2013, when the Texas state court issued an order permitting Wells Fargo to
proceed with foreclosure. Wells Fargo scheduled the foreclosure sale for March
4, 2014; on the eve of sale, Alexander asked a Texas state court to halt the sale.
Two days later, Wells Fargo rescinded its Notice of Acceleration, and
Alexander moved to dismiss her suit without prejudice. Alexander then made
several attempts to make her monthly loan payments, which Wells Fargo
refused because her account was in foreclosure.
On July 28, 2014, Wells Fargo sent yet another Notice of Acceleration,
and in early September, applied for expedited foreclosure. A date of sale was
then set for May 5, 2015. On the eve of sale, Alexander, appearing pro se, again
responded with a suit in the Texas state court, alleging violations of the Texas
Constitution, breach of contract, negligent misrepresentation, and breach of
the duty of good faith and fair dealing required under the UCC. In her prayer
for relief, Alexander requested: (1) a TRO halting the foreclosure sale; (2) a
preliminary injunction preventing the foreclosure sale; (3) an order requiring
Wells Fargo to produce the original, executed “Fair Market Acknowledgment”
for the property; (4) a permanent injunction preventing the foreclosure sale;
(5) economic damages; (6) punitive damages; (7) a declaration from the Court
that Wells Fargo must produce an accounting to the court and to Alexander
prior to foreclosing; (7) exemplary damages; (8) equitable relief; (9) reasonable
fees; (10) court costs; (11) all other relief to which Plaintiff is entitled; and (11)
general relief. 7
7Outside of the prayer for relief, Alexander’s complaint also argues that forfeiture is
the only appropriate remedy where a lender fails to cure a constitutional defect after
receiving notice of the defect from the borrower.
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Wells Fargo removed the action to the federal district court, invoking
diversity jurisdiction. Wells Fargo moved to dismiss the complaint for failure
to state a claim, which the district court granted, dismissing the entire action
with prejudice. Relevant to the claims before us, in dismissing Alexander’s
Texas Constitutional claims, the district court held that:
Alexander’s argument fails in light of Preister v. JP Morgan Chase
Bank, NA, where the Fifth Circuit addressed whether a statute of
limitations applies to claims under the Texas Constitution Article
XVI, § 50(a)(6). . . . The Fifth Circuit concluded that the residual
statute of limitations in Texas Civil Practice and Remedies Code §
16.051 “applies to constitutional infirmities under § 50(a)(6)” . . . .
Under this authority Alexander’s claim accrued on September 15,
1998 [when the home equity loan instrument was executed]. She
did not bring this action until May 4, 2015, more than four years
later. . . . Therefore, this claim has no merit. 8
On June 9, 2016, Alexander, still appearing pro se, moved for post-
judgment relief under Rule 59, arguing that the Texas Supreme Court case of
Wood v. HSBC Bank USA, N.A., decided eight days after dismissal of her
complaint, explicitly held that Preister’s “Erie guess” was wrong—that no
statute of limitations operates to restrict a suit for quiet title arising under
Section 50(c). The district court denied Alexander’s motion without
explanation. Alexander timely noticed her appeal.
II.
“We generally review a decision on a motion to alter or amend judgment
for abuse of discretion, although to the extent that it involves a reconsideration
of a question of law, the standard of review is de novo.” 9 “Under Rule 59(e),
amending a judgment is appropriate (1) where there has been an intervening
8 Alexander v. Wells Fargo Bank, N.A., No. H-15-1596, 2016 WL 2770547, at *9 (S.D.
Tex. May 12, 2016) (citations omitted).
9 In re: Deepwater Horizon, 824 F.3d 571, 577 (5th Cir. 2016) (citing Ross v. Marshall,
426 F.3d 745, 763 (5th Cir. 2005)).
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change in the controlling law; (2) where the movant presents newly discovered
evidence that was previously unavailable; or (3) to correct a manifest error of
law or fact.” 10 Additionally, “[a] notice of appeal from the denial of a timely
Fed.R.Civ.P. 59(e) motion brings up the underlying judgment for review.” 11
We also review dismissal under Rule 12(b)(6) de novo, 12 “accepting all
well-pleaded facts as true and viewing those facts in the light most favorable
to the plaintiff.” 13 In the case at bar, the claims at issue were not dismissed for
failure to plead sufficient facts, but rather because the district court found the
case barred by limitations. “A statute of limitations may support dismissal
under Rule 12(b)(6) where it is evident from the plaintiff’s pleadings that the
action is barred and the pleadings fail to raise some basis for tolling or the
like.” 14
III.
Alexander does not challenge the disposition of her general breach of
contract claim, her negligent misrepresentation claim, or her UCC claim. The
only claims at issue here are for a permanent injunction preventing the
foreclosure sale and for forfeiture as provided under Article XVI, Section
50(a)(6)(Q)(xi) of the Texas Constitution.
10 Demahy v. Schwarz Pharma, Inc., 702 F.3d 177, 182 (5th Cir. 2012) (citing Schiller
v. Physicians Res. Grp. Inc., 342 F.3d 563, 567 (5th Cir. 2003)).
11 Martinez v. Johnson, 104 F.3d 769, 771 (5th Cir. 1997) (citing United States v. One
1988 Dodge Pickup, 959 F.2d 37, 41 n.5 (5th Cir. 1992)).
12 Alexander v. City of Round Rock, No. 16-50839, 2017 WL 1393702, at *2 (5th Cir.
Apr. 18, 2017) (quoting Thompson v. City of Waco, 764 F.3d 500, 502 (5th Cir. 2014)).
13 Stokes v. Gann, 498 F.3d 483, 484 (5th Cir. 2007) (per curiam) (citing Walker v. S.
Cent. Bell Tel. Co., 904 F.2d 275, 276 (5th Cir. 1990)).
14 Jones v. Alcoa, Inc., 339 F.3d 359, 366 (5th Cir. 2003).
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A.
“In Texas, ‘the homestead has always been protected from forced sale,
not merely by statute as in most states, but by the Constitution.’” 15 It was not
until 1997 that Texas created exceptions to the constitutional ban on
foreclosure for reverse mortgages and other home equity loans. 16 “[B]ut,
consistent with Texas’s long tradition of protecting the homestead, the
amendments clearly prescribed very specific and extensive limitations on those
encumbrances.” 17 Article XVI, Section 50 of the Texas Constitution provides,
in relevant part:
(a) The homestead of a family, or of a single adult person,
shall be, and is hereby protected from forced sale, for the payment
of all debts except for:
...
(6) an extension of credit that:
...
(Q) is made on the condition that:
...
(ix) the owner of the homestead and the lender sign a written
acknowledgment as to the fair market value of the
homestead property on the date the extension of credit is
made;
(x) except as provided by Subparagraph (xi) of this
paragraph, the lender or any holder of the note for the
extension of credit shall forfeit all principal and interest of
the extension of credit if the lender or holder fails to comply
with the lender’s or holder’s obligations under the extension
of credit and fails to correct the failure to comply not later
15 Garofolo v. Ocwen Loan Servicing, L.L.C., 497 S.W.3d 474, 477 (Tex. 2016) (quoting
Fin. Comm’n of Tex. v. Norwood, 418 S.W.3d 566, 570 (Tex. 2013)).
16 Id.
17 Wood v. HSBC Bank USA, N.A., 505 S.W.3d 542, 545 (Tex. 2016).
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than the 60th day after the date the lender or holder is
notified by the borrower of the lender's failure to comply by:
...
(d) delivering the required documents to the borrower if the
lender fails to comply with Subparagraph (v) of this
paragraph or obtaining the appropriate signatures if the
lender fails to comply with Subparagraph (ix) of this
paragraph;
...
(c) No mortgage, trust deed, or other lien on the homestead
shall ever be valid unless it secures a debt described by this
section, whether such mortgage, trust deed, or other lien, shall
have been created by the owner alone, or together with his or her
spouse, in case the owner is married. All pretended sales of the
homestead involving any condition of defeasance shall be void. 18
In 2013, we addressed whether an action to have a lien declared void
under Section 50 was subject to a statute of limitations. 19 At that time, the
Texas Supreme Court had not spoken and the Texas appellate courts and the
federal district courts were split. 20 We held that actions under Section 50 are
subject to Texas’s residual four-year statute of limitations. 21 It is undisputed
that this was the law of this circuit at the time the district court dismissed
Alexander’s complaint on May 12, 2016.
On May 20, 2016, the Texas Supreme Court delivered the two opinions
at the heart of this appeal: Garofolo and Wood. In Garofolo, we proffered, and
the Texas Supreme Court accepted, two certified questions. 22 The first was
whether Section 50(a)(6) creates a constitutional remedy of forfeiture where a
18 TEX. CONST. art. XVI §§ 50(a)–(c).
19 See Preister v. JP Morgan Chase Bank, N.A., 708 F.3d 667, 673 (5th Cir. 2013).
20 Id. at 673–74.
21 Id. at 674; see also TEX. CIV. PRAC. & REM. CODE § 16.051 (West 2016).
22 Garfolo, 497 S.W.3d at 475.
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lender fails to cure a defect within the sixty-day period described in Section
50(a)(6)(Q)(x). 23 The court answered that question in the negative, holding that
“section 50(a) does not create, allow, or regulate home-equity lending. . . . It
simply describes what a home-equity loan must look like if a lender wants the
option to foreclose on a homestead upon borrower default.” 24 The court further
held that “[a] lender that includes the terms and conditions in the loan at
origination but subsequently fails to honor them might have broken its word,
but it has not violated the constitution.” 25
The second certified question asked whether a borrower can seek the
forfeiture remedy provided for in Section 50(a)(6)(Q)(x) through a breach of
contract claim absent any actual damages suffered. 26 The court answered no
under the facts before it, treating how forfeiture might be applicable to a
lender’s failure to comply with some of the constitutionally-mandated terms.
The court described a suit for breach of contract as “an appropriate cause of
action for relief from a lender’s post-origination failure to honor the terms and
conditions.” 27 “[I]f a lender fails to meet its obligations under the loan,
forfeiture is an available remedy only if one of the six corrective measures can
23 Id. at 476–77.
24 Id. at 478.
25 Id. at 479.
26 Id.
27 Id.; accord Kyle v. Strasburger, No. 16-0046, 2017 WL 2608344, at *3 (Tex. June 16,
2017) (“[W]hile forfeiture may be an appropriate contractual remedy for a lender’s failure to
comply with its home-equity loan obligations, forfeiture is not an independent cause of action
under the Texas Constitution.”).
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actually correct the underlying problem and the lender nonetheless fails to
timely perform the relevant corrective measure.” 28
The same day, the Texas Supreme Court addressed the question of
whether actions for quiet title under Section 50(c) are subject to Texas’s
residual statute of limitations. 29 The court disagreed with this Court’s “Erie
guess” from Preister, holding that “a lien securing a constitutionally
noncompliant home-equity loan is not valid before the defect is cured. We
therefore conclude that no statute of limitations applied to an action to quiet
title on an invalid home-equity lien.” 30 “The Constitution’s plain text compels
that homeowners’ right to seek a declaration of an invalid lien not be bound by
a statute of limitations.” 31
B.
We turn first to Alexander’s appeal of the district court’s refusal to
reinstate her claim seeking to permanently enjoin Wells Fargo from foreclosing
on her homestead. She argues that, construed liberally, her complaint stated
a claim for quiet title based on Wells Fargo’s failure to timely supplement the
missing Acknowledgment of Fair Market Value—a claim of the type that the
Texas Supreme Court in Wood held is not subject to any statute of
limitations. 32 Because Wood made plain that our “Erie guess” in Preister was
wrong, and because an intervening change in law is a proper grounds for
28 Garofolo, 497 S.W.3d at 482. Important to the court’s decision was the fact that, in
Garofolo, the note had already been satisfied and the alleged deficiency by the lender was
failing to provide the homeowner with a release of the lien following satisfaction. Id. at 481.
The court noted the absurdity of attempting to cure this defect with the “catch all” remedy in
subparagraph (f): “a $1,000 refund and an offer to refinance her loan . . . . [o]f course, there
was nothing to refinance—Garofolo had already paid off her loan—and a $1,000 payment
would not buy her a document only Ocwen could provide.” Id.
29 Wood, 505 S.W.3d at 543.
30 Id. at 548.
31 Id. at 550.
32 Id.
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amending a judgment under Rule 59(e), 33 she argues that the district court
abused its discretion in not reinstating her claim.
Wells Fargo lodges two arguments in response. First, Wells Fargo argues
that Wood only speaks to actions for quiet title, which Alexander did not
adequately plead. Because the complaint does not contain the words “quiet
title,” Wells Fargo argues that we must look to the remedies Alexander sought
in order to construe her claim. 34 Those remedies, Wells Fargo avers, are
incompatible with her argument on appeal, because: (1) Alexander sought
damages and attorney’s fees, neither of which are recoverable in an action for
quiet title; (2) Alexander sought orders to have Wells Fargo produce the Fair
Market Acknowledgement and accountings, neither of which are compatible
with a claim that the underlying lien is invalid; and (3) Alexander’s request for
a permanent injunction was to prevent Wells Fargo “from taking possession”
of her home, which concerns possession and the right of enjoyment—a request
that “sounds in the nature of a leasehold right” rather than a claim related to
title.
Second, as expressed at oral argument, Wells Fargo argues that
Alexander is not entitled to any relief under Section 50(c) because the loan
complied with the Texas Constitution by containing the terms required under
Section 50(a). Wells Fargo directs us to the Texas Supreme Court’s opinion in
Garofolo, holding, in part, that:
Schiller, 342 F.3d at 567-68 (citing In re Benjamin Moore & Co., 318 F.3d 626, 629
33
(5th Cir. 2002)).
34 In support of this argument, Wells Fargo cites to Austin v. Shalala, where we
construed an action to recover social security payments, initiated by the United States, to
determine whether the requested relief was a traditional remedy at law—triggering a right
to a jury trial under the Seventh Amendment—or at equity. 994 F.2d 1170, 1176 (5th Cir.
1993). Wells Fargo has not directed us to any case law supporting the proposition that we
should strictly construe the pleadings of a pro se plaintiff.
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[Section 50(a)(6)’s] terms and conditions are not constitutional
rights and obligations unto themselves. They only assume
constitutional significance when their absence in a loan’s terms is
used as a shield from foreclosure. . . . From a constitutional
perspective, compliance is measured by the loan as it exists at
origination and whether it includes the terms and conditions
required to be foreclosure-eligible. . . . A lender that includes the
terms and conditions in the loan at origination but subsequently
fails to honor them might have broken its word, but it has not
violated the constitution. 35
Wells Fargo thus reasons that, because the note contained the required terms,
the loan was eligible for foreclosure under the Texas Constitution despite
having admittedly never conformed to those terms.
As to Wells Fargo’s first argument—that Alexander did not adequately
plead her claim—we decline to so strictly construe a pro se litigant’s complaint
as to bar relief for omitting the legal term “quiet title” or because her prayer
for relief included remedies not available to her. 36 Rather, construing
Alexander’s complaint liberally, she adequately pled her claim under Section
50(c) by alleging noncompliance with Section 50(a)(6)(Q)(ix)’s requirement that
the loan contain an Acknowledgement of Fair Market Value and requesting a
permanent injunction against foreclosure.
Wells Fargo’s second argument—that inclusion of the requisite terms is
sufficient to render the lien foreclosable even if those terms are broken at
signing—runs contrary to Wood. There, the Texas Supreme Court held that:
35 Garofolo, 497 S.W.3d at 478.
36See, e.g., Kaltenbach v. Richards, 464 F.3d 524, 527 (5th Cir. 2006); see also Erickson
v. Pardus, 551 U.S. 89, 94 (2007) (per curiam) (“A document filed pro se is ‘to be liberally
construed,’ and ‘a pro se complaint, however inartfully pleaded, must be held to less stringent
standards than formal pleadings drafted by lawyers.’” (quoting Estelle v. Gamble, 429 U.S.
97, 106 (1976))).
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Section 50(c) starts with the premise that a lien securing a
noncompliant loan is never valid. Implementing a section
50(a)(6)(Q)(x) cure provision brings the loan into constitutional
compliance, thereby validating the accompanying lien. These cure
provisions are the sole mechanism to bring a loan into
constitutional compliance. Further, while a lender has 60 days to
cure after notice, the borrower has no corresponding deadline by
which it must request cure. A lien that was invalid from
origination remains invalid until it is cured. In so holding, we do
not create a new common-law category of liens that are “void until
cured.” We are merely interpreting the plain language of the
Constitution, which defies common-law categorization. 37
Section 50(a)(6)(Q)(x) allows lenders to cure a failure to include documents
required under Section 50(a) and is the “sole mechanism” under the Texas
Constitution for curing a defect in a loan, validating the lien it secures. If, as
Wells Fargo avers, merely including the 50(a) terms in the original loan
document were enough, then 50(a)(6)(Q)(x) would not be necessary to “bring[]
the loan into constitutional compliance,” but would instead only function to
cure contractual breaches.
While Wood and Garofolo may initially present as in tension, they
examine and construe different subsections of Section 50. Garofolo involved
only Section 50(a) 38—the section housing the required terms in all foreclosure-
eligible home equity loans—concluding that “[a]s to constitutional rights,
section 50(a) creates but one: freedom from forced sale to satisfy debts other
than those described in its exceptions.” 39 Wood, on the other hand, interpreted
Section 50(c), which “broadly declar[es] the lien invalid if the underlying loan
37 Wood, 505 S.W.3d at 549.
38 Id. at 546 (“In Garofolo we interpret only section 50(a), which sets the terms home-
equity loans must include in order to be foreclosure-eligible.”); see also Ocwen Loan Servicing,
L.L.C. v. Berry, 852 F.3d 469, 473 (5th Cir. 2017) (holding that claims under Section 50(a)(6)
are not subject to the four-year statute of limitations).
39 Garofolo, 497 S.W.3d at 478.
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does not comply with section 50.” 40 Together, they form a coherent whole: while
including the required Section 50(a)(6) terms and conditions in the loan
document is a necessary element of a valid lien under Texas law, the terms
alone are not sufficient—the lender must also actually comply with them.
Assuming the factual allegations in the complaint true, Alexander has
sufficiently pled a claim under Section 50(c), which, as Wood held, is not subject
to any statute of limitations. The district court’s failure to reinstate the claim
after Wood was error. On return to the district court, Alexander may proceed
with her claim seeking to preclude foreclosure.
C.
Alexander likewise argues that the district court erred in not reinstating
her action under the Texas Constitution for forfeiture. In Garofolo, the Texas
Supreme Court held that Section 50(a)(6)(Q)(x) does not itself create a cause of
action for forfeiture, but rather provides a contractual term that must be
included in foreclosure-eligible loans, allowing for a forfeiture remedy in
certain contractual breach contexts 41; that plaintiffs seeking forfeiture must do
so through a breach of contract action. Alexander argues she adequately pled
a claim of breach because her complaint alleged that: (1) there was no
Acknowledgement of Fair Market Value signed by both parties at the time the
loan was issued as required by Section 50(a)(6)(Q)(ix); (2) she notified Wells
Fargo of this deficiency; and (3) Wells Fargo did not remedy the problem within
60 days, 42 which, if true, might well trigger the contractual forfeiture remedy.
Alexander also pled that “this violation can only be remedied as provided by
40 Wood, 505 S.W.3d at 546.
41 Garofolo, 497 S.W.3d at 482.
42 Alexander alleged that Wells Fargo never responded to her 2002 letter notifying
them of the lack of the document.
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the Texas Constitution article XVI, Section 50(A)(6)(Q)(10),” the subsection
providing for forfeiture.
The district court sustained the limitations defense and dismissed
Alexander’s claim. 43 Alexander persists, arguing that her forfeiture claim is
not time barred. First, she argues that the policy underlying Wood,
“protect[ing] Texas homeowners and the Texas economy by ensuring a stable
lending market. . . . discouraging improvident lending by originating lenders
and encouraging appropriate due diligence by lenders buying those loans in
the secondary market,” 44 “applies as much to the constitutional protection of
forfeiture as to the constitutional protection against foreclosure.” She urges
that we either make an “Erie guess” and extend Wood to forfeiture actions or
else certify this question to the Texas Supreme Court. Alternatively, Alexander
argues her May 2015 complaint served as a second notice to Wells Fargo that
the loan did not comply with the requirements of Section 50(a)(6) and that
Wells Fargo’s failure to cure after receiving the complaint was a second breach,
for which her suit is timely. 45
Wells Fargo replies that a breach of this stripe occurs only once—at the
point the loan closes without the necessary document. Citing Garofolo, Wells
Fargo argues that a failure to cure is not itself a breach, but rather the
43 See Stine v. Stewart, 80 S.W.3d 586, 592 (Tex. 2002) (“A party asserting a breach of
contract claim must sue no later than four years after the day the claim accrues. It is well-
settled law that a breach of contract claim accrues when the contract is breached.”) (citations
omitted).
44 Wood, 505 S.W.3d at 550,
45 Alexander’s argument is that, on breach, the non-breaching party may either sue or
else continue under the contract—later-in-time breaches serve as separate claims with their
own accrual dates. In support of this argument, she cites to Barker v. Eckman, a case
involving serial breaches of a bailment contract where the Texas Supreme Court held that
“claims for . . . serial breaches accrued as soon as [the plaintiff] had the right to sue on them
individually, that is, immediately upon the occurrence of each breach.” 213 S.W.3d 306, 311
(Tex. 2006). This is not a serial breach case, however. The breach—the failure to include the
required document—only occurred once, at origination.
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contractual trigger for the harsh forfeiture penalty. 46 Because the alleged
breach here was a failure to include an Acknowledgement of Fair Market Value
signed by both parties, the breach occurred at the closing of the loan in 1998.
And because, under Texas law, the right of action for a breach of contract claim
accrues at the time of the breach, 47 the statute would have run in 2002, roughly
13 years before Alexander brought her action.
We agree with Wells Fargo: a breach of the Section 50(a)(6)(Q)(x) term
occurs at the point the lender fails to comply with the term, not later when the
lender fails to cure. 48 Ordinarily, the proper accrual date would be the date of
closing. However, “[i]n some types of cases, the discovery rule may defer
accrual of a cause of action until the plaintiff knew or, by exercising reasonable
diligence, should have known of the facts giving rise to a cause of action. In
order for the discovery rule to apply, the nature of the injury must be
inherently undiscoverable and the injury itself must be objectively
verifiable.” 49 Nothing before us indicates that the omission of the required
document was “inherently undiscoverable,” although ultimately it makes little
difference. Using either the date of closing—1998—or the date of discovery—
2002—the four-year limitations period had long run when Alexander brought
her claim in 2015. We hold that Alexander’s complaint alleges facts that are
46 Garofolo, 497 S.W.3d at 481.
47 Stine, 80 S.W.3d at 592 (citing TEX. CIV. PRAC & REM. CODE § 16.051); see also
Moreno v. Sterling Drug, Inc., 787 S.W.2d 348, 351 (Tex. 1990) (holding that “a cause of action
can generally be said to accrue when the wrongful act effects an injury, regardless of when
the plaintiff learned of such injury”) (citing Robinson v. Weaver, 550 S.W.2d 18, 19 (Tex.
1977)).
48 “[T]he lender or any holder of the note for the extension of credit shall forfeit all
principal and interest of the extension of credit if the lender or holder fails to comply with
the lender’s or holder’s obligations under the extension of credit and fails to correct the failure
to comply not later than the 60th day after the date the lender or holder is notified . . . .” TEX.
CONST. art. XVI §§ 50(a)(6)(Q)(x).
49 Barker, 213 S.W.3d at 311-12 (citing HECI Expl. Co. v. Neel, 982 S.W.2d 881, 886
(Tex. 1998)).
16
Case: 16-20500 Document: 00514117180 Page: 17 Date Filed: 08/15/2017
16-20500
sufficient to state a claim for a breach of the loan agreement, but her suit was
not timely filed.
****
Wood represents an intervening change in Texas law, and the district
court should have amended the judgment under Rule 59 to allow Alexander’s
claim for quiet title to go forward in its light. We reverse the denial of Rule 59
post-judgment relief and remand Alexander’s claim for quiet title, but we
affirm the refusal to amend the judgment as to Alexander’s forfeiture claim, as
that claim is barred under Texas’s four year statute of limitations for breach
of contract actions.
17