Alice M. Wood and Daniel L. Wood v. HSBC Bank USA, N, A. and Ocwen Loan Servicing, L.L.C , 439 S.W.3d 585 ( 2014 )

Affirmed and Opinion filed July 31, 2014.
In The
Fourteenth Court of Appeals
NO. 14-13-00389-CV
ALICE M. WOOD AND DANIEL L. WOOD, Appellants
V.
HSBC BANK USA, N.A. AND OCWEN LOAN SERVICING, L.L.C.,
Appellees
On Appeal from the 268th District Court
Fort Bend County, Texas
Trial Court Cause No. 12-DCV-199364
OPINION
This case arises out of a home-equity loan obtained by appellants Alice M.
Wood and Daniel L. Wood in 2004 that encumbered their homestead with a lien.
The Woods appeal the summary judgment granted in favor of appellees HSBC
Bank USA, N.A. and Ocwen Loan Servicing, L.L.C. The Woods presented a single
issue on appeal, which we address in two separate sub-issues:
(1) Whether the Texas Civil Practice and Remedies Code section
16.051 four-year statute of limitations bars the Woods’ claims
for monetary and declaratory relief based on HSBC’s and
Ocwen’s alleged violations of the home-equity lending
protections found in article XVI, section 50(a)(6), of the Texas
Constitution.
(2) Whether the section 16.051 statute of limitations bars the
Woods’ claim for monetary relief based on HSBC’s and
Ocwen’s alleged breach of the security instrument creating the
home-equity lien.
Because we conclude that the Woods’ claims are barred by limitations, we affirm.
I. FACTS AND PROCEDURAL BACKGROUND
On July 2, 2004, the Woods obtained a home-equity loan of $76,000 from
Fremont Investment & Loan, secured by a first lien on their homestead located in
Fresno, Fort Bend County, Texas. On March 16, 2012, the Woods sent HSBC, the
current holder of the lien, a “Notice of Request to Cure.” The Notice alleged that
the home-equity lien violated seven provisions of article XVI, section 50(a)(6), of
the Texas Constitution and demanded that HSBC cure the alleged violations.
HSBC did not respond to the Woods’ letter.
On July 9, 2012, the Woods sued HSBC, Ocwen, Ameriapraise, Inc., and
Joel Brock seeking forfeiture of principal and interest for the constitutional
violations, damages for breach of contract, damages for fraud, and a declaratory
judgment that (1) the loan and accompanying home-equity lien were void, (2)
HSBC failed to cure the constitutional defects, and (3) HSBC must forfeit all
principal and interest paid on the loan. HSBC and Ocwen answered on August 10,
2012. HSBC filed a counterclaim on February 28, 2013, seeking a declaration that
it was equitably subrogated to the rights of the prior lienholders.
On January 3, 2013, the Woods filed a motion for summary judgment on
their claim that the fees exceeded three percent of the loan amount. On February 7,
2
2013, HSBC and Ocwen filed a hybrid traditional and no-evidence motion for
summary judgment. In their motion, HSBC and Ocwen asserted that all of the
Woods’ claims were barred by limitations, that no tolling rule delayed the accrual
of the Woods’ claims, that the constitutional claims failed as a matter of law, that
the Woods’ breach of contract claim failed as a matter of law, and that no evidence
supported the Woods’ fraud claim. 1 On April 4, 2013, the trial court granted
HSBC’s traditional and no-evidence motions and denied the Woods’ motion for
summary judgment. The Woods then nonsuited defendants Ameriapraise, Inc. and
Joel Brock, and HSBC nonsuited its counterclaim for equitable subrogation against
the Woods. The Woods timely appealed.
II. SUMMARY JUDGMENT STANDARD OF REVIEW
We review the trial court’s granting of summary judgment de novo. Mid–
Century Ins. Co. of Tex. v. Ademaj, 243 S.W.3d 618, 621 (Tex. 2007). To prevail
on a traditional motion for summary judgment, the movant must carry the burden
of showing that there is no genuine issue of material fact and that judgment should
be granted as a matter of law. Tex. R. Civ. P. 166a(c); KPMG Peat Marwick v.
Harrison Cty. Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999). When
reviewing a traditional summary judgment granted in favor of the defendant, we
determine whether the defendant conclusively disproved at least one element of the
plaintiff’s claim or conclusively proved every element of an affirmative defense.
Am. Tobacco Co. v. Grinnell, 951 S.W.2d 420, 425 (Tex. 1997).
1
The Woods have abandoned their challenge to the no-evidence summary judgment in
favor of HSBC and Ocwen on the fraud claim because the Woods have not raised the fraud issue
on appeal. See Tex. R. App. P. 38.1(f), 47.1; Shafaii Children’s Trust & Party & Reception Ctr.,
Inc. v. W. Am. Ins. Co., 417 S.W.3d 614, 622 n.6 (Tex. App.—Houston [14th Dist.] 2013, pet.
denied); Martinez v. El Paso Cnty., 218 S.W.3d 841, 844 (Tex. App.—El Paso 2007, pet. struck)
(“When reviewing a civil matter, an appellate court has no discretion to consider an issue not
raised in the appellant’s brief, even if the ends of justice so require.”); see also Clonts v.
Johnson, 294 S.W. 844, 846 (Tex. 1927).
3
A defendant moving for summary judgment on the affirmative
defense of limitations . . . must (1) conclusively prove when the cause
of action accrued, and (2) negate the discovery rule, if it applies and
has been pleaded or otherwise raised, by proving as a matter of law
that there is no genuine issue of material fact about when the plaintiff
discovered, or in the exercise of reasonable diligence should have
discovered the nature of its injury. If the movant establishes that the
statute of limitations bars the action, the nonmovant must then adduce
summary judgment proof raising a fact issue in avoidance of the
statute of limitations.
KPMG Peat Marwick, 988 S.W.2d at 748 (footnotes omitted). A matter is
conclusively established if reasonable people could not differ as to the conclusion
to be drawn from the evidence. Farmers Ins. Exch. v. Rodriguez, 366 S.W.3d 216,
221 (Tex. App.—Houston [14th Dist.] 2012, pet. denied). In deciding whether a
disputed material fact issue exists precluding summary judgment, we must take
evidence favorable to the non-movant as true, and we must indulge every
reasonable inference and resolve any doubts in favor of the non-movant. Sysco
Food Servs., Inc. v. Trapnell, 890 S.W.2d 796, 800 (Tex. 1994). We will affirm the
summary judgment if any of the theories presented to the trial court and preserved
for appellate review are meritorious. Provident Life & Accident Ins. Co. v. Knott,
128 S.W.3d 211, 216 (Tex. 2003).
III. DISCUSSION
A. The Woods’ claims for monetary and declaratory relief under Texas
Constitution article XVI, section 50(a)(6), are barred by the section
16.051 four-year statute of limitations.
The Woods alleged in their petition that the home-equity lien on their
residence violated article XVI, sections 50(a)(6)(B), 50(a)(6)(E), 50(a)(6)(Q)(v),
and 50(a)(6)(Q)(viii), of the Texas Constitution. The Woods contend that their
home-equity lien is void because of section 50(c), which states, “No mortgage,
trust deed, or other lien on the homestead shall ever be valid unless it secures a
4
debt described by this section . . . .” Tex. Const. art. XVI, § 50(c). The Woods
assert that section 50(c) renders “void but curable” any home-equity lien that does
not strictly comply with a provision of section 50(a)(6). Consequently, because an
action to remove a cloud on title is not subject to the four-year residual statute of
limitations if a lien is void, see Ford v. Exxon Mobil Chem. Co., 235 S.W.3d 615,
618 (Tex. 2007), the Woods argue that the trial court erred in granting summary
judgment in favor of HSBC.
HSBC and Ocwen respond that the Woods’ constitutional claims are barred
by the four-year residual statute of limitations. Relying on the Dallas Court of
Appeals’ decision in Williams v. Wachovia Mortg. Corp., 407 S.W.3d 391 (Tex.
App.—Dallas 2013, pet. denied), and the Fifth Circuit Court of Appeals’ decision
in Priester v. JP Morgan Chase Bank, N.A., 708 F.3d 667 (5th Cir. 2013), cert.
denied, 134 S. Ct. 196 (2013), they contend a lien that violates section 50(a)(6) is
voidable. They further assert that section 50(a)(6)(Q)(x) allows a lender to cure a
lien that would otherwise be invalid. HSBC argues that the trial court properly
granted summary judgment on limitations grounds because a voidable lien is
subject to limitations and the Woods did not file suit until eight years after closing
the transaction.
1. Home-equity liens that do not comply with section 50(a)(6) are
voidable.
The fundamental question we face today is whether a home-equity lien that
violates section 50(a)(6) of the Texas Constitution is void or voidable. Two courts
have recently concluded that constitutionally noncompliant homestead liens are
voidable. First, like the Woods, the plaintiffs in Priester obtained a home-equity
loan that did not comply with the constitutional requirements. 708 F.3d at 671.
Five years after the transaction closed, the plaintiffs sent a letter to the defendant,
5
which had acquired the loan from the original lender, requesting cure under section
50(a)(6)(Q)(x). Id. The defendant took no action to cure the perceived infirmities.
Id. The plaintiffs then sued the defendants for a declaratory judgment that the loan
and lien on their home were void ab initio, that the defendants had failed to cure,
and that the defendants were required to forfeit all principal and interest. Id. In
deciding whether a statute of limitations applied to the plaintiffs’ claims, the
Priester court reasoned:
The decision in Doody v. Ameriquest Mortgage Co., 49 S.W.3d 342(Tex. 2001), offers indirect support for the applicability of limitations.
The court responded to a question certified by this court on the issue
of cure, explaining that a lien cured under Section 50(a)(6)(Q) became
valid even if it was “invalid” before the cure. Id. at 347. Discussing
forfeiture, the court stated that “if a lien that secures such a loan is
voided,” the lender loses all rights to recovery. Id. at 346. That
language suggests that the Texas Supreme Court considers liens
created in violation of Section 50(a)(6) to be voidable rather than
void—a “void” lien could not be “voided” by future action.
708 F.3d at 674. The Priester court further noted that “[b]ecause a cure provision
exists in Section 50(a)(6)(Q), liens that are contrary to the requirements of § 50(a)
are voidable rather than void from the start.” Id. at 674 n.4.2
Second, after the Priester decision was issued, the Dallas Court of Appeals
faced a similar question in Williams. In that case, the plaintiff’s husband took out a
loan on the couple’s residence and represented himself to be an unmarried man.
Williams, 407 S.W.3d at 392. Six years after she discovered the home-equity loan
2
Priester effectively overruled prior federal district court cases that reached the opposite
conclusion. See Ausmus v. Deutsche Bank Trust Co. Nat’l Ass’n, No. 3:13-CV-148, 2013 WL
3938515, at *2–*3 (S.D. Tex. Jul. 29, 2013); see also Moran v. Ocwen Loan Servicing, L.L.C.,
560 Fed. Appx. 277, 277 (5th Cir.) (Priester is controlling precedent in Fifth Circuit); Smith v.
JPMorgan Chase Bank Nat’l Ass’n, 825 F. Supp. 2d 859, 868 (S.D. Tex. 2011) (holding that
noncompliant home-equity liens are void ab initio), adhered to on reconsideration sub nom;
Santos v. CitiMortgage, Inc., No. 3:11-CV-2592-M-BK, 2012 WL 1058159, at *3 (N.D. Tex.
Feb. 7, 2012) (same), rejected in part, 2012 WL 1065464 (N.D. Tex. Mar. 29, 2012).
6
and lien, the plaintiff sought declaratory judgment that the home-equity lien was
void. Id. at 392–93, 398. The trial court granted the defendants’ motion for
summary judgment, which was based in part on the applicability of the four-year
residual statute of limitations found in section 16.051 of the Texas Civil Practice
and Remedies Code. Id. at 393. The plaintiff argued on appeal that the home-
equity lien on her homestead was void because she did not sign the agreement
granting the lien or consent to it. Id. at 395; see Tex. Const. art. XVI, §
50(a)(6)(A). Finding the Priester court’s analysis persuasive, the Williams court
held that the noncompliant home-equity lien was voidable. Id. at 397.
We too find the Priester court’s analysis persuasive not only because of its
sound reasoning, but also because its conclusion comports with Texas Supreme
Court precedent on the key distinction between a void act and a voidable act,
which is a party’s ability—either through its own action or through the judicial
process—to disaffirm, ratify, or confirm a voidable act. See Brazzel v. Murray, 481
S.W.2d 801, 803 (Tex. 1972) (“A void act is one entirely null within itself, not
binding on either party, and which is not susceptible of ratification or confirmation.
. . . A voidable act . . . is binding until disaffirmed, and . . . may be made finally
valid by failure within proper time to have it annulled, or by subsequent ratification
or confirmation.”); Slaughter v. Qualls, 162 S.W.2d 671, 674 (Tex. 1942);
Murchison v. White, 54 Tex. 78, 81 (1880); Cummings v. Powell, 8 Tex. 80, 85
(1852); see also Oles v. Curl, 65 S.W.3d 129, 131 n.1 (Tex. App.—Amarillo 2001,
no pet.) (“Simply put, if a supposedly void act can be validated then the act cannot
actually be void.”); In re Moreno, 4 S.W.3d 278, 280–81 (Tex. App.—Houston
[14th Dist.] 1999, no pet.); Bayoud v. Bayoud, 797 S.W.2d 304, 309 (Tex. App.—
Dallas 1990, writ denied).
7
Keeping this distinction in mind, if we were to decide that a noncompliant
home-equity lien is void from the start, then the lien would not be susceptible to
correction, ratification, confirmation, disaffirmation, or even cure. While this may
have been the case prior to the 1997 constitutional amendment that added the
section 50(a)(6)(Q)(x) cure provisions, it is not the case now. The 1997 home-
equity loan amendment affords lenders the means to correct mistakes in order to
validate a noncompliant home-equity lien. Doody, 49 S.W.3d at 346 (discussing
Collier v. Valley Bldg. & Loan Ass’n, 62 S.W.2d 82, 84 (Tex. Comm’n App. 1933,
holding approved)). The section 50(a)(6)(Q)(x) cure provisions place noncompliant
home-equity liens on the voidable side of the void-voidable scale. 3
Despite the Woods’ argument that a plain reading of section 50(c)
necessitates finding a constitutionally noncompliant lien void, our conclusion is
consistent with the rules governing interpretation of the Texas Constitution:
When interpreting our state constitution, we rely heavily on its literal
text and must give effect to its plain language. We strive to give
constitutional provisions the effect their makers and adopters
3
The Woods cite Collier, in support of the proposition that the Doody court created a
new “void but curable” status for section 50(a)(6) home-equity liens. Collier stands for the
proposition that an invalid lien cannot be ratified unless the authority to ratify it exists under our
Constitution or statutes. Collier v. Valley Bldg. & Loan Ass’n, 62 S.W.2d 82, 84 (Tex. Comm’n
App. 1933, holding approved). Referring to Collier, the Doody court made clear that the 1997
home-equity loan amendment affords lenders the authority to ratify an invalid lien. Doody, 49
S.W.3d at 346. The Doody court’s statement supports our conclusion that constitutionally
noncompliant liens are voidable.
The Woods’ further reliance on York v. State, 373 S.W.3d 32 (Tex. 2012), in support of
their “void but curable” argument is also misplaced. The York court held that a judgment that
violates a bankruptcy automatic stay is void unless a federal bankruptcy court modifies the stay.
Id. at 40. The Woods’ situation is distinguishable because the lender in a home-equity transaction
has the ability under our Constitution to cure the noncompliant lien without the involvement of
the federal judiciary or any other third party. Furthermore, the Texas Supreme Court has noted
that the rationale for classifying judgments in violation of an automatic stay as void was that
bankruptcy law vests “exclusive jurisdiction” in the bankruptcy courts. See Roccaforte v.
Jefferson Cnty., 341 S.W.3d 919, 923 (Tex. 2011) (citing Kalb v. Feuerstein, 308 U.S. 433(1940)). That rationale does not apply to the present case.
8
intended. We construe constitutional provisions and amendments that
relate to the same subject matter together and consider those
amendments and provisions in light of each other. And we strive to
avoid a construction that renders any provision meaningless or
inoperative.
Doody, 49 S.W.3d at 344 (citations omitted). In adhering to these core principles,
the Doody court stated:
[T]he cure provision in section 50(a)(6)(Q)(x) applies to all the
lender’s obligations under the ‘extension of credit’ including section
50(c)’s requirements that to be valid a homestead must secure a debt
described by this section.
Id. at 345. Accepting the Woods’ position would require us to read section 50(c) in
isolation and in contravention of Texas Supreme Court precedent, which we
decline to do.
Accordingly, we hold that because a cure provision exists in the Texas
Constitution, homestead liens that do not comply with the constitutional
requirements are voidable. Priester, 708 F.3d at 674; Williams, 407 S.W.3d at
396–97.
2. The four-year statute of limitations of Texas Civil Practice and
Remedies Code section 16.051 applies to the Woods’ constitutional
claims.
Having determined that noncompliant home-equity liens are voidable, and
because such liens are subject to limitations, we must decide which statute of
limitations applies to the Woods’ constitutional claims. “Every action for which
there is no express limitations period, except an action for the recovery of real
property, must be brought not later than four years after the day the cause of action
accrues.” Tex. Civ. Prac. & Rem. Code Ann. § 16.051 (West 2008). Section
50(a)(6) does not contain an express limitations period. Williams, 407 S.W.3d at
394. Therefore, the Woods’ causes of action based on HSBC and Ocwen’s alleged
9
violations of section 50(a)(6) are subject to the section 16.051 four-year residual
statute of limitations.
Anticipating the possibility that section 16.051 would apply to their
constitutional claims, the Woods assert that section 16.051 does not apply to their
declaratory judgment action to cancel HSBC’s lien because it constitutes an action
for the recovery of real property. An action for the recovery of real property is one
that would support a trespass to try title suit without first invoking the equitable
powers of the court to cancel a deed. Miles v. Martin, 321 S.W.2d 62, 69 (Tex.
1959); Carr v. Weiss, 984 S.W.2d 753, 762 (Tex. App.—Amarillo 1999, pet.
denied); see also Neill v. Pure Oil Co., 101 S.W.2d 402, 404 (Tex. Civ. App.—
Dallas 1937, writ ref’d); Landram v. Robertson, 195 S.W.2d 170, 175 (Tex. Civ.
App.—San Antonio 1946, writ ref’d n.r.e.). A trespass to try title suit is “the
method of determining title to lands, tenements, or other real property.” Tex. Prop.
Code Ann. § 22.001(a) (West 2000). It is generally used to clear problems in
chains of title or to recover possession of land unlawfully withheld from a rightful
owner. Martin v. Amerman, 133 S.W.3d 262, 265 (Tex. 2004). A declaratory
judgment action, on the other hand, provides an efficient procedural method for
seeking a declaration of rights regarding the construction or validity of deeds by
those whose rights are affected by such instruments. Jordan v. Bustamante, 158
S.W.3d 29, 35 (Tex. App.—Houston [14th Dist.] 2005, pet. denied).
Initially, we note that the Woods’ claim for forfeiture of principal and
interest is an action to recover money damages. As such, it is not an action for the
recovery of real property. Nor is the Woods’ declaratory judgment action to void
the home-equity lien—which does not implicate any of the issues resolved by a
trespass to try title suit—an action for the recovery of real property. Cf. Mortg.
Elec. Registration Sys., Inc. v. Groves, No. 14-10-00090-CV, 2011 WL 1364070,
10
at *4 (Tex. App.—Houston [14th Dist.] Apr. 12, 2011, pet. denied) (mem. op.)
(where defendant did not dispute plaintiff’s title to property and plaintiff did not
dispute defendant’s ownership of deed of trust, plaintiff’s claim that deed of trust
was invalid did not implicate any issues resolved by trespass to try title suit).
Citing the general principle that the legal and equitable estates in real
property are severed when a mortgagor executes a deed of trust, see Flag-Redfern
Oil Co. v. Humble Expl. Co., Inc., 744 S.W.2d 6, 8 (Tex. 1987), the Woods further
contend that their suit to invalidate the home-equity lien is an action to recover
“equitable title.” Therefore, it is an action to recover real property. The Woods
then cite two cases, MacDonald v. Follett, 180 S.W.2d 334 (Tex. 1944), and In re
Lemons, 281 S.W.3d 643 (Tex. App.—Tyler 2009, no pet.), for the proposition that
“the Supreme Court has long held that suits for equitable title are not subject to the
4-year residual statute of limitations.”
We reject the Woods’ argument. In MacDonald, the plaintiff brought an
action in trespass to try title seeking to impose a constructive trust on the legal title
to real property acquired by the defendant through an alleged breach of fiduciary
duty. 180 S.W.2d at 335–36. The Texas Supreme Court held that if the plaintiff
could successfully establish a relationship of trust and confidence with the
defendant, then the four-year statute of limitations would not apply to the
plaintiff’s suit because it would be an action to recover real property. Id. at 338. In
Lemons, the plaintiff sued to impose a constructive trust on the legal title to real
property purchased by the defendant with funds that were removed from the
plaintiff’s bank account without authority. 281 S.W.3d at 645. The defendant
moved to transfer venue under section 15.011 of the Texas Civil Practice and
Remedies Code. Id. at 646. Section 15.011 is a mandatory venue provision stating
that “[a]ctions for recovery of real property . . . shall be brought in the county in
11
which all or a part of the property is located.” Tex. Civ. Prac. & Rem. Code Ann.
§ 15.011 (West 2002); Lemons, 281 S.W.3d at 646. The Tyler Court of Appeals
held that section 15.011 applied to the plaintiff’s claim because “a suit to impose a
constructive trust on real property is a suit for the recovery of real property.”
Lemons, 281 S.W.3d at 647.
Based on the context provided by the facts of MacDonald and Lemons, the
more accurate proposition is that suits for equitable title by reason of a constructive
trust are not subject to the four-year residual statute of limitations because a
beneficiary’s interest under a constructive trust will support an action in trespass to
try title. See Binford v. Snyder, 189 S.W.2d 471, 476 (Tex. 1945); Grunwald v.
Grunwald, 487 S.W.2d 240, 245 (Tex. Civ. App.—Houston [1st Dist.] 1972, writ
ref’d n.r.e.); Gates v. Coquat, 210 S.W.2d 614, 615 (Tex. Civ. App.—San Antonio
1948, no writ).
Here, the Woods are not attempting to impose a constructive trust on the
home-equity lien and do not allege that HSBC has acquired legal title through
wrongdoing. To the contrary, the Woods have merely asserted a cause of action to
cancel their home-equity lien, which will not support an action in trespass to try
title and which requires the equitable powers of the court to determine. Cf. Neill,
101 S.W.2d at 403 (“[P]laintiffs’ action [to cancel the voidable deeds] rests upon
equitable title, assertion of which requires the aid of a court of equity to determine,
thus the action is not one to recover real estate but one to remove the impediment
to such title, and is barred by the [article 5529, now section 16.051] statute of
limitation . . . .”); Johnson v. Wood, 157 S.W.2d 146, 148 (Tex. 1941) (a cause of
action to cancel a conveyance will not support an action in trespass to try title); see
also Groves, 2011 WL 1364070, at *4 (declaratory judgment action to cancel deed
of trust did not implicate issues resolved by trespass to try title suit).
12
Because the Woods’ declaratory judgment action to cancel their home-
equity lien would not support a trespass to try title action and requires the equitable
powers of the court to cancel their lien, their declaratory judgment action to cancel
the home-equity lien is not an action to recover real property.
We conclude that the section 16.051 four-year statute of limitations applies
to the Woods’ constitutional claims.
3. The Woods’ constitutional claims accrued on July 2, 2004, the date
the home-equity transaction closed.
We now address whether HSBC and Ocwen conclusively proved when the
Woods’ cause of action accrued. Generally, a cause of action accrues when a
wrongful act causes a legal injury. Etan Indus., Inc. v. Lehmann, 359 S.W.3d 620,
623 (Tex. 2011); Williams, 407 S.W.3d at 398. In cases involving a challenge to
the validity of a home-equity lien on constitutional grounds, the legal injury occurs
on the date the transaction closes. Priester, 708 F.3d at 676; Williams, 407 S.W.3d
at 398; Rivera v. Countrywide Home Loans, Inc., 262 S.W.3d 834, 840 (Tex.
App.—Dallas 2008, no pet.); Schanzle v. JPMC Specialty Mortg. LLC, No. 03-09-
00639-CV, 2011 WL 832170, at *4 (Tex. App.—Austin Mar. 11, 2011, no pet.)
(mem. op.). Here, the Woods are challenging the validity of the home-equity lien
on constitutional grounds. Therefore, the Woods’ constitutional claims accrued on
July 2, 2004, the date the Woods’ home-equity loan closed.
In reaching this conclusion, we reject the Woods’ alternative arguments for a
later accrual date. The Woods initially rely on Dessommes v. Dessommes, 543
S.W.2d 165 (Tex. Civ. App.—Texarkana 1976, writ ref’d n.r.e.), in support of their
position that no controversy arose with respect to their declaratory judgment action
until HSBC failed to cure. Essentially, the Woods argue that, for purposes of
determining the accrual date, their legal injury did not occur until the sixty-day
13
period for cure expired. See Tex. Const. art. XVI, § 50(a)(6)(Q)(x). However,
Dessommes simply restates the general principle that a statute of limitations begins
to run when facts come into existence authorizing a party to seek a judicial remedy,
i.e., when the legal injury occurs. 543 S.W.2d at 169 (citing Williams v. Pure Oil
Co., 78 S.W.2d 929, 931 (Tex. 1935)); see also Knott, 128 S.W.3d at 221.
We have already held that the legal injury in this case occurred when the
transaction closed on July 2, 2004. The facts that would have alerted the Woods to
potential constitutional violations—e.g., fees exceeding three percent of the loan
amount—existed when the transaction closed, as did their right to seek a judicial
remedy for those violations. Furthermore, nothing in the Texas Constitution
prevented the Woods from initiating their declaratory judgment action as soon as
the transaction closed. See Priester, 708 F.3d at 675 n.6 (“[T]here is nothing in the
Texas Constitution that suggests that the borrower must seek cure before filing
suit.”).
The Woods next argue that the statute of limitations was tolled because of
HSBC’s “continuing and ongoing violations” of the Texas Constitution. The
Woods did not explain or cite any legal authority in support of their contention.
This issue is therefore inadequately briefed. See Tex. R. App. P. 38.1(i); In re
S.A.H., 420 S.W.3d 911, 929 (Tex. App.—Houston [14th Dist.] 2014, no pet.).
Because we conclude that the Woods have waived error on this particular
argument, we decline to address it.4
4
The Woods pleaded two alternative tolling theories in their second amended petition—
the discovery rule and equitable tolling. Both theories were addressed in HSBC and Ocwen’s
motion for summary judgment and in the Woods’ response to HSBC and Ocwen’s motion for
summary judgment. The Woods did not raise these theories on appeal and have therefore
abandoned them. See Tex. R. App. P. 38.1(f), 47.1; Shafaii Children’s Trust, 417 S.W.3d at 622
n.6; Martinez, 218 S.W.3d at 844 (“When reviewing a civil matter, an appellate court has no
discretion to consider an issue not raised in the appellant’s brief, even if the ends of justice so
14
In sum, because a cure provision exists in the Texas Constitution, homestead
liens that do not comply with the constitutional requirements are voidable. The
section 16.051 four-year residual statute of limitations applies to the Woods’
constitutional claims, and their constitutional claims are not actions for the
recovery of real property. The Woods’ constitutional claims accrued when the
home-equity transaction closed on July 2, 2004. The Woods had until July 2, 2008,
to file their petition. The Woods did not file their original petition until July 9,
2012.
With regard to the Woods’ constitutional claims, we conclude that the trial
court did not err in granting HSBC’s motion for summary judgment on limitations
grounds. The Woods’ first sub-issue is overruled.5
B. The Woods’ breach-of-contract claim was barred by the section 16.051
four-year statute of limitations.
The Woods alleged in their second amended petition that HSBC and Ocwen
breached paragraph 13 of the security agreement that created the home-equity lien
by charging fees exceeding three percent of the loan amount, in violation of section
require.”); see also Clonts, 294 S.W. at 846.
5
In an additional argument against the applicability of a statute of limitations to their
constitutional claims, the Woods characterize their declaratory judgment action as a defense to
foreclosure. According to the Woods, because defenses are not governed by the statutes of
limitations, their declaratory judgment action is not barred by limitations. We have indicated in
the foreclosure context that a lender’s failure to comply with the constitutional requirements is in
the nature of an affirmative defense. Wilson v. Aames Capital Corp., No. 14-06-00524-CV, 2007
WL 3072054, at *1 (Tex. App.—Houston [14th Dist.] Oct. 23, 2007, no pet.) (mem. op.).
However, potential defendants like the Woods cannot “use a declaratory judgment to
prematurely adjudicate defenses to liability that may not yet exist.” Transcon. Realty Investors,
Inc. v. Orix Capital Mkts., LLC, 353 S.W.3d 241, 245 (Tex. App.—Dallas 2011, pet. denied)
(citing Calderon v. Ashmus, 523 U.S. 740, 748 (1998), for the proposition that under the federal
constitution, a party cannot use a declaratory judgment to obtain an advance ruling on an
affirmative defense). Nothing in the record before us indicates that the Woods were actually
faced with foreclosure; thus, their liability may not yet exist, and because we are prohibited from
issuing advisory opinions, Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 444 (Tex.
1993), we decline to treat the Woods’ declaratory judgment action as a defense to foreclosure.
15
50(a)(6)(E) of the Texas Constitution.6 The Woods contend on appeal that because
notice is a prerequisite to filing suit under the security instrument,7 their cause of
action for breach of contract did not accrue until March 16, 2012, the date they sent
HSBC notice of the alleged constitutional violations. HSBC and Ocwen respond
that the Woods’ breach-of-contract claim is barred by limitations because the
Woods filed suit more than four years after their claim accrued on July 2, 2004,
when the transaction closed.
The limitations period for a breach-of-contract cause of action is four years.
See Tex. Civ. Prac. & Rem. Code Ann. § 16.051; Stine v. Stewart, 80 S.W.3d 586,
592 (Tex. 2002). A claim for breach of contract accrues when the contract is
breached. Barker v. Eckman, 213 S.W.3d 306, 311 (Tex. 2006); Stine, 80 S.W.3d
at 592. Generally, when demand is a condition precedent to the right to sue, the
statute of limitations does not begin to run until demand is made, unless the
demand is waived or unreasonably delayed. Gabriel v. Alhabbal, 618 S.W.2d 894,
896 (Tex. Civ. App.—Houston [1st Dist.] 1981, writ ref’d n.r.e.).
Where demand is a prerequisite to a right of action, the injured party
must make the demand within a reasonable time after it may lawfully
be made. . . . The reasonableness of the delay is normally a fact
question, but in the absence of mitigating circumstances, the law will
ordinarily consider a reasonable time as being coincident with the
6
Paragraph 13 of the security agreement reads, in pertinent part: “Lender may not charge
fees that are expressly prohibited by this Security Instrument or by Applicable Law.” The term
“Applicable Law” is defined as “all controlling applicable . . . state and local statutes . . . .”
7
Paragraph 19 of the security agreement states, in pertinent part:
Neither Borrower nor Lender may commence . . . any judicial action . . .
that arises from the other party’s actions pursuant to this Security
Instrument or that alleges that the other party has breached any provision
of, or any duty owed by reason of, this Security Instrument, until such
Borrower or Lender has notified the other party . . . of such alleged breach
and afforded the other party hereto a reasonable period after the giving of
such notice to take corrective action.
16
running of the statute, and an action will be barred if a demand is not
made within that period.
Barnes v. LPP Mortg., Ltd., 358 S.W.3d 301, 306 (Tex. App.—Dallas 2011, pet.
denied) (quoting Stevens v. State Farm Fire & Cas. Co., 929 S.W.2d 665, 671
(Tex. App.—Texarkana 1996, writ denied)).
Assuming, for the sake of argument, that HSBC did in fact breach the
security agreement by charging fees in excess of three percent of the loan amount,
the breach occurred on the date the excessive fees were charged. The Woods
referred to certain itemized charges in the HUD-1 settlement statement as evidence
that HSBC assessed excessive fees.8 The HUD-1 identified the settlement date as
July 2, 2004, which coincides with the closing date of the transaction. Therefore,
the alleged excessive fees were charged, and the Woods’ breach-of-contract claim
accrued, on July 2, 2004. Absent mitigating circumstances, the Woods had until
July 2, 2008, to demand cure and file their breach-of-contract cause of action. The
Woods did not demand cure until March 16, 2012, and they did not file their
original petition until July 9, 2012. The Woods did not allege in their live petition
any mitigating circumstances to justify waiting nearly eight years to demand cure.
Therefore, with regard to the Woods’ breach-of-contract claim, we conclude
that the trial court did not err in granting HSBC and Ocwen’s motion for summary
judgment on limitations grounds. The Woods’ second sub-issue is overruled.
IV. CONCLUSION
The trial court did not err by granting summary judgment in favor of HSBC
and Ocwen on limitations grounds. We overrule both of the Woods’ sub-issues on
8
For purposes of the HUD-1, “settlement means the process of executing legally binding
documents regarding a lien on property that is subject to a federally related mortgage loan. This
process may also be called ‘closing’ or ‘escrow’ in different jurisdictions.” 24 C.F.R. § 3500.2(b)
(2014).
17
appeal and affirm the trial court’s judgment.
/s/ Marc W. Brown
Justice
Panel consists of Justices Boyce, Christopher, and Brown.
18