Timothy Livingston and Lori Livingston v. U.S. Bank National Association ( 2020 )

In the
Court of Appeals
Second Appellate District of Texas
at Fort Worth
___________________________
No. 02-19-00185-CV
___________________________
TIMOTHY LIVINGSTON AND LORI LIVINGSTON, Appellants
V.
U.S. BANK NATIONAL ASSOCIATION, Appellee
On Appeal from the 271st District Court
Wise County, Texas
Trial Court No. CV14-05-319
Before Kerr, Birdwell, and Womack, JJ.
Memorandum Opinion by Justice Womack
MEMORANDUM OPINION
I. INTRODUCTION
This appeal arises out of a home-equity loan dispute involving Appellants
Timothy Livingston and Lori Livingston and Appellee U.S. Bank National
Association. In two issues, Appellants challenge the trial court’s order denying their
motion for summary judgment on U.S. Bank’s judicial foreclosure claim. Because the
trial court properly denied Appellants’ motion for summary judgment based on res
judicata as well as fact questions in Appellants’ summary judgment evidence, we
affirm.
II. BACKGROUND
On October 23, 2006, Appellants executed a Texas Home Equity Note, which
governed the terms of Appellants’ obligation to repay a $320,000 home-equity loan to
National City Mortgage, a division of National City Bank, at the rate of $2,075.52 in
monthly installments, beginning December 1, 2006, and continuing each month
thereafter until paid or until November 1, 2036, at which time the Note will mature.
On the same day, Appellants executed a Texas Home Equity Security Instrument
(Security Instrument or Deed of Trust), which granted National City a lien on the
property. The Deed of Trust gave National City the right to foreclose on the
property in the event of Appellants’ default on the payments under the Note.
2
PNC Bank, N.A. is the successor by merger to National City. PNC later
assigned the Deed of Trust to U.S. Bank. PNC remained the mortgage servicer of the
loan since the assignment. U.S. Bank is the owner and holder of the Note.
Beginning in December 2009, Appellants ceased to make their monthly
payment on the Note. As a result of Appellants’ default, U.S. Bank elected to
accelerate the entire debt. As of July 6, 2016, Appellants were due and owing for the
December 2009 Note payment and all subsequent months, and as of July 14, 2016,
Appellants owed at least $467,342.32, which consisted of unpaid principal, interest,
accrued late charges, miscellaneous fees and costs, and unpaid escrow balance.
This suit is the second lawsuit challenging the right of U.S. Bank to foreclose.
In the first lawsuit, Appellants filed suit in the district court of Wise County, Texas,
seeking declaratory relief and alleging the failure “to provide [Appellants] with
documents at closing that provided all blanks filled in as required by the Texas
Constitution Section 50(a)(6)(Q)(iii).” After removal to federal court, PNC filed a
motion to dismiss Appellants’ claim for declaratory relief that PNC had “failed to
provide [Appellants] with documents at closing that provided all blanks filled in as
required by the Texas Constitution Section 50(a)(6)(Q)(iii).” The federal court
granted the motion to dismiss because “[Appellants’] claim under the Texas
constitution is barred by the statute of limitations.” The order dismissing the claim
also stated that “[t]his suit arises out of the October 23, 2006 closing of [Appellants’]
home equity loan. . . . [Appellants] seek a declaration that ‘Defendant failed to
3
provide [Appellants] with documents at closing that provided all blanks filled in as
required by the Texas Constitution Section 50(a)(6)(Q)(iii).’”
This lawsuit was filed in May 2014 by U.S. Bank seeking a judicial foreclosure
of the property pursuant to Texas Rule of Civil Procedure 735. See Tex. R.
Civ. P. 735. Appellants filed an answer, which included a general denial, affirmative
defenses, and counterclaims. One of the affirmative defenses alleged that U.S. Bank
had “failed to provide [Appellants] with documents at closing that provided all blanks
filled in as required by the Texas Constitution Section 50(a)(6)(Q)(iii) . . . mak[ing] the
lien void ab initio.”
Thereafter, U.S. Bank filed a traditional summary judgment motion against
Appellants’ counterclaims, alleging that (1) the statute of limitations does not bar U.S.
Bank’s right to foreclosure, (2) Appellants’ counterclaims are barred by res judicata,
(3) any claims premised upon the loan’s compliance with the provisions in the Texas
Constitution applicable to home equity loans are barred by the statute of limitations,
(4) any oral statements allegedly made to Appellants instructing them to stop making
their loan payments are barred by the statute of frauds, (5) Appellants’ intentional
misrepresentation claim fails as a matter of law, and (6) Appellants’ claims under the
Texas Deceptive Trade Practices Act fail as a matter of law. Appellants responded to
the motion. The trial court granted U.S. Bank’s motion for summary judgment on
Appellants’ counterclaims.
4
U.S. Bank then amended its petition for judicial foreclosure to add claims for
equitable and contractual subrogation. Appellants filed their motion for summary
judgment against the claim for judicial foreclosure, asserting that the lien “is void as
the loan failed to comply with the requirements of the Texas Constitution and [U.S.
Bank] failed to timely cure the defect once it was notified as required.” Several
months later, U.S. Bank filed a traditional motion for summary judgment asserting
that it was entitled to an “equitable lien under the doctrine of equitable subrogation.”
The trial court granted U.S. Bank’s motion for summary judgment and denied
Appellants’ motion for summary judgment, stating that it “is barred by res judicata.”
Thereafter, U.S. Bank filed a motion for summary judgment on its claim for
judicial foreclosure. The trial court granted U.S. Bank’s motion for summary
judgment and ordered foreclosure. This appeal followed.
III. DISCUSSION
In their brief, Appellants raise two issues, both complaining of the trial court’s
denial of their motion for summary judgment against U.S. Bank’s claim for judicial
foreclosure. First, they state that the trial court erred by denying their motion for
summary judgment “by virtue of res judicata as [Appellee] elected not to pursue
judicial foreclosure in any litigation prior to the instant case and was obligated to
substantiate [that] the lien being asserted was valid and capable of enforcement under
Texas law.” Second, they assert that the trial court erred by denying the motion for
summary judgment “as the home equity lien being claimed was in violation of the
5
Texas Constitution and was not cured within the prescribed time limits.” Neither of
the issues complain of the trial court’s granting of U.S. Bank’s motions for summary
judgment.
A. Standard of Review
We review a summary judgment de novo. Travelers Ins. Co. v. Joachim,
315 S.W.3d 860, 862 (Tex. 2010). We consider the evidence presented in the light
most favorable to the nonmovant, crediting evidence favorable to the nonmovant if
reasonable jurors could, and disregarding evidence contrary to the nonmovant unless
reasonable jurors could not. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding,
289 S.W.3d 844, 848 (Tex. 2009). We indulge every reasonable inference and resolve
any doubts in the nonmovant’s favor. 20801, Inc. v. Parker, 249 S.W.3d 392, 399 (Tex.
2008). A defendant is entitled to summary judgment on an affirmative defense if the
defendant conclusively proves all elements of that defense. Frost Nat’l Bank v.
Fernandez, 315 S.W.3d 494, 508–09 (Tex. 2010); see Tex. R. Civ. P. 166a(b), (c). To
accomplish this, the defendant must present summary judgment evidence that
conclusively establishes each element of the affirmative defense. See Chau v. Riddle,
254 S.W.3d 453, 455 (Tex. 2008).
B. Application of Law to Facts
In their motion for summary judgment against U.S. Bank’s claim for judicial
foreclosure, Appellants alleged that U.S. Bank’s lien was void “as the loan failed to
comply with the requirements of the Texas Constitution.” Specifically, their
6
complaint is that the Deed of Trust signed by them omitted the exhibit containing the
legal description and that a deed of trust “was recorded with an exhibit that described
10 acres of land owned by [Appellants] when it should have included only 1 acre.”
They also contend that they had notified U.S. Bank multiple times regarding the issue
and had demanded that U.S. Bank cure the “defect.” According to Appellants, U.S.
Bank “sent an offer to cure only the defect regarding the property description being
10 acres while declining any of the other concerns of [Appellants.]” These facts,
Appellants contend, violate Texas Constitution Article XVI, Section 50(a)(6)(Q)(iii),1
which states that a lien on a homestead can attach only if it is made on the condition
that “the owner of the homestead not sign any instrument in which blanks related to
substantive terms of agreement are left to be filled in.”
This is the same argument previously raised by Appellants in their first lawsuit
and disposed of by res judicata. In both their petition in the first lawsuit and their
answer in the second lawsuit, Appellants state, “A review of the closing documents
revealed that [the] legal description attached to the recorded deed of trust was not
Texas Constitution Article XVI, Section 50(a)(6)(Q)(iii) provides,
1
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: . . . an extension of credit that: . . . is made on the condition that: . . .
the owner of the homestead not sign any instrument in which blanks
relating to substantive terms of agreement are left to be filled in . . . .
Tex. Const. art. XVI, § 50(a)(6)(Q)(iii).
7
included with the copies received by [Appellants] on October 23, 2006.” In addition,
Appellants allege in both documents that U.S. Bank had “failed to provide
[Appellants] with documents at closing that provided all blanks filled in as required by
the Texas Constitution Section 50(a)(6)(Q)(iii).”
Appellants contend that res judicata does not apply because U.S. Bank did not
pursue judicial foreclosure in the first lawsuit. However, res judicata does not require
it.
Appellants and U.S. Bank both agree that the affirmative defense of res judicata
has three elements. See Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 652 (Tex. 1996).
“The party relying on the affirmative defense of res judicata must prove (1) a prior
final determination on the merits by a court of competent jurisdiction; (2) identity of
parties or those in privity with them; and (3) a second action based on the same claims
as were or could have been raised in the first action.” Travelers Ins. Co., 315 S.W.3d at
862. Texas follows the “transactional” approach to claims preclusion under which “a
final judgment on an action extinguishes the right to bring suit on the transaction, or a
series of connected transactions, out of which the action arose.” Barr v. Resolution Tr.
Corp. ex rel. Sunbelt Fed. Savs., 837 S.W.2d 627, 631 (Tex. 1992). Following this
approach, Texas courts examine the factual bases, not the legal theories, presented in
the cases. Samuel v. Fed. Home Loan Mortg. Corp., 434 S.W.3d 230, 234 (Tex. App.—
Houston [1st Dist.] 2014, no pet.). The main concern is whether the cases share the
same nucleus of operative facts. Id. A judgment in an earlier suit “precludes a second
8
action by the parties and their privies not only on matters actually litigated[] but also
on causes of action or defenses which arise out of the same subject matter and which
might have been litigated in the first suit.” Getty Oil Co. v. Ins. Co. of N. Am.,
845 S.W.2d 794, 798 (Tex. 1992).
Appellants do not contest the second element (privity) of a res judicata defense.
With regard to the first element (prior final determination on the merits), there is a
final judgment by the U.S. District Court for the Northern District of Texas. While
acknowledging that there is a judgment, Appellants complain that U.S. Bank “did not
get a judgment on the merits of the constitutionality of the lien, rather it got a
judgment that any claim in that regard is limitations barred, which is procedural in
nature.” But the fact that the first suit was resolved based on what Appellants
contend was a “procedural device”—statute of limitations—has no bearing on the
preclusive effect of res judicata. See Igal v. Brightstar Info. Tech. Grp., Inc., 250 S.W.3d 78,
90 (Tex. 2007) (“A court’s dismissal of a claim because of a failure to file within the
statute of limitations is accorded preclusive effect.”); Fite v. King, 718 S.W.2d 345, 347
(Tex. App.—Dallas 1986, writ ref’d n.r.e.); see also Besing v. Vanden Eykel, 878 S.W.2d
182, 185 (Tex. App.—Dallas 1994, writ denied) (stating that granting summary
judgment on limitations operates as res judicata to a subsequent writ between the
same parties on the same cause of action). Even the federal courts have stated
unequivocally that res judicata “shall be given to a judgment dismissing a cause of
9
action on limitations grounds.” See Steve D. Thompson Trucking, Inc. v. Dorsey Trailers,
Inc., 870 F.2d 1044, 1046 (5th Cir. 1989).
With regard to the third element (second action based on the same claims),
Appellants argue that “the issues raised in this action could not have been raised in
the first action.” As shown above, the same allegations were made by Appellants in
the first and second suit. Each complains of the violation of Texas Constitution
Article XVI, Section 50(a)(6)(Q)(iii). The scope of res judicata is not limited to
matters actually litigated. See generally Samuel, 434 S.W.3d at 233. The doctrine of res
judicata bars a second action by parties, and those in privity with them, on matters
actually litigated in a previous suit, as well as claims that could have been litigated in
the prior suit through the exercise of diligence. Id. (citing Hallco Tex., Inc. v. McMullen
Cty., 221 S.W.3d 50, 58 (Tex. 2007) (quoting Getty Oil Co., 845 S.W.2d at 799)). Thus,
res judicata bars the issues raised in Appellants’ motion for summary judgment.
Even considering the merits of Appellants’ defensive claim as raised in their
second issue, Appellants cannot prevail. Pursuant to Texas Rule of Civil Procedure
166a(c), summary judgment is proper only if there is no genuine issue of material fact,
or the uncontroverted summary judgment evidence conclusively establishes a claim.
See Chau, 254 S.W.3d at 255; see also Provident Life & Accident Co. v. Knott, 128 S.W.3d
211, 215–16 (Tex. 2003).
In their motion for summary judgment, Appellants state, “[W]e have before us
an instance where the [Appellants] executed a deed of trust that omitted the exhibit
10
that was to include the legal description.” Therefore, according to Appellants, “This
omission at the closing table is a violation of Section 50(a)(6)(Q)(iii)[,] which states
that a lien on a homestead may only attach if it is made on the condition that: [. . .] (iii)
the owner of the homestead not sign any instrument in which blanks related to
substantive terms of agreement are left to be filled in.” To support their argument,
Appellants attached numerous documents as summary judgment evidence that had
conflicting terms. The Security Instrument reflects that both Appellants signed the
document under oath and directly below the following statement set out in bold:
“DO NOT SIGN IF THERE ARE BLANKS LEFT TO BE COMPLETED IN
THIS DOCUMENT.” As additional summary judgment evidence, Appellants
attached a copy of the “Texas Home Equity Affidavit and Agreement,” which was
also signed under oath and includes the same bold statement informing Appellants
not to sign if there are blanks in the document. The document further provided, “No
owner of the Property has signed an instrument in which applicable blanks were left
to be filled in. There are no blanks in this Texas Home Equity Affidavit and
Agreement, the Note, or the Security Instrument.”
Despite these statements, Appellant Timothy Livingston signed an affidavit to
support his motion for summary judgment that provides, “There were not any
documents presented to me [at closing] that contained a description of the collateral.”
Similarly, Appellant Lori Livingston swore, “All other documents presented [at
closing] that made reference to the collateral either used a postal address or made
11
reference to an exhibit containing a legal description that was not attached to the
document.”
A defendant who moves for summary judgment must conclusively negate a
single essential element of a cause of action or conclusively establish an affirmative
defense to be entitled to summary judgment. KCM Fin. LLC v. Bradshaw, 457 S.W.3d
70, 79 (Tex. 2015). The movant has the burden of proof and all doubts are resolved
in favor of the nonmovant. Roskey v. Tex. Health Facilities Comm’n, 639 S.W.2d 302,
303 (Tex. 1982). Appellants’ summary judgment evidence alone, without considering
U.S. Bank’s response, fails to meet this standard due to the conflicts in the evidence.
Therefore, we overrule both of Appellants’ issues.
IV. CONCLUSION
Having held that the trial court properly denied Appellants’ motion for
summary judgment, we affirm the trial court’s judgment.
/s/ Dana Womack
Dana Womack
Justice
Delivered: April 2, 2020
12