law-home-equity-loans | Texas Homestead Law | breach of promissory note | foreclosure case law |
EXPEDITED FORECLOSURE - HOME EQUITY LOANS
No appellate review in expedited foreclosure proceeding under Rule 736
Argo v. Select Portfolio Servicing, Inc. (Tex.App.- Houston [14th Dist.] Jul. 16, 2009)(per curiam dismissal)
(no interlocutory appeal of expedited foreclosure order, home equity loans)
DISMISSED: Per Curiam
Before Justices Seymore, Brown and Sullivan
14-09-00309-CV John Robert Argo v. Select Portfolio Servicing, Inc., U.S. Bank National Association, As
Trustees, Et Al.
Appeal from 55th District Court of Harris County
Trial Court Judge: Dion Ramos
Trial Court Case #: 2008-37488
This is an attempted appeal from an order signed March 26, 2009. The clerk's record was filed on May 22,
2009. On June 24, 2009, appellees filed a motion to dismiss the appeal for want of jurisdiction. See Tex. R.
App. P. 42.3(a). Appellant filed no response.
The order on appeal granted the home equity foreclosure application filed by appellees pursuant to Texas
Rule of Civil Procedure 736. Rule 736(8)(A) provides the granting or denial of an application under Rule
736 “is not an appealable order." Tex. R. Civ. P. 736 (8)(A). Consequently, we lack jurisdiction over this
appeal. See Grant-Brooks v. FV-1, Inc. 176 S.W.3d 933 (Tex. App. - Dallas 2005, pet. denied).
Appellees' motion is granted and the appeal is ordered dismissed.
TEXAS SUPREME COURT OPINION(S)
Lasalle Bank Nat'l Assn. v. White, No. 06-1016 (Tex. Dec. 21, 2007)(per curiam)(real estate law,
agricultural homestead, home-equity loan, lien validity)
Home Equity Loan and Lien not void, only voidable. Failure to appeal entails res judicata
effect. Lender was entitled to cure defect, and offered to do so
Summers v. Ameriquest Mortgage Co. (Tex.App.- Houston [14th Dist.] Jan. 15, 2008)(Fowler)
(real estate law, home owner law, foreclosure, home equity loan, summary judgment)
AFFIRMED: Opinion by Justice Fowler
14-06-00734-CV Kelly Lee Summers v. Ameriquest Mortgage Company
Appeal from 151st District Court of Harris County (Hon. Caroline Elizabeth Baker)
Summers v. Ameriquest Mortgage Co. (Tex.App.- Houston [14th Dist.] Jan. 15, 2008)(Fowler)(sj)
(real estate law, foreclosure, home equity loan)
M E M O R A N D U M O P I N I O N
In this home equity mortgage foreclosure case, Kelly Lee Summers appeals the trial court=s grant of
summary judgment in favor of Ameriquest Mortgage Company. Summers contends that her home equity
loan is invalid because it violates the Texas Constitution and that an earlier judgment declaring it valid and
enforceable is therefore void. We affirm.
Factual and Procedural Background
In July 2002, Summers executed a home equity loan with Ameriquest secured by a lien on Summer=s
homestead property located at 726 Sue Barnett Drive, Houston, Texas. The 2002 loan was paid in full
when Summers refinanced it by executing a second home equity loan with Ameriquest in March 2003. The
March 2003 loan was evidenced by two documents, a ATexas Home Equity Note@ (the Anote@) and a
ATexas Home Equity Security Instrument@ (the Alien@), both dated March 19, 2003.
In 2004, Ameriquest filed a declaratory judgment action against Summers.[1] Ameriquest alleged that, after
Summers executed the July 2002 loan, she complained that the loan did not comply with Avarious
provisions of Article XVI, sec. 50 of the Texas Constitution.@[2] Ameriquest offered to cure the purported
defects in the form of a new loan to refinance the July 2002 loan, and Summers accepted. Summers then
executed the March 2003 loan pursuant to a settlement and release.[3] According to Ameriquest=s
pleading, Summers then complained that the lien evidenced by the Security Instrument was void because it
refinanced a home equity loan less than one year after the June 2002 loan in violation of Article XVI,
section 50(a)(6) of the Texas Constitution, and demanded that Ameriquest release the lien. Ameriquest
responded to this demand by Aunilaterally curing any defect in the March 2003 loan by crediting
Summers=s account with $1,000 and offering to make a new loan with Summers as provided by Article XVI,
section 50(a)(6) of the Texas Constitution,@ but Summers rejected this offer. Ameriquest sought a
declaration that any defects in its security interest in Summers=s property were cured and the lien against
the property was valid and enforceable.
Summers answered Ameriquest=s declaratory judgment action and asserted that, because the March 2003
loan closed within one year of the July 2002 loan in violation of Article XVI, section 50(a)(6)(M)(ii) of the
Texas Constitution, the lien was void and the defect could not be cured.
Ameriquest moved for summary judgment, and in response Summers asserted her defense that the lien
violated Article XVI, section 50(a)(6)(M)(ii) of the Texas Constitution and was void. On December 21, 2004,
the trial court granted summary judgment in favor of Ameriquest, concluding that Ameriquest had
established as a matter of law that Athe lien Y is fully valid and enforceable and secures repayment of the
debt therein described by creation and continuation of a lien against [Summers=s] homestead property.@
Summers did not appeal this judgment.
In June 2005, Ameriquest sued Summers for judicial foreclosure after she defaulted on the loan. Summers
answered and again asserted that the loan was invalid under Article XVI, section 50(a)(6)(M)(ii) of the
Texas Constitution, because the second loan closed within one year of the first loan, and the defect could
not be cured.
Ameriquest moved for summary judgment on its request for judicial foreclosure. It also asserted that
Summers=s defense was barred by the doctrine of res judicata, and attached as evidence the pleadings
and judgment from the 2004 declaratory judgment action. In response, Summers again asserted that the
lien securing the March 2003 loan violated Article XVI, section 50(a)(6)(M)(ii) of the Texas Constitution, and
that this defect could not be cured. Further, Summers asserted that the trial court=s judgment from the
earlier action was void because it contradicted a provision of the Texas Constitution and so could not form
the basis for a claim of res judicata. In reply, Ameriquest asserted that, even if the lien was invalid initially,
Summers ignored the provisions of the Texas Constitution that enable lenders like Ameriquest the
opportunity to cure defects.
The trial court granted a final summary judgment in favor of Ameriquest. Summers moved for a new trial
and the trial court held a hearing on the motion, but the record does not reflect whether the motion was
denied or was overruled by operation of law. This appeal followed.
Analysis of the Issues
On appeal, Summers raises two issues, which we quote verbatim: (1) Can a home equity lien be valid when
it clearly fails to comply with a constitutional requirement and fails to explain why that portion of the
Constitution should be ignored? and (2) Can a void summary judgment be upheld? We address these
issues below.
I. The Validity of the Lien
In this issue, Summers does not dispute that she was in default on the home equity loan. Instead, she
argues that the lien is invalid because it violates Article XVI, section 50(a)(6)(M)(ii) of the Texas
Constitution. In response, Ameriquest contends this argument was previously litigated on the merits in the
2004 declaratory judgment action, and therefore it is barred by principles of res judicata and collateral
estoppel. In considering this issue, we apply the well-established standard of review applicable to a
traditional summary judgment. See Tex. R. Civ. P. 166a; Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546,
548B49 (Tex. 1985).
A. The Applicable Law
In 1997, the Texas Constitution was amended to allow home equity loans against a homestead. Doody v.
Ameriquest Mortgage Co., 49 S.W.3d 342, 343 (Tex. 2001). The amendment details the terms and
conditions for a home equity loan and the borrower=s and lender=s rights and obligations. Doody, 49 S.W.
3d at 343. Relevant here, the amendment included the requirement that a home equity loan could not
close before Athe first anniversary of the closing date of any other extension of credit described by
Subsection (a)(6) of the section secured by the same homestead property.@ Tex. Const. art. XVI, ' 50(a)(6)
(M)(ii) (amended 2007) (current version at Tex. Const. art. XVI, ' 50(a)(6)(M)(iii)).[4]
One of the amendment=s conditions for a lien=s validity is that the lender or any noteholder for the
extension of credit shall forfeit all principal and interest of the extensions of credit if it fails to comply with its
obligations under the extension of credit within a reasonable time after it is notified by the borrower of its
failure to comply. Doody, 49 S.W.3d at 343; Tex. Const. art. XVI, ' 50(a)(6)(Q)(x) (amended 2003). Section
50(a)(6)(Q)(x)=s cure provision provides a means for the lender to correct mistakes within a reasonable
time in order to validate a lien securing a section 50(a)(6) extension of credit. Doody, 49 S.W.3d at 346.
B. Res Judicata and Collateral Estoppel
In both the present case and the 2004 declaratory judgment action, Summers argued that section 50(a)(6)
(M)(ii)=s requirement that a home equity loan could not close within one year of another home equity loan
on the same homestead property renders the lien invalid, and because the problem is a temporal one, it
cannot be retroactively cured. We agree with Ameriquest that the doctrine of res judicata bars Summers
from relitigating this claim in this case.
Broadly speaking, res judicata is the generic term for a group of related concepts concerning the
conclusive effects given final judgments. Barr v. Resolution Trust Corp., 837 S.W.2d 627, 628 (Tex.
1992). Within this general doctrine, there are two principal categories: (1) claim preclusion (also known as
res judicata); and (2) issue preclusion (also known as collateral estoppel). Id. Res judicata, or claim
preclusion, prevents the relitigation of a claim or cause of action that has been finally adjudicated, as well
as related matters that, with the use of diligence, should have been litigated in the prior suit. Id. Issue
preclusion, or collateral estoppel, prevents relitigation of particular issues already resolved in a prior suit.
Id.
To apply, res judicata requires proof of (1) a prior final judgment 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 raised or could have been raised in the first action. Amstadt v. U.S. Brass Corp, 919 S.W.
2d 644, 652 (Tex. 1996). For the doctrine of collateral estoppel to bar re-litigation of an issue, it must be
proved that (1) the facts sought to be litigated in the second action were fully and fairly litigated in the first
action, (2) those facts were essential to the judgment in the first action, and (3) the parties who litigated in
the second action were cast as adversaries. Sysco Food Servs. v. Trapnell, 890 S.W.2d 796, 801 (Tex.
1994). The party asserting these defenses has the burden to present evidence that they apply. See In re
H.E. Butt Grocery Co., 17 S.W.3d 360, 377 (Tex. App.CHouston [14th Dist.] 2000, orig. proceeding)
(collateral estoppel); Bell v. Moores, 832 S.W.2d 749, 754 (Tex. App.CHouston [14th Dist.] 1992, writ
denied) (res judicata).
Ameriquest=s summary judgment evidence showed that in the 2004 action, it sought a declaratory
judgment to resolve Summers=s claim that Ameriquest=s lien was invalid. Summers answered the suit and
pleaded that the lien violated section 50(a)(6)(M)(ii) because the lien was closed less than one year after
Ameriquest closed an earlier home equity loan to Summers. Based on the evidence before it, the trial court
concluded as a matter of law that the lien securing the March 2003 loan was valid and enforceable.[5]
Summers did not appeal the trial court=s judgment in that action.
Summers does not dispute that the 2004 declaratory judgment action litigated on the merits Summers=s
defense that Ameriquest=s lien was invalid under section 50(a)(6)(M)(ii)Cthe identical issue she raises as a
defense in the present case. The parties in both are identical and the judgment was final. Thus, the trial
court in the present case would not have erred in concluding that Summers=s defense was barred by the
principles of res judicata and collateral estoppel.
Even if the trial court rejected Ameriquest=s affirmative defense and ruled on the merits of Summers=s
complaintCthat the lien is invalid under Article XVI, section 50(a)(6)(M)(ii) because it was closed less than
one year after Ameriquest closed the earlier home equity loan to SummersCwe would be constrained to
conclude that the trial court did not err in rejecting this complaint, given the Texas Supreme Court=s broad
pronouncement in Doody that Asection 50(a)(6)(Q)(x) is a cure provision that applies to all of section 50(a)
and . . . operates as a cure provision that validates a lien securing a section 50(a)(6) extension of credit.@
Doody, 49 S.W.3d at 345B46 (emphasis added); see also Adams v. Ameriquest Mortgage Co., 307 B.R.
549, 558 (N.D. Tex. 2004) (applying broad language of Doody to reject debtors= argument that some
requirements found in section 50(a)(6)(A)B(Q) cannot be cured because no subsequent act by the lender
can A>turn back time=@). The Doody court=s pronouncement that the cure provision applies to all of
section 50(a)(6) would necessarily include section 50(a)(6)(M)(ii)=s requirement that two home equity loans
must not close within one year. Thus, Summers=s argument that the temporal defect could never be cured
must fail.
Further, we note that a more recent amendment to the cure provision of section 50(a)(6)(Q)(x), setting out
the particular cure Ameriquest offered, provides additional support for this conclusion.[6] Of particular
relevance is the following:
(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 than the 60th day after the date the lender or holder is notified by the borrower of
the lender's failure to comply by:
(a) paying to the owner an amount equal to any overcharge paid by the owner under or related to the
extension of credit if the owner has paid an amount that exceeds an amount stated in the applicable
Paragraph (E), (G), or (O) of this subdivision;
***
(f) if the failure to comply cannot be cured under Subparagraphs (x)(a)B(e) of this paragraph, curing the
failure to comply by a refund or credit to the owner of $1,000 and offering the owner the right to refinance
the extension of credit with the lender or holder for the remaining term of the loan at no cost to the owner
on the same terms, including interest, as the original extension of credit with any modifications necessary to
comply with this section or on terms on which the owner and the lender or holder otherwise agree that
comply with this section Y .
Tex. Const. art. XVI, ' 50(a)(6)(Q)(x) (emphasis added). Referencing the amendment=s legislative history,
courts have determined that this amendment was intended Ato clarify already existing rights of the lender
under the cure provision@ and Aexpressly provides for the cure of other defects where the cure itself will
not fully fulfill the purpose of the requirement.@ See Adams, 307 B.R. at 558; Fix, 2007 WL 4126919, at
*5. This conclusion is consistent with the Texas Supreme Court=s pronouncement in Doody that the cure
provision applies to Aall the lender=s obligations under the extension of credit.@ Doody, 49 S.W.3d at
345, 347.
Therefore, the trial court could have correctly concluded that Ameriquest was entitled to correct its failure to
comply with its constitutional obligations within a reasonable time after Summers notified it that the lien did
not comply with section 50(a)(6)(M)(ii)=s requirement that two home equity loans must not close within one
year. Doody, 49 S.W.3d at 343; Fix, 2007 WL 4126919, at *6B7 (affirming summary judgment for lender on
ground that it properly and timely offered to cure constitutional defects in loan under pre-2003 amendment
version of section 50(a)(6)(Q)(x) of Texas Constitution). Ameriquest made an offer to cure Summers=s
complaint and validate the lien, but Summers rejected it. Summers complains that the cure offered was
inapplicable because the constitutional amendment specifically providing for it was not enacted until after
the home equity loan was executed. But, other than complaining that a temporal problem cannot be
curedCa position that is at odds with DoodyCSummers does not contend that the cure offered was
unreasonable under the then-existing version of section 50(a)(6)(Q)(x).
We overrule Summers=s first issue.
II. The Validity of the Judgment
In her second issue, Summers contends the trial court=s judgment in the earlier 2004 declaratory judgment
action is void because it violates a specific provision of the Texas Constitution, and therefore it cannot be
given preclusive effect.[7] Ameriquest contends the earlier judgment is not void and Summers=s argument
is an impermissible attack on the earlier judgment. We agree with Ameriquest.
To support her argument that a plain reading of section 50(a)(6)(M)(ii) renders the March 2003 lien invalid
because it was part of a home equity loan closing less than one year after the June 2002 home equity loan
closing, Summers cites to the Doody court=s discussion of the general rules courts apply when interpreting
the Texas Constitution. See Doody, 49 S.W.3d at 344. However, this citation does not aid Summers
because the meaning of this provision is not disputed. As discussed above, the dispute concerns whether
Ameriquest was entitled to cure its failure to comply with this provision, and as we have determined, the
Doody court=s interpretation of the Texas Constitution=s cure provision is at odds with Summers=s position.
Next, Summers cites to two cases involving void judgments in other contexts. See In re Hamel, 180 S.W.3d
226, 227B28 (Tex. App.CSan Antonio 2005, orig. proceeding) (holding relator entitled to writ of mandamus
to vacate turnover order based on underlying void default judgment); In re Jamilah, Nos. 01-05-00521-CV,
01-05-00522-CV, 2005 WL 1704506, at *3 (Tex. App.CHouston [1st Dist.] 2005, orig. proceeding) (mem.
op.) (holding final judgment void because automatic bankruptcy stay deprived court of jurisdiction over
debtor and his property). However, neither of these cases demonstrate that a trial court=s judgment that
conflicts with a constitutional provision is void.
Generally, as long as the court entering a judgment has jurisdiction of the parties and the subject matter
and does not act outside its capacity as a court, its judgment is not void. Reiss v. Reiss, 118 S.W.3d 439,
443 (Tex. 2003). Errors other than lack of jurisdiction, such as a court=s action contrary to a statute,
constitutional provision, or rule of civil or appellate procedure render the judgment merely voidable or
erroneous, so that it may be corrected through the ordinary appellate process or other proper
proceedings. See Id., 118 S.W.3d at 443; Mapco, Inc. v. Forrest, 795 S.W.2d 700, 703 (Tex. 1990); Cook
v. Cameron, 733 S.W.2d 137, 140 (Tex. 1987). Unless the judgment is void because the court lacked
jurisdictional power to render it, a judgment that has become final can only be set aside by appeal or bill of
review. McEwen v. Harrison, 345 S.W.2d 706, 710 (Tex. 1961); see also Nguyen v. Intertex, Inc., 93 S.W.
3d 288, 294B96 (Tex. App.CHouston [14th Dist.] 2002, no pet.) (holding appellant=s claims that earlier
judgment was void because the pleadings were defective and he was not properly served were not
jurisdictional challenges and therefore judgment had to be attacked by bill of review); Shoberg v. Shoberg,
830 S.W.2d 149, 152 (Tex. App.CHouston [14th Dist.] 1992, no pet.) (rejecting appellant=s contention that
lien in prior judgment was void because it violated the Texas Constitution and holding that a defense to a
judgment debt on the ground that the prior judgment is erroneous is an impermissible collateral attack).
Here, Summers makes no argument that the trial court which signed the judgment in the 2004 declaratory
judgment action lacked jurisdiction over the parties or the subject matter, or was acting without authority as
a court. Moreover, our review of the record reveals nothing that would indicate any lack of jurisdiction.
Summers did not appeal this judgment. Therefore, Summers may not attack the judgment as void in the
present case.
We overrule Summers=s second issue.
III. Ameriquest Was Entitled to Summary Judgment
Ameriquest=s summary judgment evidence demonstrated that Summers was obligated on the note and lien
with Ameriquest, she was in default, and she did not cure the default after Ameriquest notified her of the
default. Summers did not contest that she was in default on the loan. Thus, Ameriquest was entitled to
judgment establishing the balance due under the note and lien. Ameriquest also demonstrated that it was
entitled to judicial foreclosure and an order permitting it to sell the property as provided in the home equity
loan documents.
We overrule Summers=s issues and affirm the trial court=s judgment.
/s/ Wanda McKee Fowler
Justice
Judgment rendered and Memorandum Opinion filed January 15, 2008.
Panel consists of Justices Yates, Fowler, and Guzman.
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[1] The documents in the record from the 2004 action are styled Ameriquest Mortgage Company v. Kelly
Lee Summers, Cause No. 2004-32742, in the 113th District Court of Harris County, Texas.
[2] In the statement of facts in her appellate brief and elsewhere, Summers makes various claims
concerning the reasons for the second home equity loan, including alleged Alast minute demands for
repairs to the house,@ but offers no citations to the record to substantiate them.
[3] The settlement and release agreement is not included in the summary judgment record.
[4] Unless otherwise indicated, citations to provisions of the Texas Constitution are to the then-existing
provisions applicable to the parties.
[5] The evidence considered by the trial court in the 2004 declaratory judgment action apparently included
Ameriquest=s cure letter of April 2, 2004, in which it sought to respond to Summers=s complaints by
crediting her loan with $1,000 and offering her the right to refinance the loan under the same terms as the
original loan, modified as necessary to comply with section 50(a)(6) of the Texas Constitution. However,
Ameriquest=s motion for summary judgment in the present case did not include the exhibits attached to its
motion for summary judgment in the 2004 action. Nevertheless, Summers does not dispute that
Ameriquest=s motion for summary judgment included this letter and, in fact, attaches a copy of the letter to
her appellate brief and characterizes it as Ameriquest=s Aactual settlement offer.@ This letter is marked
AExhibit E,@ consistent with the AExhibit E@ referenced in Ameriquest=s motion for summary judgment as
the cure letter. Thus, the trial court could have concluded that Ameriquest=s offer to cure validated the
lien. See Doody, 49 S.W.3d at 346 (stating that section 50(a)(6)(Q)(x)=s cure provision provides a means
for a lender to correct mistakes within a reasonable time in order to validate a lien securing a section 50(a)
(6) extension of credit).
[6] This amendment does not apply to the contracts between Ameriquest and Summers, which were
executed before the effective date of the amendment. See Fix v. Flagstar Bank, FSB, ___ S.W.3d ___, No.
2-07-030-CV, 2007 WL 4126919, at *5B6 (Tex. App.CFort Worth Dec. 13, 2007, n.p.h.) (holding 2003
amendments to notice provision of article XVI, section 50(a)(6)(Q)(x) of Texas Constitution did not apply
retroactively).
[7] In a separate section of her brief, Summers also contends that the trial court=s ruling fails to articulate
an Aexcuse@ for the lien=s validity, and so fails to Apreserve, protect, and defend the Constitution.@
Summers further posits that the trial court=s ruling conflicts with its oath of office by making Aan
unsubstantiated ruling that is at odds with the clear wording of the constitution.@ These arguments appear
to be directed at the trial court=s judgment being appealed. However, to the extent it is necessary to
address these arguments, we conclude they are meritless because we have determined that the trial court
did not err in granting Ameriquest=s motion for summary judgment.