Carrington Mortgage Services, LLC and Deutsch Bank Trust Company, as Indenture Trustee for New Century Home Equity Loan Trust 2005-2 v. Larrie Hutto and Bonnie Hutto
14-15-00442-CV
| Tex. App. | Oct 23, 2015Background
- In 2005 Larry and Bonnie Hutto executed a Texas home-equity note and deed of trust; lender failed to sign the written acknowledgement of fair market value on the date of the loan (signed 4 days later).
- The deed of trust required the lender to be given notice of constitutional noncompliance and 60 days to "cure" such defects before enforcing the power of sale. The Huttos sent a Notice to Cure in October 2012; the lender did not cure or respond.
- The Huttos entered a 6-month repayment plan (Aug 2011–Jan 2012), paid nearly $16,000 and were told their loan was current, but later received statements showing unexplained fees and a May 2012 default notice claiming a $4,277.30 cure amount.
- Bank (Deutsche/Carrington) filed for foreclosure and later counterclaimed for foreclosure and equitable subrogation; the Huttos nonsuited their affirmative claims and defended against foreclosure only.
- Trial court denied bank's summary-judgment motions and ultimately denied bank the right to foreclose and denied equitable subrogation, holding bank failed to perform contract preconditions (did not cure §50(a)(6)(Q)(ix) defect), failed to prove default/provide proper notice, and failed to timely/support its subrogation claim.
Issues
| Issue | Plaintiff's Argument (Huttos) | Defendant's Argument (Bank) | Held |
|---|---|---|---|
| Whether homeowners' defenses based on lender's failure to perform deed-of-trust cure obligations are barred by limitations | Defenses are purely defensive (not affirmative relief) and therefore not time-barred; statute of limitations cannot be used offensively to block defenses | Limitations bar challenges to alleged constitutional defects and related defenses | Held for Huttos: defenses not barred; limitations inapplicable to defensive claims asserting nonperformance of preconditions |
| Whether lender complied with deed-of-trust preconditions (cure of §50(a)(6)(Q)(ix)) required to enforce power of sale | Lender failed to cure constitutional defect (acknowledgement of FMV signed after closing) and thus cannot enforce foreclosure provisions | Claimed lien was valid/curable or time-cured and bank entitled to enforce power of sale | Held for Huttos: bank failed to perform contract condition precedent (did not cure §50(a)(6)(Q)(ix)), so cannot foreclose |
| Whether bank gave a proper notice of intent to accelerate / proved homeowners were in default | Notice was inaccurate (incorrect cure amount) and deprived Huttos of a meaningful opportunity to cure after repayment-plan payments; bank produced no substantiation of fees | Bank contends notice and default were proper and foreclosure permitted | Held for Huttos: notice insufficient and bank failed to prove actual default |
| Whether bank is entitled to equitable subrogation | Subrogation is inapplicable because Huttos do not seek to void the lien; additionally bank's claim is time-barred and equities do not favor relief | Bank sought equitable subrogation to step into prior lienholder's position and recover payments made in 2005 | Held for Huttos: equitable subrogation denied—claim barred by limitations, inapplicable given lien not extinguished, and equities do not favor bank |
Key Cases Cited
- Santa Fe Petroleum, L.L.C. v. Star Canyon Corp., 156 S.W.3d 630 (Tex. App.—Tyler 2004) (standard of review for findings of fact and conclusions of law)
- Ogden v. Gibraltar Savings Ass'n, 640 S.W.2d 232 (Tex. 1982) (notice of intent to accelerate must be proper to permit acceleration and foreclosure)
- LaSalle Bank Nat'l Ass'n v. White, 246 S.W.3d 616 (Tex. 2007) (context for remedies when home-equity lien violates §50 and lender's recovery issues)
- Murray v. San Jacinto Agency, Inc., 800 S.W.2d 826 (Tex. 1990) (when causes of action accrue for limitations purposes)
- Guillot v. Hix, 838 S.W.2d 230 (Tex. 1992) (limitations law discussion applied to subrogation claims)
- Hennigan v. Heights Sav. Ass'n, 576 S.W.2d 126 (Tex. Civ. App.—Houston [1st Dist.] 1978) (defenses to enforcement of a contract are not barred by limitations)
- Cooper v. Republic Bank Garland, 696 S.W.2d 629 (Tex. App.—Dallas 1985) (plaintiff cannot use limitations offensively to negate defendant's contract defenses)
- Alvarado v. Farah Mfg. Co., 830 S.W.2d 911 (Tex. 1992) (failure to respond to discovery can bar evidence at trial)