Freddie L. Shellnut v. Wells Fargo Bank, N.A., D/B/A America's Servicing Company US Bank National Assoc., as Trustee for Credit Suisse First Boston Mortgage Securities Corp., Home Equity Asset Trust 2006-7, Home Equity Pass-Through Certificate
02-15-00204-CV
| Tex. App. | Apr 27, 2017Background
- Freddie Shellnut obtained a 2006 home-equity loan (nonrecourse) later held by U.S. Bank; Wells Fargo serviced the loan. Shellnut fell behind on payments beginning in 2010.
- Shellnut alleges Wells Fargo repeatedly represented he was being considered for a loan modification (including federal programs), told him to stop payments during the process, and delayed/failed to provide promised assistance, while fees and charges accrued.
- U.S. Bank obtained a judicial foreclosure order in 2012; Shellnut sued U.S. Bank and Wells Fargo in district court asserting breach of contract, fraud, negligent misrepresentation, TDCA and other claims; the trial court granted a take-nothing summary judgment (no grounds specified).
- On appeal Shellnut challenged summary judgment as to breach of the loan documents, fraud, negligent misrepresentation, and TDCA violations; he did not challenge several other claims and those parts of the judgment were affirmed.
- The court framed the central dispute as whether Shellnut’s claims were merely attempts to recover a right to a loan modification (which he had no contractual right to) or instead alleged independent tortious/statutory misrepresentations and reliance damages separate from the contract.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether summary judgment proper because plaintiff had no contractual right to a loan modification | Shellnut: claims allege affirmative misrepresentations that he was being considered for modification (and would be assisted), not simply wrongful refusal to modify; he relied to his detriment | Lender: all claims derive from refusal/not-obligation to modify; no legal right to modification so claims fail | Court: Reversed as to this general ground — Shellnut pleaded actionable misrepresentations distinct from a mere refusal to modify (sustain subissue 1A) |
| Breach of written contract (performance/tender) | Shellnut: tendered performance or was excused by lender’s prior breaches | Lender: Shellnut admitted he never tendered full past-due amount and loan nonwaiver clauses preclude excuse; summary judgment evidence negates performance | Court: Affirmed summary judgment on breach claim — Shellnut failed to raise fact issue that lender materially breached first or that he tendered performance (overrule subissue 1B) |
| Whether statute of frauds barred tort claims (fraud, negligent misrep., TDCA) | Shellnut: seeks out-of-pocket/reliance damages from misrepresentations, not enforcement of an oral modification contract | Lender: alleged misrepresentations concern modification (oral) and are barred by statute of frauds | Court: Statute of frauds does not bar tort claims to the extent plaintiff seeks out-of-pocket/reliance damages; summary judgment improper on that ground (sustain subissue 2) |
| Whether economic-loss rule (independent-injury rule) bars tort/statutory claims | Shellnut: alleged independent injuries (lost time/earnings, out-of-pocket expenses, mental anguish, credit damage) distinct from contractual expectancy | Lender: harms are economic losses to contractual subject matter (loan/equity/fees) and thus barred | Court: Economic-loss rule bars recovery for tort damages that merely seek contractual benefit (e.g., lost equity, foreclosure-related losses), but does not bar recovery for independent reliance/out-of-pocket harms; TDCA claims largely survive except the allegation that threatening foreclosure (on a valid default) is actionable under TDCA (partial sustain/partial overrule for subissue 3A/3B) |
Key Cases Cited
- Wells Fargo Bank, N.A. v. Murphy, 458 S.W.3d 912 (Tex. 2015) (explaining nonrecourse nature of Texas home-equity notes)
- Haase v. Glazner, 62 S.W.3d 795 (Tex. 2001) (statute of frauds bars fraud claims seeking benefit-of-the-bargain but not out-of-pocket reliance damages)
- Chapman Custom Homes, Inc. v. Dallas Plumbing Co., 445 S.W.3d 716 (Tex. 2014) (economic-loss rule precludes tort recovery for mere contractual expectancy losses)
- Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407 (Tex. 2011) (limits on broad formulations of economic-loss rule; statutory duties may create independent duties)
- Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299 (Tex. 2006) (different remedies available for contract vs. fraud; mental-anguish and exemplary damages may be available for fraud but not breach)
- Travelers Ins. Co. v. Joachim, 315 S.W.3d 860 (Tex. 2010) (standard of review for traditional summary judgment)