in Re: The Estate of Carolyn C. Hardesty
2014 Tex. App. LEXIS 12432
| Tex. App. | 2014Background
- In July 2004 Carolyn Hardesty obtained a $500,000 home-equity loan secured by a deed of trust on her homestead; she signed a sworn fair-market-value acknowledgment listing value at $625,000. PrimeLending funded the loan; CitiMortgage later serviced/held it.
- Carolyn died in November 2007; her will devised the property to her son Kenneth Hardesty, who later acquired title and paid roughly $100,000 in mortgage payments post-death; CitiMortgage paid property taxes for several years.
- In July 2010 CitiMortgage filed for foreclosure in Tarrant County Probate Court under Texas Probate Code §306; the probate court allowed the claim and in December 2010 entered an order authorizing foreclosure.
- Hardesty sued in district court (June 2011) seeking declaratory relief that the loan violated Tex. Const. art. XVI, §50(a)(6)(B) (loan-to-value limit) and sought forfeiture; he also pled fraud based on alleged oral promises by CitiMortgage not to foreclose and to pay taxes.
- The district case was transferred to probate court; the probate court granted summary judgment for PrimeLending and CitiMortgage on standing/limitations/statute-of-frauds grounds, denied some claims, severed others, and awarded CitiMortgage $42,379.65 in attorney fees; Hardesty appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to challenge foreclosure/order | Hardesty (as heir and later title owner) has a concrete property interest and thus standing to seek declaratory relief and challenge the foreclosure order | PrimeLending: no privity with borrower so Hardesty lacks standing to contest loan/lien; only PR can sue for estate claims | Court: Hardesty had standing—he acquired estate interest and paid mortgage installments, sufficient to challenge the foreclosure order |
| Probate court jurisdiction to enter foreclosure and decide constitutionality of lien | Probate court lacked jurisdiction to issue foreclosure under Rule 736 and could not adjudicate constitutional validity of lien | CitiMortgage: foreclosure proceeded under Probate Code §306(e)(3); probate court has authority and pendent jurisdiction to adjudicate related constitutional issues | Court: foreclosure was brought under §306 and complied with Probate Code procedures; probate court had jurisdiction to authorize foreclosure and to decide constitutional claims |
| Applicability of limitations to challenge that lien violates art. XVI, §50(a)(6) | Hardesty: a lien made in violation of §50 is void (not voidable) and thus not subject to the four-year residual limitations; alternatively accrual started only after 60-day cure notice | Defendants: §50(a)(6)(Q)(x) provides cure; liens are voidable; residual 4-year limitations applies and accrual is at closing (2004) | Court: Adopted Priester reasoning—such liens are voidable and subject to the 4-year residual limitations; accrual at closing (July 23, 2004); claim filed in 2011 is time-barred |
| Fraud claim re: alleged oral promise to pay taxes/delay foreclosure | Hardesty: CitiMortgage orally agreed to pay taxes and to forbear foreclosure while he paid monthly payments; oral promise induced reliance and states fraud | CitiMortgage: oral agreement is barred by Texas statute of frauds (Bus. & Com. Code §26.02) and loan documents contain required no-oral-modification notice; thus unenforceable; also pleaded res judicata/collateral estoppel defenses | Court: Summary judgment for CitiMortgage on fraud; the alleged oral modification/commitment is barred by §26.02 and related notice language—statute of frauds applies even as to a non-signatory's oral promise here |
| Award of attorney fees to CitiMortgage | Hardesty: fees not properly segregated; conditional appellate award not supported; award inequitable given his payments and equitable claims | CitiMortgage: supported fee request with affidavit and testimony; provided segregation estimate (90% to declaratory claim); trial court held fee evidence sufficient and reduced conditional amounts | Court: No abuse of discretion—trial court permissibly accepted expert opinion segregation, awarded reasonable trial and conditional appellate fees, and found award equitable and just |
Key Cases Cited
- Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844 (Tex. 2009) (summary-judgment standard)
- KPMG Peat Marwick v. Harrison Cnty. Hous. Fin. Corp., 988 S.W.2d 746 (Tex. 1999) (defendant moving for summary judgment on limitations must conclusively prove accrual)
- Priester v. JP Morgan Chase Bank, N.A., 708 F.3d 667 (5th Cir. 2013) (home-equity lien noncompliance is voidable and cure provision means limitations applies; accrual at closing)
- Williams v. Wachovia Mortgage Corp., 407 S.W.3d 391 (Tex. App.—Dallas 2013) (followed Priester: §50 noncompliance yields voidable lien; four-year residual limitations applies)
- Wood v. HSBC Bank USA, N.A., 439 S.W.3d 585 (Tex. App.—Houston [14th Dist.] 2014) (adopted Priester reasoning; legal-injury rule for accrual)
- Goswami v. Metro. Savs. & Loan Ass’n, 751 S.W.2d 487 (Tex. 1988) (third-party with a legal/equitable interest in property may challenge foreclosure)
- Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299 (Tex. 2006) (permissible proof of fee segregation by opinion testimony)
- Cline v. Niblo, 8 S.W.2d 633 (Tex. 1928) (probate court cannot order sale of homestead for ordinary debts but retains jurisdiction to determine homestead/exemption issues)
- Ditta v. Conte, 298 S.W.3d 187 (Tex. 2009) (equitable action to remove cloud on title survives while injury remains)