Justice v. Wells Fargo Bank National Ass'n ex rel. Registered Holders of Bear Stearns Asset Backed Securities, I, L.L.C.
674 F. App'x 330
5th Cir.2016Background
- In 2006 Justice obtained a $720,000 mortgage; the loan was assigned to Wells Fargo in 2008. Justice defaulted in 2008 and EMC (the servicer) sent a notice of acceleration in March 2009.
- EMC accepted two partial payments from Justice in Nov. and Dec. 2009 ($3,250 each); a proposed repayment plan was drafted but never became a binding contract.
- EMC and later SPS sent additional default and acceleration notices (2010–2014). Wells Fargo sought foreclosure under Texas Rule 736 in Oct. 2014.
- Justice sued to quiet title; district court granted summary judgment for Wells Fargo and SPS, holding the lender had abandoned the 2009 acceleration and thus foreclosure in 2014 was timely.
- Parties agreed Texas law applied; appeal challenged whether the 2009 acceleration was abandoned (which would reset accrual for the four-year foreclosure limitations period).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Subject-matter jurisdiction (trust citizenship) | Not contested by Justice; he is Texas citizen | Wells Fargo as trustee is the relevant citizen | Court: Wells Fargo’s trustee status controls citizenship; diversity jurisdiction proper |
| Whether 2009 acceleration was abandoned (statute of limitations) | 2009 acceleration stood; foreclosure in 2014 is time-barred | Acceptance of partial payments and loan communications show abandonment of acceleration | Court: Abandonment demonstrated; foreclosure not time-barred |
| Significance of partial payments and repayment plan | Repayment plan and disclaimers show lender did not abandon acceleration; plaintiff also argues plan was an unaccepted offer | Defendants: acceptance of two partial payments and refraining from remedies evidences abandonment; plan never effective | Court: Acceptance of payments while not exercising remedies is compelling evidence of abandonment; repayment plan was not binding and argument about it was waived on appeal |
| Effect of deed-of-trust disclaimer (reservation of rights clause) | Clause prevents treating payment acceptance as abandonment unless clearer evidence exists | Clause preserves lender’s future rights but does not bar abandonment of a prior acceleration | Court: Clause reserves future rights but does not negate abandonment when lender’s conduct shows intent to abandon |
Key Cases Cited
- Americold Realty Tr. v. Canagagr Foods, Inc., 136 S. Ct. 1012 (addressing citizenship rules for trusts and trustees)
- Navarro Sav. Ass’n v. Lee, 446 U.S. 458 (trustee filing suit takes the citizenship of the trustee)
- C.T. Carden v. Arkoma Assocs., 494 U.S. 185 (diversity depends on citizenship of unincorporated entity’s members)
- Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562 (Texas: acceleration can be abandoned by accepting payments without enforcing remedies)
- Rivera v. Bank of Am., N.A., [citation="607 F. App'x 358"] (acceptance of post-acceleration payments can evidence abandonment)
- Boren v. U.S. Nat’l Bank Ass’n, 807 F.3d 99 (abandonment restores original maturity; waiver principles govern)
- Martin v. Fed. Nat’l Mortg. Ass’n, 814 F.3d 315 (accepting payments after acceleration can, in some circumstances, amount to abandonment)