Luis A. and Linda A. Santiago v. Novastar Mortgage, Inc.
2014 Tex. App. LEXIS 9702
Tex. App.2014Background
- Luis and Linda Santiago obtained a Texas home equity loan on May 14, 2004, for $999,999; most proceeds paid off an existing lien and the borrowers made payments until default in 2010.
- After closing, a document titled Texas Home Equity Affidavit and Agreement (Affidavit) was recorded; the Santiagos later alleged their signatures on that Affidavit were forged and that they never received a copy as required by Art. XVI §50(a)(6)(Q)(v).
- The Santiagos sued (May 2011) asserting fraud by nondisclosure, breach of contract, quiet title, and constitutional violations seeking forfeiture of principal and interest; defendants (including Novastar and The Bank of New York Mellon (BONY)) counterclaimed for breach of contract, suit on the note, and foreclosure relief.
- Defendants moved for traditional and no‑evidence summary judgment; the trial court granted summary judgment for defendants, and the Santiagos appealed.
- The court focused on whether the Santiagos raised fact issues about constitutional violations (blanks filled after closing; forged Affidavit), whether limitations or revival doctrines applied, and whether BONY had standing/ownership of the note.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Whether defendants violated Art. XVI §50(a)(6)(Q) (blanks filled; failure to provide executed documents) and whether the loan/ lien is voidable/forfeitable | Santiagos: blanks on rescission documents were filled post‑closing; Affidavit signature forged and they never received a copy, so constitutional violation renders loan void and forfeits principal/interest | Defendants: rescission‑period forms were properly left blank until rescission period elapsed; the Affidavit was recorded and available; any alleged violation is subject to limitations and the loan is voidable, not automatically void | Court: rescission forms did not violate §50; claims based on Affidavit are time‑barred by the four‑year statute (loan is voidable) |
| 2. Whether the discovery rule or Tex. Civ. Prac. & Rem. Code §16.069 tolled/revived the Santiagos’ constitutional claims | Santiagos: did not discover the forged Affidavit until 2010; discovery rule and §16.069 (revival when counterclaim arises from same transaction) save claims | Defendants: legal injury accrued at closing (2004); discovery rule does not apply to this category; §16.069 does not revive stale claims where party was not an original defendant or to avoid forcing defendants to choose claims | Court: discovery rule does not apply (injury was discoverable via public records); §16.069 does not revive the Santiagos’ stale claims here; claims are barred by limitations |
| 3. Whether unresolved constitutional claims precluded summary judgment on defendants’ counterclaims for breach of contract and suit on the note | Santiagos: if constitutional violations raise fact issues, defendants cannot obtain summary judgment on breach/suit on note | Defendants: even absent constitutional claims, they proved standing, default, and entitlement to relief | Court: because constitutional claims are time‑barred and loan is voidable, defendants’ summary judgment on their claims stands |
| 4. Whether BONY had standing/ownership to enforce the Note given alleged gaps in chain of transfers | Santiagos: evidence of a 2004 transfer to a different Novastar entity creates an unexplained gap, raising a fact issue on BONY’s ownership | BONY: produced affidavit and original Note specially indorsed to BONY; under UCC rules a specially indorsed holder may enforce | Court: BONY’s summary judgment evidence established its right to enforce the Note; no genuine fact issue on standing |
Key Cases Cited
- Priester v. JP Morgan Chase Bank, N.A., 708 F.3d 667 (5th Cir. 2013) (legal injury for unconstitutional lien accrues at creation; discovery rule inapplicable)
- Williams v. Wachovia Mortg. Corp., 407 S.W.3d 391 (Tex. App.—Dallas 2013) (claims under Art. XVI §50 governed by residual four‑year limitations and liens may be voidable)
- S.V. v. R.V., 933 S.W.2d 1 (Tex. 1996) (framework for discovery rule: inherently undiscoverable and objectively verifiable requirements)
- Hobbs Trailers v. J.T. Arnett Grain Co., 560 S.W.2d 85 (Tex. 1977) (statute reviving counterclaims not intended to let original defendants avoid limitations by party realignment)
- LaSalle Bank Nat’l Ass’n v. White, 246 S.W.3d 616 (Tex. 2007) (equitable subrogation survives constitutional challenges in some contexts)
- HECI Exploration Co. v. Neel, 982 S.W.2d 881 (Tex. 1998) (constructive notice from public records and royalty owner diligence principles)
- Shell Oil Co. v. Ross, 356 S.W.3d 924 (Tex. 2011) (court determines inherent undiscoverability categorically)