Steven Steptoe and Patricia Carballo v. JPMorgan Chase Bank, N.A.
01-14-00813-CV
| Tex. App. | Jan 12, 2015Background
- This document is the appellants’ reply brief in Cause No. 01-14-00813-CV (First Court of Appeals, Houston) filed by Steven Steptoe and Patricia Carballo against JPMorgan Chase Bank, N.A.
- Appellants contend Texas home-equity liens "may be foreclosed upon only by a court order" under Tex. Const. Art. XVI §50(a)(6)(D), so foreclosure must be judicial (i.e., occur with court authorization).
- Appellants argue that because a home-equity lender has no valid extrajudicial foreclosure option, the rationale for applying the Kaspar compulsory-counterclaim/election-of-remedies rule (which prevents a borrower from forcing a lender’s election of remedies) does not apply.
- Appellants assert appellee misstates controlling law and misattributes Fifth Circuit authority rejecting appellants’ position; they say the cited Fifth Circuit decisions do not address home-equity loans or the specific issue here.
- Appellants propose that a lender seeking foreclosure on a home-equity lien can and should file a counterclaim for judicial foreclosure (seeking a court order authorizing either a constable’s/sheriff’s sale or trustee’s sale) rather than relying on extrajudicial remedies.
- Appellants warn that applying Kaspar to home-equity liens would paradoxically insulate the constitutionally most-protected homestead lien from constitutional challenge.
Issues
| Issue | Plaintiff's Argument (Steptoe/Carballo) | Defendant's Argument (JPMorgan) | Held |
|---|---|---|---|
| Whether the Kaspar election-of-remedies/compulsory-counterclaim rule bars a borrower’s challenge to a home-equity lien/foreclosure | Kaspar should not apply because home-equity liens must be judicially foreclosed and lender has no extrajudicial option to be protected from a borrower’s suit | Kaspar doctrine prevents borrowers from forcing a lender to abandon an extrajudicial foreclosure by suing first (lender retains election of remedies) | Presented on appeal; no final appellate ruling in this brief |
| Whether a home-equity lien may be foreclosed extrajudicially under Texas law | Home-equity liens can be foreclosed only by court order under Tex. Const. Art. XVI §50(a)(6)(D) | Banker/servicer position (as characterized by appellants): lender treats foreclosure options as including power-of-sale/nonjudicial mechanisms | Presented on appeal; no final appellate ruling in this brief |
| Whether Fifth Circuit precedent cited by appellee controls this issue | Appellants: cited Fifth Circuit decisions do not address home-equity loans or the specific legal question; thus they are not controlling | Appellee: invokes Fifth Circuit authority to support its position (as asserted by appellee) | Presented on appeal; no final appellate ruling in this brief |
| Whether lender should be required to seek judicial relief (counterclaim) rather than pursue separate extrajudicial sale | Appellants: lender can and should file a foreclosure counterclaim seeking court authorization for sale; this avoids duplicative litigation and respects constitutional requirement | Appellee: resists limiting remedies and seeks court acceptance of its chosen approach (per appellants’ description) | Presented on appeal; no final appellate ruling in this brief |
Key Cases Cited
- Douglas v. FNCNB Tex. Nat'l Bank, 979 F.2d 1128 (5th Cir.) (used by appellee but, per appellants, did not involve a home-equity loan)
- Kaspar v. Keller, 466 S.W.2d 326 (Tex. Civ. App. — Waco 1971) (discusses mortgagor’s suit preventing mortgagee’s extrajudicial foreclosure and the election-of-remedies/compulsory-counterclaim rationale)