OPINION AND ORDER
Pending before the Court is Defendant Deutsche Bank National Trust Company Americas, as Trastee for the Certificate-holders of Dover Mortgage Capital 2005-A Corporation, Grantor Trust Certificate Series 2005-A’s (“Deutsche”) Motion to Alter or Amend Judgment. Doc. 25. Having considered the motion and response, the facts in the record, and the applicable law, the Court concludes Defendant’s motion should be granted.
I. Background
This is a foreclosure suit removed from state court, challenging a foreclosure action which Plaintiff Elizabeth Callan alleges is barred by the statute of limitations. In August 2004, Callan obtained a home equity loan (the “Loan”) from Deutsche’s predecessor in interest, Bank of America, which was secured by her property at 4818 Bayou Vista Drive, Houston, Texas 77091 (“the Property”). Original Pet., Doc. 1-3 ¶¶ 4, 11; Note, Doc. 12-1 at 10-12; Deed of Trust, Doc. 12-1 at 13-19. Plaintiff failed to remit her monthly payment due
On. November 6, 2007, Deutsche sent Callan notice that it had elected to accelerate the maturity of the Loan.2007 Notice of Acceleration, Doc. 12-1 at 25-26. Deutsche sent a second formal notice of acceleration on July 8, 2008. 2008 Notice of Acceleration, Doc. 12-1 at 27-28. On July 24, 2008, Deutsche filed an application for foreclosure in the 295th District Court of Harris County, Texas, Cause No. 2008-44989. Doc. 1-3 ¶ 12; Verified Tex. Rule Civ. P. 736 Appl. for Home Equity Foreclosure Order, Doc. 12-1 at 1-9. For reasons not explained in the record, Deutsche filed a motion to dismiss the application which was granted on November 5, 2008. Doc. 1-3 ¶ 18.
Deutsche filed a second application for foreclosure in the same court on February 4, 2009, Cause No. 2009-07482. Doc. 1-3 ¶ 19. The court granted the application on April 13, 2009, thereby giving Deutsche authority to foreclose the Property. Again, for reasons that are not explained in the record, Defendant did not proceed with the foreclosure. On August 2, 2010, Callan filed for Chapter 13 bankruptcy. Doc. 11-1 ¶ 19. The proceeding was dismissed two months and 16 days later on October 18, 2010. Id.; Order of Dismissal, Doc. 6-4.
On November 3, 2011, Deutsche sent Callan a notice of rescission of acceleration of Loan maturity stating:
Mortgagee under the Deed of Trust referenced below hereby rescinds the notice of acceleration dated December 17, 2008 and all prior notices of acceleration. Mortgagee further agrees that Borrower may continue to pay the indebtedness due Mortgagee pursuant to the terms of the debt secured by the Deed of Trust.
Notice of Rescission, Doc. 15-1. On August 27, 2012, Defendant filed a third application for foreclosure, Cause No. 2012-49290, which was granted. ■ Doc. 1-3 ¶ 21.
On January 2, 2013, Callan filed suit in Texas state court for a declaratory judgment that more than four years had elapsed since the Deutsche’s cause of action accrued and that the lien and power of sale had expired. Id. ¶ 10. She also requested costs and attorney’s fees under § 37.009 of the Texas Civil Practice and Remedies Code. Id. ¶ 33-35. Defendant timely removed the case to this Court on the basis of diversity jurisdiction. Notice of Removal, Doc. 1.
On January 27, 2014, United States Magistrate Judge Frances Stacy issued a Memorandum and Recommendation (M & R) (Doc. 20) recommending Defendant’s motion for summary judgment be granted and Plaintiffs motion for leave to file an amended complaint and cross-motion for summary judgment be denied. Plaintiff filed objections to the M & R (Doc. 21) and Defendant filed a response thereto. Doc. 22. On March 27, 2014, this Court declined to adopt the Magistrate Judge’s M & R, granted Plaintiffs motion for leave to file an amendment complaint, denied Defendant’s motion for summary judgment, and granted Plaintiffs cross-motion for summary judgment. Doc. 23.
II. Legal Standard
“A motion to alter or amend the judgment under Rule 59(e) must clearly establish either a manifest error of law or fact or must present newly discovered evidence and cannot be used to raise arguments which could, and should, have been made before the judgment issued.” Rosenblatt v. United Way of Greater Hous.,
III. Applicable Law
The seminal case on abandonment of acceleration is San Antonio Real-Estate
Certain language in Stewart appears to prohibit unilateral abandonment by the lender. Id. at 388 (“It is not in the power of the creditor by his acts alone to change the rights of the parties resulting from the maturity of the debt.”). The issue of unilateral abandonment, however, was not before the court. The court found abandonment based on the fact that the debtor “paid off at different times twenty-nine of the seventy-two notes.... Both parties acted in connection with the notes as though no default had taken place....” Id. at 444,
A more explicit reason Stewart does not reach unilateral abandonment is the particular acceleration clause at issue was automatic upon default, rather than optional as in subsequent cases and in Deutsche’s loan and most contemporary loans. The court held, under an automatic clause, unilateral actions by the lender by himself are insufficient to show abandonment:
When the proposition is established that the failure to pay an installment ipso facto gives rise to the cause of actioii upon the whole debt [i.e., under an automatic clause], it necessarily follows that mere delay in suing, or acceptance of part of what is due, or other act of the creditor, alone will not take away his right to sue, and, if that right continues, limitation runs against it.
The court acknowledged courts examining optional acceleration clauses reached opposite results:
Authorities4 holding that by acceptance of payment of overdue installments, or extension of time upon an installment, and other like acts, the creditor waives the default, are relied upon, but those are decisions in which the contract is regarded as only giving to the creditor the right of election.
Id. at 388. The preceding passages appear to exclude the issue of unilateral rescission under an optional acceleration clause from the scope of the opinion. The court goes on, however, in an oft-quoted but oblique passage, to make a general pronouncement against unilateral abandonment:
It is not in the power of the creditor by his acts alone to change the rights of the parties resulting from the maturity of the debt. •.. But, aside from this, while neither party by his separate action or nonaction could impair the rights of the other, each could waive his own rights as they accrued from the default in payment of an installment so as to estop him from relying upon such default. To accomplish this, it would only be necessary that each should so act as to justify the other in believing and acting upon the belief that the effect of the failure to pay an installment was to be disregarded, and that the contract should stand as if there had been no default. The principle of estoppel by waiver would, we think, have proper application in such a case. An agreement or waiver having the effect supposed may be inferred from the conduct and declarations of the parties as well as evidenced by their express stipulations.
Id. at 388-89 (internal citations omitted). Some, but not all, courts have quoted this passage in reference to unilateral abandonment of optional acceleration. Manes v. Bletsch,
Notwithstanding the court’s distinction between automatic and optional acceleration, lower court decisions citing Stewart have all involved optional acceleration. Most have found abandonment based on continued payment, without discussion of whether the debtor agreed. See, e.g., Holy Cross Church of God in Christ v. Wolf,
On the other hand, four lower court decisions following Stewart have suggested unilateral abandonment is not permitted where the debtor objects or, alternatively, detrimentally relies on the notice of acceleration. Manes,
Appellant contends that, having already exercised his option, the same was irrevocable. This may be true as against the will of the payer, but, where the payer is not objecting to the recall of such option, we can see no reason why the payee could not revoke the same as well as not to have exercised it in the beginning.
Second, in Dallas Joint Stock (the first opinion to discuss abandonment as “rescission”), the court directly acknowledged a debtor’s argument that joint action was necessary and that he had not agreed to
Third, in Denbina, the first case involving a unilateral rescission in the form of a nonsuit of a foreclosure claim, the court stated: “As we view the record, the City had a right to withdraw or revoke its option to accelerate payment, and effectively expressed its intent to do so by taking a nonsuit.”
Appellants contend that appellee having already exercised its option to accelerate, made the acceleration irrevocable. This may be true as against the will of the payor, but, where the payor makes no objection to the recall of the option, we see no reason why the City could not revoke the same as well as not to ‘have exercised it in the beginning. Manes v. Bletsch, supra. There is nothing in the record indicating appellants made any objection to the recall brought about by the nonsuit prior to the time the judgment was rendered in the previous suit.
Id.
Finally, in Swoboda, the court found abandonment where debtors continued payment and “neither asserted nor presented any evidence that they relied on the acceleration, took any responsive action, or in any way changed their position as a result of the notice.”
A hundred years after Stewart, the Texas Supreme Court revisited the issue of abandonment in Holy Cross Church of God in Christ,
[T]he court of appeals noted, it “is undisputed that the Church did not pay the balance or any portion thereof, or resume making regular payments or in any way change its position.” And [the lender] has not argued that [the former lender] or its successors had otherwise expressed an intent to abandon acceleration.
Id. at 570. Detrimental reliance was not asserted. The church “did not pay the balance or any portion thereof’ or change its position in any way, so the lender failed to show even unilateral “mere acceptance” of payment. In fact, there was “no evidence of abandonment” by either party, merely a failure to foreclose within the statutory period. Id. The court of appeals (which was reversed) had adopted detrimental reliance from Swoboda, which Holy Cross disapproved of as “nonsensical” for further requiring “affirmative actions” beyond notice to trigger acceleration. Id. On the contrary, in the last sentence of the passage above, Holy Cross suggests the lender may “otherwise express an intent to abandon” by unilateral rescission. The court summarizes the law of abandonment as follows:
Even when a noteholder has accelerated a note upon default, the holder can abandon acceleration if the holder continues to accept payments without exacting any remedies available to it upon declared maturity. City Nat’l Bank v. Pope,260 S.W. 903 , 905 (Tex.Civ.App.-San Antonio 1924, no writ); see also San Antonio Real Estate, Bldg. & Loan Ass’n v. Stewart,94 Tex. 441 ,61 S.W. 386 , 388 (1901) (explaining that the parties’ agreement or actions can “have the effect of obviating the default and restoring the contract to its original condition as if it had not been broken”); Denbina v. City of Hurst,516 S.W.2d 460 , 463 (Tex.Civ.App.-Tyler 1974, no writ) (explaining that an option to accelerate may be withdrawn or revoked after it is exercised by the noteholder, effectively restoring the note’s original maturity date).
Id. at 567. The court cites Denbina for the proposition that acceleration may be revoked “by the noteholder,” apparently unilaterally, omitting the requirement that “the payor makes no objection to the recall of the option.” Denbina,
Lower courts following Holy Cross, like those preceding, have generally found abandonment based on acceptance of payment, and the debtor’s agreement has not been in dispute. Khan v. GBAK Properties, Inc.,
Several federal courts have upheld notices of rescission under Texas law. In Clawson, the court found abandonment based on a notice of rescission that stated the debtor had “requested an opportunity to fully cure the defaults.”
In general, Texas law allows rescission or waiver of claims by written notice or other evidence of intent. See Tex. Bus. & Com.Code Ann. § 2A.107 (“A claim or right arising out of an alleged default or breach of warranty may be discharged in whole or in part without consideration by a written waiver or renunciation signed and delivered by the aggrieved party.”); Massachusetts Bonding & Ins. Co. v. Orkin Exterminating Co.,
Other jurisdictions generally allow rescission of acceleration. See Dallas Joint Stock,
One way lenders have sought to show abandonment in the absence of express notice is dismissal of an initial application for foreclosure, either voluntary (as in Dentina) or involuntary for want of prosecution (or involuntary abatement, as in Murphy ).
IV. Discussion
The parties agree the loan was accelerated on November 6, 2007, resulting in a four year limitations period ending November 6, 2011.
Under the facts of this case, it is not necessary to resolve the issue of the validity of notices of rescission under Texas law. According to the “no-objection” rule suggested by Manes and Denbina, a note holder cannot unilaterally rescind acceleration over the objection of the debt- or,
According to the detrimental reliance standard suggested by Swoboda and restated in the Order under consideration (“[A] noteholder cannot unilaterally rescind acceleration ... where the debtor has detrimentally relied on the acceleration.”), Callan has failed to show she detrimentally relied on acceleration of her loan.
It is undisputed Callan is in default, and there is no evidentiary' concern which might justify limitations. See Robinson v. Weaver,
V. Conclusion
Accordingly, it is hereby
ORDERED that Defendant Deutsche Bank National Trust Company America’s Motion to Alter or Amend Judgment (Doc. 25) is GRANTED.
An Amended Final Judgment will be entered by separate document.
Notes
. Id. at 389 (“That there was such an agreement or waiver as we have supposed is not definitely stated in the certificate, but evidence is recited which tends to show it.”).
. "Payment was never refused by Stewart until just before the suit was instituted.” Id. at 444,
. Courts in other jurisdictions have found “mere acceptance” insufficient to show the lender’s intent to abandon, in cases where debtors are seeking to establish abandonment as a defense to foreclosure (rather than to refute abandonment in a statute of limitations defense as in the instant case). See Paul Londe & Assoc., Inc. v. Rathert, 522 S.W.2d 609, 610-11 (Mo.Ct.App.1975) (cited by F.D.I.C. v. Massingill,
. The court does not provide citations. The relevant cases cited by counsel which are listed in the syllabus are from other jurisdictions.
. The parties' rights include both the right of the lender to foreclose and the debtor’s right "to pay all before the times agreed upon.” Although the latter is central to the argument in the quoted passage, the court expressly refrains 'from holding the right exists and admits it creates difficulties that lead other courts to ignore the distinction between automatic and optional acceleration altogether:
Most of the authorities [treating an automatic provision as an option] regard the provision as being in the nature of a penalty or forfeiture of which the party to whom it may accrue is not bound to take advantage .... [A] reason more difficult to meet is found in the stipulations in the contract itself. The debtor promises to make his payments in installments at stipulated times, and thereby gives to the creditor the benefit of an interest-bearing investment for the period agreed upon; and it may be said that this shows the intention of the parties that he should not have the right to violate this promise by breaking another, — to pay each installment at maturity, — and thereby secure the right to pay all before the times agreed upon; in other words, that the intention is apparent that he should not have the right to mature the debt, because he has promised to do the things which would prevent it from maturing, and that hence it was contemplated that only the creditor should have such right.
The question now before us is one of limitation, and we need not determine whether or not, under the view taken in this state, the debtor, by his willful default, could secure a right to pay the whole debt before he had agreed to pay it without the creditor's consent.
Id. at 388-89 (emphasis added). The court, however, posits another "useful purpose” of automatic provisions for debtors which arguably justifies a prohibition against unilateral abandonment: '
It might happen that the debtor, upon good grounds, would afterwards deny his liability upon the contract, and therefore refuse to pay installments, in which case the provision would serve him a useful purpose in bringing the question at issue to a prompt test, and not leave it entirely with the creditor to delay until perhaps evidence of the defense had been lost.
Id.
. "[I]t is immaterial that appellee did not know that appellant had declared the remaining note to be due. Appellant knew such fact, and we think that his agreement not to exercise his option to declare the remaining note due is, in effect, to agree that, although it had become due by the exercise of his option, the same should be extended to the definite time fixed by the terms of the remaining note.” Id. at 308.
. Unlike statute of limitations cases such as the instant case, in prepayment penalty cases, the lender seeks a contractual penalty after the loan is paid off. Yet courts are still divided on the issue. See Westmark Commercial Mortg. Fund IV v. Teenform Associates, L.P.,
."The exercise of an option to accelerate is not irrevocable, and the holder of a note who has exercised the option of considering the whole amount due may subsequently waive this right and permit the obligation to continue in force under its original terms for all purposes. The waiver may be express, since a claim or right arising out of an alleged default or breach may be discharged, in whole or in part, without consideration by the aggrieved party in a signed record.” (Emphasis added.)
. "Exercise of the option to accelerate is not irrevocable, and the holder of a note who has exercised his option of considering the whole amount due may subsequently waive this right and permit the obligation to continue in force under its original terms for all purposes, including the determination of when the statute of limitations begins to run on the right to sue.”
. See note 7, supra.
. See Andrew J. Bernhard, Deceleration: Restarting the Expired Statute of Limitations in Mortgage Foreclosures, Fla. B.J. 30, 36 (2014) ("If something more than a mere dismissal is required to decelerate, the lenders are in trouble. It is not the regular practice of lenders to deliver independent notices of deceleration, to collect on individual installments or send monthly invoices after voluntary dismissal of an initial foreclosure action, or to send second notices of intent to accelerate. Further, lenders do not regularly allege deceleration or subsequent default in their second foreclosure complaints, as their foreclosure firms simply reuse their standard complaint forms.")
. Id. at 30 (“As Florida courts struggled to process the swelling foreclosure actions, so too did lenders and their foreclosure firms, leading to mass misfilings, the David J. Stern and Ben Ezra Katz law firm implosions, rocket dockets and mobbed for-want-of-prosecution calendars, and the robo-signing pandemic. In reaction, many lenders voluntarily dismissed up to thousands of foreclosure actions, thinking it better to collect their original loan documents and refile another day. Likewise, the courts involuntarily dismissed innumerable foreclosure actions to clear their overcrowded dockets.”).
. The limitations period is further extended two months and 16 days as a result of Cal-lan’s bankruptcy proceeding, expiring January 22, 2012. Deutsche’s foreclosure application on August 27, 2012 still falls outside the limitations period. 11 U.S.C. § 362.
. The Court acknowledges Texas law on this issue is unresolved.