Theresa WASHINGTON-JARMON, Appellant v. ONEWEST BANK, FSB, Appellee
NO. 14-14-00861-CV
Court of Appeals of Texas, Houston (14th Dist.).
November 22, 2016
Rehearing Overruled February 14, 2017
513 S.W.3d 103
We therefore direct the trial court to (1) vacate its Order Denying Hearing on Damages, (2) remand the issue of the amount of relators’ damages to the Architect for determination, and (3) conduct a hearing on relators’ claim for attorney‘s fees.
We are confident that the trial court will act in accordance with this opinion. The writ of mandamus will issue only if the trial court fails to do so.
Adam Nunnallee, Thomas M. Hanson, Christine A. Nowak, DALLAS, TX, for Appellee.
OPINION
John Donovan, Justice
Appellant, Theresa Washington-Jarmon, sued appellee, OneWest Bank, FSB (“OneWest“), based on its plan to foreclose on appellant‘s home, after the death of her spouse, pursuant to a reverse mortgage previously obtained by the spouse. Relative to the claims involved on appeal, (1) foreclosure is permitted only upon the death of “All Borrowers,” and appellant contends she is a borrower, and (2) appellant alleges OneWest misrepresented the amount due to prevent foreclosure. The trial court granted summary judgment in favor of OneWest. We affirm.
I. BACKGROUND
Appellant and her husband, Shelley Jarmon (“Jarmon“), purchased a home in Spring, Texas. In 2005, the couple experienced financial difficulties because of Jarmon‘s medical issues. They acquired a home equity loan for $165,000. When they had exhausted those proceeds in 2009, Jarmon obtained a Home Equity Conversion Mortgage, commonly known as a “reverse mortgage” from OneWest‘s predecessor, to pay off the home equity loan.1
A reverse mortgage allows homeowners, age 62 or older, to convert home equity into periodic payments or advances made by the lender over the life of the homeowners. See J. Alton Alsup, The New and Improved Texas Reverse Mortgage, 55 Consumer Fin. L.Q. Rep. 207, 209 (2001); see also Larsen v. OneWest Bank, FSB, No. 14-14-00485-CV, 2015 WL 6768722, at *4 (Tex. App.-Houston [14th Dist.] Nov. 5, 2015, no pet.) (mem. op.) (citing Alsup when explaining features of a reverse mortgage). An initial advance typically is made at loan closing to cover closing costs and payoff any existing lien, and the balance of the credit is then advanced in periodic payments according to the plan. See Alsup, supra, at 209. Interest accrues only on the amounts advanced over the term of the loan. See id. The homeowners have no obligation to repay any principal or interest during their lifetimes unless they sell or transfer the home, permanently cease occupying the home as their principal residence, or fail to properly maintain the property, timely pay property taxes and insurance premiums, or maintain the priority of the reverse mortgage lien. See id. A reverse mortgage is a non-recourse debt, meaning the lender may look only to the proceeds of the sale of the home for repayment when the debt becomes due, typically upon the death of the last of the homeowners to die or upon one of the other maturing events that permit the lender to accelerate the debt. See id. at 209-10. Neither a deceased homeowner‘s estate nor his heirs are liable for any deficiency that may result after the sale. See id. at 210. Since 1998, the Texas Constitution has expressly authorized a reverse mortgage as a type of debt that may be secured by a valid lien against homestead property. See
Jarmon was age 66 at the time he obtained the reverse mortgage, but appellant had not reached age 62 and thus was not eligible to be a borrower on a reverse mortgage. On February 25, 2009, multiple documents, entitled as follows, were executed to consummate the transaction:
Although both spouses are shown on this application as title holders, only Jarmon‘s name is included in the space designated for “Borrower‘s Name.” The space for “Co-Borrower‘s Name” is left blank. Only Jarmon signed the application.
Texas Home Equity Conversion Loan Agreement
The loan agreement states it is made between Jarmon as “Borrower” and OneWest. Only Jarmon signed the agreement.
Adjustable Rate Note (Home Equity Conversion)
At the outset, the note defines “Borrower” to mean “each person signing at the end of this Note.” Only Jarmon signed the note. The note permitted a maximum principal advance of $412,500, and Jarmon agreed to repay all amounts advanced plus interest. The note states that the promise to pay is secured by a deed of trust dated the same day. The note lists several different events upon which “Lender may require immediate payment in full of all outstanding principal and accrued interest,” including “if . . . All Borrowers die . . . .”
Adjustable Rate Home Equity Conversion Deed of Trust
At the outset, the deed of trust states “The trustor is SHELLY JARMON and THERESA WASHINGTON-JARMON, MARRIED whose address is [property address] (“Borrower“).” The deed of trust is signed by both Jarmon and appellant. Under each signature line is the word, “Borrower.” The deed of trust outlines events upon which “Lender may require immediate payment in full of all sums secured by” the deed of trust and may invoke the power of sale, including “All Borrowers die . . . .”
U.S. Department of Housing and Urban Development (“HUD“) Settlement Statement
This statement, which itemizes the loan disbursements, lists only Jarmon in the box for “Name & Address of Borrower.” Only Jarmon signed this document.
General Warranty Deed
Appellant signed this warranty deed, conveying her interest in the property to Jarmon, subject to all valid encumbrances.
Non-Borrower Spouse Ownership Interest Certification
This document, setting forth various acknowledgments, is signed by Jarmon as “Borrower” and appellant as “Non-Borrower Spouse” and includes the following statement:
[T]he non-borrowing spouse acknowledges . . . that . . . She understands that should [her] spouse predecease [her] . . . and unless another means of repayment is obtained, the home where [she] resides may need to be sold to repay the reverse mortgage loan and [she] may be required to move from [her] residence.
Both spouses also acknowledge that they had been given ample opportunity to consult with independent legal and tax experts of their own choosing regarding “ownership or vesting of real property that will serve as collateral for the reverse mortgage” and the spouses determined, either on their own or after consultation with experts, that entering into a reverse mortgage was in their best interest.
Upon closing, the loan proceeds of $178,547.23 were disbursed, which included the amount to discharge the home equity loan and closing costs. Jarmon died on December 29, 2010. In early 2011, OneWest wrote to Jarmon‘s estate, requesting that it advise OneWest within 30 days whether it intended to pay the loan balance, which was $192,086.16 at that time,
Appellant sued OneWest for breach of contract and violations of the Texas Debt Collection Act (“the Act“). Appellant alleged that she is a considered a borrower under the deed of trust and therefore the instrument permits foreclosure only after both spouses have died. Appellant claimed OneWest breached the deed of trust by (1) instituting foreclosure proceedings before appellant‘s death, (2) failing to fund the full amount permitted under the loan, and (3) failing to give appellant an opportunity to sell the home or otherwise cure the default before instituting foreclosure proceedings. Appellant claimed that OneWest violated the Act by (1) declaring the loan in default and threatening to foreclose before the death of both spouses, and (2) misrepresenting that appellant owes more than the amount advanced under the loan. Appellant sought (1) declarations that the lien is invalid and OneWest must forfeit all amounts owed on the loan for failing to disburse all the loan funds or the “total amount owed be reduced to reflect the equity in the property to conform the loan with the requirements of the Texas Constitution,” and (2) damages of $234,000, representing the amount allegedly never disbursed but demanded against the home equity, and (3) damages for mental anguish. Appellant also sought temporary injunctive relief.
The trial court signed a temporary restraining order followed by a temporary injunction, precluding OneWest from foreclosure pending a final judgment. OneWest filed a traditional and no-evidence motion for summary judgment, to which appellant responded.2 Appellant also filed a motion for summary judgment. The trial court signed an order denying appellant‘s motion, granting OneWest‘s motion, and dismissing all of appellant‘s claims with prejudice. Appellant filed a motion for new trial, which was overruled by operation of law.
II. ANALYSIS
In two issues, appellant contends the trial court erred by (1) granting OneWest‘s motion for summary judgment,3 and (2) failing to rule on appellant‘s motion for judicial notice.
As OneWest asserted in its motion, two of appellant‘s claims on which she challenges summary judgment on appeal depend on her being classified as a borrower under the loan. OneWest moved for summary judgment on those claims and on appellant‘s additional claim alleging a misrepresentation in violation of the Act irrespective of whether she is a borrower. We will analyze separately the two categories of claims because the summary-judgment grounds are different. Further, we will address the contention regarding judicial notice as essentially a sub-issue relative to the first category of claims.
A. Claims Based on Appellant‘s Alleged Status as a Borrower
On appeal, appellant challenges summary judgment on two of her claims that depend on her being classified as a borrower under the reverse mortgage: (1) breach of contract; and (2) violation of the Act by attempting to foreclose before the
OneWest moved for summary judgment on these claims on both traditional and no-evidence grounds. When, as in this case, a trial court‘s order granting summary judgment does not specify the ground relied on for its ruling, we affirm the summary judgment if any theory advanced is meritorious. Carr v. Brasher, 776 S.W.2d 567, 569 (Tex. 1989). We conclude the trial court properly granted traditional summary judgment on these claims, so we set forth only that standard in this section.
A party moving for traditional summary judgment must establish there is no genuine issue of material fact and it is entitled to judgment as a matter of law. See
In its motion, OneWest asserted that appellant is not a borrower when all of the documents comprising the transaction are considered together or alternatively, the note controls over the deed of trust. Appellant contends she is a borrower because (1) the deed of trust shows she is a borrower and it is the only document that should be considered when determining the rights between appellant and OneWest, and (2) under federal law, a lender may not foreclose on a reverse mortgage until the spouse who did not sign the note has also died.
1. Whether appellant is a borrower based on the loan documents
As OneWest asserts, the general rule is that separate instruments or contracts executed at the same time, for the
As mentioned above, other than the deed of trust, all documents expressly show only Jarmon as a borrower. Significantly, the note which creates the debt identifies only Jarmon as a borrower and provides that the debt becomes due and payable upon the death of “All Borrowers.” We recognize that the deed of trust uses the term “Borrower” to refer to both spouses—after identification of the trustors at the outset of the instrument and under the signature lines. The deed of trust also provides the debt is due and the property subject to foreclosure upon the death of “All Borrowers.” But, construing the deed of trust together with the rest of the loan documents, the references on the deed of trust do not make appellant a borrower.
Unlike the loan application, the loan agreement, and the note, which expressly define Jarmon as a borrower, the parenthetical “(“Borrower“)” after identification of both spouses as trustors on the deed of trust seems to be used as a shorthand term to refer to them, and then the signature lines are consistent by using the same term to refer to the signators. Nonetheless, the note is the instrument creating Jarmon‘s debt whereas the deed of trust is the document securing performance of the debt. Consequently, we look to the note as the instrument defining the parties to the obligation. In fact, the deed of trust states,
Borrower has agreed to repay to Lender amounts which Lender is obligated to advance, including future advances, under the terms of a Home Equity Conversion Loan Agreement dated the same date as this Security Instrument (“Loan Agreement“). The agreement to repay is evidenced by Borrower‘s Adjustable Rate Note dated the same date as this Security Instrument (“Note“). This Security Instrument secures to Lender: (a) the repayment of the debt evidenced by the Note, with interest, and all renewals, extensions and modifications of the Note, up to a maximum principal amount of . . . $412,500.00 . . . .”
Therefore, the deed of trust‘s own terms negate that the appellant is a borrower, despite the shorthand references therein, because that instrument looks to the note to define the debt; the deed of trust references the actual borrower as the party to the note—only Jarmon. Alternatively, to the extent the deed of trust may be con-
In fact, appellant even signed a document acknowledging she is not a borrower and the loan would become due and payable and she might be required to leave the home upon the death of Jarmon. Moreover, due to her age, appellant did not even qualify as a borrower on a reverse mortgage. Additionally, as part of the transaction, appellant conveyed her interest in the property to Jarmon, further negating that she is a borrower of funds secured by a lien against the property.
Accordingly, we agree with OneWest‘s explanation that the reason for requiring appellant‘s signature on the deed of trust (albeit on a signature line with the designation “Borrower” and with a parenthetical reference to “Borrower” after identifying appellant as a trustor) was to comply with the law, requiring that appellant be made a party to the deed of trust. Specifically, under Texas statutory law, “Whether the homestead is the separate property of either spouse or community property, neither spouse may sell, convey, or encumber the homestead without the joinder of the other spouse.”
After briefing in the present case, our court concluded a spouse was not a borrower on a reverse mortgage in a case with facts and documents substantially similar to those in the present case, where OneWest was also the lender: Husband obtained the reverse mortgage on a home he and his wife owned, but she was too young to qualify; only Husband, as borrower, signed the loan application and the note, which made the obligation due and payable upon the death of “All Borrowers“; both spouses signed the deed of trust, which had a reference to Wife as a “Borrower,” and provided the lender may require immediate payment of all sums secured by the instrument if “All Borrowers die“; Wife executed a warranty deed conveying her interest in the home to Husband; and both spouses signed a “Non-Borrower Spouse Ownership Interest Certification,” with Wife acknowledging that the home may need to be sold to repay the debt and she may be required to move from the home if Husband predeceases Wife. See Larsen, 2015 WL 6768722, at *1–2.
After Husband‘s death, OneWest (which acquired the loan after closing) sought the balance due on the loan and announced its intent to foreclose. See id. Wife sued OneWest alleging, inter alia, that OneWest could not foreclose because Wife was a borrower under the deed of trust and that instrument required immediate payment only if all borrowers have died. See id. The trial court granted OneWest‘s motion for summary judgment, which contended that Wife was not a borrower under the reverse mortgage. See id. at *3-4.
Like the present case, OneWest asserted Wife was not a borrower because only Husband was a borrower in the loan agreement and note, all documents must be construed together, and the note controlled over the deed of trust. See id. at *9. We rejected Wife‘s appellate contentions that the deed of trust was determinative as to borrower status, that she was a borrower under the reverse mortgage, and that OneWest could not foreclose before Wife‘s death. See id. at *9-12.
However, in the present case, appellant proffers additional reasons to challenge OneWest‘s arguments. Therefore, we will conduct an independent analysis of appellant‘s contentions while recognizing that Larsen is precedent that the note controls over the deed of trust and demonstrates appellant is not a borrower unless one of appellant‘s arguments (not raised in Larsen) has merit. See id.
Appellant contends the cases relied on by OneWest in its summary-judgment motion are distinguishable, as they involve different facts than the present case. However, we conclude the general principles discussed in those cases are applicable in the present case despite those courts applying the principles to different facts. Specifically, in the present case, all instruments were executed on the same day. Although the note defines the debt and the deed of trust secures payment of the debt, these instruments necessarily constitute one transaction. It is axiomatic that OneWest would not have lent the money if there were no deed of trust securing the loan and OneWest would have no deed of trust if there were no debt. As mentioned above, the deed of trust looks to the loan agreement and the note to define the obligation secured by the deed of trust, and the note refers to the deed of trust as the security for the loan. Consequently, all instruments were necessary to effectuate a reverse mortgage. All of the instruments construed together reflect the only borrower was Jarmon despite the label on the deed of trust. Or, even if appellant may be read as a borrower under the deed of trust, the note controls over the deed of trust.
Appellant also contends that the principle regarding construing instruments together does not apply here because this case involves separate contracts, with separate parties. But, the Texas supreme court has stated that instruments may be construed together or treated as one contract although they are not between the same parties. See Jones, 614 S.W.2d at 98. In the deed of trust, to which appellant was a party, she agreed that the obligation secured by the instrument was the obligation defined in the note (again, the debt on which only Jarmon was a borrower) although appellant was not a party to the note. Thus, by signing the deed of trust, appellant essentially agreed that the documents must be construed together to effectuate the reverse mortgage. Therefore, we disagree that the fact Jarmon, but not appellant, was a party to all the instruments precludes construing them together to determine the identity of the borrower.
Finally, appellant argues that one case cited by OneWest supports appellant‘s position. In Bierwirth v. BAC Home Loans Servicing, L.P., No. 03-11-00644-CV, 2012 WL 3793190 (Tex. App.-Austin Aug. 30, 2012, no pet.) (mem. op.), the Austin Court of Appeals stated, “this Court [has] rejected the argument that a note and its security are inseparable by recognizing that the note
2. Appellant‘s contention regarding federal law
Appellant also contends that pursuant to
We recognized that
We also held that Bennett did not support Wife‘s contention that
In summary, because appellant is not a borrower under the reverse mortgage as a matter of law, the trial court did not err by granting summary judgment on all claims that depended on appellant being classified as a borrower.
B. Claim Based on Alleged Misrepresentation
Appellant pleaded that OneWest violated the Act by misrepresenting that appellant must pay $412,5005 to avoid foreclosure, which exceeded the amount due on the loan. See
OneWest moved for summary judgment on this claim on both no-evidence and traditional grounds. We conclude the trial court properly granted no-evidence summary judgment.
After adequate time for discovery, a party may move for summary judgment on the ground there is no evidence of one or more essential elements of a claim or defense on which an adverse party would have the burden of proof at trial.
In its motion for summary judgment, OneWest asserted there is no evidence that it violated the Act, specifically that it ever claimed appellant must pay $412,500 to satisfy the debt.6 In her response and on appeal, appellant relies on (1) the Notice of Substitute Trustee‘s Sale prepared in April 2012, purportedly showing an amount due of $412,500, and (2) the August 2012 statement for the loan, showing a balance of $207,861.75. According to appellant, these documents constituted evidence that OneWest represented an amount greater than the actual balance was owed.
However, the Notice of Substitute Trustee‘s Sale does not state that the balance is $412,500. Rather, the notice references $412,500 as the total amount secured by the deed of trust, which is consistent with that instrument showing it secures the maximum principal amount of $412,500, although the full amount permitted under the loan was never disbursed. Nothing on
In summary, the trial court did not err by granting summary judgment in favor of OneWest on all of appellant‘s claims or commit harmful error by any refusal to take judicial notice of federal law. Accordingly, we overrule both of appellant‘s issues and affirm the trial court‘s judgment.
JOHN DONOVAN
JUSTICE
CITY OF HOUSTON, Sylvester Turner, Kelly Dowe, Chris Brown, Brenda Stardig, Jerry Davis, Ellen Cohen, Dwight Boykins, Dave Martin, Steve Le, Greg Travis, Karla Cisneros, Robert Gallegos, Mike Laster, Larry Green, Mike Knox, David Robinson, Michael Kubosh, Amanda Edwards, and Jack Christie, Appellants v. HOUSTON MUNICIPAL EMPLOYEE PENSION SYSTEM, Appellee
ΝΟ. 14-15-00865-CV
Court of Appeals of Texas, Houston (14th Dist.).
November 22, 2016
Rehearing Overruled February 14, 2017