### T E X A S C O U R T O F A P P E A L S , T H I R D D I S T R I C T , A T A U S T I N

NO. 03-13-00007- CV

Jam es Seth Hicks, App ellant

v. Chase Hom e F inan ce, LLC; C hase Texas Hom e F inan ce, LLC; and JP Mor gan Chase Ban k, N.A., Appellees

F ROM TH E DISTRI CT COURT O F TRAVIS CO UNTY, 126 TH JUDICI AL DISTRICT NO. D-1 -GN-1 2-0 0273 4, H ONO RAB LE ERIC SH EP P ERD, JUDGE P RESIDING

M E M O R A N D U M O P I N I O N

J ames Seth Hicks appea ls from the trial court’s g rant of summary judgme nt in favor of Chase Home Financ e, L L C, Chase Texas Home Financ e, L L C, and J P Morg an Chase Ba nk, N.A. (collec tively , Chase). Hicks sued Chase reg arding two mortg ag es, claiming that Chase had violated
t h e Truth in L ending Act (TI L A), see 15 U.S.C. §§ 1601-1667, and the Real Estate Settlemen t Procedur es Act (RESPA), see 12 U.S.C. §§ 2601-2617

. C h as e moved for summary judgme nt arg uing tha t the mortg ag es we re obta ined for busine ss purposes and ther efor e not subject to TI L A

or RESP A. The trial court rende red summary judgme nt in favor of Chase. We will aff irm the trial court’s judg ment.BACK GR OUND I n Marc h 2007, Hicks obt ained two mortg ag es i n order to purcha se two re sidential proper ties locate d in Austin, Texas. Hicks subsequently sued his mortg ag e broker and lender , Chase, in connec tion with those mortg ag es, claiming that he was the v i cti m of a “bait and switch.” Acc ording to his petition, Hicks contac ted his mortg ag e broker and informed him that he wanted to obtain mortg ag es with s p ec i fi c terms. Hicks’s mortg ag e broker repr esente d that the mortg ag es would comply with Hicks’s specifica tions an d would not contain certain terms that Hicks vi ewe d as unfa vorable . Howeve r, whe n Hicks ar rived at the closing on the mortg ag es, he discove red tha t the mortg ag es did, in fac t, contain the unfavor able terms. Acc ording to Hicks, he protested the
terms but ultimately signe d the mor t gag e documents only afte r his mortg ag e broker assure d him that the terms wer e temporar y and would be can ce l l ed af t er one y ear . Be g inning in Marc h 2008,

a y ear afte r closing , Hi ck s co n t acted Chase reque sting that it canc el the disputed terms. Despite repe ated r equests, Chase r efuse d to remove the terms.

Hicks sued Chase and asser ted numerous cause s of action, including alleg ations that Chase violat ed T I L A and RESP A by , among other things, failing to make cer tain require d disclosures and ref

using to cooper ate with him on the remova l of the disputed terms. Chase moved 1 for summary judgme nt on all of Hicks’s claims. Wit h reg ard to Hicks’s TI L A and RESP A claims, Chase asserted that the claims wer e barred as a matter of law by the bus iness-purpose s exception. See 15 U.S.C. § 1603 (1 ); 1 2 U. S .C. § 2606(a) (1). Chase also filed objections to and moved to

I n addition to TI L A and RESP A cl aims, Hicks also asser ted claims ag ainst Chase for 1 (1) wrong ful fore cl o s u

r e , ( 2) fra ud, (3) intentional and neg lige nt misrepre sentation, (4) conce alment, (5) f raudule nt inducement, (6) brea ch of c ontrac t, (7) usury , and (8) brea ch of f iduciary duty

. 2strike exhibi ts attache d to Hicks’s response to its motion for summary judgme nt, including portions

of Hicks’s aff

idavit. Following a hear ing, the t ri al court g rante d summary judgme nt in favor of Chase on all of H icks’s cla ims. 2

On appeal, in two rela ted issues, Hicks asser ts that the trial court err ed in g ranting summary judgme nt on his TI L A and RESP A claims. I n his third issue, Hicks contends that the trial 3

co u rt er re d in excluding portions of his aff idavit. Hicks reque sts that this Court reve rse the trial court’s g rant of summary judgme nt with respe ct to his claims under TI L A and RESP A and rema nd the ca use to the trial cour

t.

STANDARD OF REVIEW We r e v ie w a tr ia l c o u

r t’ s g r a n t o f s u mm a r y ju d g me n t d e n o v o . V

a le n c e O p e r a ti n g Co

.

v. Dorsett, 164 S.W .3d 656, 661 (Tex. 2005). A movant is entitled to traditional summary judgme nt if (1) there is no g enuine issue as to any materia l fac t and (2) the moving party is entitled to judgme nt

as a matter of law. Tex. R. Civ. P. 166a(c ). To obtain traditional summary judgme nt on an opposing party ’s claims, the movant must conclusively neg ate at least one element of eac h of the claims or conclusively est ab l i s h eac h element of an affirmative defense

. See Centeq Realty , Inc. v. Siegler , 899 S.W .2d 195, 197 (Tex. 1995). I n revie wing a summary judgme nt, we take as true all evidenc e

The original lawsuit ag ainst Chase and the m ortg ag e broke r was assig ned cause number 2 D-1-G N-09-001426. Following the trial court’s g rant of summary judgme nt in favor of Chase, and on Chase’s motion, the cour t severe d Hicks’s c laims ag ainst Chase into the instant suit. Be cause Hicks onl y challeng es the trial c ourt’s g rant of summar y judgme nt on his TI L A 3 and R ESPA claims, we do not decide whether the t rial court err ed in g ranting summary judgme nt on Hicks’s other

claims ag ainst Chase. 3favor able to the nonmovant and indulge ever y rea sonable infere nce and resolve any doubts in favor of the nonmovant. Valence Operating Co. , 164 S.W .3d at 661.

DISCUSSIO N I n his first and second issues, Hicks arg ues that the trial co u rt er red in concluding that the mortg ag es wer e not subject to TI L A and RESP A. See 15 U.S.C. § 1603(1 ); 1 2 U. S

. C. § 2606(a) (1). More specific al l y , Hi ck s asser ts that the trial court err ed in concluding that the mortg ag es wer e extended for business purposes since Hicks, an individual, obtained the mortg ag es in order to acquir e residential, non-commer cial proper ty as part of his “per sonal investment portfolio.” I n response , Chase ar g ues t hat s ummary judgme nt was proper because the undi sputed evidenc e shows that Hicks acquir ed the mortg ag es for the business purpose o f ac q u i ri ng renta l properties.

TI L A protec ts consumers fr om inaccur ate a nd unfair c redit pra ctices by mandating that cre ditors provide “mea ningf ul disclosure of cre dit terms.” See 15 U.S

. C

. § 1 6 01; Martin v. New Century Mortg. Co. , 377 S.W .3d 79, 87 (Tex. App.—Hou s t o n [1st Dist.] 2012, no pet.). Simi larly , RESP A protec ts re al es t ate consumers by ensuring that consumers are “provide d with g rea ter and more timely information on the nature and co s ts of the settlement proce ss.” See 12 U. S .C. § 2601(a) ; O’Sullivan v. Countrywide Home Loans, Inc. , 319 F.3d 732, 738 (5th Cir. 2003). To come within the scope of TI L A and RESP A protec tions, the claimant must be a consumer as def ined by the Acts, a

nd the cr edit must not be ex tended “ primarily for business .

. . purposes.” See 15 U.S.C. § 1603(1); 12 U.S.C. § 2606(a) (1). This business-purposes exception exempts nonconsumer activities from protec tion under the Acts. See American Express Co. v. Koerner , 452
4U.S. 233, 239-40 (1981). Be cause the burden is on the complaining party t o show that the cre dit

transac tions at issue are cover ed by the Acts, the complaining party must show that the loans at issue

wer e obtained for persona l, as opposed to business, purposes. See Breck enridge v. NationsBank of Texas, N.A. , 79 S.W .3d 151, 159 (Tex. App.—Texarkana 2002, pet. denied)

. Ordinar ily , as one would expect, a loan obtained to make a profit is a loan extended for business purposes under the Acts. See In re Booth , 858 F.2d 1051-55 (5th Cir. 1988) (noting that “[c]ases decide d under [TI L A] indicate that when the cre dit transac tion involves a profit motive, it is outside the definition of consumer cre dit”). Fur ther, it is well established that a loan obtained in order to invest in non-owne r-oc cupied renta l proper ty is a loan for business purposes, reg ardle ss of how the proper

ty will ultimately be used by the tenant. See Daniels v. SCME Mortg. Banke rs, Inc. , 680 F.Supp. 2d 1126, 1130-31 (C.D. Cal 2010); Mauro v. Countrywi d e Ho me Loans, Inc. , 727 F.Supp. 2d 145, 154-55 (E .D.N.Y. 2010)

.

Whether a loan is for persona l or bus i n es s p u rp o ses is often a question of fac t. See Daniels , 680 F.Supp. 2d at 1130-31. Howeve r, there is at least one exception to this g ener al

ru l e. Reg ulation Z , the Fe dera l Reserve Boa rd’s administrative interpre tation to TI L A, provi d es :

Non-o w n er occupied rental property. Credit extended to acquir e, improve or mai n tain renta l proper

ty (re g ardle ss of the number of housing units) that is not owner -occ upied is deem ed to be for business purposes. This includes, for example, the ac quisiti on of a w are house that will be lease d or a single -fa mily house that will be re nted to another

person to live in.

12 C.F.R. Pt. 226, Supp. I , Cmt. 3(a) (4) (Off icial Staff Commentary to Reg ulation Z , section 226.3) (empha sis added) ; see Ford Mot or Credit Co. v. Milhollin , 444 U.S. 555, 565-66 n.9 (1980)

5(noting that Boa rd’s staf f interpr etations of TI L A and Reg ulation Z should be dis positive [u] nless “demonstra

bly irrational” ). Under Reg ulation Z , once the acquir ed proper ty is shown to be a “non- 4

owner -occ upied rental proper ty ,” the loan transac tion is considered to be f or busi ness purposes as a matter of law and exempt from TI L A and RESPA. 12 C.F.R. Pt. 226, S upp. I , Cmt. 3(a)(4) ; see Johnson v. W

ells Fargo Home Mortg., Inc ., 635 F.3d 401, 417 (9th Cir. 2011) (conc luding that loan
to acquir e non-owne r occupie d renta l proper ty under Reg ulation Z was also excluded under RESP A as loan for

business purpose). I n support of its motion for summary judgme nt, Cha s e a tt a c h e d e xc e r

p ts from Hicks’s deposition, in which Hicks admitted that the mortg ag es in this case wer e obtained in order to purcha se renta l proper

ties for investment purposes. I n response , Hicks did not prese nt evidenc e that any portion of the mortg ag es was extended for some other persona l, as opposed to business, purpose. Fur ther, Hicks does not dispute that the m ortg ag es were obtained solely in order to purcha se nonowner -occ upied renta l proper ties. I nstead, he contends that he obtained the mortg ag es as an individual, not as a business, and th at t h e p ro p er ties wer e purcha sed as a part of his “per sonal investment portfolio.” Whether Hicks purcha sed the proper ty in his individual capa city or on behalf of a business is beside the point—Chase’s summary -judg ment evidenc e establishes that t he proper ties wer e obtained for purposes of g ener ating income for Hicks. Hicks failed to pr esent any evidenc e that would cr eate a g enuine issue of materia l fac t as to the purpose of the mortg ag es. The undisputed su m m ary -judg ment evidenc e demonstrates Hicks obtained the mortg ag es for the p u rp o s e of purcha sing non-owne r-oc cupied renta l proper ty

. This evidenc e

The Fe dera l Reserve Boa rd is char g ed with implementing and i n t er p re t i ng TI L A. 4 15 U.S.C. § 1604; see also 12 C.F.R. Pt. 26 (“Reg ulation Z ”). 6establishes, as a matter of law, that the mortg ag es wer e obtained for business purposes and thus are

outside the scope of

TI L A and RESPA. We overrule H icks’s first and se cond issues on appe al. 5 I n his third issue on appea l, Hicks contends that the trial court err ed in excluding and striking portions of his aff idavit. Prior to the summary judgme nt hear ing, Chase objected to portions of Hicks’s aff

idavit testimony on the g rounds that Hi cks lacke d persona l knowledg e and that his aff idavit testimo n y const ituted inadmissible hear say . See Tex. R. Civ. P. 602, 802. Hicks arg ues that the trial court should have overr uled Chase’s objections beca use Hicks was permitted to testify

as an expert witness, despite any hear say or lack of persona l knowledg e. See In re Christ us Spohn Hosp. , 222 S.W .3d 434, 440 (Tex. 2007) (explaining that experts may rely on inadmissible hear say and other information that ordinary witness may not). Acc ording to Hicks, “[t] hese err ors we re

cruc ial, as t hey impacted the very impor t an t q u es t i o n as t o whether Chase Bank was awa re of the misrepre sentations of [his m ortg ag e broke r].”

I n response , Chas e as s er t s that, as a threshold matter, Hicks has failed to prese rve this complaint for appellate revie w beca use the rec ord fails to show that the trial court ruled on his objections. See Tex. R. App. P

. 33.1(a) (2). I n addition, Chase asser ts that any err or i n sustaining Chase’s objec tions was harmless.

Hicks also points out that Reg ulation Z provides five fac tors that should be considere d by 5 the finder of fa ct in deciding whether the business-purpose s exception applies. 12 C.F.R. Pt. 226, Supp. I , Cmt. 3(a) (3)( i)(A) -(E) ) (Off icial Staff commentar

y to Reg ulation Z , section 226.3). Hicks arg ues t hat t he trial court fai l ed t o consi der these five fac tors and, therefor e, it s g rant of summary judgme nt was improper. Hicks, howeve r, ignor es the lang uag e in comment 3(a) (4), providing that cr edit extended to acquir e non-owne r-oc cupied renta l proper ty is “ deem ed to be for bus i n es s purposes,” thus dispen s i n g wi t h the need to consider eac h individual fac tor in this ty pe of transac tion. See id. Cmt. 3(a)(4) (empha sis added). 7To preva il on this issue, Hicks must establish that (1 ) the trial court abused its

discretion in excluding portions of his aff idavit as summary -judg ment evidenc e, a n d ( 2 ) th e im

p r o p e r ruling probably cause d the re n d i t i o n o f an improper summary judgme nt. See Tex. R. App. P. 44.1(a) ; Interstate Northborough P’ship v. State , 66 S.W .3d 2 1 3 , 220 (Tex. 2001). Assuming without decidi n g t h at Hi cks has adequately prese rved this issue for appea l and that the trial court

err ed in concluding that the challeng ed portions of Hick’s aff idavit wer e inadmissible, we cannot conclude that the exclusion of this evidenc e probably cause d the rendition of an improper summary judgme nt. Whether Chase was awa re of any misrepre sentations m ad e by the broker and orig inal lender h as no bear ing on the i ssue of whether the m ortg ag es were ex tended for bus iness purposes under TI L A and RESP A. As a result, any err or committed by the trial court in striking portions of Hi ck s’s aff

idavit was harmless with respe ct to the trial court’s g rant of summary jud gm en t o n Hicks’s TI L A and RESP A claims—the sole portion of the trial court’s summary judgme nt for which Hicks see ks appellate revie w. Acc ording ly , we ove rrule H icks’s third issue.

CONCLUSION Having overr

uled Hicks’s issues on appea l, we aff irm the trial court ’s j udg ment.

__________________________________________ Scott K. Field, Just ice Be fore Chief J ustice Jones, J ustices Pemberton a nd Field Affir med Filed: Aug ust 13, 2014
8