Opinion ID: 1463910
Heading Depth: 2
Heading Rank: 2

Heading: The First Question: The Lien's Validity

Text: We agree with Ameriquest's interpretation of the home equity amendment to section 50. We conclude that the cure provision in section 50(a)(6)(Q)(x) applies to all the lender's obligations under the extension of credit including section 50(c)'s requirements that to be valid a homestead lien must secure a debt described by this section. Accordingly, we answer the first certified question no. Texas citizens adopted the home-equity loan amendment, which includes section 50(a)(6)(Q)(x)'s cure provision, in 1997. We must read all the amendment's provisions together because they relate to the same subject matter, and we must consider them in light of each other. Purcell, 314 S.W.2d at 284; Duncan, 215 S.W.2d at 159; Allred, 40 S.W.2d at 15. When we read all the amendment's provisions together, we conclude that section 50(a)(6)(Q)(x) is a cure provision that applies to all of section 50(a) and is not limited to protecting the loan's principal and interest. Rather, this provision also operates as a cure provision that validates a lien securing a section 50(a)(6) extension of credit. To be valid, a home-equity loan must be made without recourse for personal liability against the homeowner. Tex. Const. art. XVI, § 50(a)(6)(C). Therefore, if a lien that secures such a loan is voided, the lender is left with no method for recovering any sums extended to the borrower. Doody argues that no valid lien can be created on homestead property unless the lender strictly complies with the constitutional requirements when the loan is made and that the lender's subsequent efforts cannot resurrect a void lien. Doody relies on several cases to support this argument. See, e.g., Laster, 826 S.W.2d at 129; Hruska, 747 S.W.2d at 784; Burkhardt v. Lieberman, 138 Tex. 409, 159 S.W.2d 847, 850-51 (1942); Lincoln v. Bennett, 138 Tex. 56, 156 S.W.2d 504, 505-07 (1941); Kepley v. Zachry, 131 Tex. 554, 116 S.W.2d 699, 700, 702 (1938); Cocke v. Conquest, 120 Tex. 43, 35 S.W.2d 673, 678 (1931); Toler v. Fertitta, 67 S.W.2d 229, 230 (Tex. Comm'n App.1934, judgm't adopted); Collier v. Valley Bldg. & Loan Ass'n, 62 S.W.2d 82, 84 (Tex. Comm'n App.1933, holding approved); Fidelity Sav. & Loan Ass'n of Port Arthur v. Baldwin, 416 S.W.2d 482, 484 (Tex.Civ.App.-Beaumont 1967, writ ref'd n.r.e.); Lewis v. Brown, 321 S.W.2d 313, 317 (Tex.App.-Fort Worth 1959, writ ref'd n.r.e.); Kemper v. Freeman, 254 S.W.2d 837, 838 (Tex. App.-Fort Worth 1953, no writ); Hicks v. Wallis Lumber Co., 70 S.W.2d 440, 440 (Tex.Civ.App.-San Antonio 1934, no writ); see also In re Daves, 770 F.2d 1363, 1366-67 (5th Cir.1985); In re Howard, 65 B.R. 498, 507 (Bankr.W.D.Tex.1986); Jeter v. Seminole State Nat'l Bank, 48 B.R. 404, 407-08 (Bankr.N.D.Tex.1985). These cases are distinguishable. As we have already observed, section 50(a)(6)(Q)(x)'s cure provision is new and all the cases on which Doody relies predate the 1997 home-equity loan constitutional amendment. Further, none of the cases involve a cure provision. For example, in Hruska, a lender agreed to provide a construction loan to a homeowner. 747 S.W.2d at 784. When construction was nearly completed, the lender discovered that it had not executed a mechanic's and materialmen's lien before the materials were furnished and construction began, as required by our constitution at that time. Hruska, 747 S.W.2d at 784. The lender tried to cure the problem by executing a backdated lien contract, but this Court refused to enforce the lien. Hruska, 747 S.W.2d at 784-85. We held that the constitutional requirements for creating the lien against the homestead were not met, and neither the attorney's attempted cure nor the homeowner's alleged misrepresentations about securing the lien could validate the lien. Hruska, 747 S.W.2d at 784-85. Unlike the circumstances in Hruska, the 1997 home-equity loan amendment to our constitution includes a cure provision. Thus, Hruska and the other cases do not apply and lenders have a reasonable opportunity to cure mistakes. Additionally, Doody overlooks this Court's prior holding that a homestead lien that may not have complied with constitutional requirements at the outset can be made valid at a later date if the power to do so exists under our constitution or statutes. Collier, 62 S.W.2d at 84. The 1997 home-equity loan amendment affords lenders such authority. Specifically, through section 50(a)(6)(Q)(x)'s cure provision, the amendment provides a means for the lender to correct mistakes within a reasonable time in order to validate a lien securing a section 50(a)(6) extension of credit. Finally, Doody argues that construing section 50(a)(6)(Q)(x) as a cure mechanism that validates the lien will allow lenders to frequently issue home-equity loans in total disregard for such requirements as the three-percent closing-cost cap in section 50(a)(6)(e). But this argument ignores that a lender's unlawful business activities may subject it to liability under federal and state laws. See, e.g., Tex. Bus. & Com. Code § 17.46. Moreover, as Ameriquest explains, a lender has little business incentive to not comply with lender requirements, because its business' success depends largely on customer satisfaction and the lender's reputation in the community. We hold that section 50(a)(6)(Q)(x) operates as authority to cure not only the particular lender obligation at issue under section 50(a)(6), but also to validate the lien. We, therefore, answer the first certified question no. Because we answer the first question no, we need not reach the Fifth Circuit's second question.