Court Opinion

ID: 4420323
Source: CourtListenerOpinion
Date Created: 2019-07-26 06:49:33.387819+00
Date Added: 2024-06-11T14:51:24.467759
License: Public Domain

Opinion issued July 25, 2019

                                     In The

                               Court of Appeals
                                    For The

                        First District of Texas
                         ————————————
                               NO. 01-18-00866-CV
                         ———————————
                  JIMMIE DALE WHEELER, Appellant
                                       V.
  MTGLQ INVESTORS, L.P. AND NEW PENN FINANCIAL, LLC D/B/A
        SHELLPOINT MORTGAGE SERVICING, Appellees

                     On Appeal from the 125th District
                           Harris County, Texas
                     Trial Court Case No. 2016-88326

                     MEMORANDUM OPINION

     Appellant, Jimmie Dale Wheeler, appeals the trial court’s order granting

summary judgment in favor of appellees, MTGLQ Investors, L.P. and New Penn
Financial, LLC d/b/a Shellpoint Mortgage Servicing1 and a take-nothing judgment

on Wheeler’s claims for breach of contract and declaratory and injunctive relief.

Wheeler contends that the trial court erred because (1) the statute of limitations bars

MTGLQ’s enforcement of its lien; (2) MTGLQ cannot enforce its lien because

Wheeler did not agree to allow MTGLQ such a right in the deed of trust; and (3)

Texas Practice and Remedies Code section 16.038 is unconstitutional. We affirm.

                                    Background

      Wheeler, a former investment adviser and real estate developer, obtained a

secured loan to purchase property in 1993. After Wheeler repeatedly failed to repay

the loan, JPMorgan Chase Bank, N.A., the loan servicer at the time, and Wheeler

entered into two forbearance agreements—in August 2005 and November 2007—

and two modification agreements—in October 2006 and December 2010—to allow

Wheeler to cure his defaults. The 2010 modification agreement extended the loan’s

maturity date to November 1, 2050.

      Under the 2010 modification agreement, Wheeler made five payments but did

not make a payment in May 2011 or any payment thereafter. After Wheeler

defaulted on the modified loan, Chase sent him written notice of his default on

December 7, 2011, informing him that if he failed to cure his default Chase would

1
      New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing is now known as
      NewRez, LLC.
                                          2
accelerate his loan. Wheeler did not cure his default and Chase’s foreclosure

counsel, Barrett Daffin, sent Wheeler notices of acceleration dated May 2, 2011 and

June 20, 2011. The acceleration notices also advised Wheeler that the substitute

trustee would foreclose on the property on June 7 and August 2, 2011, respectively.

        Chase did not foreclose on the property on June 7 or August 2, 2011. On

January 19, 2012, Daffin sent notice to Wheeler that Chase rescinded “the notice of

acceleration dated 6/20/11 and all prior notices of acceleration.” After Wheeler did

not bring his loan current following the deceleration, Daffin sent Wheeler a notice

of acceleration, advising him that the substitute trustee would foreclose on the

property on February 5, 2013. On February 4, 2013, Wheeler sued Chase and

obtained a temporary restraining order to prevent foreclosure.

        The trial court subsequently dismissed Wheeler’s suit. Daffin sent Wheeler a

notice of acceleration dated September 11, 2014, advising him that the substitute

trustee would sell the property on October 7, 2014. On November 20, 2014, Daffin

sent another notice of acceleration to Wheeler, advising him that the trustee would

sell the property at a foreclosure sale on January 6, 2015. Wheeler again sued Chase

and obtained a temporary restraining order to prevent foreclosure on January 5,

2015.

        The trial court dismissed Wheeler’s second suit. Two months later, and after

Chase did not proceed with the foreclosure sale, Chase’s counsel sent Wheeler notice

                                          3
dated May 13, 2015, advising him that Chase “rescinds and abandons any

acceleration of the Note or any other debt secured by the Deed of Trust made by

[Chase] or by its servicer(s) prior to the date of execution of this document.”

      Chase subsequently transferred servicing of Wheeler’s loan to Shellpoint,

effective February 1, 2016. On May 9, 2016, Shellpoint, as the servicer for MTGLQ,

sent a notice to Wheeler advising him that his loan was in default and that, if he

failed to cure his default within forty-five days, Shellpoint would accelerate the loan.

Wheeler did not cure his default. On November 23, 2016, Shellpoint accelerated the

loan, advising Wheeler that the foreclosure sale would take place on January 3, 2017.

      On December 28, 2016, Wheeler filed the instant suit “seek[ing] to stop the

pending foreclosure of his homestead.” He alleged that a pending foreclosure sale

was “in breach of contract” and that the four-year statute of limitations prevented

MTGLQ from “enforc[ing] the lien and power of sale in the Deed of Trust.”

Wheeler sought temporary injunctive relief “blocking all aspects of the foreclosure

process during the pendency of [the] case” and a declaratory judgment that “the lien

and power of sale in the Deed of Trust have expired” and “MTGLQ has no legal

interest in the property.” Wheeler also requested “his costs and reasonable and

necessary attorney fees under Section 37.009” of the Civil Practice and Remedies

Code. On December 29, 2016, the court entered another temporary restraining order

preventing Shellpoint and MTGLQ from proceeding with foreclosure. The order

                                           4
included the following handwritten notation: “This is Plaintiff’s third suit to block

foreclosure on this property.” On January 27, 2017, Shellpoint and MTGLQ filed

their answer.

      On March 21, 2018, MTGLQ and Shellpoint moved for traditional summary

judgment on the grounds that limitations did not bar enforcement of the lien on

Wheeler’s property or sale of the property and MTGLQ did not breach any contract.

On March 23, 2018, Wheeler moved for summary judgment on the basis that “the

lien against his homestead had expired as a matter of law.” On April 9, 2018,

MTGLQ and Shellpoint filed their response to Wheeler’s summary judgment

motion.   On July 14, 2018, Wheeler filed his reply to MTGLQ and Shellpoint’s

summary judgment response and his response to their summary judgment motion.

      On July 17, 2018, the trial court entered an order (1) granting MTGLQ and

Shellpoint’s motion for summary judgment; (2) denying Wheeler’s motion for

summary judgment; and (3) awarding MTGLQ and Shellpoint a take-nothing

judgment on Wheeler’s affirmative claims for relief against them.

      On August 14, 2018, Wheeler moved for rehearing and a new trial. The trial

court denied Wheeler’s motions on September 13, 2018. This appeal followed.2

2
      Wheeler filed an emergency motion to set a bond for a stay pending appeal. The
      trial court granted the motion and ordered a bond set in the amount of $2,500.00 per
      month. MTGLQ and Shellpoint filed a motion for reconsideration of the trial
      court’s order granting Wheeler’s motion to set a bond. On April 2, 2019, this Court
      granted MTGLQ and Shellpoint’s motion and vacated the trial court’s order.
                                           5
                                      Discussion

      In three issues, Wheeler argues that the trial court erred in granting summary

judgment in favor of MTGLQ and a take-nothing judgment on his claims because

(1) the statute of limitations bars MTGLQ’s enforcement of its lien; (2) MTGLQ

cannot enforce its lien because he did not agree to allow MTGLQ such a right in the

deed of trust; and (3) Texas Practice and Remedies Code section 16.038 is

unconstitutional and, even if it is constitutional, it does not apply in this case.

   A. Standard of Review

      We review a trial court’s grant of summary judgment de novo. Travelers Ins.

Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010). When reviewing a summary

judgment motion, we must (1) take as true all evidence favorable to the nonmovant

and (2) indulge every reasonable inference and resolve any doubts in the

nonmovant’s favor. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex.

2005) (citing Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex.

2003)). If a trial court grants summary judgment without specifying the grounds for

granting the motion, we must uphold the trial court’s judgment if any one of the

grounds is meritorious. Beverick v. Koch Power, Inc., 186 S.W.3d 145, 148 (Tex.

App.—Houston [1st Dist.] 2005, pet. denied).

      In a traditional summary judgment motion, the movant has the burden to show

that no genuine issue of material fact exists and that the trial court should grant

                                            6
judgment as a matter of law. TEX. R. CIV. P. 166a(c); KPMG Peat Marwick v.

Harrison Cty. Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999). A defendant

moving for traditional summary judgment must conclusively negate at least one

essential element of each of the plaintiff’s causes of action or conclusively establish

each element of an affirmative defense. Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d
910, 911 (Tex. 1997). Where, as here, both parties moved for summary judgment

and the trial court granted one motion and denied the other, “we review all the

summary judgment evidence, determine all of the issues presented, and render the

judgment the trial court should have.” Merriman v. XTO Energy, Inc., 407 S.W.3d
244, 248 (Tex. 2013).

   B. Statute of Limitations

      In his first issue, Wheeler contends that the statute of limitations bars

MTGLQ’s enforcement of its lien. Specifically, he argues that MTGLQ’s right to

enforce the lien accrued when MTGLQ accelerated the loan on May 2, 2011, and

that the applicable four-year statute of limitations expired before MTGLQ sought to

enforce the deed of trust.

   1. Applicable Law

      “A sale of real property under a power of sale in a mortgage or deed of trust

that creates a real property lien must be made not later than four years after the day

the cause of action accrues.” TEX. CIV. PRAC. & REM. CODE § 16.035(b). When, as

                                          7
here, the lien secures an installment note, the four-year period begins to run on the

note’s maturity date of the last note, obligation, or installment. Id. § 16.035(e). “On

the expiration of the four-year limitations period, the real property lien and a power

of sale to enforce the real property lien become void.” Id. § 16.035(d).

      If a note or deed of trust secured by real property contains an optional

acceleration clause, the action accrues when the holder of the note actually exercises

its option to accelerate. Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d
562, 566 (Tex. 2001); Khan v. GBAK Props., Inc., 371 S.W.3d 347, 353 (Tex.

App.—Houston [1st Dist.] 2012, no pet.). Effective acceleration requires (1) notice

of intent to accelerate and (2) notice of acceleration. Holy Cross, 44 S.W.3d at 566.

Both notices must be “clear and unequivocal.” Id. (quoting Shumway v. Horizon

Credit Corp., 801 S.W.2d 890, 893 (Tex. 1991)).

      After a lender accelerates a note, the acceleration can be abandoned by

agreement or other action of the parties. See Holy Cross, 44 S.W.3d at 566–67

(stating noteholder who has accelerated note upon default can abandon acceleration

if holder continues to accept payments without exacting any remedies available to it

upon declared maturity); Khan, 371 S.W.3d at 353. Abandonment of acceleration

restores the contract to its original condition, including restoring the note’s original

maturity date and resetting the statute of limitations. Holy Cross, 44 S.W.3d at 566–

67; Khan, 371 S.W.3d at 353; see also Bracken v. Wells Fargo Bank, N.A., No. 05-

                                           8
16-01334-CV, 2018 WL 1026268, at *3 (Tex. App.—Dallas Feb. 23, 2018, pet.

denied) (mem. op.) (“If acceleration is abandoned before the limitations period

expires, the note’s original maturity date is restored and the noteholder is no longer

required to foreclose within four years from the date of acceleration.”).

   2. Analysis

      Here, the deed of trust contains an optional acceleration clause.           It is

undisputed that Chase exercised its option to accelerate the note. On December 7,

2011, Chase sent Wheeler notice of his default and Chase’s intent to accelerate the

loan if he did not cure his default. After Wheeler did not cure his default, Chase sent

Wheeler notices of acceleration on May 2, 2011 and June 20, 2011. It is also

undisputed that, on January 19, 2012, Chase sent notice to Wheeler by certified mail

that it “rescinds the notice of acceleration dated 6/20/2011 and all prior notices of

accelerations.” After Chase again exercised its option to accelerate in 2013 and

2014, Chase’s counsel sent Wheeler notice dated May 13, 2015, advising him that

Chase “rescinds and abandons any acceleration of the Note or any other debt secured

by the Deed of Trust made by [Chase] or by its servicer(s) prior to the date of

execution of this document.” Wheeler did not cure his default and, on November

23, 2016, Shellpoint accelerated the loan.

      Wheeler does not dispute that he received the acceleration rescissions. Rather,

he argues that the rescissions were ineffective because Holy Cross makes clear that

                                          9
abandonment of acceleration can only occur when a borrower makes payments after

acceleration and the lender accepts the payments. Contrary to Wheeler’s contention,

Holy Cross does not stand for the proposition that abandonment of acceleration can

only occur if a borrower makes payments after acceleration. Noting that the

borrower had made no payments after acceleration, the Court in Holy Cross stated

that neither the noteholder nor its successors “had otherwise expressed an intent to

abandon acceleration.” Holy Cross, 44 S.W.3d at 570. The Court cited other cases

holding that acceleration had been waived in instances other than those involving

post-acceleration payments. See id. at 566–67 (citing San Antonio Real Estate, Bldg.

& Loan Ass’n v. Stewart, 61 S.W. 386, 388 (Tex. 1901) (explaining that 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”) and Denbina v. City

of Hurst, 516 S.W.2d 460, 463 (Tex. App.—Tyler 1974, no writ) (finding that after

city had exercised its option to accelerate maturity date upon final installment of

assessment levied against landowner, city’s subsequent taking of nonsuit on its

counterclaim was unilateral revocation of exercise of acceleration option)).

      Chase timely rescinded its 2011 acceleration and each subsequent

acceleration, thereby restoring the note’s maturity, and limitations would not run

until four years after the note matured, i.e., November 1, 2054. The trial court did

                                         10
not err in granting summary judgment because the statute of limitations did not bar

MTGLQ from enforcing its lien. We overrule Wheeler’s first issue.

   C. Right to Rescind Acceleration

      In his second issue, Wheeler argues that Chase could not rescind its own

acceleration because “[t]here is absolutely no contractual right in the Deed of Trust

for the original Lender, or any subsequent assignee of the original Lender, to invent

the right to unilaterally rescind an acceleration[.]”

      The Austin Court of Appeals rejected a similar argument in Brannick v.

Aurora Loan Services, LLC, No. 03-17-00308-CV, 2018 WL 5729104, at *3 (Tex.

App.—Austin Nov. 2, 2018, no pet.) (mem. op.). In that case, the borrowers argued

that the mortgagee had no contractual right to waive acceleration because the note

and security instrument did not authorize abandonment. See id. at *3. The court

disagreed, concluding that “whether a party has waived a contractual right does not

depend on whether the contract allows for it.” Id. (citing Shields Ltd. P’ship v.

Bradberry, 526 S.W.3d 471, 482 (Tex. 2017)). Other courts have also recognized a

mortgagee’s right to rescind acceleration without requiring that the contract

expressly allow it. See, e.g., Emmert v. Wilmington Sav. Fund Soc’y, FSB, No. 02-

17-00119-CV, 2018 WL 1005002, at *2 (Tex. App.—Fort Worth Feb. 22, 2018, no

pet.) (mem. op.) (recognizing note holder may waive or abandon acceleration by

agreement or by action); Khan, 371 S.W.3d at 356 (“[I]f an agreement abandoning

                                           11
acceleration had to be in writing, then the parties would not be able to do it by their

actions alone . . . .”); Santibanez v. Saxon Mortg. Inc., No. 11–10–00227–CV, 2012
WL 3639814, at *2 (Tex. App.—Eastland Aug. 23, 2012, no pet.) (mem. op.) (“The

parties can abandon acceleration and restore the contract to its original terms by

agreement or actions.”) (emphasis in original); Dallas Joint Stock Land Bank v.

King, 167 S.W.2d 245, 247 (Tex. App.—Fort Worth 1942, writ ref’d) (“[A]fter a

note has been declared all due under a provision giving the holder the option to do

so, [the holder may] waive or rescind such action so as to reinstate the note and make

it payable again according to its original terms.”). We therefore overrule Wheeler’s

second issue.

   D. Texas Civil Practice and Remedies Code Section 16.038

       In his third issue, Wheeler contends that Texas Civil Practice and Remedies

Code section 16.038 is unconstitutional. He argues that, even if it is constitutional,

it is inapplicable in this case.

   1. Applicable Law

       The Texas Constitution provides that “[n]o bill of attainder, ex post facto law,

retroactive law, or any law impairing the obligation of contracts, shall be made.”

TEX. CONST. art. I, § 16. A retroactive law is “a law that acts on things which are

past.” Subaru of Am., Inc. v. David McDavid Nissan, Inc., 84 S.W.3d 212, 219 (Tex.

2002). However, retroactive effect alone will not make a statute unconstitutional.

                                          12
See Robinson v. Crown Cork & Seal Co., 335 S.W.3d 126, 139 n.67 (Tex. 2010)

(citing Tex. Water Rights Comm’n v. Wright, 464 S.W.2d 642, 648 (Tex. 1971)).

We presume that a statute is constitutional, see Walker v. Gutierrez, 111 S.W.3d 56,

66 (Tex. 2003), and the burden of demonstrating that a statute is unconstitutional is

on the party challenging it. Id.

      In 2015, the Legislature enacted section 16.038 of the Texas Civil Practice

and Remedies Code, entitled “Rescission or Waiver of Accelerated Maturity Date.”

The statute provides, in relevant part:

      If the maturity date of . . . a note . . . payable in installments is
      accelerated, and the accelerated maturity date is rescinded or waived in
      accordance with this section before the limitations period expires, the
      acceleration is deemed rescinded and waived and the note . . . shall be
      governed by Section 16.035 as if no acceleration had occurred.

TEX. CIV. PRAC. & REM. CODE § 16.038(a). Under the statute, rescission or waiver

is effective if made by “a written notice of a rescission or a waiver” served by first

class or certified mail. Id. § 16.038(b), (c). While the statute affirmatively states

that it does not create an exclusive method for abandoning or waiving acceleration,

see id. § 16.038(e), it does provide a specific mechanism by which a lender can

unilaterally waive its earlier acceleration. See Graham v. LNV Corp., No. 03-16-

00235-CV, 2016 WL 6407306, at *4 (Tex. App.—Austin Oct. 26, 2016, pet. denied)

(mem. op.). Section 16.038 “applies with respect to a maturity date accelerated

before, on, or after the effective date of this Act [June 17, 2015] and any notice of

                                          13
rescission or waiver of an accelerated maturity date served before, on, or after the

effective date of this Act.” See Act of May 26, 2015, 84th Leg., R.S., ch. 759, § 2,

2015 Tex. Gen. Laws 2309, 2310.

   2. Analysis

       Wheeler contends that section 16.038 is unconstitutional because it deprives

him of his right to rely on the expiration of the applicable four-year statute of

limitations in this case. He argues that the effect of an expired statute of limitations

is precisely the kind of substantive right protected by section 16 of the Texas

Constitution. However, as we concluded above, MTGLQ timely rescinded all

accelerations before expiration of the limitations period—thus, Wheeler is not being

deprived of the effect of an expired limitations period. Further, Texas courts

recognized, long before section 16.038 was enacted, that a mortgagee can rescind its

acceleration option. See Denbina, 516 S.W.2d at 463; see also TEX. CIV. PRAC. &

REM. CODE § 16.038(e) (“This section does not create an exclusive method for

waiver and rescission . . . .”).

       Moreover, Wheeler bore the burden of demonstrating that section 16.038 is

unconstitutional. See Walker, 111 S.W.3d at 66. In determining whether a statute

or ordinance violates the prohibition against retroactive laws, courts must consider

three factors: (1) the nature and strength of the public interest served by the statute

as evidenced by the legislature’s findings; (2) the nature of the prior right impaired

                                          14
by the statute; and (3) the extent of the impairment. Robinson, 335 S.W.3d at 145.

Wheeler does not provide any analysis of these factors on appeal, nor did he do so

in the summary judgment proceedings below.

      Finally, Wheeler argues that, even if section 16.038 is constitutional, it is

inapplicable in this case. This is so, he reasons, because MTGLQ invoked the statute

four years after acceleration and section 16.038 only applies “before the limitations

period expires.” As discussed above, MTGLQ timely rescinded all accelerations

before expiration of the limitations period. Section 16.038 applies in this case.

Accordingly, we overrule Wheeler’s third issue.

                                    Conclusion

      We affirm the trial court’s judgment.

                                              Russell Lloyd
                                              Justice

Panel consists of Justices Keyes, Lloyd, and Hightower.

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