Lynch et al v. JPMorgan Chase Bank, N.A. et al

Filing 57

ORDER ADOPTING REPORT AND RECOMMENDATIONS for 52 Report and Recommendations, 44 Motion for Summary Judgment. filed by JPMorgan Chase Bank, N.A. Accordingly, Defendant JPMorgan Chase Bank, N.A.s Motion for Summary Judgment is GRANTED, and Plaintiffs claims and/or counterclaims are dismissed with prejudice. Signed by Judge Ron Clark on 10/31/14. (cm, )

**NOT FOR PRINTED PUBLICATION**
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION
WILLIAM LYNCH and CHERYL LYNCH,
Plaintiffs,
v.
JPMORGAN CHASE BANK, N.A., PAULA
M. STRAHAN, and FIRST AMERICAN
TITLE COMPANY,
Defendants.

§
§
§
§
§
§
§
§
§
§
§

CASE NO. 4:13-CV-704

ORDER ADOPTING REPORT AND RECOMMENDATION
OF UNITED STATES MAGISTRATE JUDGE
On August 21, 2014, the United States Magistrate Judge issued its report and
recommendation [Doc. #52], this matter having been referred to the United States Magistrate
Judge pursuant to 28 U.S.C. § 636. The Magistrate Judge recommended that Defendant
JPMorgan Chase Bank, N.A.’s Motion for Summary Judgment [Doc. #44] be granted.
Plaintiffs sued Defendant JPMorgan Chase Bank, N.A. (“JPMC”) in this case for
forfeiture of principal and interest, fraud in a real estate transaction, common law fraud,
negligent misrepresentation, breach of contract, violations of the Texas Deceptive Trade
Practices Act, negligence, and for declaratory judgment. The Magistrate Judge determined that
Plaintiffs’ claims should be dismissed, and Plaintiffs should take nothing from their claims
and/or counterclaims.
On September 4, 2014, Plaintiffs filed their objections [Doc. #53]. On September 17,
2014, Defendant filed its response [Doc. #54].

1

Plaintiffs first object to the finding of the Magistrate Judge that Plaintiffs’ claims for
fraud in a real estate transaction, common law fraud, negligent misrepresentation, breach of
contract, and negligence fail because these claims were premised on the false assertion that the
2010 Loan violates section 50(a)(6) of the Texas Constitution, and that JPMC misrepresented
that it could make a valid home equity loan on the Property [Doc. #53 at 1-2]. Plaintiffs contend
that it is undisputed that JPMC did represent the loan as a Texas home equity loan, and that the
Magistrate Judge misapplied the facts to the law.
In reviewing Plaintiffs’ claims, the Magistrate Judge noted that, while the 2010 Loan may
have been “papered” as a home equity loan, it is not a home equity loan. The 2010 Loan lacks
many of the characteristics of a home equity loan; for example, it does not include an “advance
of additional funds” and is not a refinance of a debt. The Magistrate Judge concluded that “[t]he
2010 Loan is simply a refinance of a prior lien on the Property under section 50(a)(4) of the
Texas Constitution” [Doc. #52 at 8]. Plaintiffs’ objection does not identify any reason to reject
the Magistrate Judge’s recommendation. Plaintiffs do not assert that there somehow was an
advance of additional funds, or that they relied on the representation by JPMC to their detriment.
In addition, the Magistrate Judge found that even if the 2010 Loan was considered a
home equity loan, Plaintiffs’ claims pertaining to the 2010 Loan fail as a matter of law because:
(1) they are barred by Plaintiffs’ own fraud; (2) Plaintiffs raised no issue of fact on the elements
of the claims pertaining to the 2010 Loan; and (3) Plaintiffs’ negligent misrepresentation and
negligence claims are barred by the statute of limitations [See Doc. #52 at 8-9]. Plaintiffs do not
object to these findings. Thus, Plaintiffs’ objection is overruled.
Plaintiffs next object to the finding of the Magistrate Judge that Plaintiffs’ claims relating
to the 2005 Loan are barred by the statute of limitations because the conduct at issue occurred

2

nearly nine years ago [See Doc. #52 at 10]. Plaintiffs argue that the Magistrate Judge ignored
controlling Texas law, and states that the Texas Supreme Court has not yet addressed whether
the residual limitations period applies to defects in homestead liens.
As a preliminary matter, the Magistrate Judge found that all of Plaintiffs’ claims
pertaining to the 2005 Loan, including their claim that the 2005 Loans violate section 50(a)(6) of
the Texas Constitution, are based on the false allegation that JPMC never made a principal
reduction of $502.68 to the First 2005 Loan. The undisputed evidence demonstrates that JPMC
did make a principal reduction of $502.68 to the First 2005 Loan, and the Magistrate Judge
found that Plaintiffs’ claims pertaining to the 2005 Loan failed on the merits [Doc. #52 at 9-10].
Plaintiffs do not object to this finding, and for this reason alone, the court finds Plaintiffs’ claims
should be dismissed. Turning to Plaintiffs’ objection, the court notes that several Texas courts
have adopted the reasoning set out by the Fifth Circuit in Priester v. JPMorgan Chase Bank,
N.A., 708 F.3d 667 (5th Cir. 2013), and applied by the Magistrate Judge in this case. See
Williams v. Wachovia Mortg. Corp., 407 S.W.3d 391 (Tex. App. – Dallas 2013, pet. denied)
(following Priester); see also Wood v. HSBC Bank USA, N.A., No. 14-13-00389-CV, 2014 WL
3747618, at *4 (Tex. App. – Houston [14th Dist.] July 31, 2014, no pet. h.) (citing Williams and
stating “We too find the Priester court’s analysis persuasive not only because of its sound
reasoning, but also because its conclusion comports with Texas Supreme Court precedent on the
key distinction between a void and a voidable act[.]”); Santiago v. Novastar Mortg., Inc., No. 0513-00619-CV, 2014 WL 4244068 (Tex. App. – Dallas Aug. 28, 2014, no pet. h.) (following
Priester). The Fifth Circuit recently stated:
[T]here has been no change in the law that would empower us to overturn the
Priester decision. In fact, subsequent Texas decisions have validated Priester’s
reasoning, finding “the Fifth Circuit’s analysis persuasive.” Williams v.
Wachovia Mortg. Corp., 407 S.W.3d 391 (Tex. App. – Dallas 2013, pet. denied).
3

The Texas Supreme Court denied review of the Williams decision, further
emphasizing that Priester was rightly decided. We decline to overrule Priester.
Bormio Investments, Inc. v. USBC Bank USA Nat. Ass’n, 574 F. App’x 417, 418 (5th Cir. 2014).
In light of this precedent, the court sees no reason to deviate from the holding in Priester, as
applied by the Magistrate Judge, and finds Plaintiffs’ section 50(a)(6) claim, with respect to the
2005 Loans, is barred by limitations. Plaintiffs’ objection is overruled.
Plaintiffs next object to the Magistrate Judge’s finding that there is no controversy.
Plaintiffs contend that the controversy at issue is the application of Texas law. As stated above,
this objection is overruled.
Plaintiffs next object to the Magistrate Judge’s finding that JPMC’s counterclaims
should, to the extent necessary, be granted. Plaintiffs object to this recommendation on the basis
that a loan that violates the Texas Constitution is void. Again, as noted above, Texas courts have
adopted the reasoning in Priester that violations of section 50(a)(6) only render a loan voidable.
Further, the Magistrate Judge found that none of the loans at issue violate the Texas Constitution,
and Plaintiffs have not objected to this finding. Plaintiffs’ objection is overruled.
The court has conducted a de novo review of the objections in relation to the pleadings
and applicable law. After careful consideration, the court concludes Plaintiff’s objections are
without merit and are, therefore, overruled.
It is therefore ORDERED that the Report and Recommendation of United States
Magistrate Judge [Doc. #52] is adopted. Accordingly, Defendant JPMorgan Chase Bank, N.A.’s
Motion for Summary Judgment [Doc. #44] is GRANTED, and Plaintiffs’ claims and/or
counterclaims are dismissed with prejudice.

So ORDERED and SIGNED this 31 day of October, 2014.

___________________________________
Ron Clark, United States District Judge