Sturges v. SunTrust Mortgage, Inc.
Filing
45
MEMORANDUM AND ORDER granting 38 MOTION for Summary Judgment (Signed by Judge Gregg Costa) Parties notified.(arrivera, )
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
GALVESTON DIVISION
HARRY W. STURGES, IV,
Plaintiff,
VS.
SUNTRUST MORTGAGE, INC.,
Defendant.
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§ CIVIL ACTION NO. 3-11-396
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MEMORANDUM AND ORDER
In one of the many cases pending in this Court that challenge
threatened or completed home foreclosures, Plaintiff Harry W. Sturges IV
sued his mortgage lender, Defendant SunTrust Mortgage, Inc., to contest the
June 7, 2011 foreclosure sale of his Galveston Island home. Sturges asserts
claims for wrongful foreclosure, quiet title, and trespass to quiet title, and
additionally seeks declaratory relief on these claims. SunTrust now seeks
summary judgment. Having reviewed the briefing, argument of counsel at a
hearing, and applicable law, the Court concludes that undisputed facts show
SunTrust is entitled to judgment as a matter of law. Its motion is therefore
GRANTED.
I.
BACKGROUND
In August 2007, Sturges bought the property at issue in this suit, a lot
and house located at 13711 Windlass Circle, Galveston, Texas (the
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“Property”).
Sturges also owns a home in Houston that serves as his
primary residence (the “Westchase Address”). Sturges paid for the Property
with two loans from SunTrust. The first loan consisted of a fixed rate note
in the amount of $650,000.00 plus interest and a deed of trust granting
SunTrust a first lien against the Property. The second loan consisted of an
adjustable rate note in the amount of $132,000.00 plus interest and a deed of
trust granting SunTrust a second lien against the Property.
The loans did not provide for escrowing, so Sturges had the
responsibility of directly paying all tax on the Property to the appropriate
authorities. Sturges did not pay taxes on the Property for the years 2007,
2008, 2009, or 2010. Sturges claims he never received a tax bill from the
appropriate authorities, disputes that he was ever liable for the taxes and
contends that, if he was liable, the tax assessed was grossly inflated.
In March 2009, Galveston County sued Sturges for $22,568.34 in
unpaid taxes. See Docket Entry Nos. 38-5; 38-15 at 3. In the suit, Galveston
County requested a lien on the Property for the amount of Sturges’s tax
liability.
Sturges defended against the tax suit but, in January 2010,
SunTrust intervened, paid the outstanding tax, and, in September 2010, won
dismissal of the tax suit. It then increased the monthly payments Sturges
owed on the first loan so that it could recoup the amount of tax paid. It set
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Sturges’s January 2011 mortgage payment at $31,169.55, a more than
$21,000 increase from his November 2010 payment of $10,040.30. Docket
Entry No. 38-5 at 39, 44.
Sturges failed to make the increased payments on the first loan. On
February 3, 2011, SunTrust notified Sturges that the first loan was in default.
It gave him 30 days to cure the default in order to avoid acceleration. See
Docket Entry No. 38-17. On May 6, 2011, SunTrust, via certified mail, sent
Sturges a notice that the first loan had been accelerated and that the Property
would be sold at a foreclosure sale on June 7, 2011. The sale occurred as
scheduled. On June 8, 2011, SunTrust mailed Sturges a letter concerning a
possible loan modification for the second loan.
Sturges signed an
application for a modification on that loan and returned the application to
SunTrust on June 23, 2011. Although the Property was sold at a foreclosure
sale, Sturges did not relinquish possession, and he continues to retain
possession. Sturges filed suit on August 4, 2011 in state court, and SunTrust
promptly removed the case to this Court.
II.
STANDARD OF REVIEW
When a party moves for summary judgment, the reviewing court shall
grant the motion “if the movant shows that there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law.”
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Fed. R. Civ. P. 56(a). A dispute about a material fact is genuine “if the
evidence is such that a reasonable jury could return a verdict for the
nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). All reasonable doubts on questions of fact must be resolved in favor
of the party opposing summary judgment. See Evans v. City of Houston,
246 F.3d 344, 348 (5th Cir. 2001) (citation omitted).
III.
A.
DISCUSSION
Wrongful Foreclosure
Sturges’s primary claim is that the June 7, 2011 foreclosure on the
Property was procedurally defective. The elements of wrongful foreclosure
in Texas are “(1) a defect in the foreclosure proceedings; (2) a grossly
inadequate selling price; and (3) a causal connection between the defect and
the grossly inadequate selling price.” In re Gongora, No. H-12-0278, 2012
WL 5373466, at *1 (S.D. Tex. Oct. 30, 2012) (citing Sauceda v. GMAC
Mortg. Corp., 268 S.W.3d 135, 139 (Tex. App.—Corpus Christi 2008, no
pet.)). For the following reasons, Sturges fails create a genuine issue of
material fact for any of the three procedural defects he alleges. 1
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SunTrust also argues that Sturges would not be entitled to any remedy even if he could
prove the elements of wrongful foreclosure. The Court need not address this issue given
the holding that Sturges fails to create a genuine issue of material fact regarding whether
there was a procedural defect in the foreclosure process.
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i. Payment of Taxes and Increase in Mortgage Payments
Sturges first contends that a procedural default occurred when
SunTrust paid the taxes due on the Property and added the total to his
payments on the first loan. SunTrust argues that Section 9 of the deed of
trust expressly authorizes this procedure. Docket Entry No. 41-1 Ex. C, at 8
¶ 9. In relevant part, Section 9 states:
9. Protection of Lender’s Interest in the Property and
Rights Under this Security Instrument. If (a) Borrower fails
to perform the covenants and agreements contained in this
Security Instrument, [or] (b) there is a legal proceeding that
might significantly affect Lender’s interest in the Property
and/or rights under this Security Instrument (such as a
proceeding . . . for enforcement of a lien which may attain
priority over this Security Instrument or to enforce laws or
regulations), . . . then Lender may do and pay for whatever is
reasonable or appropriate to protect Lender’s interest in the
Property and rights under this Security Instrument, . . . Lender’s
actions can include, but are not limited to (a) paying any sums
secured by a lien which has priority over this Security
Instrument, (b) appearing in court, and (c) paying reasonable
attorneys’ fees to protect its interest in the Property and/or
rights under this Security Instrument . . . .
Any amounts disbursed by Lender under this Section 9 shall
become additional debt of Borrower secured by this Security
Instrument. These amounts shall bear interest at the Note rate
from the date of disbursement and shall be payable, with such
interest, upon notice from Lender to Borrower requesting
payment.
Id.
Sturges does not dispute that Section 9—if applicable—would have
allowed SunTrust to pay the tax on the Property and add the amount to his
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mortgage payments. However, Sturges contends that Section 9 does not
apply to tax suits or tax liens, which he argues are controlled by a different
part of the deed of trust, Section 4. Docket Entry No. 41-1 Ex. C, at 6 ¶ 4.
The relevant language in Section 4 states as follows:
4.
Charges; Liens. Borrower shall pay all taxes,
assessments, charges, fines, and impositions attributable to the
Property which can attain priority over this Security
Instrument . . . .
Borrower shall promptly discharge any lien which has
priority over this Security Instrument unless Borrower . . .
(b) contests the lien in good faith by, or defends against
enforcement of the lien in, legal proceedings which in Lender’s
opinion operate to prevent the enforcement of the lien while
those proceedings are pending . . . . If Lender determines that
any part of the Property is subject to a lien which can attain
priority over this Security Instrument, Lender may give
Borrower a notice identifying the lien. Within 10 days of the
date on which that notice is given, Borrower shall satisfy the
lien or take one or more of the actions set forth above in this
Section 4.
Id.
Sturges argues that Section 4, not Section 9, governs his situation
because it explicitly mentions taxes, which Section 9 does not, and it appears
earlier in the deed of trust.
According to Sturges, he performed his
obligation under Section 4 to either discharge the tax suit or “contest[] the
lien in good faith.” Id. He argues that SunTrust then breached the deed of
trust by not giving him the notice required under Section 4 and by
unilaterally paying the tax on the Property. In his view, SunTrust’s action
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was a “prior material breach” that excuses his later default on the increased
mortgage payments. Docket Entry No. 39, at ¶ 17.
The basic rules of contractual interpretation that Sturges cites lead the
Court to reject his argument. In particular, as Sturges notes, the Court must
consider each part of the deed of trust “with every other part so that the
effect and meaning of one part on any other part may be determined.” Smart
v. Tower Land & Inv. Co., 597 S.W.2d 333, 337 (Tex. 1980) (citation
omitted). “No single provision taken alone will be given controlling effect;
rather, all the provisions must be considered with reference to the whole
instrument.” J.M. Davison, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex.
2003) (citation omitted). Ultimately, the Court “must examine and consider
the entire writing in an effort to harmonize and give effect to all the
provisions of the contract so that none will be rendered meaningless.” Id.
(citation omitted).
Section 9 provides that if “there is a legal proceeding that might
significantly affect Lender’s interest in the Property,” a category that
explicitly includes proceedings for the enforcement of liens, then “Lender
may do and pay for whatever is reasonable or appropriate to protect
Lender’s interest in the Property,” including “paying any sums secured by a
lien which has priority over this Security Instrument.” Docket Entry No. 41-
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1 Ex. C, at 8 ¶ 9. Section 9’s language is broad and inclusive; it does not
differentiate between types of liens. If the Court were to accept Sturges’s
interpretation of the deed, Section 9’s expansive language would be rendered
meaningless in the specific context of tax suits and tax liens, and,
potentially, for any other proceedings not expressly mentioned in Section 9.
A better reading of the deed, one that harmonizes and gives effect to
all its provisions, is as follows: Sections 4 and 9 operate in tandem by giving
SunTrust two different courses of action if its lien becomes threatened by a
superior lien. Under Section 4, SunTrust “may” notify the borrower of the
threatened lien and require him to discharge or contest it, while, under
Section 9, it “may” choose to discharge the superior lien itself and add the
amount to the borrower’s debt. The use of the permissive “may” in both
sections indicates that SunTrust had the power, but not the duty, to take
either action. See Townsend v. BAC Home Loan Servicing, L.P., 461 F.
App’x 367, 372 (5th Cir. 2011) (holding, under a very similar set of facts,
that “[plaintiff] was not entitled to notice of payment of the property taxes
because the deed of trust provides that the Lender ‘may’ give such notice”);
see also Baisden v. I’m Ready Prods., Inc., 693 F.3d 491, 502 (5th Cir.
2012) (citing Retractable Techs. Inc. v. Abbott Labs. Inc., 281 F. App’x 275,
276 (5th Cir. 2008) (per curiam)) (noting the permissive nature of the word
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“may”). SunTrust chose the latter option, as it had every right to do. Thus,
its action did not constitute a procedural defect in the foreclosure process.
ii. Notice
Sturges’s second alleged procedural defect is that SunTrust failed to
give him “proper notice of foreclosure” because he maintains he did not
receive the notice of acceleration and foreclosure sent to him on May 6,
2011. Docket Entry No. 42, at ¶ 8. Under Texas law, however, “[a]ctual
receipt of foreclosure notices is not required for a valid foreclosure sale.”
Spady v. Am.’s Servicing Co., No. H-11-2526, 2012 WL 1884115, at *4
(S.D. Tex. May 21, 2012) (citing Onwuteaka v. Cohen, 846 S.W.2d 889, 892
(Tex. App.—Houston [1st Dist.] 1993, writ denied). All that is required for
notice to be sufficient is that the foreclosing party “serv[e] written notice of
the sale by certified mail on each debtor who . . . is obligated to pay the
debt.” Tex. Prop. Code Ann. § 51.002(b)(3). Moreover, the Code is clear
that “[s]ervice of a notice under this section by certified mail is complete
when the notice is deposited in the United States mail, postage prepaid and
addressed to the debtor at the debtor’s last known address.” Id. § 51.002(e).
Sturges alleges that he never received notice at his last known address,
which he maintains was the Westchase Address in Houston. However,
SunTrust has presented return receipts from the U.S. Postal Service showing
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that the notice was timely sent to, and the delivery timely attempted at, both
the Property and the Westchase Address. See Docket Entry Nos. 38-9 at 7;
38-10 at 7. Moreover, Sturges admitted in his deposition that he had no
evidence that could call SunTrust’s evidence on this point into dispute. See
Docket Entry No. 38-1 at 42:6–44:9. Because SunTrust properly served
notice of acceleration and foreclosure upon Sturges under Texas law, no
procedural defect occurred for lack of notice.
iii. Misleading on Potential Loan Modification
Third and finally, Sturges argues that a procedural defect occurred
because SunTrust misled him into believing he would receive a loan
modification. He claims that he spent the months leading up to foreclosure
asking numerous SunTrust agents for a loan modification, and that because
he “believed that his loan would be modified, he had no reason to be on the
look-out for a foreclosure notice and protect his interests accordingly.”
Docket Entry No. 39, at ¶ 19.
Several federal courts have assumed that misrepresentations to a
borrower that he will be approved for a loan modification can give rise to a
procedural defect sufficient to state a claim for wrongful foreclosure under
Texas law. See, e.g., Hurd v. BAC Home Loans Servicing, LP, No. 3:11-cv1752-M, 2012 WL 1106932, at *15–16 (N.D. Tex. Mar. 29, 2012) (noting in
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passing that the plaintiff, who alleged that she had been promised a loan
modification before foreclosure, had “allege[d] that there were procedural
defects in the foreclosure sale”); Hunt v. BAC Home Loans Servicing, LP,
No. C-11-261, 2012 WL 219330, at *5 (S.D. Tex. Jan. 24, 2012) (stating in
passing that the plaintiff’s allegation that defendants had “promised not to
foreclose,” a promise which allegedly accompanied promises of a loan
modification, “could constitute a procedural defect”); Zoluaga v. BAC Home
Loasn Servicing, L.P., No. 4:11-CV-369, 2011 WL 5600377, at *7 (E.D.
Tex. Nov. 16, 2011) (stating that plaintiffs had alleged a procedural defect in
pleading the existence of facts including “misrepresentations regarding a
loan modification”).
However, even if such misrepresentations or promises can give rise to
a procedural defect, the evidence is clear that no such promise existed. First,
as Sturges admitted in his deposition, he only had preliminary conversations
with SunTrust about a loan modification. Docket Entry No. 38-1 at 65:25–
66:6. He and SunTrust never discussed many of the essential details of a
loan modification, including what the new principal balance or interest rate
would be.
Id. at 66:24–67:4.
Moreover, Sturges acknowledged his
understanding that no modification could have occurred until a new contract
was signed. Id. at 30:4–31:15; see also Docket Entry Nos. 38-6; 38-7.
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Indeed, in response to a direct question by SunTrust’s counsel, he conceded
that “I don’t believe we reached a final agreement, no, sir.” Docket Entry
No. 38-1 at 65:20–24. No procedural defect occurred in the foreclosure
proceedings.
Summary judgment is appropriate on Sturges’s wrongful
foreclosure claim.
B.
Quiet Title and Trespass to Quiet Title
Sturges also asserts claims for quiet title and trespass to quiet title.
Though these are distinct causes of action, see Woods v. Bank of Am., No.
3:11-CV-1116-B, 2012 WL 1344343, at *9 (S.D. Tex. Apr. 17, 2012), both
require Sturges to prove his case “on the strength of his own title, not the
weakness of his adversary’s title.” Fricks v. Hancock, 45 S.W.3d 322, 327
(Tex. App.—Corpus Christi 2001, no pet.). Thus, to prevail under either
cause of action, Sturges must meet his burden to prove that his title is
superior to SunTrust’s. See Bell v. Bank of Am. Home Loan Servicing, LP,
No. 4:11-cv-2085, 2012 WL 568755, at *6 (S.D. Tex. Feb. 21, 2012) (citing
Hahn v. Love, 321 S.W.3d 517, 531 (Tex. App.—Houston [1st Dist.] 2009,
no pet.). The Court has already rejected Sturges’s wrongful foreclosure
claim, his sole basis for alleging that his title in the Property was superior to
SunTrust’s. Summary judgment is thus appropriate on both the quiet title
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and trespass to quiet title claims. 2 Accord Woods, 2012 WL 1344343, at *9;
see also Bell, 2012 WL 568755, at *7 (collecting cases dismissing suits for
quiet title where the plaintiffs could not prevail on their wrongful foreclosure
claims).
C.
Declaratory Judgment
Because a federal declaratory judgment action creates no substantive
rights, it requires the existence of a justiciable controversy between the
parties. Bell, 2012 WL 568755, at *8. Thus, since summary judgment is
appropriate on all of Sturges’s substantive claims, his action for a
declaratory judgment is “redundant” and must be denied. Swim v. Bank of
Am., N.A., No. 3:11-CV-1240-M, 2012 WL 170758, at *8 (N.D. Tex. Jan.
20, 2012).
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Even if Sturges had a superior title, his suit for trespass to quiet title would fail since he
retains possession of the Property. See Tex. R. Civ. P. § 784 (“The defendant in the
action shall be the person in possession if the premises are occupied . . . .”).
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IV.
CONCLUSION
For the reasons discussed above, summary judgment is appropriate on
all of Sturges’s claims.
Defendant’s Motion for Summary Judgment
(Docket Entry No. 38) is therefore GRANTED.
IT IS SO ORDERED.
SIGNED this 14th day of December, 2012.
______________________________
Gregg Costa
United States District Judge
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