Steptoe v. Chase Home Finance, LLC
Filing
25
OPINION AND ORDER granting 15 Deft's Motion for Summary Judgment. Deft's Motion for Summary Judgment is GRANTED and Pltf's claims are DISMISSED. (Signed by Judge Melinda Harmon) Parties notified.(htippen, )
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
STEVEN STEPTOE,
Plaintiff,
VS.
JPMORGAN CHASE BANK NA,
Defendant.
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CIVIL ACTION NO. 4:11-CV-3427
OPINION AND ORDER
Pending before the Court is the Motion for Summary Judgment (Doc. 15) filed by
Defendant JPMorgan Chase Bank, N.A., successor by merger to Chase Home Finance LLC
(“JPMC,” or “Defendant”). Plaintiff Steven Steptoe (“Steptoe,” or “Plaintiff”) filed a response
(Doc. 18), and Defendant filed a reply (Doc. 20).
Having considered the parties’ submissions, the facts in the record, and the applicable
law, the Court finds that the motion should be granted.
I. Background
On August 8, 2007, Plaintiff Steven Steptoe applied by phone for a home equity loan
(Doc. 15-2 Ex. J.) and, on August 29, 2007, executed a Texas Home Equity Fixed/Adjustable
Rate Note (the “Note”) (Doc. 15-1 Ex. B) promising to pay the principal amount, $184,000, plus
interest, to Chase Bank USA, N.A. Mot. 3. Also on August 29, 2007, Steptoe and his wife,
Patricia Carballo, signed several additional documents. To secure payment of the Note, they
executed a Texas Home Equity Security Instrument (the “Deed of Trust”) (Doc. 15-1 Ex. C),
which encumbered the property located at 1908 Taft Street, Houston, Harris County, Texas
77006 (the “Property”). Mot. 4. They executed an Acknowledgment of Fair Market Value of
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Homestead Property (the “Acknowledgment of Fair Market Value”) (Doc. 15-3 Ex. L), which
listed the appraised value of the Property as $230,000; an Acknowledgement of Receipt of
Documents (the “Acknowledgment of Receipt”) (Doc. 15-3 Ex. M), which stated that they
received a copy of every document they signed at closing; and a Texas Home Equity Affidavit
and Agreement (the “Affidavit and Agreement”) (Doc. 15-1 Ex. D). Mot. 4-5.
On September 24, 2010, Chase Bank USA, N.A., executed an Assignment of Note and
Deed of Trust (Doc. 15-2 Ex. K), thereby assigning, effective May 16, 2009, the Note and Deed
of Trust to JPMC for value. Mot. 5.
On August 26, 2011, Steptoe filed his Original Petition (Doc. 1-2) in the 80th Judicial
District of Harris County, Texas, alleging violations of the Texas Constitution, article XVI,
section 50(a)(6). Steptoe alleged three specific violations: (1) that the principal of the loan at the
time it was made exceeded 80 percent of the fair market value of the home; (2) that the loan
closed before the twelfth day after the date that Steptoe submitted his loan application to the
lender; and (3) that Steptoe did not receive a copy of the final loan application and all final
executed loan documents at closing. Original Petition ¶ 8. On September 21, 2011, JPMC
removed the action to this Court, see Notice of Removal (Doc. 1), and, on October 31, 2012,
filed its motion for summary judgment.
II. Legal Standard
Summary judgment is proper if “there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The substantive law
governing the claims determines the elements essential to the outcome of the case and thus
determines which facts are material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
A dispute over such a fact is genuine if the evidence presents an issue “that properly can be
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resolved only by a finder of fact because [it] may reasonably be resolved in favor of either
party.” Id. at 250.
The moving party bears the burden of identifying evidence that no genuine issue of
material fact exists, Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986), and the court must view
the evidence and all reasonable inferences in the light most favorable to the nonmoving party,
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). Where the
nonmovant bears the burden of proof at trial, the movant need only point to the absence of
evidence supporting an essential element of the nonmovant’s case; the movant does not have to
support its motion with evidence negating the case. Little v. Liquid Air Corp., 37 F.3d 1069,
1075 (5th Cir. 1994). If the movant succeeds, the nonmovant can defeat the motion for summary
judgment only by identifying specific evidence of a genuine issue of material fact, Anderson, 477
U.S. at 248-49, but that evidence need not be in a form that would be admissible at trial, Celotex,
477 U.S. at 324.
III. Analysis
In this diversity action, the Court must apply federal procedural law and state substantive
law, specifically the Home Equity Constitutional Amendment of the Texas Constitution. Cerda
v. 2004-EQR1 L.L.C., 612 F.3d 781, 786 (5th Cir. 2010). Because the loan at issue was executed
on August 29, 2007, and, effective November 6, 2007, various changes were made to the Texas
Constitution, article XVI, section 50(a)(6), the Court cites the version that was in effect on
August 29, 2007, where appropriate. See id. at 787.
A. Fair Market Value
Plaintiff alleges that the principal of the loan at the time it was made exceeded 80% of the
fair market value of the home in violation of section 50(a)(6)(B). Original Petition ¶ 8.a. The
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Texas Constitution provides that:
(a) The homestead of a family, or of a single adult person, shall be, and is hereby
protected from forced sale, for the payment of all debts except for:
....
(6) an extension of credit that:
....
(B) is of a principal amount that when added to the aggregate total of the
outstanding principal balances of all other indebtedness secured by valid
encumbrances of record against the homestead does not exceed 80 percent of the
fair market value of the homestead on the date the extension of credit is made;
[and]
....
(Q) is made on the condition that:
....
(ix) the owner of the homestead and the lender sign a written acknowledgment as
to the fair market value of the homestead property on the date the extension of
credit is made.
Tex. Const. art. XVI, § 50(a)(6). It further provides that “[a] lender or assignee for value may
conclusively rely on the written acknowledgment as to the fair market value” if (1) the value is
estimated in accordance with applicable state or federal requirements and (2) “the lender or
assignee does not have actual knowledge at the time of the payment of value or advance of funds
by the lender or assignee that the fair market value stated in the written acknowledgment was
incorrect.” Tex. Const. art. XVI, § 50(h).
There is no controversy with regard to either the amount of the credit extended
($184,000) or the amount listed in the Acknowledgment of Fair Market Value ($230,000), or
with regard to the percentage that the former is of the latter: exactly 80%. Nor is there any
dispute whether the fair market value was determined by an appraisal done in accordance with
state requirements. The only question, therefore, is whether there is a genuine dispute of material
fact as to the second prong of section 50(h): that Defendant had actual knowledge that the stated
value of $230,000, as of August 29, 2007, was incorrect.
Plaintiff argues that Defendant did have such knowledge and offers three additional
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appraisals in support: (1) the “Harris County Appraisal” for the 2007 tax year (Doc. 1-2 Ex. C);
(2) the “Fontana Appraisal,” conducted on November 7, 2006 (Doc. 18-7); and (3) the “Prigmore
Appraisal,” a retrospective opinion of the August 29, 2007, value given on April 22, 2012 (Doc.
18-6). None of these documents raise a genuine dispute of material fact. First, the Harris County
Appraisal is relevant for the purpose of assessing property tax—but not for establishing market
value. Penrod v. Bank of New York Mellon, 824 F. Supp. 2d 754, 760 (S.D. Tex. 2011) (citing
Hous. Lighting & Power Co. v. Fisher, 559 S.W.2d 682, 686 (Tex. Civ. App. 1977)). Second, the
Fontana Appraisal, estimating the value as $183,000 on November 7, 2006, carries little
probative weight. Assuming that this appraisal was correct, it still cannot prove that the increased
value one year later was incorrect. Although the increase of $47,000 is undoubtedly significant,
such a change is hardly impossible: Plaintiff’s own evidence, in fact, is proffered to show a oneyear change (in the other direction) of $68,000. Third, that evidence—the Prigmore Appraisal—
carries no weight with respect to Defendant’s actual knowledge years earlier.
At the closing on August 29, 2007, Plaintiff signed the Acknowledgment of Fair Market
Value, stating that “[o]n the date of the closing, the fair market value of the Property is
$230,000.” Four years later, through the prism of retrospection, Plaintiff argued that this
valuation was wrong. Retrospection, however, cannot prove that the Defendant knew it to be
wrong at the time, let alone that the appraised value was in fact wrong on that specific day. There
is no evidence creating a genuine dispute of material fact, and Defendant is entitled to summary
judgment on this claim.
B. Twelve-Day Rule
Plaintiff alleges that Defendant violated section 50(a)(6)(M) because the “application was
signed on August 29, 2007—the same day the loan was closed and clearly in violation of the 125/8
day rule.” Original Petition ¶ 8.b. In August 2007, the relevant portion of the Texas Constitution
read:
(a) The homestead of a family, or of a single adult person, shall be, and is hereby
protected from forced sale, for the payment of all debts except for:
....
(6) an extension of credit that:
....
(M) is closed not before:
(i) the 12th day after the later of the date that the owner of the homestead submits
an application to the lender for the extension of credit or the date that the lender
provides the owner a copy of the notice prescribed by Subsection (g) of this
section.
Tex. Const. art. XVI, § 50(a)(6)(M)(i) (amended 2007). Although subsection (i) contains two
alternative clauses, it is clear that Plaintiff’s claim is based on the first clause: that the extension
of credit was closed before the twelfth day after he submitted his loan application. Since both
parties agree that the loan was closed on August 29, 2007, the only question is on what date the
application was submitted.
“Because the broad term ‘application’ . . . in § 50(a)(6)(M)(i) . . . encompass[es] oral
applications, including telephonic applications,” Cerda, 612 F.3d at 788, the only date that
properly answers that question is August 8, 2007, when Plaintiff applied for his loan by
telephone. That date—21 days before the loan was closed—is undisputed, and the signing date
upon which Plaintiff’s claim is based is immaterial. Therefore, there is no dispute as to any
material fact and Defendant is entitled to judgment on this claim as a matter of law.
C. Executed Loan Documents
Plaintiff alleges that Defendant violated section 50(a)(6)(Q)(v) because Plaintiff “did not
receive a copy of the final loan application and all final executed loan documents.” Original
Petition ¶ 8.c. In August 2007, the Texas Constitution provided that:
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(a) The homestead of a family, or of a single adult person, shall be, and is hereby
protected from forced sale, for the payment of all debts except for:
....
(6) an extension of credit that:
....
(Q) is made on the condition that:
....
(v) the lender, at the time the extension of credit is made, provide the owner of the
homestead a copy of all documents signed by the owner related to the extension
of credit.
Tex. Const. art. XVI, § 50(a)(6)(Q)(v) (amended 2007). Even if there is a violation of this
section, however, a lender can cure this defect by delivering the required documents to the
borrower within 60 days of being notified of such violation. Tex. Const. art. XVI, §
50(a)(6)(Q)(x)(d). And “[a] lender or holder who complies with Section 50(a)(6)(Q)(x) to cure a
violation before receiving notice of the violation from the borrower receives the same protection
as if the lender had timely cured after receiving notice.” 7 Tex. Admin. Code § 153.95 (2004).
In this case, Defendant shows, and Plaintiff does not dispute, that Plaintiff first sent
notice he had not received a copy of the final loan application by a letter dated June 17, 2011
(Doc. 15-3 Ex. O), and that Defendant had already provided Plaintiff with a copy of the final
loan application, as well as all other relevant documents, by letters dated March 15 (Doc. 15-3
Ex. R), April 4 (Doc. 15-5 Ex. S), April 6 (Doc. 15-6 Ex. T), and April 8, 2011 (Doc. 15-7 Ex.
U). Mot. 14-15. Moreover, on August 29, 2007, Plaintiff and his wife signed the
Acknowledgment of Receipt, stating that they “received a copy of each and every document that
[they] signed at closing.” That Plaintiff received copies of all relevant documents within the time
allotted by the Texas Constitution is not in dispute; therefore, Defendant is entitled to judgment
on this claim as a matter of law.
In sum, there is an absence of evidence necessary to support elements of each of
Plaintiff’s three claims. Consequently, Plaintiff cannot defeat summary judgment or obtain the
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declaratory or injunctive relief he seeks.
IV. Conclusion
For the foregoing reasons, it is hereby
ORDERED that Defendant’s Motion for Summary Judgment is GRANTED and
Plaintiff’s claims are DISMISSED.
SIGNED at Houston, Texas, this 13th day of February, 2013.
___________________________________
MELINDA HARMON
UNITED STATES DISTRICT JUDGE
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