Parffrey et al v. Deutsche Bank National Trust Company, as Trustee for Argent Securities Inc., Asset-Backed Pass-Through Certificates, Series 2005-W2 et al
Filing
35
MEMORANDUM OPINION AND ORDER granting 27 Defendants' MOTION for Summary Judgment; and denying 26 Plaintiffs' MOTION for Summary Judgment. (Signed by Judge Kenneth M Hoyt) Parties notified.(chorace)
United States District Court
Southern District of Texas
ENTERED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
§
§
Plaintiffs,
§
VS.
§
§
DEUTSCHE BANK NATIONAL TRUST
§
COMPANY, AS TRUSTEE FOR ARGENT §
SECURITIES INC., ASSET-BACKED PASS- §
THROUGH CERTIFICATES, SERIES 2005- §
W2, et al.,
§
§
Defendants.
§
September 28, 2018
David J. Bradley, Clerk
BRYON PARFFREY, et al.,
CIVIL ACTION NO. 4:17-CV-269
MEMORANDUM OPINION AND ORDER
I.
INTRODUCTION
Pending before the Court are the plaintiffs’, Bryon Parffrey (“B. Parffrey”) and Angeline
Parffrey (“A. Parffrey”) (collectively, the “plaintiffs”), motion for summary judgment (Dkt. No.
26) and the defendants’, Deutsche Bank National Trust Company, as Trustee for Argent
Securities Inc., Asset-Backed Pass-Through Certificates, Series 2005-W2 (“Deutsche Bank”) and
Ocwen Loan Servicing, LLC (“Ocwen”) (collectively, the “defendants”), response in opposition
thereto. (Dkt. No. 28). Also, before the Court are the defendants’ motion for summary judgment
(Dkt. No. 27) and the plaintiffs’ response in opposition thereto. (Dkt. No. 29). After having
carefully considered the motions, responses, the record and the applicable law, the Court
determines that the defendants’ motion for summary judgment should be GRANTED and the
plaintiffs’ motion for summary judgment should be DENIED.
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II.
FACTUAL BACKGROUND
On July 12, 2005, B. Parffrey obtained a home equity mortgage loan from Argent
Mortgage Company, LLC (“Argent Mortgage”) in the amount of $560,000.00, pursuant to a
Texas Home Equity Adjustable Rate Note (the “Note”). (See Dkt. No. 27, Ex. A, Ocwen Aff. at
¶ 6; Ex. A.1.). Simultaneously therewith, B. Parffrey and A. Parffrey, as his spouse, executed a
Texas Home Equity Security Instrument (First Lien) (the “Security Instrument”) granting Argent
Mortgage, as lender, a lien on their residential property located at 2610 Tudor Manor, Houston,
Texas 77082 (the “Property”). (Id., Ex. A.2.). The Security Instrument expressly provides that
Argent Mortgage, as lender, has the right to exercise any and all rights of interests granted by the
borrowers and authorizes it to foreclose and sell the property and/or to take any action required.
(Id.).
Prior to closing on July 11, 2005, B. Parffrey signed a copy of the U.S. Department of
Housing and Urban Development (“HUD”) settlement statement, providing an itemized
disclosure of all actual fees, and other charges that would be charged the following day at
closing. (Id., Ex. A.3.). At closing, the plaintiffs executed a Texas Home Equity Affidavit and
Agreement (First Lien) (the “Home Equity Affidavit”), wherein they both acknowledged that
they had received the HUD disclosure statement the day prior to closing and that all
requirements set forth in section 50(a)(6), article XVI of the Texas Constitution had been
satisfied. (Id., Ex. A.5; see also Ex. C.). Specifically, they each warranted and represented
under oath, before a notary, the following:
The Note and Security Instrument have not been signed before one business day
after the date that the owner of the Property received a final itemized disclosure
of the actual fees, points, interest, costs, and charges that would be charged at
closing or a bona fide emergency or other good cause exists and the owner of
the Property hereby consents to the Lender providing or modifying such final
itemized disclosure on the date of the signing of the Note and Security
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Instrument and execution of this Texas Home Equity Affidavit and Agreement
is deemed evidence of such consent.
(Id.)
In April of 2006, B. Parffrey fell behind on his payment obligations under the Note. (See
Dkt. No. 27, Ex. A, Ocwen Aff. at ¶ 8.). He has remained in default of his payment obligations
under the Note. (Id.). In fact, the last payment received from him was in January of 2011. (Id.).
His payment obligations under the Note remain due and owing for the month of February 2011
and each subsequent month thereafter. (Id.). Nonetheless, despite his failure to render such
payment, the plaintiffs have continued to occupy the Property. (Id.).
On or about July 21, 2008, Argent Mortgage assigned its rights and interest in the
Security Instrument to Deutsche Bank National Trust Company, as Trustee, in trust for the
registered holders of Argent Securities Inc., Asset-Backed Pass-Through Certificates, Series
2005-W2. (See Dkt. No. 27, Ex. A.6).
Notices of the default were sent to the plaintiffs on April 7, 2011. (Id., Ex. A, Ocwen
Aff. at ¶ 9; Exs. A.6; C.). On September 7, 2011, a notice of acceleration was sent to the
plaintiffs. (Id.). On September 20, 2011, the Note’s prior servicer filed an application for a Rule
736 order permitting foreclosure of the Note. (Id.). The plaintiffs, in response, commenced a
lawsuit against Deutsche Bank and the then-servicer alleging a myriad of claims, which were
subsequently dismissed on the merits. (Id., Ex. F.)
On March 11, 2013, Ocwen began servicing the Note. (Id., Ex. A, Ocwen Aff. at ¶ 7.).
On or about April 7, 2014, Ocwen sent the plaintiffs a new, properly addressed, notice of default.
(Id., Ex. A, Ocwen Aff. at ¶ 11; Exs. A.7, D.). This new notice of default requested only the
amount overdue under the Note, not the entire balance. (Id.). A new, properly addressed, notice
of acceleration, dated May 12, 2014, was also sent to the plaintiffs. (Id.).
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On December 29, 2016, the plaintiffs filed the instant lawsuit to once again stymie
foreclosure efforts with respect to the Property. (Dkt. No. 1). On January 27, 2017, the
defendants timely removed the action to this Court, on the basis of diversity jurisdiction. Id.
The parties have now filed cross-motions for summary judgment.
III.
SUMMARY JUDGMENT STANDARD
Rule 56 of the Federal Rules of Civil Procedure authorizes summary judgment against a
party who fails to make a sufficient showing of the existence of an element essential to the
party’s case and on which that party bears the burden at trial. See Celotex Corp. v. Catrett, 477
U.S. 317, 322 (1986); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc).
The movant bears the initial burden of “informing the Court of the basis of its motion” and
identifying those portions of the record “which it believes demonstrate the absence of a genuine
issue of material fact.” Celotex, 477 U.S. at 323; see also Martinez v. Schlumber, Ltd., 338 F.3d
407, 411 (5th Cir. 2003). Summary judgment is appropriate where the pleadings, the discovery
and disclosure materials on file, and any affidavits show that “there is no genuine issue as to any
material fact and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a).
If the movant meets its burden, the burden then shifts to the nonmovant to “go beyond the
pleadings and designate specific facts showing that there is a genuine issue for trial.” Stults v.
Conoco, Inc., 76 F.3d 651, 656 (5th Cir. 1996) (citing Tubacex, Inc. v. M/V Risan, 45 F.3d 951,
954 (5th Cir. 1995); Little, 37 F.3d at 1075). “To meet this burden, the nonmovant must
‘identify specific evidence in the record and articulate the ‘precise manner’ in which that
evidence support[s] [its] claim[s].’” Stults, 76 F.3d at 656 (citing Forsyth v. Barr, 19 F.3d 1527,
1537 (5th Cir.), cert. denied, 513 U.S. 871, 115 S. Ct. 195, 130 L. Ed.2d 127 (1994)). It may not
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satisfy its burden “with some metaphysical doubt as to the material facts, by conclusory
allegations, by unsubstantiated assertions, or by only a scintilla of evidence.” Little, 37 F.3d at
1075 (internal quotation marks and citations omitted). Instead, it “must set forth specific facts
showing the existence of a ‘genuine’ issue concerning every essential component of its case.”
American Eagle Airlines, Inc. v. Air Line Pilots Ass’n, Intern., 343 F.3d 401, 405 (5th Cir. 2003)
(citing Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380 (5th Cir. 1998)).
“A fact is material only if its resolution would affect the outcome of the action, . . . and
an issue is genuine only ‘if the evidence is sufficient for a reasonable jury to return a verdict for
the [nonmovant].’” Wiley v. State Farm Fire and Cas. Co., 585 F.3d 206, 210 (5th Cir. 2009)
(internal citations omitted). When determining whether a genuine issue of material fact has been
established, a reviewing court is required to construe “all facts and inferences . . . in the light
most favorable to the [nonmovant].” Boudreaux v. Swift Transp. Co., Inc., 402 F.3d 536,
540 (5th Cir. 2005) (citing Armstrong v. Am. Home Shield Corp., 333 F.3d 566, 568 (5th Cir.
2003)). Likewise, all “factual controversies [are to be resolved] in favor of the [nonmovant], but
only where there is an actual controversy, that is, when both parties have submitted evidence of
contradictory facts.” Boudreaux, 402 F.3d at 540 (citing Little, 37 F.3d at 1075 (emphasis
omitted)). Nonetheless, a reviewing court is not permitted to “weigh the evidence or evaluate the
credibility of witnesses.” Boudreaux, 402 F.3d at 540 (quoting Morris, 144 F.3d at 380). Thus,
“[t]he appropriate inquiry [on summary judgment] is ‘whether the evidence presents a sufficient
disagreement to require submission to a jury or whether it is so one-sided that one party must
prevail as a matter of law.’” Septimus v. Univ. of Hous., 399 F.3d 601, 609 (5th Cir. 2005)
(quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251 – 52, (1986)).
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IV.
ANALYSIS AND DISCUSSION
A.
The Plaintiffs’ Breach of Contract Claim
As a threshold matter, the plaintiffs contend that the Security Instrument, pursuant to its
terms, was required to “conform strictly to [the] provisions of the Texas Constitution applicable
to Extension of Credit as defined by Section 50(a)(6), Article XVI of the Texas Constitution.”
(Dkt. No. 1, Ex. A-3, ¶ 24.). 2009)). More specifically, the plaintiffs allege that the Security
Instrument held by the defendants is invalid or void because the loan failed to comply with the
requirements set forth in § 50(a)(6)(M)(ii).
Article XVI, § 50(a)(6)(M)(ii) of the Texas
Constitution provides, in pertinent part, that an extension of credit may not be closed before:
one business day after the date that the owner of the homestead receives a copy
of the loan application if not previously provided and a final itemized disclosure
of the actual fees, points, interest, costs, and charges that will be charged at
closing.
Tex. Const. art. XVI, § 50(a)(6)(M)(ii).
In this case, it remains undisputed that B. Parffrey, one business day prior to closing,
received and returned an executed copy of the HUD disclosure statement detailing the “itemized
disclosure of actual fees, points, interest, costs, and charges” to be assessed at the closing. (See
Dkt. No. 27, Ex. A.3). In addition, at the closing held on July 12, 2005, B. Parffrey and A.
Parffrey, as his spouse, expressly acknowledged that they each had received the HUD disclosure
statement a day prior to closing and that all requirements set forth in section 50(a)(6), Article
XVI of the Texas Constitution had been satisfied. (See Dkt. No. 27, Ex. A, Ocwen Aff. at ¶ 6;
Ex. A.5; see also Ex. C.). More specifically, in accordance with the Home Equity Affidavit
executed by the plaintiffs on July 12, 2005, B. Parffrey and A. Parffrey represented and
warranted, under oath, before a notary, the following:
The Note and Security Instrument have not been signed before one business day
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after the date that the owner of the Property received a final itemized disclosure
of the actual fees, points, interest, costs, and charges that would be charged at
closing or a bona fide emergency or other good cause exists and the owner of
the Property hereby consents to the Lender providing or modifying such final
itemized disclosure on the date of the signing of the Note and Security
Instrument and execution of this Texas Home Equity Affidavit and Agreement
is deemed evidence of such consent.
(Id.).
By way of their signatures, the plaintiffs also acknowledged that their execution of the
Home Equity Affidavit induced the lender and its assigns to make the extension of credit, with
the understanding that the lender and its assigns could rely on such signatures. (Id.). In light of
the HUD disclosure statement executed by B. Parffrey on July 11, 2005, coupled with the Home
Equity Affidavit executed contemporaneously with the plaintiffs’ closing, the plaintiffs are
estopped from now claiming that they failed to receive the required disclosures one business day
prior to closing. See Sierra v. Ocwen Loan Servicing, LLC, No. H-10-4984, 2012 WL 527940,
*3 (S.D. Tex. Feb. 16, 2012). Since the plaintiffs have failed to raise a genuine issue of material
fact concerning whether the required disclosure was given at least one business day prior to
closing, the Court determines that the constitutional requirement mandated by § 50(a)(6)(M)(ii)
was satisfied. Further, even assuming the validity of the plaintiffs’ breach of contract claim,
such a claim is barred by the applicable four-year statute of limitations, which expired on July
12, 2009—four years after the July 12, 2005 closing date.1 See Alexander v. Wells Fargo Bank,
N.A., 867 F.3d 593, 603 (5th Cir. 2017). Accordingly, the defendants are entitled to a summary
judgment on the plaintiffs’ breach of contract claim.
1
To the extent that the plaintiffs’ attempt to allege additional constitutional violations by way of their general
pleadings, the Court determines that such claims are barred by the res judicata doctrine. See Warren v. Mortg. Elec.
Registration Sys., Inc., 616 F. App’x 735, 738 (5th Cir. 2015).
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B.
The Plaintiffs’ Claim to Quiet Title
Next, the plaintiffs argue that the defendants’ real property lien and power of sale are
void because they failed to bring suit for foreclosure within four years after the Note was
accelerated. (See Dkt. No. 1, Ex. A-3, ¶¶ 29 – 32). As such, the plaintiffs seek to quiet title in
their favor. A suit to clear or quiet title “‘enable[s] the holder of the feeblest equity to remove
from his way to legal title any unlawful hindrance having the appearance of better right.’”
Morlock, L.L.C. v. JP Morgan Chase Bank, N.A., No. 12-20623, 2013 WL 2422778, at *1 (5th
Cir. June 4, 2013) (quoting Bell v. Ott, 606 S.W.2d 942, 952 (Tex. App.-Waco 1980, writ ref’d.
n.r.e.) (quoting Thomson v. Locke, 66 Tex. 383, 1 S.W. 112, 115 (Tex. 1886)). Such an action
“relies on the invalidity of the defendant’s claim to the property.” Morlock, 2013 WL 2422778,
at *1 (internal citation omitted). In order to prevail on a claim to quiet title, the plaintiffs are
required to demonstrate that: (1) they have an interest in the property; (2) title to the property is
impaired by the defendants’ claim; and (3) the defendants’ claim, while facially valid, is
unenforceable. See Hurd v. BAC Home Loans Servicing, LP, 880 F. Supp.2d 747, 766 (N.D.
Tex. 2012). As a consequence, “the plaintiff[s] ha[ve] the burden of supplying the proof
necessary to establish [their] superior equity and right to relief.” Essex Crane Rental Corp. v.
Carter, 371 S.W.3d 366, 388 (Tex. App.-Houston [1st Dist.] 2012, pet. denied) (quoting Hahn v.
Love, 321 S.W.3d 517, 531 (Tex. App.-Houston [1st Dist.] 2009, pet. denied).
Here, the plaintiffs contend that the lien held by the defendants is invalid because the defendants
failed to initiate foreclosure within four years after the date of acceleration of the Note. Under
Texas law, “[a] person must bring suit for the recovery of real property under a real property lien
or the foreclosure of a real property lien not later than four years after the day the cause of action
accrues.” Tex. Civ. Prac. & Rem. Code § 16.035(a). After the four-year period expires, “the
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real property lien and [the] power of sale to enforce the real property lien become void.” Tex.
Civ. Prac. & Rem. Code § 16.035(d). A cause of action under § 16.035 accrues “when the holder
actually exercises its option to accelerate.” Holy Cross Church of God in Christ v. Wolf, 44
S.W.3d 562, 566 (Tex. 2001). Acceleration requires two “clear and unequivocal” acts: (1) notice
of intent to accelerate; and (2) notice of acceleration. See Murphy v. HSBC Bank USA, 95 F.
Supp. 3d 1025, 1030 (S.D. Tex. 2015) (internal citations omitted).
Even after a note holder has accelerated a note after default, however, acceleration can be
abandoned if the note holder resumes accepting payments without employing any of the
remedies available to it upon maturity. See Wolf, 44 S.W.3d at 566 - 67. In instances where the
debtor does not object, a note holder may also abandon or rescind its acceleration by voluntarily
dismissing its claims against the debtor. See DTND Sierra Invs. LLC v. Bank of N.Y. Mellon
Trust Co., N.A., 958 F. Supp.2d 738, 749 - 750 (W. D. Tex. 2013) (holding that unilateral notices
of rescission were sufficient to abandon acceleration); In re Rosas, 520 B.R. 534, 540 (W.D.
Tex. 2014) (“The parties can establish abandonment through an agreement or their actions alone,
including unilateral
actions
in
certain
circumstances.”) (internal
citations
omitted).
“Abandonment of acceleration has the effect of restoring the contract to its original condition,”
thereby “restoring the note’s original maturity date” for purposes of accrual. Khan v. GBAK
Props., Inc., 371 S.W.3d 347, 353 (Tex. App.—Houston [1st Dist.] 2012, no pet.) (internal
citations omitted).
Neither party disputes that the plaintiffs are in default under the Note, and have been
since April 2006. It is also undisputed that the loan was accelerated on September 7, 2011.
Rather, the parties dispute whether the acceleration was unilaterally abandoned by a subsequent
notice of default. The evidence in the record confirms that a subsequent notice of default,
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requesting less than the full balance due under the Note, was sent to the plaintiffs on April 7,
2014, by notice given pursuant to Texas law, along with a new notice of acceleration sent to
them on May 12, 2014. (See Dkt. No. 27, Ex. A, Ocwen Aff. at ¶ 11; Ex. A.7.). On March 27,
2018, the defendants sent the plaintiffs a Notice of Rescission of Acceleration of Loan Maturity.
(Id., Ocwen Aff. at ¶ 13; Ex. A.8.). Nevertheless, the plaintiffs maintain that these subsequent
notices are insufficient to establish that the defendants unequivocally rescinded acceleration.
(See Dkt. No. 26 at 4.). This Court does not agree, as the Fifth Circuit has held that:
a lender may unilaterally abandon acceleration of a note, thereby restoring the
note to its original condition . . . by sending notice to the borrower that the
lender is no longer seeking to collect the full balance of the loan and will permit
the borrower to cure its default by providing sufficient payment to bring the note
current under its original terms.
Boren v. U.S. Nat’l Bank Ass’n, 807 F.3d 99, 105 (5th Cir. 2015); see also DeFranceschi v.
Seterus, Inc., No. 17-11151, 2018 WL 1989974, *2 (5th Cir. Apr. 26, 2018) (reasoning that the
note holder “unequivocally manifested an intent to abandon the previous acceleration” by way of
its subsequent notice of default provided to the debtor).
Indeed, the new subsequent notice unequivocally manifested the defendants’ intentions to
abandon the previous acceleration and provided the plaintiffs with an opportunity to avoid
foreclosure if they cured the amount in arrears. See Dkt. No. 27, Ex. A, Ocwen Aff. at ¶ 11; Ex.
A.7.). “As a result, the statute of limitations period under § 16.035(a) ceased to run at that point
and a new limitations period did not begin to accrue until” the plaintiffs defaulted again and the
defendants exercised their right to accelerate. Boren, 807 F.3d at 106. The fact that the plaintiffs
now contend, without tendering a modicum of support, that the April 2014 notice of default is
insufficient to serve as notice of abandonment because they failed to receive it is of no moment
because Texas law does not require actual receipt. See Martins v. BAC Home Loans Servicing,
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722 F.3d 249, 256 (5th Cir. 2013). Therefore, this Court concludes that the plaintiffs have failed
to raise a genuine issue of material fact concerning whether acceleration occurred more than four
years ago so as to render the defendants’ lien and power of sale void.
Accordingly, the
defendants are entitled to a summary judgment on the plaintiffs’ claim to quiet title due to the
expiration of the four-year limitations period.
C.
The Plaintiffs’ Claims for Declaratory and Injunctive Relief
The plaintiffs also seek declaratory and injunctive relief restraining the defendants from
interfering with their rights to quiet enjoyment and use of the Property. (See Dkt. No. 1, Ex. A.3
at 8 – 10.). Both declaratory and injunctive relief, however, are forms of relief grounded on
underlying claims. See Sid Richardson Carbon & Gasoline Co. v. Interenergy Res., Ltd., 99
F.3d 746, 752 n. 3 (5th Cir. 1996) (reasoning that declaratory relief is a procedural device and
does not establish any substantive rights or causes of action); Cook v. Wells Fargo Bank,
N.A., No. 3:10–CV–0592–D, 2010 WL 2772445, at *4 (N.D. Tex. July 12, 2010) (“Under Texas
law, a request for injunctive relief is not itself a cause of action but depends on an underlying
cause of action.”). Because this Court has determined that the plaintiffs’ substantive claims for
relief fail, the plaintiffs’ claims for declaratory and injunctive relief also fail. As such, the
defendants are entitled to judgment as a matter of law on these claims.
D.
The Plaintiffs’ Claim for Attorney’s Fees
Lastly, the plaintiffs allege that they are entitled to recover reasonable attorneys’ fees
pursuant to § 37.009 of the Texas Civil Practice & Remedies Code. The defendants move for
judgment as a matter of law on the plaintiffs’ attorney’s fee claim. Tex. Civ. Prac. & Rem. Code
§ 37.009 expressly provides that a “court may award costs and reasonable and necessary
attorney’s fees as are equitable and just,” for any action brought under the Texas Declaratory
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Judgment Act. Tex. Civ. Prac. & Rem. Code § 37.009. Because the plaintiffs’ request for
declaratory and injunctive relief fail and the Fifth Circuit has held that under Erie principles the
Texas Declaratory Judgment Act is procedural and does not apply in federal proceedings, the
plaintiffs are not entitled to recover attorney’s fees. See Camacho v. Texas Workforce Comm’n,
445 F.3d 407, 413 (5th Cir. 2006). Accordingly, the defendants are entitled to judgment as a
matter of law on the plaintiffs’ attorney’s fee claim.
V.
CONCLUSION
Based on the foregoing analysis and discussion, the defendants’ motion for summary
judgment is GRANTED; the plaintiffs’ motion for summary judgment is DENIED.
It is so ORDERED.
SIGNED and ENTERED this 28th day of September, 2018.
___________________________________
Kenneth M. Hoyt
United States District Judge
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