Salek v. SunTrust Mortgage, Inc.

Filing 39

MEMORANDUM AND ORDER GRANTED 35 MOTION for Summary Judgment (Signed by Judge Nancy F Atlas) Parties notified.(sashabranner, 4)

United States District Court
Southern District of Texas

ENTERED
July 17, 2019

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
LINA SALEK,
Plaintiff,
v.
SUNTRUST MORTGAGE, INC.,
Defendant.

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David J. Bradley, Clerk

CIVIL ACTION NO. 4:18-01664

MEMORANDUM AND ORDER
Before the Court in this breach of contract lawsuit is Defendant’s Motion for
Summary Judgment (“Motion”) [Doc. # 35].
Defendant replied.2

Plaintiff filed a response,1 and

The Motion is ripe for decision.

Based on the parties’

briefing, pertinent matters of record, and relevant legal authority, the Court grants
Defendant’s Motion and dismisses Plaintiff’s claims with prejudice.
I.

BACKGROUND
This is a dispute between Plaintiff Lina Salek and her mortgagee, Defendant

SunTrust Mortgage, Inc., (“SunTrust”), over SunTrust’s allegedly delayed
disbursement of insurance proceeds for damage Salek’s house sustained during

1

Plaintiff’s Response and Brief in Opposition to Defendant’s Motion for Summary
Judgment (“Response”) [Doc. # 37].

2

Defendant’s Reply in Support of Motion for Summary Judgment (“Reply”)
[Doc. # 38].

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Hurricane Harvey. Plaintiff Salek and Ata Tom Salek, Plaintiff Salek’s husband
and a non-party to this lawsuit, purchased a house located in Houston, Texas, in
September 2010.

To fund their purchase, Salek and her husband executed a

Promissory Note and Deed of Trust with Defendant SunTrust.3
Under the Deed of Trust, Salek was required to maintain hazard and flood
insurance for the house and use any insurance proceeds to restore or repair the
property.4 Paragraph 5 of the Deed of Trust provides in relevant part:
During such repair and restoration period, Lender shall have the right
to hold such insurance proceeds until Lender has had an opportunity
to inspect such Property to ensure the work has been completed to
Lender’s satisfaction, provided that such inspection shall be
undertaken promptly. Lender may disburse proceeds for the repairs
and restoration in a single payment or in a series of progress payments
as the work is completed.5
Paragraph 7 provides in relevant part:
If insurance or condemnation proceeds are paid in connection with
damage to, or the taking of, the Property, Borrower shall be
responsible for repairing or restoring the Property only if Lender has
released proceeds for such purposes. Lender may disburse proceeds
for the repairs and restoration in a single payment or in a series of
progress payments as the work is completed.6
3

Note [Doc. # 37-4]; Deed of Trust [Doc. # 35-1].

4

Deed of Trust ¶ 5.

5

Id.

6

Id. ¶ 7.
2

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After Salek’s house was damaged by Hurricane Harvey, Salek made a claim
with her flood insurer.7 Salek received a $90,667.65 flood insurance payment on
November 1, 2017, which she endorsed and sent to SunTrust.8 In total, the Saleks
received and forwarded to SunTrust $129,122.47 in insurance payments.9
On November 3, 2017, SunTrust sent Salek an “Insurance Claims Package,”
listing the steps required for SunTrust to disburse the insurance proceeds.10
SunTrust requested Salek provide the insurance company adjuster’s worksheet, a
signed contract or proposal with a contractor, a contractor’s waiver of lien, the
contractor’s W-9, and a copy of the contractor’s license.11 SunTrust further stated
that after receipt of these documents, if Salek’s loan was current, her “initial check
amount will be up to the greater of $40,000 or 10% of the unpaid principal
balance.”12 Upon demonstrating that at least 50% of the repairs were completed,
the Package states the “second check will equal 50% of the remaining claim
7

Plaintiff’s Responses to Defendant’s First Set of Interrogatories and Requests for
Production (“Plaintiff’s Responses”) [Doc. # 35-6], Response to Interrogatory No.
2.

8

SunTrust Payment Screens [Doc. # 37-9], at SUNTRUST 000895 (ECF 11).

9

Plaintiff’s Responses, Response to Interrogatory No. 4.

10

Insurance Claims Package [Doc. # 35-2], at SUNTRUST 000563 (ECF 5).

11

Id. at SUNTRUST 000563-64 (ECF 5-6).

12

Id. at SUNTRUST 000565 (ECF 7).

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funds.”13 In order to receive the remaining proceeds, the Package states that Salek
must send all outstanding documentation and SunTrust would conduct an
inspection to confirm “all repairs” were complete.14
On November 28, 2017, SunTrust released $15,400.00 of the received
insurance proceeds to Salek.15 On March 2, 2018, SunTrust conducted its initial
inspection of Salek’s house, which indicated that 50% of the necessary repairs
were completed.16

On March 15, 2018, SunTrust disbursed an additional

$56,861.24 to Salek..17

This $56,861.24 constituted 50% of the undisbursed

$113,722.47 in proceeds.18
A second and third inspection on March 14 and 27, 2018, respectively
revealed that 92% and 95% of the repairs were completed.19 SunTrust did not
13

Id.

14

Id.

15

SunTrust Letter dated November 28, 2017, re: Insurance Claim [Doc. # 35-2], at
SUNTRUST 000570 (ECF 10).

16

Inspection Form dated March 2, 2018 [Doc. # 35-3].

17

SunTrust Letter dated March 15, 2018, re: Insurance Claim [Doc. # 35-5], at
SUNTRUST 000573 (ECF 15).

18

Plaintiff’s Responses, Response to Interrogatory No. 4; Oral Deposition of Lina
Salek (“Salek’s Deposition”) [Doc. # 35-11], at 37:8-11.

19

Inspection Form dated March 14, 2018 [Doc. # 35-4]; Inspection Form dated
March 27, 2018 [Doc. # 35-5].
4

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release additional funds to Salek after either of these inspections. On May 18,
2018, SunTrust concluded the repairs were 100% complete.20
On May 22, 2018, Salek filed this lawsuit, alleging had SunTrust had failed
to timely disburse her insurance proceeds, and asserting claims for breach of the
Deed of Trust, breach of fiduciary duty, violations of the Texas Deceptive Trade
Practices Act (“DTPA”), and unjust enrichment.21 On May 25, 2018, Salek paid
off her outstanding loan in full, using, in part, the remaining insurance funds held
by SunTrust in Salek’s restricted escrow account.22
On August 8, 2018, the Court granted in part SunTrust’s motion to dismiss
Salek’s claims, dismissing her fiduciary duty, DTPA, and unjust enrichment causes
of action.23 The Court also dismissed Salek’s contract claims stemming from
SunTrust’s actions occurring before the first property inspection on March 2, 2018,
and Salek’s contract claim based on SunTrust’s alleged failure to abide by oral
commitments to release the funds after 90% of the repairs were completed.24

20

Excerpts from Account Notes [Doc. # 35-2], at SUNTRUST 000479 (ECF 20).

21

Plaintiff’s Original Complaint [Doc. # 1].

22

Disbursement Check Voucher [Doc. # 37-8], at SUNTRUST 000229 (ECF 1).

23

Memorandum and Order dated August 8, 2018 [Doc. # 12], at 21.

24

Id. at 6-8 & n.6.

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On September 7, 2018, Salek filed an amended complaint, asserting claims
for breach of the Deed of Trust and conversion.25 Salek asserts that SunTrust
breached the Deed of Trust and engaged in conversion of Salek’s insurance
proceeds by failing to disburse additional funds after the March 14 and 27, 2018,
inspections respectively revealed that 92% and 95% of the repairs were completed.
SunTrust moves for summary judgment on Salek’s remaining claims.
II.

LEGAL STANDARD
Under Federal Rule of Civil Procedure 56, “[a] party may move for

summary judgment, identifying each claim or defense—or the part of each claim or
defense—on which summary judgment is sought.”

FED. R. CIV. P. 56(a).

Summary judgment on a claim or part of a claim is appropriate “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.” Seacor Holdings, Inc. v. Commonwealth
Ins. Co., 635 F.3d 675, 680 (5th Cir. 2011) (quoting FED. R. CIV. P. 56(a)).
For summary judgment, the initial burden falls on the movant to identify
areas essential to the non-movant’s claim in which there is an “absence of a
genuine issue of material fact.”

ACE Am. Ins. Co. v. Freeport Welding &

Fabricating, Inc., 699 F.3d 832, 839 (5th Cir. 2012). The moving party, however,
25

Plaintiff’s First Amended Complaint [Doc. # 14], ¶¶ 36-45.

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“need not negate the elements of the nonmovant’s case.” Coastal Agric. Supply,
Inc. v. JP Morgan Chase Bank, N.A., 759 F.3d 498, 505 (5th Cir. 2014) (quoting
Boudreaux v. Swift Transp. Co., 402 F.3d 536, 540 (5th Cir. 2005)). The moving
party may meet its burden by pointing out “the absence of evidence supporting the
nonmoving party’s case.” Malacara v. Garber, 353 F.3d 393, 404 (5th Cir. 2003)
(citing Celotex, 477 U.S. at 323; Stults v. Conoco, Inc., 76 F.3d 651, 656 (5th Cir.
1996)).
In deciding whether a genuine and material fact issue has been created, the
court reviews the facts and inferences to be drawn from them in the light most
favorable to the nonmoving party. Reaves Brokerage Co. v. Sunbelt Fruit &
Vegetable Co., 336 F.3d 410, 412 (5th Cir. 2003). A genuine issue of material fact
exists when the evidence is such that a reasonable jury could return a verdict for
the non-movant. Tamez v. Manthey, 589 F.3d 764, 769 (5th Cir. 2009) (citing
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).
III.

DISCUSSION
A.

Breach of Contract

“The elements of a breach of contract action under Texas law are: ‘(1) the
existence of a valid contract; (2) performance or tendered performance by the
plaintiff; (3) breach of the contract by the defendant; and (4) damages sustained by
the plaintiff as a result of the breach.’” Certain Underwriters at Lloyd’s of London
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v. Lowen Valley View, L.L.C., 892 F.3d 167, 170 (5th Cir. 2018) (quoting Smith
Int’l., Inc. v. Egle Grp., LLC, 490 F.3d 380, 387 (5th Cir. 2007)). SunTrust
challenges only whether a genuine dispute of fact exists with respect to the third
element, i.e., that it breached the Deed of Trust.
Salek contends SunTrust breached the terms of the Deed of Trust by failing
to timely disburse her insurance proceeds after SunTrust’s inspections on March 14
and 27, 2018, revealed that 92% and 95% of the total work was completed. Salek
argues that under Paragraph 7, SunTrust must release proceeds before Salek was
obligated to complete repairs. Salek further appears to argue that, under the Deed
of Trust, SunTrust is obliged to make progressive disbursements of funds as repairs
are completed.26
Salek’s interpretation of the Deed of Trust is untenable. Paragraph 5 allows
SunTrust to hold Salek’s insurance proceeds “until [it] has had an opportunity to
inspect such Property to ensure the work has been completed to [its] satisfaction,

26

Salek also argues that SunTrust breached the terms of the Promissory Note by
refusing to allow Salek to apply the insurance proceeds to her outstanding loan
balance, in violation of the Promissory Note’s right of prepayment. See Note ¶ 4.
Salek did not include a claim for breach of contract based on the Promissory
Note’s prepayment clause in her operative pleadings. See Amended Complaint
¶¶ 36-45. This claim is not properly before the Court. See Cutrera v. Bd. of Sup’rs
of La. State Univ., 429 F.3d 108, 113 (5th Cir. 2005) (“A claim which is not raised
in the complaint but, rather, is raised only in response to a motion for summary
judgment is not properly before the court.”).

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provided that such inspection shall be undertaken promptly.”27 Paragraphs 5 and 7
of the Deed of Trust state that SunTrust “may disburse proceeds for the repairs and
restoration in a single payment or in a series of progress payments as the work is
completed.”28 Under Paragraph 7, Salek is “responsible for repairing or restoring
the Property only if [SunTrust] has released proceeds for such purposes.”29 The
Deed of Trust does not state that funds must be disbursed according to a schedule
or that funds must be released when repairs have reached certain percentages of
completion. A holistic reading of these provisions is that SunTrust was required to
disburse some proceeds—but not all—to Salek before she was obliged to begin
repairs. Once a portion of the proceeds were disbursed, Salek’s duty to repair
ripened and SunTrust had no obligation to disburse all the funds in advance of
Salek’s completion of other repairs or when the repairs reached a certain
percentage of completion. Instead, SunTrust’s only other contractual obligation
was, assuming a prompt inspection, to release the funds once the “work ha[d] been
completed to [SunTrust’s] satisfaction.”30

27

Deed of Trust ¶ 5.

28

Id. ¶¶ 5, 7 (emphasis added).

29

Id. ¶ 7.

30

See id. ¶ 5.

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No genuine dispute exists over whether SunTrust complied with these terms.
SunTrust disbursed $15,400.00 to Salek on November 28, 2017.

After an

inspection revealed that 50% of the necessary repairs were complete, SunTrust
disbursed 50% of the remaining insurance proceeds, $56,861.25, to Salek on
March 15, 2018.

SunTrust’s failure to disburse additional funds after until

approximately two months the March 14 and 27, 2018, inspections, which
disclosed that repairs were 92% and 95% complete, respectively, was not a
violation of any provision of the Deed of Trust. Salek cites no summary judgment
evidence demonstrating, and does not argue, that the repairs and restoration of her
house by this time had “been completed to [SunTrust’s] satisfaction.” 31
Because Salek fails to demonstrate the existence of a genuine factual dispute
whether SunTrust breached the Deed of Trust, the Court grants summary judgment
and dismisses Salek’s breach of contract claim.

31

Salek argues that SunTrust may not rely on the Insurance Claims Package to
demonstrate its compliance with the Deed of Trust because the Insurance Claims
Package is not a contract between the parties. Salek alternatively argues that even
if the Insurance Claims Package binds the parties, SunTrust breached its terms.
The Court agrees with Salek that the Insurance Claims Package is not a contract
between the parties, and thus SunTrust’s breach of the Insurance Claims Package,
if it occurred, cannot give rise to a breach of contract claim.

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B.

Conversion

Under Texas law, “[t]he elements of a conversion claim are (1) the plaintiff
owned or had possession of the property or entitlement to possession; (2) the
defendant unlawfully and without authorization assumed and exercised control
over the property to the exclusion of, or inconsistent with, the plaintiff’s rights as
an owner; (3) the plaintiff demanded return of the property; and (4) the defendant
refused to return the property.” Stroud Prod., L.L.C. v. Hosford, 405 S.W.3d 794,
811 (Tex. App.—Houston [1st Dist.] 2013, pet. denied).

“There can be no

conversion where the owner has expressly or impliedly assented to the taking or
disposition.” Robinson v. Nat’l Autotech, Inc., 117 S.W.3d 37, 39-40 (Tex. App.—
Dallas 2003, pet. denied), cited with approval in Ashmore v. JMS Constr., Inc., No.
05-15-00537-CV, 2016 WL 7217256, at *13 (Tex. App.—Dallas Dec. 13, 2016,
no pet.). A party may be liable for conversion if it, without authorization,
“wrongfully assumes and exercises dominion and control over another’s property,
to the exclusion of the true owner’s rights, even though possession of the property
may have originally been acquired by lawful means.” Bosworth v. Gulf Coast
Dodge, Inc., 879 S.W.2d 152, 158 (Tex. App.—Houston [14th Dist.] 1994, no
writ).
Salek has not presented evidence to create a genuine factual dispute over
whether SunTrust “unlawfully and without authorization assumed and exercised
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control over” Salek’s insurance proceeds. See Stroud Prod., 405 S.W.3d at 811.
For the reasons stated above, the Deed of Trust authorized SunTrust to exercise
control over and dispose of Salek’s insurance proceeds in the manner SunTrust did.
Because Salek “expressly . . . assented” under the Deed of Trust to SunTrust’s
disposition of her proceeds, Salek’s conversion claim fails as a matter of law. See
Robinson, 117 S.W.3d at 39-40; Nazareth Int’l., Inc. v. J.C. Penney Co., Inc., No.
Civ.A.3:04-CV-1265-M, 2005 WL 1520854, at *4 (N.D. Tex. Jan. 19, 2005)
(dismissing conversion claim when the parties’ contract authorized the defendant’s
challenged disposition of the relevant goods).
IV.

CONCLUSION AND ORDER
For the foregoing reasons, the Deed of Trust authorized SunTrust’s

challenged disposition of Salek’s insurance proceeds. It is therefore
ORDERED that the Defendant’s Motion for Summary Judgment
(“Motion”) [Doc. # 35], is GRANTED and Plaintiff Lina Salek’s claims are
DISMISSED with prejudice.
A final judgment will separately issue.
SIGNED at Houston, Texas, this 17th day of July, 2019.

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NAN Y F. ATLAS
SENIOR UNI
STATES DISTRICT JUDGE