Jarvis, William C. and Cindy Jarvis v. K&E RE One, LLC Stewart Title Company Bayview Loan Servicing, LLC

390 S.W.3d 631, 2012 WL 5987385, 2012 Tex. App. LEXIS 9927
CourtCourt of Appeals of Texas
DecidedNovember 30, 2012
Docket05-11-00341-CV
StatusPublished
Cited by22 cases

This text of 390 S.W.3d 631 (Jarvis, William C. and Cindy Jarvis v. K&E RE One, LLC Stewart Title Company Bayview Loan Servicing, LLC) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Jarvis, William C. and Cindy Jarvis v. K&E RE One, LLC Stewart Title Company Bayview Loan Servicing, LLC, 390 S.W.3d 631, 2012 WL 5987385, 2012 Tex. App. LEXIS 9927 (Tex. Ct. App. 2012).

Opinion

OPINION

Opinion By

Justice FILLMORE.

William C. Jarvis and Cindy Jarvis appeal (1) the trial court’s judgment granting K & E Re One, LLC (K & E) declaratory and injunctive relief and awarding K & E attorney’s fees, and (2) the trial court’s grant of summary judgment in favor of Stewart Title Company (Stewart Title) and Bayview Loan Servicing (Bayview). In four points of error, the Jarvises contend the trial court erred by (1) denying then-motion to exclude evidence, (2) finding North American Capital (NAC) had the authority to act as agent for the Jarvises, (3) granting summary judgment in favor of Stewart Title and Bayview, and (4) awarding K & E attorney’s fees. We affirm the trial court’s judgment.

Factual Background

In the summer of 2007, Gena Lofton purchased a fourteen-unit apartment complex in Dallas, Texas (the Property). Lof-ton contacted NAC to obtain financing for the purchase. NAC is in the business of facilitating short-term real estate loans between private mortgage investors and real estate purchasers for the acquisition and *635 rehabilitation of commercial and residential property.

As part of its loan facilitation services, NAC is involved prior to a loan being funded in performing due diligence as to the borrower and the property being purchased. After a loan closes, NAC collects the monthly payments from the borrower and forwards the payments to the lender. NAC keeps records of any late payment and notifies the borrower of the necessity to pay a late fee. NAC may also be involved in contacting counsel about foreclosing on a piece of property or about representing the lender in a bankruptcy proceeding.

NAC contacted the Jarvises, and they agreed to provide the funding for the Lof-ton loan. Lofton understood that NAC was operating as a servicer for the Jarvis-es. Lofton was not provided with any contact information for the Jarvises and had no direct contact with them during the loan application process. In connection with closing the loan, Lofton signed a number of documents, including a promissory note (the Note); a deed of trust (DOT); a business purpose affidavit; an assignment of leases, deposits and rents (the Assignment); an environmental indemnification statement; and a legal representation agreement. The Note, the business purpose affidavit, the legal representation agreement, and the environmental indemnification agreement all reference NAC as the “servicer.” The DOT names the Jar-vises as the beneficiaries “c/o” NAC. The Assignment identifies the lender as the Jarvises “c/o” NAC. The settlement agreement signed at the time Lofton purchased the Property indicates NAC received a loan origination fee and a processing fee. It also shows that, after the closing, NAC held $28,100 of the loan proceeds in escrow and also held an additional $6,270.41 of the loan proceeds. According to Lofton, the $28,100 held in escrow was for construction work on the Property. Lofton could not recall why NAC held the remaining $6,270.41.

Lofton transferred title to the Property to Capital Asset Solutions, LLC (CAS), an entity controlled by Lofton. Pursuant to the terms of the Note, Lofton made payments every month to the Jarvises at the offices of NAC. The Note did not restrict the form of payment, and Lofton did not receive any instructions from either the Jarvises or NAC about the form of payment. Lofton made the monthly payments by check written on the account of CAS.

In the spring of 2008, CAS agreed to sell the Property to K & E. Stewart Title was retained to handle the closing. Adam Ra-chavong, a closing agent with Stewart Title, reviewed the DOT, the Assignment, and the UCC financing statement filed by the Jarvises and saw no contact information for the Jarvises. Because Lofton believed NAC was the servicer on the loan and it is customary for the servicer to prepare a payoff request on a loan, she told Rachavong to contact NAC. According to Rachavong, he “didn’t know for sure” if the “c/o” in the documents he reviewed gave NAC authority to accept funds on behalf of the Jarvises. However, in Ra-chavong’s opinion, “c/o” meant all correspondence or matters regarding the loan should be directed to NAC.

Rachavong contacted Mark Cleaton, NAC’s president, and Cleaton provided a loan payoff amount. Cleaton also provided Rachavong with instructions on how to wire the loan payoff funds to NAC’s account. The funds to pay off the Note were wired to NAC in April 2008 following the closing of the sale of the Property to K & E. Lofton testified she was not alarmed when the settlement statement for the closing indicated the funds would be sent to NAC, because it is customary for a *636 servicer to collect the proceeds from a sale and distribute them to the lender. In Rachavong’s opinion, the wire transfer to NAC was consistent with the beneficiary information in the DOT. William Jarvis, however, denied the Jarvises gave NAC the authority to accept payments from borrowers or subsequent purchasers on their behalf. Cleaton also denied NAC had authority to accept payments as a payee under the Note.

NAC did not disburse the loan payoff funds to the Jarvises. Rather, NAC began sending monthly checks written on its operating account to the Jarvises purporting to be payments on the Note. The Jar-vises deposited these checks and did not complain that the payments came from NAC, rather than from Lofton. NAC stopped making the monthly payments in November 2008. In November 2009, William Jarvis contacted Lofton and learned the Property had been sold and the funds to pay off the loan had been wired to NAC. On November 14, 2009, the Jarvises informed Cleaton that NAC “was no longer authorized to act as a servicing agent on [their] behalf.” On January 11, 2010, the Jarvises posted the Property for foreclosure.

Procedural Background

K & E filed this suit, seeking a declaration the Note had been paid and the DOT had been discharged and no longer constitutes a valid and subsisting lien on the Property. K & E also requested the Jar-vises be permanently enjoined from attempting to foreclose on the Property, taking possession and control of the Property, or otherwise attempting to extinguish K & E’s interest in the Property. The Jarvises filed a third-party petition against Stewart Title, CAS, OneWest Bank Group, LLC, and Bayview. 1 The Jarvises asserted a negligence claim against CAS. They also alleged (1) Stewart Title had been negligent by failing to pay the Jarvises the loan payoff funds, and (2) they were third-party beneficiaries of the escrow agreement relating to the sale contract between CAS and K & E and Stewart Title breached the escrow agreement by failing to properly account for and distribute the funds from the transaction. The Jarvises also requested a declaratory judgment against Stewart Title that the Note and the DOT dictate payment was to be made to the Jarvises, Stewart Title was obligated to pay the Jarvises, Stewart Title failed to pay the Jarvises, and the DOT had not been discharged. The Jarvises sought the equitable remedy of quiet title against OneWest and Bayview and requested a declaratory judgment that the deed of trust executed in favor of OneWest and Bayview was inferior to the DOT. The parties agreed to try K & E’s claims against the Jarvises first.

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Bluebook (online)
390 S.W.3d 631, 2012 WL 5987385, 2012 Tex. App. LEXIS 9927, Counsel Stack Legal Research, https://law.counselstack.com/opinion/jarvis-william-c-and-cindy-jarvis-v-ke-re-one-llc-stewart-title-texapp-2012.