COURT OF APPEALS EIGHTH DISTRICT OF TEXAS EL PASO, TEXAS
§ PATRICK KING MULVEY, JR., No. 08-17-00186-CV § Appellant, Appeal from § v. County Court at Law No. 3 § U.S. BANK NATIONAL of El Paso County, Texas ASSOCIATION, AS TRUSTEE FOR § SASCO MORTGAGE LOAN TRUST (TC # 2014DCV3597) 2006-WF2, §
Appellee. §
OPINION
In this appeal, we review a summary judgment in favor of a lender that foreclosed on
property securing a home equity loan. The question before us is whether the homeowner presented
some evidence supporting one or more of his asserted affirmative defenses. We conclude that he
did not, and we affirm the judgment below.
BACKGROUND
The relevant facts, all derived from the summary judgment record, are easily stated. On
April 6, 2006, Patrick King Mulvey, Jr. (Mulvey) borrowed $126,400.00 from Wells Fargo Bank,
N.A (Wells Fargo) through a Texas home equity loan. Mulvey promised to repay the note in
monthly installments. In conjunction with the note, Mulvey executed a Texas Home Equity Security Instrument (“deed of trust”) that granted a security interest in the real property located at
11260 Signal Ridge Drive in El Paso, Texas. The note and deed of trust were assigned to Appellee
U.S. Bank National Association, as Trustee for SASCO Mortgage Loan Trust 2006-WF2
(hereinafter “U.S. Bank”).
At some point, Mulvey fell behind on payments, and on November 21, 2008, Wells Fargo
entered into a Loan Modification Agreement with Mulvey. That modification agreement adjusted
the monthly payments and set a new payment schedule. The modification agreement also
capitalized $9,983.47 of interest into the loan, making the new principal balance $132,413.36.
In 2009, Mulvey again fell behind on his monthly payments. Wells Fargo, acting as the
mortgage servicer, hired a law firm to initiate foreclosure proceedings on behalf of U.S. Bank. In
a notice letter dated October 20, 2010, the law firm gave Mulvey written notice of a default and
intent to accelerate. On November 22, 2010, the law firm sent Mulvey a notice of acceleration.
Under the bank’s records, Mulvey did not make the July 1, 2009 payment, nor any payment
thereafter.
U.S. Bank filed suit in November 2014 seeking title, possession, and foreclosure of the
property under the deed of trust. U.S. Bank claimed that right as the mortgagee, and holder of the
note and deed of trust on the property. It did not seek any amount due under the note. Mulvey
responded to the suit by filing a general denial.
In June 2015, U.S. Bank filed a traditional motion for summary judgment. It attached the
note, the deed of trust, the 2011 notice of default/intent to accelerate and the notice of acceleration,
as well as various payment ledgers which purport to show the unpaid installments. The motion
was also supported by the affidavit of Rodney Young, Vice President for Loan Documentation at
2 Well Fargo, who attested to the authenticity of the attached loan documents, notices, and records.
He also swore to default and the amount due.
In response, Mulvey filed an “Amended Answer” to the summary judgment. Germane to
this appeal, it contains Mulvey’s affidavit which in relevant part claims:
In April 2006 I obtained a home equity loan through Wells Fargo. In December 2008 I entered into a modification agreement with Wells Fargo concerning my home equity loan. Wells Fargo advanced additional monies to me with the modification. I made several payments to Wells Fargo after the loan modification. I tried to make a payment at the Wells Fargo Bank around July or August, 2009 but they refused the payment stating, ‘I was in Active Foreclosure’ and that I had to contact the servicing department at Wells Fargo. When I did contact them I was informed that I no longer qualified for the mortgage and that was all I was told. Any delinquency on my part was due to Wells Fargo not accepting the payments and\or telling me what to do next except that I needed to complete additional paper work. After several years of trying to work with Wells Fargo, I was told they had me sign an Illegal Document with Illegal terms associated with that document in the State of Texas, at the time. This Illegal document is why I ‘did not qualify’ for the loan modification. On many occasions while talking with the various Wells Fargo’s personnel, they requested that I complete a form for another Loan Modification. I did not complete the forms knowing that they were Illegal. The trial court granted U.S. Bank’s motion for summary judgment. The court’s judgment
orders that Mulvey pay the entire sum owed under the note within thirty days, or failing that, the
property is to be sold and the proceeds, less the fee for conducting the sale, is to be applied to the
balance owed on the note. Mulvey was not responsible, however, for any deficiency following the
sale.
Mulvey filed a motion for new trial that re-urged two of his affirmative defenses: (1) he
was not in default because Wells Fargo refused to accept his monthly payments; and (2) Wells
Fargo insisted on Mulvey entering into an illegal agreement. U.S. Bank filed a response to the
motion for new trial, that attached a new affidavit from Ashely Dellinger, Vice President of Loan
Documentation for Wells Fargo. She recounts all the same facts as Rodney Young’s earlier
3 affidavit. Her affidavit also adds, however, additional history of the loan, including that another
“Notice of Default and Intent to Accelerate” was sent around June 7, 2009, as well as a Notice of
Acceleration dated July 27, 2009. Her affidavit references some seventeen attachments, none of
which are included in the appellate record. The motion for new trial was overruled by operation
of law.
This appeal follows. In a single issue, Mulvey contends that he raised some evidence in
support of several affirmative defenses to any default under the note, and U.S. Bank did not
conclusively disprove those defenses.
STANDARD OF REVIEW
We review a trial court’s decision to grant summary judgment de novo. Travelers Ins. Co.
v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010).
U.S. Bank asserted a traditional summary judgment under TEX.R.CIV.P. 166a(c). Under a
traditional motion, the moving party carries the burden of showing that there is no genuine issue
of material fact and that it is entitled to judgment as a matter of law. Diversicare General Partner,
Inc. v. Rubio, 185 S.W.3d 842, 846 (Tex. 2005); Nixon v. Mr. Property Mgmt. Co., Inc., 690
S.W.2d 546, 548 (Tex. 1985). Evidence favorable to the non-movant is taken as true in deciding
whether there is a disputed issue of material fact. Fort Worth Osteopathic Hospital, Inc. v. Reese,
148 S.W.3d 94, 99 (Tex. 2004); Tranter v. Duemling, 129 S.W.3d 257, 260 (Tex.App.--El Paso
2004, no pet.). All reasonable inferences, including any doubts, must be resolved in favor of the
non-movant. Fort Worth Osteopathic Hospital, Inc., 148 S.W.3d at 99. Once the movant
establishes its right to summary judgment, the burden then shifts to the non-movant to present
evidence that raises a genuine issue of material fact, thereby precluding summary judgment. See
City of Houston v. Clear Creek Basin Authority, 589 S.W.2d 671, 678 (Tex. 1979).
4 In general, a moving plaintiff is not under any obligation to negate a defendant’s pleaded
affirmative defenses. Woodside v. Woodside, 154 S.W.3d 688, 691-92 (Tex.App.--El Paso 2004,
no pet.); Tesoro Petroleum Corp. v. Nabors Drilling USA, Inc., 106 S.W.3d 118, 124 (Tex.App.--
Houston [1st Dist.] 2002, pet. denied). Rather, an affirmative defense only prevents the granting
of summary judgment if each element of the affirmative defense is supported by summary
judgment evidence. Woodside, 154 S.W.3d at 691-92. At several junctures in the briefing, both
parties state that the non-movant carries the burden to conclusively prove an affirmative defense.
Here, that might be true if Mulvey had moved for summary judgment on his affirmative defenses.
See American Tobacco Co., Inc. v. Grinnell, 951 S.W.2d 420, 425 (Tex. 1997)(defendant carried
burden of conclusively proving pre-emption defense in its summary judgment motion). But when
Mulvey only seeks to stave off U.S. Bank’s summary judgment based on an affirmative defense,
he needed to do no more than raise a fact issue as to each element of the defense. “Moore” Burger,
Inc. v. Phillips Petroleum Co., 492 S.W.2d 934, 936-37 (Tex. 1972); Woodside, 154 S.W.3d at
691-92.
Mulvey’s original answer asserted only a general denial. He appears to have combined
into a single pleading an “amended answer” and response to the motion for summary judgment, a
practice we neither condone nor encourage. But even assuming that Mulvey did not amend his
answer to assert affirmative defenses, U.S. Bank had two options: it could object that the
affirmative defenses had not been properly pled, or it could respond on the merits and try the issue
by consent. Via Net v. TIG Ins. Co., 211 S.W.3d 310, 313 (Tex. 2006); see also Roberts v. Wells
Fargo Bank, N.A., 406 S.W.3d 702, 707 (Tex.App.--El Paso 2013, no pet.)(noting the movant’s
same two choices); Nicholson v. Mem’l Hosp. Sys., 722 S.W.2d 746, 749 (Tex.App.--Houston
[14th Dist.] 1986, writ ref’d n.r.e.)(“If the affirmative defense is not specifically pled, but
5 competent summary judgment evidence establishes a genuine issue of material fact with regard to
that affirmative defense, summary judgment is improper.”). We find no indication that U.S. Bank
raised any pleading deficiency below. We therefore turn to the merits.
DISCUSSION
Did U.S. Bank Prove its Entitlement to Summary Judgment
U.S. Bank sought to judicially foreclose on property that secured a Texas home equity loan.
To sustain that claim, U.S. Bank needed to prove that it held a valid deed of trust on the real
property securing the note, and Mulvey was in default under terms of the note and security
agreement. See Kyle v. Countrywide Home Loans, Inc., 232 S.W.3d 355, 362 (Tex.App.--Dallas
2007, pet. denied)(stating that copy of security agreement and affidavit showing default were
sufficient to support summary judgment for judicial foreclosure); see also McKeehan v.
Wilmington Sav. Fund Soc’y, FSB, 554 S.W.3d 692 (Tex.App.--Houston [1st Dist.] 2018, no
pet. h.)(same); Salas v. LNV Corp., 409 S.W.3d 209, 220 (Tex.App.--Houston [14th Dist.] 2013,
no pet.)(same). Because U.S Bank sought to sell the property, it also needed to show that Mulvey
was properly served with a notice of default and acceleration. TEX.PROP.CODE ANN. § 51.002(d)
(“Notwithstanding any agreement to the contrary, the mortgage servicer of the debt shall serve a
debtor in default under a deed of trust or other contract lien on real property used as the debtor’s
residence with written notice by certified mail stating that the debtor is in default under the deed
of trust or other contract lien and giving the debtor at least 20 days to cure the default before notice
of sale can be given under Subsection (b).”).
While Mulvey raised various challenges below to U.S. Bank’s status as the holder of the
note and deed of trust, none are urged on appeal, and we conclude that U.S. Bank met its initial
burden of showing that it was entitled to summary judgment on it judicial foreclosure claim.
6 Mulvey thus had the burden to come forward with some evidence to raise a genuine issue of
material fact challenging U.S. Bank’s right to obtain a judicial foreclosure.
Did Mulvey Raise a Fact Issue on His Affirmative Defenses?
Mulvey’s single issue claims that the trial court erred in granting summary judgment
because he asserted affirmative defenses that were “not contested” by U.S. Bank. The substance
of his argument is that he asserted and presented some evidence of at least one affirmative defense
that raises a genuine issue of material fact precluding summary judgment. His affirmative defenses
alleged that: (1) U.S. Bank’s suit was barred by limitations; (2) Wells Fargo insisted on Mulvey
signing “illegal” paperwork, which appears to mean that Wells Fargo improperly advanced
additional money when it modified the loan; and (3) any default was based on Wells Fargo refusing
to accept tendered payments.
Limitations
The sale of real property under a power of sale in a mortgage or deed of trust that creates a
real property lien must be made not later than four years after the day the cause of action accrues.
TEX.CIV.PRAC.&REM.CODE ANN. § 16.035(b); Holy Cross Church of God in Christ v. Wolf, 44
S.W.3d 562, 567 (Tex. 2001). Generally, when a note is payable in installments and is secured by
a real property lien, the four-year limitations period does not begin to run until the maturity date
of the note, or date of the last installment. TEX.CIV.PRAC.&REM.CODE ANN. § 16.035(c); EMC
Mortg. Corp. v. Window Box Ass’n, Inc., 264 S.W.3d 331, 335 (Tex.App.--Waco 2008, no pet.).
However, if that note allows for the acceleration of the payments upon default, the cause of action
accrues when the note holder actually accelerates the note. Wolf, 44 S.W.3d at 566; Boren v. U.S.
Nat. Bank Ass’n, 807 F.3d 99, 104 (5th Cir. 2015). Acceleration requires two distinct unequivocal
actions: (1) a notice of intent to accelerate, and (2) notice that the obligation has been accelerated.
7 Wolf, 44 S.W.3d at 566. Here, under the summary judgment record, the lender’s agent mailed a
notice of an intent to accelerate on October 26, 2010 and a notice of acceleration on November 22,
2010. The lawsuit was filed on November 12, 2014, which is within four years of the actual
acceleration of the debt. The trial court would have properly concluded that Mulvey did not raise
a material fact issue on a statute of limitations defense.
Illegality
Mulvey also claimed that someone told him that Wells Fargo had him sign an “Illegal
Document.” His affidavit fails to identify what document he refers to, nor does he explain what
makes it illegal. He further claims that he declined to pursue any kind of additional loan
modification because it would similarly require him to sign an “illegal” document.
Courts will not enforce an illegal contract. Phillips v. Phillips, 820 S.W.2d 785, 789 (Tex.
1991). However, it is not for a lay witness to decide illegality, and we are not required to simply
accept the assertion of such in Mulvey’s affidavit. Cf. City of Keller v. Wilson, 168 S.W.3d 802,
812-13 (Tex. 2005)(“When expert testimony is required, lay evidence supporting liability is legally
insufficient. In such cases, a no-evidence review cannot disregard contrary evidence showing the
witness was unqualified to give an opinion.”). Without describing any specific document, or
failing to state the basis for the alleged illegality, his affidavit fails to raise any genuine issue of
material fact on an illegality defense.
At most, by parsing his affidavit and written response together, we might surmise that
Mulvey was complaining that the loan modification agreement in November 2008 was an
extension of credit that violated section 50 of Article XVI of the Texas Constitution. Because this
was a home equity loan involving homestead property, the loan must have conformed to the
requirements for such loans as set out in the Texas Constitution. See Tex.Const. art. XVI, § 50.
8 Section 50(c) provides that no mortgage, trust deed, or other lien on the homestead shall ever be
valid unless it secures a debt “described by this section.” Tex.Const. art. XVI, § 50(c).
The loan modification here actually increased the principle due under the note because it
capitalized $9,983.47 of interest into the loan, and thus raised the loan’s principal balance from
$126,400.00 to $132,413.36. Mulvey essentially claims that capitalizing past due interest into the
principal of the loan constitutes a new extension of credit, which would then require the loan
modification to meet the technical qualifications for home equity loans under section 50 of Article
XVI of the Texas Constitution. However, the Texas Supreme Court rejected a similar claim in
Sims v. Carrington Mortg. Services, L.L.C., 440 S.W.3d 10, 15 (Tex. 2014). There, the court held
that “as long as the original note is not satisfied and replaced, and there is no additional extension
of credit, as we define it, the restructuring is valid and need not meet the constitutional
requirements for a new loan.” Id. at 11-12. The court then further defined what was not an
additional extension of credit:
[T]he restructuring of a home equity loan that, as in the context from which the question arises, involves capitalization of past-due amounts owed under the terms of the initial loan and a lowering of the interest rate and the amount of installment payments, but does not involve the satisfaction or replacement of the original note, an advancement of new funds, or an increase in the obligations created by the original note, is not a new extension of credit that must meet the requirements of Section 50.
Id. at 17.
Here, the loan modification agreement specifically stated that the original note and
mortgage would “remain unchanged” and bound both parties except as specifically amended.
Mulvey’s response to the summary judgment complained only that the interest was capitalized into
the loan modification agreement. He asserts no other reason why the loan modification constitutes
an additional extension of credit. But the Sims court characterized recapitalization of interest as a
9 “mechanism for deferring payment of obligations already owed in a way that allows the borrower
to retain his home.” Id. at 16. Based solely on the only argument that Mulvey raised, his summary
judgment proofs did not raise an illegality defense under the Texas Constitution.1
Mulvey accordingly failed to raise a genuine issue of material fact on his illegality defense.
Denial of Tender
Finally, Mulvey’s response to the summary judgment alleged that he “was not past due on
his payments.” His response alleged that he attempted to “make payments to Wells Fargo for a
number of months in 2009” but Wells Fargo “refused the payments.” He also alleged that Wells
Fargo failed to notify him that payments were to be made to another entity and that the account
became delinquent because of Wells Fargo’s acts. His pleading then incorporates his affidavit, in
which he swears that “around July or August of 2009” Mulvey tried to make a payment at a Wells
Fargo Bank but it was refused. The stated basis for the refusal was that he was in active foreclosure
and no longer qualified for the mortgage.
Mulvey’s brief refers to this a “confession and avoidance” defense. Confession and
avoidance is “a plea in which a defendant admits allegations but pleads additional facts that deprive
the admitted facts of an adverse legal effect.” Zorrilla v. Aypco Constr. II, LLC, 469 S.W.3d 143,
156 (Tex. 2015), quoting confession and avoidance, Black’s Law Dictionary 361 (10th ed. 2014).
What Mulvey really alleges is a breach of the agreement by U.S. Bank’s agent, Wells Fargo.
Assuming proper tender, Wells Fargo could not refuse payment, and then declare the note in
default. In several contexts, court have recognized wrongful refusal of a proper tender as a
1 We do note that the monthly payment under the modification agreement differed from that in the original note ($1,176.32 verse $1,104.59). It was impossible to tell from Mulvey’s affidavit or his summary judgment proofs if the increased monthly obligation was based only on the modification agreement or from some other reason. The original note allowed that the monthly payment might fluctuate because the interest rate was adjustable. And in Sims, the court noted that the required payment schedule under a home-equity loan “is not one that, when initially set, can never be altered.” Id. at 16.
10 potential defensive issue. See Guaranty Bank v. Thompson, 632 S.W.2d 338, 340 (Tex. 1982),
citing predecessor version of TEX.BUS.&COM.CODE ANN. § 3.603 (agreeing that the wrongful
failure to accept tender might form a meritorious defense to the claimed default of installment note
contract); Universal Life & Acc. Ins. Co. v. Shaw, 163 S.W.2d 376, 379 (Tex. 1942)(stating similar
rule in context of refused insurance policy payments); In re Smith, 524 B.R. 125, 135-36 (S.D.
Tex. 2015)(allowing common law claim against bank for its wrongful refusal of a payoff that
would discharge deed of trust).
U.S. Bank responds to Mulvey’s argument in two ways. First, it notes that the statute of
frauds precludes any of the oral statements referenced in Mulvey’s affidavit from varying the terms
of the note.2 Modifications to mortgages that exceed $50,000 are subject to the statute of frauds.
TEX.BUS.&COM.CODE ANN.§ 26.02(b)(“A loan agreement in which the amount involved in the
loan agreement exceeds $50,000 in value is not enforceable unless the agreement is in writing and
signed by the party to be bound or by that party’s authorized representative.”); see Miller v. BAC
Home Loans Servicing, L.P., 726 F.3d 717, 726 (5th Cir. 2013)(“It is well-settled in Texas that
agreements pertaining to loans in excess of $50,000 must be in writing, including modifications
of those agreements.”); Kiper v. BAC Home Loans Servicing, LP, 884 F.Supp.2d 561, 571 (S.D.
Tex. 2012)(“The statute of frauds bars and makes unenforceable oral modifications to a loan
agreement under § 26.02 unless they fall within an exception to the statute of frauds or do not
2 The note contains in all caps and bolded the following provision:
13. NO ORAL AGREEMENTS
THIS NOTE CONSTITUTES A ‘WRITTEN LOAN AGREEMENT’ PURSUANT TO SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE, IF SUCH SECTION APPLIES. THIS WRJTTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
11 materially alter the obligations imposed by the original contract.”)(internal quotation marks
omitted). To the extent that Mulvey claims Wells Fargo orally lead him to believe that he did not
need to make his payments, those alleged statement are barred by the statute of frauds.
U.S. Bank also responds that Mulvey failed to show that he made a proper tender. We
agree. A tender is an unconditional offer by a debtor or obligor to pay another, in current coin of
the realm, a sum not less in amount than that due on a specified debt or obligation. Baucum v.
Great Am. Ins. Co. of New York, 370 S.W.2d 863, 866 (Tex. 1963). The tender described in
Mulvey’s affidavit suffers from two problems--it was not made at the proper place and time, and
does not account for all the payments due up to the time of acceleration.
Tender must be at the place provided in the contract for performance. 13 Sarah Howard
Jenkins, Corbin on Contracts, § 67.7 (2003)(“Tender must be made at the time and place required
by the contract.”); 58 Tex.Jur.3rd, Payment, § 8 (2013), at 16 (“Where an obligation is made
payable at a certain place, tender of payment must be made at that place.”). Failure to tender at
the place designated by the contract belies a proper tender. Scott v. Grant, 84 S.W. 265, 266
(Tex.Civ.App. 1904, writ ref’d)(“[W]e hold that the plaintiff’s petition was insufficient and failed
to disclose a cause of action, because it failed to show either payment or tender of the purchase
money at the place required by the contract, and failed to furnish a sufficient excuse for
noncompliance on the plaintiff’s part.”). The note required payments be made on the first day of
each month at “P.O. BOX 17339, BALTIMORE, MD 21297-4339 or at a different place if
required by the Note Holder.” Mulvey swore that sometime in July or August of 2009 he tried to
tender “a payment at the Wells Fargo Bank[.]” He never established that the physical bank location
was allowed or required by note holder.
12 Second, Mulvey swore that he tried to make one monthly payment around July or August
of 2009 (though the payment was due on the 1st of July). He does not claim to have made tender
of any additional monthly payments, nor does his response or briefing explain how a refusal to
accept that single payment excused his performance for all the subsequent payments. U.S. Bank’s
summary judgment was premised on a default of all the payments from July 1, 2009 through
November 22, 2010 when the note was accelerated. Mulvey does not show that the improper
refusal of a single payment excused all the subsequent payments not made under the loan.
In summary, we overrule Mulvey’s single issue and affirm the trial court’s judgment.
December 19, 2018 ANN CRAWFORD McCLURE, Chief Justice
Before McClure, C.J., Rodriguez, and Palafox, JJ.