Opinion
Civil Action No.: SA-03-CA-0141-XR.
July 1, 2004
ORDER
On this day came on to be considered Defendants Countrywide Home Loans, Inc. d/b/a America's Wholesale Lender ("Countrywide") and the Federal National Mortgage Association's ("Fannie Mae") joint motion for summary judgment. After considering the response and replies, the Court GRANTS the motion (docket no. 31).
I. Factual Background
In 1967, Nola Grun acquired property located at 217 Ridgemont Avenue, San Antonio, Texas. In 1999, a $100,000 home equity loan was secured. The request for the refinancing of the 1999 home equity loan originated from Henry Jr., the son of Ms. Grun. Henry Jr. and his wife Janet, used the home equity loan to redecorate the home, install a new air conditioning unit, swimming pool and spa, and improve the landscaping. Thereafter, Henry Jr., Janet, and their son moved in with Ms. Grun. On April 24, 2001, another home equity loan was sought for a $250,000 cash-out refinancing. On June 19, 2001, documents regarding the refinanced home equity loan were placed before Nola Grun. At that time, Ms. Grun was a widow and almost ninety years of age. Henry Jr. was licensed to practice law in the state of Texas at that time, and was allegedly acting as his mother's attorney.
Henry Jr. was disbarred in December 2002 for misappropriating client funds.
Henry Jr. admits in his deposition testimony that there was no written contract between he and his mother regarding his representation. Further, he states in his deposition that there was "no kind of agreement with her to represent her." (January 16, 2004 deposition at p. 26). Ms. Grun, however, testified that she gave Henry Jr. a Power of Attorney, he was her attorney, and she trusted him completely with all her affairs. (November 18, 2003 deposition at pp. 31, 33, 37, and 39-41, 69). Henry Jr. states that he was not acting as Ms. Grun's agent, or under the Power of Attorney, with regard to this home equity loan. (January 16, 2004 deposition at p. 68).
Gregory Rubiola d/b/a Rubiola Mortgage Company ("Rubiola") assisted Henry Jr. in procuring the second home equity loan. Documents supporting the loan application claimed that Ms. Grun was a self-employed artist. Twelve months of bank statements were supplied by Henry Jr. in support of the loan application. Based on these bank statements, Rubiola's office calculated that Ms. Grun was earning in excess of $13,000 per month. Evidently, although Henry Jr. supplied bank statements identifying Nola Grun, Henry Jr. was actually utilizing his mother's bank account and the bank statements reflected his income from his then existing law practice. Although Ms. Grun's total monthly income was less than $2,000 per month, Ms. Grun would owe $2,817 per month for the principal, interest, tax and insurance payments.
The reality was Ms. Grun was a 90 year old widow living on social security benefits, who never was a professional artist, and who was already in arrears on her original home equity loan.
Notwithstanding that Henry Jr. drafted a statement indicating that the extra $119,276 was going to be used to establish a fund to pay insurance, taxes and 12 months of mortgage payments, Ms. Grun's last payment on the loan was in February 2002. On June 13, 2002, a notice of default and intent to accelerate the loan was sent to Ms. Grun by certified mail. Henry Jr., who was living in the house and was allegedly acting as his mother's attorney, signed for the letter on June 15, 2002. On August 8, 2002, Countrywide instituted a foreclosure suit against Ms. Grun in the 225th Judicial District Court of Bexar County, Texas. A default foreclosure order was entered on October 7, 2002. Ms. Grun argues that she did not receive notice of the suit or a copy of the default judgment. In the alternative, her guardian alleges that if either was received, Ms. Grun was not competent to understand the meaning of the notice or the default judgment. Further, Ms. Grun argues that the default judgment required a copy of the judgment to be sent to her attorney. Henry Jr., claims that at this point he was his mother's attorney, and that he provided Countrywide with notice of his representation but did not receive a copy of the default judgment at his place of business.
$250,000 minus payment of the first lien and closing costs.
Ms. Grun's property was sold to Fannie Mae on November 5, 2002, for $222,127.71. At the time of the foreclosure sale, Ms. Grun alleges that her home had a fair market value between $400,000 and $500,000. On January 16, 2003, a motion for new trial was granted in the Bexar County case, and the default judgment was set aside. Countrywide now complains that Henry Jr. and his family continue to reside in the home, but have not made a single loan payment since February 2002. Ms. Grun is no longer living in the home because in October 2003, Henry Jr. and his wife, Janet, placed her in a retirement home. A month after she was placed in the retirement home, Ms. Grun was found to be an incapacitated person pursuant to an Order signed by the Honorable Tom Rickhoff, Probate Court No. 2, Bexar County, Texas.
In this lawsuit, Ms. Grun seeks a declaratory judgment that the Deed of Trust being used by the Defendants to create a lien on her property is void or unenforceable. In the alternative, Ms. Grun seeks to set aside the refinanced home equity note and mortgage because they were procured by fraud and undue influence. As such, Ms. Grun petitions the Court to set aside the foreclosure sale held on November 5, 2002. Finally, Ms. Grun petitions for injunctive relief against Fannie Mae from entering and appropriating her property.
II. Jurisdiction
On April 9, 2003, the Honorable Edward C. Prado denied the Plaintiff's motion to remand finding that jurisdiction existed in this case pursuant to 12 U.S.C. § 1723a. Fannie Mae's charter gives it the authority "to sue and be sued, and to complain and defend, in any court of competent jurisdiction, State or Federal." Citing Am. Nat'l Red Cross v. S.G. A.E., 505 U.S. 247 (1992), Judge Prado concluded that a congressional charter to "sue and be sued" confers jurisdiction in this Court over this controversy. Thus, subject matter jurisdiction exists.
III. Analysis
A. Did Plaintiff receive all notices that she was entitled to?
Plaintiff complains that she did not receive adequate notice of Countrywide's intention to foreclose. A party seeking to foreclose on a home equity mortgage must provide notice to the party being foreclosed upon. See TEX. R. CIV. P 735 and 736. The party seeking to foreclose must: (1) give the requisite notices to cure the default and accelerate the maturity of the debt under the security instrument; (2) provide notice to the debtor of the Rule 736 application; and (3) complete a certificate of service. If the above requirements are met, and no response has been filed by the debtor, Rule 736 provides that the court shall grant the application without further notice or hearing. The order granting a Rule 736 application "shall recite the mailing address and legal description of the property, direct that foreclosure proceed under the security instrument and Texas Property Code § 51.002, provide that a copy of the order shall be sent to respondent with the notice of sale, provide that applicant may communicate with the respondent and all third parties reasonably necessary to conduct the foreclosure sale, and, if respondent is represented by counsel, direct that notice of the foreclosure sale date shall also be mailed to counsel by certified mail." TEX. R. CIV. P. 736(8)(B).
"Service of the application and notice shall be by delivery of a copy to the party to be served by certified and first class mail addressed to each party who, according to the records of the holder of the debt is obligated to pay the debt. Service shall be complete upon the deposit of the application and notice, enclosed in a postage prepaid and properly addressed wrapper, in a post office or official depository under the care and custody of the United States Postal Service. If the respondent is represented by an attorney and the applicant's attorney has knowledge of the name and address of the attorney, an additional copy of the application and notice shall be sent to respondent's attorney." TEX. R. CIV. P. 736(2)(A).
"The applicant or applicant's attorney shall certify to the court compliance with the service requirements of Rule 736. The applicant shall file a copy of the notice and the certificate of service with the clerk of the court. The certificate of service shall be prima facie evidence of the fact of service." TEX. R. CIV. P. 736(2)(B).
"At any time after a response is due, the court shall grant the application without further notice or hearing if: (A) the application complies with Rule 736(1); (B) the respondent has not previously filed a response; and (C) a copy of the notice and the certificate of service shall have been on file with the clerk of the court for at least ten days exclusive of the date of filing." TEX. R. CIV. P. 736(5).
As stated above, on June 13, 2002, a notice of default and intent to accelerate the maturity of the loan was sent to Ms. Grun by certified mail. A creditor's obligation to give notice to a debtor, prior to acceleration, is completed upon sending such notice by certified mail, notwithstanding the addressee's failure to claim it. Grant-Brooks v. Wilshire Credit Corp., 2004 WL 1194462 (N.D. Tex. 2004) citing Dillard v. Broyles, 633 S.W.2d 636, 641 (Tex.App.-Corpus Christi 1982, writ ref'd n.r.e.), cert. denied, 463 U.S. 1208 (1983). Here, Henry Jr. signed for the letter on June 15, 2002. Absent fraud by Countrywide in that notice, Ms. Grun's failure to read her mail is not grounds to avoid it. Cf. Estes v. Republic Nat. Bank of Dallas, 462 S.W.2d 273 (Tex. 1970) (absent fraud, failure to read contract is not grounds to avoid it). Moreover, Henry Jr. was allegedly acting as his mother's attorney during this time period. Thus, Plaintiff is unable to dispute that she had constructive notice of the notice of default and intent to accelerate the loan. (Exhibit 10, Appendix to Countrywide's Motion for Summary Judgment).
Countrywide next sent the notice and a copy of the application to foreclose. (Exhibit 19, Appendix to Countrywide's Motion for Summary Judgment). The notice was sent by certified mail and first class mail. Id. This time, the certified mail was acknowledged by Janet Grun, Henry Jr.'s wife who was living at the home. (Exhibit 11, Appendix to Countrywide's Motion for Summary Judgment). Again, Ms. Grun must be held responsible for her mail. For this notice, Plaintiff appears to argue that because Henry Jr. was acting as her attorney at this time, he was entitled to receive the application notice at his place of business. Although Henry Jr's deposition testimony sheds some doubt that he was acting in his mother's best interest and as her attorney at this time, he still resided at the very address all these notices were delivered to, and he, his wife and his son acknowledged receipt of them. Thus, Countrywide complied with the application notice requirements of Rule 736(2)(A) and (B).
Plaintiff also argues that she never received a copy of the default foreclosure order. The Bexar County presiding judge signed the Home Equity Foreclosure Order on October 7, 2002. A copy of the Order was sent by certified mail and received by either Nola Grun, or another member of the Grun family, on October 15, 2002. (Exhibits 11 and 17, Appendix to Countrywide's Motion for Summary Judgment). Ms. Grun cannot argue that she, or a member of her household, did not receive a copy of the foreclosure order. With regard to the argument that Henry Jr. was acting as his mother's attorney and was entitled to receive a copy of the order, Defendants submitted proof that he or a member of his household received the order at his residence. Thus, Countrywide complied with the notice requirements of Rule 736(8)(B) and Ms. Grun is charged with the knowledge of the default.
Notwithstanding receipt of the notices, Plaintiff argues that she did not have the mental capacity to enter into the loan and thus, did not have the mental capacity to understand the notices. In response to Defendants' motion for summary judgment, Plaintiff submitted the affidavit of Louis D. Holst, M.D. Dr. Holst opined that Ms. Grun "suffers from macular degeneration and has a substantial hearing impairment despite the assistance of hearing aids" and that "as a result of the aging process, Nola P. Grun, more than 90 years old and frail, has experienced the natural decline in certain mental functions." He further opines that "Nola P. Grun's mental incapacity is progressive, and due to the subtle progression of her decline in mental function . . . that she has been unable to manage her financial and business affairs for more than two years prior to my April 17, 2003 examination." Countrywide responds that Plaintiff has failed to demonstrate that Dr. Holst, a general practitioner, is qualified to testify as to the Plaintiff's mental capacity in June 2001. Further, Defendants argue that there is no proof, absent Dr. Holst's "unsupported conclusion" that Ms. Grun was not competent at the time she signed the loan documents.
"Mental capacity to make a deed simply means sufficient capacity to know and understand in a reasonable manner the nature and character of the transaction engaged in. . . ." Shelton v. Shelton, 281 S.W. 331 (Tex.Civ.App.-Austin 1926, no writ). The burden rests on Ms. Grun's guardian, relying upon want of capacity, to prove that fact. See Gonzalez v. Mendoza, 739 S.W.2d 120, 121-122 (Tex.App.-San Antonio 1987, no writ). The Court finds that Ms. Grun's guardian has failed to demonstrate that Dr. Holst, a general practitioner, is qualified to testify as to the Plaintiff's mental capacity in June 2001. The Supreme Court in Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999), stated that the Daubert standard for experts is a flexible one, but that a district court should "make certain that an expert, whether basing testimony upon professional studies or personal experience, employs in the courtroom the same level of intellectual rigor that characterizes the practice of an expert in the relevant field." Kumho, 526 U.S. at 152. Dr. Holst fails to provide any analysis to substantiate his conclusion that Ms. Grun was not competent at the time she signed the loan documents because elderly persons are not presumptively incompetent. Edward D. Jones Co. v. Fletcher, 975 S.W.2d 539, 545 (Tex. 1998); see also Smith v. Smith, 607 S.W.2d 617, 620 (Tex.Civ.App.-Waco 1980, no writ) ("Old age, sickness or distress in mind and body may or may not constitute unsoundness of mind; and unsoundness of mind at another time, prior or after the making of a deed may or may not indicate lack of mental capacity at the time of making the deed. The controlling question is the condition of the grantor's mind at the time the deed was executed."). Ms. Grun, the party carrying the burden on this issue, fails to establish that she lacked the requisite capacity to know and understand in a reasonable manner the nature and character of the transaction she entered into in June 2001.
Absent proof and determination of mental incapacity, a person who signs a document is presumed to have read and understood the document. See Reyes v. Storage Processors, Inc., 995 S.W.2d 722, 725 (Tex.App.-San Antonio 1999, pet. denied). Although Ms. Grun was in her nineties when she signed for the home equity loan, her age alone does not indicate she was mentally incompetent. Ms. Grun was not found incompetent by a court of law until November 2003. In fact, the Court notes that Ms. Grun submitted an affidavit in the Bexar County court in January 2003, in support of her Motion for New Trial. In it, there was no claim of mental incapacity and she based her affidavit upon personal knowledge. Thus, as a matter of law, Ms. Grun was not incapacitated during the notice time period required by Texas Rules of Civil Procedure 735 and 736.
B. Does the sales price render the foreclosure void?
As stated above, Ms. Grun's property was sold to Fannie Mae on November 5, 2002. At the time of the foreclosure sale, Ms. Grun alleges that her home had a fair market value between $400,000 and $500,000. Fannie Mae purchased the property for $222,127.71 which Plaintiff argues is grossly inadequate. However, the "mere inadequacy of consideration is not grounds for setting aside a trustee's sale if the sale was legally and fairly made." American Sav. and Loan Ass'n of Houston v. Musick, 531 S.W.2d 581, 587 (Tex. 1975). There must also be evidence of some irregularity that caused or contributed to the sale for a grossly inadequate price. Id.; See also Powell v. Stacy, 117 S.W.3d 70, 75 (Tex.App. — Ft. Worth 2003, no writ). Plaintiff argues that because the real property was not described with sufficient particularity and then sold for inadequate consideration, the foreclosure must be set aside.
Plaintiff argues that the Deed of Trust referred to "Terrell Hills an addition to the City of San Antonio, Bexar County, Texas." It should read as follows: "City of Terrell Hills, Bexar County, Texas." Defendant notes that the legal description in the Deed of Trust calls for "South 28 deg. 20 min. 17 sec." instead of "South 79 degrees 03 min." While inaccurate in its recitation of the course degree, the Deed of Trust nevertheless correctly states that the course is with the "south line of Lot II, 100.000 feet to an iron pin set for the northeast corner of [Lot 7]." Thus, the description contains a "call for an adjoinder" which controls over a mistaken call for course. The Court finds that these two irregularities do not result in any deficiency in describing the property to be conveyed and did not contribute to the consideration at issue. See Templeton v. Dreiss, 961 S.W.2d 645, 658 (Tex.App.-San Antonio 1998, pet denied).
C. Did the Order granting a New Trial void the sale to Fannie Mae?
The property was sold by the Substitute Trustee to Fannie Mae on or about November 5, 2002. On or about January 21, 2003, the Bexar County court granted Plaintiff's Motion for New Trial. Plaintiff argues that Countrywide lost its right to proceed non-judicially when the Bexar County court withdrew the October 7, 2002, default judgment and foreclosure order. Defendants respond that Rule 736 governs this issue.
Rule 736 establishes a procedure to obtain a court order allowing foreclosure of a home equity loan. This Court, as outlined above, has found that Countrywide properly established that a default occurred and otherwise met all the notice provisions of Rule 736. Accordingly, the Bexar County district court properly signed its court order allowing foreclosure. It also appears that on or about November 5, 2002, Fannie Mae was a "bona fide" or "innocent" purchaser of the property. This Court finds that Texas Rule of Civil Procedure 329 applies to this situation. Rule 329(c) states: "If property has been sold under the judgment and execution before the process was suspended, the defendant [Grun] shall not recover the property so sold, but shall have judgment against the plaintiff [Fannie Mae] in the judgment for the proceeds of such sale." Accordingly, since the property was lawfully sold prior to Grun's motion for new trial, Plaintiff's argument that the sale is void fails. Plaintiff cannot overturn the valid sale but could only recover a judgment for the proceeds of such sale if she succeeds in this lawsuit.
The Court notes, however, that this affirmative defense has not been pled by Fannie Mae.
D. Was the lien valid?
Plaintiff argues that Countrywide failed to obtain a valid lien because the requirements of the Texas Constitution article XVI, § 50(a)( 6) were not satisfied. Specifically, Grun complains that the equity loan's closing costs exceeded the 3% cap, that she was not given a twelve — day cooling off period, that a three day right of rescission was not provided, and that she was required to prepay hazard insurance out of the loan proceeds in violation of section 50(a)(6)(Q)(i).
"Sec. 50. (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: . . . (E) does not require the owner or the owner's spouse to pay, in addition to any interest, fees to any person that are necessary to originate, evaluate, maintain, record, insure, or service the extension of credit that exceed, in the aggregate, three percent of the original principal amount of the extension of credit. . . ."
"Sec. 50. (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. . . ."
"(viii) the owner of the homestead and any spouse of the owner may, within three days after the extension of credit is made, rescind the extension of credit without penalty or charge. . . ."
"(i) the owner of the homestead is not required to apply the proceeds of the extension of credit to repay another debt except debt secured by the homestead or debt to another lender. . . ."
The 3% cap
Grun argues that pursuant to § 50(a)( 6)(E) of article XVI of the Texas Constitution, she should not have been charged more than $7,500. Total settlement charges for Grun were $13,351.84. The breakdown was as follows: $7,500 for an alleged loan discount, $462.30 for interest, $2,909 for hazard insurance, $50 for attorney's fees, $2,117.30 for title insurance, $51.24 for a tax certificate, $150 for an escrow fee, $30 for courier and federal express fees, $50 for a recording fee and $32 for a record assign/affidavit. In a case of first impression, the Waco court of appeals in Tarver v. Sebring Capital Credit Corp., 69 S.W.3d 708 (Tex.App.-Waco 2002, no pet.) concluded "that points are not `fees' under subsection `E,' because they are not charged to `originate, evaluate, maintain, record, insure, or service the extension of credit.' TEX. CONST. art. XVI, § 50(a)( 6)(E)." Id. at 712. See also Pelt v. U.S. Bank Trust Nat. Ass'n, 2002 WL 31006139 (N.D. Tex. 2002).Grun attempts to overcome the holding in Tarver by arguing that loan discounts or points are paid to a lender in order to secure more favorable interest rates. In this case, Grun argues that the loan discount was paid to Rubiola, the broker, rather than Countrywide, the lender. Grun argues that the $7,500 paid to Rubiola was actually a broker's discount fee. (Exhibit 14 and 14A, Appendix to Plaintiff's Response to Joint Motion for Summary Judgment). In its latest reply, Countrywide concedes that the $7,500 paid to Rubiola was a broker's fee. It nevertheless argues that the 3% cap was not violated because the final settlement statement indicates Rubiola credited Grun with $2,500. Grun does not dispute that she received the $2,500. In addition, Countrywide argues that the $2,909 charged for hazard insurance is excluded from the 3% cap calculation. See 7 TEX. ADMIN. CODE § 153.5 (16). Since property insurance is excluded from the 3% calculation, and Grun did not pay $7,500 (but only paid $5,000), Countrywide did not exceed the 3 percent cap.
"(16) Property Insurance Premiums. Premiums an owner or an owner's spouse is required to pay to purchase homeowner's insurance coverage are not fees subject to the three percent limitation. Examples of property insurance premiums include fire and extended coverage insurance and flood insurance. Failure to maintain this insurance is generally a default provision of the equity loan agreement and not a condition of the extension of credit. The lender may collect and escrow premiums for this insurance and include the premium in the periodic payment amount or principal amount. If the lender sells insurance to the owner, the lender must comply with applicable law concerning the sale of insurance in connection with a mortgage loan."
$13,351.84 minus $462.30 for interest minus $2,500 credit minus $2,909 for hazard insurance equals $7,480.54.
The 12 day cooling off period
Pursuant to section 50(a)(6)(M), a homestead is protected from forced sale by ensuring a "12 day cooling off period" before a home equity loan can be closed. The application was submitted on April 24, 2001. The closing took place on June 19, 2001. Plaintiff argues that the signature located on the April 24, 2001, application is not hers. In support, she relies upon the affidavit of Michael Weldon, a forensic document examiner. Accordingly, she argues that since she is the owner of the homestead, and did not sign the April 24, 2001, application, the requisites of section 50(a)(6)(M) have not been met.Pursuant to the Texas Administrative Code, a loan application may be given orally or electronically. 7 TEX. ADMIN. CODE § 153.12 Accordingly, whether Ms. Grun signed the application is not controlling. Rather, the issue is whether Countrywide knew, or had reason to know, that Ms. Grun was not submitting the application. Ms. Grun offers no evidence that Countrywide was aware that someone other than her was submitting the application. Although she appears to argue her son, Henry Jr. submitted the loan application for her, she also testified that Henry Jr. was her attorney, and that she trusted him completely with all her affairs. (November 18, 2003 deposition at pp. 31, 33, 37, and 39-41, 69). Even if Henry Jr. submitted the loan application, Ms. Grun cannot show that Countrywide had reason to suspect it's authenticity. Thus, no fact issue exists to demonstrate that the twelve day cooling off period was not met.
The three-day right of rescission
The Texas Home Equity Adjustable Rate Note had an effective date of June 18, 2001. The settlement date was June 19, 2001. The Texas Home Equity Security Instrument (First Lien) and Deed of Trust were signed on June 22, 2001, and the Election not to Rescind was signed on June 25, 2001. Grun argues that the three day right of rescission began on June 22, and accordingly, she had until June 26 to exercise her right of rescission. Countrywide argues that Plaintiff has not pled, or otherwise identified in discovery, that there was any violation of the three day right of rescission provision, and that the Court should strike this argument from Plaintiff's response. The Court denies Defendants' motion to strike the allegations and proceeds to analyze the merits of Plaintiff's claim.
An owner "may rescind the extension of credit within three calendar days. If the third calendar day falls on a Sunday or federal legal public holiday then the right of rescission is extended to the next calendar day that is not a Sunday or federal legal public holiday." 7 TEX. ADMIN. CODE § 153.25. The Court finds that the extension of credit was made, and accepted by Ms. Grun for purposes of the three day right of rescission, on June 19, 2001. On June 18, Countrywide offered the credit, and on June 19, Grun accepted the offer. The Election not to Rescind was signed on June 25, 2001. Thus, the three day provision was satisfied.
In any event, this case is not a situation where an attempt was made by Plaintiff to rescind the loan at any time during the June 2001 time frame. Plaintiff only now argues this constitutional violation in an attempt to overcome her foreclosure.
Prepayment of hazard insurance
Grun acknowledges that prepayment of hazard insurance was a requirement of the loan, however, she complains that prepayment of hazard insurance out of the loan proceeds should not be required and was not disclosed prior to the closing of the loan. She argues that she likely could have obtained better premium rates on her own. Countrywide responds that there is no evidence that it required prepayment of hazard insurance out of the loan proceeds. It argues that in the absence of the borrower obtaining insurance prior to closing, this was a voluntary choice made by the borrower. Countrywide's closing instructions and the Texas Home Equity Security Instrument (First Lien) substantiate this claim. Otherwise, section 50(a)(6)(Q)(i) does not prohibit this arrangement. See Stringer v. Cendant Mortg. Corp., 23 S.W.3d 353, 355 (Tex. 2000). Therefore, this argument fails and is unsubstantiated by law or fact.E. Plaintiff claims that the note and mortgage should be set aside because of fraud and undue influence
Ms. Grun argues that her son Henry Jr., Gregory Rubiola and Rubiola Mortgage Company, and Commerce Land Title Inc. conspired together to defraud her. To recover for fraud or misrepresentation, a plaintiff is required to prove: "(1) that a material misrepresentation was made; (2) that it was false; (3) that the speaker knew it was false when made or that the speaker made it recklessly without any knowledge of the truth and as a positive assertion; (4) that he made it with the intention that it be acted upon by the other party; (5) that the party acted in reliance upon it; and (6) damage." T.O. Stanley Boot Co., Inc. v. Bank of El Paso, 847 S.W.2d 218, 222 (Tex. 1992).
Ms. Grun provides no evidence that Defendants Countrywide or Fannie Mae ever exercised any undue influence over her. Further, Ms. Grun provides no evidence that Defendants Countrywide or Fannie Mae ever made any false and material misrepresentations to her that she relied upon to her detriment. Plaintiff responds that Countrywide set the "conditions" under which the loan would close, and accepted false documents. But there has been no allegation by Ms. Grun that Countrywide or Fannie Mae created any false documents or knew that the documents submitted were false. Indeed, if any fraudulent activity took place, it apparently was undertaken by Ms. Grun's son, Henry Jr. In an affidavit Henry Jr. provided the Bexar County court in seeking a new trial, Henry Jr. testified that he "was representing Nola P. Grun as her attorney during all relevant times." He claims he never received certain notices related to the failure to pay the note, but on June 13, 2002, a notice of default and intent to accelerate the loan was sent to Ms. Grun by certified mail and Henry Jr. signed for it. Other members of Henry Jr.'s family received and signed for all notices sent in this case. Henry Jr. testified in his affidavit that "Nola P. Grun never understood the amount of the loan for which she was signing." Yet, Henry Jr. was her son and attorney and was present when Ms. Grun signed the closing documents. Henry Jr. states in his affidavit that the loan amount was increased from $160,000 to $250,000, but fails to state that he requested, ostensibly on behalf of his mother, the increased amount. Henry Jr. states that a letter was written explaining what the funds were going to be used for, but fails to disclose that he wrote the letter. Finally, Henry Jr. supplied the allegedly false financial documents relied upon by Countrywide and Rubiola. Because Ms. Grun cannot connect Countrywide and Fannie Mae to the fraudulent procurement of this loan, their joint motion for summary judgment is GRANTED.
Conclusion
Grun's guardian argues that "the testimony and documents in this case . . . indicate . . . that she has been taken advantage of and financially abused." The Court agrees. The salient question is who is responsible? The guardian complains that Fannie Mae was created to help families achieve home ownership, but that it is involved in a loan that strips a 93-year old widow out of the equity in her home. But Countrywide and Fannie Mae did not make any fraudulent statements or exert any undue influence that resulted in this unfortunate situation. The person primarily responsible for this tragic situation appears to be Henry Jr., who currently lives in his mother's home free of rent, who acquiesced in having her placed in a retirement home, who had his mother obtain a $100,000 home equity loan to refurbish the home which he then moved in to, and who had his mother obtain a second home equity loan apparently utilizing the $119,276 in proceeds for his own benefit.
Countrywide and the Federal National Mortgage Association's Joint Motion for Summary Judgment is GRANTED (docket no. 31) . Defendants' motion to strike Plaintiff's fraud allegations because they do not satisfy Federal Rule of Civil Procedure 9 is DENIED as moot. This Order has no impact on the cross-claims at issue.