Opinion
No. 04-22-00223-CV
04-30-2024
REVERSE MORTGAGE SOLUTIONS, INC., Appellant v. Greg HELD, Joe J. Reilly, Jr., and Allstate Vehicle and Property Insurance Company, Appellees
APPELLANT ATTORNEY: Amanda Hoffmann, Title Resources Guaranty Company, 8111 LBJ Fwy., Ste. 1200, Dallas, TX 75251. APPELLEE ATTORNEY: Mark Stanton Smith, Heard & Smith, LLP, 9601 McAllister Fwy., Ste. 620, San Antonio, TX 78216, Michael P. Wortham, The Wortham Law Firm, 12001 N. Central Expy., Ste. 650, Dallas, TX 75243-3795. Sitting: Luz Elena D. Chapa, Justice (not participating), Beth Watkins, Justice, Liza A. Rodriguez, Justice
From the 288th Judicial District Court, Bexar County, Texas, Trial Court No. 2020-CI-10472, Honorable Antonia Arteaga, Judge Presiding
APPELLANT ATTORNEY: Amanda Hoffmann, Title Resources Guaranty Company, 8111 LBJ Fwy., Ste. 1200, Dallas, TX 75251.
APPELLEE ATTORNEY: Mark Stanton Smith, Heard & Smith, LLP, 9601 McAllister Fwy., Ste. 620, San Antonio, TX 78216, Michael P. Wortham, The Wortham Law Firm, 12001 N. Central Expy., Ste. 650, Dallas, TX 75243-3795.
Sitting: Luz Elena D. Chapa, Justice (not participating), Beth Watkins, Justice, Liza A. Rodriguez, Justice
OPINION
Opinion by: Liza A. Rodriguez, Justice
Reverse Mortgage Solutions, Inc. ("RMS") appeals from the portion of the trial court’s judgment that (1) declares it does not have a valid lien on the property commonly known as 11715 Pepper Tree Street in San Antonio, Texas ("the Property"); (2) releases said lien; and (3) awards the interpled funds to be divided between Appellees Greg Held and Joe J. Reilly, Jr. On appeal, RMS argues the trial court erred in its rulings because the lien on the Property was valid. Specifically, RMS argues (1) the Trustee consented to the lien on the Property as required by the Texas Constitution; (2) any alleged violation of the U.S. Department of Housing and Urban Development ("HUD") rules does not invalidate the lien on the Property; and (3) a reverse mortgage was permitted under the terms of the Trust. Because we hold the trial court erred in determining the lien was invalid, we reverse its judgment in part.
No party has appealed the portion of the trial court's judgment that declared the Agreement to Change Separate Property to Community Property validly converted the Property from separate property to community property. Thus, that portion of the judgment is affirmed.
B ackground
Pursuant to an Agreed Statement of Facts filed by the parties, the undisputed facts in this case are as follows:
Joe J. Reilly, Sr. ("Joe Sr.") purchased the Property when he was single and held title solely in his name as separate property. In 1989, Joe Sr. married Mona P. Reilly ("Mona"). At the time of their marriage, Joe Sr. had two children (Appellee Joe J. Reilly, Jr. ("Joe Jr.") and Teresa Reilly), and Mona had three children (Appellee Greg Held, Lisa Lansing, and another daughter who predeceased Joe Sr.).
On October 31, 1989, Joe Sr. executed a Last Will and Testament with testamentary trusts. In 1991 and 1994, Joe Sr. executed codicils to his will. The Last Will and Testament, along with the two codicils, are collectively referred to as "the Will." In 2005, Joe Sr. and Mona signed an "Agreement to Change Separate Property to Community Property." This agreement was dated May 18, 2005.
Joe Sr. died testate in 2007. At the time of his death, Mona was still his spouse. The Will conveyed his entire estate (except for two cash bequests) into two testamentary trusts: a "tax exempt trust" and a "marital deduction trust" (collectively "the Trust"). Under the tax exempt trust, Mona was entitled to receive the income of the Trust and could receive principal if her own property and income was insufficient to provide for her health, support, and maintenance in the manner to which she was accustomed at the time of Joe Sr.’s death. For the marital deduction trust, Mona was entitled to receive the income of the Trust and could receive principal if, in light of her other sources of support, income, and principal, the trustee deemed it necessary for her reasonable health, maintenance, and support in a manner to which she was accustomed at the time of Joe Sr.’s death. The Will appointed Mona as Trustee. Upon Mona’s death, any remaining assets of the Trust were devised to the beneficiaries of Joe Sr.’s Trust: Joe Jr. and Teresa.
On September 23, 2013, Mona obtained a home equity loan ("the Loan"). She executed an Adjustable-Rate Note (Home Equity Conversion) ("the First Note") in the original principal amount of $412,500 in favor of Cherry Creek Mortgage Co., Inc. ("Cherry Creek"). The signature on the First Note is "Mona P. Reilly." The collateral for the Loan was the Property, as shown by Mona’s execution of an Adjustable Rate Home Equity Conversion Deed of Trust ("First Deed of Trust"), which was also dated September 23, 2013. The signature on the First Deed of Trust is "Mona P. Reilly." At the time Mona signed the First Note and the First Deed of Trust, she was the Trustee of the Trust. Mona also executed a second note ("Second Note") and a second deed of trust ("Second Deed of Trust") in favor of the Secretary of Housing and Urban Development as the insurer of the Loan. The signatures on the Second Note and the Second Deed of Trust are "Mona P. Reilly."
On or about September 23, 2013, the Loan closed, and proceeds from the Loan in the amount of $178,214.05 were wired from Cherry Creek to Providence Title Company. On or about September 30, 2013, Providence Title Company wired Mona the proceeds from the Loan in the amount of $174,031.24. Proceeds from the Loan in the amount of $526.50 were paid to USAA for the homeowner’s insurance premium on the Property. From September 2013 and continuing through the date of trial, RMS and/or its predecessor-in-interest paid the homeowner’s insurance on the Property.
Cherry Creek, the lender, prepared the agreements comprising the reverse mortgage, including the First Note, the First Deed of Trust, the Second Note, the Second Deed of Trust, and a Home Equity Conversion Loan Agreement. The First Note defined "Borrower" to mean each person signing at the end of the First Note. The signature was set up and signed as "Mona P. Reilly." The First Deed of Trust and the Second Deed of Trust state that the grantor of the security interest is "Mona P. Reilly, A Single Woman." The signatures on the First Deed of Trust and the Second Deed of Trust were set up and signed as "Mona P. Reilly."
There is no recorded instrument concerning the Property with Mona in the chain of title.
On July 11, 2019, the First Deed of Trust and Second Deed of Trust were assigned to RMS. RMS alleged that as of January 4, 2022, the amount due and owing on the Loan was $284,339.07, with said amount increasing $27.98 per diem.
On December 30, 2019, Mona passed away. Since his mother’s death, Held has had possession and control of the Property.
On January 20, 2020, the Property was destroyed by a fire and declared to be a total loss. Allstate Vehicle and Property Insurance Company ("Allstate"), which insured the property under a residential homeowner’s insurance policy, agreed to make available the entire dwelling and debris removal limits as payment under its policy for the loss. It thus interpled funds in the amount of $246,338.74 in the registry of the court and requested the trial court to distribute the funds to the proper parties. Noting that Allstate was "subject to rival claims," the trial court allowed Allstate to deposit funds in its registry, discharged Allstate from any and all liability, and dismissed it as a party to the lawsuit.
Because the trial court's order dismissing Allstate was interlocutory and not severed from the underlying litigation, Allstate is listed as an appellee in this appeal from the final judgment.
Held brought a cross claim for declaratory judgment, requesting that the trial court declare that RMS had no valid lien on the Property and thus had no claim to the insurance proceeds deposited in the registry of the court. Joe Jr. filed a similar cross claim, requesting the trial court to declare no valid lien existed on the Property. Joe Jr. also filed a cross claim that requested the trial court declare the Agreement to Change Separate Property to Community Property signed by Joe Sr. and Mona was unenforceable.
Teresa assigned her interest in the Property and insurance proceeds to Joe Jr.
In addition, RMS brought a claim for affirmative relief, requesting that the trial court declare that RMS’s lien on the Property was valid, that RMS held the position as senior creditor with superior right to the interpled funds, and that RMS was entitled to recover the interpled funds in their entirety.
At the bench trial, the parties agreed the facts stated in the Agreed Statement of Facts were undisputed. Twenty-five exhibits were also admitted in evidence at trial, including the First Note, the First Deed of Trust, the Second Note, the Second Deed of Trust, the Agreement to Change Separate Property to Community Property, and the history of payments on the Loan that showed the payoff amount on the Loan as of January 4, 2022 was $284,339.07.
The parties also agreed that each party’s attorney’s fees were reasonable and necessary in the following amounts: (1) $25,000 for preparation and trial of the case in the district court; (2) $10,000 for any appeal to the court of appeals; and (3) $10,000 for any appeal to the Texas Supreme Court.
After hearing argument from counsel and reviewing the evidence admitted, the trial court determined RMS did not have a valid lien on the Property because the First Deed of Trust was "ineffective to establish a valid lien upon [the Property]." The trial court thus ordered "any purported lien which was attempted to be established by this document … to be released." The trial court further determined that the Second Deed of Trust was also "ineffective to establish a valid lien upon [the Property]" and ordered "any purported lien which was attempted to be established by this document … to be released." The trial court thus denied RMS’s claim for affirmative relief and granted Appellees Joe Jr.’s and Greg Held’s respective cross claims for declaratory judgment by declaring that no lien on the Property existed.
The trial court also considered Joe Jr.’s cross claim for declaratory judgment, which requested the trial court to declare the Agreement to Change Separate Property to Community Property, signed on May 18, 2005 by Joe Sr. and Mona, did not convert the Property from Joe Sr.’s separate property to community property. The trial court denied Joe Jr.’s cross claim and determined that the Agreement did con- vert the Property from separate property to community property.
No party has appealed this determination by the trial court. Thus, with regard to this finding, the judgment of the trial court is affirmed.
Because the trial court determined RMS did not have a valid lien on the Property and the Property was community property, the trial court determined that the interpled funds should be divided equally between Held and Joe Jr., "but that prior to such division, attorney’s fees and costs should be awarded" under section 37.009 of the Texas Civil Practice and Remedies Code to Held in the following amounts: $25,000 for the trial of the case; an additional $10,000 for any appeal to the court of appeals; and $10,000 for any appeal to the Texas Supreme Court. RMS appealed.
It appears the trial court awarded Held attorneys' fees, and not Joe Jr., because Held prevailed on the issue of whether the Agreement to Change Separate Property to Community Property converted the Property from Joe Sr.'s separate property to community property.
D iscussion
A. Standard of Review
[1–3] The underlying facts are not in dispute in this appeal. We review a case tried on agreed stipulated facts de novo. Amaro v. Wilson Cnty., 398 S.W.3d 780, 784 (Tex. App.—San Antonio 2011, no pet.). "The agreed stipulations are binding on the parties, the trial court, and the reviewing court." Id. "We do not review the legal or factual sufficiency of the evidence, but simply review the trial court’s order to determine if it correctly applied the law to the agreed stipulated facts." Id.
B. Did the Deeds of Trust Create a Valid Lien on the Property?
At trial, Appellees Joe Jr. and Held brought three arguments regarding the validity of RMS’s lien on the Property. Their first argument related to the Texas Constitution’s requirement that for a valid lien to be created, all owners must consent to a reverse mortgage on a homestead. See Tex. Const. art. 16, § 50(k). They argued RMS’s First and Second Deeds of Trust were invalid because both Mona and the Trust owned the Property at the relevant time and Mona signed the First and Second Deeds of Trust as "Mona P. Reilly" without specifying her trustee capacity. Thus, they argued the deeds of trust reflect only that Mona in her individual capacity consented to the reverse mortgage. Because the Texas Constitution requires all owners (i.e., both Mona and the Trust) to consent to a reverse mortgage on a homestead, they argued the First and Second Deeds of Trust did not create a valid lien.
With regard to their second argument, Joe Jr. and Held argued RMS’s lien was not valid because the Trust, as a testamentary trust, could not enter into a reverse mortgage pursuant to HUD regulations that stated HUD would insure only inter vivos trusts.
In their third argument, Joe Jr. and Held contended that RMS’s lien was not valid because the terms of the Trust did not allow the trustee to obtain a reverse mortgage, emphasizing that reverse mortgages were not allowed at the time the Trust was created.
Because the trial court did not issue conclusions of law stating on which ground it determined RMS’s lien was invalid, RMS attacks all three grounds on appeal. We address each in turn. 1. The Texas Constitution’s Requirement that Ail Owners Consent to a Reverse Mortgage on a Homestead
RMS argues that its First and Second Deeds of Trust created a valid lien on the Property when Mona signed the deeds with the signature "Mona P. Reilly." Article XVI, section 50 of the Texas Constitution "has long protected the homestead, strictly limiting the types of loans that may be secured by a homestead lien." Wood v. HSBC Bank USA, 505 S.W.3d 542, 545 (Tex. 2016). "Historically, constitutionally noncompliant homestead liens were absolutely void." Id. "In 1997, the [Texas] Constitution was amended to permit homestead liens to secure home-equity loans, but, consistent with Texas’s long tradition of protecting the homestead, the amendments clearly prescribed very specific and extensive limitations on those encumbrances." Id. Thus, section 50 provides that "[n]o mortgage, trust deed, or other lien on the homestead shall ever be valid unless it secures a debt described by this section, whether such mortgage, trust deed, or other lien, shall have been created by the owner alone, or together with his or her spouse, in case the owner is married." Tex. Const. art. XVI, § 50(c) (emphasis added). Subsection (k)(1) defines "reverse mortgage" as "an extension of credit … that is secured by a voluntary lien on homestead property created by a written agreement with the consent of each owner and each owner’s spouse." Id. § 50(k)(1) (emphasis added).
[4, 5] RMS argues that because Mona was the trustee, her signature was sufficient to show the Trust also consented to the reverse mortgage. RMS points out that under Texas law, the "term ‘trust’ refers not to a separate legal entity but rather to the fiduciary relationship governing the trustee with respect to the trust property." Ray Malooly Tr. v. Jnhl, 186 S.W.3d 568, 570 (Tex. 2006) (quoting Huie v. DeShazo, 922 S.W.2d 920, 926 (Tex. 1996)). Indeed, the Texas Property Code defines "trustee" as "the person holding the property in trust, including an original, additional, or successor trustee, whether or not the person is appointed or confirmed by a court." Tex. Prop. Code § 111.004(18). Thus, in Texas, a "trustee is vested with legal title and right of possession of the trust property but holds it for the benefit of the beneficiaries, who are vested with equitable title to the trust property." Faulkner v. Bost, 137 S.W.3d 254, 258-59 (Tex. App.—Tyler 2004, no pet.) (emphasis added). Because the trustee, and not the trust, holds trust property, RMS argues that Mona’s signature on the First and Second Deeds of Trust was sufficient to also show consent by the Trust to the reverse mortgage.
In contrast, Joe Jr. and Held contend that Mona signing the First and Second Deeds of Trust as "Mona P. Reilly" did not create a valid lien under the Texas Constitution because the First and Second Deeds of Trust did not show that the owner, i.e. the Trust, consented to the reverse mortgage. They point out that although trust property is held by a trustee without identifying the trust or its beneficiaries, trust property is not liable to satisfy the personal obligations of the trustee. See Tex. Prop. Code §§ 101.002, 114.0821. Thus, they argue a trustee who is a party to an agreement, note, or deed should be described as "Mona P. Reilly, as Trustee of the Testamentary Trust established in Joe J. Reilly’s Last Will and Testament dated October 31, 1989," and the signature block should also list the trustee this way. Because that was not done in this case, they argue the First and Second Deeds of Trust reflect that Mona consented to the reverse mortgage only in her individual capacity. This court has considered the issue of whether a trustee who did not explicitly sign a deed "as trustee" conveyed trust property. In West 17th Resources, LLC v. Pawelek, 482 S.W.3d 690, 691 (Tex. App.— San Antonio 2015, pet. denied), the subject property was a 290.69-acre tract owned by several members of a family. The appellants’ mother "owned an undivided 1/6 interest individually and an undivided 1/10 interest as trustee in the 290.69-acre tract for her benefit during her lifetime." Id. Irene’s interest as trustee was pursuant to her late husband’s will. Id. at 691-92. The will provided that upon Irene’s death, the trust’s 1/10 interest would vest in appellants in equal shares. Id. at 692. The will authorized Irene, "in her sole and absolute discretion," "to disburse from the corpus of the trust estate anything she deemed necessary for her support, ‘even to the point of completely exhausting the [trust estate].’ " Id. "In 1994, Irene, along with the other [family members] who owned the subject property, executed a deed granting, selling, and conveying the subject property to the" appellees. Id. Irene was named on the deed as one of the grantors. Id. "But Irene simply signed her name without designating whether she was signing ‘individually’ or ‘as trustee.’ " Id. The appellants "argued the 1994 deed did not convey the trust’s 1/10 interest because Irene did not explicitly sign ‘as trustee.’ " Id. The appellees "argued that the deed, by its express terms, conveyed ‘all’ of the subject property." Id.
In considering this issue, this court first noted that the appellants had "cited no authority and we ha[d] found none [providing] that a grantor’s failure to specify her capacity either ‘individually’ or ‘as trustee’ nullifies a deed’s purported conveyance of property that the grantor holds in trust." Id. at 694. We emphasized that the issue of whether a particular "deed conveyed all of the subject property" was one of "deed construction." Id. at 694-95. As the deed in question was not ambiguous, we construed it as a matter of law, seeking to "ascertain the parties’ true intent." Id. at 695 (quotation omitted). In doing so, we explained that "[t]o determine a grantor’s intent when conveying real property by deed," we should "analyze the four corners of the deed using rules of interpretation and construction." Id. "We discern a grantor’s intent from the plain language of the deed without reference to technicalities or arbitrary rules." Id. We explained that "[a]ll parts of a written instrument must be harmonized and given effect if possible." Id. (quotation omitted).
In considering the deed in question, we emphasized that the granting clause conveyed "all" 290.69 acres of the subject property subject only to a utility easement. Id. "The only part of the 1994 deed that [a]ppellants argue supports Irene’s intent not to convey the trust’s undivided 1/10 interest is her failure to specify any capacity when signing the deed." Id. We explained that "[s]uch an implied reservation is disfavored" and that construing her "failure to specify her capacity as an implied intent to reserve the 1/10’s interest would also conflict with the deed’s plain, unambiguous language." Id. "By the plain, unambiguous language of the granting clause, Irene and the other grantors intended to convey ‘all’ of the subject property, subject only to a utility easement." Id. We thus held that the "1994 deed conveyed ‘all’ of the subject property, including the 1/10 interest Irene held as trustee, to the [appellees], subject only to the utility easement specified in the deed." Id.
[6, 7] Joe Jr. and Held argue that the facts in West 17th Resources are distinguishable from the facts presented here, emphasizing that the deed in West 17th Resources was an instrument of conveyance while this case involves deeds of trust creating a lien. However, whether we are interpreting the language of a deed conveying property or a deed of trust, we are governed by the same rules that apply to contracts. Fin. Freedom Sr. Funding Corp. v. Horrocks, 294 S.W.3d 749, 753 (Tex. App.—Houston [14th Dist.] 2009, no pet.). Further, we construe a deed of trust along with the note it is intended to secure, and we "employ the same rules for interpreting a note that" are used to interpret a contract. Id. Thus, whether the issue involves a deed conveying property or a deed of trust (and accompanying note) securing a lien, we employ the same rules that are applied to the interpretation of contracts. Id. Accordingly, our holding and analysis in West 17th Resources is instructive and guides us to construe the deeds of trust and accompanying notes by employing rules of contractual interpretation. See W. 17th Res., 482 S.W.3d at 695.
[8–13] "In construing a written contract, the primary concern of the court is to ascertain the true intentions of the parties as expressed in the instrument." Fin. Freedom Sr. Funding Corp., 294 S.W.3d at 753. "Ordinarily, the writing alone is sufficient to express the parties’ intentions for it is the objective, not subjective, intent that controls." Id. (citing Matagorda Cnty. Hosp. Dist. v. Burwell, 189 S.W.3d 738, 740 (Tex. 2006)). "To achieve this, we examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless." Id. "Contract terms are given their plain, ordinary, and generally accepted meanings unless the contract itself shows them to be used in a technical or different sense." Id. "The contract must be read as a whole, rather than by isolating a certain phrase, sentence, or section of the agreement." Id. "We presume the parties to the contract intended every clause to have some effect." Id. Thus, as in West 17th Resources, we employ these contractual interpretation rules to the First and Second Deeds of Trust and the First and Second Notes. See W. 17th Res., 482 S.W.3d at 695.
[14] In considering the plain, unambiguous language of both the First and Second Deeds, Appellees Joe Jr. and Held emphasize that the Trust is not mentioned by name in any of the documents. They also argue that because the First and Second Deeds of Trust state the grantor is "Mona P. Reilly, A Single Woman," Mona conveyed only her individual interest in the Property. However, whether a person is single or married does not correlate to whether a person is acting in an individual capacity, a representative capacity, or both. See City of Port Isabel v. Pinnell, 161 S.W.3d 233, 238 (Tex. App.—Corpus Christi-Edinburg 2005, no pet.) ("Capacity is a party’s legal authority to sue or be sued."); see also Slaughter v. Qualls, 139 Tex. 340, 346, 162 S.W.2d 671, 675 (1942) (explaining that a deed "may be regular on its face and yet be void and ineffectual to pass any title to the grantee … where the grantor had no capacity to execute it"). That is, the issue is not whether Mona was single or married; the issue is whether she signed the First and Second Deeds of Trust, and accompanying notes, in her individual capacity, her capacity as trustee, or in both.
All the documents (the First and Second Notes, along with the First and Second Deeds of Trust) are signed by "Mona P. Reilly." The First and Second Notes define "Borrower" as the "person signing at the end of this Note." As noted, the First and Second Deeds of Trust state that "Mona P. Reilly, A Single Woman" is the "Borrower." The First and Second Notes state that "[i]n return for amounts to be advanced by Lender to or for the benefit of Borrower under the terms of a Home Equity Conversion Loan Agreement," "Borrower promises to pay to the order of Lender a principal amount equal to the sum of all Loan Advances made under the Loan Agreement with interest." Similarly, the First and Second Deeds of Trust both state that "Borrower has agreed to repay to Lender amounts which Lender is obligated to advance, including future advances, under the terms of a Home Equity Conversion Loan Agreement." The First and Second Notes further provide that "Borrower’s promise to pay is secured by a mortgage, deed of trust or similar security instrument," which "protects the Lender from losses [that] might result if Borrower defaults under this Note."
The First and Second Deeds of Trust provide that "Borrower irrevocably grants and conveys to Trustee, in trust, with power of sale, the following described property located in BEXAR County, TEXAS: [legal description of the Property], which was the address of 11715 Pepper Tree Street, San Antonio, Texas 78230." (emphasis added). Thus, both the First and Second Deeds of Trust show an intent by Mona to grant and convey to Trustee, in trust, with power of sale, the entire Property.
The First Deed of Trust then states, "BORROWER COVENANTS that Borrower is lawfully seized of the estate hereby conveyed and, has the right to grant and convey the Property and that the Property is unencumbered." (emphasis added). The Second Deed of Trust similarly states, "BORROWER CONVENANTS that Borrower is lawfully seized of the estate hereby conveyed and has the right to mortgage, grant and convey the Property and that the Property is only encumbered by a First Security Instrument given by Borrower and dated the same date as this Security Instrument ("First Security Instrument")." (emphasis added). The Second Deed of Trust then provides, "Borrower warrants and will defend generally the title to the Property against all claims and demands, subject to any encumbrances of record." Thus, under the plain, unambiguous language of the First Deed of Trust, Mona granted and conveyed the entire Property to the Trustee, in trust, with power of sale and promised that (1) she had the legal authority to do so and that (2) the Property was unencumbered. Further, under the plain, unambiguous language of the Second Deed of Trust, Mona promised that (1) she was "lawfully seized of the estate hereby conveyed" and had "right to mortgage, grant and convey the Property," and that (2) the Property was "only encumbered by" the First Deed of Trust. If Mona had intended to only convey her individual interest, she would not have made these covenants as the Property would have also been encumbered by the Trust’s interest in the Property. See U.S. Shale Energy II, LLC v. Laborde Props., L.P., 551 S.W.3d 148, 151 (Tex. 2018) (explaining that courts cannot constroe deed in a manner that would render language meaningless). Joe Jr. and Held emphasize that the existence of a trust "is not mentioned or suggested in any of the" documents relating to the reverse mortgage. While it is true that the Trust is not explicitly mentioned, the First and Second Deeds of Trust do clearly convey Mona’s intent to convey the entire property.
Finally, we note that Held urges this court to distinguish our opinion West 17th Resources, and instead to adopt the reasoning by the El Paso Court of Appeals in Lockhart v. Chisos Minerals, LLC, 621 S.W.3d 89, 104 (Tex, App.—El Paso 2021, pet. denied). Lockhart, however, is not in conflict with our analysis in West 17th Resources. The El Paso Court of Appeals in Lockhurt discussed West 17th Resources and agreed that the issue in both appeals was one of deed construction. See Lockhart, 621 S.W.3d at 104. It then summarized our analysis in West 17th Resources by noting that "[b]ecause the granting clause of the deed conveyed ‘all’ of the property, subject only to a utility easement, the [Fourth Court of Appeals] concluded that it conveyed the interest held by Mika as trustee." Id. (quoting W. 17th Res., 482 S.W.3d at 695). In reviewing the documents presented in its appeal, the El Paso Court concluded it could not construe the deeds as constituting a conveyance by the trustee because of the express language in the deeds in question. See id. Thus, both West 17th Resources and Lockhart agreed that these issues rely on deed construction.
[15] For these reasons stated above, we conclude that Mona signed the First and Second Notes, and the First and Second Deeds of Trust, in both her individual capacity and in her capacity as trustee of the Trust. See W. 17th Res., 482 S.W.3d at 695 (holding that "[b]y the plain, unambiguous language of the granting clause," the grantor who held interest in the property in both her individual capacity and in her capacity as trustee conveyed "all" of the subject property even though she signed the deed without designating whether she was signing it "as trustee"). Therefore, we hold the Texas Constitution’s requirement that all owners consent to a reverse mortgage of a homestead was met. See Tex. Const. art. 16, § 50(k).
2. Are the Deeds of Trust In valid As a Result of HUD Rules
As noted, Appellees Joe Jr. and Held argued in the trial court that the deeds were invalid because "HUD does not enter into or insure reverse mortgages when the property is owned by a testamentary trust." and "HUD will only insure a reverse mortgage on property held by an inter vivos trust." In support of this assertion, Joe Jr. and Held cited the following provision in chapter 4, section 4-5 of the U.S. Department of Housing and Urban Development, Home Equity Conversion Handbook:
4-5 HOME EQUITY CONVERSION MORTGAGES FOR PROPERTY HELD IN TRUST. HUD will insure HECMs on property held in the name of an inter vivos trust, also known as a living trust. In general, a living trust is created during the lifetime of a person [as opposed to a testamentary trust which is created by the person’s will after his/her death]. A living trust is created when the owner of property conveys his/her property to a trust for his or her benefit or for that of a third party [the beneficiaries].
They then point to section 405(a) of the HUD Handbook, which states that the "lender must be satisfied that the trust is valid and enforceable …." In their brief, they argue that the reverse mortgage in this case "violates HUD rules, which would make the lien invalid in other jurisdictions such as New York." (emphasis added). Joe Jr. and Held, however, have failed to cite any authority in Texas in support of this proposition.
[16] RMS further argues that whether HUD rules were followed in this case do not affect the validity of the Deed of Trust. It points out that "courts have observed [that] the regulations promulgated under the National Housing Act govern relations between the mortgagee and, the government, and give the mortgagor no claim for duty owed or for the mortgagee’s failure to follow said regulations." Mitchell v. Chase Home Fin. LLC, No. 3:06-CV-2099-K, 2008 WL 623395, at *3 (N.D. Tex. Mar. 4, 2008) (emphasis added) (citing Roberts v. Cameron-Brown Co., 556 F.2d 356, 360-61 (5th Cir. 1977), In re Miller, 124 Fed. Appx. 152, 155 (4th Cir. 2005), Leggette v. Wash. Mut. Bank, 2005 WL 2679699, *5 (N.D. Tex. 2005), and Baker v. Northland Mortg. Co., 344 F. Supp. 1385 (N.D. Ill. 1972)); see also Lindsey v. JP Morgan Chase Bank Nat’l Ass’n, No. 3:12-CV-4535-M, 2013 WL 2896897, at *7 N.D. Tex. June 13, 2013 ("With respect to the National Housing Act … and the corresponding HUD regulations, courts in this Circuit have found that their objective is not to provide mortgagors with a private remedy for a mortgagee’s ‘failure to follow,’ but that they ‘deal only with the relations between the mortgagee and the [federal] government.’ "). Thus, a mortgagor does not have a private right of action for a mortgagee’s failure to comply with HUD regulations. See Hornbuckle v. Countrywide Home Loans, Inc., No. 02-09-00330-CV, 2011 WL 1901975, at *5 (Tex. App.—Fort Worth May 19, 2011, no pet.) ("Additionally, appellant has no private right of action regarding any alleged failure by appellees to follow HUD regulations, even those incorporated in the deed of trust.").
We agree with RMS. We have found no legal authority for the proposition that failure to follow HUD rules invalidates a lien under the circumstances presented in this appeal. Therefore, the trial court could not have relied on this basis to determine the lien at issue was not valid.
3. Terms of the Trust
[17] Third, Joe Jr. and Held argued in the trial court that RMS’s lien was not valid because the terms of the Trust did not allow the trustee to obtain a reverse mortgage, emphasizing that reverse mortgages were not allowed at the time the Trust was created. Pursuant to section 113.015 of the Texas Property Code, a "trustee may borrow money from any source, including a trustee, purchase property on credit, and mortgage, pledge, or in any other manner encumber all or any part of the assets of the trust as is advisable in the judgment of the trustee for the advantageous administration of the trust." Tex. Prop. Code § 113.015. Here, the express terms of the Trust authorized the trustee "[t]o borrow money and to encumber, mortgage or pledge any asset of my Estate or any Trust Estate for a term within or extending beyond the term of the trust, in connection with the exercise of any power vested in my Executor or Trustee." Despite this broad language in the Trust giving Mona, as trustee, broad powers to borrow money and to encumber, mortgage or pledge any asset of Joe Sr.’s Estate or any Trust Estate, Joe Jr. and Held argue the terms of the Trust did not permit Mona, as trustee, to enter into a reverse mortgage because the concept of reverse mortgages did not exist in Texas at the time the Trust was created. However, a trustee entering into a reverse mortgage is simply a manner of encumbering or mortgaging an asset of the Trust. Thus, the fact that the concept of reverse mortgages did not exist in Texas at the time the Trust was created is irrelevant. The terms of the Trust gave Mona, as trustee, authority to "borrow money and to encumber, mortgage or pledge any asset of" Joe Sr.’s Estate or any Trust Estate. The terms of the Trust did not restrict her as to the manner she could do so. Thus, this ground could not form a basis for the trial court to conclude the lien was invalid.
C onclusion
For the reasons stated above, we conclude as a matter of law that the trial court could not have determined RMS’s lien was invalid. Therefore, the portion of the trial court’s judgment declaring RMS’s lien to be invalid, releasing said lien, and awarding the interpled funds, including attorney’s fees, to Joe Jr. and Held is REVERSED. We render judgment as follows: (1) The affirmative relief contained in the Interpleader Defendant’s Original Answer and Claim for Affirmative Relief filed by RMS is GRANTED.
(2) RMS does have a valid lien on the property located at Lot 289, New City Block 16043, Mission Trace Planned Unit Development, City of San Antonio, Bexar County, Texas according to a plat thereof recorded in volume 8100, Page 191, Deed and Plat Records of Bexar County, Texas, and commonly known as 11715 Pepper Tree Street, San Antonio, Texas 78230.
(3) Held’s Cross Claim for Declaratory Judgment that No Lien Exists is DENIED.
(4) Joe Jr.’s First Amended Cross Claim for Declaratory Judgment that No Lien Exists is DENIED.
(5) RMS is entitled to recover the interpled funds in their entirety, which is currently held in the registry of the trial court. Because RMS is entitled to recover the interpled funds in their entirety, the attorney’s fees awarded to Held (which the trial court ordered to be deducted from the funds held in the registry of the court) is VACATED.
(6) The trial court clerk, after deducting any fees or costs allowed by law for the deposit of the funds or for the issuance of checks, is ordered to issue a check for the remaining funds on deposit in Cause No. 2020CI10472 that is made payable to RMS.
The judgment of the trial court is AFFIRMED in all other respects.