Opinion
14-23-00707-CV
12-10-2024
THE ESTATE OF JAMES MCMAHON, DECEASED, Appellant v. FEDERAL NATIONAL MORTGAGE ASSOCIATION AND NATIONSTAR MORTGAGE LLC D/B/A MR. COOPER, Appellees
On Appeal from the 295th District Court Harris County, Texas Trial Court Cause No. 2021-08015
Panel consists of Justices Wise, Bourliot, and Wilson.
MEMORANDUM OPINION
Frances Bourliot Justice
James McMahon closed on a home equity loan in 2017. Federal National Mortgage Association (Fannie Mae) is the owner and holder of the note and Nationstar Mortgage LLC d/b/a Mr. Cooper (Mr. Cooper) is the current servicer of the loan. Several years later, McMahon alleged that the loan violated certain provisions of the Texas Constitution, namely article XVI, § 50(a)(6)(N). McMahon filed suit against appellees, Fannie Mae and Mr. Cooper (collectively referred to as the "Lenders"), asserting claims for declaratory relief, breach of contract, and quiet title. McMahon passed away in 2021, and his executor entered into a written agreement to continue this litigation in the name of the Estate of James McMahon, Deceased (hereinafter referred to as "appellant"). Appellant raises seven issues on appeal, challenging the trial court's denial of his request for declaratory judgment and the grant of Lenders' summary judgment motion. We dismiss in part and affirm in part.
Background
In February 2017, McMahon entered into a home equity loan transaction. He executed the Texas Home Equity Security Instrument to secure a promissory note in the principal amount of $149,250, which was secured by the property located at 21131 Park Villa Drive, Katy, Texas 77450. The security instrument was recorded in the real property records of Harris County, Texas. McMahon also executed the Texas Home Equity Affidavit and Agreement. In this affidavit, he swore under oath that (1) he was the borrower named in the Texas Home Equity Note, (2) the extension of credit was secured by a voluntary lien, and (3) the extension of credit was being closed at the office of the lender, an attorney at law, or a title company. It is undisputed that the closing took place at a Regus office-share conference room located at 2500 City West Boulevard, Suite 300, Houston, Texas 77042. This was apparently the office of "Attorney Carter." This closing location was chosen by the notary, and she testified that she understood the space to belong to an attorney.
Attorney Carter's full name is unknown and is not otherwise included in the record.
In December 2020, almost three years later, McMahon sent a certified letter to Fannie Mae, alleging, among other things, that the home equity loan violated the Texas Constitution because he "did not sign the closing documents at a lender's office, title company, or attorney's office." This letter served as McMahon's formal notice for Fannie Mae to cure all defects. Fannie Mae responded to McMahon's letter in January 2021, asserting that McMahon's allegations lacked merit, referencing the affidavit executed by McMahon at closing.
In February 2021, McMahon filed suit against Lenders. In his original petition, McMahon asserted claims for declaratory relief, breach of contract, and quiet title. McMahon passed away shortly thereafter in July 2021. In December 2021, the executor of McMahon's estate entered into a written agreement to continue litigation in the name of the Estate of James McMahon, Deceased. In May 2022, the property securing the home equity loan was sold to a third party, and the outstanding loan was paid in full. Lenders later filed their hybrid summary judgment motion, which was granted by the trial court.
Standards of Review
Declaratory Judgment. Declaratory judgments are reviewed under the same standards applicable to other judgments; thus, the denial or grant of a declaratory judgment in a summary judgment is reviewed under summary judgment standards. See Tex. Civ. Prac. & Rem. Code § 37.010; Lidawi v. Progressive Cty. Mut. Ins. Co., 112 S.W.3d 725, 730 (Tex. App.-Houston [14th Dist.] 2003, no pet.). We look to the procedure used to resolve the issue at trial to determine the standard of review on appeal. Lidawi, 112 S.W.3d at 730 (citing Galveston v. Giles, 902 S.W.2d 167, 170 (Tex. App.-Houston [1st Dist.] 1995, no writ.)). Here, because the trial court resolved the case on summary judgment, we review the propriety of the trial court's denial of the declaratory judgment under the same standards we apply to the summary judgment. Id. (citing Unauthorized Practice of Law Comm. v. Jansen, 816 S.W.2d 813, 814 (Tex. App.-Houston [14th Dist.] 1991, writ denied)).
No-Evidence Standard. Lenders' summary judgment motion was a hybrid, combining a no-evidence motion with a traditional motion for summary judgment. We review both traditional and no-evidence summary judgments de novo. See Boerjan v. Rodriguez, 436 S.W.3d 307, 310 (Tex. 2014) (per curiam). Where, as here, a successful movant sought both no-evidence and traditional summary judgment, and the record does not reveal the grounds on which the trial court granted judgment, we review the no-evidence grounds first. See Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 600 (Tex. 2004). If the nonmovant fails to meet its burden under the no-evidence motion, there is no need to address the challenge to the traditional motion as it necessarily fails. Merriman v. XTO Energy, Inc., 407 S.W.3d 244, 248 (Tex. 2013).
In a no-evidence motion for summary judgment, the movant asserts that there is no evidence of one or more essential elements of the claim or defense for which the nonmovant bears the burden of proof at trial. Tex.R.Civ.P. 166a(i); see Timpte Indus., Inc. v. Gish, 286 S.W.3d 306, 310 (Tex. 2009). The burden then shifts to the nonmovant to present evidence raising a genuine issue of material fact as to the elements specified in the motion. See Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006). The evidence does not create an issue of material fact if it is "so weak as to do no more than create a mere surmise or suspicion" that the fact exists. Kia Motors Corp. v. Ruiz, 432 S.W.3d 865, 875 (Tex. 2014) (quoting Ridgway, 135 S.W.3d at 601). We will affirm a no-evidence summary judgment when (a) there is a complete absence of evidence of a vital fact, (b) the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact, (c) the evidence offered to prove a vital fact is no more than a mere scintilla, or (d) the evidence conclusively establishes the opposite of the vital fact. See City of Keller v. Wilson, 168 S.W.3d 802, 816 (Tex. 2005).
Traditional Standard. Claims that survive the no-evidence review will then be reviewed under the traditional standard. First United Pentecostal Church of Beaumont, d/b/a the Anchor of Beaumont v. Parker, 514 S.W.3d 214, 219-20 (Tex. 2017). A party moving for traditional summary judgment must demonstrate that "there is no genuine issue as to any material fact" and that it is "entitled to judgment as a matter of law." Tex.R.Civ.P. 166a(c); see also Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009).
Discussion
On appeal, appellant raises seven issues. As presented, we interpret appellant's issues to challenge: (1) the trial court's denial of its request for declaratory judgment and (2) the trial court's grant of Lenders' summary judgment motion. We first discuss the denial of appellant's request for declaratory judgment and then analyze appellant's remaining claim challenging Lenders' entitlement to summary judgment.
I. The Trial Court Lacked Subject Matter Jurisdiction to Decide the Merits of the Declaratory Judgment Action
In its amended petition, appellant requested a declaration that (1) the home equity loan was not compliant with the constitutional requirements set forth in section 50(a)(6)(N), (2) the loan was void, and (3) Lenders' time to cure had lapsed. As a preliminary matter, we note that neither party raises the issue of subject matter jurisdiction for the trial court to decide the merits of the declaratory judgment. However, we may address the issue of subject matter jurisdiction sua sponte. See Goodman-Delaney v. Grantham, 484 S.W.3d 171, 174 (Tex. App.-Houston [14th Dist.] 2015, no pet.).
A declaratory judgment is appropriate only if a justiciable controversy exists concerning the rights and status of the parties and the controversy will be resolved by the declaration sought. Bonham State Bank v. Beadle, 907 S.W.2d 465, 467 (Tex. 1995); WesternGeco, L.L.C. v. Input/Output, Inc., 246 S.W.3d 776, 781 (Tex. App.-Houston [14th Dist.] 2008, no pet.). For a justiciable controversy to exist, there must be a real and substantial controversy involving a genuine conflict of tangible interests and not merely a theoretical dispute. Bonham State Bank, 907 S.W.2d at 467; WesternGeco, L.L.C., 246 S.W.3d at 781. A justiciable controversy is to be distinguished from an advisory opinion, which is prohibited under the Texas and federal constitutions. Tex. Ass'n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 444 (Tex. 1993). If a justiciable controversy does not exist, the trial court must dismiss the case for lack of subject matter jurisdiction. See Russell v. Metro. Transit Auth. of Harris Cty., 343 S.W.3d 825, 833 (Tex. App.-Houston [14th Dist.] 2011, no pet.). Ripeness is a component of subject matter jurisdiction and requires the existence of a "concrete injury"-i.e., the facts must show "that an injury has occurred or is likely to occur, rather than being contingent or remote." Robinson v. Parker, 353 S.W.3d 753, 755 (Tex. 2011).
According to section 50(a)(6)(N), which falls under the heading "Protection of homestead from forced or unauthorized sale":
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: an extension of credit that . . . is closed only at the office of the lender, an attorney at law, or a title company.Tex. Const. art. XVI, § 50(a)(6)(N). This provision specifically protects homeowners from forced, coercive sales of their homes. Id. Appellant's request for declaratory judgment presents no justiciable controversy because foreclosure had not occurred nor had Lenders attempted foreclosure. Garofolo v. Ocwen Loan Servicing, L.L.C., 497 S.W.3d 474, 479 (Tex. 2016) ("Section 50(a) simply has no applicability outside foreclosure."). Put another way, appellant's request was not yet ripe. Robinson, 353 S.W.3d at 755.
If Lenders had sought to foreclose on appellant's homestead after he became delinquent in payments, then appellant could stand on the constitutional right to freedom from forced sale. Garofolo, 497 S.W.3d at 479. But, this is not what happened in this case. For three years, appellant made timely payments, there was no default, and Lenders never sought nor attempted foreclosure. Because the facts do not demonstrate the existence of justiciable controversy, the trial court lacked subject matter jurisdiction to consider appellant's request for declaratory judgment. Bonham State Bank, 907 S.W.2d at 467.
II. The Trial Court Did Not Err in Granting Summary Judgment on the Breach of Contract Claim
In its amended petition, appellant asserted claims for breach of contract and quiet title. On appeal, appellant indicated that he verbally nonsuited the quiet title claim. Our review is therefore limited to the breach of contract claim. See Fields v. City of Tex. City, 864 S.W.2d 66, 68 (Tex. App.-Houston [14th Dist.] 1993, writ denied) (refusing to consider arguments raised in trial court but abandoned on appeal).
To prevail on a breach of contract claim, a party must establish the following elements: (1) a valid contract existed between the plaintiff and the defendant; (2) the plaintiff tendered performance or was excused from doing so; (3) the defendant breached the terms of the contract; and (4) the plaintiff sustained damages as a result of the defendant's breach. West v. Triple B Servs., LLP, 264 S.W.3d 440, 446 (Tex. App.-Houston [14th Dist.] 2008, no pet.).
As discussed, we first consider Lenders' no-evidence motion. Lenders' motion generally asserts that appellant's causes of action are all based on alleged violations of section 50(a)(6)(N), but appellant did not provide any evidence of foreclosure or forced sale. But, Lenders do not specifically challenge any of the required elements for a breach of contract claim. See Sudan v. Sudan, 199 S.W.3d 291, 292 (Tex. 2006) (providing that to prevail on a no-evidence motion for summary judgment, the movant must first allege there is no evidence of one or more specified elements of a claim or defense); West, 264 S.W.3d at 446. Because Lenders did not allege that there was no evidence of "one or more essential elements" necessary to maintain a breach of contract cause of action, the burden did not shift to appellant to present evidence raising a genuine issue of material fact as to the elements specified in the motion. See Tex. R. Civ. P. 166a(i); Tamez, 206 S.W.3d at 582. Lenders therefore did not establish their entitlement to judgment as a matter of law on their no-evidence motion. Nevertheless, our inquiry does not end here. We now examine Lenders' claim under the traditional standard. See Parker, 514 S.W.3d at 219-20.
In their traditional motion, Lenders assert, among other things, that there is no question of fact concerning appellant's breach of contract claim because appellant did not sustain any damages from any alleged failure to cure. Appellant, on the other hand, claims that he sustained $149,250 in damages because the appropriate model for damages is forfeiture of interest and principal paid on the home equity loan.
In Garofolo, the Fifth Circuit asked, and the supreme court answered, two certified questions. 497 S.W.3d at 475. Relevant here, the second certified question asked whether a borrower could seek the forfeiture remedy provided for in Section 50(a)(6)(Q)(x) through a breach of contract claim absent any actual damages suffered. Id. at 479. The supreme court answered this question in the negative. Id. Thus, to succeed on a breach of contract claim premised on failure of a home equity lender to comply with Section 50(a), a plaintiff must either show actual damages or make out a valid claim for liquidated damages. Id. at 475; see also Garofolo v. Ocwen Loan Servicing, L.L.C., 669 Fed.Appx. 219, 220 (5th Cir. 2016).
Our review of the record indicates that the principal amount of the home equity loan was paid in full in May 2022. Appellant does not show how he sustained damages as a result of the loan's alleged noncompliance with section 50(a)(6)(N) or any alleged failure to cure by Lenders. Likewise, appellant does not contend that the forfeiture provision is a liquidated damages provision. See Flores v. Millennium Interests, Inc., 185 S.W.3d 427, 431 (Tex. 2005) ("The term 'liquidated damages' ordinarily refers to an acceptable measure of damages that parties stipulate in advance will be assessed in the event of a contract breach."). Because appellant cannot establish an essential element of his claim, Lenders were entitled to judgment as a matter of law. See Tex. R. Civ. P. 166a(c); see also Fielding, 289 S.W.3d at 848. Accordingly, we overrule appellant's second issue.
Conclusion
When a trial court lacks subject matter jurisdiction to render a judgment, the proper procedure on appeal is for the appellate court to set the judgment aside and dismiss the cause. It's The Berrys, LLC v. Edom Corner, LLC, 271 S.W.3d 765, 772 (Tex. App.-Amarillo 2008, no pet.). Finding the trial court lacked subject matter jurisdiction, we sever the declaratory judgment action, vacate the judgment in the declaratory judgment, and dismiss the declaratory judgment action. Otherwise, we affirm the trial court's judgment.