Opinion
No. 07-19-00206-CV
07-16-2020
NESANET BELAY, APPELLANT v. WELLS FARGO BANK, N.A., APPELLEE
On Appeal from the 201st District Court Travis County, Texas
Trial Court No. D-1-GN-14-001863 , Honorable Todd Blomerth, Presiding
Originally appealed to the Third Court of Appeals, this case was transferred to this Court by the Texas Supreme Court pursuant to its docket equalization efforts. See TEX. GOV'T CODE ANN. § 73.001 (West 2013).
MEMORANDUM OPINION
Before QUINN, C.J., and PIRTLE and PARKER, JJ.
Nesanet Belay, acting pro se, appeals from a summary judgment entered in a home equity loan foreclosure suit. We affirm the judgment of the trial court.
Background
On June 16, 2014, Wells Fargo Bank, N.A., filed an original petition for foreclosure against Belay and Woldu Gebrehiwet. Belay was served with citation referencing the expedited foreclosure proceeding under Texas Rule of Civil Procedure 736; however, in its petition, Wells Fargo sought a judgment for judicial foreclosure pursuant to Texas Rule of Civil Procedure 735.3.
The trial court subsequently granted judgment against defendant Gebrehiwet. Because Gebrehiwet has not appealed, we discuss only the evidence pertinent to Belay's appeal.
Shortly thereafter, and before her answer was due, Belay filed a voluntary petition for bankruptcy relief under Chapter 13 of the United States Bankruptcy Code. The bankruptcy court dismissed the case in September of 2014. Belay filed another petition for bankruptcy relief in December of 2014.
Wells Fargo filed a motion for relief from the automatic stay on June 3, 2015. In its motion, Wells Fargo recited its claim of Belay's indebtedness and provided copies of the note and deed of trust. The bank requested the bankruptcy court lift the stay and allow it to "proceed to foreclose in accordance with its ARM Note and Deed of Trust." The motion included a notice stating, "If no timely response is filed within fourteen (14) days from the date of service, the relief requested herein may be granted without a hearing being held. A timely filed response is necessary for a hearing to be held."
Belay's response objecting to Wells Fargo's motion to lift the stay was dated June 22, 2015. She requested a hearing and asserted that the motion should be denied because (1) she had filed an objection to Wells Fargo's proof of claim and no ruling had yet been made to allow or disallow the claim and (2) allowing Wells Fargo to lift the stay would deprive other creditors of her equity in the property. In an affidavit attached to her objection, Belay claimed that she did not sign or authorize the loan referenced in Wells Fargo's proof of claim and did not sign the deed of trust.
The certificate of service stated that the pleading was served "on or about May 29, 2015," a date prior to the filing of Wells Fargo's motion.
By order dated June 23, 2015, the bankruptcy court granted Wells Fargo's motion for relief from the stay. The order stated, "The Court is advised that after proper notice and timely service of the Motion, no response has been filed and the Motion should be granted. Therefore, it is ORDERED that the stay afforded by 11 U.S.C. § 362 is terminated with respect to Movant on the [real property at issue]." It further provided that "WELLS FARGO HOME MORTGAGE, A DIVISION OF WELLS FARGO BANK, N.A. may immediately enforce and implement this Order Lifting Stay." Belay did not appeal the bankruptcy court's order.
Wells Fargo filed a motion in district court to reinstate the case on the court's active docket. Belay filed an answer in which she alleged that she did not sign the deed of trust at issue and requested that the court declare the deed of trust void. Meanwhile, Belay's bankruptcy estate was administered, and the bankruptcy case closed on March 24, 2017.
Wells Fargo filed a motion for summary judgment on its foreclosure claim in November of 2018. The trial court granted the motion, and Belay instituted this appeal.
Analysis
Belay poses these four questions as her issues in this appeal: (1) Did the trial judge have authority to determine material fact issues? (2) Did Wells Fargo meet its burden of proving res judicata? (3) Was Belay denied due process when the trial judge ignored her material fact issues, thus concluding there were not material facts in dispute? (4) Did the trial judge err when he ignored the Texas Constitutional violations enumerated in Belay's Response to Petitioner's Traditional Motion for Summary Judgment?
Belay's third argument, regarding due process, is limited to the statement "Belay was denied due process when the facts were not presented to a jury." Because no citations to legal authorities are provided in support of this claim, Belay's due process claim is waived for inadequate briefing. See TEX. R. APP. P. 38.1(i). Belay's remaining issues essentially collapse into a review of the central issue on appeal, i.e., whether Wells Fargo was entitled to summary judgment.
Summary Judgment Standard
We review a trial court's order granting summary judgment de novo. Cmty. Health Sys. Prof'l Servs. Corp. v. Hansen, 525 S.W.3d 671, 680 (Tex. 2017). When reviewing a summary judgment, we take evidence favorable to the nonmovant as true, and indulge every reasonable inference and resolve any doubts in the nonmovant's favor. Id.
Judicial Foreclosure
Under Texas Rule of Civil Procedure 735, a party seeking to foreclose a home equity lien may file an action for judicial foreclosure. TEX. R. CIV. P. 735.3. To obtain a judicial foreclosure, Wells Fargo was required to establish that it held a note, that some part of the money was due and unpaid, and that the property subject to the lien was the same property on which it sought to enforce the lien. See Hornbuckle v. Countrywide Home Loans, Inc., No. 02-09-00330-CV, 2011 Tex. App. LEXIS 3857, at *6-7 (Tex. App.—Fort Worth May 19, 2011, no pet.) (citing Kyle v. Countrywide Home Loans, Inc., 232 S.W.3d 355, 362 (Tex. App.—Dallas 2007, pet. denied)).
In support of its right to foreclose, Wells Fargo presented evidence that Belay acquired the property in 1992; that on March 25, 2004, she obtained a home equity loan and executed a note in the amount of $92,000 in conjunction with a deed of trust granting the lender a security interest in the property; that Wells Fargo was the holder of the note and beneficiary of the deed of trust; that the loan was in default because of Belay's failure to make payments when due; and that the property Wells Fargo sought to foreclose was the same property subject to the deed of trust lien. The bank's summary judgment evidence included copies of (1) the Texas equity loan adjustable rate mortgage note bearing Belay's signature; (2) the Texas equity deed of trust bearing Belay's signature; (3) documents reflecting Wells Fargo's ownership of the note and deed of trust; (4) notice of default with demand to cure and intent to accelerate; (5) notice of acceleration; (6) payment history on the note; and (7) an affidavit from a Wells Fargo vice president of loan documentation averring that Belay defaulted on the loan, failed to cure the default, and owed $137,250.11 under the note as of April 19, 2018. In addition, Wells Fargo presented evidence of its motion to lift the bankruptcy stay and the bankruptcy court's order granting the motion.
The note provides, "This Note and the lien securing same are authorized by the Texas Constitution, Article XVI, Section 50(a)(6). This Note is given without personal liability against each owner of the Property and the spouse of each owner, unless the owner or spouse obtained this extension of credit by actual fraud."
Based on the evidence presented, Wells Fargo met its initial burden of showing that it was entitled to summary judgment on its judicial foreclosure claim. See id. Belay thus had the burden to come forward with some evidence to raise a genuine issue of material fact challenging Wells Fargo's right to obtain foreclosure.
In her response to Wells Fargo's motion for summary judgment, Belay argued that the home equity loan was not foreclosure-eligible because (1) it did not include terms in Texas Constitution art. XVI, sec. 50(a)(6)(B), (D), (E), (F), (G), (H), (I) and (Q)(x)-(xi), and (2) it was not made by each owner and their spouse. Belay further argued that the relief afforded by the bankruptcy court's lift of the automatic stay did not bar consideration of these issues under the doctrine of res judicata. In support of her response, Belay attached an unsworn declaration in which she recited that the property at issue was her homestead, that she did not sign the note, and that she did not sign the security instrument. Belay did not submit any other evidence in opposition to Wells Fargo's motion for summary judgment.
Other issues raised by Belay on appeal that are not discussed in this opinion are deemed waived because they were not expressly raised in her summary judgment response. See TEX. R. CIV. P. 166a(c); McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 341 (Tex. 1993) (providing that issues a non-movant contends avoid movant's entitlement to summary judgment must be expressly presented in written response to the motion).
Validity of Wells Fargo's Lien; Res Judicata
As she did in the trial court, Belay argues on appeal that material fact issues exist, namely as to the validity and foreclosure-eligibility of Wells Fargo's claimed lien. Wells Fargo asserts that Belay's challenges to the lien could have, and should have, been raised in the bankruptcy proceeding. Because they were not, the bank claims, the doctrine of res judicata precludes Belay from contesting the lien's validity. The issue before us, then, is whether the bankruptcy court's order bars Belay's claims in state court. On this issue, the federal law of res judicata controls. Geary v. Tex. Commerce Bank, 967 S.W.2d 836, 837 (Tex. 1998) (per curiam) (since bankruptcy is a federal proceeding, federal law controls whether res judicata will bar a later state court proceeding).
Res judicata, or claim preclusion, prevents the relitigation of a finally adjudicated claim and related matters that should have been litigated in a prior suit. Barr v. Resolution Trust Corp., 837 S.W.2d 627, 628 (Tex. 1992). For res judicata to apply, the following elements are required: (1) the parties must be identical in both suits; (2) the prior judgment must have been rendered by a court of competent jurisdiction; (3) there must have been a final judgment on the merits; and (4) the same cause of action must be involved in both cases. Southmark Properties v. Charles House Corp., 742 F.2d 862, 869 (5th Cir. 1984). Res judicata applies to a bankruptcy court order even if the order does not close the bankrupt's estate or fully dispose of the claim. In re Baudoin, 981 F.2d 736, 742 (5th Cir. 1993).
Belay and Wells Fargo were both parties to the bankruptcy order: Belay was the debtor and Wells Fargo was the creditor seeking relief from the automatic stay. Thus, the first element is met. The parties, correctly, do not dispute that the bankruptcy court had jurisdiction to enter the order granting Wells Fargo relief from the stay. Hence, the second element is also met.
The fourth element is whether both cases involve the same cause of action. In making this determination, the Fifth Circuit applies a "transactional test." In re Howe, 913 F.2d 1138, 1144 (5th Cir. 1990). Under this test, the critical inquiry is whether the two causes of action are based on the same nucleus of operative facts. Travelers Ins. Co. v. St. Jude Hosp., 37 F.3d 193, 195 (5th Cir. 1994). If two causes of action arise from the same transaction, res judicata bars not only any claim that was adjudicated in a prior action, but any claim that could have been adjudicated. Id. In the bankruptcy proceeding, the court ordered the automatic stay lifted so that Wells Fargo could foreclose on its lien covering Belay's property. In the current case, Belay seeks to establish that Wells Fargo cannot foreclose on the lien because it is invalid. Both claims arise out of Wells Fargo's lien on Belay's property. Thus, we conclude the two actions are based on the same nucleus of operative facts, making them the same for purposes of res judicata.
As for the third element, case law is clear that "an order granting relief from an automatic stay is a final and appealable order." In re Chunn, 106 F.3d 1239, 1241 (5th Cir. 1997). However, Belay disputes that res judicata applies because, as she contends, there was "never any litigation" between herself and Wells Fargo in the bankruptcy proceeding.
Even where the four elements of res judicata are met, we must determine whether the previously unlitigated claim could or should have been brought in the earlier litigation. D-1 Enters., Inc. v. Commercial State Bank, 864 F.2d 36, 38 (5th Cir. 1989) (op. on reh'g) ("Essential to the application of the doctrine of res judicata is the principle that the previously unlitigated claim to be precluded could and should have been brought in the earlier litigation."). The Dallas court of appeals addressed the question of whether a debtor should have raised her claim that a bank's lien was void in a bankruptcy proceeding in Rios v. Town North National Bank, No. 05-94-00980-CV, 1995 Tex. App. LEXIS 3600, at *9-12 (Tex. App.—Dallas 1995, writ denied). The court observed, "A bankruptcy court is required to determine the debtor's equity in the property to be foreclosed on in determining whether to lift the stay." Id. at *10 (citing 11 U.S.C. § 362(d)). Additionally, the court noted, the validity of a creditor's lien is a factual predicate in determining both the debtor's equity and the creditor's interest in the property. Id. Consequently, the court concluded that the debtor's claim that the bank's lien was void "goes directly to the issues to be determined at the motion to lift stay" and therefore should have been asserted in the bankruptcy court. Id. at *10-11. Because the debtor did not challenge the validity of the bank's lien in the lift of stay proceeding, she was precluded from doing so in the district court proceeding. Id.; see also Baskett v. Pleasant, No. 05-95-00271-CV, 1996 Tex. App. LEXIS 1187, at *26 (Tex. App.—Dallas 1996, writ denied) (because debtor could have, and should have, asserted her claim that lien and deed of trust were void in the bankruptcy case, she was precluded from raising those issues in a later proceeding).
We find the reasoning of Rios applicable in this case. Wells Fargo's interest in Belay's property was placed squarely before the bankruptcy court. Wells Fargo requested relief from the stay for the express purpose of foreclosing on its lien against the property. Any claim that Belay had challenging the validity of Wells Fargo's lien could have, and should have, been brought at the time that Wells Fargo sought to lift the stay and pursue foreclosure. Because Belay did not timely raise her defense, it is now precluded by the application of res judicata. See also Mitchell v. Fort Davis State Bank, 243 S.W.3d 117, 126 (Tex. App.—El Paso 2007, no pet.) ("Because a challenge to the validity of the lien could have and should have been raised before the bankruptcy court, the doctrine of res judicata precludes the Mitchells from raising the defense in the state district court."); Flippin v. Wilson State Bank, 780 S.W.2d 457, 462 (Tex. App.—Amarillo 1989, writ denied) ("It is well settled that res judicata may be pleaded as a bar, not only regarding matter actually presented in the earlier proceeding, but also regarding any other available matters that might have been presented. Therefore, the Flippins, having failed to raise the question of lien validity in the bankruptcy proceedings to which they were parties, and in which it could have been raised and determined, were precluded by the doctrine of res judicata from later raising that question in the instant suit.") (citation omitted).
Wells Fargo met its burden of showing that it was entitled to summary judgment on its judicial foreclosure claim. Because the doctrine of res judicata precludes Belay from attacking the validity of Wells Fargo's lien, Belay has failed to raise a genuine issue of material fact to defeat summary judgment.
Conclusion
We conclude that Wells Fargo conclusively established its right to summary judgment on its suit for judicial foreclosure. As such, the district court correctly granted summary judgment, and we affirm.
Judy C. Parker
Justice Do not publish.