Thomas et al v. HSBC Bank USA, National Association

RESPONSE in Opposition to 30 MOTION for Summary Judgment

S.D. Tex.October 31, 2017

DAL 80071357v1 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS GALVESTON DIVISION DANIEL THOMAS AND, § TAMI THOMAS, § § Plaintiffs, § § CIVIL ACTION NO. 3:16-cv-00322 v. § § HSBC BANK USA, NATIONAL § ASSOCIATION, § § Defendant. § DEFENDANT BENEFICIAL FINANCIAL I INC.’S1 RESPONSE IN OPPOSITION TO PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT Peter S. Wahby Attorney-in-charge State Bar No. 24011171 wahbyp@gtlaw.com Joseph P. Griffith State Bar No. 24045982 griffithj@gtlaw.com GREENBERG TRAURIG, LLP 2200 Ross Avenue, Suite 5200 Dallas, Texas 75201 Tel: (214) 665-3600 Fax: (214) 665-3601 ATTORNEYS FOR DEFENDANT BENEFICIAL FINACIAL I INC. 1 Defendant Beneficial Financial I Inc. was improperly named as HSBC Bank USA, N.A.. Case 3:16-cv-00322 Document 31 Filed in TXSD on 10/31/17 Page 1 of 9 DEFENDANT BENEFICIAL FINANCIAL I INC.’S RESPONSE IN OPPOSITION TO PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT PAGE 2 DAL 80071357v1 Defendant Beneficial Financial I Inc. (improperly named as HSBC Bank USA, N.A.) (“Beneficial”) hereby submits this Response In Opposition to Plaintiffs’ Motion for Summary Judgment [Dkt 30] and respectfully shows as follows: I. INTRODUCTION Plaintiffs Daniel and Tami Thomas (“Plaintiffs”) continue their thinly-veiled attempt to avoid foreclosure by seeking to convince this Court that Plaintiffs may destroy Beneficial’s rights under the parties’ contract simply by filing this lawsuit. In essence, Plaintiffs’ sole complaint on Summary Judgment is that Beneficial cannot foreclose on the Plaintiffs’ home equity loan because Plaintiffs brought this suit. (See Pls.’ Mot. for Summ. J. (“Pls.’ Mot.), ECF 30.) Contrary to Plaintiffs’ arguments, Beneficial is not barred from foreclosing on the Property by the four-year statute of limitations found in Section 16.053 of the Texas Civil Practice and Remedy Code. First, a statute of limitation creates no substantive rights or causes of action and, accordingly, cannot give rise to Plaintiffs’ claim for relief. Further, even if this were not the case, Plaintiffs’ own actions in filing this litigation have prevented Beneficial from exercising its rights under Texas law or the home equity loan and, as a result, have tolled the limitations period during the pendency of this suit. Finally, Plaintiffs present no evidence or arguments to rebut Beneficial’s no-evidence motion for summary judgment on Plaintiffs’ quiet title claim. As Plaintiffs’ claims all fail as a matter of law and evidence, Plaintiffs’ declaratory judgment claim also fails. Accordingly, Beneficial is entitled to summary judgment on all claims. Case 3:16-cv-00322 Document 31 Filed in TXSD on 10/31/17 Page 2 of 9 DEFENDANT BENEFICIAL FINANCIAL I INC.’S RESPONSE IN OPPOSITION TO PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT PAGE 3 DAL 80071357v1 II. UNDISPUTED FACTS Plaintiffs obtained a home equity loan on their home located at 1002 Ransom Street, Anahuac, Texas 77514 (the “Property”) and, by 2011, were unable to make the required mortgage payments because of a financial hardship. (Pls.’ Second Am. Compl. [Dkt 16]. at ¶¶ 10-11.) The home equity loan consisted of a promissory note (the “Note”) and a Mortgage Home Equity – First Lien (the “Mortgage”). (See Def. Beneficial Financial I Inc.’s Mot. for Summ. J. and Br. In Supp. (“Beneficial’s Mot.”), ECF 22, Exhibits A-1 and A-2 attached thereto.) Under the Mortgage, Beneficial retained a right to accelerate the debt and a power of sale should Plaintiffs default on the loan. (Beneficial’s Mot., Ex. A-2, at ¶ 19.) On April 1, 2012, Beneficial exercised this right to accelerate when Plaintiffs defaulted on their payments. (Pls.’ Second Am. Compl. at 11.) Plaintiffs initiated this action in state court on September 20, 2016, alleging a sole cause of action for violation of the statute of limitations. (See Notice of Removal, ECF 1, Exhibit C1.) Then, on March 14, 2017, Plaintiffs filed their First Amended Complaint removing this claim and shifting Plaintiffs’ claims to seek to quiet title and a declaratory judgment due to a violation of the Texas Constitution arising from alleged improprieties occurring at the time Plaintiffs refinanced their mortgage with a home equity loan from Beneficial Texas, Inc. (Pls.’ First Am. Compl., ECF 12.) Plaintiffs again amended their complaint on April 10, 2017 to re-allege a statute of limitations claim in addition to the quiet title and declaratory judgment claims. (Pls.’ Second Am. Compl., ECF 16.) In the Second Amended Complaint, Plaintiffs again allege that Beneficial’s attempt to foreclose on the Property is barred by statute of limitations. On September 5, 2017, Beneficial moved for summary judgment on all claims. (Beneficials’ Mot. at 12-13) Plaintiffs responded on October 3, 2017, (Pls.’ Resp. to Beneficial’s Case 3:16-cv-00322 Document 31 Filed in TXSD on 10/31/17 Page 3 of 9 DEFENDANT BENEFICIAL FINANCIAL I INC.’S RESPONSE IN OPPOSITION TO PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT PAGE 4 DAL 80071357v1 Mot., ECF 26), and Beneficial filed its reply on October 10, 2017, (Beneficial’s Reply in Supp. of its Mot. for Summ. J., ECF 28.). Now, Plaintiffs file their own Motion for Summary Judgment, seeking judgment on only one of Plaintiffs’ several claims. (See Second Am. Compl.; Pls.’ Mot.) III. ARGUMENT A. Plaintiffs are Not Entitled to Relief Because the Statute of Limitations is a Defense, Not a Substantive Right. Plaintiffs’ sole ground for seeking summary judgment is based on the contention that the four-year period within which Beneficial must foreclose on the property has expired. (See Pls.’ Mot.) Simply put, the allegation that an action to foreclose on the 2013 acceleration would be barred by limitations—even if true—does not give rise to a claim for relief. The statute of limitations is a defense, not a cause of action. See TEX. CIV. PRAC. & REM. CODE § 16.035(a) (“A person must bring suit for the recovery of real property under a real property lien or the foreclosure of a real property lien not later than four years after the day the cause of action accrues.”). Section 16.053 does not provide Plaintiffs with a right of action, and instead only restricts the period of time within which a lienholder like Beneficial may assert its own rights. Landers v. Nationstar Mortgage, LLC, 461 S.W.3d 923, 925 (Tex. App.—Tyler 2015, pet. denied) (“A statute of limitations does not give any right of action, but restricts the period within which the party can assert a right.”). Further, Section 16.053 does not affect Plaintiffs’ substantive rights, and does not create a right of action for Plaintiffs. Hunt Steed v. Steed, 908 S.W.2d 581, 583 (Tex. App.—Fort Worth 1995, writ denied.). Because Section 16.053 does not provide Plaintiffs’ with a substantive right to bring a statute of limitations claim against Beneficial, Plaintiffs’ claim necessarily fails as a matter of law. Accordingly, Beneficial is entitled to summary judgment in its favor on this claim. Case 3:16-cv-00322 Document 31 Filed in TXSD on 10/31/17 Page 4 of 9 DEFENDANT BENEFICIAL FINANCIAL I INC.’S RESPONSE IN OPPOSITION TO PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT PAGE 5 DAL 80071357v1 B. Even If Plaintiffs Could Allege Statute of Limitations as a Cause of Action, Plaintiffs Cannot Show the Statute of Limitations Expired to Bar Foreclosure. Section 16.053 provides a four-year statute of limitations for two situations: where a lender seeks to judicially foreclose on a property by filing a suit to foreclose, and when a lienholder seeks to foreclose under the terms of the instrument through a non-judicial foreclosure. Rodriguez v. JPMorgan Chase Bank, N.A., 2015 Tex. App. LEXIS 6105, *9 (Tex. App.—San Antonio June 17, 2015, no pet.). Here, Plaintiffs allege that Beneficial essentially waived its rights to foreclose on the home equity loan at issue by failing to file for judicial foreclosure at the same time this case is pending. (Pls.’ Mot. at ¶ 12.) Plaintiffs assert that their own actions in filing the instant litigation has no bearing on whether the statute of limitations period has expired. To the contrary, this Court has previously found a plaintiff’s suit tolls the statute of limitations period under Section 16.053. See, e.g., Curry v. Ocwen Loan Servicing LLC, No. H-15-3089, 2016 WL 3920375 (S.D. Tex. July 14, 2016). This Court’s reasoning in Curry v. Ocwen Loan Servicing LLC is instructive. In Curry, a borrower sued a lienholder in an attempt to prevent foreclosure of real property under a home equity loan. 2016 WL 3920375, at *2. The borrower asserted any foreclosure action was prohibited by the four-year statute of limitations in Section 16.053(a).2 Id. at *4. This Court rejected the borrower’s argument that the lienholder was barred from foreclosing, although more than four years had passed since accrual of the loan, because the lienholder was prevented from foreclosing on the home equity loan while the borrower’s suit was pending. Id. at *6. In reaching this finding, this Court noted that the Texas Constitution requires home equity loans to 2 Plaintiffs also contend Beneficial is barred from foreclosing because any foreclosure sale must take place within four years from the date of acceleration of the loan under Section 16.053(b). (Pls.’ Mot. at ¶ 7.) However, Section 16.053(b) applies only to non-judicial foreclosure actions and does not apply to actions to foreclose a home equity loan. See PNC Bank Nat’l Ass’n v Fisher, No. 4:150CV-01217, 2017 U.S. Dist. LEXIS 99917, at *6, n.2 (S.D. Tex. June 28, 2017). To the extent Plaintiffs request summary judgment under Section 16.053(b), this Court should deny the request. Case 3:16-cv-00322 Document 31 Filed in TXSD on 10/31/17 Page 5 of 9 DEFENDANT BENEFICIAL FINANCIAL I INC.’S RESPONSE IN OPPOSITION TO PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT PAGE 6 DAL 80071357v1 be foreclosed by court order, through either a judicial foreclosure action or a Rule 736 proceeding. Id. at *5 (citing Tex. Const., art. XVI, § 50(a)(6)(D)). Even though the lienholder in Curry could have brought a Rule 736 proceeding, the Court noted that a Rule 736 proceeding could not be brought as a counterclaim to the borrower’s already-filed suit. Curry, 2017 WL 3920375, at *6. Additionally, any Rule 736 proceeding would be mandatorily stayed where the borrower brings an original proceeding putting in issue any matter related to the origination, servicing, or enforcement of the lien—just as Plaintiffs have done here. See id. at *5 (citing TEX. R. CIV. P. 736.11(a)). Plaintiffs point to Landers v. Nationstar Mortgage, LLC as a parallel case. (Pls.’ Mot. at ¶ 17.) In contrast, the court in Landers dealt with a wholly different situation, and the reasoning in Landers does not apply to this case. The Tyler Court of Appeals in Landers held that an injunction prohibiting a lienholder from conducting a foreclosure sale does not toll the statute of limitations for foreclosure because the lienholder may file a judicial foreclosure action. 461 S.W.3d at 927. First, and notably, the loan at issue in Landers is not a home equity loan such as the loan at issue here. See id. at 924. While a lienholder ordinarily may pursue either a judicial or non-judicial action to foreclose on a real property lien, see id. at 927, a home equity lien requires a court order for foreclosure through either a judicial foreclosure action or a judicial proceeding under Texas Rule of Civil Procedure 736, Curry v. Ocwen Loan Servicing LLC, No. H-15-3089, 2016 WL 3920375, at *2 (S.D. Tex. July 14, 2016); but see Deutsche Bank Nat. Trust Co. v. Ra Surasak Ketmayura, No. A-14-CV-00931, 2015 WL 3899050 (W.D. Tex. June 11, 2015) (holding mandatory dismissal of a lienholder’s Rule 736 action does not toll the statute of limitations). Case 3:16-cv-00322 Document 31 Filed in TXSD on 10/31/17 Page 6 of 9 DEFENDANT BENEFICIAL FINANCIAL I INC.’S RESPONSE IN OPPOSITION TO PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT PAGE 7 DAL 80071357v1 Additionally, unlike in Landers, there is no injunction in this case barring Beneficial’s foreclosure. Rather, Beneficial is barred from foreclosing on the home equity loan by operation of law while this suit is pending because a home equity lien foreclosure requires a court order through either a judicial foreclosure action or a Rule 736 action. See Curry, 2016 WL 3920375 at *5 (citing Tex. Const., art. XVI, § 50(a)(6)(D)). Beneficial cannot assert a Rule 736 action as a counterclaim in this suit, and any action Beneficial brings would be mandatorily stayed due to the pendency of this suit. See id. As this Court noted in Curry, it is beyond reason to expect Beneficial to be required to file a separate proceeding in order to preserve its right to foreclose when such a proceeding would be required to be mandatorily stayed due to Plaintiffs’ suit here. See Curry, 2017 WL 393595, at *6; TEX. R. CIV. P. 736.11(a). Indeed, judicial efficiency requires the opposite. Accordingly, Plaintiffs’ suit currently pending before this Court prevents Beneficial from pursuing its legal right to enforce the lien and, as a result, it is Plaintiffs’ own actions which have tolled the statute of limitations. See Curry, 2017 WL 3920375, at *6; see also Devdara, L.L.C. v. Wells Fargo Bank, N.A., 2017 WL 3288552, at *3 (S.D. Tex. July 3, 2017) (following Curry, in finding a borrower’s suit operates to toll the limitations period within which a lienholder may foreclose); Murphy v. HSBC Bank USA, No. H-12-3278, 2017 WL 393595, at *20 (S.D. Tex. Jan. 20, 2017) (holding the applicable statute of limitations was tolled during the pendency of a borrower’s original proceeding which prevented the lienholder from pursuing an expedited foreclosure under Rule 736 of the Texas Rules of Civil Procedure); HSBC Bank USA, N.A. v. Crum, 2016 WL 728569 (N.D. Tex. Feb. 24, 2016) (citing Wells Fargo Bank, N.A. v. Murphy, 458 S.W.3d 912, 915 n.1 (Tex. 2015)). Case 3:16-cv-00322 Document 31 Filed in TXSD on 10/31/17 Page 7 of 9 DEFENDANT BENEFICIAL FINANCIAL I INC.’S RESPONSE IN OPPOSITION TO PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT PAGE 8 DAL 80071357v1 IV. PRAYER For the reasons explained above, Beneficial is entitled to judgment as a matter of law. WHEREFORE, PREMISES CONSIDERED, Defendant Beneficial Financial I Inc. respectfully requests that the Court deny Plaintiffs Daniel Thomas and Tami Thomas’ Motion for Summary Judgment and dismiss all claims asserted against Beneficial with prejudice and enter final judgment in Beneficial’s favor. Beneficial further requests that the Court grant it all further relief at law and in equity to which it may be justly entitled. Dated: October 31, 2017 Respectfully submitted, By: /s/ Joseph P. Griffith Peter S. Wahby Lead counsel State Bar No. 24011171 S.D. Tex. Bar No. 37917 wahbyp@gtlaw.com Joseph P. Griffith State Bar No. 24045982 SD Tex Bar No. 946129 Email: griffithj@gtlaw.com Of Counsel GREENBERG TRAURIG, LLP 2200 Ross Avenue, Suite 5200 Dallas, Texas 75201 Tel: (214) 665-3600 Fax: (214) 665-3601 ATTORNEYS FOR DEFENDANT BENEFICIAL FINANCIAL I INC. Case 3:16-cv-00322 Document 31 Filed in TXSD on 10/31/17 Page 8 of 9 DEFENDANT BENEFICIAL FINANCIAL I INC.’S RESPONSE IN OPPOSITION TO PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT PAGE 9 DAL 80071357v1 CERTIFICATE OF SERVICE I certify that on October 31, 2017, I served a copy of the foregoing Defendant Beneficial Financial I Inc.’s Response in Opposition to Plaintiffs’ Motion for Summary Judgment through the Court’s CM/ECF system on all parties as well as via U.S. Mail and E-Mail: Robert C. Lane Joshua D. Gordon The Lane Law Firm, P.L.L.C. 6200 Savoy Drive, Suite 1150 Houston, Texas 77036 /s/ Joseph P. Griffith Joseph P. Griffith Case 3:16-cv-00322 Document 31 Filed in TXSD on 10/31/17 Page 9 of 9