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JAAV Investments, LLC v. AMCAP Mortgage, Ltd.

Court of Appeals of Texas, Fourteenth District

January 23, 2014


On Appeal from the 61st District Court Harris County Trial Court Cause No. 2009-73072

Panel consists of Justices Christopher, Donovan, and Brown.


Marc W. Brown, Justice

In eleven issues, appellant JAAV Investments, LLC, challenges the trial court proceedings and the sufficiency of the evidence supporting the jury's findings in favor of appellee Amcap Mortgage, Ltd., for mortgage fraud. We sustain JAAV's legal insufficiency challenge to the measure of damages submitted to the jury. Amcap, however, presented some evidence of the correct measure of damages. Therefore, we reverse the trial court's judgment on Amcap's fraud claim against JAAV, and remand such claim for a new trial. We otherwise affirm the trial court's judgment.

I. Factual and Procedural Background

This appeal involves a judgment against the seller of a townhome, appellant JAAV Investments, LLC, in favor of the mortgage company involved in the transaction, appellee Amcap Mortgage, Ltd. Amcap had listed as defendants JAAV and Michael Citizen, the purchaser of the townhome, along with several other corporations and individuals it alleged were part of the fraud. However, JAAV and Citizen were the only defendants brought to trial.

Amcap loaned money to Citizen to purchase a townhome located at 1005 Gillette Street in Houston, Texas, which was one of three townhomes in the area built by JAAV. JAAV took out a construction loan with Sterling Bank to build the properties. Phuong Nguyen, a JAAV partner, testified that at various points he contracted with several real estate agents regarding the 1005 Gillette property. At one time, the property was listed for sale on the Multiple Listing Service ("MLS"), but the listing was terminated on October 3, 2007. The property was not listed on the MLS and was not the subject of a real estate agent contract at the time of the sale to Citizen.

Citizen found out about the JAAV property from Jimmy Thomas. When Citizen and his wife were having problems, he asked Thomas to help him find a home. Citizen testified he never saw the property prior to closing, and he only spoke with Thomas and a woman named Dana Davis prior to closing on the property. Thomas worked for a company called Osaca International, and Dana Davis was a loan officer who prepared Citizen's loan application that was then sent by Lone Star Realty & Mortgage to Amcap. The loan application was supported by W-2s, paystubs, and a credit report. However, at trial, Citizen testified that information included with the loan application, including his income and assets, was incorrect. Citizen also testified that he gave accurate information to Davis and he was not aware any inaccurate information was submitted to Amcap until this lawsuit.

The loan application also indicated that Citizen would make a cash down payment at closing. A representative for Amcap, Phillip Garrett Clayton, testified at trial that whether the buyer makes a cash down payment at closing is considered by Amcap when it is deciding whether to make the loan. The "New Home Contract, " executed between JAAV and Citizen[1] on February 15, 2008, did not indicate that a broker or agent was involved with the transaction and showed Citizen would bring a down payment to the closing.

At the closing on March 11, 2008, Nguyen brought a cashier's check for $24, 005.50 that he had purchased using JAAV funds to serve as the down payment. However, the cashier's check listed Michael Citizen as the purchaser. At trial, Nguyen testified that the title company involved, Pinnacle Title, told him to designate Citizen as the purchaser on the check.

Also at the closing, Nguyen signed a "Settlement Statement, " a form from the U.S. Department of Housing and Urban Development commonly called a "HUD-1." At trial, the HUD-1 was admitted into evidence. The HUD-1, which is generated by the title company, summarizes all payments made during the transaction. The HUD-1 in this case demonstrates that Citizen made a cash down payment of $24, 005.50, with the remaining balance paid from the $356, 250 Amcap loan. Clayton testified that before funding is authorized, all parties review the HUD-1 settlement statement. During cross-examination, Clayton said that he was unable to testify whether he personally had been the one to review the HUD-1 or any other documentation regarding this loan prior to funding.

As to funds JAAV received at the sale, the HUD-1 indicates the property sold for $375, 000. The HUD-1 also shows Lone Star Realty & Mortgage was paid $7, 125 from seller's funds at closing for the loan origination fee, [2] and Osaca International was paid $36, 000 from seller's funds for "services." Additionally, the HUD-1 shows $270, 000 was paid from seller's funds to an unnamed source. At trial, Nguyen testified that the $270, 000 was paid to Sterling Bank at the time of the sale toward JAAV's construction loan.

According to Clayton, the HUD-1 would indicate if a real estate broker was involved in the transaction. The HUD-1 at issue here did not specifically indicate that any payments were made from seller's funds for broker services.

At the time of closing, Danny Wells appraised the property at $375, 000. According to Wells, who testified at trial, his appraisal indicated that the borrower would be making a down payment at closing. Wells testified that his appraisal is relied on by parties to the transaction, including lenders. Clayton testified that he could not remember whether he personally reviewed the appraisal on the 1005 Gillette property, but that Amcap's system requires underwriters to review appraisals prior to ...

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