United States District Court, W.D. Texas, Austin Division
MEMORANDUM OPINION AND ORDER
W. AUSTIN UNITED STATES MAGISTRATE JUDGE
the Court is the above-entitled cause of action. The parties
appeared for a bench trial and the Court heard testimony and
evidence on December 12, 2016. Pursuant to the Court's
Order the parties filed post-trial briefing. The last of all
the Court-ordered briefing was received January 30, 2016.
Having considered the evidence and testimony and post-trial
briefing, the Court enters the following Memorandum Opinion
FINDINGS OF FACT 
case arises from a suit to foreclose on real property owned
by Janos Farkas. Wells Fargo Bank, N.A. (Wells Fargo) brought
suit for foreclosure alleging that Farkas had defaulted on a
2007 Home Equity Loan. Farkas argued that the lien on the
property was invalid and unenforceable due to deficiencies in
the lien documents. Shortly before the trial was scheduled,
Wells Fargo dismissed its foreclosure claim as the loan was
no longer in default. However, Farkas, in his answer to Wells
Fargo's third amended complaint, added a counterclaim for
quiet title based on the allegedly invalid lien.
Specifically, Farkas claimed that the lien documents-the
Wells Fargo Home Equity Account Agreement and Disclosure
Statement (Agreement) and Texas Deed of Trust (Deed)-did not
include three terms required by the Texas Constitution:
Article XVI, Section 50(a)(6)(J), (P), &
(Q)(xi).These omissions, he argued, make the lien
invalid. The parties were unable to come to an agreement on
this claim, and a bench trial commenced on December 12, 2016.
parties do not dispute the relevant facts. The only evidence
submitted was the Agreement and Deed. Farkas also testified
to his method of searching for the allegedly missing terms.
following are the relevant factual findings of the Court:
• The heading of the Agreement states “THIS IS AN
EXTENSION OF CREDIT AS DEFINED BY SECTION 50(a)(6) and (t),
ARTICLE XVI OF THE TEXAS CONSTITUTION.” (Dkt. No. 97,
Exh. 2 at 1).
• Section 2 of the Deed provides that “This
Agreement is intended to evidence an ‘Extension of
Credit' as that term is defined by Section 50(a)(6) and
(t), Article XVI of the Texas Constitution. . . .”
(Dkt. No. 97, Exh. 3 at 1).
• Section 29 of the Agreement states that “The
Bank shall comply with any of its obligations under Sections
50(a)(6), 50(e)-(i), or 50(t) Article XVI, Texas Constitution
. . . .” (Dkt. No. 97, Exh. 2 at 14).
CONCLUSIONS OF LAW
Texas law, “[a] suit to clear or quiet title- also
known as suit to remove cloud from title-relies on the
invalidity of the defendant's claim to the
property.” Essex Crane Rental Corp. v. Carter,
371 S.W.3d 366, 388 (Tex. App.-Houston [1st Dist.] 2012, pet.
denied). This equitable action “exists to ‘enable
the holder of the feeblest equity to remove from his way to
legal title any unlawful hindrance having the appearance of
better right.'” Hahn v. Love, 321 S.W.3d
517, 521 (Tex. App.-Houston [1st Dist.] 2009, pet. denied)
(quoting Thomson v. Locke, 66 Tex. 383, 1 S.W. 112,
115 (1886)). The elements of a quiet-title claim are
“(1) an interest in a specific property; (2) title to
the property is affected by a claim by the defendant; and (3)
the claim, although facially valid, is invalid or
unenforceable.” Cruz v. CitiMortgage, Inc.,
No. 11-cv-2871, 2012 WL 1836095, at *4 (N.D. Tex. May 21,
2012) (citing Sadler v. Duvall, 815 S.W.2d 285, 293
n.2 (Tex. App.-Texarkana 1991, writ denied)). Neither party
disputes that Farkas has established the first two elements.
However, they disagree as to the invalidity of the lien.
argues that because the extension of credit fails to comply
with Section 50(a)(6), Article XVI of the Texas Constitution,
Wells Fargo's claim to the property is invalid or
unenforceable. In 2003, the Texas Constitution was amended to
provide additional protections to the homestead. In
particular, Section 50(a)(6) provides that: “[t]he
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”
complies with this section. It includes a list of
requirements that the lien must meet in order to be
foreclosure eligible. Section 50(c) then 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 . . . .” Under Section 50(c),
a party may file suit for quiet title, voiding the lien, when
it fails to comply with the requirements listed in Section
50(a)(6). Wood v. HSBC Bank USA, N.A., 505 S.W.3d
542, 548-49 (Tex. 2016). Thus, not only may the lender lose
the ability to foreclose on the lien if it does not comply
with the Texas Constitution, but the owner may also quiet
title to void the lien entirely. This right, in part, is
limited by Section 50(a)(6)(Q)(x)-(xi), which gives the
lender an opportunity to cure any defects within sixty days
of notice by the owner of the property.
sole argument in support of his claim for quiet title is that
the terms of the lien failed to include three of the required
provisions under Section 50(a)(6): (J), (P), and (Q)(xi).
Wells Fargo contends that though these three provisions were
not explicitly included in the Agreement or Deed, Section
50(a)(6) was incorporated in its entirety by reference in two
sections of the Agreement.Under Texas law, “[a] written
contract must be construed to give effect to the parties'
intent expressed in the text as understood in light of the
facts and circumstances surrounding the contract's
execution.” Houston Exploration Co. v. Wellington
Underwriting Agencies, Ltd., 352 S.W.3d 462, 469 (Tex.
2011). Contracts that “can be given a certain or
definite legal meaning or interpretation” will be
construed as a matter of law. Coker v. Coker, 650
S.W.2d 391, 393 (Tex. 1983). A term in the contract “is
ambiguous when its meaning is uncertain and doubtful or it is
reasonably susceptible to more than one meaning.”
contract law provides that “an unsigned paper may be
incorporated by reference” in a signed document. In
re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135 (Tex.
2004). The language used to refer to the incorporated
document “is not important provided the document signed
. . . plainly refers to another writing.” Id.
(quoting Owen v. Hendricks, 433 S.W.2d 164, 166
(Tex. 1968)). This incorporated document becomes part of the
contract, and “both instruments must be read and
construed together.” Bob Montgomery Chevrolet, Inc.
v. Dent Zone Cos., 409 S.W.3d 181, 189 (Tex.
App.-Dallas, 2013, no pet.). Texas courts have interpreted
the “plainly refers” requirement as meaning
“clearly refers” and have held that a “mere
reference” to another document is not enough to
establish a wholesale incorporation of the referenced
document “when the facts and circumstances surrounding
the agreement do not indicate that incorporation was
intended.” Al Rushaid v. Nat'l Oilwell Varco,
Inc.,757 F.3d 416, 420 (5th Cir. 2014). When the
reference to another document “is clear and the
circumstances indicate that the intent of the parties was
incorporation, [Texas] courts have held that a document may
be incorporated, even in the absence of specific language of
incorporation.” Id. at 420; cf. Gray &
Co. Realtors, Inc. v. Atlantic Hous. Found., Inc., 228
S.W.3d 431, 436 (Tex. App.-Dallas 2007, no pet. h.)
(“[A]ll that is required is that ...