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Christiana Trust v. Bush

United States District Court, S.D. Texas, Houston Division

June 7, 2017

CHRISTIANA TRUST, A DIVISION OF WILMINGTON SAVINGS FUND SOCIETY, FSB, NOT IN ITS INDIVIDUAL CAPACITY BUT AS TRUSTEE OF ARLP TRUST 5, Plaintiff,
v.
EDWARD A. BUSH, GARY ODOMS AND THE UNKNOWN HEIRS AT LAW OF CHERYL A. BUSH, DECEASED, Defendants.

          MEMORANDUM AND OPINION

          Lee H. Rosenthal Chief United States District Judge.

         The Christiana Trust seeks a declaratory judgment that it may foreclose on a property. It sued Edward Bush and Gary Odoms, as well as any unknown heirs of one of the property's original purchasers. After a court-appointed attorney ad litem determined that there were no unknown heirs, the Christiana Trust moved for summary judgment, seeking an order permitting it to foreclose on the property. Neither Mr. Bush nor Mr. Odoms responded. The court grants the motion, for the reasons explained below.

         I. Background

         In exchange for a loan, Cheryl and Edward Bush[1] executed a $64, 000 promissory note in favor of the Bank of America. (Docket Entry No. 35-1 at 8). The note was secured by their property at 7715 Whidbey Island Drive, Houston, Texas 77086. The Bushes also executed a Homestead Lien Contract and Deed of Trust. (Id. at 12). The Christiana Trust is the current owner of the note and is the mortgagee of the security interest in the property. (Id. at 22). The note required the Bushes to make regular payments; failure to make scheduled payments was a default. (Id. at 8). The lien agreement provided that, in the event of a default, the lienholder could accelerate the entire debt after proper notice. (Id. at 15).

         The Bushes stopped making payments on the loan in May 2009. (Id. at 4). In March 2014, the Christiana Trust's mortgage servicer sent the Bushes a notice of default and intent to accelerate. (Id. at 26). The Bushes did not attempt to cure the default. (Id. at 4). The Christiana Trust's mortgage servicer sent a notice of acceleration in May 2015. (Id. at 41).

         In November 2016, Edward Bush sent the Christiana Trust a Notice of Request to Cure that purported to identify five defects in the loan process and demanded that the Christiana Trust rectify them. (Id. at 53). Specifically, Edward Bush claimed that:

• the loan closed on the same day that the Bushes received an itemized disclosure of the fees and costs involved in closing instead of one or more business days after receipt of such a disclosure;
• the Bushes did not receive a copy of the final loan documents;
• the fair market value of the property identified in the loan agreements was not based on a legally sufficient appraisal of the property;
• the Bushes did not receive notice of their right to rescind the agreement within three days; and
• the parties to the agreement did not execute the required acknowledgment of the fair market value of the property as of the date of closing;

         all in violation of Texas law.

         The Christiana Trust responded to the letter within 60 days. (Id. at 4, 49). In response to the first complaint-failure to provide disclosures a business day before the loan closed-the Trust stated that it could not prove that the disclosures were provided timely and therefore offered to cure the defect under Article XVI, § 50(a)(6)(Q)(x)(f) of the Texas Constitution. That “catch-all” provision allows a lender to cure an otherwise incurable mortgage defect by paying $1, 000 and offering to refinance or modify the loan, on its original terms but with compliant origination procedures, at no cost to the buyer. E.g., Guthrie v. Bank of N.Y. Mellon, No. 6:12-CV-290-WSS, 2013 WL 12108605, at *2 (W.D. Tex. June 27, 2013). The Christiana Trust argued that all of the other alleged defects were meritless. As to the second objection-failure to provide a copy of the final loan documents-the Trust provided a copy of all relevant loan documents, including a form that the Bushes signed stating that they had received copies of the relevant documents. (Id. at 70). As to the third objection, about the alleged absence of a legally sufficient appraisal, the Christiana Trust provided a copy of an appraisal status report outlining the steps taken in the appraisal process. (Id. at 85). The Trust responded to the fourth objection to the notice of right to cancel by providing the Bushes' signed acknowledgments of their right to cancel the transaction. (Id. at 62-63). The Trust similarly responded to the fifth objection to the required agreement as to fair market value by providing the Bushes' signed acknowledgments of the fair market value of the house. (Id. at 66). Mr. Bush did not respond to the Trust's letter. (Id. at 5).

         The Christiana Trust filed this lawsuit seeking a declaratory judgment permitting it to foreclose on the property. Mr. Bush filed an answer, but Mr. Odom did not. Neither Mr. Bush nor Mr. Odom ...


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