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Reddick v. Deutsche Bank National Trust Co.

United States District Court, N.D. Texas, Dallas Division

December 12, 2017

SWEET ASTER REDDICK, et al., Plaintiffs,
v.
DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE FOR HSI ASSET SECURITIZATION CORPORATION 2006-OPT2, MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2006-OPT2, Defendant.

          MEMORANDUM OPINION AND ORDER

          SIDNEY A. FITZWATER, UNITED STATES DISTRICT JUDGE.

         In this action seeking declaratory relief, to quiet title, and a permanent injunction, defendant Deutsche Bank National Trust Company, as Trustee for HSI Asset Securitization Corporation 2006-OPT2, Mortgage Pass-Through Certificates, Series 2006-OPT2 (“Deutsche Bank”), moves for summary judgment on all claims. For the reasons that follow, the court grants Deutsche Bank's motion and dismisses this action with prejudice by judgment filed today.

         I

         In 2005 plaintiffs Sweet Aster Reddick and Bessie L. Reddick (the “Reddicks”) obtained a Texas home equity loan from Alpha Mortgage USA, Inc.[1] The loan was secured by a lien on the Reddicks' residential property located in Dallas (the “Property”). The loan and lien (collectively, the “Mortgage”) were later assigned and transferred to Deutsche Bank.

         The Reddicks made consistent payments on the Mortgage until 2009, when they experienced financial hardship. Pursuant to the optional acceleration clause in the security agreement, which gives the lender the right to sell the Property if the borrower fails to cure a default, [2] Deutsche Bank sent the Reddicks a Notice of Default and Intent to Accelerate.[3]On May 24, 2011 Deutsche Bank accelerated the debt, and on June 20, 2011 Deutsche Bank attempted to exercise its power of sale under the Mortgage by applying for an order allowing it to foreclose on the Property pursuant to Tex.R.Civ.P. 736. This foreclosure proceeding was dismissed on December 12, 2011, after the Reddicks filed a separate foreclosure prevention lawsuit against Deutsche Bank on October 20, 2011. The lawsuit eventually was dismissed with prejudice on September 9, 2014.[4]

         The Reddicks remained in default after the dismissal of the lawsuit, and, on June 8, 2015, Deutsche Bank sent them a new Notice of Default and Intent to Accelerate. Deutsche Bank sent another notice of acceleration on September 14, 2015. On November 10, 2015 Deutsche Bank filed another Rule 736 proceeding. This suit was abated when the Reddicks filed the present lawsuit in Texas state court, and the Rule 736 proceeding was ultimately dismissed on February 29, 2016.

         On July 8, 2016 Deutsche Bank removed the instant case to this court. In this lawsuit, the Reddicks seek a declaration that Deutsche Bank's lien on the Property is void, to quiet title to the Property, and a permanent injunction. All three claims rely on the Reddicks' contention that Deutsche Bank's lien on the Property is void due to the expiration of the statute of limitations. Deutsche Bank moves for summary judgment dismissing all of the Reddicks' claims. The Reddicks oppose the motion.

         II

         Deutsche Bank moves for summary judgment on claims for which the Reddicks will have the burden of proof at trial. Because the Reddicks will have the burden of proof, Deutsche Bank's burden at the summary judgment stage is to point the court to the absence of evidence of any essential element of the Reddicks' claim. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once it does so, the Reddicks must go beyond their pleadings and designate specific facts demonstrating that there is a genuine issue for trial. See Id. at 324; Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc) (per curiam). An issue is genuine if the evidence is such that a reasonable jury could return a verdict in the Reddicks' favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The Reddicks' failure to produce proof as to any essential element of a claim renders all other facts immaterial. TruGreen Landcare, L.L.C. v. Scott, 512 F.Supp.2d 613, 623 (N.D. Tex. 2007) (Fitzwater, J.). Summary judgment is mandatory where the Reddicks fail to meet this burden. Little, 37 F.3d at 1077.

         III

         Where, as here, the proper resolution “turns on the interpretation of Texas law, ‘[this court is] bound to apply [Texas] law as interpreted by the state's highest court.'” Am. Int'l Specialty Lines Ins. Co. v. Rentech Steel L.L.C., 620 F.3d 558, 564 (5th Cir. 2010) (second brackets in original) (quoting Barfield v. Madison Cnty., Miss., 212 F.3d 269, 271-72 (5th Cir. 2000)). Under Texas law, a home equity loan may only be foreclosed upon by a court order. See Tex. Const. Ann. Art. XVI, § 50(a)(6)(D). When a lender exercises its power of sale granted in a mortgage, Rule 736 provides the procedure for obtaining a court order.[5] See Tex. R. Civ. P. 735.1. Lenders may opt instead to pursue an order by judicial foreclosure. See Tex. R. Civ. P. 735.3 (“A Rule 736 order is not a substitute for a judgment for judicial foreclosure, but any loan agreement, contract, or lien that may be foreclosed using Rule 736 procedures may also be foreclosed by judgment in an action for judicial foreclosure.”).

         “A sale of real property under a power of sale in a mortgage or deed of trust that creates a real property lien” must take place within four years after the day the cause of action accrues. Tex. Civ. Prac. & Rem. Code Ann. § 16.035(b) (West 2017).[6] When this four-year period expires, “the real property lien and a power of sale to enforce the real property lien become void.” Id. at § 16.035(d); Cline v. Deutsche Bank Nat'l Tr. Co., 2015 WL 4041791, at *5 (N.D. Tex. July 2, 2015) (Fitzwater, J.) (citing Khan v. GBAK Props., Inc., 371 S.W.3d 347, 353 (Tex. App. 2010, no pet.)). If a noteholder has the option to accelerate, then the date of accrual is the date the noteholder exercises the option. Khan, 371 S.W.3d at 353 (citing Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 566 (Tex. 2001)). Although accrual is a legal question, “whether a holder has accelerated a note is a fact question.” Cline, 2015 WL 4041791, at *5 (quoting Holy Cross, 44 S.W.3d at 568).

         IV

         The material facts in this case are largely undisputed, and the parties focus instead on the legal issue of tolling. Neither side disputes that the Reddicks' claims accrued when Deutsche Bank accelerated the loan on May 24, 2011. The Reddicks maintain that Deutsche Bank exercised its option to accelerate the debt on May 24, 2011, that the statute of limitations expired on May 24, 2015, and that the lien is void. Deutsche Bank primarily contends the statute of limitations was tolled when the Reddicks filed the two lawsuits because it could not foreclose under Rule 736 while the lawsuits were pending. The Reddicks maintain that because Deutsche Bank could ...


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