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Rivera v. Wells Fargo Bank, N.A.

United States District Court, W.D. Texas, El Paso Division

March 29, 2018

VERONICA VASQUEZ RIVERA, Individually and as Independent Executrix of the Estate of Felipe B. Rivera, Plaintiff,
WELLS FARGO BANK, N.A., Defendant,



         Presently before the Court are Defendant Wells Fargo Bank, N.A.'s ("Wells Fargo") "Second Amended Motion for Summary Judgment and Brief in Support" (ECF No. 58) ("Defendant's Motion for Summary Judgment") filed on October 13, 2017, and Plaintiff Veronica Vasquez Rivera's ("Veronica") "Motion for Summary Judgment" (ECF No. 59) ("Plaintiffs Motion for Summary Judgment") filed on October 16. The parties' briefing on the motions was completed in November 2017.[1]

         On March 12, 2018, pursuant to Federal Rule of Civil Procedure 56(f)(2), the Court notified the parties that it may resolve their disputes on a ground not raised by their motions and ordered the parties to submit supplement briefs addressing that ground.[2] The parties have complied with that order.[3] Having carefully considered the parties' arguments and record evidence, the Court, for the reasons that follow, DENIES Veronica's motion and GRANTS Wells Fargo's motion as supplemented by additional briefs.

         I. BACKGROUND

         A. Factual Background

         Unless otherwise stated, the following facts are undisputed. In 1978, Felipe B. Rivera ("Felipe"), now deceased, and Mary Collins f/k/a Mary Rivera ("Mary") married.[4] In September 1988, they bought a home located at 5828 Bagdad Way, El Paso, Texas 79924 ("Property"), which is the subject of this lawsuit.[5] In July 2006, they divorced, pursuant to a divorce decree entered by a divorce court.[6] Regarding the Property, the decree stated only that: "IT IS FURTHER ORDERED AND DECREED that the [P]roperty and all improvements located thereon ... shall be refinanced and MARY RIVERA shall receive $40, 000.00 as her share of the house's net equity to be paid within ninety (90) days of May 22, 2006."[7] By the time of the divorce, Mary resided in Michigan.[8] Felipe continued to reside at the Property, and Veronica moved in and began to reside there in 2006.[9]

         In June 2009, Mary filed a petition with the divorce court to enforce Felipe's obligations under the divorce decree. Her petition alleged, inter alia, that Felipe "failed to turn over her $40, 000.00 as her share of the net equity for her interest in the marital residence of the parties at 5828 Baghdad. El Paso. Texas."[10] She requested that a lien be placed against the Property to secure the unpaid payments in the amount of $40, 000.[11]

         On August 26, 2009, Felipe obtained a reverse mortgage loan from Wells Fargo by executing a Closed-End Fixed Rate Note ("Note") and a Texas Home Equity Conversion Loan Agreement ("Loan Agreement") that was secured by a Closed End Fixed Rate Home Equity Conversion Deed of Trust ("Deed of Trust").[12] The Deed of Trust secured repayment of the Note by creating a lien interest in the Property.[13] Felipe received a lump sum of $28, 253.37 under the Loan Agreement.[14] Section 2.2.2 of the Loan Agreement states that the lump-sum money "shall be used by Lender to discharge the lien[] on the Property listed in the Schedule of Liens (Exhibit 2) attached to and made a part of this Loan Agreement";[15] the Schedule of Liens, in turn, lists "Mary Rivera" and "$40, 000."[16] Mary did not sign the Note, the Loan Agreement, or the Deed of Trust.[17]

         For services in connection with the loan, Wells Fargo had retained Lawyers Title of El Paso, a title insurance company.[18] Pursuant to its closing conditions for the loan, Wells Fargo required the title company to have Mary execute a special warranty deed to remove her from the title of the Property.[19] Sometime prior to August 26, 2009, Mary signed a pay-off statement and provided it to the title company.[20] Also prior to that date, Mary agreed to sign a special warranty deed in exchange for $40, 000.[21] Subsequently, Mary signed a special warranty deed, granting her interest in the Property to Felipe before a notary public in Michigan.[22] The parties dispute when Mary signed the deed: according to Wells Fargo, August 26, 2009, but according to Veronica, August 29, 2009.[23] At some point, Mary received $40, 000, which was paid from the proceeds of the loan.[24]

         On August 28, 2009, Felipe and Veronica were married by a judge.[25] Felipe died in February 2014.[26] Following his death, his estate was probated: Veronica was appointed independent executrix of his estate, and letters of testamentary were issued in April 2015 by the probate court.[27] Veronica is the heir to the Property per Felipe's will.[28] To date, she continues to reside at the Property.

         The loan became due upon Felipe's death.[29] When Veronica failed to cure the default, Wells Fargo initiated foreclosure proceedings.[30] In February 2016, Wells Fargo mailed a notice informing Veronica that the loan had been accelerated and that the Property was scheduled to be sold at foreclosure sale on May 3, 2016.[31]

         B. Procedural Background

         On May 2, 2016, Veronica, in her individual capacity and as the independent executrix of Felipe's estate, brought this lawsuit against Wells Fargo in the 243rd Judicial District Court in El Paso County, Texas.[32] In June 2016, Wells Fargo removed the case to federal court, premised upon diversity jurisdiction. 28 U.S.C. §§ 1332(a), 1141, 1146.

         In June 2017, Veronica filed her First Amended Complaint (ECF No. 35). Therein, she claims the Property as her homestead and asserts a cause of action under the Texas Constitution, Article XVI, §§ 50(a)(7), 50(k)(1), and 50(c), challenging the reverse mortgage lien.[33] As relief, she asks the Court to declare the lien is limited to an undivided 50 percent share of the Property and permanently enjoin Wells Fargo from foreclosing on her homestead unless the foreclosure is limited to an undivided 50 percent share of the Property.[34]

         II. STANDARD

         Summary judgment is appropriate when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). "A genuine dispute of fact exists when evidence is sufficient for a reasonable jury to return a verdict for the non-moving party, and a fact is material if it 'might affect the outcome of the suit.'" Willis v. Cleco Corp., 749 F.3d 314, 317 (5th Cir. 2014) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986))). In deciding whether a genuine dispute as to material fact exists, a trial court considers all of the evidence in the record and "draw[s] all reasonable inferences in favor of the nonmoving party, " but "refrain[s] from making credibility determinations or weighing the evidence." Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007) (citation and internal quotation marks omitted).

         Procedurally, the party moving for summary judgment "bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." E.KO.C. v. LHC Grp., Inc., 773 F.3d 688, 694 (5th Cir. 2014) (alterations in original) (quotation marks and citation omitted). If the moving party succeeds, "the onus shifts to the nonmoving party to go beyond the pleadings and by her own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial." Id. (internal quotation marks and citation omitted). However, the nonmoving party "cannot defeat summary judgment with conclusory allegations, unsubstantiated assertions, or only a scintilla of evidence." Davis v. Fort Bend Cty., 765 F.3d 480, 497 n.20 (5th Cir. 2014) (quotation marks and citation omitted).


         In this action, Veronica challenges the validity of the reverse mortgage lien under the Texas Constitution. Compl. ¶¶ 15-21; Pl's Mot. for Summ. J. at 8-9. Article XVI, Section 50 of the constitution 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[.]" Tex. Const, art. XVI, § 50(c) (emphasis added); see also Wood v. HSBC Bank USA, N.A., 505 S.W.3d 542, 544 (Tex. 2016) ("This language [in Section 50(c)] is clear, unequivocal, and binding."). Section 50 protects the homestead from foreclosure for the payment of debts subject to eight exceptions, one of which covers reverse mortgages. Tex. Const, art. XVI, § 50(a) ("The 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:... (7) a reverse mortgage"); Garofolo v. Ocwen Loan Servicing, L.L.C., 497 S.W.3d 474, 477 (Tex. 2016). As critical in this case, Section 50(k)(1) defines "reverse mortgage" as "an extension of credit[]... that is secured by a voluntary lien on homestead property created by a written agreement with the consent of each owner and each owner's spouse" Tex. Const, art. XVI, § 50(k)(1) (emphasis added).

         Veronica argues that on August 26, 2009, when the lien was created, she was an "owner, " but she did not consent to the lien. Pl's Mot. Summ. J. at 11; see also Tex. Const, art. XVI, § 50(k)(1) (" ... a voluntary lien . .. created by a written agreement with the consent of each owner [i.e., Mary] and each owner's spouse." (emphasis added)). Therefore, Veronica posits, if the lien is valid at all, it is limited to 50 percent undivided interest in the Property, which was all that Felipe owned on that day. Id. at 10-11. Wells Fargo responds that Mary consented to the creation of the lien. Resp. to Pl's Mot. for Summ. J. at 8-12. In support, Wells Fargo points to various actions by Mary, including her execution of the special warranty deed (which Wells Fargo assumes arguendo occurred on August 29, 2009), as well as her deposition testimony. Id. at 11-12; see also Reply to Def.'s Mot. for Summ. J. at 7-8. Veronica counters that even if Mary consented by signing the special warranty deed on August 29, it was too late for the lien to become valid: by then, Veronica and Felipe were married for a day (they married on August 28), but Veronica did not consent to the lien. See Pl's Mot. Summ. J. at 11; Reply to Pl's Mot. for Summ. J. at 5-6; see also Tex. Const, art. XVI, § 50(k)(1) (" ... a voluntary lien ... created by a written agreement with the consent of each owner and each owner's spouse [i.e., Veronica]." (emphasis added)).

         As their initial arguments reveal, Veronica asserts-without citing any case, binding or otherwise-and Wells Fargo assumes that on August 26, 2009, when the challenged lien was created, Mary was an "owner, " as that term is used in Article XVI, Section 50(k)(1)[35] and thereby further assumes that Mary's consent was required for the lien creation for it to be valid under Section 50(c). It appearing to the Court that, that assertion and assumption may not be warranted here, on March 12, 2018, the Court issued an order notifying the parties that it may decide their motions on whether Mary's consent was required, see Fed. R. Civ. P. 56(f)(2) ("After giving notice and a reasonable time to respond, the court may[]... grant the motion on grounds not raised by a party."), [36] and ordered for additional briefing on the following issue:

Whether or not, under the facts of this case, Mary's consent to the creation of the lien was required for the lien to be valid under Sections 50(c), as that section applies to Sections 50(a)(7) and 50(k)(1). Stated another way, whether or not Mary was an "owner" on August 26, 2009, as that term is used in Section 50(k)(1).

         Notice & Order for Briefing at 2. The Court notified the parties that that issue depends on what homestead interest Mary had in the Property on August 26-which, in turn, may depend on a proper construction of Mary and Felipe's divorce decree. Having received the parties' additional briefs, the Court now addresses this issue.

         The parties cite no case interpreting "owner, " as the term appears in Section 50(k)(1). Texas agencies, which have the delegated authority to interpret Article XVI, Section 50 of the constitution, see Wood, 505 S.W.3d at 574, have interpreted "owner, " as the term appears in a parallel constitutional provision regarding home-equity loans, [37] to mean "[a] person who has the right to possess, use, and convey, individually or with the joinder of another person, all or part of the homestead, " 7 Tex. Admin. Code § 153.1(13) (emphasis added). Sine qua non of homestead ownership interest is the possessory right. See Laster v. First Huntsville Props. Co., 826 S.W.2d 125, 130 (Tex. 1991) (Section 50's "homestead protection ... can arise only in the person or family who has a present possessory interest in the subject property."); In re Odes Ho Kim, 748 F.3d 647, 661-62 (5th Cir. 2014) ("When a spouse no longer possesses the real property that was impressed with homestead rights, [that spouse's] homestead rights in that property cease to exist." (citing cases)).

         The Court turns to Mary and Felipe's divorce decree to ascertain what homestead interest each had in the Property as a result of their divorce. When interpreting a divorce decree, which is a type of judgment, Texas courts apply the general rules regarding construction of judgments. Wilde v. Murchie, 949 S.W.2d 331, 332 (Tex. 1997). "Courts should not give conclusive effect to the judgment's use or omission of commonly employed decretal words, but should instead determine what the trial court adjudicated from a fair reading of all the judgment's provisions." Id. at 333. If the decree, read as a whole, is unambiguous as to the property's disposition, then courts must effectuate the decree as written. Id. If the decree is ambiguous-i.e., subject to more than one reasonable interpretation-then courts must review the record along with the decree to aid in its construction. Shanks v. Treadway, 110 S.W.3d 444, 447 (Tex. 2003). Whether a divorce decree is ambiguous is a question of law. Coker v. Coker, 650 S.W.2d 391, 394 (Tex. 1983).

         Wilde is particularly instructive here. Although the divorce decree in Wilde did not expressly divest the wife of her interest in the community homestead, the decree liquidated her equity interest in the home and stipulated that the husband assumed the debts on that property; the Texas Supreme Court concluded that the decree indicated the divorce court's decision "to award the home solely to [the husband], " Wilde, 949 S.W.2d at 333, that is, "the divorce court's decision that the husband take sole possession of the community home, " Tex. Workers' Comp. Ins. Fund v. Lopez, 21 S.W.3d 358, 362 (Tex. App.-San Antonio 2000, pet. denied) (emphasis in original) (interpreting Wilde). The actions of the parties after the divorce (he had sole possession for twenty years and she sought only to collect the monetary award that, as stated in the decree, included her equity in the homestead) further supported the court's conclusion. Wilde, 949 S.W.2d at 333.

         Here, as in Wilde, the divorce decree does not expressly divest Mary of her interest in the Property, but it liquidated her equity interest in the home. The decree states: "IT IS FURTHER ORDERED AND DECREED that the [P]roperty and all improvements located thereon ... shall be refinanced and MARY RIVERA shall receive $40, 000.00 as her share of the house's net equity to be paid within ninety (90) days of May 22, 2006." First Am. Compl., Ex. 1 (divorce decree) at 12. The decree, as a fair reading indicates, stipulated that Felipe assumed all debts on the Property, as he was ordered to refinance the Property. The Court therefore concludes that the divorce court awarded the Property solely to Felipe. Consequently, the Court finds that the divorce court awarded Felipe sole possession of the Property, Lopez, 21 S.W.3d at 362, and thereby awarded him "full homestead right" in the Property, Hankins v. Harris,500 S.W.3d 140, 146-47 (Tex. App-Houston [1st Dist.] 2016, pet. denied) (holding that "[a]fter the divorce, the remaining spouse [as here, Felipe] received thsfuli homestead interest pursuant to the divorce decree, " which included stipulations that the entire property would be transferred to that spouse in exchange for financial consideration." (emphasis added)). Further because the decree awarded sole ...

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