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Wilmington Trust, N.A. v. Rob

United States Court of Appeals, Fifth Circuit

May 21, 2018

WILMINGTON TRUST, NATIONAL ASSOCIATION, not in its individual capacity but as Trustee of ARLP Securitization Trust, Series 2014-2, Plaintiff - Appellee
v.
ANGEL ROB; KCEVIN ROB, Defendants - Appellants

          Appeal from the United States District Court for the Western District of Texas

          Before SMITH, BARKSDALE, and HIGGINSON, Circuit Judges.

          STEPHEN A. HIGGINSON, CIRCUIT JUDGE

         Kcevin and Angel Rob defaulted on a home equity loan. The Robs' lender, Wilmington Trust, sued for a judgment permitting foreclosure. The district court granted summary judgment in Wilmington Trust's favor. The Robs appeal, arguing that Wilmington Trust is not entitled to foreclosure because the company failed to prove that it provided adequate notice of intent to accelerate. Agreeing, we reverse the summary judgment and render a judgment of dismissal.[1]

         I.

         On July 26, 2007, appellant Kcevin Rob executed a note in the principal amount of $113, 600. On the same day, Kcevin and his wife Angel executed a Texas Home Equity Security Instrument, which secured payment of the note with a lien on the Robs' home in Austin, Texas. In 2014, following a series of assignments, Wilmington Trust, as trustee for ARLP Securitization Trust, Series 2014-2, came into possession of the Robs' loan.

         By the time Wilmington Trust acquired it, the Robs' loan had a tumultuous history. The Robs stopped making payments on the loan in March 2011. On April 15, 2011, one of Wilmington Trust's predecessors mailed Kcevin a notice of default and intent to accelerate.[2] On June 22, 2011, Kcevin was sent a notice of acceleration. On March 6, 2012, the predecessor sent a second notice of default and intent to accelerate, followed by a second notice of acceleration on May 22, 2013. On November 3, 2014, Wilmington Trust, having taken assignment of the loan, sent the Robs a "NOTICE OF RESCISSION OF ACCELERATION." That document stated that the lender "hereby rescinds Acceleration of the debt and maturity of the Note" and that the "Note and Security Instrument are now in effect in accordance with their original terms and conditions, as though no acceleration took place."

         On June 25, 2015, Wilmington Trust sued the Robs in the Western District of Texas seeking a judgment for foreclosure or, alternatively, a judgment of equitable subrogation. In August 2015, Wilmington Trust filed an Amended Complaint, which alleged that the total debt owed on the note was $159, 949.07. The Amended Complaint also stated that Wilmington Trust "accelerates the maturity of the debt and provides notice of this acceleration through the service of this Amended Complaint."

         On August 26, 2016, Wilmington Trust moved for summary judgment. The district court granted Wilmington Trust's motion, and entered judgment permitting Wilmington Trust to foreclose on the Robs' home. This appeal followed.

         II.

         We review a grant of summary judgment de novo, applying the same standard as the district court. Auguster v. Vermilion Parish Sch. Bd., 249 F.3d 400, 402 (5th Cir. 2001). "Where, as here, the proper resolution of the case turns on the interpretation of Texas law, we are bound to apply Texas law as interpreted by the state's highest court." Boren v. U.S. Nat. Bank Ass'n, 807 F.3d 99, 104-05 (5th Cir. 2015) (quoting Am. Int'l Specialty Lines Ins. Co. v. Rentech Steel LLC, 620 F.3d 558, 564 (5th Cir. 2010)). On issues the Texas Supreme Court has not yet decided, "we must make an 'Erie guess' as to how the Court would resolve [the] issue." Id. (quoting Am. Int'l Specialty Lines Ins. Co., 620 F.3d at 564).

         III.

         "[W]hether a holder has accelerated a note is a fact question." Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 568 (Tex. 2001). Wilmington Trust's lien includes an optional acceleration clause, under which the "Lender at its option may require immediate payment in full of all sums secured by this Security Instrument . . . ." In its First Amended Complaint, Wilmington Trust alleges that it has accelerated the Robs' debt, that the Robs are in default of the full $159, 949.07 owed under the note, and that Wilmington Trust should therefore be permitted to foreclose.

         "Texas courts disfavor acceleration because it imposes a severe burden on the mortgagor." Schuhardt Consulting Profit Sharing Plan v. Double Knobs Mountain Ranch, Inc., 468 S.W.3d 557, 569 (Tex. App.-San Antonio 2014, pet. denied); see also Mastin v. Mastin, 70 S.W.3d 148, 154 (Tex. App.-San Antonio 2001, no pet.) ("Acceleration is a harsh remedy with draconian consequences for the debtor and Texas courts look with disfavor upon the exercise of this power because great inequity may result."). Further, a lender may lose the right to accelerate if its conduct is "inconsistent or inequitable." William J. Schnabel Revocable Living Tr. v. Loredo, No. 13-13-00297, 2014 WL ...


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