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Kyle v. Strasburger

Court of Appeals of Texas, Thirteenth District, Corpus Christi-Edinburg

April 4, 2019

WENDY LEE KYLE, Appellant,
v.
H.T. STRASBURGER, INDIVIDUALLY AND IN HIS CAPACITY AS A MEMBER OF THE BOARD OF DIRECTORS OF FIDELITY BANK OF TEXAS, AND AS A MEMBER OF TUITION LLC; SHIRLEY STRASBURGER, INDIVIDUALLY AND IN HER CAPACITY AS VICE-CHAIR OF THE BOARD OF DIRECTORS OF FIDELITY BANK OF TEXAS, AND AS A MEMBER OF THE TUITION LLC; TERRY WHITLEY, INDIVIDUALLY AND IN HIS CAPACITY AS PRESIDENT AND MEMBER OF THE BOARD OF DIRECTORS OF FIDELITY BANK OF TEXAS; FIDELITY BANK OF TEXAS; AND TUITION LLC, Appellees.

          On appeal from the 250th District Court of Travis County, Texas.

          Before Chief Justice Contreras [1] and Justices Valdez and Rodriguez [2]

          MEMORANDUM OPINION ON REMAND

          DORI CONTRERAS JUSTICE

         We issued our memorandum opinion on remand and judgment in this matter on December 28, 2018. Appellant Wendy Lee Kyle has filed a motion for rehearing. We deny the motion for rehearing but withdraw our December 28, 2018 memorandum opinion on remand and judgment and substitute the following memorandum opinion on remand and accompanying judgment.

         This matter is before the Court on remand from the Texas Supreme Court.[3] Kyle argued by five issues that the trial court erred in granting summary judgment dismissing her claims against appellees, Fidelity Bank of Texas et al. (collectively Fidelity).[4]

         The dispute arose from a 2004 home equity loan which was secured by a deed of trust on the Austin homestead belonging to Kyle and her ex-husband Mark. Kyle later learned that Mark's employee forged Kyle's signature on the loan documents. Subsequently, pursuant to a Rule 11 agreement, Kyle executed a special warranty deed and an agreed divorce decree transferring her interest in the homestead to Mark. In this suit, filed in 2012, Kyle alleges that she agreed to the transfer only because Fidelity and others incorrectly and fraudulently led her to believe that the property would be foreclosed upon and that she would be held personally liable on the home equity loan.

         On original submission, we affirmed the trial court's dismissal of the following claims made by Kyle, on limitations grounds: (1) for declaratory judgment that the deed of trust securing the loan is void; (2) for forfeiture of principal and interest under article XVI, section 50 of the Texas Constitution; and (3) for declaratory judgment setting aside the special warranty deed. Kyle v. Strasburger, 520 S.W.3d 74, 80 (Tex. App.-Corpus Christi 2015) (holding that the alleged defects made the loan voidable, not void ab initio, and applying the residual four-year statute of limitations), aff'd in part & rev'd in part, 522 S.W.3d 461 (Tex. 2017). We also held that because Kyle's statutory real estate fraud, Texas Finance Code, and Deceptive Trade Practices Act (DTPA) claims (collectively, the statutory claims) were each dependent on her claim that the deed of trust is void, those claims were properly disposed of on no-evidence grounds. 520 S.W.3d at 81-83.[5]

         The supreme court affirmed in part and reversed in part, holding that: (1) Kyle's claim for forfeiture of principal and interest was not an independent cause of action under the Texas Constitution and was therefore properly dismissed; but (2) the statute of limitations did not bar Kyle's declaratory judgment claims and, therefore, those claims and the remaining statutory claims should not have been dismissed. 522 S.W.3d at 464-67 ("A home-equity loan secured by a lien that was not created with the consent of each owner and each owner's spouse is not 'a debt described by this section' [under article XVI, section 50] and is therefore invalid unless and until such consent is obtained. . . . The statute of limitations does not bar Kyle's claim to declare the lien invalid.") (citing Garofolo v. Ocwen Loan Servicing, 497 S.W.3d 474, 478 (Tex. 2016); Wood v. HSBC Bank USA, N.A., 505 S.W.3d 542, 548 (Tex. 2016)).[6]

         In accordance with the supreme court's opinion, we now consider whether summary judgment on Kyle's outstanding claims was supported on any of the other grounds raised in Fidelity's motions. We affirm in part and reverse and remand in part.

         I. Background

         In our 2015 opinion, we set forth the background of this case as follows:

On May 24, 2004, appellant's ex-husband, Mark Kyle, obtained a 1.1 million dollar home equity loan from Fidelity, a loan which was secured by the couple's homestead. It is undisputed that Mark's employee signed appellant's name on the loan documents, including the promissory note, deed of trust, and disclosure statements.[7] Fidelity alleges that appellant consented to her friend signing the document[8]; however, appellant claims that she did not consent to the forgery and learned of the signature later. In late 2009, appellant filed for divorce from Mark. During the divorce proceedings, Mark failed to pay ad valorem taxes and Fidelity declared the note on the loan in default. Threatened with foreclosure, attorneys for Mark and appellant attempted to negotiate a forbearance agreement with Fidelity that would temporarily abate the threatened foreclosure of the couple's homestead. Appellant refused to sign a document requiring her to verify that she had signed the original loan documents. Terry Whitley, Fidelity's president, testified that he did not know whether Fidelity was aware that appellant had not signed the original loan documents.
On March 24, 2011, Fidelity began foreclosure proceedings on the property. The foreclosure application included Whitley's affidavit stating that appellant and Mark had executed the loan agreement. Appellant filed a verified denial in response to the foreclosure proceedings stating that she had not signed the loan agreement and that she had not given anyone authority to sign on her behalf. Fidelity began investigating whether appellant had actually signed the loan documents. However, according to appellant, Fidelity continued to pursue foreclosure against the couple's homestead and represented to others that appellant had executed the home-equity loan documents. Fidelity also "sent notice of the pending non-judicial foreclosure sale of the [couple's] homestead to the Internal Revenue Service," asserting "that Mark and [appellant] had executed the home-equity loan and that Fidelity had scheduled the foreclosure sale on August 2, 2011."
On June 2, 2011, pursuant to a Rule 11 agreement with Mark and as part of the final divorce decree, appellant conveyed her interest in the home to Mark by special warranty deed, thereby making Mark the sole owner of the home. Fidelity points out that appellant testified that she signed the Rule 11 agreement and accompanying documents based on the advice of her attorneys and confirmed that she did not rely on the advice of anyone else. However, appellant claims that she sold the property because she did not want to be part of the foreclosure proceeding. The divorce court entered a final judgment of divorce decreeing that the home was Mark's sole and separate property and appellant signed the judgment as "approved and consented as to both form and substance." On June 21, 2011, Fidelity nonsuited appellant from the foreclosure proceedings.
On October 13, 2011, Fidelity sold the note and assigned the lien to Tuition LLC, a corporation formed by the Strasburgers for, according to appellant, "the sole purpose of holding the note and lien." Appellant claims that Tuition LLC had been attempting to collect past-due payments on the home-equity note from her and has instituted foreclosure proceedings naming her as a party.
On October 3, 2012, appellant filed suit against Fidelity and Mark asserting claims for fraudulent filing of a financing statement, statutory fraud in a real estate transaction, securing the execution of a document by deception, common law fraud, negligent misrepresentation, "aiding and abetting," fraudulent inducement, and damage to credit. Appellant sought damages from Fidelity that she claims were sustained as a result of misrepresentations made by Fidelity that a loan secured by a fraudulent signature was enforceable. Appellant requested the trial court to declare the loan agreement void and set aside the transfer of the property to Mark.
On March 11, 2013, Fidelity filed its first motion for summary judgment on traditional and no-evidence grounds challenging all elements of appellant's causes of action and claiming the affirmative defense of absolute privilege. On March 13, 2013, appellant amended her petition adding claims for forfeiture of principal and interest and declaratory judgment actions requesting that the lien be declared void and that the special warranty deed be set aside. The trial court granted Fidelity's motion on May 16, 2013. Fidelity filed a subsequent motion for summary judgment as to the claims appellant added in her amended petition arguing that appellant did not have standing and that her suit was barred by the statute of limitations. The trial court granted the motion without specifying the grounds and severed appellant's suit against Fidelity from her claims against Mark. This appeal followed.

Kyle, 520 S.W.3d at 76-77 (footnotes in original).

         Following Kyle's abandonment of certain claims and the supreme court's 2017 ruling, only the following claims raised by Kyle remain pending: (1) declaratory judgment that the deed of trust securing the loan is void; (2) declaratory judgment setting aside the special warranty deed; (3) Texas Finance Code violations; (4) DTPA violations; and (5) statutory fraud in a real estate transaction under the business and commerce code. See id. at 81 n.13.

         II. Discussion

         A. Summary Judgment Law and Standard of Review

         A party may move for summary judgment on traditional or no-evidence grounds. See Tex. R. Civ. P. 166a(c), (i). In a traditional motion for summary judgment, the movant has the burden to establish that no genuine issue of material fact exists and that he is entitled to judgment as a matter of law. Tex.R.Civ.P. 166a(c); Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 2002). A defendant seeking traditional summary judgment must either disprove at least one element of each of the plaintiff's causes of action or plead and conclusively establish each essential element of an affirmative defense. Cathey v. Booth, 900 S.W.2d 339, 341 (Tex. 1995) (per curiam); Sanchez v. Matagorda Cty., 124 S.W.3d 350, 352 (Tex. App.-Corpus Christi 2003, no pet.). A no-evidence summary judgment must show that no evidence exists of one or more essential elements of a claim on which the adverse party bears the burden of proof at trial. Tex.R.Civ.P. 166a(i); Timpte Inds., Inc. v. Gish, 286 S.W.3d 306, 310 (Tex. 2009). Once the motion is filed, the burden shifts to the non-movant to produce evidence raising a genuine issue of material fact on the elements specified in the motion. Tex.R.Civ.P. 166a(i); Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006).

         Fidelity's motions for summary judgment raised both traditional and no-evidence grounds. See Tex. R. Civ. P. 166a(c), (i). Though the burden varies for traditional and no-evidence summary judgment motions, because all parties brought forth summary judgment evidence, the differing burdens are immaterial and the ultimate issue is whether a fact issue exists. Neely v. Wilson, 418 S.W.3d 52, 59 (Tex. 2013) (citing Buck v. Palmer, 381 S.W.3d 525, 527 & n.2 (Tex. 2012)). A fact issue exists, precluding summary judgment, if there is more than a scintilla of probative evidence to support each element of the plaintiff's claim. Id. Evidence is more than a scintilla if it "rises to a level that would enable reasonable and fair-minded people to differ in their conclusions." Serv. Corp. Int'l v. Guerra, 348 S.W.3d 221, 228 (Tex. 2011). Evidence is less than a scintilla if it is "so weak as to do no more than create a mere surmise or suspicion that the fact exists." Regal Fin. Co. v. Tex Star Motors, Inc., 355 S.W.3d 595, 603 (Tex. 2010). We review the summary judgment evidence in the light most favorable to the non-movant, indulging every reasonable inference and resolving any doubts against the motion. City of Keller v. Wilson, 168 S.W.3d 802, 824 (Tex. 2005).

         Because the trial court's orders granting summary judgment do not specify the basis for the rulings, we must affirm the judgments if any of the theories advanced in Fidelity's motions are meritorious. W. Invs., Inc. v. Urena, 162 S.W.3d 547, 550 (Tex. 2005). We review the rulings de novo. Neely, 418 S.W.3d at 59.

         B. Analysis

         The following grounds raised in Fidelity's summary judgment motions have not previously been addressed on appeal: (1) whether Kyle lacks standing to assert her declaratory judgment claims; (2) whether judicial estoppel bars her declaratory judgment, finance code, and DTPA claims; (3) whether the absolute privilege doctrine bars her statutory claims; (4) whether the evidence conclusively negates the reliance and causation elements of Kyle's statutory claims; and (5) whether there is no evidence supporting the statutory claims or the claim to declare the special warranty deed invalid. See Kyle, 520 S.W.3d at 467 n.11.[9]

         1. Standing

         In a footnote in its second summary judgment motion, Fidelity argued that Kyle does not have standing to pursue her claims for declaratory relief because she "divested herself of all interest to her homestead." It further contended that, having already conveyed her interest in the homestead, Kyle has no justiciable interest in the loan documents because the loan is "without recourse for personal liability." Kyle argues by part of her first issue on appeal that summary judgment was improper if granted on these grounds.

         Standing is a component of subject matter jurisdiction and is a constitutional prerequisite to maintaining suit. Tex. Ass'n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 443-44 (Tex. 1993). A plaintiff has the initial burden to plead facts establishing standing. See id. at 446. The issue focuses on whether a party has a sufficient relationship with the lawsuit so as to have a "justiciable interest" in its outcome. Austin Nursing Ctr., Inc. v. Lovato, 171 S.W.3d 845, 848 (Tex. 2005). Generally, a party has standing to sue if there is (1) "a real controversy between the parties" that (2) "will be actually determined by the judicial declaration sought." Id. (citing Tex. Ass'n of Bus., 852 S.W.2d at 443-44). More specifically, chapter 37 of the civil practice and remedies code, the Uniform Declaratory Judgments Act (UDJA), provides that:

A person interested under a deed, will, written contract, or other writings constituting a contract or whose rights, status, or other legal relations are affected by a statute, municipal ordinance, contract, or franchise may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract, or franchise and obtain a declaration of rights, status, or other legal relations thereunder.

Tex. Civ. Prac. & Rem. Code Ann. § 37.004 (West, Westlaw through 2017 1st C.S.).

         As to her claim for a declaration that the special warranty deed is void, Kyle alleged in her live petition that she is a party to the deed and therefore has a justiciable interest in her claim to determine its validity.[10] However, the sequence of events revealed by the summary judgment evidence shows that there is no genuine controversy surrounding the validity of the special warranty deed. The parties' Rule 11 agreement, in which Kyle agreed to transfer her interest in the homestead to Mark, was executed and filed with the trial court on June 2, 2011. Kyle executed the special warranty deed a few days later. But the agreed divorce decree, rendered in August 2011 and also based on the Rule 11 agreement, also awarded the entire homestead to Mark as part of the just and right division of the marital estate. The decree stated that Kyle "is divested of all right, title, interest, and claim in and to" the homestead. The decree further stated as follows in a section entitled "Judgment Effective to Pass Title":

Notwithstanding any other provisions of this Agreed Final Decree of Divorce, this judgment shall operate as a conveyance to the parties so named of the real property described herein and title to such real property passes as ordered herein, without the necessity of any further action by the party being divested of title.
This decree shall serve as a muniment of title to transfer ownership of all property awarded to any party in this Agreed Final Decree of Divorce.

         The terms of the unchallenged divorce decree render the validity of the special warranty deed inconsequential. Even if the trial court were to declare the June special warranty deed invalid, the August divorce decree would effectuate the same result-i.e., a 100% conveyance of Kyle's interest in the homestead to Mark. Accordingly, the judicial declaration sought by Kyle would not "actually determine" a "real controversy" between the parties. See Austin Nursing Ctr., Inc., 171 S.W.3d at 848. It follows that Kyle lacked standing under the UDJA to bring her claim for a declaration that the special warranty deed is invalid. See id.

         The terms of the agreed divorce decree also deprive Kyle of standing to seek a declaration that the deed of trust securing the home equity loan is void. In particular, consistent with the Rule 11 agreement, the decree allocated 100% of the debt associated with the loan to Mark[11]; and as Fidelity notes, the Texas Constitution provides that a home equity loan is "without recourse for personal liability against each owner and the spouse of each owner . . . ." Tex. Const. art. XVI, § 50(a)(6)(C); see Patton v. Porterfield, 411 S.W.3d 147, 159 (Tex. App.-Dallas 2013, pet. denied). The terms of the decree, combined with the constitutional provision cited above, ensured that Kyle could not be held personally liable on the home equity loan, regardless of whether the trial court declared the deed of trust securing the loan void. Kyle therefore lacked a justiciable interest in the outcome of this claim. See Austin Nursing Ctr., Inc., 171 S.W.3d at 848.

         Kyle argues on appeal that she has standing to seek these declarations because she "remain[s] an obligor on the promissory note, her credit continued to be affected by the loan despite the conveyance of the collateral to her husband in the divorce, and she is still named as a respondent in Fidelity's latest foreclosure application." But Kyle did not allege these specific facts in her live petition and her appellate brief directs us to no evidence in the summary judgment record establishing those facts. Accordingly, she has not met her burden to allege facts showing that she has standing to seek a declaration that the deed of trust is void. See Tex. Ass'n of Bus., 852 S.W.2d at 446.

         We observe that Kyle's claims are focused principally on the alleged misrepresentations by Mark and Fidelity as to whether the home equity loan was valid and whether she could be held personally liable thereon. She asserts that, without those alleged misrepresentations, she would not have entered into the Rule 11 agreement to convey her interest in the homestead. But, as the supreme court noted, "[t]here is no basis for declaratory relief when a party is seeking in the same action a different, enforceable remedy, and a judicial declaration would add nothing to what would be implicit or express in a final judgment for the enforceable remedy." Kyle, 522 S.W.3d at 467 n.10 (citing Patel v. Tex. Dep't of Licensing & Regulation, 469 S.W.3d 69, 79 (Tex. 2015) (holding that "courts will not entertain an action [against a governmental unit] under the [UDJA] when the same claim could be pursued through different channels"); Etan Indus., Inc. v. Lehmann, 359 S.W.3d 620, 624 (Tex. 2011) (per curiam) (noting that a declaratory judgment claim "must do more than merely duplicate the issues litigated via [other] claims" in order to authorize an award of attorney's fees under the UDJA); Universal Printing Co. v. Premier Victorian Homes, Inc., 73 S.W.3d 283, 296 (Tex. App.- Houston [1st Dist.] 2001, pet. denied)).[12] To the extent Kyle seeks relief in connection with the alleged misrepresentations, her remaining statutory claims provide an enforceable remedy and the declarations she seeks "would add nothing to what would be implicit or express in a final judgment for the enforceable remedy." See id.

         For the foregoing reasons, we conclude that the trial court's summary judgment on Kyle's declaratory judgment claims was proper on grounds that she lacked standing. This part of Kyle's first issue on appeal is overruled. We proceed to address the remaining summary judgment grounds as they pertain to Kyle's remaining statutory claims.

         2. Judicial Estoppel

         Fidelity argued in its second summary judgment motion that Kyle is judicially estopped from asserting that she did not execute the home equity loan documents "because she successfully took the contrary position in the divorce action." Fidelity's argument is based on the recital, in the section of the divorce decree regarding the just and right division of marital liabilities, that both Kyle and Mark "executed" the promissory note associated with the loan. See supra n.11. Fidelity notes that Kyle signed the decree under a statement indicating that she "approved and consented to" both the "form and substance" of the decree. It argues that this negates the contrary assertion made by Kyle as part of her finance code and DTPA claims.

         Judicial estoppel "precludes a party from adopting a position inconsistent with one that it maintained successfully in an earlier proceeding." Pleasant Glade Assembly of God v. Schubert, 264 S.W.3d 1, 6 (Tex. 2008). "The doctrine is not strictly speaking estoppel, but rather is a rule of procedure based on justice and sound public policy." Id. "Its essential function 'is to prevent the use of intentional self-contradiction as a means of obtaining unfair advantage.'" Id. (quoting Andrews v. Diamond, Rash, Leslie & Smith, 959 S.W.2d 646, 650 (Tex. App.-El Paso 1997, writ denied)).

         By part of her first issue on appeal, Kyle contends that the recital in the decree cannot give rise to judicial estoppel because it "is not a sworn statement." We agree. Judicial estoppel may be based only on a sworn statement made in a prior judicial proceeding. See Long v. Knox, 291 S.W.2d 292, 295 (Tex. 1956) ("Under the doctrine of judicial estoppel, as distinguished from equitable estoppel by inconsistency, a party is estopped merely by the fact of having alleged or admitted in his pleadings in a former proceeding under oath the contrary to the assertion sought to be made." (emphasis added)); In re Marriage of Butts, 444 S.W.3d 147, 151 (Tex. App.-Houston [14th Dist.] 2014, no pet.); Owen v. Knop, 853 S.W.2d 638, 641 (Tex. App.-Corpus Christi 1993, writ denied) (noting that "the doctrine of judicial estoppel serves to uphold the sanctity of the oath, and to eliminate the prejudice which would result to the administration of justice if a litigant were to swear one way one time and a different way another time"). Citing Schubert, Fidelity argues that a statement need not be sworn in order to trigger judicial estoppel, but the Texas Supreme Court held nothing of the sort in that case. See 264 S.W.3d at 6. Though the Schubert Court did not recite the well-established precedent that a statement must be sworn in order to give rise to judicial estoppel, it held that the doctrine did not apply in that case for three unrelated reasons. See id. Therefore, it is inapposite.

         Because the recital in the agreed divorce decree was not a sworn statement, it could not have served as the basis for judicial estoppel. Therefore, the trial court erred if it granted summary judgment on these grounds. We sustain this part of Kyle's first issue.

         3. ...


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