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Bank of New York Mellon v. Riley

Court of Appeals of Texas, Ninth District, Beaumont

October 10, 2019

THE BANK OF NEW YORK MELLON, Appellant
v.
SONIA RILEY AND FLOYD RILEY, Appellees

          Submitted on April 15, 2019

          On Appeal from the 136th District Court Jefferson County, Texas Trial Cause No. D-201, 456

          Before McKeithen, C.J., Kreger and Johnson, JJ.

          MEMORANDUM OPINION

          CHARLES KREGER, JUSTICE

         The Bank of New York Mellon (BONYM) sued Sonia and Floyd Riley to foreclose on their property located in Beaumont, Texas. BONYM appeals the trial court's grant of the Rileys' cross-motion for summary judgment and denial of BONYM's motion for new trial.[1] BONYM presents three issues on appeal asking whether: (1) the trial court erred in granting the Rileys' motion for summary judgment on their affirmative defense of limitations when a disputed material fact existed regarding whether the lender "abandoned the acceleration of the debt" whereby resetting limitations; (2) the trial court abused its discretion in failing to grant BONYM's motion for new trial upon BONYM establishing that the Rileys' affidavits submitted in support of their motion for summary judgment were submitted in bad faith; and (3) the trial court abused its discretion in failing to grant BONYM's motion for new trial upon BONYM's submittal of newly discovered evidence reflecting that the Rileys had previously settled all claims relating to the foreclosure of their home equity deed of trust with their prior mortgage servicer. We reverse the judgment of the trial court and remand for proceedings consistent with this opinion.

         Background

         In 2004, the Rileys took out a loan for $104, 000.00 secured by a note on the property. The Rileys defaulted on the loan. In August of 2010, a prior loan servicer sent correspondence to the Rileys putting them on notice of default and its intent to accelerate the amounts due. BONYM obtained the note by assignment from Full Spectrum Lending in 2011.[2] On December 28, 2011, a prior loan servicer sent a notice of acceleration to the Rileys advising it had "elected to ACCELERATE the maturity of the Debt." However, on December 28, 2015, BONYM sent a notice of rescission of the acceleration of the debt to the Rileys via certified mail. On August 16, 2016, based on the Rileys' default, BONYM's servicer sent them another Notice of Default and Intent to Accelerate by certified mail. On March 13, 2018, BONYM filed its original petition for foreclosure.

         The evidence attached to BONYM's motion for new trial reveals the parties had an extensive history of dealings and court proceedings between the time of initial default and the commencement of the current litigation. The record establishes that BONYM filed at least three prior applications for foreclosure, two of which the district court granted. The Rileys also filed suit to stop the foreclosure in a separate district court at one point, which the trial court dismissed with prejudice at the Rileys' request following a settlement agreement. The Rileys answered the present lawsuit, asserting a general denial and affirmative defenses, including the statute of limitations.

         BONYM filed a traditional motion for summary judgment with evidence in support of its motion. Evidence included with BONYM's motion for summary judgment included the original loan documentation, the deed of trust, the lien documentation, the assignment of the deed of trust to BONYM, a BONYM representative's affidavit, the August 2016 notice of default and intent to accelerate, account history information, payoff statement form, and counsel's affidavit regarding attorney's fees. The Rileys responded to BONYM's traditional motion for summary judgment asserting BONYM's claim was barred by a four-year statute of limitations. With their response, the Rileys included the December 28, 2011, acceleration letter and affidavits from each of them containing the following testimony:

In a notice dated August 10, 2010, Bank of America, the loan servicer for . . . predecessor in interest to Bank of New York, sent me a notice of default w/intent to accelerate. The notice stated that I was in default of the Texas home equity loan and that if I fell (sic) to cure the default, by September 19, 2010, the loan will be accelerated. In a letter dated December 28, 2011, Bank of New York . . . sent me a notice of acceleration. Replying upon information in the acceleration notice, in January 2013, I temporarily moved from the property and into a rental property . . . . Based upon Texas law, Bank of New York was required to file suit to foreclose on the property by December 28, 2015. Bank of New York failed to file suit within the statutory time limits and therefore its lien on the property is no longer valid.[3]

         Thereafter, the Rileys filed a cross-motion for traditional summary judgment based on the affirmative defense of statute of limitations. Their cross-motion for summary judgment included the same acceleration letter and affidavits as their response to BONYM's motion for summary judgment. The Rileys' cross-motion for summary judgment also incorporated as evidence a temporary lease agreement for the rental they claimed they moved into after the bank threatened foreclosure as well as a contract with a law firm. The Rileys argued that BONYM sent a notice of acceleration dated December 28, 2011, and because of the four-year statute of limitations, BONYM was required to foreclose on the property by December 28, 2015. The Rileys did not mention BONYM's prior applications for foreclosure in their response or cross-motion. The Rileys contend this foreclosure suit is barred by the statute of limitations and the lien is void. Neither the Rileys' response to BONYM's summary judgment nor their cross-motion for summary judgment mentioned a rescission of acceleration by BONYM.

         BONYM responded to the Rileys' cross-motion for summary judgment; however, BONYM filed this response late. Rather than filing its response the requisite seven days before the scheduled summary judgment hearing, BONYM filed the response three days before the hearing and did not request leave from the trial court to submit evidence late. While BONYM agreed they sent a prior notice of acceleration letter dated December 28, 2011, they argued that on December 28, 2015, they sent a rescission of this acceleration to the Rileys and their response referenced the correspondence as Exhibit "A." Despite referencing the actual letter as an exhibit in its response to the motion for summary judgment, BONYM failed to attach the actual letter as an exhibit.

         One day before the scheduled summary judgment hearing, the Rileys filed a reply to BONYM's response to their cross-motion for summary judgment. In their reply, the Rileys state that "[BONYM] argue[s] that the acceleration was abandon[ed] on December 28, 2015, which allegedly restored the contract as such no acceleration occurred. While, plaintiff attached no evidence of such abandonment, after a search of documents, defendant(s) concede plaintiff attempted an eleventh hour abandonment." The Rileys attached an additional affidavit from Floyd Riley to their reply, as well as a letter from Floyd dated January 26, 2016, responding to the rescission of acceleration. Floyd's affidavit avers "[o]n January 26, 2016, I sent Barrett Daffin Frappier Turner & Engel, a letter in response to a notice I received regarding a rescission of acceleration notice send (sic) from their law firm." The subject line of the letter from Floyd notes "Re: Rescission of Acceleration[.]" The Rileys contend in their reply that BONYM's rescission of acceleration was ineffective because they "detrimentally relied on the 2011 acceleration and objected to the abandonment." They also complained about the untimeliness of BONYM's response.

         During the summary judgment hearing, the trial court explained that while BONYM sought a continuance on the hearing, BONYM's stated reason was to seek leave to amend its petition after discovering new information. However, the trial court reasoned that a motion for leave was not needed to amend the petition, so he denied the motion to continue the hearing. The trial court noted that BONYM filed its response to the Rileys' cross-motion for summary judgment late and failed to request leave. The trial court further explained that while the response referenced the rescission of acceleration letter as an exhibit, it failed to attach the letter, and the Rileys objected. ...


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