Kyle v. Strasburger

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

NUMBER 13-13-00609-CV

COURT OF APPEALS THIRTEENTH DISTRICT OF TEXAS CORPUS CHRISTI - EDINBURG

December 28, 2018

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

MEMORANDUM OPINION ON REMAND

Before Chief Justice Valdez and Justices Rodriguez and Contreras

Memorandum Opinion on Remand by Justice Contreras

This matter is before the Court on remand from the Texas Supreme Court.¹ Appellant Wendy Lee 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).²

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, on limitations grounds, of the following claims made by Kyle: (1) for declaratory judgment that the deed of trust securing the loan is void; (2) for forfeiture of principal and interest under articleXVI, 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 81-83.³

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)).⁴

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.⁵ Fidelity alleges that appellant consented to her friend signing the document⁶; 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 thehome-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 statuteof 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...