Nationstar Mortg. LLC v. Barefoot

654 S.W.3d 440

NATIONSTAR MORTGAGE LLC; HSBC Bank USA, N.A.; Bank of America, N.A.; and Fidelity National Title Insurance Company, Appellants

v.Joan Mauri BAREFOOT, Appellee

NO. 14-19-00750-CV

Court of Appeals of Texas, Houston (14th Dist.).

Opinion filed October 28, 2021

Reconsideration En Banc Denied October 11, 2022

Christopher Charles Townsend, Michael J. McKleroy Jr., Dallas, for Appellants HSBC Bank USA, N.A., as trustee, Nationstar Mortgage LLC.

Elizabeth Chandler, Dallas, for Appellant Bank of America, N.A.

Jonathan Jay Cunningham, Gregory T. Brewer, Christina Johnson, Plano, Amanda Hoffmann, Dallas, for Appellant Fidelity National Title Ins. Co.

Stephen Crowder, Kraft G. Eidman Jr., William David George, Houston, for Appellee.

Panel consists of Justices Spain, Hassan, and Poissant

Charles A. Spain, Justice This appeal requires this court to address in detail what makes a lien on real property "fraudulent" for purposes of Civil Practice and Remedies Code section 12.002 and decide for the first time what limitations period applies to claims for prohibited debt collection under Finance Code chapter 392. Tex. Fin. Code Ann. §§ 392.001 –.404. We address these discrete issues in the "opinion," and as the other issues in the case are not of significant interest to the public and practicing members of the bar, we address them in the "memorandum opinion." Tex. R. App. P. 47.2(a), 47.4.¹

This case centers on the making and enforcement of liens on the homestead of appellant Joan Mauri Barefoot, and her counterclaims against the four appellants in this case: Nationstar Mortgage LLC; HSBC Bank USA, N.A.; Bank of America, N.A.; and Fidelity National Title Insurance Company. The trial court granted Barefoot relief on her counterclaims for (1) declaratory judgments, (2) claims involving fraudulent liens against all appellants, and (3) claims of unfair debt collection against Bank of America and Nationstar. As specifically explained in the memorandum portion of this opinion, we affirm in part and reverse in part the trial court's declaratory judgments. As to Bank of America, we affirm the trial court's award of $75,000 in mental-anguish damages. As to Fidelity, we reverse the trial court's awards of $104,000 in actual damages and $225,000 in mental-anguish damages and suggest a remittitur; if the remittitur is not timely filed, Barefoot's claims against Fidelity for fraudulent liens will be remanded for a new trial. As to HSBC and Nationstar, we reverse the trial court's awards of $100,000 and $50,000, respectively, on legal-insufficiency grounds, and remand with instructions that Barefoot take nothing in mental-anguish damages from HSBC and Nationstar. We also reverse the trial court's awards of attorney's fees and costs and remand for reconsideration.

I. WHAT IS A "FRAUDULENT" LIEN ?

What makes a lien "fraudulent" for purposes of Civil Practice and Remedies Code section 12.002 ? See Tex. Civ. Prac. & Rem. Code Ann. § 12.002(a) ("A person may not make, present, or use a document or other record with ... knowledge that the document or other record is ... a fraudulent lien[.]"). "Fraudulent" is not defined in the statute. When construing a code, "[w]ords and phrases shall be read in context and construed according to the rules of grammar and common usage." Code Construction Act, Tex. Gov't Code Ann. § 311.011(a). Black's Law Dictionary provides two definitions of a "fraudulent act": "1. Conduct involving bad faith, dishonesty, a lack of integrity, or moral turpitude. 2. Conduct satisfying the elements of a claim for actual or constructive fraud."²

Fraudulent Act , Black's Law Dictionary (11th ed. 2019).

In practice, courts applying the statute, including this court and our sister court in Houston, have applied a standard consistent with Black's first definition, i.e., a lien is fraudulent if created in bad faith or with dishonesty, a lack of integrity, or moral turpitude. Compare Young v. Neatherlin , 102 S.W.3d 415, 421–22 (Tex. App.—Houston [14th Dist.] 2003, no pet.) (even if incorrect, lien was not "fraudulent" when testimony showed filer believed it to be accurate) with Centurion Planning Corp., Inc. v. Seabrook Venture II , 176 S.W.3d 498, 507 (Tex. App.—Houston [1st Dist.] 2004, no pet.) (lien "fraudulent" when created by filer "knowing ... that the lien was invalid and intending that it be given the same legal effect as a valid lien"); see also In re Cowin , 492 B.R. 858, 900 (Bankr. S.D. Tex. 2013) (surveying Texas cases and concluding that liens were "fraudulent" when, among other things, they "were created with a fraudulent purpose").³ Accordingly, when analyzing whether a lien is fraudulent, we will consider whether it was created in bad faith or with dishonesty, a lack of integrity, or moral turpitude. See Fraudulent Act , Black's Law Dictionary (11th ed. 2019) (fraudulent act "involve[es] bad faith, dishonesty, a lack of integrity, or moral turpitude").

II. LIMITATIONS PERIOD FOR CHAPTER -392 CLAIMS

As it appears to be a matter of first impression in this court, we next address Bank of America's argument that a two-year statute of limitations applies to claims of improper debt collection under Finance Code chapter 392 which does not specify a limitations period. Bank of America cites cases, discussed further below, applying to chapter 392 the two-year limitations period found in Civil Practice and Remedies Code section 16.003(a), which states:

Except as provided by Sections 16.010, 16.0031, and 16.0045, a person must bring suit for trespass for injury to the estate or to the property of another, conversion of personal property, taking or detaining the personal property of another, personal injury, forcible entry and detainer, and forcible detainer not later than two years after the day the cause of action accrues.

Tex. Civ. Prac. & Rem. Code Ann. § 16.003(a). The plain language of section 16.003(a), however, does not explicitly mention debt collection or otherwise include debt collection in its scope. As the United States District Court for the Western District of Texas explains, "[o]n its face" the language of section 16.003 does not apply to a suit for unlawful debt collection under chapter 392: "Unless the legislature intended ‘debt collection’ to be defined enormously broadly, debt collection is not properly characterized as a ‘trespass,’ ‘conversion of personal property,’ ‘personal injury,’ ‘forcible entry,’ or ‘forcible detainer.’ " Vine v. PLS Fin. Services, Inc. , No. EP-16-CV-31-PRM, 2018 WL 456031, at *17 (W.D. Tex. Jan. 16, 2018). Based on this analysis, the Vine court applied the residual four-year limitations period to chapter 392 claims. See Tex. Civ. Prac. & Rem. Code Ann. § 16.051 ("Every action for which there is no express limitations period, except an action for the recovery of real property, must be brought not later than four years after the day the cause of action accrues.").

By contrast, the cases cited by Bank of America applying a two-year limitations period do not contain a substantive analysis of the language of section 16.003 and its applicability to chapter 392. In Duzich v. Marine Office of America Corp. , a case decided before the enactment of chapter 392, the Corpus Christi–Edinburgh Court of Appeals listed claims for "unfair debt collection practices" among other causes of action before simply stating, "Each of these causes have two year statutes of limitations." 980 S.W.2d 857, 872 (Tex. App.—Corpus Christi–Edinburgh 1998, pet. denied) (citing, inter alia , Tex. Civ. Prac. & Rem. Code Ann. § 16.003 ). Bank of America also cites Onabajo v. Household Financial Corp. III , No. A-18-CV-233-LY-ML, 2018 WL 6739070, at *9 (W.D. Tex. Nov. 19, 2018).⁴ The Onabajo court concluded that a two-year limitations period applied to chapter-392 claims, again without substantive analysis and citing section 16.003 along with Galindo v Snoddy , 415 S.W.3d 905, 911 (Tex. App.—Texarkana 2013, no pet.) and Clark v. Deutsche Bank National Trust Co. , 719 F. App'x 341, 343 (5th Cir. 2018). Neither Galindo nor Clark , however, contains any substantive analysis either. Galindo simply stated that "[t]he parties agree that the two-year statute of limitations applies to all of Galindo's claims," including chapter-392 claims, before citing section 16.003(a). 415 S.W.3d at 911. Likewise, Clark applied a two-year limitations period to chapter-392 claims without explanation, simply citing section 16.003(a) and Galindo. Clark , 719 F. App'x at 343 & n.1.

Agreeing with the Vine court that, by its plain terms, the two-year limitations period in Civil Practice and Remedies Code section 16.003 does not apply to prohibited-debt-collection claims under Finance Code chapter 392, we conclude the residual four-year statute of limitations applies to chapter-392 claims. See Tex. Civ. Prac. & Rem. Code Ann. § 16.051.

We address the remainder of the parties' issues in the form of a memorandum opinion. Tex. R. App. P. 47.2(a), 47.4. As explained in further detail below, we reverse the trial court's judgment in part, remanding both with instructions and for further proceedings; we affirm in part; and we suggest a remittitur. See Tex. R. App. P. 46.3 ("The court of appeals may suggest a remittitur.").

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MEMORANDUM MAJORITY OPINION

After the first phase of a bifurcated trial, the trial court signed an interlocutory judgment granting relief on Barefoot's claims for declaratory judgments under the Uniform Declaratory Judgments Act (UDJA)⁵ against all appellants, violations of Civil Practice and Remedies Code section 12.002⁶ governing fraudulent liens against all appellants, and violations of Finance Code chapter 392⁷ governing prohibited debt collection against appellants Bank of America and Nationstar. After the second phase of trial, the trial court signed a final judgment assessing attorney's fees, prejudgment interest, and costs against all appellants.

In three separate briefs, the four appellants challenge the above...