SettlePou Scores Summary Judgment Victory in Texas Home Equity Foreclosure Limitations Case

Author: Michael R Steinmark

SettlePou recently obtained summary judgment for its residential mortgage lender client in a case involving the statute of limitations on nonjudicial foreclosure of a Texas home equity loan. Ultimately, the Court held that litigation automatically abating a Texas Rule 736 expedited action for an order permitting nonjudicial foreclosure tolls the running of limitations on nonjudicial foreclosure, even if limitations has already expired on the lender’s judicial foreclosure remedy.

In Sweet Aster Reddick et al. v. Deutsche Bank National Trust Company, as Trustee for HSI Asset Securitization Corporation 2006-OPT2, Mortgage-Pass Through Certificates, Series 2006-OPT2, Civil Action No. 3:16-CV-1997-D (N.D. Tex. - Dallas Division Dec. 12, 2017), the borrower Plaintiffs alleged that the statute of limitations on the lender’s right to nonjudicially foreclose had expired in 2015 because the lender could have filed a judicial foreclosure counterclaim in the borrowers’ prior litigation before that date.

The lender contended that even if limitations for judicial foreclosure had already expired, limitations on nonjudicial foreclosure had not expired and, instead, had been tolled, because the lender had been prevented from exercising its bargained-for right of nonjudicial foreclosure due to the borrowers’ prior litigation. That prior litigation had the effect of automatically abating the Rule 736 proceedings and thus precluding the lender from nonjudicially foreclosing, which it could only do upon obtaining a Rule 736 order. The lender argued that the ability to exercise its judicial foreclosure remedy during the prior litigation had no effect on its right to nonjudically foreclose, which it undisputedly could not do because of the litigation abating the Rule 736 action. The lender further argued that the borrower should not be permitted to force the lender to elect one of its available remedies, judicial foreclosure, over another, nonjudicial foreclosure. The Court agreed and granted summary judgment in favor of the lender, holding that the lender’s lien remained valid and could still be foreclosed nonjudicially.

Notably, in so doing, the Court rejected the borrowers’ reliance upon Deutsche Bank Nat’l Trust Co. v. Ra Surasak Ketmayura, 2015 WL 3899050, at *8-9 (W.D. Tex. June 10, 2015), which the Court found distinguishable because that decision held only that the abatement of a Rule 736 proceeding does not toll limitations for judicial foreclosure, whereas here the lender sought to foreclose nonjudicially. The Court also rejected the borrowers’ reliance upon Landers v. Nationstar Mortgage, LLC, 461 S.W.3d 923 (Tex. App. 2015, pet. denied), finding that case inapplicable because it “does not involve a nonjudicial foreclosure remedy. Landers merely states that, because the injunction in question did not restrain the defendant from filing suit for judicial foreclosure of its lien, the statute of limitations for such a suit was not tolled.” (internal citation omitted).

This decision is an important victory for not only SettlePou’s client but the home equity lending industry in Texas generally. If you have any questions or would like more information, please contact Michael R. Steinmark of SettlePou at 214.520.3300 or msteinmark@settlepou.com.