Laurie B. Grady v. Nationstar Mortgage LLC, and U.S. Bank National Association, as Trustee for Specialty Underwriting and Residential Finance Trust Mortgage Loan Asset-Backed Certificates, Series 2006-BC5

In the
Court of Appeals
Second Appellate District of Texas
at Fort Worth
___________________________
No. 02-19-00006-CV
___________________________
LAURIE B. GRADY, Appellant
V.
NATIONSTAR MORTGAGE, LLC, AND U.S. BANK NATIONAL
ASSOCIATION, AS TRUSTEE FOR SPECIALTY UNDERWRITING AND
RESIDENTIAL FINANCE TRUST MORTGAGE LOAN ASSET-BACKED
CERTIFICATES, SERIES 2006-BC5, Appellees
On Appeal from the 153rd District Court
Tarrant County, Texas
Trial Court No. 153-290822-17
Before Kerr, Bassel, and Wallach, JJ.
Memorandum Opinion by Justice Kerr
MEMORANDUM OPINION
After appellant Laurie B. Grady defaulted on her home-equity loan, the loan’s
owner—appellee U.S. Bank National Association, as Trustee for Specialty
Underwriting and Residential Finance Trust Mortgage Loan Asset-Backed
Certificates, Series 2006-BC5—twice successfully sued for a home-equity-foreclosure
order. Each time, Grady sued U.S. Bank and the current mortgage servicer, appellee
Nationstar Mortgage, LLC, in a separate suit alleging that they lacked capacity to
foreclose on the lien, that the lien was unenforceable, and that they had violated the
Texas Debt Collection Act.
This appeal arises from Grady’s second suit, in which U.S. Bank and Nationstar
successfully moved for summary judgment as a matter of law on Grady’s claims and
on their judicial-foreclosure counterclaim. In three issues, Grady challenges the trial
court’s summary-judgment orders arguing that (1) U.S. Bank and Nationstar’s
counterclaim was impermissible; (2) the summary-judgment evidence established fact
issues on each claim; and (3) U.S. Bank and Nationstar’s evidence was insufficient to
support the money judgment against her. We will affirm in part and reverse and
remand in part.
I. Background
In July 2006, Grady executed a “Texas Home Equity Security Instrument” in
National City Mortgage’s favor to secure the repayment of a “Texas Home Equity
2
Note” in the original principal amount of $135,200. U.S. Bank is the current owner of
the loan, and Nationstar is the current mortgage servicer.
When Nationstar started servicing the loan in April 2014, Grady was already
over five years behind on her loan payments. That month, Nationstar wrote Grady
that the loan was in default and that she had to pay $106,310.17 to cure the default.
The letter also stated that if the default was not cured within 30 days, the note would
be accelerated and foreclosure proceedings would begin. When Grady failed to cure,
Nationstar wrote to her in September 2014 notifying her that U.S. Bank had
accelerated the note. After acceleration, the total amount due on the note was
$227,117.09.
In November 2014, U.S. Bank filed for a home-equity-foreclosure order under
Rule 736. 1 See Tex. R. Civ. P. 735, 736. In June 2015, that court signed an order
allowing U.S. Bank to foreclose on its lien. The trustee’s sale was noticed for August
4, 2015.
But the day before the foreclosure sale, Grady sued U.S. Bank and Nationstar
in a separate suit (“the first suit”), which automatically stayed the foreclosure sale. See
Tex. R. Civ. P. 736.11(a) (“A proceeding or order under [Rule 736] is automatically
stayed if a respondent files a separate, original proceeding in a court of competent
jurisdiction that puts in issue any matter related to the origination, servicing, or
1
A lien securing repayment of a home-equity note may be foreclosed upon only
by a court order. See Tex. Const. art. XVI, § 50(a)(6)(D).
3
enforcement of the loan agreement, contract, or lien sought to be foreclosed prior to
5:00 p.m. on the Monday before the scheduled foreclosure sale.”). Grady alleged that
U.S. Bank and Nationstar did not have capacity to foreclose on her property because
they had failed to prove that they were the mortgagee and mortgage servicer,
respectively. Grady also alleged that because the note was accelerated in 2007, the
four-year statute of limitations in Civil Practice and Remedies Code Section
16.035 barred U.S. Bank and Nationstar from enforcing U.S. Bank’s lien. See Tex. Civ.
Prac. & Rem. Code Ann. § 16.035. Grady also pleaded claims for breach of contract
and for violations of the Texas Property Code and the Debt Collection Act. In
addition to damages, costs, and attorney’s fees as allowed by law and under the Debt
Collection Act, Grady sought—
• an order quieting title to the property;
• a declaration that U.S. Bank’s and Nationstar’s actions violated the Debt
Collection Act;
• a declaration that limitations barred enforcement of the lien;
• an injunction prohibiting U.S. Bank and Nationstar from violating the
Debt Collection Act; and
• an injunction preventing any foreclosure or forcible-detainer proceedings
or any other action interfering with her use or possession of the property.
The trial court granted summary judgment for U.S. Bank and Nationstar on all
of Grady’s claims. Grady appealed, challenging only the trial court’s summary
judgment on her limitations-based claims. Grady v. Nationstar Mortg., LLC, No. 02-16-
4
00481-CV, 2017 WL 5618690, at *2 n.4 (Tex. App.—Fort Worth Nov. 22, 2017, pet.
denied) (mem. op.). We rejected her limitations argument and affirmed the trial
court’s judgment. Id. at *3–4.
While Grady’s appeal was pending, U.S. Bank filed for a second home-equity-
foreclosure order under Rule 736. See Tex. R. Civ. P. 735, 736. In January 2017, the
court handling the second Rule 736 proceeding signed an order allowing U.S. Bank to
foreclose on its lien. The trustee’s sale was noticed for March 7, 2017.
Once again, the day before the foreclosure sale, Grady sued U.S. Bank and
Nationstar in a separate suit (“this suit”) and thus automatically stayed the foreclosure
sale.2 See Tex. R. Civ. P. 736.11(a). As in the first suit, Grady complained that U.S.
Bank and Nationstar lacked capacity to foreclose. She again alleged that because the
note was accelerated in 2007, the four-year statute of limitations barred U.S. Bank and
Nationstar from enforcing the lien. See Tex. Civ. Prac. & Rem. Code Ann. § 16.035.
She also pleaded claims for violations of the Debt Collection Act similar to those in
alleged in the first suit and pleaded identical requests for relief.
Grady also sued the law firm Taherzadeh, PLLC and attorneys with the firm—
2
Scott H. Crist, Jeremiah B. Hayes, and Selim Taherzadeh. Nationstar had retained the
firm to file both Rule 736 proceedings. In this suit, the firm and its attorneys
successful moved for summary judgment on Grady’s claims against them. Grady does
not challenge this ruling.
5
U.S. Bank and Nationstar answered and pleaded that res judicata barred
Grady’s claims. They also counterclaimed for judicial foreclosure under Texas Rule of
Civil Procedure 309. See Tex. R. Civ. P. 309.
U.S. Bank and Nationstar moved for judgment as a matter of law on their res
judicata defense. The trial court granted their motion and dismissed all of Grady’s
claims. U.S. Bank and Nationstar then moved for judgment as a matter of law on their
judicial-foreclosure counterclaim, asserting that their “debt, damages, and costs” were
$294,841.10. Id. They also requested a writ of possession. See Tex. R. Civ. P. 310.
In addition to filing a summary-judgment response, Grady amended her
petition to add claims for breach of contract and for violations of the Texas Estates
Code, the Texas Business Organizations Code, and the Property Code. But the trial
court struck Grady’s amended petition “sua sponte on res judicata grounds” and
granted U.S. Bank and Nationstar summary judgment on their judicial-foreclosure
counterclaim. The trial court then signed a final judgment authorizing a constable or
sheriff to seize and sell the property, granting U.S. Bank and Nationstar a writ of
possession, and awarding them a $294,841.10 judgment against Grady. See Tex. R.
Civ. P. 309, 310.
Grady has appealed and challenges the trial court’s summary-judgment rulings.
II. Standard of Review
We review a summary judgment de novo. Travelers Ins. v. Joachim, 315 S.W.3d
860, 862 (Tex. 2010). We consider the evidence presented in the light most favorable
6
to the nonmovant, crediting evidence favorable to the nonmovant if reasonable jurors
could and disregarding evidence contrary to the nonmovant unless reasonable jurors
could not. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844,
848 (Tex. 2009). We indulge every reasonable inference and resolve any doubts in the
nonmovant’s favor. 20801, Inc. v. Parker, 249 S.W.3d 392, 399 (Tex. 2008).
U.S. Bank and Nationstar moved for judgment as a matter of law on their res
judicata affirmative defense. Tex. R. Civ. P. 94 (listing res judicata as an affirmative
defense). A defendant is entitled to summary judgment on an affirmative defense if
the defendant conclusively proves all elements of that defense. Frost Nat’l Bank v.
Fernandez, 315 S.W.3d 494, 508–09 (Tex. 2010); see Tex. R. Civ. P. 166a(b), (c). To
accomplish this, the defendant must present summary-judgment evidence that
conclusively establishes each element of the affirmative defense. See Chau v. Riddle,
254 S.W.3d 453, 455 (Tex. 2008).
U.S. Bank and Nationstar also moved for judgment as a matter of law on their
judicial-foreclosure counterclaim. A plaintiff is entitled to summary judgment on a
cause of action if it conclusively proves all essential elements of the claim. See Tex. R.
Civ. P. 166a(a), (c); MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex. 1986).
III. Analysis
Grady raises three issues: (1) the trial court erred by granting summary
judgment for U.S. Bank and Nationstar on an impermissible counterclaim; (2) the trial
court erred by granting summary judgment for U.S. Bank and Nationstar because the
7
summary-judgment evidence established fact issues on each claim; and (3) U.S. Bank
and Nationstar’s evidence was insufficient to support the money judgment against
her. We address each of Grady’s issues in turn.
A. U.S. Bank and Nationstar’s Judicial-Foreclosure Counterclaim
In her first issue, Grady asserts that Texas Rule of Civil Procedure 736.11(d)
bars U.S. Bank and Nationstar’s Rule 309 judicial-foreclosure counterclaim. See Tex.
R. Civ. P. 736.11(d) (“If the automatic stay under [Rule 736.11] is in effect, any
foreclosure sale of the property is void.”); Steptoe v. JP Morgan Chase Bank, N.A.,
464 S.W.3d 429, 433 (Tex. App.—Houston [1st Dist.] 2015, no pet.) (explaining that a
lender cannot bring a Rule 736 counterclaim in a borrower’s suit against the lender
because a Rule 736 proceeding “is a special, expedited proceeding with a unique
procedural mechanism that is not compatible with the administration of a suit
brought by a borrower to challenge the propriety of a loan agreement”).
But Grady did not raise this argument in her summary-judgment response.
Generally, a nonmovant must expressly present to the trial court any reasons for
avoiding the movant’s right to summary judgment. 3 McConnell v. Southside ISD,
858 S.W.2d 337, 343 (Tex. 1993); see Tex. R. Civ. P. 166a(c) (“Issues not expressly
3
“The exception to this general rule is that the non-movant may still challenge
on appeal the legal sufficiency of the evidence supporting summary judgment.” Murray
v. Pinnacle Health Facilities XV, No. 01-13-00527-CV, 2014 WL 3512773, at
*2 n.4 (Tex. App.—Houston [1st Dist.] July 15, 2014, pet. denied) (mem. op.). This
exception does not apply here.
8
presented to the trial court by written motion, answer or other response shall not be
considered on appeal as grounds for reversal.”); D.R. Horton-Tex., Ltd. v. Markel Int’l
Ins. Co., 300 S.W.3d 740, 743 (Tex. 2009) (“A non-movant must present its objections
to a summary judgment motion expressly by written answer or other written response
to the motion in the trial court or that objection is waived.”). Because Grady did not
raise this argument in her summary-judgment response, she failed to preserve this
issue for our review, and we cannot consider it on appeal as a ground for reversal. See
Tex. R. Civ. P. 166a(c). Accordingly, we overrule Grady’s first issue.
B. The Trial Court’s Summary-Judgment Rulings
In her second issue, Grady argues that the trial court erred by granting
summary judgment for U.S. Bank and Nationstar because the summary-judgment
evidence established that there were material fact issues that precluded summary
judgment. Within this issue, Grady presents three subissues: (1) U.S. Bank’s failure to
comply with the Estates Code and the Business Organizations Code precluded
summary judgment in its favor on U.S. Bank and Nationstar’ counterclaim; (2) U.S.
Bank and Nationstar’s summary-judgment evidence was insufficient, internally
inconsistent, and inconsistent with their prior filings; and (3) res judicata does not bar
her claims in this suit. We address each of these subissues in turn.
9
1. U.S. Bank’s alleged noncompliance with the Estates Code and the
Business Organizations Code
Grady asserts that because U.S. Bank—a “national banking association believed
to be domiciled in Ohio”—failed to comply with the filing requirements in Section
505.004 of the Estates Code, it was barred from filing either of the Rule
736 proceedings and from defending or enforcing its lien in this suit and in the first
suit. See Tex. Est. Code Ann. § 505.004 (setting out filing requirements for foreign
corporate fiduciaries). She additionally argues that U.S. Bank’s failure to register in
accordance with Section 9.001 of the Business Organizations Code similarly barred
U.S. Bank from enforcing its lien. See Tex. Bus. Orgs. Code Ann. § 9.001 (requiring
foreign entities to register under Chapter 9 and to maintain that registration while
transacting business in Texas). Grady further contends that by extension, Nationstar
“cannot lawfully act to threaten[] or seek[] authority for a foreclosure” because its
authority is derived from U.S. Bank’s authority.
Grady first alleged violations of the Estates Code and the Business
Organizations Code in her amended petition, which she filed after U.S. Bank and
Nationstar moved for summary judgment on their judicial-foreclosure counterclaim.
In its order granting summary judgment for U.S. Bank and Nationstar on that
counterclaim, the trial court sua sponte struck Grady’s amended petition. These
claims were thus not before the trial court. To the extent that Grady is arguing that
she was entitled to some sort of affirmative relief on these allegations—and assuming
10
that affirmative relief is even available—she has not challenged the trial court’s
striking her amended petition. She has thus waived any appellate complaint regarding
this ruling. See Jacobs v. Satterwhite, 65 S.W.3d 653, 655–56 (Tex. 2001) (concluding that
failing to raise an issue on appeal waives error); see also Tex. R. App. P. 38.1(f), (i)
(requiring an appellant’s brief to concisely state all issues presented for review and to
“contain a clear and concise argument for the contentions made, with appropriate
citations to authorities and to the record”). But because Grady raised her Estates
Code and Business Organizations Code arguments in response to U.S. Bank and
Nationstar’s summary-judgment motion on their counterclaim, we will address them.
Even if U.S. Bank was required to register with the Secretary of State under
Estates Code Section 505.004, Grady failed to present any evidence that it had not
done so. See Caballero v. Rushmore Loan Mgmt. Servs. LLC, No. 05-19-00298-CV,
2020 WL 1685418, at *6 (Tex. App.—Dallas Apr. 7, 2020, no pet.) (mem. op.). And
the registration requirements in Business Organizations Code Section 9.001 do not
prevent holders in due course from filing suit or enforcing the terms of a negotiable
instrument, nor do they prohibit a mortgagee from enforcing a mortgage lien. Reyes v.
U.S. Bank Nat’l Ass’n, No. 4:18-CV-00828-P, 2019 WL 7371099, at *5 (N.D. Tex.
Dec. 31, 2019). Accordingly, these two code-related arguments fail.
2. U.S. Bank and Nationstar’s summary-judgment evidence
Grady next attacks several facets of U.S. Bank and Nationstar’s summary-
judgment evidence, arguing that (1) the affidavit supporting U.S. Bank and
11
Nationstar’s summary-judgment motion was defective; (2) the indorsements on the
copy of the note attached to the affidavit did not match U.S. Bank’s claimed
ownership of the note and lien; and (3) the summary-judgment evidence creates a fact
issue on her Debt Collection Act and Property Code claims.
a. The summary-judgment affidavit
In support of their summary-judgment motion, U.S. Bank and Nationstar
attached the affidavit of A.J. Loll, a Vice President of Nationstar. On appeal, Grady
asserts that Loll’s affidavit is defective because it lacks (1) Loll’s signature; (2) the
notary’s signature; and (3) the notary’s seal. Grady argues that because of these
defects, all the exhibits attached to Loll’s affidavit—the note, the security agreement,
the “Texas Home Equity Affidavit of Agreement,” the deed-of-trust assignments, the
notice-of-default letter, the notice-of-acceleration letter, and the loan’s transaction
history—were not authenticated as business records.
Loll’s affidavit lacks his and the notary’s actual signatures. Instead, Loll
“signed” the affidavit “/s/A.J. Loll,” and Niki Storey, the notary, “signed” the jurat
“/s/ Niki Storey.”4 The jurat also lacks Storey’s notarial seal.
4
We assume without deciding that “/s/” followed by a typed name does not
constitute an affiant’s or a notary’s signature. See Tex. R. Civ. P. 21(f)(7)(A) (stating
that an electronically filed document is considered signed if the document includes “a
‘/s/’ and name typed in the space where the signature would otherwise appear, unless
the document is notarized or sworn” (emphasis added)).
12
The Texas Government Code defines “affidavit” as “a statement in writing of a
fact or facts signed by the party making it, sworn to before an officer authorized to
administer oaths, and officially certified to by the officer under his seal of office.”
Tex. Gov’t Code Ann. § 312.011(1). An instrument that does not meet these
requirements is not an affidavit. See Mansions in the Forest, L.P. v. Montgomery Cty.,
365 S.W.3d 314, 316–17 (Tex. 2012). A defect in a purported affidavit that renders it
noncompliant with the Government Code is a formal defect. See id. at 317. Failure to
object to a formal defect in a summary-judgment affidavit waives any appellate
complaints regarding that defect. See Tex. R. Civ. P. 166a(f); Seim v. Allstate Tex. Lloyds,
551 S.W.3d 161, 163–64 (Tex. 2018); see also Tex. R. App. P. 33.1(a)(1).
Here, Grady did not complain in the trial court about the Loll affidavit’s failure
to satisfy the Government Code’s requirements. She thus failed to preserve her
complaints for appeal.5 See Seim, 551 S.W.3d at 162–63, 166 (concluding that lack of
notary’s signature was a formal defect that had to be objected to and ruled on by the
trial court to preserve error); Mansions in the Forest, 365 S.W.3d at 317 (holding that
because record lacked any indication that purported affidavit was sworn to by the
5
To the extent that Grady’s challenge to the Loll affidavit can be construed as
raising an independent argument that the exhibits attached to the affidavit were not
properly authenticated as business records, that objection also asserts a formal defect
that must be raised in the trial court to preserve it for appellate review. See Albright v.
Good Samaritan Soc’y–Denton Vill., No. 02-16-00090-CV, 2017 WL 1428724, at *2 (Tex.
App.—Fort Worth Apr. 20, 2017, no pet.) (mem. op.). Because Grady did not raise
this complaint in the trial court, she failed to preserve it for our review. See id.
13
affiant, the instrument was not an affidavit under Government Code Section
312.011(1), but that complaint had to be raised in the trial court to be raised on
appeal); Bray v. Fuselier, 107 S.W.3d 765, 769 (Tex. App.—Texarkana 2003, pet.
denied) (“The lack of a notary’s seal is a defect in form.”).
b. The note’s indorsements
Grady next asserts that “the copy of the Note that [U.S. Bank and Nationstar]
offer[] does not bear indorsements matching [their] claimed chain of ownership of the
Note and the associated lien as shown in [the assignments attached to Loll’s
affidavit].” Grady does not challenge U.S. Bank’s ownership of the note and lien or
the assignments’ validity. She asserts merely that the note’s indorsements conflict with
the assignments, implying that this alleged conflict is enough to create a fact issue
precluding summary judgment on U.S. Bank and Nationstar’s judicial-foreclosure
counterclaim. See, e.g., De La Garza v. Bank of N.Y. Mellon, No. 02-17-00427-CV,
2018 WL 5725250, at *9–10 (Tex. App.—Fort Worth Nov. 1, 2018, no pet.) (mem.
op.) (concluding that summary judgment on bank’s judicial-foreclosure counterclaim
was improper because bank’s summary-judgment evidence presented an unexplained
gap in bank’s chain of title to the note). A review of the evidence, however, reveals
that there is no such conflict.
The two assignments reflect that National City Mortgage transferred the note
and deed of trust to National City Mortgage Co. and that National City Mortgage Co.
transferred the note and deed of trust to U.S. Bank. Consistent with those
14
assignments, the note’s indorsements show that National City Mortgage specially
indorsed the note to National City Mortgage Co., which indorsed the note in blank,
thus making it payable to the bearer. Tex. Bus. & Com. Code Ann. § 3.205(a), (b).
According to Loll’s affidavit, the note is in U.S. Bank’s possession, which is sufficient
to prove that it is the note’s holder and thus entitled to collect on it. See Tex. Bus. &
Com. Code Ann. §§ 1.201(b)(21), 3.204, 3.205(b); Blizzard v. Select Portfolio Servicing,
No. 03-13-00716-CV, 2015 WL 5096710, at *3 (Tex. App.—Austin Aug. 27, 2015, no
pet.) (mem. op.); see also Perdomo v. Fed. Nat’l Mortg. Ass’n, No. 3:11-CV-734-M,
2013 WL 1123629, at *4 (N.D. Tex. Mar. 18, 2013) (“Under Texas law, a holder of a
note indorsed in blank is presumed to be entitled to enforcement of the instrument
merely by showing possession of that instrument. Such a holder is not also required to
establish an unbroken chain of title.” (citation omitted)).
c. Grady’s Debt Collection Act and Property Code claims
Grady next asserts that U.S. Bank and Nationstar’s judicial admissions and
summary-judgment evidence create fact issues on her Property Code violation claim.
But like Grady’s Estates Code and Business Organizations Code claims, Grady first
pleaded her Property Code violation claim in her amended petition, which the trial
court struck. Because the Property Code violation claim was thus not before the trial
court and because Grady does not challenge the trial court’s striking her amended
petition, we will not address her arguments regarding her Property Code violation
claim.
15
Grady also complains that U.S. Bank and Nationstar’s judicial admissions and
summary-judgment evidence create fact issues on her Debt Collection Act claims.
U.S. Bank and Nationstar successfully moved for summary judgment on these claims
based on their res judicata defense. In the following section, we examine whether the
trial court erred by granting summary judgment on Grady’s claims on res judicata
grounds.
3. Res judicata
Grady argues that res judicata does not bar the claims she raises in this suit. Res
judicata, or claim preclusion, bars relitigation of claims or causes of action that have
been finally adjudicated, “as well as related matters that, with the use of diligence,
should have been litigated in the prior suit.” Barr v. Resolution Tr. Corp. ex rel. Sunbelt
Fed. Sav., 837 S.W.2d 627, 628 (Tex. 1992). For res judicata to apply, there must be
(1) a prior final judgment on the merits by a court of competent jurisdiction,
(2) identity of parties or those in privity with them, and (3) a second action based on
the same claims as were raised or could have been raised in the first action. Amstadt v.
U.S. Brass Corp., 919 S.W.2d 644, 652 (Tex. 1996).
Here, U.S. Bank and Nationstar moved for summary judgment on their res
judicata defense, arguing that the final judgment in the first suit was a final judgment
on the merits; that the parties in the first suit were identical to those in this suit; and
that the same claims were at issue in both suits. In support, U.S. Bank and Nationstar
attached the following summary-judgment evidence: (1) Grady’s original petitions
16
from the first suit and this suit; (2) the final judgment in the first suit; and (3) our
opinion in Grady’s appeal from that judgment.
Grady does not dispute that this evidence established that U.S. Bank and
Nationstar satisfied the first two res judicata elements. But she maintains that they
failed to prove the third element because neither the “specific facts and acts” she
complains of in this suit nor the relief she now seeks is identical to those in the first
suit.
But res judicata’s preclusive effect is not so narrow. Texas courts apply the
transactional approach to res judicata, “which requires claims arising out of the same
subject matter to be litigated in a single lawsuit.” Hallco Tex., Inc. v. McMullen Cty.,
221 S.W.3d 50, 58 (Tex. 2006). Under this approach, “a subsequent suit is barred if it
arises out of the same subject matter as the prior suit, and that subject matter could
have been litigated in the prior suit.” Citizens Ins. Co. of Am. v. Daccach, 217 S.W.3d 430,
449 (Tex. 2007). The Texas Supreme Court has explained that “a final judgment on an
action extinguishes the right to bring suit on the transaction, or series of connected
transactions, out of which the action arose.” Barr, 837 S.W.2d at 631. “Determining
the scope of the ‘subject matter’ or ‘transaction’ of the prior suit requires ‘an analysis
of the factual matters that make up the gist of the complaint, without regard to the
form of action.’” Citizens Ins. Co. of Am., 217 S.W.3d at 449 (quoting Barr, 837 S.W.2d
at 630). We make this determination pragmatically, “giving weight to such
considerations as whether the facts are related in time, space, origin, or motivation,
17
whether they form a convenient trial unit, and whether their treatment as a trial unit
conforms to the parties’ expectations or business understanding or usage.” Barr,
837 S.W.2d at 631 (quoting Restatement (Second) of Judgments § 24(2) (Am. Law.
Inst. 1982)).
Here, both suits’ subject matter was U.S. Bank and Nationstar’s attempts to
enforce the loan agreement by foreclosing on U.S. Bank’s lien after Grady defaulted
on the note. With this in mind, we will compare each of Grady’s claims from the first
suit with those here to determine whether the claims in this suit were raised or could
have been raised in the first suit, thus entitling U.S. Bank and Nationstar to summary
judgment on res judicata grounds.6
a. U.S. Bank’s and Nationstar’s Capacity
In the first suit, Grady alleged that in the first Rule 736 proceeding, U.S. Bank
and Nationstar failed to prove that they had capacity to foreclose on the property as
the mortgagee and mortgage servicer, respectively. See Tex. Prop. Code Ann.
§ 51.0001(4), (5). Grady asked the trial court to “definitively adjudicate[]” U.S. Bank’s
and Nationstar’s “status (or lack thereof) with respect to the Loan.”
6
We recognize that a Rule 736 order “is without prejudice and has no res
judicata, collateral estoppel, estoppel by judgment, or other effect in any other judicial
proceeding.” Tex. R. Civ. P. 736.9. The issue here, however, is the first suit’s
preclusive effect, if any, on this suit. The merits of Grady’s claims are irrelevant to this
analysis, and we are therefore agnostic about them.
18
U.S. Bank’s and Nationstar’s alleged lack of capacity was the basis for Grady’s
Property Code claim in the first suit.7 Grady did not re-allege that claim in her original
petition in this suit, but she did re-assert her lack-of-capacity allegations, adding that
U.S. Bank and Nationstar failed to prove their capacity to foreclose in the second
Rule 736 proceeding as well. But because U.S. Bank’s and Nationstar’s capacity to
foreclose on the property was raised and determined in the first suit, res judicata bars
her capacity-related claims in this suit.
b. Limitations
In both suits, Grady’s limitations allegations are identical: because the note was
accelerated in 2007, the four-year statute of limitations in Civil Practice and Remedies
Code Section 16.035(e) bars U.S. Bank and Nationstar from enforcing the lien. She
additionally alleged limitations as one of the bases for her Debt Collection Act claims
in both suits. Grady’s limitations-based claims were raised and finally adjudicated in
the first suit. See Grady, 2017 WL 5618690, at *2–4. Res judicata thus bars Grady’s
limitations-based claims in this suit.
7
In the first suit, Grady alleged that U.S. Bank and Nationstar violated Property
Code Section 51.002(b) and (d) because they lacked capacity to send the default and
sale notices those subsections require. See Tex. Prop. Code Ann. § 51.002(b), (d). In
this suit, Grady asserted this claim in her amended complaint, which the trial court
struck. As noted, Grady has not challenged that ruling on appeal.
19
c. Other Debt Collection Act Claims
Grady also asserts other Debt Collection Act claims in this suit. First, she
claims that U.S. Bank and Nationstar violated Section 392.101(a) of the Debt
Collection Act in both Rule 736 proceedings because the alleged third-party debt
collectors that they used in those proceedings—the Taherzadeh law firm and its
attorneys—could not engage in debt collection because they had failed to file a copy
of the statutorily required surety bond with the Texas Secretary of State. See Tex. Fin.
Code Ann. § 392.101(a) (“A third-party debt collector . . . may not engage in debt
collection unless the third-party debt collector . . . has obtained a surety bond issued
by a surety company authorized to do business in this state as prescribed by this
section. A copy of the bond must be filed with the secretary of state.”); see also id.
§ 392.001(5) (defining “debt collection”), (7) (defining “third-party debt collector”).
Grady did not allege this claim in the first suit. But U.S. Bank and Nationstar used the
same law firm in both Rule 736 proceedings, and Grady—with the use of diligence—
could have challenged its failing to file the required surety bond in the first suit. Res
judicata thus bars Grady’s Section 392.101(a) claim.
Next, Grady alleges that U.S. Bank and Nationstar violated Section
392.304(a)(8) of the Debt Collection Act because they misrepresented the “character,
extent, or amount of a consumer debt” in both Rule 736 proceedings and in the first
suit. See id. § 392.304(a)(8). In the first suit, Grady alleged this claim with respect to
the first Rule 736 proceeding, and with the use of diligence, she could have raised her
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complaint regarding U.S. Bank’s and Nationstar’s representations in the first suit
regarding the debt in that suit. Thus, res judicata bars her Section 392.304(a)(8) claim
based on U.S. Bank’s and Nationstar’s representations in the first Rule 736 proceeding
and in the first suit.
But U.S. Bank and Nationstar did not conclusively prove the third res judicata
element regarding Grady’s Section 392.304(a)(8) claim based on their representations
regarding the debt in the second Rule 736 proceeding. Section 392.304(a)(8) prohibits
a debt collector from “misrepresenting the character, extent, or amount of a
consumer debt, or mispresenting the consumer debt’s status in a
judicial . . . proceeding.” Id. The second Rule 736 proceeding—which was filed while
the appeal in the first suit was pending—was a separate “judicial proceeding.” U.S.
Bank and Nationstar presented no evidence regarding their representations in either
Rule 736 proceeding. They thus failed to conclusively prove that Grady’s Section
392.304(a)(8) claim based on representations made in the second Rule 736 proceeding
was raised or could have been raised in the first suit. Accordingly, U.S. Bank and
Nationstar were not entitled to summary judgment on Grady’s Section 392.304(a)(8)
claim arising from the second Rule 736 proceeding.
Finally, Grady alleges that U.S. Bank and Nationstar violated the Debt
Collection Act in both Rule 736 proceedings by attempting to enforce a claimed lien
using an affidavit that did not meet Rule 736’s requirements. See Tex. R. Civ. P.
736.1(6) (requiring Rule 736 application to “[i]include an affidavit of material facts in
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accordance with Rule 166a(f)” and setting forth affidavit’s requirements). The
affidavit deficiencies Grady alleges in this suit—“the affiant’s knowledge was qualified
by limitation to examination of business records” and “the Note copy attached to the
affidavit bears indorsements which do not conform with the assignment of the
claimed lien”—are identical to the affidavit deficiencies that she described in the first
suit. And Grady offered no summary-judgment evidence raising a fact issue about
whether the affidavit deficiencies alleged in the first Rule 736 proceeding differed
from those deficiencies alleged in the second. Accordingly, Grady’s Debt Collection
Act claim in this suit—which is based on exactly the same affidavit deficiencies
alleged in the first suit—was thus raised and finally adjudicated in the first suit.
Accordingly, res judicata bars this claim.
4. Conclusion
With the exception of Grady’s Section 392.304(a)(8) claim based on U.S.
Bank’s and Nationstar’s representations regarding the debt in the second Rule
736 proceeding, U.S. Bank and Nationstar proved that they were entitled to summary
judgment on their res judicata defense. But because they failed to prove that res
judicata bars Grady’s Section 392.304(a)(8) claim based on the representations made
in the second Rule 736 proceeding regarding the character, extent, or amount of
Grady’s debt, the trial court erred by granting summary judgment on that claim. We
thus sustain this part of Grady’s second issue. Having rejected Grady’s other
arguments, we overrule the rest of her second issue.
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C. Evidence supporting the money judgment
In her third and final issue, Grady claims that the final judgment “specified no
specific amount of the money judgment” and “provides no objective basis on which
the parties or any third party could definitively determine the exact amount thereof.”
But at the same time, she paradoxically asserts that “there was insufficient evidence
before the trial court to support any money judgment,” particularly the
$294,841.10 amount “as set out” in the final judgment.
Both arguments lack merit. The final judgment awarded a
$294,841.10 judgment against Grady to be satisfied from the property’s sale
proceeds.8 This amount is supported by Loll’s affidavit, which stated that the loan
payoff was at least that amount. See generally Energico Prod., Inc. v. Frost Nat’l Bank, No.
02-11-00148-CV, 2012 WL 254093, at *5 (Tex. App.—Fort Worth Jan 26, 2012, pets.
denied) (mem. op.) (“A lender need not file detailed proof [of] the calculations
reflecting the balance due on a note; an affidavit by a bank employee which sets forth
the total balance due on a note is sufficient to sustain an award of summary
judgment.”); see also Myers v. Sw. Bank, No. 02-14-00122-CV, 2014 WL 7009956, at *2
“[A] secured home-equity-loan lender may seek payment of the home-equity
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loan only from the collateral and cannot seek a deficiency judgment against the
borrower personally.” De La Garza, 2018 WL 5725250, at *6 n.11 (citing Tex. Const.
art. XVI § 50(a)(6)(C) (requiring that to be foreclosure-eligible, Texas home-equity
loans must be nonrecourse); Wells Fargo Bank, N.A. v. Murphy, 458 S.W.3d 912,
917 (Tex. 2015)).
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(Tex. App.—Fort Worth Dec. 11, 2014, pet. denied) (mem. op.) (same). We thus
overrule Grady’s third issue.
IV. Conclusion
Having sustained the part of Grady’s second issue challenging the trial court’s
summary judgment on her Section 392.304(a)(8) claim based on U.S. Bank’s and
Nationstar’s representations regarding the debt in the second Rule 736 proceeding, we
reverse the trial court’s judgment on that claim only and remand that claim to the trial
court. Having overruled the rest of Grady’s second issue, along with her first and
third issues, we affirm the balance of the trial court’s judgment.
/s/ Elizabeth Kerr
Elizabeth Kerr
Justice
Delivered: September 3, 2020
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