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Alexander v. Wells Fargo Bank, N.A.

United States Court of Appeals, Fifth Circuit

August 15, 2017

TINA ALEXANDER, Plaintiff - Appellant
v.
WELLS FARGO BANK, N.A., formerly known as WACHOVIA MORTGAGE, FSB, formerly known as WORLD SAVINGS BANK F.S.B, its successors and/or assigns; DOES 1-10, Defendants - Appellees

         Appeal from the United States District Court for the Southern District of Texas

          Before STEWART, Chief Judge, and HIGGINBOTHAM and COSTA, Circuit Judges.

          PATRICK E. HIGGINBOTHAM, Circuit Judge

         Wells Fargo's predecessor in interest extended a loan to Tina Alexander, secured by a deed of trust on her homestead, as permitted under the Texas Constitution Article XVI, Section 50. Alexander fell into default and Wells Fargo initiated foreclosure. Alexander then brought this action, alleging nonconformity with the requirements for foreclosing home equity loans in Section 50(a)(6) and seeking (1) a permanent injunction preventing foreclosure and (2) forfeiture of the note's remaining principal and interest. The district court, relying on our decision in Preister, [1] held that Alexander's suit was time barred and dismissed under Rule 12(b)(6). Thereafter, the Texas Supreme Court issued two opinions, Wood[2] and Garofolo, [3] in light of which Alexander argues that the district court erred in failing to amend its judgment to reinstate her claims.

         We hold that Wood and Garofolo constitute intervening changes in law sufficient to justify post-judgment relief for Alexander on her claim to preclude foreclosure but not on her claim for forfeiture. We affirm in part, reverse in part, and remand for further proceedings.

         I.

         As this case reaches us on dismissal for failure to state a claim under Rule 12(b)(6), we treat the complaint's factual allegations and its attached documents as true.[4] In 1998, Alexander received a home equity loan from Wells Fargo, secured by a deed of trust on her home. Four years later, Alexander discovered that her copy of the loan documents did not contain an Acknowledgment of Fair Market Value signed by both parties at the time the loan was issued, as required by Article XVI, Section 50 of the Texas Constitution.[5] She requested a copy from Wells Fargo, but Wells Fargo never responded. By 2005, Alexander had fallen into default, and on June 8, 2006, Wells Fargo sent Alexander the first of several Notices of Acceleration.

         Alexander responded by filing for Chapter 13 bankruptcy protection. Less than two months later, the bankruptcy was dismissed and Wells Fargo was permitted to move forward with foreclosure. On September 7, 2007, Wells Fargo sent Alexander a second Notice of Acceleration. Shortly thereafter, Wells Fargo sent Alexander a "Reinstatement Quote, " requiring payment of $105, 440.15 by September 25, 2007 to reinstate the loan. On September 28, 2007, three days after the deadline to tender the reinstatement amount, Alexander wired $106, 000.00 to Wells Fargo.[6] Wells Fargo responded via a letter dated October 3, 2007 that it had "received and processed the funds to reinstate" and "the loan is now due for the October 01, 2007 payment in the amount of $2, 561.12."

         The complaint next details a series of communications over the following two months, with Wells Fargo demanding payment and then-in response to inquiries by Alexander-either explicitly disclaiming that amount as requested in error or implicitly disclaiming that amount by sending another communication requesting a different amount. On December 11, 2007, Alexander received a notice of intent to foreclose from Wells Fargo, dated December 4, 2007, demanding a payment of $14, 182.97 by January 3, 2008 or else the loan would be accelerated.

         On April 25, 2008, Wells Fargo sent Alexander another Notice of Acceleration. Wells Fargo applied for judicial foreclosure in May before, nearly a year later, sending Alexander an "Escrow Breakdown" that showed no trace of the $106, 000 payment she had made to reinstate the loan. In October 2009, Alexander and Wells Fargo attended a Texas state court hearing where the court ordered Alexander to make three monthly payments of $2, 120. Wells Fargo demanded that Alexander make those payments through its counsel of record, which she did, but the IRS Form 1098 Mortgage Interest Statement she received in January 2010 showed that Wells Fargo had not credited any of her payments against the principal balance on the note.

         The complaint is silent as to the events that followed until November 2013, when the Texas state court issued an order permitting Wells Fargo to proceed with foreclosure. Wells Fargo scheduled the foreclosure sale for March 4, 2014; on the eve of sale, Alexander asked a Texas state court to halt the sale. Two days later, Wells Fargo rescinded its Notice of Acceleration, and Alexander moved to dismiss her suit without prejudice. Alexander then made several attempts to make her monthly loan payments, which Wells Fargo refused because her account was in foreclosure.

         On July 28, 2014, Wells Fargo sent yet another Notice of Acceleration, and in early September, applied for expedited foreclosure. A date of sale was then set for May 5, 2015. On the eve of sale, Alexander, appearing pro se, again responded with a suit in the Texas state court, alleging violations of the Texas Constitution, breach of contract, negligent misrepresentation, and breach of the duty of good faith and fair dealing required under the UCC. In her prayer for relief, Alexander requested: (1) a TRO halting the foreclosure sale; (2) a preliminary injunction preventing the foreclosure sale; (3) an order requiring Wells Fargo to produce the original, executed "Fair Market Acknowledgment" for the property; (4) a permanent injunction preventing the foreclosure sale; (5) economic damages; (6) punitive damages; (7) a declaration from the Court that Wells Fargo must produce an accounting to the court and to Alexander prior to foreclosing; (7) exemplary damages; (8) equitable relief; (9) reasonable fees; (10) court costs; (11) all other relief to which Plaintiff is entitled; and (11) general relief.[7]

         Wells Fargo removed the action to the federal district court, invoking diversity jurisdiction. Wells Fargo moved to dismiss the complaint for failure to state a claim, which the district court granted, dismissing the entire action with prejudice. Relevant to the claims before us, in dismissing Alexander's Texas Constitutional claims, the district court held that:

Alexander's argument fails in light of Preister v. JP Morgan Chase Bank, NA, where the Fifth Circuit addressed whether a statute of limitations applies to claims under the Texas Constitution Article XVI, § 50(a)(6). . . . The Fifth Circuit concluded that the residual statute of limitations in Texas Civil Practice and Remedies Code § 16.051 "applies to constitutional infirmities under § 50(a)(6)" . . . . Under this authority Alexander's claim accrued on September 15, 1998 [when the home equity loan instrument was executed]. She did not bring this action until May 4, 2015, more than four years later. . . . Therefore, this claim has no merit.[8]

         On June 9, 2016, Alexander, still appearing pro se, moved for post-judgment relief under Rule 59, arguing that the Texas Supreme Court case of Wood v. HSBC Bank USA, N.A., decided eight days after dismissal of her complaint, explicitly held that Preister's "Erie guess" was wrong-that no statute of limitations operates to restrict a suit for quiet title arising under Section 50(c). The district court denied Alexander's motion without explanation. Alexander timely noticed her appeal.

         II.

         "We generally review a decision on a motion to alter or amend judgment for abuse of discretion, although to the extent that it involves a reconsideration of a question of law, the standard of review is de novo."[9] "Under Rule 59(e), amending a judgment is appropriate (1) where there has been an intervening change in the controlling law; (2) where the movant presents newly discovered evidence that was previously unavailable; or (3) to correct a manifest error of law or fact."[10] Additionally, "[a] notice of appeal from the denial of a timely Fed.R.Civ.P. 59(e) motion brings up the underlying judgment for review."[11]

         We also review dismissal under Rule 12(b)(6) de novo, [12] "accepting all well-pleaded facts as true and viewing those facts in the light most favorable to the plaintiff."[13] In the case at bar, the claims at issue were not dismissed for failure to plead sufficient facts, but rather because the district court found the case barred by limitations. "A statute of limitations may support dismissal under Rule 12(b)(6) where it is evident from the plaintiff's pleadings that the action is barred and the pleadings fail to raise some basis for tolling or the like."[14]

         III.

         Alexander does not challenge the disposition of her general breach of contract claim, her negligent misrepresentation claim, or her UCC claim. The only claims at issue here are for a permanent injunction preventing the foreclosure sale and for forfeiture as provided under Article XVI, Section 50(a)(6)(Q)(xi) of the Texas Constitution.

         A.

         "In Texas, 'the homestead has always been protected from forced sale, not merely by statute as in most states, but by the Constitution.'"[15] It was not until 1997 that Texas created exceptions to the constitutional ban on foreclosure for reverse mortgages and other home equity loans.[16] "[B]ut, consistent with Texas's long tradition of protecting the homestead, the amendments clearly prescribed very specific and extensive limitations on those encumbrances."[17] Article XVI, Section 50 of the Texas Constitution provides, in relevant part:

(a) The homestead of a family, or of a single adult person, shall be, and is hereby protected from forced sale, for the payment of all debts except for:
. . .
(6) an extension of credit that:
. . .
(Q) is made on the condition that:
. . .
(ix) the owner of the homestead and the lender sign a written acknowledgment as to the fair market value of the homestead property on the date the extension of credit is made;
(x) except as provided by Subparagraph (xi) of this paragraph, the lender or any holder of the note for the extension of credit shall forfeit all principal and interest of the extension of credit if the lender or holder fails to comply with the lender's or holder's obligations under the extension of credit and fails to correct the failure to comply not later than the 60th day after the date the lender or holder is notified by the borrower of the lender's failure to comply by:
. . .
(d) delivering the required documents to the borrower if the lender fails to comply with Subparagraph (v) of this paragraph or obtaining the appropriate signatures if the lender fails to ...

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