David K. Everson and Patricia M. Everson v. Mineola Community Bank, S.S.B.--Appeal from 115th District Court of Upshur County

NO. 12-05-00334-CV

IN THE COURT OF APPEALS

TWELFTH COURT OF APPEALS DISTRICT

TYLER, TEXAS

DAVID K. EVERSON AND APPEAL FROM THE 115TH

PATRICIA M. EVERSON,

APPELLANTS

V. JUDICIAL DISTRICT COURT OF

MINEOLA COMMUNITY

BANK, S.S.B.,

APPELLEE UPSHUR COUNTY, TEXAS

MEMORANDUM OPINION

David K. Everson and Patricia M. Everson appeal a summary judgment granted Mineola Community Bank, S.S.B. We affirm.

Background

On October 10, 2003, the Eversons contracted to purchase a home and 65.92 acres located at 1765 Crabapple Road in Big Sandy, Texas for $385,000. The closing for the sale was to take place on November 14, 2003.

The contract required that the Eversons apply promptly for financing for the purchase, and the Eversons first applied to First National Bank of Granbury for a loan. First National Bank secured an appraisal of the property setting its value at $386,016 and gave a copy of this appraisal to the Eversons. For undisclosed reasons, the Eversons decided not to borrow the money from First National Bank.

The Eversons next approached Mineola Community Bank, S.S.B. ( Mineola ) for financing for the purchase. On November 14, 2003, Mineola obtained an appraisal from Ronny Willingham, a licensed appraiser and a vice president of Mineola. The appraisal included the $65,000 cost of a horse barn the Eversons proposed to build and did in fact build on the property. Excluding the cost of the proposed horse barn, the value placed on the property was $386,850. The Eversons borrowed $410,500 from Mineola and signed a promissory note dated November 24, 2003 in that amount and a deed of trust securing the payment of the loan. The Eversons made five monthly payments, the last on May 7, 2004.

On October 5, 2004, Mineola sent a letter to the Eversons by certified mail, return receipt requested, telling them they had thirty days to cure their breach of the mortgage agreement by paying all past due payments together with late charges. On November 15, 2004, Mineola filed a Notice of Trustee s Sale with the county clerk, posted notice of the sale at the courthouse, and sent a copy of the notice to the Eversons by certified mail, return receipt requested. The trustee s sale was held on December 7, 2004. The trustee sold the property to Mineola for $430,223.31, the existing balance due together with interest and penalties.

On December 8, 2004, Mineola sent notice to the Eversons by both regular and certified mail that Mineola had purchased the property and advising the Eversons that they had seven days to vacate the premises. Mineola finally gained possession in July 2004 after successfully prosecuting an action for forcible detainer.

The Eversons filed suit against Mineola on February 2, 2005 alleging Mineola s (1) violation of the Texas Deceptive Trade Practices Act, (2) negligence, (3) trespass, (4) breach of the duty of good faith and fair dealing, (5) unjust enrichment, (6) common law and statutory fraud, and (7) wrongful foreclosure. Mineola filed a motion for summary judgment, which the trial court granted on all the causes of action asserted.

Standard of Review

A summary judgment is reviewed de novo. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2003). In the case of a traditional summary judgment, (1) the movant has the burden of showing that there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law; (2) in deciding whether there is a material fact issue precluding summary judgment, evidence favorable to the nonmovant will be taken as true; (3) every reasonable inference must be indulged in favor of the nonmovant; and (4) any doubts must also be resolved in favor of the nonmovant. D. Houston, Inc. v. Love, 92 S.W.3d 450, 454 (Tex. 2002). Once the movant has established a right to summary judgment, the nonmovant must respond to the motion for summary judgment by presenting to the trial court any issues that would defeat the movant s right to summary judgment. Failing to do so, the nonmovant may not later assign them as error on appeal. City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 679 (Tex. 1979); see also Tex. R. Civ. P. 166a(c). A motion for summary judgment must present the grounds upon which it is made, and it must stand or fall on these grounds alone. See Tex. R. Civ. P. 166a(c). Issues not expressly presented to the trial court by written motion or response to the motion for summary judgment cannot be considered by an appellate court as grounds for reversal. Clear Creek Basin Auth., 589 S.W.2d at 674-75; see also Tex. R. Civ. P. 166a(c). When the motion for summary judgment is based on several grounds, and the trial court does not state the basis for granting the motion, the summary judgment must be affirmed if any of the theories urged by the movant are meritorious. FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872-73 (Tex. 2001).

Summary Judgment

The Eversons contend the trial court erred in granting summary judgment, because the evidence in their response to Mineola s motion for summary judgment raised material fact issues on each of the various causes asserted.

Deceptive Trade Practices Act

The Eversons, in their last live pleading, contended that Mineola violated the Texas Deceptive Trade Practices Act (DTPA). See Tex. Bus. & Com. Code Ann. 17.41 17.63 (Vernon 2002 & Supp. 2005). In order to establish a claim under the DTPA, a plaintiff must establish each of the following elements:

1. The plaintiff is a consumer;

2. The defendant can be sued under the DTPA;

3. The defendant committed a false, misleading, or deceptive act or practice; and

4. That act or practice was a producing cause of the plaintiff s damages.

See id. 17.44, 17.45(4), 17.50(a); Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 649 (Tex. 1996). To qualify as a consumer under the DTPA, the Eversons must have sought or acquired goods or services by purchase or lease, and the goods or services must form the basis of the complaint. Cameron v. Terrell & Garrett, Inc., 618 S.W.2d 535, 539 (Tex. 1981).

The Eversons contend they are consumers because they purchased a good, the residence and acreage. However, Mineola merely loaned money to the Eversons. The Eversons bought the residence and acreage from the Caballeros. For the purposes of the DTPA, a mortgage is not a good or a service. Riverside Nat l Bank v. Lewis, 603 S.W.2d 169, 174-75 (Tex. 1980).

The Eversons also contend that they are consumers because they were forced by Mineola to purchase private mortgage insurance (PMI). The basis of their complaint, however, is not the purchase of PMI or the PMI, but Mineola s allegedly wrongful foreclosure. An activity related to a loan transaction is a service for DTPA purposes only if the activity at issue is, from the plaintiff s point of view, an objective of the transaction, not merely incidental to it. White v. Mellon Mortgage Co., 995 S.W.2d 795, 801 (Tex. App. Tyler 1999, no pet.). Neither their purchase of the property from the Caballeros nor the purchase of PMI form the basis of the Eversons complaint. The Eversons are not consumers and can make no claim under the DTPA. Mineola was entitled to summary judgment on the Eversons claim that Mineola violated the DTPA.

Negligence

The Eversons argue that Mineola was negligent in (1) failing to provide a copy of the appraisal to them and (2) failing to provide information to them of a workout program that they contend the PMI carrier offered.

In order to recover for negligence, the plaintiff must prove (1) the existence of a legal duty, (2) the breach of that duty, and (3) damages proximately caused by the breach. See Van Horn v. Chambers, 970 S.W.2d 542, 544 (Tex. 1998).

Mineola contends that it owed no duty to the Eversons to unilaterally provide them with a copy of the appraisal report or to provide information regarding a workout program that the Eversons maintain was offered by PMI. We agree. The Eversons signed a form that specifically stated the Eversons could obtain a copy of the appraisal if they submitted a written request for it. The Eversons never requested a copy. Absent such a request, Mineola had no contractual, statutory, or other legal obligation to furnish the Eversons with a copy of the appraisal.

Similarly, Mineola had no duty to the Eversons under its contract with its PMI insurer. The Eversons were not parties to the contract, which was for the sole benefit of Mineola. The Private Mortgage Insurance Disclosure Form, signed by the Eversons, stated that PMI protects lenders and others against financial loss when borrowers default. The PMI policy imposed no duty on Mineola to act as an intermediary between the PMI carrier and the Eversons. The Eversons negligence claims fail as a matter of law.

Trespass to Try Title

The Eversons contend that Mineola s foreclosure under its deed of trust was invalid because they could not remember signing the deed of trust investing the trustee with power to sell the property in the event of their default. Therefore, they claim, they have title to the property. The Eversons do not allege that they never signed the deed of trust, only that they did not sign it on November 24, the date shown on the instrument. The Eversons signatures on the deed of trust were notarized. A notary s certificate cannot be successfully impeached by the uncorroborated statements of a party attempting to deny its acknowledgment. See Birdwell v. Kidd, 240 S.W.2d 488, 490-91 (Tex. Civ. App. Texarkana 1951, no writ). Therefore, the Eversons uncorroborated testimony that they do not remember appearing before a notary is wholly insufficient to impeach the notary s acknowledgment.

The summary judgment record establishes as a matter of law that Mineola has title to the property as grantee in the trustee s deed executed after the trustee s sale pursuant to the deed of trust signed by the Eversons.

Breach of the Duty of Good Faith and Fair Dealing

The Eversons maintain that Mineola breached its duty of good faith and fair dealing to the Eversons by (1) failing to advise them that Mineola s board of directors raised concerns regarding the granting of the loan to them, (2) failing to advise them of the contents of the appraisal, and (3) failing to advise them of a loan workout available from Mineola s PMI insurer.

In Texas, the relationship between mortgagor and mortgagee does not give rise to a duty of good faith and fair dealing. Fed. Deposit Ins. Corp. v. Coleman, 795 S.W.2d 706, 709 (Tex. 1990); White, 995 S.W.2d at 800. The trial court correctly granted summary judgment for Mineola on the Eversons claims that Mineola breached a duty of good faith and fair dealing.

Unjust Enrichment

The Eversons claim that Mineola was unjustly enriched as a result of the foreclosure, because Mineola will receive the benefit of the PMI insurance proceeds from MGIC, the PMI carrier.

The summary judgment record establishes as a matter of law that any PMI payment to Mineola will not be a result of Mineola s fraud, duress, or the taking of undue advantage, but of the Eversons failure to pay their mortgage payments as they agreed.

The Eversons also claim that Mineola will be enriched by the Eversons $60,000 down payment. The record shows the Eversons agreed to make a down payment of $41,320.03. At closing, their down payment was actually $41,975.15, not $60,000 as alleged. Mineola bought the property at the foreclosure sale for exactly the existing balance on the note together with the fees and penalties provided in the agreement. The Eversons were not induced to make the down payment through the fraud, duress, or the taking of undue advantage by Mineola. Their loss, the record shows, was occasioned by their failure to make the monthly mortgage payments. Therefore, the Eversons claim of unjust enrichment fails as a matter of law.

Fraud

The elements of common law fraud are (1) that a material representation was made; (2) the representation was false; (3) when the representation was made, the speaker knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion; (4) the speaker made the representation with the intent that the other party should act upon it; (5) the party acted in reliance on the representation; and (6) the party thereby suffered injury. In Re Firstmerit Bank, N.A., 52 S.W.3d 749, 758 (Tex. 2001). The elements of statutory fraud are the same as common law fraud except that in the case of statutory fraud, it is not necessary to prove that the speaker acted with knowledge or recklessness. Brush v. Reata Oil & Gas Corp., 984 S.W.2d 720, 726 (Tex. App. Waco 1998, pet. denied); see also Tex. Bus. & Com. Code Ann. 27.01 (Vernon 2002).

It is difficult, if not impossible, to construe the Eversons allegations as stating a cause of action for fraud. They allege they were not given a copy of the bank s appraisal, which showed the property was unique in value for its location, perhaps because the residence was a log house. Despite the reservations of some members of its board of directors, Mineola loaned the purchase price and the money to build a horse barn. This, the Eversons argue, constituted a false representation by Mineola that the purchase was a good investment, which they relied on to their detriment.

The Eversons signed a statement informing them they had a right to obtain a copy of the appraisal by submitting a written request. They never asked for it. The appraisal placed the same value on the property as the undisputedly independent appraisal obtained by the First National Bank of Granbury where the Eversons had first applied for a loan. Judging from the price paid at the trustee s sale, the horse barn did add to the value of the land. The summary judgment record established that in buying the property, the Eversons did not rely on Mineola s appraisal or its willingness to make the loan. When Mineola advanced the money for the purchase price, the Eversons had already contracted to buy the property for a price only a few hundred dollars less than the two banks appraisals. The trial court did not err in granting summary judgment against the Eversons on their fraud claim.

Wrongful Foreclosure

The Eversons maintain Mineola s foreclosure was wrongful. The elements of a wrongful foreclosure claim are (1) a defect in the foreclosure sale proceedings, (2) a grossly inadequate selling price, and (3) a causal connection between the defect and the grossly inadequate selling price. Charter Nat l Bank Houston v. Stevens, 781 S.W.2d 368, 371 (Tex. App. Houston [14th Dist.] 1989, writ denied).

The Eversons maintain that foreclosure was wrongful because they did not receive notice of the foreclosure and because they do not remember signing the deed of trust.

A notice of foreclosure must be in writing and must be sent by certified mail to each debtor, who according to the records of the holder of the debt, is obligated to pay the debt. Tex. Prop. Code Ann. 51.002(b)(3). Service by certified mail is complete when the notice is deposited in the U.S. mail, postage prepaid, and addressed to the debtor at the debtor s last known address as shown by the records of the debt holder. Id. 51.002(e).

The summary judgment record shows that Mineola sent a notice of pending foreclosure and a notice of trustee s sale by certified mail, return receipt requested, and deposited both in the U.S. mail. The notice of trustee s sale was returned to Mineola after the sale was completed. The envelope bore a notation that three attempts had been made to deliver the notice, but that it was being returned to the sender as unclaimed. The evidence establishes as a matter of law that Mineola complied with the applicable notice requirements.

Although the Eversons do not remember signing the deed of trust, their signature on that instrument was notarized. They have produced no evidence sufficient to impeach the notary s certificate. The summary judgment establishes that there was no genuine issue of material fact on this cause of action and that the Eversons claim of wrongful foreclosure is totally without merit.

Conclusion

The summary judgment record shows that Mineola has established its right to prevail as a matter of law on each of the causes of action alleged by the Eversons. The trial court properly granted summary judgment. The Eversons sole issue is overruled. The judgment is affirmed.

BILL BASS

Justice

Opinion delivered July 31, 2006.

Panel consisted of Worthen, C.J., Griffith, J., and Bass, Retired Justice, Twelfth Court of Appeals, Tyler, sitting by assignment.

(PUBLISH)