RHONDA SEXTON v. DEUTSCHE BANK TRUST COMPANY AMERICAS AS TRUSTEE FOR RESIDENTIAL ACCREDIT LOANS INC MORTGAGE ASSET BACKED PASS THROUGH CERTIFICATES SERIES 2006 14 (2025)

REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

Rhonda Sexton and Scott Scher sued Deutsche Bank and PHH Mortgage Corporation to prevent the foreclosure sale of their house. Dkt. 3. The defendants removed the case to this court based on diversity of the parties' citizenships, Dkt. 1, and moved for summary judgment, Dkt. 39. The plaintiffs filed an untimely response to the motion for summary judgment in which they also asked the court to strike the defendants' evidence. Dkt. 42. The court will recommend that the summary-judgment motion be granted and that the motion to strike be denied.

BACKGROUND

I. Factual Background and Litigation History

According to the complaint, Sexton and Scher have owned their house in Prosper, Texas, since 2006. In 2011, Deutsche Bank, the mortgage holder, and PHH, the servicing agent for Deutsche Bank, accelerated the note on the house. Then, in October 2022, Deutsche Bank notified Sexton and Scher of an impending foreclosure sale scheduled for December 2022. The complaint also mentions other lawsuits over the house that were filed in 2011, 2019, and 2021.

The defendants' motion for summary judgment fleshes out that history. According to it, Deutsche Bank first accelerated the note in January 2011, foreclosed on the house in May of that year, and purchased the house at the foreclosure sale. The same year, the plaintiffs sued Deutsche Bank and PHH's predecessor, nonsuited their claims, and then sued again in 2013. The district court dismissed those claims, and the Fifth Circuit affirmed. Scher v. Deutsche Bank Tr. Co., 634 F. App'x 435 (5th Cir. 2015).

In 2016, Deutsche Bank sued Sexton and Scher for forcible detainer and was awarded possession of the house. Sexton and Scher appealed but later dropped the appeal pursuant to a settlement agreement that allowed them to stay in the house subject to a modified loan agreement. The settlement agreement also included a rescission of the 2011 acceleration and foreclosure, which restored the note and deed of trust to their original effectiveness, and a release signed by Sexton and Scher of “any and all known and unknown claims [they] had at that time relating to the property and the loan.” Dkt. 39 at 2.

Sexton and Scher again defaulted on the loan. When Deutsche Bank accelerated the note in 2017, Sexton and Scher sued again. Deutsche Bank then rescinded the acceleration in 2019. The parties settled that lawsuit in 2020, and Sexton and Scher signed a second release.

Sexton and Scher sued Deutsche Bank another time in 2021, but that suit was dismissed by joint stipulation in 2022.

Then Sexton and Scher defaulted yet again, and Deutsche Bank accelerated the note in October 2022. Dkt. 43-1 at 60. It notified Sexton and Scher of the impending foreclosure in December 2022, precipitating this lawsuit.

II. Procedural History of This Case

Seeking declaratory and injunctive relief, Sexton and Scher asserted claims for wrongful foreclosure, negligence, “breach of mortgage,” and quiet title. Dkt. 3. They sued to stop the December 2022 foreclosure. The essence of their complaint is that the four-year statute of limitations for foreclosure actions ran in 2015 because Deutsche Bank first accelerated the note in 2011.

The defendants moved for summary judgment, arguing that the statute of limitations that began to run in 2011 cannot bar the 2022 foreclosure sale because Deutsche Bank foreclosed on the house in 2011. They also argue that Sexton and Scher have twice released all legal claims against them.

Sexton and Scher failed to timely respond to the defendants' motion. See Loc. R. CV-7(e) (21-day deadline). The court then ordered Sexton and Scher to respond, giving them a total of 40 days from service of the motion to respond. Dkt. 41. They missed that deadline by nine days, so the court could properly ignore the response and presume that Sexton and Scher “do[ ] not controvert the facts set out by [the defendants] and ha[ve] no evidence to offer in opposition to the motion.” Loc. R. CV-7(d)). The court will nevertheless address the arguments raised in the untimely response, which do not change the outcome.

LAW

A summary-judgment movant bears the initial burden of demonstrating, by reference to record evidence, if necessary, that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a), (c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A fact is material if, under the governing substantive law, it could affect the outcome of the suit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A factual issue is genuine if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id.

When the movant would bear the burden of proof at trial, it must come forward with evidence that establishes “beyond peradventure all of the essential elements of the claim or defense” it seeks to prove. Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986). But when the nonmovant would bear the burden of proof at trial, the movant may carry its initial summary-judgment burden by alleging that “the nonmovant has failed to establish an element essential to” its case. Austin v. Kroger Tex., L.P., 864 F.3d 326, 335 (5th Cir. 2017). The nonmovant may then avoid summary judgment by demonstrating the existence of a genuine issue of material fact. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). The court must resolve all reasonable doubts in the nonmovant's favor. Casey Enters., Inc. v. Am. Hardware Mut. Ins. Co., 655 F.2d 598, 602 (5th Cir. Unit B Sept. 1981).

DISCUSSION

I. Summary-Judgment Evidence

Sexton and Scher argue that the evidence attached to the defendants' summary-judgment motion should be struck because the defendants failed to timely disclose it. The court will decline that request.

Federal Rule of Civil Procedure 56(c)(2), which governs summary judgment, allows a party to object to material cited in a motion for summary judgment on the ground that the material “cannot be presented in a form that would be admissible in evidence.” And Rule 37(c)(1), which governs failure to comply with certain discovery obligations, provides that a party will not be allowed to use evidence in support of a motion if that evidence had to be disclosed under Rule 26(a) or (e) (which govern required disclosures and their supplementation) “unless the failure was substantially justified or is harmless.”

Sexton and Scher do not challenge the evidence's admissibility. They just assert that it was late. In particular, they say that the defendants did not produce any of the evidence attached to the summary-judgment motion until March 22, 2024.

The defendants disagree, arguing that most of the documents were part of their initial disclosures in December 2023. They add that the key evidence consists of documents signed by Sexton and Scher, so they could not have been surprised and likely already had copies. The defendants add that, even if Sexton and Scher first saw the documents when they were served with the defendants' motion, they had ample opportunity to respond to the motion and were therefore not unfairly prejudiced.

The court agrees with the defendants. Sexton and Scher cannot show surprise or other harm. Many of the documents reflect that they were mailed to Sexton and Scher, and some of them bear their signatures. The court is not persuaded that Sexton and Scher were unaware of the documents' contents before the defendants filed their summary-judgment motion. And even if they had never seen the documents before being served with the motion, Sexton and Scher still had 40 days to review them and file a response.

II. Statute of Limitations

Sexton and Scher's request for a declaration that the four-year limitations period that began to run in 2011 now bars the 2022 foreclosure fails for two alternative reasons. Deutsche Bank foreclosed on the property shortly after accelerating the note, well within the limitations period. But even if that were not true, the subsequent rescission and reacceleration of the note reset the limitations period.

A. Deutsche Bank foreclosed on the property well within four years of accelerating the note in 2011.

Sexton and Scher argue that the defendant's foreclosure is barred by the four-year statute of limitations, which began to run in 2011 when Deutsche Bank first accelerated the note. They further contend that the defendants did not take any action to enforce the note within the four years preceding the filing of this lawsuit and that the default did not occur during that time. The defendants argue that the four-year limitations period that began to run upon acceleration of the note in 2011 does not bar the 2022 foreclosure because Deutsche Bank foreclosed on the property in 2011. The court agrees with the defendants.

Under Texas law, a lienholder “must bring suit for ․ the foreclosure of a real property lien not later than four years after the day the cause of action accrues.” Tex. Civ. Prac. & Rem. Code § 16.035(a). “If a note or deed of trust secured by real property contains an optional acceleration clause,” the cause of action “accrues only when the holder actually exercises its option to accelerate.” Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 566 (Tex. 2001). “[W]hen a cause of action accrues is a question of law.” Id. at 567.

Although it has been more than four years since Deutsche Bank first accelerated the note, the limitations period that began to run in 2011 did not expire. The period terminated when Deutsche Bank foreclosed on the house a few months later. The bank did all that was required of it during that limitations period.

B. The 2022 reacceleration following the 2016 rescission restarted the limitations clock.

In Moore v. Wells Fargo Bank, N.A., the Texas Supreme Court discussed the effect of a lienholder's rescission of an acceleration on the four-year limitations period. 685 S.W.3d 843, 846 (2024). The court noted that, by abandoning or rescinding the acceleration of the note, the lienholder could “restore the original maturity date[ ] and reset the limitations period.” Id. At that point, the lienholder's reacceleration of the note would open a new limitations period. See id. at 847–48; see also Moore v. Wells Fargo Bank, N.A., No. 22-20138, 2024 WL 1156533, at *1 (5th Cir. Mar. 18, 2024) (explaining that, “under Texas law, the lenders' rescission and reacceleration notices did reset the statute of limitations period for foreclosure”).

That is what happened here. Specifically, when Deutsche Bank foreclosed in 2011, the four-year period triggered by the 2011 acceleration stopped running and never expired. See supra Part II.A. When the parties agreed to a loan modification in 2016, Deutsche Bank rescinded the 2011 acceleration. See Tex. Civ. Prac. & Rem. Code § 16.038(a) (allowing a lienholder to rescind an acceleration before the expiration of the limitations period “as if no acceleration had occurred”); Boren v. U.S. Nat. Bank Ass'n, 807 F.3d 99, 105 (5th Cir. 2015) (explaining that Texas law allows a lienholder to “unilaterally abandon acceleration after its exercise, so long[ ] as the borrower neither objects to abandonment nor has detrimentally relied on the acceleration”); Ankus, L.L.C. v. U.S. Bank Tr., Nat'l Ass'n, No. 01-18-00777-CV, 2020 WL 4118025, at *3 (Tex. App.—Houston [1st Dist.] July 21, 2020, pet. denied) (explaining that a lender can abandon an acceleration by agreement). The plaintiffs were then back “in the same position under the original terms of the lien,” Moore, 685 S.W.3d at 848; see Dkt. 39-1 at 94–101. And after Deutsche Bank reaccelerated the note in 2022, a new four-year limitations period began. The 2022 foreclosure proceedings were initiated within that period.

III. Releases

The failure of Sexton and Scher's limitations argument is reason enough to grant summary judgment for the defendants. The releases, however, also support that result.

As part of the 2016 settlement, Sexton and Scher agreed that they,

for and on behalf of themselves and ․ any and all other persons who could claim through them (collectively, the “Releasors”) hereby unconditionally, irrevocably, forever and fully release[,] acquit, and forever discharge Ocwen [a prior servicer], Trustee [i.e., Deutsche Bank], [and] Ally [another prior servicer] ․ , and its/their ․ successors [and] assigns ․ (the “Releasees”), of and from any and all claims, demands, actions, causes of action, suits, liens, debts, obligations, promises, agreements, costs, damages, liabilities, and judgments of any kind, nature, or amount whether in law or equity, whether known or unknown, anticipated or unanticipated, liquidated or unliquidated ․ which were or could have been raised in, arise out of, relate to, or in any way, directly or indirectly, involve the Action, the Property, the Note, the Mortgage, or the Loan․ It is the intention and effect of this release to discharge all claims that the Releasors have against the Releasees up until and including the date of the execution of this Agreement.

Dkt. 39-1 at 38–39. Then, in 2020, they signed a second release that contains substantially the same language but specifically releases claims against PHH, one of the defendants in this case. Dkt. 39-1 at 71. Each release agreement bears Sexton's and Scher's signatures.

The defendants argue that the plaintiffs' claims are covered by the release agreements because the claims “arise out of” or “relate to” “the Property, the Note, the Mortgage, or the Loan” and they could have been brought at the time of either the 2016 or the 2020 release.

Sexton and Scher argue that the defendants should not be permitted to raise the releases in support of an affirmative defense because they did not plead that defense in their answer. They also argue that a waiver or release of the statute of limitations must be clear and specific, and the agreements are not.

Once again, the defendants have the better argument. Because they raised it at a pragmatically sufficient time and the plaintiffs were not prejudiced, the defendants did not waive their release defense. And the requirement that waiver of a limitations defense be accomplished by clear and specific language does not apply to the post-accrual releases of Sexton and Scher's claims.

A. The defendants did not waive their defense of release.

Citing Rule 8(c), Sexton and Scher argue that the defendants should be barred from raising a release defense because they should have pled that defense in their first answer or other responsive pleading. The defendants argue that the affirmative defense of release may be raised for the first time in a summary-judgment motion as long as the nonmovant is not prejudiced.

Rule 8(c) provides that, “[i]n responding to a pleading, a party must affirmatively state any avoidance or affirmative defense, including: ․ release.” Failure to comply with that rule may result in waiver. Motion Med. Techs., L.L.C. v. ThermoTek, Inc., 875 F.3d 765, 771 (5th Cir. 2017). But an affirmative defense not included in an initial pleading will not be waived if “(1) the defendant raised the affirmative defense at a pragmatically sufficient time, and (2) the plaintiff was not prejudiced in its ability to respond.” Id. (quotation marks omitted). The summary-judgment stage is a pragmatically sufficient time to raise an affirmative defense. Id. at 772 (collecting cases). And the plaintiffs do not argue that they were prejudiced by the defendants raising their affirmative defense in a motion for summary judgment. After all, they had nearly twice the usual amount of time to respond to the motion, given the court's leniency. The court will not treat the defendants' affirmative defense as waived.

B. Texas law allows for releases like the ones that Sexton and Scher signed.

Citing Simpson v. McDonald, 179 S.W.2d 239 (Tex. 1944), Sexton and Scher argue that any agreement to release a statute-of-limitations defense must be “specific and clear as to the waiver of the defense.” Dkt. 42 at 4. The defendants argue that Simpson does not apply to a release of claims that have already accrued and that Texas law approves broad-form releases like those at issue here.

Sexton and Scher's reliance on Simpson is misplaced. In that case, the Texas Supreme Court held that a pre-dispute agreement to indefinitely suspend a limitations period was contrary to public policy. 179 S.W.2d at 243. More recently, the same court stated that “[b]lanket pre-dispute waivers of all statutes of limitation are unenforceable.” Godoy v. Wells Fargo Bank, N.A., 575 S.W.3d 531, 538 (Tex. 2019) (contrasting such waivers with “waivers of a particular limitations period for a defined and reasonable amount of time,” which “may be enforced”).

Those cases do not support the plaintiffs' argument because they address pre-dispute waivers—agreements that would prevent signatories from raising limitations defenses to claims that have not yet accrued. The agreements at issue here do not suggest that Sexton and Scher agreed in advance to waive an unaccrued claim. Rather, they agreed, in 2016 and then again in 2020, to release any and all claims that had accrued “up until and including the date of” the agreement. Dkt. 39-1 at 38–39, 71. That is permissible under Texas law. See, e.g., Keck, Mahin & Cate v. Nat'l Union Fire Ins. Co. of Pittsburgh, 20 S.W.3d 692, 698 (Tex. 2000). Indeed, “[t]here is no logic in prohibiting people from settling existing claims.” Mem'l Med. Ctr. of E. Tex. v. Keszler, 943 S.W.2d 433, 435 (Tex. 1997).

C. Sexton and Scher released the claims at issue here.

Based on their argument that the four-year limitations period expired in 2015 because Deutsche Bank accelerated the note in 2011, Sexton and Scher seek a declaration that they have “unencumbered legal title to the subject property” because “the Note and deed of trust are now void.” Dkt. 3 at 3. That claim falls squarely within the language of the 2016 and 2020 releases.

As already noted, the releases comprehensively covered “any and all claims, demands, actions, causes of action, suits, liens, debts, obligations, promises, agreements, costs, damages, liabilities, and judgments of any kind, nature, or amount.” A request for declaratory judgment falls within that broad release as either an “action,” a “cause of action,” or a “suit.” See action, Black's Law Dictionary (10th ed. 2014) (“A civil or criminal judicial proceeding”); cause of action, id. (“A group of operative facts giving rise to one or more bases for suing; a factual situation that entitles one person to obtain a remedy in court from another person”); suit, id. (“Any proceeding by a party or parties against another in a court of law”). Further, a suit for declaratory judgment that Sexton and Scher's title to the property is unencumbered also “relate[s] to ․ the Property,” such that it is covered by the releases. Dkt. 39-1 at 38, 71. And because Sexton and Scher argue that their title is unencumbered because the statute of limitations ran in 2015, their claim is one that accrued “up until and including the date of the execution of” the 2016 and the 2020 releases. Id. at 38–39, 71.

In short, the plaintiffs released their present claims. The defendants are entitled to summary judgment on that basis, too.

RECOMMENDATION

It is RECOMMENDED that the motion for summary judgment, Dkt. 39, be GRANTED and the motion to strike, Dkt. 42, be DENIED.

* * *

Within 14 days after service of this report, any party may serve and file written objections to the findings and recommendations of the magistrate judge. 28 U.S.C. § 636(b)(1)(C).

A party is entitled to a de novo review by the district court of the findings and conclusions contained in this report only if specific objections are made. Id. § 636(b)(1). Failure to timely file written objections to any proposed findings, conclusions, and recommendations contained in this report will bar an aggrieved party from appellate review of those factual findings and legal conclusions accepted by the district court, except on grounds of plain error, provided that the party has been served with notice that such consequences will result from a failure to object. Id.; Thomas v. Arn, 474 U.S. 140, 155 (1985); Douglass v. United Servs. Auto Ass'n, 79 F.3d 1415, 1417 (5th Cir. 1996) (en banc), superseded by statute on other grounds; 28 U.S.C. § 636(b)(1) (extending the time to file objections from 10 to 14 days).

So ORDERED and SIGNED this 17th day of February, 2025.

Bill Davis United States Magistrate Judge