                                                                                ACCEPTED
                                                                           01-14-00813-CV
                                                                 FIRST COURT OF APPEALS
                                                                         HOUSTON, TEXAS
                                                                      1/12/2015 2:34:43 PM
                                                                       CHRISTOPHER PRINE
                                                                                    CLERK

                   No. 01-14-00813-CV
   _________________________________________________
                                                           FILED IN
                                                    1st COURT OF APPEALS
                  In the                                HOUSTON, TEXAS
                                                    1/12/2015 2:34:43 PM

           First Court of Appeals                   CHRISTOPHER A. PRINE
                                                            Clerk


              Houston, Texas
   _________________________________________________

           STEVEN STEPTOE AND PATRICIA CARBALLO,
                                      Appellants,
                            v.

               JPMORGAN CHASE BANK, N.A.,
                                   Appellee.
   _________________________________________________

           On Appeal from the 61st District Court of
         Harris County, Texas, Cause No. 2013-32035
                       Hon. Al Bennett
   _________________________________________________

                 REPLY BRIEF OF APPELLANTS


                                 Robert Y. Petersen
                                 Texas Bar No. 24083655
                                 THE LANE LAW FIRM
                                 6200 Savoy, Suite 1150
                                 Houston, Texas 77036
                                 [Tel.] (713) 595-8200
                                 [Fax] (713) 595-8201
                                 Robert.Petersen@lanelaw.com

ATTORNEYS FOR APPELLANTS STEVEN STEPTOE AND PATRICIA CARBALLO




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                                             TABLE OF CONTENTS

Index of Authorities ................................................................................................... 3

Argument In Reply..................................................................................................... 4

Certificate of Compliance with Tex. R. App. P. 9 ..................................................... 7

Certificate of Service ................................................................................................. 7




                                                            2
                                            INDEX OF AUTHORITIES
CASES

Douglas v. FNCNB Tex. Nat. Bank, 979 F.2d 1128, 1130 (5th Cir. 1992) ................ 4

in re Albert Morris, 2012 Bankr. LEXIS 3656, *4-5 (Bankr. S.D. Tex. Aug.
       8, 2012) ............................................................................................................ 5

in re Erickson, 566 Fed.Appx. 281, 283 (5th Cir. 2014) ............................................ 4

Huston v. U.S. Bank National Association, et al., 2013 WL 6731988 *7
     (S.D. Tex. 2013) .............................................................................................. 5

Kaspar v. Keller, 466 S.W.2d 326, 329 (Tex.App.—Waco 1971, writ ref’d
     n.r.e.) ............................................................................................................ 5, 6

Steve Thomas v. Ocwen Loan Servicing, LLC et al, 2013 U.S. Dist. LEXIS
      630, *13 (N.D. Tex. Jan 3, 2013) .................................................................... 5


STATUTES AND RULES

Tex. Const. ART. XVI § 50(a)(6)(D) .................................................................... 4, 5

Tex. R. Civ. P. 735 ..................................................................................................... 5


SECONDARY SOURCES

Black’s Law Dictionary (Abridged Eighth Edition) .................................................. 5




                                                              3
                               ARGUMENT IN REPLY

       Appellee’s Response seeks to mischaracterize the law on this issue as clear

and unambiguous in favor of Appellee, yet tellingly, Appellee fails to cite to a

single case that is controlling or precedential in their favor.

       Furthermore,     Appellants     strenuously     object      to   Appellee’s   blatant

misattributing of the authority behind their argument. Appellee claims Appellant’s

argument is contrary to relevant legal authority from the Fifth Circuit and that this

exact argument was rejected by the Fifth Circuit; when in fact, the Fifth Circuit has

never rendered an opinion considering this specific issue.

       The Fifth Circuit case of Douglas v. NCNB Texas Nat’l Bank did not deal

with a home equity loan, which is a crucial factor in Appellants argument.1

       The Fifth Circuit case of Erickson, addressed whether a cause of action for

judicial foreclosure had to be authorized by the loan documents—a position which

the court rejected—which has no direct bearing on Appellants’ argument.2

       Appellants’ argument is that because a home equity lien requires “a court

order,”3 the lender has only one remedy available to it: to seek a court order

authorizing foreclosure. It is well settled law that home equity loans in Texas




1
  Douglas v. FNCNB Tex. Nat. Bank, 979 F.2d 1128 (5th Cir. 1992)
2
  In re Erickson, 566 Fed.Appx. 281, 283 (5th Cir. 2014)
3
  See Tex. Const. art XVI Section 50(a)(6)(D).

                                             4
require a judicial foreclosure i.e. a court order.4 A position Appellee never

addresses.

       Common sense dictates that a foreclosure requiring a judicial proceeding is a

“judicial foreclosure” whether or not it is performed as part of a constable’s sale or

through a trustee sale.5 Either way, it is occurring under the auspices of the Court’s

authority, hence it is a “judicial foreclosure.”

       To the extent a lender could elect either foreclosure through the power of

sale, or foreclosure through a sheriff’s or constable’s sale, the application of the

compulsory counterclaim rule has deprived the lender of nothing. See TEX. R. CIV.

P. 735.6 In other words, the entire justification for invoking the Kaspar rule no

longer applies (i.e. preventing the borrower from forcing the lender’s election of

remedies). Here, the lender has no extra-judicial option.7 Both options are judicial


4
  Pursuant to the Texas Constitution, a home equity lien may only be foreclosed judicially. See
TEX. CONST. ART XVI § 50(a)(6)(D)(“is secured by a lien that may be foreclosed upon only by a
court order”); see also Steve Thomas v. Ocwen Loan Servicing, LLC et al, 2013 U.S. Dist.
LEXIS 630, *13 (N.D. Tex. Jan 3, 2013)(“It is well settled law that home equity loans in Texas
must be foreclosed judicially.”); in re Albert Morris, 2012 Bankr. LEXIS 3656, *4-5 (Bankr.
S.D. Tex. Aug. 8, 2012)
5
  See Black’s Law Dictionary “Judicial Foreclosure”.
6
  In other words, assuming arguendo the elements of a compulsory counterclaim are met, the
lender remains free to choose either: an order authorizing foreclosure via trustee through the
power of sale granted by the Security Instrument or to seek an order granting a sheriff’s or
constable’s sale of the property.
7
  “We adopt the logic of the trial court that the mortgagor should not be permitted to destroy or
impair the mortgagee's contractual right to foreclosure under the power of sale by the simple
expedient of instituting a suit, whether groundless or meritorious, thereby compelling the
mortgagee to abandon the extra-judicial foreclosure which he had the right to elect, nullifying
his election, and permitting the mortgagor to control the option as to remedies.” Kaspar v.
Keller, 466 S.W.2d 326, 329 (Tex.App.—Waco 1971, writ ref’d n.r.e.)

                                               5
and require judicial approval. Furthermore, both options remain available

regardless of the borrower’s action. Therefore, the justification for the Kaspar rule

is no longer present.

      All the lender has to do is simply file a counterclaim with the court for

foreclosure seeking either a constable’s sale of trustee’s sale (an action they would

have to take regardless of the borrower’s actions). Instead, Appellee is seeking this

Court’s blessing to multiply litigation for the benefit of the attorneys and servicers

handling the mortgage loans.

      Ironically, the application of the Kaspar rule to home equity loans would

result in the lien with the most constitutional protections being the only lien on a

homestead that cannot be challenged for violating the Texas Constitution.

                                              Respectfully submitted,

                                              /s/ Robert Y. Petersen
                                              Robert “Chip” Lane
                                              State Bar No. 24046263
                                              Robert Y. Petersen
                                              State Bar No. 24083655
                                              THE LANE LAW FIRM
                                              6200 Savoy Drive, Suite 1150
                                              Houston, Texas 77036
                                              [Tel.] (713) 595-8200
                                              [Fax] (713) 595-8201
                                              Lane@lanelaw.com
                                              Robert.Petersen@lanelaw.com
                                              ATTORNEYS FOR
                                              STEVEN STEPTOE AND PATRICIA
                                              CARBALLO


                                          6
                          CERTIFICATE OF COMPLIANCE

       As required by Rule 9 of the Texas Rules of Appellate Procedure, I certify
that this brief does not exceed 15,000 words and that the aggregate of all briefs
filed by Appellants does not exceed 27,000 words.


                                             /s/ Robert Y. Petersen
                                             Robert Y. Petersen




                         CERTIFICATE OF SERVICE

       Pursuant to Rule 6.3 and 9.5(b), (d), and (e), of the Texas Rules of Appellate
Procedure, I certify that I have served this document on all other parties which are
listed below on January 12, 2015, as follows:

Crystal G. Roach
Barrett Daffin Frappier Turner & Engle, LLP
15000 Surveyor Blvd.
Addison, Texas 75001
972.386.5040
972.341.0734 (fax)

                                             /s/ Robert Y. Petersen
                                             Robert Y. Petersen




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