                                        In The

                                 Court of Appeals

                     Ninth District of Texas at Beaumont

                                __________________

                                NO. 09-18-00260-CV
                                __________________

   CFNA RECEIVABLES (TX) INC. F/K/A CITIFINANCIAL, INC., AND
           CITIFINANCIAL SERVICING, LLC, Appellants

                                           V.

                     CYNTHIA D. HOLLENBERG, Appellee

__________________________________________________________________

                On Appeal from the 284th District Court
                     Montgomery County, Texas
                   Trial Cause No. 16-04-03926-CV
__________________________________________________________________

                           MEMORANDUM OPINION

      Appellants CFNA Receivables (TX) Inc. (f/k/a CitiFinancial, Inc.) and

CitiFinancial Servicing, LLC (collectively “CitiFinancial”) appeal from a judgment

entered following a jury verdict in favor of appellee, Cynthia D. Hollenberg. In two

issues, appellants contend that (1) the trial court erred in holding that the home equity

extension of credit to Hollenberg violated article XVI, section 50(a)(6) of the Texas


                                           1
Constitution and (2) the home equity extension of credit it sought to foreclose is not

void because the original acceleration of the loan was abandoned. We affirm the trial

court’s judgment.

                         PROCEDURAL BACKGROUND

      On April 1, 2016, Hollenberg filed a lawsuit against CitiFinancial, in which

she asserted that she owns a home, and that as security to the lender, CitiFinancial,

she executed a note and home equity security instrument conveying a security

interest in the property to CitiFinancial. According to the Deed of Trust attached as

an exhibit to her petition, the original principal amount was $43,967.54, payable in

monthly installments of principal and interest. Hollenberg pleaded that she “last

defaulted on the loan due to financial hardship in 2009.”

      Hollenberg asserted that CitiFinancial “cannot engage in foreclosure because

the limitations period to foreclose has passed.” Hollenberg pleaded that (1) the note

matured on April 7, 2009, when CitiFinancial sent her a notice of default and intent

to accelerate, followed by a notice of acceleration, and (2) the statute of limitations

began to run on that date. Hollenberg contended that no foreclosure sale of the

property had taken place, and “[a]t no time were actions taken by the parties that

could be construed as a waiver or abandonment of acceleration of the [n]ote.”

Hollenberg sought a declaration of the parties’ rights, obligations, and interests as to

                                           2
the property, as well as a determination of the validity of the real property lien, and

she requested quiet title, “voiding all documents on file” reflecting any interest of

CitiFinancial in the property. Hollenberg also requested a permanent injunction to

prevent CitiFinancial from interfering with her possession.

      CitiFinancial Servicing, LLC (“CitiFinancial Servicing”) filed a general

denial and removed the case to federal court, but it was subsequently remanded to

the 284th District Court of Montgomery County upon Hollenberg’s motion.

CitiFinancial Servicing filed an amended answer, in which it raised several

affirmative defenses. CFNA Receivables (TX) Inc. f/k/a CitiFinancial, Inc. (“CFNA

Receivables”) filed a general denial and also raised the following as affirmative

defenses: (1) Hollenberg’s own acts or omissions caused her alleged damages, (2) a

third party’s acts or omissions caused Hollenberg’s alleged damages, (3)

Hollenberg’s claims “are barred by her own breach of contract[,]” (4) waiver,

consent, and agreement, (5) estoppel, (6) failure to mitigate, and (7) Hollenberg

failed to state a cause of action for which the court could grant relief. CitiFinancial

Servicing and CFNA Receivables later filed amended answers, in which they alleged

that Hollenberg’s claim is barred by the statute of limitations.

      On September 1, 2016, Hollenberg filed a sixty-day notice for CitiFinancial

to cure violations under Article XVI, section 50(a)(6) of the Texas Constitution. See

                                          3
Tex. Const. art. XVI, § 50(a)(6)(Q)(x). In said notice, Hollenberg asserted that the

home equity loan violated the Texas Constitution in four ways: (1) closing costs

exceeded three percent of the principal; (2) the required notice was signed on the

same day as the closing; (3) Hollenberg did not receive the final itemized disclosure

of the actual fees, points, interest, costs, and charges that would be charged at closing

at least one day before closing, but instead received “the final itemized HUD-1

Settlement Statement” on the day of closing; and (4) Hollenberg never received a

copy of the final loan application.

      In January 2017, Hollenberg filed an amended petition, in which she added

claims for violations of the Texas Constitution and breach of contract stemming from

those alleged constitutional violations. Hollenberg claimed that because

CitiFinancial failed to cure the constitutional violations, it had forfeited all principal

and interest on her loan, and she sought a declaratory judgment declaring the note

void due to the alleged constitutional violations. Hollenberg filed a motion for

traditional summary judgment, in which she contended that she was entitled to

summary judgment because she had proven both her limitations claim and her

constitutional violation claim. CitiFinancial filed a traditional motion for summary

judgment, in which it asserted that Hollenberg should take nothing and that

CitiFinancial is entitled to judicial foreclosure. In its motion for summary judgment,

                                            4
CitiFinancial contended that Hollenberg was not entitled to prevail on her limitations

claim against CitiFinancial, but it did not assert its affirmative defense that

limitations barred Hollenberg’s claim. The trial court denied both parties’ motions,

and the case proceeded to a jury trial.

                                    THE TRIAL

      Hollenberg testified that she and her husband took out the subject loan with

CitiFinancial on June 21, 2004, on property she had continuously owned as her

homestead since 1995. According to Hollenberg, she signed the deed of trust and

note at the closing of the loan. Hollenberg testified that she received a document

entitled “Housing and Urban Development Settlement Statement” on the date of the

closing, and the document was admitted into evidence as an exhibit. Hollenberg

agreed that the document summarizes the charges related to her loan. In addition,

Hollenberg agreed that the first time she saw the actual charges for her loan was on

the day of closing. According to Hollenberg, “everything we got was on the same

day.” When asked whether she ever received the final loan application, Hollenberg

testified, “I didn’t know there was such a thing.”

      Hollenberg’s husband died eight months after the loan closed, and he had been

the family’s sole source of income. Hollenberg testified that she defaulted on the

loan, and she received a letter from a law firm stating that she was in default,

                                          5
demanding a payment of $8400, and informing her that CitiFinancial could

accelerate the loan. On May 8, 2007, Hollenberg received notice that the loan had

been accelerated. In February 2009, Hollenberg received another letter stating that

her loan had been accelerated. Hollenberg also testified that sometime in 2014, she

received a letter informing her that if she paid a certain amount by a certain date, her

home would not go into foreclosure. Although foreclosure has “been attempted quite

a few times[,]” Hollenberg explained that she still owns the home. According to

Hollenberg, CitiFinancial never offered to cure the alleged constitutional violations.

Hollenberg rested at the end of her testimony.

      Kyle Ramey testified that he is “employed by Citimortgage, Incorporated[,]”

which “fall[s] under the same work umbrella[]” as CitiFinancial and CFNA. Ramey

explained that he is “assigned files that are in default for research and analyzing the

history for testimony.” According to Ramey, the Disclosure Statement Note and

Security Agreement lay out all the terms of Hollenberg’s loan, including the

principal balance of $43,967.54 and the first monthly payment, which included any

insurance premiums. The disclosure document reflects that Hollenberg signed it on

June 21, 2004.

      According to Ramey, Hollenberg incurred fees in the amount of $1280.61 for

the loan. Ramey testified regarding Hollenberg’s repayment history. Ramey

                                           6
explained that the first notice of acceleration was sent to Hollenberg on May 8, 2007.

Ramey testified that CitiFinancial halted the acceleration in July 2009 when it

received a payment, and that it is CitiFinancial’s practice to waive acceleration when

it receives funds showing a borrower’s willingness to pay. According to Ramey,

Hollenberg never cured the default after receiving the acceleration notice of July 11,

2014, and the foreclosure process is ongoing. CitiFinancial rested at the conclusion

of Ramey’s testimony.

      Question three of the charge asked whether Hollenberg received “a final

itemized disclosure of the actual fees, points, interest, costs[,] and charges that will

be charged at closing of the Loan at least one day before the closing of the Loan[,]”

and the jury answered, “No.” In its response to question six, the jury found that

CitiFinancial did not offer Hollenberg $1000 and the right to refinance the loan

within sixty days of receiving her notice of the constitutional violations. The jury

also found in its response to question ten that Hollenberg had not waived her right

to dispute the validity of the loan. The trial judge rendered judgment in favor of

Hollenberg, in which it declared Hollenberg the owner of the tract and decreed that

the security instrument filed by CitiFinancial “is void and of no force or effect now

and forever.” Additionally, the trial judge ordered that “any and all assignments,

substitution of trustee documents, and notices of sale . . . are also void and of no

                                           7
force or effect now and forever” and awarded damages to Hollenberg in the sum of

$46,370.90. Moreover, the trial court permanently enjoined CitiFinancial from

directly or indirectly engaging in foreclosure activity or disrupting Hollenberg’s

quiet and peaceful control, possession, and ownership of the subject property.

CitiFinancial filed a motion for new trial and then filed a notice of appeal.

                                     ANALYSIS

      In its first issue, CitiFinancial argues that the trial court erred in holding that

the home equity extension of credit violated the Texas Constitution because

“Hollenberg received a final itemized disclosure of the actual fees, points, interests,

costs[,] and charges at least one day before the closing of the loan.” According to

CitiFinancial, if the extension of credit to Hollenberg failed to comply with the

requirements of Article XVI, section 50(a)(6) of the Texas Constitution, it is “still

entitled to an equitable lien on the homestead based upon the doctrine of equitable

subrogation.”

      In 1998, the Texas Constitution was amended to allow a homeowner to

voluntarily encumber her homestead with a lien in return for an extension of credit,

i.e., a home equity loan. Williams v. Wachovia Mortg. Corp., 407 S.W.3d 391, 394

(Tex. App.—Dallas 2013, pet. denied). Article XVI, section 50(a)(6)(M)(ii) of the

Texas Constitution provides as follows:

                                           8
      The homestead . . . shall be, and is hereby protected from forced sale,
      for the payment of all debts except for: . . . (6) an extension of credit
      that . . . is closed not before . . . one business day after the date that the
      owner of the homestead receives a copy of the loan application . . . and
      a final itemized disclosure of the actual fees, points, interest, costs, and
      charges that will be charged at closing.

Tex. Const. art. XVI, § 50(a)(6)(M)(ii). “[S]ection 50 of the constitution protects the

homestead from foreclosure for the payment of debts subject to eight exceptions,

one of which covers only those home-equity loans that contain a litany of exacting

terms and conditions set forth in the constitution.” Garofolo v. Ocwen Loan

Servicing, L.L.C., 497 S.W.3d 474, 477 (Tex. 2016). Article XVI, section 50(a)(6)

“describes what a home-equity loan must look like if a lender wants the option to

foreclose on a homestead upon borrower default.” Id. at 478. The only constitutional

right created by section 50(a) is freedom from a forced sale to satisfy debts other

than the types of debts described in its exceptions. Id. “[A] lien securing a

constitutionally noncompliant home-equity loan is not valid before the defect is

cured.” Wood v. HSBC Bank USA, N.A., 505 S.W.3d 542, 547 (Tex. 2016).

      Section 50(a)(6)(M)(ii) protects a homestead from forced sale due to default

on a home equity loan unless, at least one business day before closing, the owner of

the homestead received a final itemized disclosure of the actual fees, points, interest,

costs, and charges that will be charged at closing. See Tex. Const. art. XVI, §

50(a)(6)(M)(ii). We must review the legal and factual sufficiency of the evidence
                                       9
supporting the jury’s finding that CitiFinancial failed to provide Hollenberg the

requisite notice. Evidence is legally sufficient to support a factfinder’s verdict if the

evidence would enable a reasonable and fair-minded factfinder to reach the verdict

under review. City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). When

reviewing evidence to determine whether it was legally sufficient to support the

verdict, we credit evidence that supports the verdict if a reasonable factfinder could

and disregard contrary evidence unless a reasonable factfinder could not. Kroger

Tex. Ltd. P’ship v. Suberu, 216 S.W.3d 788, 793 (Tex. 2006); see Am. Interstate Ins.

Co. v. Hinson, 172 S.W.3d 108, 114 (Tex. App.—Beaumont 2005, pet. denied). We

will sustain a legal sufficiency challenge “when, among other things, the evidence

offered to establish a vital fact does not exceed a scintilla.” Suberu, 216 S.W.3d at

793. “Evidence does not exceed a scintilla if it is ‘so weak as to do no more than

create a mere surmise or suspicion’ that the fact exists.” Id. (quoting Ford Motor Co.

v. Ridgway, 135 S.W.3d 598, 601 (Tex. 2004)).

      When reviewing evidence to determine whether it was factually sufficient to

support the verdict, we must weigh all the evidence, both for and against the finding.

Dow Chem. Co. v. Francis, 46 S.W.3d 237, 242 (Tex. 2001). In reviewing a factual

sufficiency challenge for which the appellee had the burden of proof, we “set aside

the verdict only if it is so contrary to the overwhelming weight of the evidence as to

                                           10
be clearly wrong and unjust.” Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986). As

long as the evidence falls within the zone of reasonable disagreement, we cannot

subject our judgment for that of the factfinder. City of Keller, 168 S.W.3d at 822.

      Hollenberg testified that she and her husband took out the loan on her

homestead on June 21, 2004. In addition, as discussed above, Hollenberg testified

that she received notice of the actual charges for her loan on the day of closing.

Documents introduced into evidence, including (1) the Deed of Trust and (2) the

Disclosure Statement, Note, and Security Agreement, reflect that the loan documents

were executed on June 21, 2004. CitiFinancial points to Hollenberg’s signature on

the Disclosure Statement, Note, and Security agreement, arguing that “[w]hen

Hollenberg signed the Note, she acknowledge[d] receipt of the Note, the Deed of

Trust[,] and accompanying information about the amount financed.” However,

Hollenberg’s signature by which she acknowledged receipt of the note, deed of trust,

and accompanying information is dated June 21, 2004.

      Hollenberg’s signature on the document does not contradict her testimony.

CitiFinancial did not point this Court to any evidence in the record that Hollenberg

received the required notice of the charges no later than one business day before the

closing of the loan, and our review of the record revealed none. Crediting favorable

evidence if reasonable jurors could, and disregarding contrary evidence unless

                                         11
reasonable jurors could not, we conclude that the evidence would enable reasonable

and fair-minded people to conclude that Hollenberg did not receive the required

notice; therefore, the evidence is legally sufficient. See City of Keller, 168 S.W.3d

at 827. Furthermore, considering and weighing all the evidence, we conclude that

the evidence is not so weak nor is the finding so against the great weight and

preponderance of the evidence as to be clearly wrong and unjust. See Francis, 46

S.W.3d at 242. Therefore, the evidence is factually sufficient.

      As part of its argument in issue one, CitiFinancial contends that even if the

loan failed to comply with the Texas Constitution, it is “still entitled to an equitable

lien on the homestead based upon the doctrine of equitable subrogation.” The record

reflects that CitiFinancial did not raise the issue of equitable subrogation in the trial

court. Equitable subrogation is an affirmative defense that must be properly pleaded

and cannot be raised for the first time on appeal. Wells Fargo Bank, N.A. v. Leath,

425 S.W.3d 525, 540 (Tex. App.—Dallas 2014, pet. denied). We conclude that

CitiFinancial has waived its equitable subrogation argument for purposes of appeal.

See id.

      CitiFinancial also asserts in its argument regarding issue one that

Hollenberg’s claims are barred by the applicable statute of limitations. As discussed

above, CitiFinancial pleaded in an amended answer that Hollenberg’s claims were

                                           12
barred by the statute of limitations. In its motion for summary judgment,

CitiFinancial argued against Hollenberg’s contention that limitations began to run

as to CitiFinancial’s claims against her when the note was accelerated in 2009,

thereby barring CitiFinancial’s foreclosure efforts. However, the record reflects that

CitiFinancial never submitted issues to the jury or obtained a ruling in the trial court

regarding when Hollenberg’s claims against CitiFinancial accrued. 1 “Limitations is

an affirmative defense and cannot be raised for the first time on appeal.” Naficy v.

Baker, 642 S.W.2d 282, 284 (Tex. App.—Houston [14th Dist.] 1982, writ ref’d

n.r.e.); see Tex. R. App. P. 33.1(a). We conclude that CitiFinancial has waived its

limitations argument for purposes of appeal. See Naficy, 642 S.W.2d at 284; see also

Tex. R. App. P. 33.1(a).

      Having concluded that the evidence was legally and factually sufficient to

support the jury’s finding that Hollenberg did not receive a final itemized disclosure

of the actual fees, points, interest, costs, and charges that would be charged at closing


      1
        The charge defined “waiver” as “an intentional surrender of a known right or
intentional conduct inconsistent with claiming the right.” Question seven of the
charge asked whether CitiFinancial waived one or more accelerations of the loan,
and the jury answered affirmatively as to three of the four dates included with the
question. Question ten of the charge asked the jury whether Hollenberg “waive[d]
her right, if any, to make claims against CitiFinancial disputing the validity of the
Home Equity Loan[,]” and the jury answered, “No[.]” CitiFinancial does not
specifically challenge the jury’s answer to questions seven or ten in its appellate
brief.
                                         13
at least one business day before the loan closed, we likewise conclude that the trial

court did not err by finding that the home equity loan violated article XVI, section

50(a)(6) of the Texas Constitution. We therefore overrule issue one.

      Furthermore, because we have concluded that the trial court did not err by

finding that the loan to Hollenberg violated the Texas Constitution, we need not

address issue two, in which CitiFinancial argues that because it abandoned previous

acceleration attempts, the four-year statute of limitations “did not begin to run again

until the latest acceleration effort [] on September 23, 2014.” Because of the

constitutional violation, Hollenberg’s home is protected from forced sale by

CitiFinancial. See Tex. Const. art. XVI, § 50(a)(6); Wood, 505 S.W.3d at 547;

Garofolo, 497 S.W.3d at 477-78. For all these reasons, we affirm the trial court’s

judgment.

      AFFIRMED.
                                                     _________________________
                                                        STEVE McKEITHEN
                                                            Chief Justice
Submitted on April 17, 2019
Opinion Delivered July 11, 2019

Before McKeithen, C.J., Kreger and Horton, JJ.




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