Thursday, March 23, 2017

Res judicata for claims following bankruptcy dismissal without discharge

Res judicata and you

Today I'm discussing in brief a fun topic about bankruptcy I've covered in part elsewhere. People file for bankruptcy and try to get a bunch of claims paid off at a discount or otherwise re-termed to help stay financially afloat. Sometimes, though, for whatever reason, the bankruptcy plans they make fall apart and then the bankruptcy case gets dismissed. Then the debtor tries to attack the claims in ways they never tried to during the bankruptcy case. This is a no-no; such arguments are barred by res judicata, which is basically a judicial doctrine that says "If you had the chance to make this argument before about the same things you're arguing about now and you didn't, tough luck, I don't want to hear it."

For my clients, this usually works out like so:
1) Creditor loans money to Debtor.
2) Debtor files.
3) Creditor's claim is treated into the plan.
4) The plan is confirmed.
5) Debtor's bankruptcy is dismissed without discharge.
6) Creditor files suit on claim for balance.
7) Debtor now says "lol you can't because I paid that a long time ago, before bankruptcy" or something like that (lol you can't because unconscionable at formation, etc etc)
8) Creditor invokes res judicata.
9) Creditor and Debtor become friends.

This issue is pernicious for the pro rata distributees in the bankruptcy case because then there could be a bit of a fact fight over whether any payments were ever made to their fund before the dismissal. Trustees apply payments usually as follows: secured, priority, then the pro rata. You'd have to ask the trustee or check the payment history in the file off NDC to see what the story is on the payment breakdown if your client's records don't say anything about credits through the bankruptcy payment process.

Res judicata breaks down in the Fifth Circuit like this:
"(1) [T]he parties must be identical in both suits; (2) the prior judgment must have been rendered by a court of competent jurisdiction; (3) there must have been a final judgment on the merits; and (4) the same cause of action must be involved in both cases." - Res Judicata Revisited by the Fifth Circuit, ABI, June 2000.

There are three big federal cases I can think of (haven't followed up on them, so cite with caution) that essentially condition the res judicata doctrine at various phases of the bankruptcy process when claims were treated in the plan. In re Baudoin, No. 91-5091 at *11-. (5th Cir. Jan. 6, 1993) (post-discharge debtors barred by res judicata from bringing lender liability action); see also Siegel v. Fed. Home Loan Mortg. Corp., No. 97-55174 (9th Cir. May 5, 1998) (where no objections to contract proof of claim raised, res judicata applies to post-discharge suit regarding breach of contract claims by the debtor). You'll note that both of these cases involve post-discharge arguments. The rationale kicks in at plan confirmation, however. See Sure-Snap Corp. v. State Street Bank and Trust Co., 948 F.2d 869, 870 (2d. Cir. 1991) (cited approvedly in Baudoin); see also Matter of Applewood Chair Co., 203 F.3d 914 (5th Cir. 2000) (confirmation res judicata). Because bankruptcy dismissal essentially resets parties to their pre-filing positions, then the creditor's claim becomes something viable with an additional immunity against arguments that could have been raised during bankruptcy. The strength of the res judicata doctrine would hold (IMHO) that claims, even objected claims, once confirmed are stronger claims after the bankruptcy dismissal. The Fifth Circuit's transactional test for a determination of res judicata does not care about the legal theories for recovery, only the essential facts viable at the time of the original judgment / order / decree. Note that these holdings mainly discuss counterclaims brought against creditors for alleged misbehaviors. The doctrine bans claims and defenses when the transactional test shows the same nuclear of operative facts at issue.

This is important. I read these holdings as saying that if Dougie says to you, "Hey Cindy, I paid that debt before my bankruptcy," but Dougie still made provision in the plan for the debt, he cannot now make up this defense of payment. It has been held that the logical results of res judicata do not even require that an adversary proceeding occur pre-confirmation. Interesting, right? Assuming a claim could sneak by the trustee and the debtor's counsel, then a creditor is going to be entitled to a claim, even if it was already paid, unless some equitable showing can be made to get around res judicata. This is just me bullshitting. I don't know. But a similar issue is involved in the Supreme Court case heard recently, where a debtor basically argued that a time-barred debt which was not objected to and got into the plan is a violation of the FDCPA. I have misgivings about such an argument, but it's awaiting decision.

Food for thought: I am 100% certain though that a creditor could not sanely invoke res judicata for a limitations defense after the bankruptcy dismissal. Assuming the creditor files outside the limitations period for the claim which was confirmed in the plan, a debtor should be able to fairly invoke this defense without the res judicata argument being a problem, because the "fact" of the timeliness of the claim under applicable law was not a "fact" involved in the transaction when the claim was presented to the bankruptcy court for confirmation in the plan. The same for service issues which may be involved in the new lawsuit after bankruptcy dismissal; why would a debtor be res judicata barred on the question of a court's personal jurisdiction where service was defective? It wouldn't fly, so don't try. What up.

Tuesday, March 21, 2017

UT Law 2013's Best Movie Reviewer Takes on Get Out (good), Logan (good) and Beauty and the Beast (sucks)

2017 may be my most White pop-friendly year. I wrote in Obama for a third term, I'm into Florence and the Machine, I only listen to the top ten podcasts, and I watch movies the public likes. I'll start with the shittiest one, Beauty and the Queef, and move on to Logan and then Get Out.

Beauty and the Beast
NEWS FLASH! The curse said if the last petal falls before Belle returns the love of the Beast, he's cursed and so is everyone in the castle. In this movie, the Beast dies, the petal falls, Belle says her thing. That's not what happened in the source material. This movie ends with everyone being turned into objects, Belle kills herself and the Beast's corpse rots in the rain because that's what the writers told us would happen. It would be insane for the writers to lie about something so simple as the main plot conceit, right?

God this movie sucks. It's a soulless scene for scene reanimation of a fairly perfect and inoffensive cartoon from 1991. It's dedicated to a songwriter for the original cartoon who croaked from AIDS, which makes the pre-release PR misinformation campaign waged by Disney about a "gay character" being proudly exhibited in this new adaptation of the cartoon more than a little suspicious. Luckily, Disney's aware that you can be gay for purposes of their silver screen as long as it's not too gay. You know, like actually gay.

I played "spot the gay moment" throughout the entire movie and was stumped, since the thing was gay from end to end. If Disney meant "spot the homosexual moment," I failed to find it.

In Beauty and the Beast, LeFou pines for his taller friend Gaston, who's a retard who can be hypnotized by memories of some French war, including all the widows he presumably fucked his way through. In the bro song where LeFou sings up Gaston's praises, there's a bit where he hugs Gaston from behind (VERY SEXUAL CUZ GAYS COME FROM BEHIND), and then he asks "too much" and Gaston says "too much" and then they sing some more. He's a gay illiterate it turns out! Can't even spell his buddy's name! Oh, LeFou! You make me laugh.

Apparently the movie ends with a SUPER GAY SCENE where LeFou is dancing with a bunch of people in the Beast's ballroom and ends up passing partners into the hands of a man. That's the moment Disney apparently thought was his gay coming out moment or something.

Absolutely none of the rest of the plot matters. Disney is just checking off liberal boxes. Feminist scene? Check - Belle teaches a girl to read in 5 minutes while her laundry tumbles (but never does another feminist thing the entire movie.) Blacks? Check - tons of them! Lots and lots of single Black dudes, all the Black girls are fucking White guys and no Blacks fuck each other! Hell yeah! Historically accurate race relations lol! Gays? Check - because Disney said so, as otherwise it would require a sexualist frame of reference by which the audience interprets certain behaviors as gay (you know, saying stuff like "it's never gonna happen ladies" to bar wenches pining for Gaston, talking to a mirror after Gaston is done talking to the mirror, a fucking teapot saying that LeFou is too good for Gaston although it's never met him and has no idea who Gaston is, etc etc etc).

Can't wait for the "first openly trans character" in a Disney movie and how they'll fumble that shit. I imagine some kid trying to talk to his single mom about how he's feeling really weird lately when he's at a high tech school for nerds, and it happens only when he goes to the bathroom because that's where sex and gender roles are well defined by how one takes a piss in front of other people, and his clothes are beginning to chafe at his spirit, so he uses his education to create a badass power trans suit for himself so he can be a hero while comfortable in his gender, and the only tell Disney lets you in on to understand that the suit is to accommodate his trans is they use those male / female key symbols and just swap the arrow for the cross or vice versa and you just have to "get" that he's trans because it'd be super duper transphobic to make him do something like talk about being trans in a Disney movie rather than simply being a caricature of a trans.

There's a retarded technology in the movie where the Beast can literally teleport anywhere he wants to in time and the world and bring things back from that place. No one knows why. It's used for a throwaway scene where Belle finds out her origins (plague baby) and takes a memento from the past. I don't even want to think about the stupidity of this scene, as it's never used again in the whole movie but is literally a world-changing magical item. Wasn't the mirror enough?

Beauty and the Beast sucks. It's a force-fed film that tries to pack nostalgia into a movie with extra scenes and plot that is completely abandoned. Random elements are tossed in: what if the townsfolk forgot they had a prince? how would they self-govern? what if spouses forgot they were married to people in the castle? how funny would that be if like people got married again and that was explored for comedic effect? what if it's randomly winter in the castle but it's not anywhere else, for no good reason? how would anyone find the Beast if the path to the Beast was magically blocked off again?

People fucking laughed and cheered and clapped in this movie. I hope they all got in car wrecks.

Logan
Logan's cool. Opens up with Wolverine killing Mexicans, and ends with him dying of adamantium cancer. I thought it was pretty retarded to make the villain a Wolverine clone, since it was already established in one of the Wolverine movies that the most badass hero was Deadpool and the only way around dying to him was to beat him as both Sabertooth and Wolverine. Then they resurrected Deadpool with Ryan Reynolds again and it's a hit! Nothing matters as long as profits can be made on contradictory roles and stories! Pluralities!

Professor X is good in this movie. Foul-mouthed Alzheimers guy. Wolverine cusses at a kid. The kid is the worst bit. She kills gobs of people and apparently would have also killed some store clerk for talking to her, because she "doesn't understand English" and then this is tossed out the window when it's revealed she knows Spanish and English. Yawn.

The movie is done in an episodic fashion. It's built as a Western, like True Grit. Man takes girl somewhere, keeps her safe from nature and violent forces.

There are dumb scenes. It's explained early on that Professor X literally killed X-Men with his brain when he got Alzheimers because his seizures make him kill people by freezing them in place with psychic resonance. In the first 8 minutes he almost kills a mutant friend of his with a seizure (his words, not mine), and then he has an intentional episode where he uses his mind to freeze assailants in their place. This lasts for fifteen minutes as Wolverine crawls from his car through a casino lobby and then has to wait for the elevator to come down and then take him up. No one dies. What the fuck.

Wolverine and the little girl are unstoppable murder machines and could have eviscerated every single person challenging them at the start of the movie. They don't. Yawn.

The little girl is apparently a custom built bioweapon who can only be located by using another mutant whose trait is finding mutants. Versus, say, a GPS chip in her? Convincing.

Little things. Good movie. Too many kids in it.

Get Out
Get Out rules. Culminates in sweet Black on White violence following long episodes of White racism, predicated on a reverse racism assumption that the lived experience of the Black man in White America is to fear and expect to be talked down to, objectified and treated like chattel. There's even an auction scene for him! Awww.

I'm talking shit, but it's a very smart movie. Surprising as it comes from one half of the guys who did this. Blah blah blah Black guy is dating a White girl (PROBLEMATIC), goes to visit them in the Hamptons or something, gets bombarded with racism coded in weird remarks while his White girlfriend doubts him at every chance, leading him to doubt that what he's rightly viewing as racist as actually being racist. The movie obviously has to set up some group for its own racism, so it picks the Whites (and thank God, the Asians): Whites think like this, and talk like this. Blacks can't be like Whites, and to even try is to deny your identity. Fist bumps are Black: handshakes are White! Why ever would two Black men shake hands except after having assumed White values? It's a bit heavyhanded when it introduces other Blacks into the plot to make the "point" of the body snatching storyline, as it's otherwise excellently subtle. "Woulda voted Obama third term" "hey you ever been in any street fights you beast" - male buck deer are metaphors for Black men, dead does are metaphors for Black women, struck, hit and forgotten; the White girlfriend's milk and Fruit Loops don't mix (which honestly makes no sense, since she fucks Black guys, her White grandparents occupy Black bodies and in time presumably the whole family will end up in Black bodies; since the White values never go away, why would they not "mix" now? Isn't that the whole fucking point - doddy old Whites get young Black bodies for reaming their old ass White wives?).

The worst bit about the movie is the hypnosis plotline. Somehow a magic technique exists by which Black men are lulled into sleep by a grandma stirring tea and then they lose all sense of identity, go instantly to sleep and can't remember a lot of stuff after. Our hero somehow escapes an inescapable situation involving hypnosis and ends up surviving the horror movie, a subversion of the Black guy always dies first trope.

The movie's good. It's not "funny" except in reviewing the development of the imagery and the plotpoints. There's a useless Black supporting comedic relief character who just says dumb shit like "Dem niggas went over to that cannibal's house and he fucked they heads!" (Which led me to this thought: if the body swapping ever had to go into a White body with a Black brain, no Black would ever be fooled as they'd immediately know Whites don't talk like that; but the "wigga" in the movie fooled me into thinking that this was the true plot - everyone's brains and bodies were being swapped, so the Whites with Black brains and Black vocabulary would be marginalized and forgotten. Oh, well.)


Tuesday, February 28, 2017

Scripture says

Sometimes I remember the dumb shit I was asked to study as a kid in order to become a better Christian, and while I hold no grudges against this use of my time (what else would I do besides play videogames and jack off if not study something, even the Bible?), I was always wary of a certain predilection in those predisposed to believe.

A central tenet of Christian thinking is that the Bible you can buy in any old bookstore for 40 bucks or so (lol), including some of the shittiest Bibles (original pairing of words there, Google me), is somehow a 100% totally true, persistent divinely transmitted message from the Godhead. It is error free and divinely authored (because the writer of 2 Timothy said so).

I won't dig into the question of errors, because it's a boring conversation for college atheists to have when not jizzing over Daniel Dennett apocrypha about bugs. I'm more interested in the question of the source Christians commonly use to make this claim of divine authorship. The logic goes: the Bible is God's Word given to men, who wrote their separate texts across time under inspiration from God, to produce a coherent message of the history of the world and the salvation of men from destruction of the immortal soul, and because God is good and true and not at all Satan who is a liar (see peculiar claim "father of lies" ascribed to Jesus in John 8:44, and Paul in 2 Cor. 11:14, claiming Satan somehow clothes himself as an angel of light), therefore every single word we claim to have been written, preserved and translated unto this very day as the cohesive BIBLE, the Old Testament and the New, is from God.

The trick is that retarded laymen who speak only English (like me) read a book in English and say "well it says right here! ALL SCRIPTURE IS GOD-BREATHED (2 Tim. 3:16)!"

I think this all turns on the common conception of "Scripture" as meaning and referring to the entire Bible, an obvious misnomer if you consider its mere compilation history.

The first time we see the term "Scriptures" is in Daniel 9, when he claims that he interpreted "the books" of Jeremiah to portend that Jerusalem would suffer 70 years of desolation in servitude to the king of Babylon. (Interestingly, Daniel 1:21 says Daniel lived through the first year of King Cyrus, meaning the whole text was compiled after he died, and probably written by scribes who copied his statements down. Cyrus ordered the return of the Jews to Jerusalem and away from Babylonian captivity, you are free to be cynical as to when Daniel made his proclamation - 69 years into captivity? Some people estimate the period of the first exile of Jews by Nebuchadnezzar to be about 70 years.) This interpretation in turn derived from Jeremiah 29:10. To be fair, the passage in Jeremiah says that God would return his people to Jerusalem "from all the nations and places where I have banished you." Jer. 29:14. Did that happen? Who knows. People find prophecy where they like it.

So, in English, somehow we get a verse discussing a very specific set of books of prophecies (חֲזוֺן נַחוּם ׳ס in Hebrew) to refer generally to a nice, capital S "Scriptures."

This in turn is the kind of problematic editorialization that results in mouthbreathers flipping quickly to 2 Timothy, cross-indexing the term "Scriptures" from "books of prophecies" in Daniel and concluding God must have, through the writer of 2 Timothy, closed an infinitely recursive loop, by which the New Testament is, through English-translated Greek linked forever with English-translated Hebrew. But, what word does the writer of 2 Timothy use?

Graphe! γραφὴ 
This term is used in the nominative feminine singular noun; i.e. the subject of the clause in question.

The Greek writers of the New Testament used this particular noun in a specialized sense, to refer to the words of the Old Testament. Compare 1 Peter 2:6 to Isaiah 28:16 - Peter writes of the "stone in Zion" as written in Scripture and that who believes in "him" (the Stone) shall not die; Isaiah is more objective, and simply refers to the stone as an "it" and not a "him" - the gendering is intentional for the New Testament to help the apologists testify to the salvation in Christ. For another example, compare James 2:23 to Genesis 15:6 and Isaiah 41:8 - the writer of James is discussing in the passage including James 2:23 the acts of Abraham, and how his offering of his son Isaac as a sacrifice to God was credited to him as an act of faith and righteousness and earned him the friendship of God; this passage of the attempted sacrifice of Isaac is oft-discussed and delineated in Genesis 22; Isaiah quotes God as referring to Abraham as his current friend; 2 Chronicles 20:7 also refers to the writers' understanding of Abraham as God's "friend forever."

Okay, so it's pretty clear that the use of the term graphe in the New Testament is almost always used (too lazy to confirm it is always used) in the context of a discussion of the prophets and Torah (probably also some of the Mosaic commandments, but whatever, too lazy to confirm).

Thus, the translation by the English writers of the Greek term graphe makes sense to turn it into a word for the holy Hebrew texts. What it does not fucking do, and never can fucking do, and never will fucking do, is magically turn the texts of the New Testament into the Scripture. It's temporally impossible for the New Testament to also be Scripture; it is linguistically absurd to assume that the contemporary Christians who wrote the New Testament and founded the early churches used the term graphe in this bizarro sense. However, every fucking time I look into the topic of "divine authorship" I am dickslapped by 2 Timothy 3:16. "WELL IT SAYS IT RIGHT HURR IN PLAIN INGLISH SO IT MUST BE TRUE."




God has a special place in hell for Martin Luther and Tyndale for giving das Volk the Bible. No more harm has been done to the world than to let the everyman think his private codes mirror the will of God, based on his half-assed reading of the books selected as our canon centuries beforehand. No Berean Jews, these neighbors of ours - the uninitiated, the illiterate, the too-busy-to-learn-theology-and-languages-but-goddamn-if-I-don't-know-one-thing-the-Bible-sez-a-good-woman-listens-to-her-goddamn-godgiven-husband-and-gives-him-healthy-sons-when-and-where-he-goddamn-well-wants: these godly illiterates of reality are truly the outside dogs who the Revelator Angel condemned beyond the walls of the New Jerusalem.

Monday, February 20, 2017

Plenary period to revise 736 orders on expedited foreclosures

So far, I have only found one case even mentioning the plenary period of a district court to revise an order denying (and presumably granting) a 736 application for expedited foreclosure, as discussed ad nauseam in my last post.

This case is In re Casterline, No. 13-13-00708-CV (Tex. App.--Corpus Christi Jan. 15, 2014). The Rules on their face prohibit a party from moving for reconsideration on an order denying the application for foreclosure; in this case, the applicant moved for rehearing because the court scheduled the notice of hearing at one time, but the lawyer for the applicant thought it'd be for another time. Id. at *3. So the appeals court granted mandamus relief, directing the trial court to vacate its orders granting the motion to reconsider and thereafter granting the expedited foreclosure.

The appeals court noted that it would "express no opinion regarding whether or not a trial court can sua sponte change its order under Rule 736.8(c) within its period of plenary power because that issue [was] not presented." Id. at *9.

This is an interesting issue. I note that the Rule also says that any order is not res judicata in "any other judicial proceeding." Tex. R. Civ. P. 736.9. It is quite possible that the specialized nature of the Rule for purposes of seeking permission to do a forced sale of only certain types of liens makes every application final upon the order, without any right for revision under a plenary period. However, Rule 306a generally refers to a plenary period to "vacate, modify, correct or reform a judgment or order." Tex. R. Civ. P. 306a(1). I'd wager that Rule 306a would govern, and at a minimum a court has 30 days to revise any orders issued in 736 proceeding. Presumably, this would come up more often in denials than grants, as creditors would simply move forward with their foreclosures upon a grant of the application. This could run into some issues, as under Texas Property Code § 51.002(b), notice of a foreclosure sale needs to be provided at least 21 days prior to the sale date. Notice of default must have been provided with "at least 20 days" to cure the deficiency. Tex. Prop. Code § 51.002(d). This notice could be given any time before the § 51.002(b) notice, which means it could be given before the 736 hearing (excluding discussion of limitations and the like for this post). See my previous post for a discussion on the differences between a 736 hearing and a § 51.002 compliant foreclosure. In such a case, a court would be wise to set a date of sale period more than 30 days beyond its plenary period, so a debtor isn't shortchanged through an immediate grant of authority to conduct the sale within a minimum of 21 or 22 days from the order granting the 736 application.

Thus, if a court denies a 736 application, there is not yet any case law explicitly barring a creditor from re-applying within the same cause during the plenary period, thus giving the court an opportunity to overturn its own order denying the application. The only current argument I can think of would be that the order denying application in the cause operates as res judicata against another order in the same cause, due to the particular wording of "any other judicial proceeding" in the Rule.

Friday, February 17, 2017

Expedited Foreclosures in Texas Pursuant to Texas Rules of Civil Procedure 735, 736 and Texas Constitution Section 50(a)(6)

Yeah it's here. You know it's here. Mood: foreclosure sexy. https://www.youtube.com/watch?v=eglu23iGsU0

This is a very long post about foreclosures as they relate to Rule 736 proceedings and the Texas Constitution in light of two Supreme Court of Texas opinions issued May 20, 2016 in Garofolo and Wood. I first write about whether a lender is required to send any notices prior to applying for an expedited foreclosure under Rule 736 of the Texas Rules of Civil Procedure, and if so, which notices. I conclude that unless the loan documents require mailing out notice, you do not need to attach any notices sent to the application, provided your affidavit can show some other evidence that you provided a form of notice that was not written (phone call, conversation, etc.). The Rule only pertains to any necessary notices to mail, not any notices to otherwise serve.

It might be safer to save you hassle from a denial to just do what you think a court wants you to do, but in case you don't and have some other evidence at your 736 hearing, this post may help you out.

After that, I get into the issues raised in those Supreme Court cases and how their holdings might affect 736 hearings. In my opinion, they should not do a thing to affect a 736 hearing, because the contents of a 736 hearing are listed explicitly in the Rule, but I 100% expect to see opposing counsel try to force them into the hearing. Prepare to block them as best you can accordingly.

***

This is a very important body of law for both creditors and borrowers. Borrowers care about this issue because compliance with the law is the difference between another rent-free month at their house before eviction or not. Creditors care because any delay in their remedies for defaulted mortgages is another alligator chomping at their wallets.

Some basic notes for the reader of this piece:

Article 3810 of the Texas Revised Civil Statutes was repealed in the 60s or whenever and replaced by Section 51.002 of the Texas Property Code. Try Googling shit related to subsections of article 3410 like " 'Article 3810.4' Texas." You'll love the results! I don't refer to it here, but it's cited in some of the older cases I discuss.

Rules 735 and 736 of the Texas Rules of Civil Procedure (TRCP) relate to so-called "expedited foreclosure proceedings."

Section 51.002 of the Texas Property Code (TPC) relates to foreclosure sales and prerequisite notices of those sales.

There are no other statutes or promulgated rules which matter to this post; the only other relevant body of law derives from common law, the Texas constitution, and case law.

Caveats:  

This post is not talking about property owners associations. Those guys are governed under some independent requirements laid out in Texas Property Code § 209.0091 and other provisions.

This post does not apply to manufactured homes, which are technically personal property. There are notice requirements laid out in Texas Finance Code § 347.356 related to that.

In my sweet opinion, the Constitution is silent about notice requirements throughout all of article XVI, Section 50.

Article 9 is inapposite, though it's informative that (as I understand it) under Article 9, your lien would only extend to the amount of payments missing, versus the balance due, without a proper notice of the full balance being due.

Capsule summary of my positions articulated herein:

a) If the loan documents for a homestead lien provide for waiver of notice of default with opportunity to cure and notice of acceleration, your 736 application should face no problem in court, but it's an unappealable decision, so if you got slapped down for it, either add the notices of default into an amended application and try again, or file suit separately for foreclosure.  Note: under case law holding that applying for an expedited foreclosure equates to an acceleration notice, if the debtor can argue that because no  notice of default issued, you broke the law, and a court buys it, you could be in trouble. However, because the law is pretty damn clear that a borrower can waive notice of default, this should be slapped down in a no evidence motion for summary judgment. These agreements of waiver do not affect your obligations of notice under Section 51.002 of the Texas Property Code, however, because it 1) says so on its face and b) is distinct from a 736 proceeding seeking permission to foreclose in that it provides the steps to properly foreclose.

b) A borrower should not be able to blow a 736 proceeding into an inquiry into the constitutional validity of the lien you are seeking permission to foreclose on, because the Rule hasn't been changed by any of these recent opinions from the Supreme Court of Texas in its Garofolo and Wood decisions.

Alright that's literally all I say here. But I dig into some of the details.

***

THE RULES
Rule 736 of the Texas Rules of Civil Procedure dictate the requisites of an application for expedited foreclosure of certain real estate liens, as well as the conditions of any hearing conducted on such application or or order granted pertaining to such application.

TRCP Rule 735.1 declares that "Rule 736 provides the procedure for obtaining a court order, when required, to allow foreclosure of a lien containing a power of sale in the security instrument, dedicatory instrument, or declaration creating the lien, including a lien securing any of the following: (a) a home equity loan, reverse mortgage, or home equity line of credit under article XVI, sections 50(a)(6), 50(k), and 50(t) of the Texas Constitution . . . ." TRCP Rule 735.2 also adds that Rule 736 proceedings are very limited: "[t]he only issue to be determined in a Rule 736 proceeding is whether a party may obtain an order under Rule 736 to proceed with foreclosure under applicable law and the terms of the loan agreement, contract, or lien sought to be foreclosed." Additionally, TRCP 735.3 provides that a 736 proceeding does not exhaust your options for judicial foreclosures: "any loan agreement, contract, or lien that may be foreclosed using Rule 736 procedure may also be foreclosed by judgment in an action for judicial foreclosure.

TRCP Rule 736.1 lists the requirements of an application. I won't go over all of them because they're self-explanatory. I became intensely interested in one subsection after hearing it thrown at me in court, however: TRCP 736.1(6)(B), which requires that the application "[i]nclude an affidavit of material facts in accordance with Rule 166a(f) signed by the petitioner or the servicer describing the basis for foreclosure and, . . . attach a legible copy of each notice required to be mailed to any person under applicable law and the loan agreement, contract, or lien sought to be foreclosed before the application was filed and proof of mailing of each notice."

"Proof of mailing"
Lots to unpack in that precious little law. What is "proof of mailing"? I mean: you write a letter, you put it in the mail, and there goes your evidence, right? How do you "prove" you mailed something? Why, you see if anyone made up a legal definition of it, of course! "Proof of mailing" is defined by the Texas Civil Practice & Remedies Code  § 136.001 by authorizing anyone to "use certified mail with return receipt requested in any case in which registered mail is required by law" to any "receipt for the certified mail is validated with an official post office postmark." Now, no law requires you use CMRRR mailings for notices of default, acceleration or application for expedited foreclosure, but this is as good a rule as any you'll get that will pass muster in court. If you have a stamped green card from the USPS, that's your "proof of mailing." For "regular mailing," the "mailbox rule" says the material is considered mailed as soon as it's dropped in the box; you should prepare some kind of affidavit affying to having sent such out as "proof of mailing" if you limited yourself to regular mailing. (Note that TPC § 51.002(e) says notices sent under § 51.002 can be evidenced by an affidavit; and service is effective upon dropping the CMRRR mail in the mailbox.)

However, proof of mailing is conditioned firstly on there being a "notice required to be mailed . . . under applicable law" or the lien materials in the first place! If no such notice is required, then no proof of mailing would kick in.

"Each notice required to be mailed"
This is what I got to figure out. Opposing counsel at my last hearing did not even dig into whether or not a notice of default with opportunity to cure and notice of acceleration were required to mail out; he only focused on proof of mailing, and the court swallowed it whole. To be fair, it's not clear without a lot of reading of case law which notices are required "to be mailed," or that any necessarily are required to be mailed. Written notice, actual notice or otherwise constructive notice probably does the trick (but you have to be very careful relying on this argument). Judges distrust non-mailed notices, and opposing counsel is eager to yarn up a storm about no distinction between "notice" generally and "to be mailed" specifically. I am still on the fence about this very technical language. One of my client's typical packages of notes and homestead lien contracts with deeds of trust do not detail a mailing requirement for default whatsoever, much less acceleration; they instead defer to "applicable law," same as Rule 736 does. That's a draft tip: when in doubt, mirror the law so you do not truncate any liberties otherwise afforded you at law.

I am going to come out and say this affirmatively: There are no statutes requiring that any notice be sent prior to application for foreclosure. The closest statute that might suggest such is Section 51.002 of the Property Code, which governs notices of sale prior to foreclosures, and notices of default with opportunity to cure prior to sending the notice of sale. Compare Tex. Prop. Code § 51.002(b) and § 51.002(d). However, the language of § 51.002 does not refer to an application for foreclosure: that provision discusses notices to be sent prior to initiating the actual sale. The Rule 736 application merely seeks permission from the court to conduct a foreclosure sale pursuant to a valid lien authorizing such. See TRCP 735.1 (stating “Rule 736 provides the procedure for obtaining a court order . . . to allow foreclosure of a lien containing a power of sale . . . .”).

What Rule 736 does not on its face say is that it incorporates equity into its requirements. Common law rule required presentment for payments in arrears prior to exercising an option for acceleration, but there was no common law rule regarding notice of the actual exercise of the option to accelerate.

Must notify of default prior to acceleration under most circumstances (can be waived)
It has been held to be a “well established” rule that where a note holder has an option to accelerate upon default, the holder cannot lawfully accelerate “without presentment for payment, . . . if no specific place of payment is expressed in the note, until it has been presented to the payer at the latter’s known place of business.” Faulk v. Futch, 147 Tex. 253 (Tex. 1948). The Court in that case upheld a trial court finding that presentment for installments had been made “and the failure to pay such installments authorizes respondents to accelerate the maturity of the note.” Id. In that case, the holder “wrote a letter notifying petitioners of the acceleration of the unpaid payments on the note, and demanded payment of the entire note.” Id. Faulk did not discuss any common law rule or statute requiring notice of acceleration itself, only that as a predicate for acceleration, presentment for late payment with a chance to cure the default is required.

 Note that any requisite notices may be waived.  See Shumway v. Horizon Credit Corp., 801 S.W.2d 890 (Tex. 1991); Ogden v. Gibraltar Sav. Ass'n, 640 S.W.2d 232 (Tex. 1982). In my client's case (and more to my consternation of the court denying me on my first go round), the documents expressly waived presentment of notice of intent to accelerate and the notice of acceleration. Under established law, my client should have gotten to move onto the next batch of issues, but who am I to judge?

The Shumway opinion provides "that a waiver of presentment, notice of intent to accelerate, and notice of acceleration is effective if and only if it is clear and unequivocal." Id. at 893. I highly recommend reading the Shumway discussion as to what is an effective waiver. Note especially well: "waiver of 'notice' or 'notice of acceleration' does not waive notice of intent to accelerate, a separate right;" for that, "a waiver of 'notice of intent to accelerate' is effective to waive that right. See, e.g., Valley v. Patterson, 614 S.W.2d 867, 871-72 (Tex.Civ.App—Corpus Christi 1981, no writ) (notice of intent to accelerate is waived when note specifically states that maker 'expressly waives all notices, demands for payment, presentations for payment, notices of intention to accelerate the maturity[,] protest and notice of protest"'). . . . " Id. at 894.

Case law subsequent to Faulk has also noted that “demand [need not] be made prior to acceleration under all circumstances,” because a holder “is only required to use reasonable diligence in attempting to locate the maker and demand payment of the overdue installment;” additionally, “the payor may waive his right of demand or presentment” by “making it impossible for the payee to locate him after a reasonably diligent search.” Allen Sales Servicenter, Inc. v. Ryan, 525 S.W.2d 863 (Tex. 1975), citing Holt v. Henrichsen, 321 S.W.2d 146, 148 (Tex. Civ. App. 1959, writ ref’d n.r.e.). In effect, this line of cases describes notice of default, and together can be read to show that the common law rule described in Faulk is bounded by “reasonable diligence” and that “actual notice” is not required.

However, it has been held that notices of acceleration must be preceded by a notice of default with opportunity to cure. If you do not, you're liable for a wrongful foreclosure action. See Karam v. Brown, 407 S.W.3d 464 (Tex. App.–El Paso 2013, no pet.), citing Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 56 (Tex. 2001) (notice of intent to accelerate and notice of acceleration need to be sent in right sequence and be clear and unequivocal). 

In my client's case, the loan defined default as nonpayment of an installment, and noted that it had multiple remedies, including acceleration or foreclosure. Nothing in the Property Code or these cases described a notice of intent to foreclose prior to actually foreclosing, but a line of these cases has held that notice of intent to foreclose or notice of expedited foreclosure application coupled with the notice of default constituted a notice of acceleration. Now, the court in Karam also cited to another Supreme Court of Texas case which held that the default notice must apprise the debtor that failure to cure would result in both acceleration and the right to seek foreclosure under any power of sale. Id., citing Ogden v. Gibraltar Sav. Ass’n, 640 S.W.2d 232, 233-34 (Tex. 1982). Upon failure to cure, notice of acceleration must then be given, which can be expressed through conduct. Id., citing Joy Corp. v. Nob Hill N. Props., Ltd., 543 S.W.2d 691, 694-95 (Tex. Civ. App.–Tyler 197, no writ), disapproved on other grounds by Wolf, 44 S.W.3d at 569-70. However, other cases have held that provided a trustee’s sale notice is preceded by “the require notice of intent to accelerate,” such notice “constitutes unequivocal action indicating the debt is accelerated.” Id., citing Meadowbrook Gardens, Ltd. v. WMFMT Real Estate Ltd. P’ship, 980 S.W.2d 916, 919 (Tex. App.–Fort Worth 1998, pet. denied); McLemore v. Pacific Sw. Bank, FSB, 872 S.W.2d 286, 292-93 (Tex. App.–Texarkana 1994, writ dism’d). Particularly apropos to the case I went to court for, see Burney v. Citigroup Global Markets Realty Corp., 244 S.W.3d 900, 904 (Tex. App.–Dallas 2008, no pet.) (notice of filing expedited application for foreclosure after notice of intent sufficient to constitute notice of acceleration). This will be the case especially where notice of sale says something similar to “the indebtedness evidenced therein [the Note secured by the deed of Trust] is now wholly due.” See the court discussion in Karam.

Note that the cases discussed in this preceding paragraph again refer to notices of default prior to notices of acceleration, but that they together can be read to hold that to the extent a creditor issues notice of foreclosure or even applies for expedited foreclosure, such behaviors will be interpreted at law as notices of acceleration, thus triggering the prerequisite that notices of default with chance to cure have been provided.

Therefore, the absolute minimum notice required “at law” is a notice of default before applying for expedited foreclosure (again, assuming no waiver). Now, while the facts of most of these cases all dealt with the common, easy method of mailing notices, none of them expressly hold that notice of default or acceleration must be mailed. This body of case law apparently reserves that question to any "common law" rule or the contracts themselves.

UNWRITTEN NOTICE OF DEFAULT IS LAWFUL
In the Faulk case, the creditor called the debtor "at his place of business . . . and demanded both payments, but was unable to collect either," immediately after which his attorney "wrote a letter notifying [the debtors] of the acceleration . . ., and demanded payment of the entire note." Under the facts of that case, the Supreme Court of Texas upheld the trial court's finding that the creditor "had made proper presentment to the [debtors] for the payment of the installments due on the note, and the failure to pay such installments authori[zed] [the creditor] to accelerate the maturity of the note."

That is supremely important to reading Rule 736.1. If a "notice of default" prior to the lawful exercise of an option to accelerate can comprise of phone calls demanding payments past due, especially combined with a showing that a business is otherwise failing which could support an independent finding of "anticipatory breach," then a creditor who has not limited himself to "written notice of default" in his loan materials he seeks to foreclose upon through a 736 proceeding could demonstrate proper "presentment for payment" through other means, therefore liberating an applicant from having to attach a copy of any written notice of default or proof of mailing of such, because no law requires such and the contracts do not.

If, obviously, the contracts do require mailing of notices, then you MUST comply with this requirement or be prepared to watch your application get used for 3-point practice.


CONCLUSION
In short, Rule 736 does not require you attach shit to the application requiring "notices" if your contract does not require such be mailed, or further if your contract waives presentment of any such notices to the borrower, under established case law. Look your materials over carefully.


Caveat: 120 day prohibition period
The CFPB servicing rules to Regulation X effective January 10, 2014 require a “mortgage servicer” to wait until the borrower is more than 120 days delinquent before filing for foreclosure (with two exceptions unrelated to Kelley’s case). See 12 C.F.R. §1024.41(f)(1)(i), as amended by the CFPB, available at http://files.consumerfinance.gov/f/201309_cfpb_titlexiv_updates.pdf. So don't fuck that up.

AND NOW: THE CONSTITUTION AND YOUR 736 HEARING
Opposing counsel will sometimes show up at your 736 hearing and try to make it another issue altogether. You should be able to slap them down by reminding the court of the limitedness of the proceeding and that opposing counsel has many avenues to sue in another cause if they have issue with the foreclosure. Suing about "any matter related to the origination, servicing, or enforcement of the loan agreement, contract, or lien sought to be foreclosed prior to 5:00 p.m. on the Monday before [any] scheduled foreclosure sale" will automatically abate the 736 application proceedings or any order already granted. The case must be dismissed or the 736 order vacated under such a situation. TRCP Rule 736.11(a), (b). Any order granting or denying the application is without "res judicata, collateral estoppel, estoppel by judgment, or other effect in any other judicial proceeding." TRCP Rule 736.9.

Thus, while no case law appears to yet exist on the matter, an order denying an application does not res judicata you from refiling an application or filing an application in that particular cause. The use of the term "other judicial proceeding" may cast some doubt about being able to refile, but until a case comes down saying otherwise, you're safe to do so.

So those are the basics. Remember also that Rule 735 delimits the scope of Rule 736: you are seeking "a court order, when required, to allow foreclosure of a lien containing a power of sale." Due to two recent Supreme Court of Texas opinions, what "a lien" is and is not has become very important for purposes of a 736 proceeding from a debtor's point of view. A creditor may still attempt to argue that questions about the "origination, servicing, or enforcement of the . . . lien" should be invoked in another lawsuit, and not in a 736 proceeding. However, because TRCP Rule 735 references a "lien," opposing counsel will argue that if it can be shown that no lien exists in the 736 response, then no 736 order can issue granting the application. I'm not convinced by this argument, because everything about 736 says no evidence may be wiggled in. So opposing counsel would be limited to essentially saying "well I'm not introducing any evidence - but you can see by the documents attached that full compliance with the Constitution is lacking, therefore no lien exists, therefore denial is appropriate."

What do these cases say?

GAROFOLO V. OCWEN LOAN SERVICING, LLC
In Garofolo, a borrower sued a lender in federal court "seeking forfeiture after he lender failed to deliver a release of lien," as required by the Constitution. No. 15-0437 at *1 (Tex. May 20, 2016). Following a 12(b)(6) dismissal, she appealed to the the Fifth Circuit, which certified the question to the Supreme Court of Texas. The Court opened by observing that the Texas Constitution permits foreclosure of homesteads with home-equity loans "only if the underlying loan includes specific terms and conditions." The Court noted that "if the lender wishes to foreclose on a homestead following borrower default," the constitutional terms must be adhered, but a borrower does not get "a constitutional cause of action or remedy for a lender's subsequent breach of those terms or conditions." The Court distinguishes between "post-origination breach[es]" of the these "constitutional terms and conditions" and "origination" breaches. Id. at *1.

Here, the borrower notified the lender to send her a release of lien in recordable form per the loan terms; the lender did not send her release after 60 days' notice of such. The borrower (greedy little borrowers) demanded she get reimbursed every dollar spent on principal and interest paid on the loan due to this breach. The "loan agreement incorporate[d] the protections of section 50(a)(6)(Q)(vii)," but the lender did not undertake the § 50(a)(6) "cure". Id. at *3. More explicitly: "Section 50(a) simply has no applicability outside foreclosure," so if a lender never seeks foreclosure, "there is no constitutional violation or remedy for failure" to otherwise comply with the constitution. Id. at *8.

The Court concluded that § 50(a) does not create any substantive rights or obligations; it merely spells out "what a home-equity loan must look like if a lender wants the option to foreclose on a homestead upon borrower default." Compliance with the constitution "is measured by the loan as it exists at origination and whether it includes the terms and conditions required to be foreclosure-eligible." Id., at *7, citing Sims v. Carrington Mrtg. Servs., LLC, 440 S.W.3d 10, 17 n.28 (Tex. 2014). "A lender that includes the terms and conditions in the loan at origination but subsequently fails to honor them might have broken its word, but it has not violated the constitution."Id. The Court simply interpreted the "forfeiture remedy" the borrower sought in this case as "just one of the terms and conditions a home-equity loan must include to be foreclosure-eligible." Id. The borrower's remedy thus would only be protection from forced sale. The Court affirmed that the only recourse borrowers have for these "mere breaches which are absolutely not constitutional violations no way" is tort and breach (meaning: show damages). Id., citing Wells Fargo Bank, N.A. v. Robinson, 391 S.W.3d 590, 595 (Tex. App.--Dallas 2012, no pet.) (remedy is tort and breach, "not constitutionally mandated forfeiture").

Very interesting. The Court held in Garofolo that while lenders must comply with the Constitution to foreclose, and compliance is measured from origination, post-origination failures do not permit any remedy. It raises a huge question: does failure to cure an origination breach qualify as a post-origination breach or an origination breach? I suspect wise debtors would throw the kitchen sink to show how non-compliance with origination forces a "constitutionally mandated forfeiture."

Again, the Supreme Court of Texas has held this: "Section 50(a)(66), in its totality, establishes the terms and conditions a home-equity lender must satisfy to make a valid loan." Stringer v. Cendant Mortgage Corp., 23 S.W.3d 353, 356 (Tex. 2000).

Robinson was interesting because it involved that case involved a suit for wrongful foreclosure, over a lender's failure to foreclose per the terms of agreed order entered in a 736 proceeding. This is one of the few cases I've found discussing § 50(a)(6) as it relates to 736 proceedings, and it doesn't really discuss anything too interesting about that relationship. The appeals court noted that the deed of trust could only be foreclosed on through a court order under § 50(a)(6)(D) (this requirement was "incorporated" in the deed language "by stating that Wells Fargo must obtain a court order before foreclosing"). The appeals court agreed that the foreclosure sale was in violation of the court order and therefore "violated the constitutional requirement set forth in the deed of trust." (I am bolding and underling "incorporated" for a discussion.) The court explains pretty clearly why it set aside the foreclosure (noncompliance with the order; deeds of trust can only be foreclosed under the Constitution based on a valid order). Therefore, the only appropriate remedy in that case was setting aside the trustee's deed and restoring borrower's title. See Robinson, 391 S.W.3d at 594. The court dispensed with the debtor's argument that it was entitled to forfeiture by observing that "so long as the loan agreement originally entered into by the parties complies with the constitutional requirements, forfeiture is not an appropriate remedy." Id. at 595, citing Vincent v. Bank of Am., N.A., 109 S.W.2d 856, 862 (Tex. App.--Dallas 2003, pet. denied). The court in the Vincent case asserted, "forfeiture is only available for violations of constitutionally mandated provisions of the loan documents." Vincent, 109 S.W.2d at 862 (emphasis in the original).

The Supreme Court's holding in Garofolo implicitly upheld this finding in Robinson: that post-origination breaches are not grounds for forfeiture; if forfeiture is a constitutional remedy, the inverse of the rule requires it be so only if "the loan agreement [does not comply] with the constitutional requirements."

What is incorporation?
 Garofolo doesn't disturb the Stringer holding, but adds that there is no constitutional cause of action for post-origination breaches, provided the agreement is valid at the origination. So it would pay to look at the Garofolo materials. Lookie HERE for such (page 113 of that link is page 7 of the 5th Circuit opinion, noticing that the security instrument incorporated § 50(a)(6)(Q)(vii); page 65 is page 10 of Ocwen's brief which recites the term in its security instrument that complies with § 50(a)(6)Q)(vii):

23. Release. Within a reasonable time after termination and full payment of the Extension of Credit, Lender shall cancel and return the Note to the owner of the Property and give the owner, in recordable form, a release of the lien securing the Extension of Credit. . . .

Section 50(a)(6)(Q)(vii) in turn reads:

The homestead . . . is hereby protected from forced sale, for the payment of all debts except for . . . an extension of credit that . . . is made on the condition that . . . within a reasonable time after termination and full payment of the extension of credit, the lender cancel and return the promissory note to the owner of the homestead and give the owner, in recordable form, a release of the lien.
Remember incorporation? The Supreme Court explicitly referenced this term, which was used by Ocwen in its briefing to the Fifth Circuit and by the Fifth Circuit in its opinion. Ocwen argued that Garofolo was trying to require "actual satisfaction of the conditions listed in § 50(a)(6)(Q), as distinct from mandating only the incorporation of those conditions into the loan terms." (page 73 of this link). Obviously, the term means actual recital of the constitutional terms - I am looking for a case that says you can incorporate the Constitutional terms by reference. To the extent the Supreme Court or some appellate court has not held that you cannot incorporate these terms by reference, I would not try to rely on this argument just yet - Garofolo seems to clearly hold that to get the right to foreclose on a home equity loan, the magic words must be recited, in short reading § 50(a)(6)(Q) as a "notice" disclosure to the customers. Any lender who does not do this is risking delays in its foreclosure proceedings.



WOOD v. HSBC BANK USA, N.A. and OCWEN LOAN SERVICING, LLC

On the same day the Garofolo opinion came down, the Court issued an opinion related to § 50(a)(6). In Wood, the borrower sued the lender in state court for, among other things, a declaratory judgment that the lien was void, breach of contract, and quiet title. The Court "conclude[d] that liens securing constitutionally noncompliant home-equity loans are invalid until cured, and thus not subject to any statute of limitations" for purposes of avoiding a debtor's suit for wrongful foreclosure where the loan "error" was upon origination, and the error was not sued on until after four years had passed. No. 14-0714, at *1 (Tex. May 20, 2016). The Constitution states, "No . . . lien on the homestead shall ever be valid unless it secures a debt described by this section[.]" Tex. Const. art. XVI, § 50(c).

The borrowers notified the lender and the servicer that the home-equity loan did not comply with the Constitution "in several respects," but neither respondent "attempted to cure the alleged defects." Under previous law, it had been held that such liens were voidable, not void, and thus the statute of limitations would apply, so the respondents understandably sat put on the matter. The appeals court agreed with the lender, but the Supreme Court decided to change the law all courts had followed to that day. The Court noted that lenders are provided "simple methods for curing specific defects, including refunding any overcharges, and a catch-all cure for defects that are irremediable by the other methods." Wood, at *4, citing Tex. Const. art XVI, § 50(a)(6)(Q)(x)(a)-(f). The Court noted that the cure provisions laid out in § 50(a)(6)(Q)(x) related to § 50(c) had previously been held to validate any lien invalid at origination. Id. at 6, discussing Doody v. Ameriquest Mortgage Co., 49 S.W.3d 342, 343 (Tex. 2001) (case where lender held to have cured defective lien after refunded fees in excess of 3% of loan's value in violation of § 50(a)(6)(E)). The Court observed that "lenders are permitted . . . to cure constitutional noncompliance on their own, without notice from the borrower, as the lender did in Doody." Id. at *11.

The Court stressed the difference between a quiet-title action brought for violation of Section 50(c) and a request for forfeiture for violation of Section 50(a); the one is permissible, while the other under Garofolo is not - Section 50(a) only provides defenses to foreclosure. A borrower could seek forfeiture by a traditional breach of contract theory. Id. at *6.

A borrower can try to quiet title for a void lien at any time, without any statute of limitations defense. Id. at *8, citing Slaughter v. Qualls, 162 S.W.2d 671, 674 (Tex. 1942).

The Court also did not indicate whether the loan became valid retroactively such that cure could effectively foreclose a cause of action subject to a four-year limitations period. If that ends up being the case, that will be very important for lenders who "cure" defects present at origination.

SYNCRETION
Since the Wood holding says that if you do not comply with the Constitution at outset, your lien is invalid and therefore could be subject to a quiet-title action, I 100% expect to see attorneys for debtors argue at 736 proceedings that, since Rule 736 is meant to permit an expedited foreclosure remedy for creditors for valid liens, a court could never grant a 736 application if there is any evidence in the materials submitted that the loan materials are deficient under the Constitution. This is because Rule 735 says a 736 proceeding is only for a "lien," which presumably must refer to a valid lien, and not just any old lien. Furthermore, because both Wood positively acknowledges creditors who undertake the onus to cure constitutional defects per Doody, a debtor could sit back and just wait for the 736 hearing before pointing out the various defects it alleges to exist based on the attachments to the 736 application. A judge may be disinclined to grant an application under Wood for this reason - the lien is invalid, so no foreclosure power of sale should issue!

However, both Wood and Garofolo dealt with suits brought outside of a 736 proceeding, and the big 736 case referenced in those cases was Robinson, which dealt less with the constitutional lien requirements in the context of a 736 hearing than the effect of disregarding an order granted at the conclusion of a 736 hearing. I haven't seen a good case on the subject yet, though there is one case that suggests a debtor could rightfully raise issues like lien-validity in a 736 proceeding under a response filed pursuant to TRCP Rule 736.5(c)(1) ("why the respondent believes a respondent did not sign a loan agreement document . . . that is specifically identified by the respondent") or (c)(2) ("why the respondent is not obligated for payment of the lien"). However, it is a big stretch to argue he is not obligated to pay the lien because it is not foreclosure-eligible.  There is a major difference between not being obligated to pay a lien in your response, and being able to argue that the lien itself should not be acknowledged by the court as valid. Rule 736 and Rule 735, when read together, prohibit many arguments and showings from entering the 736 hearing. An attorney trying to sneak a Wood argument under the guise of a Rule 736.5(c) argument should be strenuously opposed and to the extent a motion to strike might exist in a 736 proceeding, strike all that garbage.

Rule 736.4 also notes that no discovery is permitted so you can't grill respondents about execution in the hearing. I'd wager that if an applicant submits the loan documents with signatures or otherwise shows course of conduct showing obligement of the terms of the loan materials, he'd trump the "lack of execution" argument under (c)(1) and then the respondent could try to make his best case for not paying the lien. See Bormio v. Wells Fargo Bank, N.A., 2016 U.S. Dist. LEXIS 14368, *15 ("Rule 736 does not prevent a respondent from asserting a 'defense to the Deed of Trust' because it "expressly allows a respondent to plead in a response why the respondent is not obligated for payment"). In Bormio, among other issues, in a proceeding separate from the 736 hearing, the plaintiff argued that it was not a proper party to the loan, and thus not a proper party to the expedited foreclosure proceeding and therefore could not even file an answer; the court thus disagreed, saying it could raise party status as a defense. I have yet to find a case saying that a borrower can raise validity of the lien as a responsive defense, and such a provision is nowhere provided in Rule 736.

So, Wood and Garofolo have done a lot to clarify debtor remedies under the Constitution and lender obligations under the Constitution to avoid various types of liability in breach suits and setbacks in foreclosure hearings, but I do not think they have blown up the 736 proceeding into requiring a constitutional scrutinizing of every provision, permitting the parties to quibble over whether or not a piece of language conforms with the constitutional provisions or not, which sounds like something more appropriately brought in a quiet-title or wrongful foreclosure action.

If you liked this post, send me 100 roses and your most eligible daughter. I've written it on a variety of Godfather cocktails, to dozens of rappers' tracks, and a strong dose of bile for all lawyers not me.

Wednesday, February 1, 2017

Trolling = resistance, trivia = catharsis and other retarded equations

A polemic against an anecdote

Everything written herein is my opinion. I'm not a journalist, and if "journalism" is what the shitstains who write for the Times and the like are doing these days, thank God. I mean, I got 6th place in headlining at a journalism tourney in high school once, because writing a headline is a lot fucking easier than trying to do objective reporting, which I thought was the definition of "journalism" until the Times ilk decided that than just smoking weed and cranking out editorials counted as reporting facts. Jesus Christ, the epistemology of journalism has corroded.

In 2016, a man who (in my opinion) owned the fuck out of a Congress which has proved as inept now as it was then in doing anything of interest except grandstanding for purposes of later forming Facebook memes, was suspended from Twitter for these apparent behaviors (per this, in my opinion, "total jerk" and "totally creepy" writer, Seth Cockstein):

1) Some chick wrote an op-ed in an online publication about Trump
2) Said hero then privately wrote the girl to invite her to a Trump inauguration party.
3) She declined in a most public fashion. It was "liked" over 73,000 times.
4) The hero responded by lightly trolling her in response with a Photoshopped image of her husband replaced with his face. Seems fair, in light of the fact that she subtweeted him (some "arcane" practice of retweeting or replying or whatever without "@ing" at the original poster of a Tweet, lest you invite a conversation and not look good for your audience). Maybe she DM'd him. Who cares? Whatever the case was, she trolled him with an insult versus a public declining in a civil fashion, and he responded by making his profile a shrine to her. Which, you know, isn't different from, say, a fan page of a porn star. I haven't seen these OFFENSIVE PAGES taken down for "INSANELY FUCKED UP" tributes to ACTRESSES, WHICH ARE FEMALES.
5) She responded by appealing to a man for help. WHOOOOOOO, so brave.
6) Apparently, the hero then told her not to be so mean to him, with bad English.
7) Around the same time, he apparently alleged he'd bought this website (which now just takes you to a GoDaddy page, and probably always did, but I'm too lazy to figure that out).
8) The man the damsel appealed to then whiteknighted the fuck out of the hero and banned him from Twitter, which according to Cockstein's quotation of hearsay from a Twitter rep, was because "'The Twitter Rules prohibit targeted harassment, and we will take action on accounts violating those policies.'"

This girl is obsessed with eczema. If I were a "blogger" pretending to be a "journalist" like Cockstein, I'd say she's CREEPILY obsessed with it!

Luckily, if she suffers from eczema, it's not bodyshaming to point out the fact that other people just look like they suffer from it if it'll help her insult someone better. It's the AIDS>you argument, but for rashes.  Bonus points if you add "space slug" after "AIDS-ridden" or "eczema-stained." Unfortunately, this "journalist" is just happily Tweeting trivial jokes as part of a fad (or what some might call a bullying campaign, like when people insulted some Black actress for her role in a shitty reboot of a comedy series). Twitter crowds are prone to fads they call "jokes" and others call "bullying" because fuck it.

 Note: I really don't give a single fuck.  This is just fun.

This girl's "looks like" Tweets shows that insulting popular figures redounds to her more likes and retweets than optimistic or neutral "looks like" Tweets. Of Chris Christie, he looks like a "giant Christmas ham." Ivanka shouldn't be powerful, for whatever reason, but especially not because she "looks like she smells good"; perhaps female belittlement is beneath even this heroine, but I guess only if you're Hillary. Definitely not if you're a Republican female ("deranged Barbie doll").  Allllll the way back to the 2012 election, Santorum looks like some rookie cop who gets everyone on his side killed.

Twitter suspended a guy for some image trolling (but not really, right? it was all praise and optimism, meaning Jack the giant pussy who runs Twitter for Hillary got blue-balled into banning the hero) of a cunt who just insults people she doesn't like the looks of, which is called "bullying" or "trolling" or "flaming" in most civilized contexts. Which is fucking funny. They banned a guy who got dragged in front of Congress for a business decision, as if Congress has any business telling businesses about "ethical" pricing choices, and who did nothing but say nice things about some broad who insulted him publicly. My Lord. What would have happened if he'd sucked her pussy and said it tasted bad?

The girl wasn't finished! After Twitter took action, her legion of pussylickers and the press urged her on to comment further: The Washington Post took part in the pussy licking, quoting her as saying: "Trolling seems to be an automatic occupational hazard for female writers who receive any level of professional attention." The Post said absooooolutely nothing about her massive, public, hugely popular insult of the hero. It just said that it tried to talk to Shkreli but he insulted them instead, which good for him, considering how they did absolutely fucking no journalism to balance the story out for any interesting inputs, like the poor damsel being a provocative bitch in the first place. The way the Post makes the story in that article out to be, the girl shows up on Tucker Carlson's show, insulted him when he denigrated her, and then the hero reached out to her to invite her to the ball.

What's even funny about the hero/damsel narrative here is how if you Google the last names of our participants, you get alllll kinds of links to stories that affirmatively proclaim a legal (or moral) determination, that the one "harassed" the other. Woof.

 Trolling isn't anything but trolling, you fucking imbeciles

There's this strain of leftist thought emerging which proclaims "if I can't meet with it in an office, I guess I'll just insult it from my bedroom". The smug typists laud themselves as a new strain of "resistance," though they are just as eager to cast the blame at the foot of their opposition, the fearsome alt-right. These leftists say the same tactics they decry from the right and the fascist are perfectly apropos to their struggle (" The alt-right might not seek us in the streets, and might trounce us in trolling, but disruption, confrontation, doxxing and altercation remain tactics anyone taking seriously a refusal to normalize Trump-era fascism should consider. . . .   For the radical left, . . . militant tactics against white supremacy never stopped being necessary").

We see this explored deeply on Chapo Trap House, a favored podcast of mine (oh, I know, how can someone who thinks a retarded girlchild using  double standard of trolling ALSO like a progleft podcast, suck my dick). This profile of theirs took place both before and after Trump ascended to his mastery, and I think the show is still good despite Trump being in charge. Part of their schtick is just insulting anyone they don't like, right or left, which is great. I believe in trolling. I believe in insulting, belittling, hating and despising. I also believe in taking it as good as you give it or you're a fucking coward. If you're not funny, then you can't take it. That's a formulation I heard on Chapo once, and I absolutely believe it: if you cannot take or make a joke, if you have no humor about sincerely held beliefs, then you are in no position to criticize or change anything, and will be a tool of any "wind and wave" in charge of your mind. Even in that New Yorker piece (and before the election and just after on the podcast), Chapo just insulted and belittled Clinton, the Democrats and her sycophantic party base.

But I don't believe that shouting our rants and screeds can accomplish anything. I'm with Musk and the violent lefitsts in that sense: your protests do nothing against the deaf in charge.  VIOLENCE does things, whatever form that takes (be it vigorous non--participation in culture, or murdering various officials like our good friends our American rulers set up for power in Cuba). Chapo ended up hosting Adam Curtis, who (as I recall from the episode) ended the interview by essentially chastising those youthful thinkers rebelling against centrism and powermongering for relying on vapid trolling as a method of effecting progressive change. Chapo sounded off in agreement, and proceeded to flame in subsequent episodes. Maybe I misheard that episode's conclusion, maybe not; two of my friends who remember the episode suggested that the particular advice Curtis was giving was regarding other types of behaviors, but I dunno. If I re-hear the episode, I'll update this piece. I think it's important in this era of "protest as resistance" thinking which is coupled with the enfeebled "appeal to CEOs for help getting rid of bullies you can't outbully" thinking that the child referenced above follows.

And I think this need to normalize discourse in an effective fashion that acknowledges the limits of disgust-with-the-other has to be absorbed by either side of the political spectrum. Chapo had an episode they released (complete with a preface that they did not understand why they'd gone through and done it) with an interview they had with a so-called "tradcath" leftist named Matthew Walther.  Knowing full well that the tradcaths hold life sacred and that if, under some bizarre hypothetical scenario in which the tradcaths held state power, they began to badger him whether he'd criminalize abortions in his ideal state. It was out of left field and irrelevant to their discussion, and FULLY KNOWN TO THEM (Biederman commented in a Tweet that any intelligent Catholic would know you cannot "make the laws of God the laws of man"), and they instead just used it to berate and belittle and yell at him (yelling from the loudest of them, Christman and then-friend of the show and now-co-host Frost) for his beliefs. Inviting someone to speak with you about his beliefs and then ganging up on him 4 against 1 to scream at him "Hail, Satan" is a very O'Reilly thing to do.

What does the insult convey to the outsider? Nothing. It galvanizes the insider; it's jargon, dog-whistle talk. The alt-right isn't going anywhere because some Jews on the left come up with a clever movie quip about their looks, and the left isn't going anywhere because some alt-righters are able to point out how ridiculous these antics are or use "echoes" to signify that Jews sometimes write on the Internet.

This is a retard war, with everyone grunting at one another with varying degrees of simian expression. Luckily, nobody seems to care (per leftist Beijer) unless you view it with an eye to the discourse that creeps out of it. And if you happen to read the doggerel of Deadspin or Medium, you'll inevitably be reading about things that crept out of Twitter.

All your equations are meaningless

This self-congratulatory strain of communication has crossed over into the pop culture reporting world, where people spend hundreds if not thousands of words extolling the virtue of writing about fucking nothing. Beijer is a huge proponent of trolling-as-politics (but be funny) line of thinking which suffers from the echo chamber effect of the pertinent publication context; he thinks "radical" analogies can really change people ("the only people who ever make me skeptical of trolling and criticism on Twitter are the people who don't actually do it. But once you're calling people out, you're in the fray, and the only question left is are you right and are you funny.")

Man, if Jacobin's own big boy Beijer thinks Twitter is just a space to waste time cracking jokes, then so fucking be it: let it be nothing but a place to quibble over bits - don't use it as a place to pontificate about "left" organization against "fascism." Especially if you're a "progressive" libtard "journalist" who can't take a shrine-joke or two.


Pop culture writers are the last people to seek shelter in their job as a meaningful exercise. There is no catharsis in capitalistic sycophantism. "I'm a Black female, life is so hard, but thank God I have other, richer Black females I can write about and refer!" The world doesn't need shit. It especially doesn't need anyone's baby or anyone writing about it or anyone writing about how writing about it is actually super interesting and not part of a therapeutic cultural assimilation of human productivity at all, nuh-uh.

What I learned in writing this garbage dump post is that Medium is the worst fucking shithole on the Internet for garbage, self-serving opinions.

"Oh, but Cottle, you wrote this and it's just mean and uh....?"

I'm better than you. That simple. I guess like Beijer I just don't believe in using certain "spaces" for certain "modalities of expression." I mean, start a discussion if you want, or subtweet it or whatever the fuck it is these neutered cowards of our generation do. I think the left has a lot more to do for itself than simply passing jokes around in a circle jerk, and if it's reaching across the aisle to open up talks with fellow leftists who have different strains of thought, the best way to go is not opening up with an insult about how you MUST be going to hell because of an abortion you had just to rile up the other side. But what do I know? I'm just a cunt of a scrivener. 

Friday, January 27, 2017

Creditors'​ claims in Independent Estates in Texas, and a general blurb about claims litigation in Texas estates

LOTS OF EDITS.

The following blurb is more of a ramble than a memo or brief or essay of any merit, but it says a lot of technical shit you might enjoy about litigating creditors’ claims in independent estates. Independent estates are where claims go to die because estate lawyers are evil, tricky bastards who sneer and point at limitations provisions in the relevant Codes. Estates litigation is a great place to get your malpractice ears dried up.

***

The Texas Estates Code replaced the Texas Probate Code (TPC) a couple years back. It updated and recodified various provisions in the old TPC.

Estate lawyers are trickster devils who prance on the graves of creditors' claims in fiendish orgies. For some reason, probably favoring practical considerations about timely estate resolution, the TPC and now Estates Code strictly limit creditors' rights to enforce their claims. When you're alive, the usual rules of limitations applies (with very few statutes cutting short those claims' limitations). So in Texas, a typical debt runs out in four years (Tex. Civ. Prac. & Rem. Code § 16.051), a negotiable instrument in six years (Tex. Bus. & Comm. Code § 3.118(a)), etc etc.

There are a lot of technical terms in the Estates Code that trip up claimants / creditors as well. “Presentment,” “dependent”, “independent,” “exhibit,” “allow”, “approve” etc. This brief blurb will discuss how some of these terms are commonly used in estates litigation in general, and how they are to be handled particularly in independent estates.

Most of what follows in the next section applies only to “dependent estates.” Independent estates are briefly addressed in a subsequent section.

Permissive Notice: The Devil's Toolkit to Shorten Statute of Limitations
But when you die and someone opens an estate on your corpse's surviving liabilities and assets, your estate gets a superpower to cut short unsecured creditors' timeline to enforce their debts through something called "permissive notice." See Tex. Estates Code § 308.054. This notice says that if the unsecured creditor doesn't "present the claim before the 121st day" of its receipt of the notice, then their claim is barred; note that this provision simply governs the notice requirements. The actual bar on the claim is found in Section 355.060 ("[i]f a personal representative gives a notice permitted by Section 308.054 to an unsecured creditor for money and the creditor's claim is not presented before the 121st day after the date of receipt of the notice, the claim is barred'). The term "personal representative" includes an executor in a dependent estate and an "independent executor" in an independent estate, as well as a dependent administrator and independent administrator. Id. at § 22.031(a)(1), (2).

Wow, so if a debtor's estate representative simply sends a letter complying with the statutory requirements, you could slice a brand new limitations period on a brand new general debt from 1,460 days to 121 days + time to receive the notice? Seems fair. Like I said, it's probably due to some silly practical notion about making sure creditors don't sit on their laurels while estates try to tally up claims they may need to pay off so the estate can be divvied up among the heirs properly and reliably. That'd make more sense if estates actually got closed, but they almost never are, for whatever reason. And under the Code, if an estate is not closed, then the interests are not "wound up" and by definition interests remain outstanding. There's a big old chapter in the Code called Chapter 362: CLOSING ADMINISTRATION OF ESTATE. Wow, so sounds like there is something to do, even if it's "not done practically." Section 362.001 says the estate will be "settled and closed when: all the debts known to exist against the estate have been paid" or paid as can be and "no further need for administration exists." And anyone interested in the estate can "compel settlement of the estate if it does not appear from the record that . . . [it] has been closed." Id. at Sec. 362.002. The materials to close up the estate need to account for "debts that have been paid" and "debts and expenses still owing by the estate." Id. at Sec. 362.004. Furthermore, if "an order for final partition and distribution of an estate has been made," then a creditor's claim cannot be allowed or sued upon against the representative, but the creditor can sue on the claim "against the heirs, devisees, or creditors of the estate, limited to the value of the property received by those . . . in distributions from the estate." Id. at § 355.063.

Alright, so that means if an estate is open and not wound up by all the necessary documents and filings, a creditor is free to present a claim if not otherwise barred.

Claims Presentment

Creditors' claims' "general statute of limitations" is tolled by filing them with the clerk. Id. at Sec. 355.008(1). These claims "may be presented to a personal representative . . . at any time before the estate is closed" and not otherwise barred by general SOL. Id. at Sec. 355.001. The claim can be presented by "depositing . . . with the clerk with vouchers and the necessary exhibits and affidavit attached to the claim." Id. at § 355.002(a). For purposes we'll get into shortly, a claim deposited with the clerk is deemed rejected if the representative "fails to act on the claim" (as by disallowing or allowing) on or before the 30th day after the date the claim is deposited." Id. at § 355.002(b).

To me, depositing means filing. I have no clue what a voucher is so don't ask. The exhibits are usually whatever supports the claim, and the affidavit is laid out in Section 355.004-.005. An attorney can file the affidavit. Furthermore, defects in the exhibits or voucher are waived unless the representative files a "written objection . . . not later than the 30th day after the claim is presented and is filed with the county clerk." Id. at § 355.007.

Allowance and approval are two distinct concepts in estates litigation. A representative either allows or disallows a claim, indicating it's okay paying it out. See generally id. at § 355.051-.052. You need to file the claim whether or not it's allowed. Id. at § 355.053. A court approves or disapproves a claim, whether allowed or disallowed. Id. at § 355.055, .057. Time-barred claims cannot be allowed, and if allowed must be disapproved. Id. at § 355.061. If a claim is rejected, it "is barred unless not later than the 90th day after the date of rejection the claimant commences suit" in the court where the estate is pending. Id. at § 355.064(a). A creditor cannot recover a judgment on the claim unless it was presented and was rejected. Id. at § 355.065. An adjudicated claim must be treated pursuant to the classification scheme and "handled as if originally allowed and approved in due course of administration." Id. at § 355.066.

No claim can be paid unless approved or adjudicated. Id. at § 355.101.

Alright, so that's the basic claims scheme in an estate, in a dependent scenario. The following will discuss independent estate issues.

Suing On a Claim in Independent Estates

This is all complicated by lack of language about how half the shit in the Code regarding claims doesn't apply to independent administrators / executors. For that, you get to "infer" and "argue" or otherwise rely on case law. Most of what is described above refers to dependent estates.

Independent estates are basically those estates which have told the court they don't want judicial aid in resolving claims for the most part. If there's a fight, it can be handled by the court. Section 401.001(a) lays out that a testator can lay out in his will "that no other action shall be had in the probate court in relation to the settlement of the person's estate than the probating and recording of the will and the return of any required inventory, appraisement, and list of claims of the person’s estate.”

This limitation does not prevent an independent executor from using permissive notice to prematurely bar unsecured claims not presented on time. In fact, the Code specifically provides for this power. Section 308.054(a) applies this power to any “personal representative,” which we see has been defined to include independent executors or administrators. Additionally, in Section 403.055, it is explicitly provided that any unsecured creditor who receives a Section 308.054 notice “shall give to the independent executor notice of the nature and amount of the claim before the 121st day after the date the notice is received or the claim is barred.” So the same rule is provided in two places in the Code, so no question exists that an independent executor can use permissive notice to screw a creditor out of its claim if they don’t take immediate action to preserve their rights.

It is thus clear from the Code that in an independent estate, an unsecured creditor who receives a permissive notice needs to timely present its claim as required. Presentment of claims to the independent executor is governed by Section 146 of the old Probate Code, only as amended September 1, 2011, and now recodified in Section 403.056 of the Estates Code, which defines the three methods of presentment as:

1) a "written instrument that complies with Section 355.004 and is hand-delivered with proof of receipt, or mailed by certified mail, return receipt requested, to the independent executor or the executor's attorney;"

2) filing a pleading in a lawsuit with respect to the claim (no need to wait for rejection, in other words)

3) a § 355.004-compliant "written instrument" or pleading filed in the court in which the administration of the estate is pending.
This is huge. The 2011 amendments to the Probate Code changed years of independent administration practice, as for the most part, informal presentment of claims was the name of the game for these executors, which led to a lot of questions about the limits of informality. 

Basically, the claim has to mirror one of the three methods listed in the permissive notice, and if you do not do that, you did not present the claim, and the claim will be barred for all estates whose decedents died on or after September 1, 2011. The Estates Code has not changed this, merely rearranged the rule a bit and changed "four months" to a more specific 121 days.

Concerns

The rejection concerns of claims which run in dependent cases do not apply here, thanks to these amendments; you simply file suit as a means of presenting the claim, or after the affidavit under Section 355.004 is presented. I am pretty sure a claim is not tolled on basis of filing it with the clerk (but boy, have I argued otherwise!).

In the unsecured debt context, I am also 100% very concerned that if a creditor comes late to the game and sues an independent executor for a rejected claim, that creditor is going to be limited to recovering only from any property still under control of the executor. However, I feel that is very cheap, as there is any number of cases where an independent executor refuses to notice a creditor of an estate, which could be opened in Nowhereville and not where a creditor might be running its frequent estate checks. Why should a creditor get reamed out of its ability to recover from property that is distributed because the executor decided not to permissive notice an unsecured creditor? In my opinion, if a creditor is unaware of an estate and comes late to the party, presents its claim, is rejected, and sues the executor, the creditor should not then be told, “Too bad, so sad, there’s nothing left in the estate in the possession of the executor ‘subject to the debt.’” But that seems like that is exactly what the Code contemplates. A dilemma. Perhaps the eager creditor should open an adversary estate and run it itself, which runs into all manner of costs; but such costs may be worth it depending on the size of the claim. I don’t know. I don’t even know if this is what the law necessitates. Remember, in the dependent context, a claim established by suit needs to be treated in the classification scheme as though it’d been processed on a timely fashion ("handled as if originally allowed and approved in due course of administration," Tex. Estates Code§ 355.066). Why should a late-to-the-game dependent estate creditor get way better treatment than a late-to-the-game independent estate creditor? Is this a messup of the Code, or a contemplated result? Is it even a contemplated result? I dunno. But it sounds like a spot ripe for a fight (and one I may pick soon with some estate reps).