Capstead Mortgage Corp. v. Sun America Mortgage Corp.

Citations: 45 S.W.3d 233; 2001 Tex. App. LEXIS 1587; 2001 WL 227376Docket: No. 07-99-0231-CV

Court: Court of Appeals of Texas; March 7, 2001; Texas; State Appellate Court

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Capstead Mortgage Corporation appeals a trial court's summary judgment favoring Sun America Mortgage Corporation, which denied Capstead's claims of alleged defaults under a Conventional Mortgage Loan Purchase and Sale Agreement. Capstead raises two main issues: first, that the trial court incorrectly applied the doctrine of election of remedies in granting the judgment; second, that the judgment should not stand based on alternative grounds presented by Sun America.

The original agreement, executed on March 11, 1992, included 31 warranties from Sun America, such as the absence of usury and the validity of the mortgage note. Capstead purchased several mortgage loans from Sun America, including a loan involving mortgagor Kadeem Omari for $281,800, which defaulted before any payments were made. Following Omari's failure to pay, Capstead demanded that Sun America repurchase the loan and concurrently initiated foreclosure proceedings. The foreclosure sale occurred on May 2, 1995, with Capstead acquiring the property at the sale.

Capstead subsequently filed suit against Sun America asserting three causes of action: breach of duty to indemnify, breach of duty to repurchase the loan, and breach of warranties. Sun America's motion for summary judgment cited five grounds, including that the foreclosure extinguished the loan and that Capstead's actions constituted election of remedies.

Before addressing Capstead's issues, the court confirmed that the April 12, 1999 order, while labeled as a partial summary judgment, was deemed a final judgment due to the non-suit of certain claims, as supported by the clerk's records. The court applied the standard for reviewing summary judgments in Texas, referencing established case law. Ultimately, the court affirmed the lower court's ruling.

A motion for summary judgment must specify its grounds under Tex.R. Civ. P. 166a(c). To succeed, the movant must demonstrate the absence of a genuine issue of material fact and entitlement to judgment as a matter of law, either by proving all essential elements of their claim or negating an essential element of the non-movant’s case. Once the movant establishes this, the non-movant bears the burden to respond and present any preclusive issues, which must be formally submitted in writing, not merely referenced in evidence. Failure to present these issues in writing precludes them from being raised on appeal. All arguments for or against the summary judgment must also be documented in writing. If a summary judgment does not state the grounds relied upon, it can still be affirmed on appeal if any grounds in the motion are valid. 

In the case discussed, Capstead argued that a foreclosure sale did not represent an election of remedies. However, this was rejected since Capstead bid the complete mortgage balance and acquired the property. The doctrine of election of remedies, aimed at preventing inconsistent legal positions, was addressed in past rulings, including cases that barred claims based on previously chosen remedies. The mortgage contract defined non-payment of the first two monthly payments as a 'defect' and stipulated that the seller must cure such defects or repurchase the loan. The seller also had an indemnification obligation for losses arising from breaches or defects. Texas case law supports enforcing a duty to repurchase against a seller, provided the contract remains enforceable, which was confirmed in Vandergriff Chevrolet Co. Inc. v. Forum Bank. Capstead did not argue that the mortgage obligation survived the foreclosure; rather, it acknowledged that the mortgage note was extinguished when Capstead bid the full amount and took ownership of the property.

Capstead's bid at the foreclosure sale extinguished the mortgage note and constituted an election of remedies, as supported by the precedent set in Lomas, Nettleton Co. v. Huckabee. Although Capstead cited Custom Leasing, Inc. v. Texas Bank, Trust Co. to argue against this, the court found that Huckabee's interpretation applied to Capstead's situation. Capstead's first issue was thus overruled.

In its second issue, Capstead claimed the summary judgment could not be affirmed based on alternative grounds provided by Sun America. While Capstead addressed some of these grounds, it failed to counter the assertion that the foreclosure extinguished the loan obligation. The relevant contract sections (2.01 and 2.02) included warranties that would continue for the "life of the Mortgage Loan," but Capstead admitted that the loan was extinguished upon foreclosure, which meant those warranties ceased. Since Capstead did not address this critical ground, the court upheld the summary judgment without needing to review Sun America's other arguments.

The trial court's judgment was affirmed as it did not specify the grounds for all of Capstead's claims, and the election of remedies issue was sufficient to support the judgment. The contract did not reference Texas Business and Commerce Code sections regarding warranties on presentment and transfer. Capstead had multiple causes of action, but the lack of specificity in the trial court's order regarding these claims led the court to review the summary judgment without clear grounds being stated.