FILED

14-0326
12/22/2014 2:55:26 PM
tex-3567216
SUPREME COURT OF TEXAS
BLAKE A. HAWTHORNE, CLERK

NO. 14-0326
_____________________________________________________

IN THE

SUPREME COURT OF TEXAS

_____________________________________________________

WELLS FARGO BANK, N.A., AS TRUSTEE FOR OPTION ONE

MORTGAGE LOAN TRUST 2006-1 ASSET-BACKED CERTIFICATES,
SERIES 2006-1

Petitioner

v.

LONZIE LEATH

Respondent.
_____________________________________________________

From the Court of Appeals for the Fifth Judicial District of Texas
No. 05-11-01425-CV

RESPONSE TO PETITIONER’S BRIEF ON THE MERITS

_____________________________________________________
LAW OFFICE OF WENDEL A. WITHROW
Wendel A. Withrow
Bar No.: 21830800
1120 Metrocrest, Suite 200
Carrollton, Texas 75006
Phone: 972-416-2500
Fax: 972-417-0685
E-Mail: wendel@withrowlaw.com
ATTORNEY FOR RESPONDENT
 TABLE OF CONTENTS

Page

TABLE OF CONTENTS ........................................................................................ (ii)

INDEX OF AUTHORITIES .................................................................................. (iv)

RESPONSE TO UNTITLED PAGE X ................................................................ (vii)

RESPONSE TO STATEMENT OF JURISDICTION ......................................... (ix)

RESPONSE TO STATEMENT OF THE ISSUES ................................................ (x)

RESPONSE TO STATEMENT OF FACTS ............................................................. 1

RESPONSE TO SUMMARY OF THE ARGUMENT ............................................ 3

RESPONSE TO ARGUMENT .................................................................................. 7

A. STANDARD OF REVIEW……………………………………… .….7

B. STANDARDS FOR INTERPRETING THE TEXAS

CONSTITUTION .................................................................................. 7

C. THE COURT SHOULD GRANT REVIEW TO PREVENT THE

CONSTITUTIONAL SAFE HARBOR IN SECTION 50(h) FROM
BEING ERODED (RESTATED) ......................................................... 9

D. THE COURT OF APPEALS’ WAIVER DECISION CONFLICTS

WITH THIS COURT’S PRECEDENT AND THAT OF THE
TEXARKANA COURT OF APPEALS (RESTATED)…………….12

E. THE COURT OF APPEALS ADOPTED A NOTICE STANDARD

UNDER SECTION 50(a)(6)(Q) (x) THAT IS UNWORKABLE AND
WOEFULLY INADEQUATE IN LIGHT OF THE FOREFEITURE
PENALTY THAT IS AT STAKE (RESTATED)…………………. 16

(ii)
PRAYER ............................................................................................................... 27

CERTIFICATE OF COMPLIANCE……………………………………………. 28

CERTIFICATE OF SERVICE ............................................................................. 29

APPENDIX ........................................................................................................... 30

(iii)
 INDEX OF AUTHORITIES

CASES Page

Cathey v. Booth 900 SW2d 339 (Tex. 1995)………………………………………14

Coastal Liquids Transp., L.P. v. Harris Cnty.Appraisal Dist.,

46 S.W.3d 880, 885 (Tex. 2001)......................................................................... 5, 6

Crump v. Frenk, 404 S.W.3d 146

(Tex. App. - Texarkana 2013, no pet.)................................................................ 13

Curry v. Bank of America 232 S.W.3d 345, 353

(Tex.App.Dallas 2007 pet. denied)........................................................................ viii

Curry v. Bank of America 232 S.W.3d 345, 354

(Tex.App.Dallas 2007 pet. denied)................................................................... 19, 25

Custom Leasing, Inc. v. Texas Bank and Trust Company of Dallas

516 SW2d 138, 144 (Tex. 1974)………………………………………………….14

Garza v. Southland Corp. 836 SW2d 214, 218

(Tex. App. – Houston [14th Dist.] 1992…………………………………………...15

Gilbane Bldg. Co. v. Two Turners Electric Co.

2007 WL 582252 (Tex. App – Hou. 14th District) 2007 pet. denied……………..14

Harris Cnty. Hosp. Dist. V. Tomball Reg’l Hosp., 283 S.W.3d 838, 842
(Tex. 2009)………………………………………………………………………7, 8

LaSalle Bank Nat’l Ass’n. v. White, 246 S.W.3d 616, 619 (Tex. 2007)…………..7

OAIC Commercial Assets, L.L.C. v. Stonegate Vill., L.P.,

234 S.W.3d 726, 747 (Tex. App.-Dallas 2007, pet. denied)
(op. on reh=g).................................................................................................... 5

Stringer v. Cendant Mortg. Corp., 23 S.W.3d 353, 355 (Tex. 2000)…………….7

(iv)
 INDEX OF AUTHORITIES

CASES Page

Texas Commission on Human Rights v. Morrison,

381 S.W.3d 533, 536 (Tex. 2012).................................................................... 13

THE FINANCE COMMISSION OF TEXAS, THE CREDIT UNION

COMMISSION OF TEXAS, AND TEXAS BANKERS ASSOCIATION,
PETITIONERS v. Valerie Norwood, Elise Shows,
Maryann Robles-Valdez, Bobby Martin, Pamela Cooper,
and Carlos Rivas, Respondents (Tex. 2014)
#10-0121 ON PETITION FOR REVIEW FROM THE COURT OF
APPEALS FOR THE THIRD DISTRICT OF TEXAS.......................................... 21

Thota v. Young, 366 S.W. 3d 678 (Tex. 2012)........................................................12

U.S. Tire-Tech, Inc. vs. Boeran 110 SW2d 194, 200

(Tex. App. – Houston [1st Dist.] 2003 pet. denied………………………………..16

Young vs. McKim 373 S.W.3d at 776, 784

(Tex. App. – Houston) [14th Dist.] 2012 pet. denied............................................. 13

(v)
STATUTES

TEX.R.CIV.P. 166a(c)................................................................................ 13

Tex. Admin. Code '153.91 ........................................................................ 21

7 Tex. Admin. Code '153.91(a)(3)(2004)................................................. 19

Texas Constitution Section 50(a)(6)(Q)(X).................................................... viii, 11

Texas Constitution Section 50(a)(Q)(X)(b)................................................... 20, 21

Texas Constitution Section 50(h)……………………vii, 3, 4, 10, 11, 12, 13, 16, 23

(vi)
 RESPONSE TO PAGE X
TO THE HONORABLE SUPREME COURT OF TEXAS

Petitioner has presented a number of Aintroductory@ remarks to the Supreme

Court which must be addressed:

1. The Court of Appeals did not ignore any provisions of the Texas

Constitution=s home equity provisions. The Court of Appeals addressed all legal

issues and factual findings properly presented to the Trial Court and then raised on

appeal to the Court of Appeals. As will be detailed herein, key Afacts@ alleged by

Petitioner were not, and are not Afacts@ presented at the Trial Court level and must be

disregarded.

2. The failure of the Petitioner to timely raise the defense of Section 50(h)

was directly addressed by Judge Brown in her Supplemental Opinion on Rehearing.

In addition to the waiver issue, Judge Brown specifically questions Wells Fargo=s

statement: Athe facts are undisputed that the requirements for protection under Section

50(h) were satisfied at closing.@

Respondent will show that Petitioner=s allegations are not correct statements of

the facts in this case, but that the trial testimony showed the original lender, H&R

Block Home Mortgage, had actual notice that this property and its appraisal had

problems, but chose to go forward anyway.

(vii)
 3. In response to the Notice requirement under Section 50(a)(6)(Q)(X), this

issue was never presented by Trial Counsel or Appellate Counsel, Robert Negrin, for a

very good reason: The issue of notice was conclusively established against Wells

Fargo nearly 32 years before the jury trial even started. Trial Counsel for Wells

Fargo never plead the issue of notice, never presented contradictory evidence on

>notice= because there was no such contradictory evidence. Trial counsel never asked

for a jury question or jury instruction on Anotice@ because the issue was never raised or

disputed. Appellate Counsel Negrin never raised the issue because it had not been

raised at trial and was not contested on appeal, until the Motion for Rehearing by new

Appellate counsel.

4. The required notice was satisfied on numerous occasions by undisputed

facts and therefore could not be Agutted@ by the Court of Appeals. Justice Fitzgerald=s

dissent is apparently based on an acceptance of Wells Fargo=s unsupported statement

that no proper notice was given. See Curry v. Bank of Am. N. A.232 S.W.3d 345, 353

(Tex. App. - Dallas 2007, pet. denied). As will be pointed out hereinafter, the appraisal

value problems started prior to the loan even closing and both the original mortgage

company and Wells Fargo were given multiple notices of an appraisal problem and

chose to do nothing, either before, during or after the 60 day cure period.

(viii)
 RESPONSE TO STATEMENT OF THE JURISDICTION

1. The case is of exceptional importance to the parties, but not of “the construction of

the Texas Constitution’s homestead protections.” As will be noted in great detail

herein, the facts of this case are very specific and only ‘exceptional’ in the multiple

failures of the mortgage lenders to follow the law or even attempt to follow the law

after receiving multiple notices of the deficiency.

2. The Court of Appeals waiver analysis is not in conflict with any Court of Appeals

opinion. The attempt to “stretch” the cited opinions into a conflict should be rejected

as discussed in detail in the Response to Argument paragraph D herein.

3. Justice Fitzgerald’s dissent on the Motion for Rehearing was clearly based on an

acceptance of an unsupported statement by Petitioner as to the “notice” being

insufficient or inadequate. The record clearly shows otherwise.

(ix)
 RESPONSE TO STATEMENT OF THE ISSUES

1. Issue #1 contains two incorrect and incomplete factual premises which

should be corrected as follows:

(b) There was also an earlier appraisal which the lender rejected. This

appraisal was even lower and would have violated the 80% rule to an even

greater degree.

(c) The independent appraiser=s report contained an error which was

confirmed in sworn testimony by the lender chosen appraiser

himself at trial and was then confirmed by the jury=s answer to the

valuation question.

(d) There was evidence from the beginning that the original lender had

actual notice of an appraisal problem.

As phrased, the “conclusive presumption” is not the correct legal test and the

only undisputed evidence confirms notice to the lender.

2. As stated, Issue #2 by Petitioner is incomplete. In addition to Lender=s

failure to Acite to Section 50(h) in the district court or before rehearing in the Court of

Appeals,@ it should also include that lender failed to raise the issue in any discovery

response, any trial pleading, any testimony, any document, any jury instruction, any

jury question, or any post-trial motion.

(x)
3.Issue #3 labels the borrower=s allegation as Ageneric@ which is incorrect and not

supported by the record. The written notice by Mr. Leath=s attorney was given nearly

32 years prior to trial. (See Appendix Exhibit One) It was specific and cited the exact

constitutional violation. Further, there were multiple other notices which were

ignored by the lender and at no time did H&R Block, Option One, or Wells Fargo

comply or attempt to comply with the cure provision available under the Texas

Constitution.

(xi)
 RESPONSE TO STATEMENT OF FACTS

Respondent would point out the following corrections and additional facts for

the Court to consider:

1. All parties did not agree the valuation of the property was $425,000.00 in

its present condition.

2. Prior to the Crum Appraisal, the lender had a lower appraisal for

$414,500.00, but Athey were not satisfied with that, and directed us to Mr. Crum@ RR

Vol. 4 pg 10 and page 18.

3. Mr. Leath and H&R Block had multiple discussions over the value of the

property and that it was a correct value Acontingent upon the repairs begin done@ RR

Vol. 4 pages 11-15, pages 21-22.

4. H&R Block went so far as to promise to make the repairs if the contractor

did not do so. RR Vol 4, pages 14-17 and Plaintiff=s Exhibit 5.

5. The H&R Block loan was initially serviced by Option One and then taken

over by Wells Fargo. Mr. Leath complained about the repairs not being done and that

the value was not what they were alleging it to be. RR Vol 4 pages 33-35.

6. Mr. Crum=s sworn testimony confirms the appraisal was incorrect and Mr.

Crum=s failure to check the box that the appraisal was subject to repairs is an error of

Mr. Crum who was selected, hired, and paid by the lender.

1
 7. The only “revisionist history” in this case is that Petitioner was given

multiple notices of an appraisal problem, but chose to take no action, either by way of

investigation or cure. The uncontroverted truth is that the most explicit, detailed and

undeniable notice was sent 3 ½ years before trial. (Attached Appendix One)

2
 RESPONSE TO SUMMARY OF THE ARGUMENT

1. Section 50(h)'s Safe Harbor Protection is critically important because it

provides security to lenders and borrowers that when a mistake is made, there is a

process to Acure@ that mistake. While Petitioner talks about Atraps@ and Agotchas,@

there is no evidence that Mr. Leath entered into this transaction with any such ideas.

There is evidence that after being given multiple notices, H&R Block and Wells Fargo

took no steps to investigate the problem, take advantage of the cure provision, or even

acknowledge a problem existed.

2. The prior discussion of Petitioner of Asubsequent assignees need

assurance@ would be far more effective if Petitioners would have followed the law and

done something to Acure@ the mistake after explicit and exact notice. If they are really

concerned about those Aassignees@ who buy their loan paper, they would take at least a

few steps towards resolving the problem, rather than ignoring it. If anything

undermines Athat assurance,@ it is not the Court of Appeals opinion, but the

mishandling of this home equity loan and not following the strict requirements which

the lender must adhere to.

3. Petitioner=s conclusion that allowing a Judge and Jury to review the

transaction somehow imposes a Anew risk@ on lenders or their assignees is not well

founded. First, it is a statement not supported by any testimony or other evidence.

3
Second, the Petitioner and their Aassignees@ would obviously favor a system of non-

review which prohibits the challenge of errors.

The Texas Constitution provides a mechanism for notice and then 60 days to

cure. The Petitioner did not follow that mechanism. The only revisionist history

going on is the Petitioner trying to distract the Court from the errors made by H&R

Block, Petitioner and the appraiser they hired and used as an expert at the trial.

The next paragraph in Petitioner=s extended >summary= of the argument contains

the following inaccurate statements which must be responded to:

A. The Court of Appeals did not adopt a standard contrary to the

constitutional mandate. The adequacy of the notice was never contested by the lender

for the simple reason that the multiple notices were clear, concise and certainly

adequate to trigger the >cure= provision of the Constitution. If the provider was truly

interested in >curing= the mistake, it has provided no evidence that during the 32 years,

it ever asked for more details or conducted any investigation after receiving the notices.

As a final note, the statement that Wells Fargo “had none of that” is only because they

did not look. Even a cursory review of the loan file from H&R Block would have

raised appraisal problem red flags.

4. The Petitioner argues that a sufficiency of the evidence argument

somehow allows the Court to now consider Section 50(h). While this ignores the well

4
recognized Appellate rules of not raising issues in a timely manner, it should be

rejected for the following additional reasons:

A. The sufficiency of the evidence arguments on appeal never

discussed whether there was sufficient evidence of the notice of a

constitutional violation. The only argument was whether the jury had

sufficient evidence of the value they found for the property.

As pointed out and accepted by the Court of Appeals and acknowledged by

current counsel for Wells Fargo in his Petition, the jury accepted the testimony of the

lender=s expert appraiser in answering the jury question on value. The evidence was

sufficient and Wells Fargo submitted no contrary evidence to the jury answer.

In reviewing the cases cited by Petitioner in this Summary, it is clear that these

do not support reversing the opinion of Judge Brown as follows:

Generally, we do not base our rulings on arguments raised for the first time on

rehearing.

See OAIC Commercial Assets, L.L.C. v. Stonegate Vill., L.P., 234 S.W.3d 726,

747 (Tex. App.-Dallas 2007, pet. denied)(op. on reh=g) (AA motion for rehearing

does not afford a party an opportunity to raise new issues after the case has been

briefed, argued, and decided on other grounds, unless the error is

fundamental.@); see also Coastal Liquids Transp., L.P. v. Harris Cnty.

5
 Appraisal Dist., 46 S.W.3d 880, 885 (Tex. 2001) (issue raised for first time on

rehearing is waived)

5. As noted above, Justice Fitzgerald=s dissent was apparently based on an

unsupported and inaccurate statement by the Petitioner that the Notice was insufficient.

If the Notice was a disputed issue, the Petitioner could have plead it and tried to prove

it to the same Judge and jury. It did not do so.

Whether the issue is waived or not, the undisputed facts were that the multiple

notices were clear and definitive. Certainly sufficient to start the 60 day >cure= period.

6
 RESPONSE TO ARGUMENT

A. STANDARD OF REVIEW: The issues presented to this Court do contain

‘issues of law,’ but they must be based on the facts and evidence as presented at the

Trial Court. If the Petitioner is allowed to make legal arguments based on

hypothetical or non-existent facts, there would no limit to the issues which could be

raised that have no relation to the case actually tried or the rulings made by the Trial

Court and the Appellate Court.

B. STANDARDS FOR INTERPRETING THE TEXAS CONSTITUTION:

When this Court is called upon to interpret the Texas Constitution, the following

rules correctly cited by Petitioner are applicable to this case:

“the fundamental guiding rule is to give effect to the intent of the makers

and adopters of the provision in question.” Harris Cnty. Hosp. Dist. V.

Tomball Reg’l Hosp., 283 S.W.3d 838, 842 (Tex. 2009); see also Stringer

v. Cendant Mortg. Corp., 23 S.W.3d 353, 355 (Tex. 2000). The Court

“presume[s] the language of the Constitution was carefully selected, and

… interpret[s] words as they are generally understood.” Id. The Court

“rel[ies] heavily on [the Constitution’s] literal text and must give effect to

its plain language.” LaSalle Bank Nat’l Ass’n. v. White, 246 S.W.3d

616, 619 (Tex. 2007). The Court may also “consider such matters as the

7
 history of the legislation, the conditions and spirt of the times, the

prevailing sentiments of the people, the evils intended to be remedied,

and the good to be accomplished.” Harris Cnty., 283 S.W.3d at

842....And the Court “strive[s] to avoid a construction that renders any

provision meaningless or inoperative.” Id.

Of particular importance is the Harris Cnty. Case which is a reminder that the

history of the legislation is very important. In regard to the Home Equity Loan

provisions, the lending industry had lobbied vigorously for decades to overturn the

most basic provision of the Texas Constitution which prohibited such loans as a

protection of the Texas homeowner against losing that most valued possession to a

lender other than the original mortgage company. When the necessary

Amendments to the Constitution were allowed, very strict provisions and

procedures were put in place to give maximum protection to the homeowner who

found themselves in the position, often due to hardship, to take out a Home Equity

Loan.

In this case, Mr. Leath and his family had suffered multiple hardships and

received multiple solicitations from H&R Block to take out such a loan. While

Forfeiture is a harsh remedy, it is the “literal text” of the Law and no one forced

8
 H&R Block or Wells Fargo to engage in the Home Equity Loan business in the

State of Texas.

C. THE COURT SHOULD GRANT REVIEW TO PREVENT THE

CONSTITUTIONAL SAFE HARBOR IN SECTION 50(h) FROM BEING ERODED

(RESTATED)

As a response to the Petitioner’s Argument, Petitioner is attempting to combine

two different sections of the Texas Constitution which serve two very different

purposes in how Home Equity Loans are viewed and administered.

Section 50(h) allows a lender to rely on an appraisal if two requirements are met:

1) The appraisal has to be prepared in accordance with State or

Federal law. One such requirement is accuracy.

2) The lender does not have actual knowledge that the fair market

value was incorrect.

On the first requirement:

A. The Petitioner=s own Statement of Facts states the Appraiser did not check

the correct box regarding repairs.

B. The Petitioner=s own Statement of Facts admits that Mr. Crum had made a

mistake on the appraisal amount by not subtracting out the repairs.

9
 C. Mr. Crum was selected, hired and paid by the Lender H&R Block which

sold the loan to Petitioner.

D. As a matter of law, the mistakes of Mr. Crum are imputed to H&R Block

and the Petitioner.

E. As a matter of law, the first requirement of Section 50(h) had not been

met by Petitioner and Trial Counsel Negrin never made any attempt to plead or prove

otherwise.

On the second requirement of Section 50(h), the following evidence was

presented at trial.

A. Prior to the Crum Appraisal, the lender had a lower appraisal for

$414,500.00, but Athey were not satisfied with that, and directed us

to Mr. Crum@ RR Vol. 4 pg 10 and page 18.

B. Mr. Leath and H&R Block had multiple discussions over the value

of the property and that it was a correct value Acontingent upon the

repairs begin done@ RR Vol. 4 pages 11-15, pages 21-22.

C. H&R Block went so far as to promise to make the repairs if the

contractor did not do so. RR Vol 4, pages 14-17 and Plaintiff=s

Trial Exhibit 5.

D. The H&R Block loan was initially serviced by Option One and

10
 then taken over by Wells Fargo. Mr. Leath complained about the

repairs not being done and that the value was not what they were

alleging it to be. RR Vol 4 pages 33-35.

E. The above testimony was not contradicted by Petitioner.

F. As a matter of law, the second requirement regarding actual

knowledge of the lender has not been met and based on the

evidence, the Lender did have actual knowledge.

G. Trial Counsel Negrin did not plead or attempt to prove otherwise.

As a consequence of the above, Petitioner has not plead, proved or otherwise

shown the Court any evidence that it is entitled to the benefits of Section 50(h).

As to Petitioner=s statement about a Afree house,@ the Texas Constitution states

that@... the lender or any holder of the note for the extension of credit shall forfeit all

principal and interest of the extension of credit if the lender or holder fails to comply

with the lender=s or holder=s obligations under the extension of credit....@ Texas

Constitution Section 50(a)(6)(Q)(X).

If Petitioner wanted to avoid this clause, Petitioner could have reviewed the loan

more carefully, consulted H&R Block or the appraiser about the repair issue, and most

importantly, taken advantage of the cure provision as provided in sub-paragraph (b) of

11
 that same sub-section after receiving the first notice letter on or about January

25, 2008.

Petitioner did not take advantage of the cure provision and has not done so to

this date.

D. THE COURT OF APPEALS= WAIVER DECISION CONFLICTS WITH THIS

COURT=S PRECEDENT AND THAT OF THE TEXARKANA COURT OF

APPEALS (RESTATED)

Respondent would show there is no conflict with any of the cases cited by

Petitioner as follows:

1. As detailed below, the cases cited by Petitioner are not even close to being

>on point.=

2. Thota and Morrison both discuss broad form submission of jury questions

which have no relevance to whether an Appellate Court can use its Acommon sense

application of our procedural rules@ to expand an insufficient evidence argument about

the jury=s valuation answer to whether the requirements of Section 50(h) were satisfied

or not. They are not the same issue, by even the most liberal view of Acommon sense.@

3. Specifically, in Thota v. Young, 366 S.W. 3d 678 (Tex. 2012), the

Supreme Court did not mention any such analysis of >form over substance= that would

allow the new issue to be considered.

12
 In Crump v. Frenk, 404 S.W.3d 146 (Tex. App. - Texarkana 2013, no pet.), the

Texarkana Court actually held the opposite of what Petitioner has cited this case for.

By clear and concise language the Court concluded in paragraph [12] that because

Crump raises this argument for the first time on appeal, she has waived any error. See

Young v. McKim, 373 S.W.3d at 776, 784 (Tex. App. – Houston) [14th Dist.] 2012 pet.

denied; see also TEX.R.CIV.P. 166a(c).

In Texas Commission on Human Rights v. Morrison, 381 S.W.3d 533, 536

(Tex. 2012) the Supreme Court did rule that to preserve a ACasteel@ complaint on

appeal, the objection to a broad form jury question did not have to mention the case

name ACasteel.@ However, the Court clearly kept the requirement that the Trial Court

had to be Asufficiently put on notice@ and be aware of a specific objection. In

Petitioner=s brief, Wells Fargo has pointed to no testimony, statement by counsel, or

document which would have made the Trial Court or even the Appellate Court aware

of Petitioner=s Section 50(h) complaint, until the Motion for Rehearing.

4. This Court should not grant review because the Petitioner never made the

Acorrect argument or objection@ regarding Section 50(h) either in substance, form or

otherwise. There was never a dispute over notice and Trial Counsel Negrin correctly

moved on to the only disputed fact issue which was valuation.

5. Any attempt to raise Section 50(h) at the Appellate level has been waived.

13
 6. In further considering the waiver issue, the Court should also note the

following:

A. Rule 94 requires “any other matter constituting an avoidance or affirmative

defense” to be plead or it is waived. Also, Defendant (Petitioner herein) must

establish all elements of an affirmative defense and request jury questions, or it

is waived. See Cathey v. Booth 900 SW2d 339 (Tex. 1995) and Gilbane Bldg.

Co. v. Two Turners Electric Co. 2007 WL 582252 (Tex. App – Hou. 14th

District) 2007 pet. denied. In this matter, Defendant did not plead, proved, or

request a jury question on the ‘notice’ or the ‘cure’ issue.

B. Rule 272 requires all objections to the charge be in writing or dictated to the

Court Reporter or they are “waived.” Specifically, the Texas Supreme Court

has ruled: “Rule 272 Texas Rules of Civil Procedure, requires only the

submission of disputed facts.” Custom Leasing, Inc. v. Texas Bank and Trust

Company of Dallas 516 SW2d 138, 144 (Tex. 1974). Defendant made no such

objection.

C. Rule 273 requires any requested Jury Questions to be submitted separately

from any objections to the charge. Defendant made no such request on ‘notice’

or ‘cure.’

14
D. Rule 274 Objections and Requests

A party objecting to a charge must point out distinctly the objectionable

matter and the grounds of the objection. Any complaint as to a question,

definition, or instruction on account of any defect, omission, or fault in

pleadings, is waived unless specifically included in the objections.

Specifically, “when addressing a complaint on the submission of a jury

question, any complaints not specifically in the objections are waived.” Garza

v. Southland Corp. 836 SW2d 214, 218 (Tex. App. – Houston [14th Dist.] 1992.

Defendant made no such complaint on ‘notice’ or ‘cure.’

E. Rule 278 specifically requires “…a party shall not be entitled to any

submission of any question raised only by a general denial and not raised by

affirmative written pleadings by that party.” And “Failure to submit a questions

shall not be deemed a ground for reversal of the judgment, unless its

submission, in substantially correct wording, has been requested in writing and

tendered by the party complaining of the judgment;….” Defendant made no

such pleading or requested any jury question on the ‘notice’ or the “cure” issue.

F. Rule 279 is the most important ‘waiver’ rule:

Rule 279. Omissions From the Charge

Upon appeal all independent grounds of recovery or of defense not conclusively

15
 established under the evidence and no element of which is submitted or

requested are waived....If no such written findings are made, such omitted

element or elements shall be deemed found by the Court in such manner as to

support the judgment....

Since the Petitioner did not plead, prove, or otherwise even address the ‘Notice’ or

‘cure’ issues under Section 50(h) or any other statute, these are waived as a matter of

law and any omitted element or elements “shall be deemed… to support the judgment.”

U.S. Tire-Tech, Inc. vs. Boeran 110 SW2d 194, 200 (Tex. App. – Houston [1st Dist.]

2003 pet. denied.

E. THE COURT OF APPEALS ADOPTED A NOTICE STANDARD UNDER

SECTION 50(a)(6)(Q)(x) THAT IS UNWORKABLE AND WOEFULLY

INADEQUATE IN LIGHT OF THE FOREFEITURE PENALTY THAT IS AT

STAKE (RESTATED)

In Petitioner=s next issue, it claims the Court of Appeals has adopted an erroneous

notice standard to trigger the opportunity cure. In response:

1) The Court of Appeals was not presented with this precise issue because it

was not plead or tried at the Trial Court level. Further, the Notice Standard issue was

not even raised at the Appellate Court until the Motion for Rehearing. The issue has

been waived.

16
 2) The evidence of proper notice was never disputed by trial counsel because

of the evidence of multiple proper notices as follows:

A. Prior to the Crum Appraisal, the lender had a lower appraisal for

$414,500.00, but Athey were not satisfied with that, and directed us

to Mr. Crum@ RR Vol. 4 pg 10 and page 18.

B. Mr. Leath and H&R Block had multiple discussions over the value

of the property and that it was a correct value Acontingent upon the

repairs begin done@ RR Vol. 4 pages 11-15, pages 21-22.

C. H&R Block went so far as to promise to make the repairs if the

contractor did not do so. RR Vol 4, pages 14-17 and Plaintiff=s

Exhibit 5.

D. The H&R Block loan was initially serviced by Option One and

then taken over by Wells Fargo. Mr. Leath complained about the

repairs not being done and that the value was not what they were

alleging it to be. RR Vol 4 pages 33-35.

E. Mr. Leath=s attorney at the time, Neil A. Mabry sent a detailed

letter to Mr. Negrin=s law firm on January 25, 2008 citing the exact

provision of the Texas Constitution which the lender had violated.

(See attached Exhibit 1).

17
 NOTE: It is undisputed Wells Fargo never attempted to Acure@ this

violation of the Texas Constitution and there is no evidence it did

any investigation to determine the validity of the complaint.

F. After Wells Fargo filed its TRCP 736 action for an expedited

foreclosure on March 7, 2008, Mr. Leath filed his Answer on April

7, 2008 stating that the home equity loan had violated the Texas

Constitution by exceeding eighty percent of the actual fair market

value. [RR Vol. 8 Defendant=s Trial Exhibit 51] NOTE: It is

undisputed that Wells Fargo never attempted to Acure@ this

violation of the Texas Constitution.

G. Mr. Leath=s live pleading for the Trial which is the subject of this

appeal is Plaintiff=s Original Petition filed July 1, 2008. In

paragraph III of this Plaintiff=s Original Petition, Mr. Leath again

gives written notice to Wells Fargo that the home equity loan

violates the Texas Constitution [Appellee=s Exhibit 2] NOTE: It

is undisputed that Wells Fargo never attempted to cure this

violation.

18
 H. Even after the Final Judgment of July 8, 2011 and the jury verdict

May 9, 2011, Wells Fargo has never attempted to Acure@ this

violation.

Based on the above, Petitioner=s entire factual premise of a Ageneric@ notice is

not supported by any evidence.

Petitioner=s next argument discusses whether the Texas Administrative Code

guidelines were satisfied as to the necessary notice to trigger the 60 day Acure@

period. As reflected in 7 Tex. Admin. Code '153.91(a)(3)(2004) and discussed in

Curry v. Bank of America 232 S.W.3d 345, 354 (Tex.App.Dallas 2007 pet. denied),

the Court specifically does address this issue by stating:

AWe note it provides that notice is adequate under the cure provision if it

>include(s) a reasonable description of the alleged failure to comply=.@

Based on the multiple notices given in this matter noted in A-H above, the notice

given is certainly Aadequate.@ At the latest, the attorney letter of January 25, 2008

directly to the law firm of Mr. Negrin starts the 60 day period which has long expired

without any attempt at Acure@.

In response to the hypothetical posed by Petitioner:

1. The hypothetical is incomplete and does not represent the facts in this

case.

19
 2. The Supreme Court should not grant a Petition for Writ of Error based on

a hypothetical set of facts.

3. Even if the hypothetical facts were close to complete and correct,

Petitioner would have to follow the cure provision of the Texas Constitution in

50(a)(Q)(x)(b) as follows:

(b) sending the owner a written acknowledgment that the lien is valid only
in the amount that the extension of credit does not exceed the
percentage described by Paragraph (B) of this subdivision, if
applicable, or is not secured by property described under paragraph
(H) or (I) of this subdivision, if applicable;

Since Petitioner never took advantage of this Acure@ provision, there are no

facts to determine whether the Petitioner acted within the Law in how they

responded to the Notice. Petitioner did not respond at all. The 60 days expired.

In response to Petitioner=s argument about the size of the violation, Petitioner

made the decision to purchase this loan which took the 80% loan to fair market

value limit right to the edge. Petitioner made the decision to purchase this loan

without checking the file to see that there was a question about the repairs or the

appraisal and further, that H&R Block had received an even lower appraisal than

the $425,000.00. Petitioner made the decision to purchase a home equity

loan with full knowledge the 80% rule was in the Texas Constitution and that the

penalty was forfeiture. Petitioner=s complaint should be with H&R Block or its

20
own internal procedures for Purchasing loans in a >bundle.= The Court of Appeals

followed the law based on the facts before it.

The next argument of Petitioner is asking for a different standard of when the 60

day right to cure should begin. However, this proposed standard does not match the

Texas Constitution mandate for Awritten acknowledgment@ in Section 50(a)(Q)(x)(b).

It does not match the regulations set out in Tex.Admin.Code '153.91.

In the words of Chief Justice Hecht responding to a complaint about the

stringent nature of the Home Equity rules:

Whether the constitutional provision=s intended protection is worth the

hardship or could be more fairly or effectively provided by some other

method is a matter that must be left to the framers and ratifiers of the

Constitution. THE FINANCE COMMISSION OF TEXAS, THE CREDIT

UNION COMMISSION OF TEXAS, AND TEXAS BANKERS

ASSOCIATION, PETITIONERS v. Valerie Norwood, Elise Shows,

Maryann Robles-Valdez, Bobby Martin, Pamela Cooper, and Carlos

Rivas, Respondents (Tex. 2014) #10-0121 ON PETITION FOR

REVIEW FROM THE COURT OF APPEALS FOR THE THIRD

DISTRICT OF TEXAS.

The final arguments of Petitioner have all been addressed above with the

21
following key points to be considered by the Court:

1. If the Court accepts the Petitioner’s premise at p. 14 that “fair market

value” is just an “estimate”, then the Constitution’s specific language of 80% of the

fair market value would be rendered meaningless in violation of every case cited by

Petitioner at page 10 in its STANDARD FOR INTERPRETING THE TEXAS

CONSTITUTION. If “fair market value” is really a moving target, then Mr.

Krum’s testimony could have been even more in error thus making the size of the

Constitutional violation even larger.

2. The Petitioner acknowledges at page 16 that one critical part of Section

50(h) is that the Lender cannot seek its protection if it was aware the appraised value

was not correct. As noted above in great detail, the only evidence in this case is that

H&R Block was aware of a serious appraisal problem. It was so aware that it even

took the incredible and probably unprecedented step of promising to make those

repairs if necessary.

While Petitioner Wells Fargo now claims it did not have such knowledge, it is

not only held as a matter of law to have such knowledge, but it could have easily found

it by just looking in the file and seeing the appraisal and repair issue discussions. It

could have addressed the problem prior to purchasing the loan or it could have told

H&R Block to keep that loan for H&R Block to handle. Petitioner did neither.

22
 3. The above discussion is even more important because Petitioner’s

discussion at page 18 begins with how “lenders or (as here) assignees” must rely on

records, it is clear they want to pick and choose which records they want to rely on.

As discussed, even a cursory review of the Leath loan file would have sent up multiple

red flags to any assignee contemplating purchasing that loan. Petitioner wants this

Court to protect them from their own failure in exercising due diligence. A request

which should be rejected.

4. The next argument by Petitioner at p. 17 have been addressed but can be

responded to with the same questioning as that of Judge Brown.

The undisputed testimony is that the lender did have knowledge of an appraisal

problem, one of which created by H&R Block itself by not accepting the lower

appraisal, but sending Mr. Leath to their own appraiser Mr. Krum. While there was

no direct testimony on the reasoning of the Lender wanting a higher appraisal, it is a

fair conclusion that a higher appraisal, meant a higher loan amount, and higher fee

when the Loan was sold to Petitioner Wells Fargo.

Therefore, the protections of Section 50(h) are actually conclusively established

against Petitioner.

5. The next Petitioner’s argument at p. 18 regarding whether the Fair Market

Value question is even proper for a Jury Question should be rejected for obvious

23
reasons that the Texas Constitution preserves the right to trial by jury on just such

questions of fact. Also if Petitioner’s argument was to be accepted, who would set the

figure? And would it still be just an “estimate” as argued earlier?

In the case at bar, the jury obviously listened very closely to the Lender’s expert

and came back with an answer which precisely matched his testimony. Any post-trial

argument by the Petitioner complaining about this jury answer should be rejected as

the Court of Appeals rejected it.

6. Petitioner’s next argument at p.20 is an attempt to attack Mr. Leath’s

signing the affidavit on value. While the argument leaves out the obvious real world

problem of a purchaser being put in the position to sign a large stack of documents

without any time to review, this particular case has undisputed sworn testimony by Mr.

Leath and the H&R Block documents to show that the value was only correct if the

repairs were made.

As indicated in the cases cited by Petitioner at pages 19-20, there are times when

a contradictory statement can be explained. Mr. Leath has more than explained this to

the Jury and the H&R Block documents confirm it. Petitioner’s conclusion is not

supported by any testimony and should be rejected.

7. The Petitioner’s argument at p.21 on a conflict with the Court of Appeals

24
has been rebutted previously. The cases cited by Petitioner are not on point. No

conflict exists.

8. The Petitioner’s argument at p.25 has been rebutted previously. The

level of Notice required has been set by the Finance Commission and discussed in

Curry v. Bank of America 232 SW3d 345, 354 (Tex.App. Dallas 2007 Pet. Denied).

While the standard of reasonable notice is acknowledged by the Petitioner at pages 26-

27, the Petitioner’s brief does not point to any testimony at trial which would support a

ruling that the Petitioner somehow was not fully informed. In comparing Mr. Leath’s

case to the facts in Curry v. Bank of America, the Curry notice is at one end of the

spectrum of almost no notice while Mr. Leath’s notice is precise, detailed, and

certainly “reasonable.” See Appendix Exhibit One for the letter of Attorney Mabry

sent to Attorney Negrin 3 ½ years prior to the trial.

As a final response to the Petitioner’s argument beginning at p.36, it should be

noted that prior to new Appellate counsel, Petitioner had never argued that in this case,

it did not have the adequate notice of Mr. Leath’s complaint. Specifically,

A. It filed no pleading stating that the notice was inadequate.

B. It answered no discovery stating the notice was inadequate.

C. It filed no Pre-Trial Motions stating the notice was inadequate.

D. It presented no testimony that the notice was inadequate.

25
 E. It asked for no jury question asking if the notice was inadequate.

F. It filed no post-trial motions stating the notice was inadequate.

G. It did not ask the Court of Appeals to rule the notice was inadequate until

new Appellate Counsel was hired.

In summary, Petitioner has not pointed this Texas Supreme Court to any

evidence that would contradict the clear and convincing conclusion that this trial was

never about whether the notice was inadequate because it was “adequate” and

“reasonable” as a matter of fact and law.

The Petition for Review should be denied.

26
 PRAYER

Respondent would pray that the Petition for Review be denied and that the Court

of Appeals be affirmed. In the alternative, Respondent would ask for oral argument, if

allowed, on the issues presented or that the matter be returned to the Court of Appeals

with instructions on any specific legal issues or conclusions. In the further alternative,

the case should be remanded to the Trial Court for the specific fact issue of whether the

notice was adequate to trigger the right to cure. As a final alternative, the Respondent

would ask for any other relief or ruling which is available under law or equity from the

Texas Supreme Court.

/s/
Wendel A. Withrow
Attorney for Respondent

27
 CERTIFICATE OF COMPLIANCE

I certify pursuant to TEX. R. APP. P. 9.4(i)(3) that this document complies with
the length limitations of Rule 9.4(i) and the typeface requirements of Rule 9.4(e).

1. Exclusive of the contents identified by Rule 9.4(i)(l), and inclusive of all

textboxes, footnotes, and endnotes, this document contains 6,917 words as
counted by the Word Count function of Microsoft Word 2010.

2. This document has been prepared in proportionally spaced typeface using:

Software Name and Version: Microsoft Word 2010

Typeface Name: Times New Roman
Font Size: 14 point

/s/
Wendel A. Withrow

28
 CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing Response to
Petitioner’s Brief on the Merits was sent on December , 2014 pursuant to Texas
Supreme Court Rules:

Robert T. Mowrey B. David L. Foster

Texas Bar No. 14607500 Texas Bar No. 24031555
rmowrey@lockelord.com dfoster@lockelord.com
W. Scott Hastings LOCKE LORD LLP
Texas Bar No. 24002241 600 Congress Avenue, Ste. 2200
shastings@lockelord.com Austin, Texas 78701
Daron L. Janis (512)305-4700
Texas Bar No. 24060015 (512)305-4800 (FAX)
djanis@lockelord.com
Locke Lord LLP
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201
(214) 740-8000
(214) 740-8800 (fax)

Robert N. Negrin
Texas Bar No. 14865550
rob.negrin@tx.cslegal.com
Codilis & Stawiarski, P. C.
650 N. Sam Houston Parkway East, Ste. 450
Houston, TX 77060
(281) 925-5200
(281) 925-5300 (fax

/s/
WENDEL A. WITHROW

29
 ÀPPEìIDTX
EXHTBTÍ ONE

LAW OFFI'CES
Ross & lH¿rrmws, P.C.
J650 Lovcll A venus
Fort Wolh, Tcxas 7610?
Pfione (817) 255-2044 Fax (El7) 25J-2090

Please refercnËcour FileNumûe¡ 1329${ whcn repl¡ing Ncil A. Mabry

Of Counscl

Jnnuary 25, 2008

Codilis & Starviarski vIA FACSIMILE to 281-925-5300

650 N. Sarn Houston Þkr¡ry,l/ 450 A}TD REGULAR MAIL
Houston, Texas 75060

Re: AccounlNunb¿r; 0019488717CN544-0e-0158

Botower: LonüeLeøtft
Properfl: 9J6 I{íckory Ihob Círcle,,Cedar I{il{ Te'xw î51t1

Dear Sir or Madam:

This letter is writ(en onbehalfoflonzieLeath with regard t0lhetbove refçrenccd ntofgage-

Initíally, Mr. Leathreccived anotíce thatyou intendcd to procecd to judicial loreclosure 0f lhis Joan
unlecs an agreernent was rsached between Option Onu Molgagc and Mr' Leafh in tcgurd to
utilization of orro of severalloss mitigatíon optíons. Mr. Leath responded irunsdiately sceking to
effectuate a modificalion ciftbç loan agreement rlhich would place any ullcged urrearage at the end
ofthe arnof ization schcdulc a¡d resu¡ne making his nomal monlhlypayruents. inthis regard, Mr.
Iæath promptly completed end rctumcd all suhmitted papcrwork rcspecting his applicatìon to enter
such an'agreement.

In that there was no promlt responso from Optíon One oryout oflice concerning the status
of this agrcement, lr4r. Leath contãøcd this firm regarding what would bo his potenfiul options with
respect to prevenfing the forcclosu¡ç, I reviewed thc papenvotkttrathad been supplied to me by Mr.
frât¡ anC ìt upp.*tnre that there maybe a serious problom with the validify of your liq ín regard
to this property. l-ccording to the settlernent statementprovidcd to me by tvfr. I.eath, a disbuncmenf
of cash occl¡red to the bonowu which would rendcr thïs a Homo Equity loan, As I am sure you are
awue, under Article 16, Sec, 5û (aXSXB) the aggrcgoto of ull hons sguity finalcing against a
homestcad mÂy not e¡c€ed 80% of the fair ma¡ket value sf suçh homest€ad.

Tfters were two appraisals which werc performed on this house a¡d whích were given
coruideration by the lcldø. Both are provided es ettachnents to tftis conespondence' Thc first
appraisal **
pärfo*ed on Aprít{S, 2ìO¡ and indicated t}¡¿t the house wotrld hsve a fnir mukct
vàìue equal to }E5o,O¿O.OO buiwæ miðe.-txprpssty curlingent upon complcfion of thc conrtrus{ion
project whioh wa.s under way ût üre tírne, The sæond appraisal wæ performcd on Scptelbcr 15,
iOO+ *¿ was used.by the lender in tireir fi.nal underwitiug proccss. That ap¡raisal repof indícates
that the determination of value was roade as arcsult of a "reccntly conpletcd...lotal renov¿lion and
mold rc¡rrediation project." The conditioo of a propcrly was describ€d æ being "like now."
 Codilís & Stawiarski
January 25,2008
Iage'2-

I{owever, thc condition of the property rvas ari¡hiug bul likc new and üre lcpairs had not
been effeotivcly cornplctcd. On Seplcrnbcr 9, I\¡tr. Leath had fu:icd a copy of an cstima(e ftom J,
Beebe Constructiort Sorvicc ard General Cont¡aclor -[nc. to Larry Englart at Option Olrd]I & R
Block showing that over $ I 10,000.00 in ropairs r¡,ere necessary to ttre propcrly due to impropcrþ
installed fl ooring and damage causcd by the cnors ä.nd omissions of thç roofing contractor. This fa¡r
was follawed by a second fu* qo September 17,2004 r¡'herein Mr. Leattr again ìdentifred the t\'/o

i
appraisals s(ating the fair r¡a¡kel valuç to be $350,000.00 and the contingency of same on the
II cffçctive conrpletionof thcreconstuuelion projecl, r{.pparentlybelieving lh¡tlhese problems could
I
I be tcsolvcd, OplÍon One chose {o procced with fhc loan closÍng on Octobe¡ 2I,2004, fhc
I
I Setilcncnt St¡tcruant indicatcs that its fo(al amount of the loan prcvided by Option Ons was
t
$280,000:00, The condítion .of the pmpeff1, cleally díd noi wma¡t the appraised value being
$350,000.00 andyouwill nôte'byreview 0f therecords oftlre Dallas CountyAppraisalDishict that,
because of tlris conditior¡ ttre 2006 ætd 200'l valueo have sígnifioeülly declined from ¿ high of .

$333,890.00toitscunentrnerketvalueof$232,890$0, Obviousi¡thÍspresenfsse¡iousíssueswith
respecl to thc valÌdity of your lien under A¡ticle 16, Scc.50..

As yoü may also be aware, Anicle 16, Sec, 50 offers you opportunÍties to address fhis
sítuatjon and Mr. Leailr may be arnerrable to yourreasonable considcËtiotrs which wÍll p¡eventthe
foroclosu¡s. I havs advised Mr, Leath that due to the seriousnots of this issug he should
immediafely furitiatc Iitígation in the evcnt you attempt to proóeed with a foreclosws witbout
addressing these issucs. I would appreciale you providing to rnyselfi in writing, e.ststement of
Option One's position r+'ith respcct to these rnalle¡s. Thank you fcr yoru ptompt atterttion to lhis
matter.

Sinceroþ

{tJ
Neil A.
Of Counsel
NAh{/baj
Enclorure(s)
cc: Lonzie Leath
File No.: 1329334