Like in the movie Matrix when Neo has that déjà vu feeling when he sees the black cat go by him again, the opinion in Skipworth v. Reverse Mortgage Funding LLC, 2022 U.S. Dist. LEXIS 181282 (N.D. Tex. October 4, 2022) is issued. Skipworth follows the line of cases based on a landmark opinion I have used successfully for many years – Riverside National Bank v. Lewis, 603 S.W.2d 169, 174-175 (Tex. 1980). The issue in Skipworth and Riverside was whether a person was a “consumer” under the Texas Deceptive Trade Practices – Consumer Protection Act (DTPA).
A consumer under the DTPA is statutorily defined. To qualify as a consumer and have standing to raise a DTPA claim, “a person must have sought or acquired goods or services by purchase or lease,” and “the goods or services purchased or leased must form the basis of the complaint.” Tex. Bus. & Com. Code § 17.45(4).
In Skipworth, Patricia Skipworth and her husband took out a reverse mortgage in favor of Reverse Mortgage Solutions and executed a deed of trust encumbering real property in Terrell, Texas. Through various conveyances, the note and deed of trust ended up in the hands of Reverse Mortgage Funding. Skipworth defaulted on the note and multiple lawsuits were filed by and against both Reverse Mortgage Solutions and Reverse Mortgage Funding. Without getting bogged down in the complicated procedural issues as cases bounced back and forth between state court and bankruptcy courts, the issue regarding consumer standing in Skipworth is straightforward.
Skipworth alleged she was a consumer under the DTPA because the objective in acquiring the loan from Reverse Mortgage was the purchase of her house. The court disagreed by looking at the plain language of the deed of trust which stated that the pledge of the house was to secure a reverse mortgage which is a type of home equity loan available to seniors, age 62 and older, to provide the resources to remain in their home for the rest of their lives.
Applying the definition of consumer, the trial court, relying on Riverside and Walker v. FDIC, 970 F.2d 114, 123 (5th Cir. 1992), held that the lending of money is not a good or a service. Further, a borrower whose sole objective is to get a loan, does not become a consumer under the DTPA. The court also repeated that while someone who borrows money to buy a house can become a consumer sometimes, subsequent actions related to mortgage accounts – for example, extensions of further credit or modifications of the original loan – do not satisfy the goods or services element of the DTPA. Skipworth v. Reverse Mortgage Funding LLC, 2022 U.S. Dist. LEXIS 181282 * 17-18 (N.D. Tex. October 4, 2022).
Standing of a claimant is always one of the first steps to look at when a lawsuit comes across my desk. The Texas DTPA is not just a sword but a shield because it has very specific requirements for standing to bring a DTPA claim. Counsel should look at what the complaint is and what the claimant’s real objective is when a claim is made under the DTPA. Many times, the pleadings try to mask the real objectives of the transaction. Focusing on the plaintiff’s objective in depositions, discovery, and the express language of the underlying documents may provide a good basis for moving for summary judgment on unfounded DTPA claims.
The opinions in this blog are solely the author’s and any comments, replies, or suggestions should be sent to john@jrjoneslaw.com.