Home Equity Loan: Void or Voidable?

In August 2002, after Kroupa and WIlliams had been living together in a common law marriage for a number of years, Williams took out a home equity loan on the parties’ residence without telling Kroupa.  Kroupa discovered the home equity loan the following month, in September 2002.  Several years passed, and Kroupa and Williams finalized their divorced in 2007 and Kroupa received the residence as part of that proceeding.  In 2008, Kroupa filed a petition seeking to have the home equity loan declared as void.

On appeal, the Court looked to the Texas Constitution’s 1998 amendment concerning home equity loans to determine whether Kroupa could prevail.  Under that amendment , Kroupa argued that the home equity line was void because she did not sign the written agreement or consent to it as the Texas Constitution required.  In response, Williams and Wachovia (the holder of the lien) insisted that Kroupa’s claim was barred by the applicable statute of limitations.  Examining the Texas Constitution and the line of cases discussing this specific provision, the Court found that becuase the lien here was voidable and not void, the statute of limitations applied.  The Court then found that, because Kroupa discovered the lien in September in 2002, and because she filed her lawsuit in September 2008, her suit was barred by the four-year statute of limitations.

Williams v. Wachovia Mortgage Corp.

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