Pnc Mortgage, a Division of Pnc Bank, N.A. Successor to National City Bank and National City Mortgage, a Division of National City Bank of Indiana v. John Howard and Amy Howard

Supreme Court of Texas
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No. 21-0941
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PNC Mortgage, a Division of PNC Bank, N.A. Successor to
National City Bank and National City Mortgage, a Division of
National City Bank of Indiana,
Petitioner,

v.

John Howard and Amy Howard,
Respondents

═══════════════════════════════════════
On Petition for Review from the
Court of Appeals for the Fifth District of Texas
═══════════════════════════════════════

Argued December 1, 2022

CHIEF JUSTICE HECHT delivered the opinion of the Court.

This case is before us for a second time. It is undisputed that PNC
Mortgage, whose predecessor refinanced the Howards’ original
mortgage loans, did not initiate foreclosure proceedings until the statute
of limitations had expired on a claim to enforce its own lien. The issue
in the first round of appeals was whether the common-law doctrine of
equitable subrogation provided PNC with an alternative means of
foreclosure. The court of appeals “balance[d] the equities”, including
PNC’s negligence, and held that the trial court did not err by denying
PNC’s claim for equitable relief and rendering judgment for the
Howards. 1
While PNC’s first petition for review was pending before this
Court, we answered the Fifth Circuit’s certified question in Federal
Home Loan Mortgage Corp. v. Zepeda. 2 That case involved the ability of
a home-equity lender to foreclose through equitable subrogation when
its own lien was invalid under Article XVI, Section 50 of the Texas
Constitution. 3 Relying on a line of cases dating back to 1890, we
explained that in the mortgage-lending context specifically, a refinance
lender’s negligence in preserving its own lien plays no part in its
entitlement to enforce an earlier lien through equitable subrogation. 4
Because the court of appeals’ equity-balancing analysis in the first
appeal of this case conflicted with our analysis in Zepeda, without
hearing oral argument, we reversed the court of appeals’ judgment and
remanded with an instruction to address the Howards’ claim that PNC’s
equitable-subrogation claim is time-barred. 5

1 PNC Mortg. v. Howard, 618 S.W.3d 75, 84-85 (Tex. App.—Dallas 2019)
[PNC I], rev’d, 616 S.W.3d 581 (Tex. 2021). There are three prior appellate
court decisions in this case, all with the same style. We will use the short forms
PNC I and PNC II when citing the decisions of the court of appeals and the
short form Howard when citing the prior decision of this Court.
2 601 S.W.3d 763 (Tex. 2020).
3 See id. at 764-765.
4 See id. at 766-767 (discussing Tex. Land & Loan Co. v. Blalock, 13
S.W. 12 (Tex. 1890)).
5 Howard, 616 S.W.3d 581 (Tex. 2021).

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 On remand, the court of appeals concluded that any equitable-
subrogation claim that PNC could have asserted would have accrued
when PNC accelerated the Howards’ note and that, therefore, this claim
is time-barred too. 6 We agree and affirm.
I
John and Amy Howard took out two mortgages with First
Franklin Financial Corporation to purchase a home in 2003. Two years
later, they refinanced those loans with the Bank of Indiana, using the
proceeds of that loan to pay off their initial mortgages. The Bank of
Indiana later assigned its note and deed of trust to PNC.
The Howards stopped paying in 2008. PNC accelerated the note
in 2009, but then Amy Howard filed for bankruptcy. In early 2010, the
bankruptcy court entered a consent order memorializing a new
repayment schedule, but the Howards remained delinquent on the
amended note.
Shortly thereafter, in the spring of 2010, the Bank of Indiana,
despite having assigned its note to PNC, sent the Howards a notice of
acceleration. In short order, the Bank appointed a substitute trustee to
conduct a nonjudicial foreclosure sale of the Howards’ property, where
the property was purchased by the Bank.
The Howards immediately sued to set aside the foreclosure sale,
naming both the Bank and PNC as defendants. But then the litigation
stalled. Four years later, in 2014, the trial court granted the Howards’

6 PNC II, 651 S.W.3d 154, 160 (Tex. App.—Dallas 2021).

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motion for partial summary judgment against the Bank and rendered a
judgment declaring the foreclosure sale void.
Only then—in January 2015—did PNC make any claim based on
the Howards’ failure to pay the note that PNC held. By then the four-
year statute of limitations 7 had expired on PNC’s claim to foreclose on
its own lien. So, in both a counterclaim to the Howards’ wrongful-
foreclosure suit and affirmatively in a separate lawsuit, PNC asserted a
claim for foreclosure on the lien held by the Howards’ original lender,
First Franklin, which was transferred to PNC’s predecessor, the Bank,
in the refinance transaction through the doctrine of equitable
subrogation. The trial court consolidated the two suits, held a bench trial
on facts stipulated by the parties, and rendered a judgment for the
Howards that PNC take nothing. A ping pong of appellate proceedings
followed. The question in this most recent round is when any claim by
PNC to enforce the lien acquired through subrogation would have
accrued. The answer turns on how subrogation operates in the
mortgage-lending context.
II
“Subrogation simply means substitution of one person for
another; that is, one person is allowed to stand in the shoes of another
and assert that person’s rights against the defendant.” 8 The right of

7 See TEX. CIV. PRAC. & REM. CODE § 16.035(a) (“A person must bring
suit for the recovery of real property under a real property lien or the
foreclosure of a real property lien not later than four years after the day the
cause of action accrues.”).
8Subrogation, BLACK’S LAW DICTIONARY (11th ed. 2019) (quoting 1
DOBBS, LAW OF REMEDIES § 4.3(4), at 604 (2d ed. 1993)); see also Zepeda, 601

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substitution arises “because, for some justifiable reason, the subrogation
plaintiff has paid a debt owed by the defendant.” 9 We see subrogation
most often in an insurance context, but it “applies ‘in every instance in
which one person . . . has paid a debt for which another was primarily
liable’”. 10
Sometimes the right of substitution “arises by contract”, 11
sometimes it is provided for by statute, 12 and sometimes it “arises by
operation of law or by implication in equity”. 13 In the third case,
equitable factors such as negligence or knowledge are sometimes
relevant to a party’s entitlement to a remedy through subrogation. 14 Yet
sometimes equitable factors play no role at all in the application of the

S.W.3d at 765 n.3.
Subrogation, BLACK’S LAW DICTIONARY (11th ed. 2019) (quoting 1
9

DOBBS, supra note 8, § 4.3(4), at 604).
Frymire Eng’g Co. v. Jomar Int’l, Ltd., 259 S.W.3d 140, 142 (Tex.
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2008) (quoting Mid-Continent Ins. Co. v. Liberty Mut. Ins. Co., 236 S.W.3d 765,
774 (Tex. 2007)).
Zepeda, 601 S.W.3d at 765 n.3 (quoting Subrogation, BLACK’S LAW
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DICTIONARY (11th ed. 2019)).
12See Fortis Benefits v. Cantu, 234 S.W.3d 642, 648 (Tex. 2007) (“The
three varieties of subrogation—equitable, contractual, and statutory—
represent three separate and distinct rights that, while related, are
independent of each other.”); Guillot v. Hix, 838 S.W.2d 230, 231 (Tex. 1992)
(observing that under the Workers’ Compensation Act, “[w]hen a claim for
workers’ compensation is made, the insurance carrier is subrogated to the
rights of the injured employee and may enforce the liability of the person who
caused the injury”).
Zepeda, 601 S.W.3d at 765 n.3 (quoting Subrogation, BLACK’S LAW
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DICTIONARY (11th ed. 2019)).
14See id. at 767 n.17 (noting the role of equitable principles in the lien-
priority context and some insurance contexts).

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doctrine we call equitable subrogation. 15 Because subrogation is
something of a shapeshifter, courts and litigants should use caution
before relying on language about subrogation that appears in a different
kind of case. 16
A
What the substituted party obtains through subrogation depends
on the context. 17 Subrogation can give an insurance carrier or another
party standing to assert a damages claim that initially belonged to a tort
victim. 18 By contrast, in the mortgage-lending context, what subrogation
gives a refinance lender is merely a back-up lien. 19 This distinction has

15 See Howard, 616 S.W.3d at 584 (“A lender’s negligence in preserving
its rights under its own lien . . . does not deprive the lender of its rights in
equity to assert an earlier lien that was discharged using proceeds from the
later loan.” (citing Zepeda, 601 S.W.3d at 766)).
16 To promote clarity in legal arguments and opinions, we also
encourage courts and litigants to avoid the terms subrogor and subrogee, which
are used in many of our past cases. The subrogor is the original creditor—
“[s]omeone who allows another to be substituted for oneself” or “who transfers
a legal right to collect a claim to another in return for payment”. Subrogor,
BLACK’S LAW DICTIONARY (11th ed. 2019). The subrogee is the transferee and
new creditor or plaintiff—“[s]omeone who is substituted for another in having
a right, duty, or claim”. Subrogee, BLACK’S LAW DICTIONARY (11th ed. 2019).
But the terms are easy to mix up, and their use could cause mischief.
17See Subrogation, BLACK’S LAW DICTIONARY (11th ed. 2019) (stating
that subrogation “entitl[es] the paying party to rights, remedies, or securities
that would otherwise belong to” another).
18 See Frymire, 259 S.W.3d at 147 (holding that under the doctrine of
equitable subrogation, an HVAC subcontractor who indemnified a hotel owner
for property damage caused by a faulty valve had standing to assert product-
liability claims against the valve’s manufacturer).
19 In LaSalle Bank National Association v. White, we said:

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consequences for when a claim acquired through subrogation accrues.
Take, for example, an insurer’s statutory right of subrogation
under the Workers’ Compensation Act. Under the Act, an insurance
carrier who pays benefits to an injured employee becomes “subrogated
to the rights of the injured employee and may enforce the liability of the
third party” by asserting the claim the injured worker could have
brought. 20 In this context, “[t]here is but one cause of action against the
third party tortfeasor”—the claim belonging to the employee, which is
transferred to the carrier under the Act. 21 We have thus held that

Texas has long recognized a lienholder’s common law right to
equitable subrogation. The doctrine allows a third party who
discharges a lien upon the property of another to step into the
original lienholder’s shoes and assume the lienholder’s right to
the security interest against the debtor. The doctrine of equitable
subrogation has been repeatedly applied to preserve lien rights
on homestead property. If applied in this case, LaSalle’s
payment of the balance of the purchase-money mortgage and the
accrued taxes on White’s property would entitle it to assume
those lienholders’ security interests in the homestead.
246 S.W.3d 616, 618-619 (Tex. 2007) (emphases added) (citations omitted); see
also Zepeda, 601 S.W.3d at 766 & n.13 (citing LaSalle for the same
proposition); Benchmark Bank v. Crowder, 919 S.W.2d 657, 661 (Tex. 1996)
(“We have previously held that a third party who refinances a debt secured by
a valid mechanic’s lien against a homestead may be subrogated to the lien.”
(emphasis added)).
20 TEX. LAB. CODE § 417.001(b); see also Guillot, 838 S.W.2d at 232
(explaining that “a carrier’s subrogation rights under the Workers’
Compensation Act” are “entirely derivative of the [injured employee’s]
interests”).
21 Guillot, 838 S.W.2d at 232 (quoting Phennel v. Roach, 789 S.W.2d
612, 615 (Tex. App.—Dallas 1990, writ denied)). The carrier’s recovery through
subrogation “is limited to the amount of the total benefits paid or assumed by
the carrier to the employee . . . , less the amount by which the court reduces

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“because the [insurer’s] subrogation claim is derivative of the employee’s
rights, . . . it accrues at the same time the employee’s action against the
third party accrues.” 22
PNC urges us to apply a similar rule here. It argues that
limitations on a refinance lender’s subrogation claim should not begin to
run until the maturity date of the note on the original debt that was
later refinanced. This idea is supported by a few federal district court
decisions. 23
The accrual rule urged by PNC is incompatible with “the dual
nature of a note and deed of trust” under Texas law, however. 24 In the

the judgment based on the percentage of responsibility . . . attributable to the
employer.” TEX. LAB. CODE § 417.001(b).
22 Guillot, 838 S.W.2d at 235. In earlier cases, we had held, based on
statutory language then in effect, that the carrier’s subrogation claim accrued
when the carrier paid the employee or when its obligation to do so was
established. See id. at 233-234. But there were “difficult[ies] with this rule”,
and by the time we decided Guillot, the statutory language had been amended.
Id. at 234.
23 See De La Cruz v. Bank of N.Y., No. A-17-CV-00163-SS, 2018 WL
3018179, at *6 (W.D. Tex. June 15, 2018); Priester v. Long Beach Mortg. Co.,
No. 4:16-CV-00449, 2018 WL 1081248, at *4 (E.D. Tex. Feb. 28, 2018);
Zepeda v. Fed. Home Loan Mortg. Ass’n, No. 4:16-CV-3121, 2018 WL 781666,
at *5 (S.D. Tex. Feb. 8, 2018), rev’d, 967 F.3d 456 (5th Cir. 2020). These cases
rely on Gillespie v. Ocwen Loan Servicing, LLC, 4:14-CV-00279, 2015 WL
12582796, at *4 (S.D. Tex. Oct. 28, 2015), but a close reading of Gillespie casts
doubt on whether it supports the rule urged by PNC and adopted by these
district court decisions.
24Martins v. BAC Home Loans Servicing, L.P., 722 F.3d 249, 255 (5th
Cir. 2013). The Fifth Circuit summarized Texas law as follows:
The Texas courts have repeatedly discussed the dual nature of a
note and deed of trust. It is so well settled as not to be
controverted that the right to recover a personal judgment for a

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refinance transaction, the original note is paid. That note then ceases to
exist; it no longer has a maturity date; and a new note between the
borrower and the refinance lender is executed.
What equitable subrogation actually transfers to a refinance
lender is the original creditor’s security interest, so the refinance lender
has an alternative lien if its own lien is later determined to be invalid. 25
This transfer occurs automatically, by operation of law, when the
refinance lender’s money is used to pay off the original creditor’s loan

debt secured by a lien on land and the right to have a foreclosure
of lien are severable, and a plaintiff may elect to seek a personal
judgment without foreclosing the lien, and even without a
waiver of the lien. Where a debt is secured by a note, which is,
in turn, secured by a lien, the lien and the note constitute
separate obligations. The Texas courts have rejected the
argument that a note and its security are inseparable by
recognizing that the note and the deed-of-trust lien afford
distinct remedies on separate obligations. A deed of trust gives
the lender as well as the beneficiary the right to invoke the
power of sale, even though it would not be possible for both to
hold the note.
Id. (citations and quotation marks omitted).
25 See supra note 19. In Zepeda and the cases on which it relied, the
refinance transaction failed one of the “litany of exacting terms and conditions”
in Article XVI, Section 50 of the Texas Constitution. 601 S.W.3d at 766 (citing
Garofolo v. Ocwen Loan Servicing, L.L.C., 497 S.W.3d 474, 477 (Tex. 2016)). A
refinance lender’s lien might also be invalidated by a mistake of fact occurring
at the time the transaction was made. See Kone v. Harper, 297 S.W. 294 (Tex.
Civ. App.—Waco 1927) (when refinance lender paid a note held by a prior
creditor, the creditor had already sold the note and deed of trust to a third
party), aff’d, 1 S.W.2d 857 (Tex. Comm’n App. 1928); Hays v. Spangenberg, 94
S.W.2d 899 (Tex. Civ. App.—Austin 1936, no writ) (debtor was determined to
be mentally incompetent at the time of execution); see also Gillespie, 2015 WL
12582796 (one of the borrowers on the first loan did not sign the deed on the
second note).

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and discharge its lien. 26 In Zepeda, we explained the public-policy reason
for this transfer and how it ultimately “protect[s] homestead property.” 27
B
The transfer or substitution that occurs through subrogation puts
the party receiving the interest on par with the party from whom the
interest was transferred. Subrogation does not put the party receiving
the interest in a better position than the party from whom it was
transferred. 28 This is another reason why the accrual rule urged by PNC
is wrong and why the rule applied by the court of appeals is correct. 29
A claim to foreclose on a real property lien accrues when the
underlying note is accelerated. 30 If the Howards’ original lender had
accelerated their notes due to nonpayment, that lender would have had
four years from the date of acceleration to initiate foreclosure
proceedings. 31 If that lender had accelerated but then waited to foreclose
until the final due date of the note, perhaps some thirty years later, its
foreclosure claim would have been lost. But PNC’s proposed rule could

26 See Howard, 616 S.W.3d at 584 (“[E]quitable-subrogation rights
become fixed at the time the proceeds from a later loan are used to discharge
an earlier lien.” (citing Zepeda, 601 S.W.3d at 766)).
27 601 S.W.3d at 768 (quoting LaSalle, 246 S.W.3d at 620).
28Cf. Mid-Continent Ins. Co., 236 S.W.3d at 774 (“[T]he insurer stands
in the shoes of the insured, obtaining only those rights held by the insured
against a third party, subject to any defenses held by the third party against
the insured.” (emphasis added)).
See PNC II, 651 S.W.3d at 160 (“PNC cannot, in the name of equity,
29

have more rights than the party to which it is subrogated . . . .”).
30 See id. at 156 (collecting cases).
31 See TEX. CIV. PRAC. & REM. CODE § 16.035(a).

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give a refinance lender—just by virtue of being the second lender in
time—not only four years from the date of acceleration to foreclose on
its own lien but then an additional period, perhaps decades, to foreclose
on the lien it acquired through subrogation. 32
Like the original lender, a refinance lender has only one
foreclosure claim, which accrues when the note made in the refinancing
transaction is accelerated. If the lien created by the refinance
transaction turns out to be invalid, then equitable subrogation
substitutes the remedy of foreclosing on the original creditor’s lien
instead. 33 Subrogation provides the refinance lender with an alternative
remedy, not an additional claim. 34 The court of appeals thus correctly

32 Though perhaps unlikely in the modern era of thirty-year mortgages,
if an original note with a short term is refinanced into a longer-term note,
under PNC’s proposed rule, the refinance lender could lose any right to
foreclose through subrogation before the borrower defaults on the refinanced
note. PNC’s rule would thus produce arbitrary results that could negatively
impact the ability of some borrowers to refinance for a reason having nothing
to do with the borrower’s creditworthiness—the remaining term on the original
note at the time of refinancing.
33 See LaSalle, 246 S.W.3d at 619 (“By definition, equitable remedies
apply only when there is no remedy at law . . . .”); Kone, 297 S.W. at 300 (“The
question is, not whether the right to subrogation is barred, for such right
arises, if at all, as a matter of law . . . .”); see also Mid-Continent Ins. Co., 236
S.W.3d at 774 (“Having a right to subrogation, however, is distinct from the
ability to recover under that right.”).
34 PNC’s argument that equitable tolling operated to defer the accrual
of its subrogation claim until after its claim to foreclose on its own lien became
time-barred fails for this reason. PNC cites Hughes v. Mahaney & Higgins,
where we held that “when an attorney commits malpractice in the prosecution
or defense of a claim that results in litigation, the statute of limitations on the
malpractice claim against the attorney is tolled until all appeals on the
underlying claim are exhausted.” 821 S.W.2d 154, 157 (Tex. 1991). Hughes
involved two distinct lawsuits: one for adoption and a second for the lawyer’s

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held that any claim PNC would have had through subrogation to
foreclose on the original lender’s lien would have accrued in June 2009,
when the Howards’ refinanced loan was accelerated. 35 Because PNC did
not initiate foreclosure within four years of that date, 36 its claim is time-
barred. 37
* * * * *
We affirm the judgment of the court of appeals.

Nathan L. Hecht
Chief Justice

OPINION DELIVERED: May 12, 2023

malpractice in the adoption case. This case involves only a single claim for
foreclosure.
35 PNC II, 651 S.W.3d at 159-160; see also Hays, 94 S.W.2d at 902 (“Nor
do we think limitation began to run against Spangenberg’s [subrogation] rights
until the due date of the note executed to him.” (emphasis added)).
PNC asserts in its briefing that it abandoned the June 2009
acceleration during Amy Howard’s bankruptcy proceeding. But this case was
tried on stipulated facts, and one says: “The Parties agree the Note was
properly accelerated on June 19, 2009.” There is no mention of abandonment,
and PNC has not offered an alternative acceleration date. And based on the
parties’ stipulation to the June 2009 acceleration date, PNC conceded in the
trial court that its claim to foreclose on its own lien was time-barred.
36 TEX. CIV. PRAC. & REM. CODE § 16.035(a).
37 PNC argues that our prior decision in this case demands a holding
that its claim is not time-barred. Howard, however, addressed whether a
lender’s negligence bars equitable subrogation in the first place, see 616 S.W.3d
at 584-585, not the date a lender’s foreclosure claim accrues.

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