Opinion
CIVIL ACTION NO. 3:10-CV-733-F
04-19-2012
DAVID MASON MONTGOMERY Plaintiff, v. SUNTRUST MORTGAGE, INC., BARRETT, DAFFIN, FRAPPIER, et al., U.S. BANK NATIONAL ASSOCIATION as TRUSTEE FOR BS ABS 2006-STI Defendants.
ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT
BEFORE THE COURT is Defendants' Motion for Summary Judgment on Plaintiff's Amended Complaint (Doc. No. 15). A Response was filed on March 12, 2012 (Doc. No. 72), and a Reply was filed on March 26, 2012 (Doc. No. 79). A hearing was held on April 4, 2012. After considering the parties' arguments and relevant law, the Court is of the opinion that Defendants' Motion for Summary Judgment should be GRANTED.
Introduction
It is not the Court's usual practice to begin its orders with an introduction. Nevertheless, the Court wishes to make clear that the following Order Granting Defendants' Motion for Summary Judgment in no way affirms or approves of the mortgage loan modification process as it stands today. To be sure, the state of the current housing crisis, the lax laws that permitted such problems to arise, and the mechanisms that enable foreclosures to take place raise troubling questions. The creation and operation of the Mortgage Electronic Registration System, or MERS, also raises questions of propriety. But this case does not involve these issues. Here, there is no question that Plaintiff was in default, Defendants had a right to foreclose, and all notice requirements were met. As a result, the law makes it clear that summary judgment must be granted. But the law is not so rigid as to compel me to approve of it.
I. Factual and Procedural Background
This is a mortgage loan modification case. On or about August 2, 2006, Mr. Montgomery purchased property located at 1102 Compton Road, Irving, Texas, 75061. He borrowed $116,400.00 from SunTrust and executed and delivered a Note made payable to SunTrust in that amount. Section 1 of the Note provides that Mr. Montgomery promises to pay $116,400.00, plus interest, to the order of the Lender. Section 1 further states that the Lender is SunTrust, it may transfer the Note, and "anyone who takes this Note by transfer and who is entitled to receive payments under this Note is called the 'Note Holder.'" Section 3 of the Note states that Mr. Montgomery will make monthly payments under the Note on the first day of each month beginning in October, 2006. It also states that he will make payments every month until he has paid all of the principal, interest, and any other charges described in the Note. Section 6(B) provides that if Mr. Montgomery does not pay the full amount of each monthly payment on the date the payment is due, he will be in default. Section 6(C) states that if Mr. Montgomery is in default, the note holder may send him a written notice informing him that if he does not pay the overdue amount by a certain date, the Note Holder may require him to pay immediately the full amount of principal that he has not paid and all interest owed on that amount. Section 6(C) also notes that date must be at least 30 days after the date on which the notice is mailed to Mr. Montgomery or delivered by other means. Section 7 states that SunTrust may provide Mr. Montgomery notices by delivering or mailing them by first class mail to the property address listed in the Note.
The Property was secured by a Deed of Trust Mr. Montgomery executed. The Note and Deed of Trust are collectively referred to herein as the "Loan." The Lender under the Deed of Trust is "SunTrust Mortgage, Inc." and "any holder of the Note who is entitled to receive payments under the Note." Section 1 of the Deed of Trust provides that Mr. Montgomery shall pay when due the principal of, and interest on, the Note and any repayment and late charges due under the Note. Section 15 of the Deed of Trust is entitled "Notices" and states
All notices given by Borrower or Lender in connection with this Security Instrument must be in writing. Any notice to Borrower in connection with this Security Instrument shall be deemed to have been given to Borrower when mailed by first class mail or when actually delivered to Borrower's notice address if sent by other means. Notice to any one Borrower shall constitute notice to all Borrowers unless Applicable Law expressly requires otherwise. The notice address shall be the Property Address....
On November 3, 2010, the Court granted the Defendants' Motion for Summary Judgment as to Plaintiff's Original Complaint (Doc. No. 26). On December 20, 2010, Plaintiff filed his Motion to Reconsider Order Granting Defendants' Motion for Summary Judgment and Brief in Support. (Doc. No. 30). On January 13, 2011, the Court entered an Order Granting in Part and Denying in Part Plaintiff's Motion for Reconsideration (Doc. No. 32). The Court stated that there was no evidence that the Defendants had the right to foreclose because they failed to submit the loan schedule referenced as Attachment 1 in the Servicing Agreement. The Court vacated its previous order granting summary judgment on this sole issue, and ordered the Defendants to submit any appropriate briefing along with a properly admissible copy of the loan schedule or any other document which proves the Defendants have authority to foreclose on the Deed of Trust.
On February 3, 2011, the Bank Defendants filed their Brief in Support of Response to the Order and attached a redacted loan schedule containing Plaintiff's Loan (Doc. No. 34). Based on concerns that the loan schedule was not submitted and other inconsistencies which indicated that a fact issue remained whether the Defendants had rights as the lender to foreclose, the Court vacated its order granting summary judgment.
Since the vacation of the summary judgment, Mr. Montgomery has filed his First Amended Complaint, which asserts new allegations and causes of action against Bank Defendants. Mr. Montgomery admits that he has not made payments under the Note from August 2009 to January 2010. Thus, it is uncontested that he failed to make payments due and owing under the Note and was in default under the Note and Deed of Trust. Nevertheless, his claims are based on Defendants' alleged failure to properly: (1) provide notice of default prior to acceleration of the loan and notice of foreclosure; (2) file the notice of foreclosure; (3) post the notice of foreclosure; and (4) file assignments. In this Motion for Summary Judgment on Plaintiff's First Amended Complaint, Defendants alleged that they have presented evidence proving that they had the authority to foreclose and that all Mr. Montgomery's claims should be dismissed.
At the hearing, the Court ordered that Mr. Montgomery's bankruptcy schedules be produced. Defendants produced the requested documents which revealed that SunTrust is a creditor in the property and that Mr. Montgomery did not list SunTrust's secured claim in the property as disputed (Doc. No. 80).
II. Summary Judgment Standard
Summary judgment is proper "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); Willis v. Coca-Cola Enters., Inc., 445 F.3d 413, 416 (5th Cir. 2006). A genuine issue of material fact exists when the evidence is such that a reasonable jury could return a verdict for the non-movant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986). The non-moving party who bears the burden of proof at trial must go beyond the pleadings and present specific facts indicating a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986); Piazza's Seafood World, LLC v. Odom, 448 F.3d 744, 752 (5th Cir. 2006).
Summary judgment can be appropriate if the non-moving party "fails to make a showing sufficient to establish the existence of an essential element to that party's case." Celotex, 477 U.S. at 322-23. At this stage, all evidence and reasonable inferences to be drawn therefrom must be viewed in the light most favorable to the party opposing the motion. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962). The trial court is given broad discretion on whether to grant or deny a motion for summary judgment. See Anderson, 477 U.S. at 255 (noting that the trial court has the power to "deny summary judgment in a case where there is reason to believe that the better course would be to proceed to a full trial"); Richard D. Freer, Civil Procedure 451 (2d ed. 2009) ("[The court] has discretion to conclude that it would be more appropriate to go to trial rather than to grant the motion [for summary judgment].").
III.Discussion
1. Action on Fraudulent Lien on Property.
Mr. Montgomery seeks a ruling that there was a failure to establish that there was an endorsement of the Note from SouthTrust to Wachovia or an Assignment from MERS to SunTrust of the Note and Deed of Trust, the assignments of the Deed of Trust or the Note are invalid, and there is no evidence of a valid lien. Compl. ¶ 57.
The Court cannot grant this ruling. Defendants have demonstrated that on or about September 1, 2006, SunTrust sold and assigned the Loan to Federal National Mortgage Association through the Mortgage Loan Purchase and Servicing Agreement. Under Section 8.06 of the Servicing Agreement, SunTrust is permitted to foreclose on the properties securing the mortgage loans remaining within the Trust when borrowers of such mortgage loans come into and continue in default. Fannie Mae assigned the Loan to Bear Stearns Asset Backed Securities I LLC through the Mortgage Loan Purchase Agreement. The evidence shows that Bear Stearns deposited the Loan into the Bear Stearns Asset Backed Securities I Trust 2006-ST1, Asset- Backed Certificates, Series 2006-ST1 (through the Pooling and Servicing Agreement). U.S. Bank is the trustee of the Trust. Fannie Mae assigned all of its rights in, to and under the Servicing Agreement to U.S. Bank through the Assignment, Assumption, and Recognition Agreement. There is ample evidence of a valid lien.
2. Breach of Statutory Filing Notice Requirement.
Mr. Montgomery further contends that there were defects in the notice and foreclosure process. But the evidence demonstrates that all statutory requirements were met. Here, the Servicing Agreement expressly permits SunTrust to foreclose on the Property. Under Section 8.06 of the Servicing Agreement, SunTrust is permitted to foreclose on the properties securing the mortgage loans remaining within the Trust when borrowers of such mortgage loans default.
On September 11, 2009, in the Notice of Default and Intent to Accelerate, SunTrust notified Mr. Montgomery that his loan was in default for failure to make payments. SunTrust informed Mr. Montgomery that to cure the default he must pay all sums necessary to bring the loan current. SunTrust further notified Mr. Montgomery that in the event he did not cure the default within 30 days of the notice, SunTrust would accelerate the maturity date of the Note and declare all sums immediately due and payable. SunTrust also stated that if Mr. Montgomery did not cure the default, the Property would be scheduled for foreclosure. The notice further stated that Mr. Montgomery had the right to reinstate the loan after acceleration and the right to bring a court action to assert the non-existence of a default or any other defense to acceleration and sale. Thus, the September 11, 2009 notice complied with the Deed of Trust.
The Deed of Trust has identical requirements to Section 51.002 of the Property Code with respect to the notice, posting, and filing requirements of a notice of foreclosure sale. On December 8, 2009, by certified mail, Defendants, through Barrett, sent Mr. Montgomery a notice in which it informed him that they was accelerating his loan and foreclosing on his Property. The December 8, 2009 letter attached a Notice of Substitute Trustee Sale scheduling the foreclosure sale for January 5, 2010. The Notice of Substitute Trustee Sale designated the area outside the "George Allen Courtsbuilding" as the place of sale. The notice specifies the earliest time of sale as 1:00 P.M. The notice specified January 5, 2010 as the sale date and was sent on December 8, 2009, which is more than 21 days prior to foreclosure. Accordingly, Defendants provided proper notice to Mr. Montgomery under the Deed of Trust and Texas Property Code.
Mr. Montgomery further claims that Bank Defendants failed to properly file the Notice of Substitute Trustee Sale. (Compl. ¶¶ 40-43, 63.) His allegation is not that the notice of foreclosure sale was not filed in the office of the county clerk as is expressly required by the Texas Property Code, but rather that the notice was not recorded in the real property or deed records, which Mr. Montgomery claims is required under Sections 192.001 and 192.007 of the Texas Government Code. But because the Texas Property Code and Deed of Trust do not require recordation of the notice of foreclosure sale in the real property or deed records and because the evidence shows that the notices were filed in compliance with the Deed of Trust and Texas Property Code, Mr. Montgomery's claims cannot survive summary judgment.
The Deed of Trust and Section 51.002 of the Texas Property Code only require the notice of sale to be filed in the office of the county clerk, not filed in the real property or deeds records. Paragraph 22 of the Deed of Trust provides that: "If the Lender invokes the power of sale, Lender or Trustee shall give notice of the time, place and terms of sale by posting and filing the notice at least 21 days prior to sale as provided by Applicable Law." And Section 51.002(b)(2) of the Texas Property Code states that notice of the sale must be given at least 21 days before the date of sale by: "(2) filing in the office of the county clerk of each county in which the property is located a copy of the notice posted under Subdivision (1)." Section 51.002(f) of the Property Code instructs the county clerk to "keep all notices filed under Subdivision (2) of Subsection (b) in a convenient file that is available to the public for examination during normal business hours. The clerk may dispose of the notices after the date of sale specified in the notice has passed."
Despite the plain language of the statute, Mr. Montgomery maintains that the filing requirement equates to recordation in the real property or deed records. (Compl. ¶¶ 40-43, 63.) However, contrary to Mr. Montgomery's assertions, the statute makes quite clear when a recording in the real property records is required as opposed to filing in the office of the county clerk. Within the same section of the Texas Property Code dictating the notice procedures, Section 51.002(h) explains that if sales are to be conducted in an area other than the courthouse, the "commissioners court shall record that designation in the real property records of the county." Other sections of the code similarly specify when recordation is required. For example, Section 51.008 provides: "[a] lien on real property created under this code or another law of this state in favor of a governmental entity must be recorded as provided by Chapters 11 and 12 in the real property records." (emphasis added). Therefore, the Texas legislature is aware of how to draft legislation to require recording, and it did not specify that recordation in the real property records is required when providing notice of foreclosure sale.
Here, on December 14, 2009, as required by Section 51.002(b)(2) of the Property Code, Defendants, through Barrett, filed and posted the Notice of Substitute Trustee Sale in the office of the Dallas County Clerk. The notice of foreclosure sale includes a file stamp from the office of the county clerk, dated December 14, 2009, indicating that the notice of sale was filed as required by the statute. Additionally, the affidavit attached to the recorded substitute trustee's deed, executed the date of the foreclosure sale by Patrick De Jesus, an employee of National Default Exchange, LP, reflects that the notice of trustee sale was filed with the county clerk in the county where the property is situated as required by law. Finally, Barrett has submitted a declaration in which it states that the notice of trustee sale was filed in the office of the county clerk, and Mr. Montgomery has no evidence to the contrary.
Finally, the Property was foreclosed and sold on January 5, 2010 at 2:01 PM. The sale was conducted in the area specified on the Notice of Substitute Trustee Sale outside of the George Allen Courts building. The Substitute Trustee's Deed, granting the Property to U.S. Bank, was electronically recorded on January 13, 2010. Because Bank Defendants satisfied the Deed of Trust and Texas Property Code, no breach of statutory filing notice requirement exists.
3. Negligent Misrepresentation
The elements of negligent misrepresentation are (1) the representation is made by a defendant in the course of his business, or in a transaction in which he has a pecuniary interest; (2) the defendant supplies "false information" for the guidance of others in their business; (3) the defendant did not exercise reasonable care or competence in obtaining or communicating the information; and (4) the plaintiff suffers pecuniary loss by justifiably relying on the representation. Henry Schein, Inc. v. Stromboe, 102 S.W.3d 675, 686 n.24 (Tex. 2002); Horizon Shipbuilding, Inc. v. Blyn II Holding, LLC, 324 S.W.3d 840, 850 (Tex. App.—Houston [14th Dist.] 2010, no pet.). Importantly, the false information complained of in a negligent misrepresentation claim "must be a misstatement of an existing fact rather than a promise of future conduct." Scherer v. Angell, 253 S.W.3d 777, 781 (Tex. App.—Amarillo 2007, no pet.) (citing Miller v. Raytheon Aircraft Co., 229 S.W.3d 358, 379 (Tex. App.—Houston [1st Dist.] 2007, no pet.)).
As a basis for his misrepresentation claims, Mr. Montgomery asserts: (1) SunTrust and Barrett misrepresented that SunTrust was the Lender, and U.S. Bank misrepresented that it was the Lender for purposes of providing the required notice under Section 51.002 of the Texas Property Code and Deed of Trust (Compl. ¶ 58); (2) SunTrust misrepresented it had "properly filed assignments and other documents to establish rights under the Deed of Trust for the purpose of foreclosure" (Compl. ¶ 60); (3) U.S. Bank misrepresented it had been "properly assigned rights in the Note and Deed of Trust for the purpose of foreclosure" (Compl. ¶ 61); (4) U.S. Bank and Barrett misrepresented that proper notice was given under Section 51.002 of the Texas Property Code (Compl. ¶¶ 64-65); and (5) Barrett misrepresented in the Petition for Eviction that "the sale was filed and posted as was required by the Deed of Trust and state laws" and that "notice was filed as required by statute" (Compl. ¶¶ 65-66). The Court finds that there is no evidence to support Mr. Montgomery's claims of negligent misrepresentation.
A. Lender Misrepresentation.
Mr. Montgomery claims that SunTrust misrepresented itself as the Lender in the notice of default and intent to accelerate lack merit because Mr. Montgomery had actual notice that U.S. Bank was the Lender and that his loan was in default and would be accelerated. The November 5 and December 8, 2009 notices of acceleration and foreclosure correctly identified U.S. Bank as the Lender. Second, as shown above, the evidence shows that notice of default and foreclosure sale were properly served and the notice of foreclosure sale was properly filed and posted. Third, Mr. Montgomery has not pled, argued, or produced any evidence that he relied on SunTrust's representation that it was the Lender to his detriment. Therefore, there is no evidence that establishes the elements of Mr. Montgomery's misrepresentation claims and summary judgment should be granted.
B. Validity of the Bank Lien.
Mr. Montgomery's challenge to the validity of Defendants' lien on the basis that SunTrust misrepresented it was the Lender during his Bankruptcy Case in order to secure relief from the automatic stay is barred by the doctrine of res judicata. In the Bankruptcy Case, SunTrust, its assigns and/or successors in interest filed a motion for relief from stay requesting that the bankruptcy court terminate the automatic stay so that it could initiate foreclose proceedings. See See In re David Mason Montgomery, Case No. 07-36436 HDH-11, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division (Doc. No. 86). Mr. Montgomery and SunTrust agreed to the bankruptcy court's entry of agreed order conditioning automatic stay ("Agreed Order") that provided the procedure granting SunTrust relief from the stay should Mr. Montgomery fail to pay his obligations under the Agreed Order, as well as other conditions upon which the stay would terminate. The Bankruptcy Court also entered an order confirming Mr. Montgomery's plan of reorganization ("Confirmation Order") that recognized SunTrust, its assigns and/or successors in interest as lienholders of the Property and stated that in the event Mr. Montgomery defaults under the terms set for the in the Confirmation Order, SunTrust and its assigns and/or successors in interest shall be free to exercise its rights and remedies against the collateral pursuant to the terms of the Deed of Trust or as provided by Texas law.
Mr. Montgomery and SunTrust were both parties to the Bankruptcy Case, and most importantly, the Agreed Order. There is little doubt that the bankruptcy court was of competent jurisdiction to enter the Agreed Order and Confirmation Order. The Agreed Order and Confirmation Order are final and appealable orders that Mr. Montgomery did not appeal and therefore became final judgments. See Mitchell, 243 S.W.3d at 124 ("An order granting relief from an automatic stay is a final appealable order. Since the [debtors] did not appeal the order, it became a final judgment"); see also Eubanks v. Fed. Deposit. Ins. Corp., 977 F.2d 166, 170 (5th Cir. 1992) ("It has long been recognized that a bankruptcy court's order confirming a plan of reorganization is given the same effect as a district court's judgment on the merits for claim preclusion purposes"). Finally, Mr. Montgomery's present claim challenging the validity of Defendants' lien, and his causes of action against SunTrust based on such, are based on the "same nucleus of operative facts" as the motion for relief from automatic stay and Agreed Order.
"Essential to the application of res judicata is the principle that the previously unlitigated claim could and should have been brought in the earlier litigation." Mitchell, 243 S.W.3d at 125 (citing D-1 Enterprises, Inc. v. Commercial State Bank, 864 F.2d 36, 38 (5th Cir. 1989)). Consequently, any claims that SunTrust misrepresented it was the Lender during the Bankruptcy Case in order to secure relief from the automatic stay should have been raised in the Bankruptcy Case. As such, Mr. Montgomery cannot now collaterally attack the validity of the Defendants' lien when it could have done so in response to the motion for relief from stay. Id. ("Here, the [debtors] did not object to the Bank's motion, and they chose not to appeal. They cannot now collaterally attack the validity of the Bank's lien."). The remaining negligent misrepresentation claims must fail.
4. Declaratory Judgment
Mr. Montgomery requests a declaratory judgment. Compl. ¶ 67. Courts will not grant declaratory relief where the cause of action has fully matured and invokes a present remedy at law. See Tucker v. Graham, 878 S.W.2d 681, 683 (Tex. App.—Eastland 1994, no writ); Sylvester v. Watkins, 538 S.W.2d 827, 831 (Tex. Civ. App.—Amarillo 1976, writ ref'd n.r.e.). In other words, Mr. Montgomery's remedy is a suit for damages for its alleged claims for violations of the Deed of Trust and other Texas laws (which he has already alleged herein), not a request for declaratory relief. See Gainesville Oil & Gas Co., Inc. v. Farm Credit Bank of Texas, 847 S.W.2d 655, 659 (Tex. App.—Texarkana 1993, no writ); see also Venator Group Specialty, Inc. v. Matthew/Muniot Family LLC, 322 F.3d 835, 839-40 (5th Cir. 2003) (stating that purpose of Federal Declaratory Judgment act is to offer a Mr. Montgomery equitable relief when legal relief is not yet available to him). To be sure, declaratory relief is a procedural device for granting a remedy. Sid Richardson Carbon & Gasoline Co. v. Interenergy Res., Ltd., 99 F.3d 746, 752 n.3 (5th Cir. 1996). "[I]t does not create any substantive rights or causes of action." Id. Since no substantive claims on which to grant declaratory relief remain, the request for declaratory relief must fail.
5. Texas Theft Liability Act
The Texas Theft Liability Act (TTLA) imposes civil liability for theft. Theft is defined as "unlawfully appropriating property or unlawfully obtaining services" as described in various Texas statutes. See, e.g., Tex. Pen. Code § 31.03; Tex. Civ. Prac. & Rem. Code § 134. 001. Section 31.03 provides, in relevant part, that "[a] person commits an offense if he unlawfully appropriates property with intent to deprive the owner of property. Appropriation is unlawful if it is without the owner's effective consent." Tex. Pen. Code § 31.03. To state a claim, a plaintiff must show that he was the owner of the property when the defendants allegedly misappropriated it. Bokor v. State, 114 S.W.3d 558, 561 (Tex. App.—Fort Worth 2002, no pet.).
Mr. Montgomery claims that the Defendants "committed civil theft" under the TTLA by "misappropriating Plaintiff's funds." Compl. ¶ 72. Other than stating that he "is entitled to the return of his funds spent to pay for the [P]roperty," Mr. Montgomery does not allege or present evidence identifying how these funds were allegedly misappropriated or any facts giving any indication of how the Defendants relate to the allegedly misappropriated funds.
In addition to failing to identify evidence of the misappropriated funds, Mr. Montgomery also fails to allege any facts or present any evidence indicating that the Bank Defendants acted with the required intent under the statute. To state a claim under TTLA, a plaintiff must show that the Bank Defendants possessed the requisite intent, which means the Bank Defendants had as their conscious desire or objective to deprive the Plaintiff of property. Christensen v. State, 240 S.W.3d 25, 32 (Tex. App.—Houston [1st Dist.] 2007, no pet.); Sellers v. Gomez, 281 S.W.3d 108, 115 (Tex. App.—El Paso, 2008). Mr. Montgomery makes no factual allegation and presents no evidence of intent whatsoever, and thus, his TTLA claim cannot survive summary judgment.
IV.Conclusion
For the foregoing reasons, Defendants' Motion for Summary Judgment should be GRANTED. The Court will enter a Final Judgment in a separate order.
IT IS SO ORDERED.
SIGNED this 19th day of April, 2012.
/s/_________
Royal Furgeson
Senior United States District Judge