Bechtold v. Wells Fargo Bank, N.A.

Filing 17

REPORT AND RECOMMENDATION OF U. S. MAGISTRATE JUDGE that the 7 Emergency MOTION for Temporary Restraining Order should be denied. Defendant has offered evidence that it is in possession of the Note, and Plaintiff has not offered any evidence or authority that would show that he will succeed in his challenge to Defendant's authority to foreclose on the Property. Signed by Magistrate Judge Don D. Bush on 11/6/12. (mrp, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION
CHAD BECHTOLD

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Plaintiff,
VS.
WELLS FARGO BANK, N.A.,
Defendant.

Case No. 4:12CV516

REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
Now before the Court is Plaintiff Chad Bechtold’s Emergency Motion for Temporary
Restraining Order and/or Preliminary Injunction with a Request for Expedited Briefing (Dkt. 7).
Having considered the record before it and the arguments presented at the October 18, 2012 hearing,
and as set forth fully below, the Court finds that the motion should be DENIED.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
On or about October 29, 2003, Plaintiff Chad Bechtold executed a Promissory Note and Deed
of Trust to purchase real property located at 304 Watson Drive, Allen, Texas 75002 (“the Property”).
See Dkt. 3 at ¶ 9. On or about March 8, 2010, Plaintiff refinanced his loan to secure a better interest
rate and executed a new Promissory Note with original lender, Primelending, a Plains Capital
Company, and Deed of Trust. Id. at ¶ 10. According to Plaintiff, the new Deed of Trust was
assigned from Mortgage Electronic Registration System, Inc. (“MERS”) as nominee for
Primelending, a Plains Capital Company, to Defendant Wells Fargo Bank, N.A., on or about
February 28, 2008. Id. at ¶ 11. Subsequently, Plaintiff lost his job and requested and received his

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first loan modification on or about July 8, 2011. Id. at ¶ 13. Due to apparent continued financial
difficulties, on or about May 10, 2012 Plaintiff requested another loan modification, but Defendant
Wells Fargo Bank denied the second request. Id. at ¶ 13.
On August 6, 2012, Plaintiff filed suit in the 429th Judicial District in Collin County, Texas.
See Dkt. 3. Defendant Wells Fargo Bank removed the suit to this Court on August 14, 2012. See
Dkt. 1.
Plaintiff’s state court petition lists the following causes of action: (1) breach of contract and
anticipatory breach of contract; (2) violation of Texas Consumer Credit Code/Debt Collection
Practices Act; (3) common law fraud; (4) negligence/ negligent misrepresentation; (5) violations of
the Texas Insurance Code; and (6) enforceability of the negotiable instrument. See Dkt. 3. Plaintiff
also seeks an accounting of all transactions on his mortgage loan, a temporary restraining order, and
injunctive relief. Id.
Plaintiff has filed an Emergency Motion for Temporary Restraining Order and/or Preliminary
Injunction, asking the Court to enjoin the foreclosure sale of the Property and requesting a $350.00
bond. See Dkt. 7.
STANDARD FOR TEMPORARY RESTRAINING ORDER / PRELIMINARY INJUNCTION
The burden of introducing sufficient evidence to justify the grant of a temporary restraining
order or preliminary injunction is on the movant. PCI Transp. Inc. v. Fort Worth & Western R.R.
Co., 418 F.3d 535, 546 (5th Cir. 2005). The party seeking such relief must satisfy a cumulative
burden of proving each of the four elements enumerated before a temporary restraining order or
preliminary injunction can be granted. Mississippi Power and Light Co. v. United Gas Pipe Line

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Co., 760 F.2d 618, 621 (5th Cir. 1985). To obtain a preliminary injunction, the applicant must show
(1) a substantial likelihood that he will prevail on the merits; (2) a substantial threat that he will
suffer irreparable injury if the injunction is not granted; (3) that his threatened injury outweighs the
threatened harm to the party whom he seeks to enjoin; and (4) that granting the preliminary
injunction will not disserve the public interest. PCI Transp., Inc. v. Fort Worth & Western R. Co.,
418 F.3d 535, 545 (5th Cir. 2005); Lake Charles Diesel, Inc. v. Gen. Motors Corp., 328 F.3d 192,
195 (5th Cir. 2003). Under Rule 65, “[e]very order granting an injunction and every restraining
order shall set forth the reasons for its issuance; shall be specific in terms; shall describe in
reasonable detail ... the act or acts sought to be restrained....” FED . R. CIV . P. 65(d).
EVIDENCE PRESENTED
In the pleadings filed with the Court, the parties have filed the following evidence in support
of their respective positions:
In support of his motion, Plaintiff has submitted:
Exhibit A -

Defendant’s Notice of Removal

Exhibit B -

Corporate Assignment of Deed of Trust

Exhibit C -

LinkedIn Profile of John Kealy

Exhibit D -

Assignment of Mortgage

Exhibit E -

Letter from Wells Fargo declining Plaintiff’s request for the second
loan modification

Defendant’s Response to Plaintiff’s Emergency Motion for Temporary Restraining Order
and/or Preliminary Injunction submits the following evidence:

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Exhibit 1- Declaration of Michael John Dolan
Exhibit A -Promissory Note, dated March 8, 2010
Exhibit B - Deed of Trust, dated March 8, 2010
Exhibit C - Mortgage Loan History
Exhibit D - Letter to Bechtold, dated February 6, 2011
Exhibit E - Forbearance Agreement, dated March 22, 2011
Exhibit F - Loan Modification Agreement, dated July 8, 2011
Exhibit G - Letter to Bechtold, dated December 4, 2011
Exhibit H - Corporate Assignment of Deed of Trust
Further, at the hearing held on October 18, 2012, Plaintiff argued that Defendant Wells Fargo
lacks authority to foreclose because Defendant cannot prove proper chain of title or possession of
the original Note. Plaintiff argued that John Kealy, a Wells Fargo employee, was not authorized to
assign or transfer the Deed of Trust to Defendant on behalf of

MERS or Primelending.

Furthermore, Plaintiff contended Defendant failed to record its interest from the assignment or
transfer of the Note, therefore, Primelending, as the last entity to record its interest in the Note, is
still the mortgagee.
In response, Defendant argued that Wells Fargo owns both the Note and the Deed of Trust.
Defendant claims that Wells Fargo is a “holder” of the negotiable mortgage Note and therefore has
the authority to foreclose.

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ANALYSIS
In support of his request for injunctive relief, Plaintiff reiterates the allegations in his
complaint that the Deed of Trust and Note on the Property were not correctly assigned. He contends
that he can demonstrate a likelihood of success on the merits of the case because material questions
remain about whether Defendant had a right to foreclose on the Property. Plaintiff first claims
Defendant lacks standing to foreclose, then challenges the enforceability of the negotiable
instrument, and then alleges fraud. The main thrust of Plaintiff’s arguments rely on whether Mr.
Kealy had the authority to sign and transfer the Deed of Trust and whether Defendant is in
possession of the original Note, or the “holder” of a negotiable mortgage Note because the
assignment was not recorded in the real property records.
Notably, Plaintiff does not dispute that he is in default on the loan. Plaintiff instead
challenges Wells Fargo’s authority to foreclose on the Property, arguing that the Note is not dated,
there is nothing that authorizes the Note to be assigned to Wells Fargo and that the assignment to
Wells Fargo was not recorded. Despite these challenges to Wells Fargo’s authority, however,
Plaintiff signed forbearance agreement and modification agreement with Wells Fargo as holder of
the Note.
Plaintiff has not shown a likelihood of success on the merits as to these claims. There is no
evidence before the Court that would suggest that Wells Fargo is not the holder of the Note on the
Property. The “holder” of a negotiable mortgage note is “the person in possession of [the mortgage
note] that is payable either to bearer or to an identified person that is the person in possession.” TEX .

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BUS. & COM . CODE § 1.201(b)(21). A person may become the holder either at issuance or by
negotiation. Leavings v. Mills, 175 S.W.3d 301, 309 (Tex. App. – Houston [1st Dist.] 2004, no pet.).
A “negotiation” is a transfer of possession “of an instrument by a person other than the issuer to a
person who thereby becomes its holder.” TEX. BUS. & COM. CODE § 3.201(a). In general, a
negotiation requires the transfer of possession of the instrument and its endorsement by the holder.
“If an instrument is payable to bearer, it may be negotiated by transfer of possession alone.” TEX.
BUS. & COM. CODE § 3.201(b).
Defendant presented a copy of the negotiable mortgage note in is possession supported by
a declaration from Michael Dolan. Dkt. 12-2. At this time, Plaintiff has not sustained his burden
in showing that he is likely to succeed on his claims that Primelending’s interest in the Note was not
properly assigned to Wells Fargo or that Wells Fargo is not a holder of the Note. Of great detriment
to Plaintiff’s position here is the fact that his signature is on the Forbearance Agreement (Dkt. 12-7)
and Loan Modification Agreement (Dkt. 12-8) with Defendant Wells Fargo Bank as lender and thus,
holder of the security instrument.
With these documents before the Court, Plaintiff has not sustained his burden is showing that
Wells Fargo otherwise lacks authority to foreclose. Under the Texas Property Code, a mortgagee
may authorize a mortgage servicer to service a mortgage and conduct a foreclosure sale. See TEX .
PROP . CODE ANN . § 51.0025. “A mortgagee is defined as (A) the grantee, beneficiary, owner, or
holder of a security instrument; (B) a book entry system; or (C) if the security interest has been
assigned of record, the last person to whom the security interest has been assigned of record.” TEX .

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PROP . CODE ANN . § 51.0001(4).
Plaintiff has advanced no evidence or facts to show that Wells Fargo misrepresented its
authority to collect on the Note, accelerate Plaintiff’s debt, and/or foreclose on the Property. Of
particular significance to the Court is the Fifth Circuit’s recent opinion in Kiggundu v. Mortgage
Electronic Registration Systems Inc., 469 Fed. Appx. 330 (5th Cir. 2012). In Kiggundu, the Fifth
Circuit affirmed the grant of summary judgment for a defendant bank whose authority to foreclose
was challenged. As explained by the Fifth Circuit:
Because the note was endorsed in blank and the Bank of New York was in
possession of the note, under Texas law, the Bank of New York was entitled to
collect on it. See TEX . BUS. & COM . CODE §§ 1.201(b)(21), 3.204, 3.205.
Moreover, under Texas law, the mortgage follows the note. Lawson v. Gibbs, 591
S.W.2d 292, 294 (Tex. App. 1979); see United States v. Vahlco Corp., 720 F.2d
885, 891 (5th Cir. 1983). Thus, the Bank of New York was authorized to
foreclose on the property when Kiggundu defaulted. Though Kiggundu attacks the
validity of the assignment of the mortgage document—the deed of trust—to the
Bank of New York, this argument is beside the point. It was sufficient for the
Bank of New York to establish that it was in possession of the note; it was not
required to show that the deed of trust had been assigned to it. See Gilbreath v.
White, 903 S.W.2d 851, 854 (Tex. App. 1995).
Id. at 331-332. Here, as in Kiggundu, Defendant has offered evidence that it is in possession of the
Note, and Plaintiff has not offered any evidence or authority that would show that he will succeed
in his challenge to Defendant’s authority to foreclose on the Property.
RECOMMENDATION
Therefore, Plaintiff Chad Bechtold’s Emergency Motion for Temporary Restraining Order
and/or Preliminary Injunction with a Request for Expedited Briefing (Dkt. 7) should be DENIED.

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Within fourteen (14) days after service of the magistrate judge’s report, any party may serve
and file written objections to the findings and recommendations of the magistrate judge. 28
U.S.C.A. § 636(b)(1)(C).
Failure to timely file written objections to the proposed findings and recommendations
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contained in this report shall bar an aggrieved party from de novo review by the district court of the
proposed findings and recommendations and from appellate review of factual findings accepted or
adopted by the district court except on grounds of plain error or manifest injustice. Thomas v. Arn,
474 U.S. 140, 148 (1985); Rodriguez v. Bowen, 857 F.2d 275, 276-77 (5th Cir. 1988).
SIGNED this 6th day of November, 2012.
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DON D. BUSH
UNITED STATES MAGISTRATE JUDGE

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