Lehman v. Select Portfolio Servicing, Inc.
Filing
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MEMORANDUM OPINION AND ORDER Granting re 29 MOTION for Summary Judgment filed by Select Portfolio Servicing, Inc. Plaintiffs claims for declaratory relief are dismissed in theirentirety. Signed by Judge Amos L. Mazzant, III on 1/7/15. (cm, )
United States District Court
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION
JOHN LEHMAN
V.
SELECT PORTFOLIO SERVICING, INC.
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CASE NO. 4:13-CV-720
Judge Mazzant
MEMORANDUM OPINION AND ORDER
Pending before the Court is Defendant’s Motion for Summary Judgment (Dkt. #29).
After considering the motion, the responses, and the relevant pleadings, the Court finds
Defendant’s motion should be granted.
BACKGROUND
On or about December 22, 2014, Plaintiff John Lehman (“Plaintiff”) entered into a loan
agreement concerning the property located at 11 Heritage Woods Place, Allen, Texas 75002 (the
“Property”) (Dkt. #32, Ex. A). In the Deed of Trust, the “Lender” is identified as WMC
Mortgage Corporation (“WMC”) or “any holder of the Note who is entitled to receive payments
under the Note.” Id. at 1. WMC was the original lender named on the Note and Deed of Trust;
however, the Note was transferred to Wells Fargo Bank, N.A. as Trustee for the
Certificateholders of Morgan Stanley ABS Capital I INc., Trust 2005-WMC3, Mortgage PassThrough Certificates, Series 2005-WMC3 (“Wells Fargo”) (Dkt. #29, Ex. A). The Deed of Trust
was also assigned to Wells Fargo as Trustee (Dkt. #29, Ex. B).
On or about November 11, 2013, Plaintiff received a letter on Shapiro and Schwartz, LLP
letterhead, indicating that the Mortgage Servicer on the Note was Select Portfolio Servicing, Inc.
(“SPS”) (Dkt. #12, Ex. B at 2). The letter stated that it was a Notice of Acceleration and Posting,
and stated that the foreclosure sale was scheduled on December 3, 2013. Id. Also, on or about
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November 11, 2013, Plaintiff received a letter titled Notice of Trustee’s Sale, which also noticed
the foreclosure for December 3, 2013. Id. at 4.
On February 25, 2014, Plaintiff filed his Third Amended Complaint, asking the Court to
enter declaratory judgment regarding whether Defendant SPS had authority under the deed to
trust initiate the foreclosure process and foreclose on the Property (Dkt. #12). Plaintiff also
requested a declaration from the Court that Plaintiff’s loan could not validly encumber Plaintiff’s
homestead property under the Texas Constitution. Id. On August 25, 2014, Defendant filed its
motion for summary judgment (Dkt. #29). On September 24, 2014, Plaintiff filed its response to
the motion (Dkt. #32). Defendant filed its reply on October 1, 2014 (Dkt. #33).
LEGAL STANDARD
The purpose of summary judgment is to isolate and dispose of factually unsupported
claims or defenses. See Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986). 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(a). A dispute about a material fact is genuine
“if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The trial court must resolve all
reasonable doubts in favor of the party opposing the motion for summary judgment. Casey
Enters., Inc. v. Am. Hardware Mut. Ins. Co., 655 F.2d 598, 602 (5th Cir. 1981) (citations
omitted). The substantive law identifies which facts are material. Anderson, 477 U.S. at 248.
The party moving for summary judgment has the burden to show that there is no genuine
issue of material fact and that it is entitled to judgment as a matter of law. Id. at 247. If the
movant bears the burden of proof on a claim or defense on which it is moving for summary
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judgment, it must come forward with evidence that establishes “beyond peradventure all of the
essential elements of the claim or defense.” Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th
Cir. 1986). But if the nonmovant bears the burden of proof, the movant may discharge its burden
by showing that there is an absence of evidence to support the nonmovant’s case. Celotex, 477
U.S. at 325; Byers v. Dallas Morning News, Inc., 209 F.3d 419, 424 (5th Cir. 2000). Once the
movant has carried its burden, the nonmovant must “respond to the motion for summary
judgment by setting forth particular facts indicating there is a genuine issue for trial.” Byers, 209
F.3d at 424 (citing Anderson, 477 U.S. at 248-49). The nonmovant must adduce affirmative
evidence. Anderson, 477 U.S. at 257. The Court must consider all of the evidence but refrain
from making any credibility determinations or weighing the evidence. See Turner v. Baylor
Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007).
ANALYSIS
Before turning to the merits of the motion for summary judgment, Plaintiff objects to
paragraphs 5, 6, 7, and 8 of the “Affidavit of Select Portfolio Servicing, Inc.” Plaintiff objects to
this affidavit from Mark Syphus (“Syphus”) on behalf of SPS, on the basis that he has no
personal knowledge for the statements made in the objectionable paragraphs of this affidavit.
Plaintiff does not object to Syphus providing the necessary foundation to qualify the records as
business records. Plaintiff also argues that the documents themselves are the best evidence of the
contents of those documents, and that these paragraphs should be stricken for this additional
reason. See FED. R. EVID. 1002.
Federal Rule of Civil Procedure 56(c)(4) requires an affidavit to be made on “personal
knowledge, set out facts that would be admissible in evidence, and show that the affiant or
declarant is competent to testify on the matters stated.” However, personal knowledge may also
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be inferred from the affiant’s position with the company. DIRECTV, Inc. v. Budden, 420 F.3d
521, 530 (5th Cir. 2005). A custodian of records is competent to testify from the business
records as a corporate representative. See FED. R. CIV. P. 803(6); Love v. Nat’l Med. Enters., 230
F.3d 765, 776 (5th Cir. 2000). Syphus is a Consumer Ombudsman Specialist for SPS, and is
authorized to testify regarding the records kept regarding the mortgage loan of Plaintiff (Dkt.
#29, Affidavit of Syphus, ¶ 2). In addition, Syphus has personally reviewed the Note and other
records, and states “[b]y virtue of my position at SPS and review of the loan file and foreclosure
file, I have personal knowledge of the statements made within this affidavit.” Id. at ¶ 3-4. As a
result of his review of the records and his position with SPS, it can reasonably be inferred that
Syphus has personal knowledge of the facts applicable to Plaintiff’s loan. Plaintiff’s objections
are overruled.
As to Plaintiff’s best evidence objections, the Court agrees that the documents are the
best evidence of what is contained therein.
However, Syphus’ statements in the relevant
paragraphs add additional testimony on the documents from Defendant’s perspective. Plaintiff’s
objections are overruled.
In his response, Plaintiff concedes his constitutional claim, and agrees that this claim
should be dismissed. On May 16, 2014, the Texas Supreme Court issued its opinion in Sims v.
Carrington Mortgage Services, L.L.C., 440 S.W.3d 10 (Tex. 2014), rehearing denied Oct. 3,
2014, which the parties agree is dispositive of this issue. In Sims, the Texas Supreme Court
determined that a restructuring of a loan that “involves capitalization of past-due amounts owed
under the terms of the initial loan and a lowering of the interest rate and the amount of
installment payments, but does not involve the satisfaction or replacement of the original note, an
advancement of new funds, or an increase in the obligations created by the original note, is not a
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new extension of credit that must meet the requirements of Section 50.” Id. at *17. The amounts
Plaintiff contends were added to the balance in the modification were amounts already
contemplated by the agreement and secured by the Security Instrument – interest due under the
note, property taxes, and insurance (See Dkt. #32, Ex. A at 4, ¶ 1; 5-6, ¶ 4; 6, ¶ 5). The Court
agrees, and finds that this claim is dismissed.
The second issue Plaintiff raises before the Court is “whether, under the deed of trust, the
mortgage servicer may invoke the power of sale – i.e., make the decision to refer an account to
foreclosure – as well as perform those necessary tasks in connection to any foreclosure sale as
outlined in Section 22 of the Deed of Trust, and which have been reserved to the Lender” (Dkt.
#32 at 3-4). Plaintiff alleges that under the Deed of Trust, the authority to give notice of intent to
accelerate the note, notice of acceleration of the note, or the authority to invoke the power of sale
are reserved to the “Lender” as that term is defined by the Deed of Trust. Plaintiff does not
dispute that while the original “Lender” was WMC, the Note was transferred to Wells Fargo as
Trustee. Plaintiff argues that Wells Fargo was the entity with the authority to perform these acts,
not Defendant SPS, the mortgage servicer.
Defendant contends that, in this case, the Noteholder, Wells Fargo, accelerated the note
and invoked the power of sale. The Notice of Default sent to Plaintiff by SPS notifies Plaintiff
that SPS is acting as the mortgage servicer for “Wells Fargo Bank, N.A., as Trustee” (Dkt. #32,
Ex. D). The letter also states that “SPS has been instructed on behalf of the owner of the Note
and Deed of Trust to pursue remedies under the Security Instrument unless you take action to
cure the default.” Id. The letter further states, “If we do not receive the Amount Required to
Cure… the Noteholder will accelerate all payments owing on your Note and require that you pay
all payments owing and sums secured by the Security Instrument in full, and may take additional
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action up to and including referral for legal action.” Id. The Notice of Acceleration and Posting
sent on Defendant’s behalf identified Wells Fargo as Trustee as the Mortgagee for Plaintiff’s
loan, and states:
[T]he Mortgagee HAS ELECTED TO ACCELERATE THE MATURITY OF
THE DEBT and declares all sums due under the Note immediately due and
payable without further demand, and is proceeding to foreclose and see the
property under the terms of the Deed of Trust at public auction.
(Dkt. #12, Ex. B at 1) (emphasis in original). The Notice of Trustee’s Sale from the Substitute
Trustee included in the notice states:
[D]efault has occurred in the payment of said indebtedness, and the same is now
wholly due, and the owner and holder has requested to sell said property to satisfy
said indebtedness.
(Dkt. #12, Ex. B at 3).
Plaintiff argues that there is at least a fact issue regarding which entity, Wells Fargo or
SPS, invoked the power of sale. Plaintiff contends that these notices were sent by the law firm of
Shapiro and Schwartz LLP, which was retained by SPS (Dkt. #32 at 8). Plaintiff argues that the
notice states that the law firm was retained to “initial legal proceedings to foreclose property for
default in payment of the Note” (Dkt. #29, Ex. E at 1). Plaintiff contends that the notices give all
indication that SPS was the entity making all decision in connection with the foreclosure
including the decision to begin the process (Dkt. #32 at 8). Plaintiff also argues that the fact that
SPS offered to work with Plaintiff to modify the loan or other options to avoid foreclosure
clearly indicates that SPS made the decision to initiate and proceed with foreclosure and could
make the decision to stop the foreclosure process. Plaintiff also relies on Defendant’s answers to
interrogatories, which state that “the decision regarding whether to proceed with foreclosure is
governed by the loan documents and state and federal statutory guidelines” (Dkt. #32, Ex. B-1 at
11).
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The Court disagrees with Plaintiff’s assertion that the documents create a fact issue
regarding which entity invoked the power. The Notice of Default, Notice of Acceleration and
Posting, and the Notice of Trustee’s Sale from the Substitute Trustee all clearly indicate that the
Mortgagee, Wells Fargo, elected to accelerate the debt and proceed to foreclosure.
This
language is unambiguous, and the letterhead and additional information contained in these
documents do not change this fact. The fact that SPS offered Plaintiff the opportunity to avoid
foreclosure through loss mitigation programs also does not change the fact that in the same
correspondence Plaintiff was notified that “the Noteholder will accelerate all payments owing…”
(Dkt. #29, Ex. D). The Court finds that there is no fact issue as to which entity invoked the
power of sale and accelerated the debt in this case, as all correspondence and documentary
evidence provided to the Court clearly indicates that Wells Fargo, the undisputed owner of the
Note, invoked the power of sale and accelerated the debt.
Plaintiff also argues that SPS did not have authority under the Note to give notice of
intent to accelerate the note and notice of acceleration of the Note. On August 31, 2012, Wells
Fargo and SPS executed a Limited Power of Attorney that gave SPS, as its mortgage servicer
and attorney-in-fact, “full authority and power to execute and deliver on behalf of [Wells Fargo
as Trustee] any and all… documents and instruments necessary to conduct any (a)
foreclosure…” (Dkt. #29, Ex. C at 1, ¶ 1(ii)). The Limited Power of Attorney further grants SPS
the authority to “execute and deliver” any “notice of default, declaration of default, notices of
foreclosure…” Id. at ¶ 1(v). Defendant contends that the Limited Power of Attorney gives SPS
the authorization to send a notice of intent to accelerate the note and notice of acceleration on
behalf of Wells Fargo.
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Plaintiff argues that the Limited Power of Attorney is a third-party document that cannot
alter the terms of the Deed of Trust itself, which Plaintiff asserts reserves to the “Lender” the
tasks of sending the notices. Plaintiff contends that the issue is whether a mortgage servicer is
authorized under the Deed of Trust to perform these tasks.
The Texas Property Code provides that a mortgage servicer may administer the
foreclosure of property under section 51.002 on behalf of a mortgagee if:
(1) the mortgage servicer and the mortgagee have entered into an agreement granting the
current mortgage servicer authority to service the mortgage; and
(2) the notices required under Section 51.002(b) disclose that the mortgage servicer is
representing the mortgagee under a servicing agreement with the mortgagee and the name
of the mortgagee and:
(A) the address of the mortgagee; or
(B) the address of the mortgage servicer, if there is an agreement granting a
mortgage servicer the authority to service the mortgage.
TEX. PROP. CODE § 51.0025. All of these requirements are met here. Wells Fargo and SPS
entered into a mortgage servicing agreement to service the mortgage, the notices required under
Section 51.002(b) disclose that SPS is representing Wells Fargo under a servicing agreement,
and provide the address of the mortgagee or the mortgage servicer. In addition, the Limited
Power of Attorney authorized SPS to send the notices on Wells Fargo’s behalf. Thus, the Court
finds that SPS was authorized to give notice of intent to accelerate the Note and notice of
acceleration of the Note.
Finally, Plaintiff argues that the Limited Power of Attorney does not delegate the
Lender’s authority to “refer a property to foreclosure to the mortgage servicer.” However, the
Deed of Trust does not reserve the power to “refer a property to foreclosure” to the Lender.
Thus, there is no requirement that Wells Fargo delegate that authority to SPS given the broad
powers granted to the mortgage servicer to “perform other mortgage servicing duties” (Dkt. #32,
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Ex. A). Further, as stated above, the mortgage servicer is authorized to administer the
foreclosure. TEX. PROP. CODE § 51.0025. It appears that Plaintiff asserts that the term “referral
to foreclosure” is a term that is equivalent to invocation of the power of sale. Plaintiff cites 12
C.F.R. § 1024.41(f) for the proposition the term referral to foreclosure is “well understood.”
However, this provision states that if a complete loss mitigation application is received before
the foreclosure referral, which is described as the “pre-foreclosure review process” or “before a
servicer has made the first notice or filing required by applicable law.” 12 C.F.R. § 1024.41(f).
The first notice required by Texas law is the notice of default. TEX. PROP. CODE § 51.002(d).
Plaintiff’s definition of “referral to foreclosure” means when the notice of default is sent, and
Plaintiff argues that this is synonymous with invoking the power of sale. However, the Deed of
Trust states that the power of sale cannot be invoked until at least thirty days after the notice of
default is served (Dkt. #32, Ex. A at ¶ 22). These terms cannot be synonymous, and Plaintiff
argument that the Deed of Trust reserves the power to refer a property to foreclosure to the
Lender fails, as the Deed of Trust does not reserve this power and does not require it to be
delegated. For these reasons, the Court finds Defendant’s motion for summary judgment is
granted and Plaintiff’s claims for declaratory relief are dismissed.
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CONCLUSION
Based on the foregoing, the Court finds Defendant’s Motion for Summary Judgment
(Dkt. #29) is hereby GRANTED. Plaintiff’s claims for declaratory relief are dismissed in their
entirety.
SIGNED this 7th day of January, 2015.
___________________________________
AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE
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