Bernal et al v. Decision One Mortgage Company, LLC et al

Filing 35

MEMORANDUM OPINION AND ORDER re DENYING 26 MOTION to Strike 24 Answer to Amended Complaint filed by Josue Bernal, Indira Bernal, GRANTING 25 MOTION for Summary Judgment and Brief in Support filed by The Bank of New York Melon . All claims that Plaintiff Indira Bernal and Plaintiff Josue Bernal assert against Defendant Bank of New York Melon are hereby DISMISSED WITH PREJUDICE. All claims that Plaintiff Indira Bernal and Plaintiff Josue Bernal assert against all other named defendants are hereby DISMISSED WITHOUT PREJUDICE. Signed by Judge Amos L. Mazzant, III on 4/28/15. (cm, )

United States District Court
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION

JOSUE BERNAL and INDIRA
BERNAL

§
§
§
§
§
§
§
§
§
§
§
§
§
§
§
§

V.
DECISION ONE MORTGAGE
COMPANY, LLC; THE BANK OF
NEW YORK MELON FKA THE BANK
OF NEW YORK, AS TRUSTEE FOR
THE CERTIFICATEHOLDERS OF
CWALT, INC., ALTERNATIVE LOAN
TRUST 2006-0C3,WACHOVIA
MORTGAGE CORP., MORTGAGE
PASS THROUGH CERTIFICATES,
SERIES 2006-0C3; HSBC MORTGAGE
SERVICES, INC., ET AL.

CASE NO. 4:14-CV-236
Judge Mazzant

MEMORANDUM OPINION AND ORDER
Pending before the Court are Plaintiffs’ Motion to Strike Defendant’s Answers and
Affirmative Defenses as Non-Responsive (Dkt. #26) and Defendant Bank of New York Melon’s
Motion for Summary Judgment (Dkt. #25). After considering the motions, responses, evidence,
and relevant pleadings, the Court finds that Plaintiffs’ Motion to Strike Defendant’s Answers and
Affirmative Defenses as Non-Responsive (Dkt. #26) should be denied and that Defendant Bank
of New York Melon’s Motion for Summary Judgment (Dkt. #25) should be granted.
BACKGROUND
Plaintiffs Josue Bernal and Indira Bernal (“Plaintiffs”) filed the instant suit to contest the
security interest in real property located at 2212 Senna Hills Lane, Plano, Texas (the “Property”).
On February 8, 2006, Plaintiffs entered into a mortgage loan with Decision One
Mortgage Company, LLC (“Decision One”) in the amount of $168,000.00. As a part of the

1

mortgage loan, Plaintiffs executed a Note and a Deed of Trust on the Property that named
Mortgage Electronic Registration System, Inc. (“MERS”), as the sole nominee for Decision One
and as the beneficiary with a lien on the Property (Dkt. #25, Exs. A1, A2). Also on February 8,
2006, Plaintiffs executed with Decision One a second loan and Second Lien Deed of Trust on the
Property in the amount of $39,555.00 (Dkt. #25, Ex. B2). Under the Second Lien Deed of Trust,
MERS was also the nominee for Decision One and the beneficiary with a second lien on the
Property.
On April 6, 2010, MERS executed an Assignment of Note and Deed of Trust that
assigned MERS’s rights as nominee under the Note and Deed of Trust to Defendant Bank of
New York (“BONY” or “Defendant”) (Dkt. #25, Ex. B3). On April 21, 2011, MERS
subsequently executed an Assignment of Deed of Trust that assigned the remainder of MERS’s
interest as beneficiary in the Deed of Trust to BONY (Dkt. #25, Ex. B4). Together, these
assignments fully conveyed MERS’s interest in the Note and first Deed of Trust to BONY.
On November 14, 2011, MERS executed a Corporate Assignment of Deed of Trust to
HSBC Mortgage Services, Inc. (“HSBC”) that conveyed MERS’s interest in the Second Lien
Deed of Trust (Dkt. #25, Ex. B5). This assignment fully conveyed MERS’s interest in the
Second Deed of Trust to HSBC.
Bank of America was the initial servicer of the loan, and Plaintiffs received
correspondence from Decision One and Bank of America confirming this information (Dkt. #12,
Ex. G). Subsequently and in compliance with the loan’s disclosure documents, Bank of America
transferred the servicing of the loan to Select Portfolio Servicing, Inc. (“SPS”) (Dkt. #25, Exs.
A6, A7). On or about October 10, 2012, Plaintiffs received correspondence from SPS that

2

informed them that their loan servicing was transferred from Bank of America to SPS (Dkt. #25,
Ex. A8).
At the present time, BONY alleges to be the owner of the Note and the first Deed of
Trust, HSBC alleges to be the owner of the Second Lien Deed of Trust, and SPS alleges to be the
servicer of the loan. The remaining defendants—Decision One, MERS, and Bank of America—
are not claiming ownership as to any of the loan documents. Plaintiffs have been notified of this
information and of the interests of the parties (Dkt. #25, Exs. A3, A4).
Beginning in March 2010, Plaintiffs refused to make any loan payments (Dkt. #25, Ex.
A9). Plaintiffs continue to refuse to re-pay the loan, which has now been in default status for
nearly five years.
Plaintiffs have filed the current suit in response to SPS’s correspondence explaining that
it could foreclose upon their Property. Plaintiffs initially filed in state court but Defendant
BONY properly removed the action to this Court on April 16, 2014 (Dkt. #1). BONY has been
the only defendant to respond to the current suit, and Plaintiffs have failed to show that the other
named defendants have been properly served.
ANALYSIS
Plaintiffs’ Motion to Strike Defendant’s Answers and Affirmative Defenses as NonResponsive
Plaintiffs move to strike Defendant BONY’s First Amended Answer to Plaintiffs’
Verified Complaint and all of Defendant’s affirmative defenses because they “fail to be
supported by any facts or law,” are “intended to be inflammatory,” are “redundant or
immaterial,” are “insufficient as a matter of law,” and “fail to provide Plaintiffs with fair notice
of the defense being advanced” (Dkt. #26 at 3).

3

The Court may strike an “insufficient defense” from a pleading or any other part of a
pleading that is “redundant, immaterial, impertinent, or scandalous.” FED. R. CIV. P. 12(f). A
motion to strike is proper only if the matter pled is “insufficient as a matter of law.” Kaiser
Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1057 (5th Cir. 1982).
As a result, motions to strike are “viewed with disfavor and are infrequently granted.” FDIC v.
Niblo, 821 F. Supp. 441, 449 (N.D. Tex. 1993). To find that a defense is insufficient as a matter
of law, the Court considers whether the defense is applicable to the instant case and whether the
pleadings give plaintiff fair notice of the defense. See Woodfield v. Bowman, 193 F.3d 354, 362
(5th Cir. 1999). This standard prevents a plaintiff from being a victim of “unfair surprise.” Id.
Plaintiffs’ main argument is that Defendant fails to plead “with sufficient specificity”
because Defendant does not furnish the loan documentation that gives it the authority to
foreclose on the Property. In regard to Defendant’s affirmative defenses, Plaintiffs allege
generally that Defendant asserts “mere bald allegations” (Dkt. #26 at 3). Having reviewed the
relevant pleadings, the Court disagrees with Plaintiffs’ arguments.

Defendant’s affirmative

defenses are applicable to the instant case and are sufficiently developed by the allegations in
Defendant’s answer (Dkt. #24). Moreover, Plaintiffs have fair notice of Defendant’s affirmative
defenses because of the allegations contained in Defendant’s answer and the loan documents
attached as exhibits to Defendant’s Motion for Summary Judgment and Brief in Support. See
GE Capital Commercial, Inc. v. Worthington Nat’l Bank, No. 3:09-CV-572, 2011 WL 5025153,
*7 (N.D. Tex. Oct. 20, 2011) (denying a motion to strike affirmative defenses because “there are
other documents, filed well before the close of discovery. . . that put Plaintiffs on notice of the
factual basis of [the affirmative defense]”). Because of this, Plaintiffs are not unfairly surprised
by the allegations and defenses contained in Defendant’s answer. Thus, the Court finds that

4

Plaintiffs’ Motion to Strike Defendant’s Answers and Affirmative Defenses as Non-Responsive
should be denied.
Defendant’s Motion for Summary Judgment
Defendant BONY moves for summary judgment on all of Plaintiffs’ causes of action.
Plaintiffs make the following four claims 1: (1) Conspiracy to Defraud; (2) Breach of Contract;
(3) Quiet Title; and (4) Misrepresentation. All of Plaintiffs’ claims are predicated and depend
upon the allegation that Defendant lacks the authority to enforce the Note and Deed of Trust
because the loan documents have been improperly assigned in such a way as to void enforcement
by any assignee. Because of this, the Court must grant summary judgment as a matter of law if it
finds that there is no genuine issue of material fact as to Defendant’s ownership and ability to
enforce the loan documents.
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. Unit B 1981) (citations
omitted). The substantive law identifies which facts are material. Anderson, 477 U.S. at 248.

1

The Court notes that Plaintiffs attempt to make the fifth claim of “The Deed of Trust Does Not
Secure the Deed of Trust Note,” but this section simply re-alleges the factual allegations from the
previous four claims and does not assert an independent cause of action.
5

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
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 satisfied 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).
In their Amended Complaint and responsive pleadings, Plaintiffs have introduced several
theories and arguments as to why the assignments of the Note and Deed of Trust to Defendant
are invalid. The Court will now review these arguments in turn.
First, Plaintiffs argue that the assignments to Defendant are invalid because the
recordings of the assignments were executed by individuals who did not have authority or
personal knowledge of the facts surrounding the assignment, otherwise colloquially known as
“robo-signing.” In support of this claim, Plaintiffs only make general allegations and fail to
provide any supporting evidence as to the status or knowledge of the individuals executing the
assignments. Even if Plaintiffs did provide evidence of the alleged robo-signing, Plaintiffs still

6

could not void the assignments because, under Fifth Circuit and Texas jurisprudence, the law is
settled that “an obligor cannot defend against an assignee’s efforts to enforce [an] obligation on a
ground that merely renders the assignment voidable at the election of the assignor.” Reinagel v.
Deutsche Bank Nat’l Trust Co., 735 F.3d 220, 225 (5th Cir. 2013). Therefore, the Court finds
that Plaintiffs’ argument fails as a matter of law because Plaintiffs were not parties to the
assignments and are thus unable to challenge or void the assignments.
Next, Plaintiffs argue that the assignments to Defendant are invalid because the Note and
the Deed of Trust were “separated since the inception of this loan” and “[a]ny attempt to assign
the beneficial interest in the Deed of Trust to another, without simultaneously being the holder of
the Note, is void” (Dkt. #12 at 13, 16). The Fifth Circuit has already addressed and rejected this
“split-the-note” theory on nearly identical facts. Martins v. BAC Home Loans Servicing, LP, 722
F.3d 249, 254 (5th Cir. 2013). Moreover, Plaintiffs have presented no argument or facts as to
why this Court should deviate from controlling authority. Accordingly, the Court finds that this
argument fails as a matter of law.
Next, Plaintiffs argue that the assignments to Defendant are invalid because MERS did
not have the authority to assign the Note or Deed of Trust because neither MERS nor Defendant
ever had the original loan documents in its physical possession. In Texas, MERS is legally
recognized as a “national book entry system for registering a beneficial interest in a security
instrument that acts as a nominee for the grantee, beneficiary, owner, or holder of the security
instrument and its successors and assigns.” TEX. PROP. CODE ANN. § 51.0001(1); see Richardson
v. CitiMortgage, Inc., No. 6:10-CV-119, 2010 WL 4818556, at *5 (E.D. Tex. Nov. 22, 2010).
The Fifth Circuit has expressly stated that “Texas recognizes assignment of mortgages through
MERS and its equivalents as valid and enforceable without production of the original, signed

7

note.” Martins, 722 F.3d at 253. Moreover, Texas law does not require either MERS or
Defendant to hold or produce the original Note in order to foreclose on the Property. See TEX.
PROP. CODE ANN. § 51.002(a)-(i); see id. at 255. Accordingly, the Court finds that this argument
fails as a matter of law.
Next, Plaintiffs argue that the assignments to Defendant are invalid because Plaintiffs
failed to receive notice of the assignments. This argument is directly contradicted by the plain
language in the Note and Deed of Trust that states that the loan documents are freely transferable
and “can be sold one or more times without prior notice to Borrower” (Dkt. #25, Ex. B1 at 11).
Because there is no requirement that Plaintiffs receive notice of this type of assignment, the
Court finds that this argument fails as a matter of law.
Next, Plaintiffs argue that the assignments to Defendant are invalid because the loan has
been securitized in violation of a pooling and servicing agreement. Plaintiffs never identify or
provide a copy of this pooling and servicing agreement to the Court. Even if Plaintiffs did
provide a copy of a pooling and servicing agreement that was executed during the assignments,
Plaintiffs were not parties to the assignment or agreement and therefore lack standing to contest
any alleged securitization of the loan documents. See Reinagel, 735 F.3d at 228. Accordingly,
the Court finds that this argument fails as a matter of law.
Next, Plaintiffs argue that the assignments to Defendant are invalid because “potentially
dozens or even thousands of third parties could come forward claiming an unsatisfied interest in
the Note” as a result of the assignment (Dkt. #12 at 12). Plaintiffs allege that Decision One,
BONY, MERS, Bank of America, HSBC, and SPS have all come forward “attempting to
demonstrate an entitlement to the property or entitlement to foreclose” (Dkt. #12 at 11). In
support of this claim, Plaintiffs submit two pieces of correspondence as evidence that allegedly

8

prove that multiple third parties are currently asserting an interest in the Property (Dkt. #12, Exs.
G, H). The first piece of correspondence is a letter dated July 3, 2012, that purports to be from a
legal representative of Bank of America (Dkt. #12, Ex. G). This letter states that Defendant
BONY is the current owner of the Note/Deed of Trust and that Bank of America is the servicer
of the loan. The second piece of correspondence is a letter dated October 10, 2012, that purports
to be from SPS (Dkt. #12, Ex. H). This letter states that servicing of the loan has been transferred
from Bank of America to SPS and that Plaintiffs should begin sending loan payments to SPS.
After reviewing these letters in connection with Defendant’s summary judgment evidence, the
Court finds that this evidence is insufficient to create a genuine issue of material fact as to the
ownership of the loan documents. In fact, these letters help to confirm Defendant’s allegations
and other summary judgment evidence that Defendant has the authority to enforce the loan
documents via the loan servicer SPS. Accordingly, the Court finds that this argument fails as a
matter of law.
Finally, Plaintiffs argue that the assignments to Defendant are invalid because MERS
assigned the loan documents after Decision One, the original lender, was closed by its parent
company, HSBC. After reviewing the evidence provided by both parties, the Court finds that
there is a clear chain of title that establishes Defendant as the mortgagee and SPS as the current
loan servicer with authority to administer foreclosure proceedings. Under Texas law, a
mortgagee may be one of the following types of entities: the grantee, beneficiary, owner, or
holder of a security instrument; a book entry system (such as MERS); or “the last person to
whom the security interest has been assigned of record.” TEX. PROP. CODE ANN. § 51.0001(4).
The uncontroverted evidence shows that Decision One and Plaintiffs initially executed the Note
and Deed of Trust with MERS as the beneficiary (Dkt. #25, Exs. A1, A2). Subsequently, MERS

9

assigned both the Note and Deed of Trust to Defendant (Dkt. #25, Exs. B3, B4). Even though
Decision One was closed at the time of the assignment, MERS still had the power as beneficiary
to properly assign and grant the security instruments to Defendant. See Scott v. Bank of America,
N.A., No. SA-12-CV-917, 2013 WL 1821874, at *3 (W.D. Tex. Apr. 29, 2013) (holding that the
lender could foreclose by virtue of assignment from MERS as beneficiary). Because of this, the
Court finds that the assignments are valid and that Defendant is the “last person to whom the
security interest has been assigned of record” with the authority to enforce the Note and Deed of
Trust on its own or through the current loan servicer SPS. The Court additionally finds that
Plaintiffs are liable to Defendant for the unpaid sum due upon the loan and that Defendant or its
loan servicer may enforce the Deed of Trust.
In response, 2 Plaintiffs argue that Defendant’s motion should be denied because Plaintiffs
have had no opportunity to perform discovery (Dkt. #28). The Court is not swayed by this
argument. Plaintiffs have indeed had the opportunity to perform discovery after the Rule 26(f)
discovery conference that occurred on or about July 29, 2014, but Plaintiffs have failed to do so.
FED. R. CIV. P. 26(d) (explaining that a party may seek non-exempt discovery from any source
after the Rule 26(f) conference); (Dkt. #18). Moreover, Defendant has included all relevant
documents as exhibits in its motion for summary judgment, and Plaintiffs do not explain with
any specificity as to the additional types of information or documents that they will seek on
discovery.
Because the Court finds that Defendant has the ability and authority to enforce the Note
and Deed of Trust, all of Plaintiffs’ causes of action must be dismissed on summary judgment.
The Court will now review each cause of action in turn.
2

Even though Plaintiffs’ response was untimely, the Court will accept and consider the response
because Plaintiffs proceed pro se.

10

First, Plaintiffs’ claim of Conspiracy to Defraud fails because the summary judgment
evidence conclusively shows that Defendant never worked in combination with another to make
unlawful representations regarding the loan documents. See Tri v. J.T.T., 162 S.W.3d 552, 556
(Tex. 2005) (describing the necessary elements of a conspiracy claim). As explained above, there
is no material or genuine issue of fact as to Defendant’s authority to enforce the loan documents.
Because of this, none of the documents provided to Plaintiffs or the Court are fraudulent and
therefore Defendant never sought to accomplish an unlawful purpose.
Second, Plaintiffs’ claim of Breach of Contract fails because the summary judgment
evidence conclusively shows that Defendant has properly performed under the loan documents
and has not breached the agreement. See Sport Supply Group, Inc. v. Columbia Cas. Co., 335
F.3d 453, 465 (5th Cir. 2003) (explaining the required elements of a breach of contract claim).
In fact, it is the Plaintiffs who are currently breaching the agreement by intentionally failing to
make required payments on the loan.
Third, Plaintiffs’ claim of Quiet Title fails because the summary judgment evidence
conclusively shows that Defendant’s claim on the Property is valid and enforceable and that
Plaintiffs cannot show superior title. See Disanti v. MERS, Inc., No. 4:10-CV-103, 2010 WL
3338633, *3 (E.D. Tex. Aug. 24, 2010) (describing the necessary elements of a trespass-to-trytitle claim). Moreover as explained above, Plaintiffs’ allegations that multiple parties are
attempting to collect on the loan and that only the “holder” of the Note may enforce the loan
documents are invalid as a matter of law.
Fourth, Plaintiffs’ claim of Misrepresentation fails because the summary judgment
evidence conclusively shows that Defendant has made no false representation to Plaintiffs about
the status of the loan documents. See Flaherty & Crumrine Preferred Income Fund, Inc. v. TXU

11

Corp., 565 F.3d 200, 212 (5th Cir. 2009) (citing Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co.,
51 S.W.3d 573, 577 (Tex. 2001)) (explaining the elements of a fraudulent misrepresentation
claim in Texas). As explained above, Plaintiffs’ allegations that Defendant is fraudulently
misrepresenting the ownership of the Note and Deed of Trust are invalid as a matter of law.
CONCLUSION
For the foregoing reasons, it is therefore ORDERED that Plaintiffs’ Motion to Strike
Defendant’s Answers and Affirmative Defenses as Non-Responsive (Dkt. #26) is hereby
DENIED.
It is further ORDERED that Defendant Bank of New York Melon’s Motion for
Summary Judgment (Dkt. #25) is hereby GRANTED.
It is further ORDERED that all claims that Plaintiff Indira Bernal and Plaintiff Josue
Bernal assert against Defendant Bank of New York Melon are hereby DISMISSED WITH
.

PREJUDICE.
It is further ORDERED that all claims that Plaintiff Indira Bernal and Plaintiff Josue
Bernal assert against all other named defendants are hereby DISMISSED WITHOUT
PREJUDICE.
SIGNED this 28th day of April, 2015.

___________________________________
AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE

12