Morse v. Codilis & Stawiarski, P.C. et al

Filing 105

MEMORANDUM ADOPTING REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE - Having considered Plaintiff's timely filed objections (Dkt. #71), and having conducted a de novo review, the Court is of the opinion that the findings and concl usions of the Magistrate Judge are correct and adopts the Magistrate Judge's report (Dkt. #67) as the findings and conclusions of the Court. It is, ORDERED that Defendant Codilis & Stawiarski, P.C.'s Amended and Supplemental Rule 12(b)(6) Motions to Dismiss (Dkts. 54 , 56 ) is GRANTED, and Plaintiff's claims against Defendant Codilis & Stawiarski, P.C. are DISMISSED with prejudice. Signed by Judge Amos L. Mazzant, III on 6/5/2017. (baf, )

United States District Court
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION

GREGORY CARL MORSE also known as
GREGORY C. MORSE,
v.
CODILIS & STAWIARSKI, P.C., DITECH
FINANCIAL, LLC, DITECH FINANCIAL,
LLC, NA

§
§
§
§
§
§
§

Civil Action No. 4:16-CV-279
(Judge Mazzant/Judge Nowak)

MEMORANDUM ADOPTING REPORT AND
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
Came on for consideration the report of the United States Magistrate Judge in this action,
this matter having been heretofore referred to the Magistrate Judge pursuant to 28 U.S.C. § 636.
On April 12, 2017, the report of the Magistrate Judge (Dkt. #67) was entered containing
proposed findings of fact and recommendations that Defendant Codilis & Stawiarski, P.C.’s
Amended and Supplemental Rule 12(b)(6) Motions to Dismiss (Dkt. #54; Dkt. 56) be granted.
Having received the report of the Magistrate Judge (Dkt. #67), having considered Plaintiff’s
timely filed objections (Dkt. #71), Defendant’s response (Dkt. #85), and having conducted a
de novo review, the Court is of the opinion that the findings and conclusions of the Magistrate
Judge are correct and adopts the Magistrate Judge’s report (Dkt. #67) as the findings and
conclusions of the Court.
BACKGROUND
The Magistrate Judge previously set forth the procedural and factual history of this litigation
relevant to Plaintiff’s allegations against Defendant Codilis & Stawiarski, P.C., and such facts
need not be restated fully herein (see Dkt. #67). This litigation arises out of Defendant Ditech’s

1

(and its predecessors’) attempts to foreclose on the real property located at 223 High Point,
Murphy, Texas 75094, of which Plaintiff alleges he is the owner.

Defendant Codilis &

Stawiarski, P.C. was retained to assist Ditech with the foreclosure of the property.

It is

undisputed that Defendant Codilis was acting as foreclosure counsel for Defendant Ditech at all
times relevant to this suit. Plaintiff asserts multiple claims against Defendant Codilis, each of
which is premised on Defendant Codilis’s purported fraudulent activities performed during the
course of its representation of Defendant Ditech, including: (1) “Assignment of Substitute
Trustee”; (2) “Filing of the fraudulent Notice of Substitute Trustee Sale”; (3) “Lying that the
Notice of Substitute Trustee’s Sale was a true copy of the one filed with the County”;
(4) “Assisting in the conducting of an illegal foreclosure sale on May 3, 2016 in Collin County,
Texas”; (5) “Engaging in racketeering activities”; and (6) “Developing statutorily defective
documents in association with the Substitute Trustee’s Sale . . .” (see Dkt. #49 at 14, 22-28, 30,
39-42, 44, 46; Dkt. #58 at 11).
On April 12, 2017, the Magistrate Judge entered a report and recommendation,
recommending that Defendant Codilis and Stawiarski’ P.C.’s Amended and Supplemental
Rule 12(b)(6) Motions to Dismiss (Dkt. #54; Dkt. 56) be granted.

The Magistrate Judge

recommended Plaintiff’s claims against Defendant Codilis be dismissed after finding Defendant
Codilis was acting as counsel for Ditech in connection with any foreclosure attempts and as such
was entitled to attorney immunity. On April 24, 2017, Plaintiff filed Objections (Dkt. #71) to the
report and recommendation. The Objections were filed by “Gregory Carl Morse, Executor, on
behalf of Gregory C. Morse” (Dkt. #71). On May 17, 2017, the Magistrate Judge conducted a
hearing and confirmed that, notwithstanding such statement, no change in parties had occurred,

2

and the objections were filed by pro se Plaintiff Gregory C. Morse (Dkt. #96). On May 1, 2017,
Defendant Codilis & Stawiarski, P.C. filed its Response to Plaintiff’s Objections (Dkt. #85).
PLAINTIFF’S OBJECTIONS
Plaintiff objects to the Magistrate Judge’s finding that Defendant Codilis is entitled to
attorney immunity; the Court discerns two primary reasons Plaintiff contends the Magistrate
Judge’s finding is in error: (1) attorney immunity can be invoked only when an attorney is
prosecuting a suit for a client that has legal standing, and (2) Defendant Codilis knowingly
engaged in fraudulent activities and there can be no attorney immunity for fraud. 1 Defendant
Codilis argues in its Response that Plaintiff failed to properly object to any specific findings
contained within the report and recommendation, and further, alleges that, even if Plaintiff had
properly objected, he has still failed to demonstrate how the Magistrate Judge’s attorney
immunity analysis is flawed. In light of Plaintiff’s objection, the Court has undertaken a de novo
review of the Magistrate Judge’s finding that Defendant Codilis is entitled to attorney immunity,
considering

each

of

the

reasons

Plaintiff

alleges

such

finding

is

in

error.

28 U.S.C. § 636(b)(1)(c); Fed. R. Civ. P. 72(b)(2)-(3).
Objection 1 – Scope of Attorney Immunity
Plaintiff’s first objection contends that attorney immunity is only applicable when an
attorney is “prosecuting a suit” for a client with “legal standing.” To the extent Plaintiff argues
by and through his use of the phrase “prosecuting a suit” that attorney immunity applies only to
counsel involved in litigation, and not to counsel pursuing foreclosure proceedings, Plaintiff’s
assertion is incorrect. The Texas Supreme Court made clear in Cantey Hanger, LLP v. Byrd that
1

Plaintiff’s objections specifically assert that (i) Defendant Codilis knew its actions for its clients were in violation
of the law, (ii) Defendant Codilis has a responsibility to uphold the law and advise its clients against actions
contravening the law, and (iii) any person who makes or uses a document knowing it is fraudulent is liable for any
damages resulting from such use. The Court construes these assertions collectively to be an allegation by Plaintiff
that Defendant Codilis knowingly engaged in fraudulent activity, and as such is not entitled to immunity.
3

while “[t]he majority of Texas cases addressing attorney immunity arise in the litigation
context[,] [t]hat is not universally the case.” 467 S.W.3d 477, 482 n.6 (Tex. 2015) (collecting
cases). Numerous opinions in other cases have found attorney immunity applicable outside of
the litigation context, including specifically in foreclosure proceedings. See, e.g., Bitterroot
Holdings, LLC v. MTGLQ Inv’r, L.P., No. 5:14-CV-862-DAE, 2015 WL 363196, at *4-5 (W.D.
Tex. Jan. 27, 2015).
The Court also finds unavailing Plaintiff’s assertion that a lawyer is without protection
from liability arising out of representation of a client where the client is alleged to lack legal
standing.

Here, Plaintiff alleges that Defendant Ditech (and its predecessors) lacked legal

standing to undertake foreclosure because Plaintiff’s contract (the underlying note and deed of
trust) lacked consideration. Plaintiff seemingly asserts that, because Defendant Ditech is alleged
to lack standing to foreclose or pursue claims against Plaintiff, Defendant Codilis cannot claim
attorney immunity. More specifically, Plaintiff alleges the Court cannot make a determination
regarding whether the actions of Defendant Codilis were consistent with the discharge of its duty
in representing a party without first determining Defendant Ditech’s standing to engage in
foreclosure.
The determination of immunity “focuses on the kind of conduct engaged in, not on
whether the conduct was meritorious in the context of the underlying lawsuit.” Bitterroot
Holdings, 2015 WL 363196, at *4 (quoting Bradt v. West, 892 S.W.2d 56, 71 (Tex. App. –
Houston [1st Dist.] 1994, writ denied). Thus, it is of no moment to the Court’s analysis of the
application of attorney immunity whether Plaintiff will ultimately prevail on his claims against
Ditech or in his assertion that Ditech is without standing to pursue a foreclosure action. Rather,
the Court’s focus is on whether Defendant Codilis’ conduct was within the scope of its legal

4

representation of Defendant Ditech. Under Texas law, an attorney representing a client in
foreclosure proceedings is entitled to immunity for actions taken during such representation.
Accordingly, Plaintiff’s first objection is overruled.
Objection 2 – No Fraud Exception to Attorney Immunity
Plaintiff next objects to the Magistrate Judge’s finding that Defendant Codilis is entitled
to attorney immunity notwithstanding Plaintiff’s fraud assertions. Specifically, Plaintiff alleges
that “NO LAWYER IS IMMUNE FROM LIABILITY WHEN FRAUD IS INVOLVED.”
Plaintiff’s argument is premised, in large part, on Defendant Codilis’s alleged actual knowledge
of the prior litigation and/or bankruptcy matters related to the property and Plaintiff’s resulting
belief that Defendant Codilis’s work in connection with any foreclosure proceedings was
wrongful, baseless, or otherwise without merit.
The Magistrate Judge directly confronted this issue in the report and recommendation,
noting that “merely labeling an attorney’s conduct ‘fraudulent’ does not and should not remove it
from the scope” of attorney immunity. Indeed, the Fifth Circuit clarified in its March 2016
opinion Troice v. Proskauer Rose, LLP, that there is no fraud exception to attorney immunity.
816 F.3d 341, 345 (5th Cir. 2016). So long as the conduct complained of is “the kind of conduct
in which an attorney engages when discharging his duties to his client,” immunity shall lie. Id. at
348. “That some of [an attorney’s conduct in representing a client is] allegedly wrongful, or that
[the attorney] allegedly carried out some of his responsibilities in a fraudulent matter, is no
matter.” Id. at 348 (relying on Cantey Hanger, 467 S.W.3d at 485). To reiterate, the immunity
analysis focuses on the type of conduct, not on whether the conduct was meritorious.
Plaintiff’s continued citation to Santiago v. Mackie Wolf Zientiz & Mann, P.C.
(Santiago I), No. 05-13-00620-CV, 2014 WL 4072131 (Tex. App.—Dallas, Aug. 19, 2014, pet.

5

denied) and Likover v. Sunflower Terrace II, Ltd., 696 S.W.2d 468 (Tex. App.—Houston [1st
Dist.] 1985, no writ) for any contrary proposition is misplaced. Notably, Santiago I reversed and
remanded the trial court’s decision on appeal. After the case was remanded to the trial court,
summary judgment was granted in favor of the law firm on immunity grounds. A second appeal
followed. The Dallas Court of Appeals found on the second appeal that, because the law firm’s
conduct was within the scope of its legal representation, attorney immunity applied. Santiago v.
Mackie Wolf Zientiz & Mann, P.C., 2017 WL 944027 (Tex. App.—Dallas, Mar.10, 2017, no
pet.); see also, Lewis v. Am. Expl. Co., 4 F. Supp. 2d 673, 378-79 (S.D. Tex. 1998)
(distinguishing Likover because that case “involve[d] allegations that the lawyer sued [had]
assisted clients in fraudulent business schemes and did not involve actions taken in the context of
litigation”).
Herein, Plaintiff does not dispute that Defendant Codilis is foreclosure counsel for
Ditech, or that Defendant Codilis’s alleged conduct was the kind of conduct attorneys engage in
when discharging duties to a client.

Irrespective of whether Plaintiff believes Defendant

Codilis’s provision of legal services was well reasoned or meritorious, such work still constitutes
the provision of legal services to a client. Defendant Codilis is entitled to attorney immunity.
Plaintiff’s second objection is overruled.
CONCLUSION
Having considered Plaintiff’s timely filed objections (Dkt. #71), and having conducted a
de novo review, the Court is of the opinion that the findings and conclusions of the Magistrate
Judge are correct and adopts the Magistrate Judge’s report (Dkt. #67) as the findings and
conclusions of the Court.

6

.

Accordingly, it is, ORDERED that Defendant Codilis & Stawiarski, P.C.’s Amended
and Supplemental Rule 12(b)(6) Motions to Dismiss (Dkts. #54, 56) is GRANTED, and
Plaintiff’s claims against Defendant Codilis & Stawiarski, P.C. are DISMISSED with prejudice.
IT IS SO ORDERED.
SIGNED this 5th day of June, 2017.

___________________________________
AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE

7