Richardson et al v. CitiMortgage, Inc. et al

Filing 33

MEMORANDUM AND OPINION, and ORDER OF DISMISSAL re 1 Complaint, filed by Todd Shane Richardson, Amanda A Richardson. ORDERED that the complaint is DISMISSED with prejudice. ORDERED that all motions not previously ruled on are DENIED. Signed by Magistrate Judge Judith K. Guthrie on 11/22/2010. (gsg)

Richardson et al v. CitiMortgage, Inc. et al

Doc. 33

IN THE UNITED STATES DISTRICT COURT F O R THE EASTERN DISTRICT OF TEXAS T Y LE R DIVISION

T O D D SHANE RICHARDSON, ET AL. VS. C IT IM O R T G A G E , INC., ET AL.

§ § § C IV IL ACTION NO. 6:10cv119

M E M O R A N D U M OPINION AND O R D E R OF DISMISSAL P lain tiffs Todd Shane Richardson and Amanda A. Richardson, proceeding pro se and in forma p a u p eris, filed this civil lawsuit in an effort to stop a foreclosure on their home. The complaint was

transferred to the undersigned with the consent of the parties pursuant to 28 U.S.C. § 636(c).
T h e present Memorandum Opinion concerns a motion to dismiss filed by Defendant Southside B an k (docket entry #16), a motion for summary judgment filed by Defendants CitiMortgage, Inc. (" C itiM o rtgage") and Mortgage Electronic Registration System, Inc. ("MERS") (docket entry #17), an d a motion to dismiss filed by Brice, Vander Linden & Wernick, P.C. (docket entry #31), along with th e various responses. F acts of the Case T h e Plaintiffs purchased their home, located at 2040 Dressage Lane in Tyler, Texas, on January 1 7 , 2006. The house was purchased with a home loan from Southside Bank in Tyler. The loan was secured by a Note signed by the Plaintiffs and an officer from Southside Bank. The Note specified that S o u th sid e Bank was the Lender and that the "Lender may transfer this Note. The Lender or anyone w h o takes this Note by transfer and who is entitled to receive payments under this Note is called the

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`Note Holder.'" The Plaintiffs also signed a First Payment Notice, where they acknowledged C itiM o rtgage to be the Loan servicer and entitled to receive payments on the Note and to enforce the N o te . The Note was secured by a Deed of Trust lien payable to the Lender, which was again id en tified as Southside Bank. The Deed of Trust utilized a standard Fannie Mae/Freddie Mac form u sed in Texas for secured transactions involving MERS. The Deed of Trust included the following p ro v isio n regarding the transfer of rights in the property: T h e beneficiary of this Security Instrument is MERS (solely as nominee for Lender and Len d er's successors and assigns) and the successors and assigns of MERS. This Security In stru m en t secures to Lender: (i) the repayment of the Loan, and all renewals, extensions and m o d ificatio n s of the Note; (ii) the performance of Borrower's covenants and agreements under th is Security Instrument and the Note. For this purpose, Borrower irrevocably grants and co n v eys to Trustee, in trust, with power of sale, the [property]. M E R S was defined as Mortgage Electronic Registration Systems, Inc., a separate corporation acting so lely as nominee for Lender and Lender's successors and assigns. MERS was identified as a b en eficiary under the Security Instrument. The Deed of Trust identified the role of MERS in securing the rights of the Lender, including th e prospect of foreclosure, as follows: B o rro w er understands and agrees that MERS holds only legal title to the interests granted by B o rro w er in this Security Interest, but, if necessary to comply with the law or custom, MERS (as nominee for Lender and Lender's successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; an d to take any action required of Lender, including but not limited to, releasing and canceling th is Security Instrument. T h e Plaintiffs signed the Deed of Trust and began making mortgage payments to CitiMortgage. On Jan u ary 2, 2006, a Transfer of Lien was filed with the Smith County Clerk indicating that Southside B an k , holder of the Note and Lien, transferred them for value to City National Bank.

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The Plaintiffs, however, stopped making mortgage payments. They have not made a payment sin ce December 2008. As of June 2010, the unpaid principal was $378,507.84, and the Plaintiffs had an arrearage exceeding $64,150.00. The Plaintiffs also filed for bankruptcy protection. On March 25, 2 0 0 9 , MERS, as nominee for Southside Bank, assigned its beneficial interest in the Deed of Trust to C itiM o rtgage. A Transfer of Lien document was filed with the Smith County Clerk. On July 20, 2 0 0 9 , the United States Bankruptcy Court in Tyler lifted the automatic stay with respect to the property an d authorized CitiMortgage to foreclose on its lien and to sell the property. The order specified that th e stay as to CitiMortgage would be lifted effective January 18, 2010. The property was posted for foreclosure on April 6, 2010. However, on April 5, 2010, the P lain tiffs filed the present lawsuit in an effort to stop the foreclosure. They sought declaratory and in ju n ctiv e relief against the Defendants regarding CitiMortgage's authority to foreclose on the p ro p erty. They challenged the role of MERS with respect to the transfer of rights in the property. They finally asked that the trustee sale scheduled for April 6, 2010, be vacated. It is noted that the fo reclo su re sale was cancelled due to the filing of this lawsuit. D iscu ssio n and Analysis T h e first motions that should be considered are the motions to dismiss filed by Defendant S o u th sid e Bank (docket entry #16) and Defendant Brice, Vander Linden & Wernick, P.C. (docket e n tr y #31). Southside Bank argued that the claims against it should be dismissed because the P lain tiff's admitted in paragraph 42 of the complaint that "Southside Bank was no longer the owner o f the note because they sold it in 2006." Southside Bank argued that the allegations in the complaint rev eal that they have no interest in this matter, thus they should be dismissed from the lawsuit. Rule 12(b)(6) allows dismissal if a plaintiff fails "to state a claim upon which relief may be gran ted ." Fed. R. Civ. P. 12(b)(6). The Supreme Court clarified the standards that apply in a motion

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to dismiss for failure to state a claim in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). The S u p rem e Court stated that Rule 12(b)(6) must be read in conjunction with Rule 8(a), which requires " a short and plain statement of the claim showing that the pleader is entitled to relief." Id. at 555. The S u p rem e Court held that "we do not require heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face. Id. at 570. A complaint may be dismissed if a plaintiff fails to "nudge [his] claims across the line from conceivable to plausible." Id. The facts as alleged by the Plaintiffs reveal that Southside Bank is no longer involved in this m atter. Southside Bank agreed. Southside Bank is not involved in the foreclosure in any respect. The P la in tiffs have not alleged any facts against Southside Bank showing that they are entitled to relief again st it. The motion to dismiss should be granted. B rice, Vander Linden & Wernick, P.C., also argued that the Plaintiffs have not stated any claim again st the firm upon which relief may be granted. The allegations by the Plaintiffs show only that the firm submitted the transfer of lien document transferring the lien from MERS to CitiMortgage on April 8 , 2009. The Plaintiffs have not shown that the firm caused any injury to them. The motion to dismiss sh o u ld be granted. T h e final motion to consider is the motion for summary judgment filed by CitiMortgage and M E R S (docket entry #17). Summary judgment is proper when the pleadings and evidence on file sh o w that "there is no genuine issue as to any material fact and that the moving party is entitled to a ju d gm en t as a matter of law." Fed. R. Civ. P. 56(c). The moving party for summary judgment has the b u rd en of proving the lack of a genuine issue as to all the material facts. Celotex Corp. v. Catrett, 477 U .S . 317, 323 (1986); Galindo v. Precision American Corp., 754 F.2d 1212, 1221-23 (5th Cir. 1985). In deciding a motion for summary judgment, the Court must make a threshold inquiry in d eterm in in g whether there is a need for a trial. "In other words, whether there are any genuine factual

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issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). "[T]he mere ex isten ce of some alleged factual dispute between the parties will not defeat an otherwise properly su p p o rted motion for summary judgment; the requirement is that there be no genuine issue of material fact." 477 U.S. at 247-48. In making this threshold inquiry, the Court must consider that "[s]ummary ju d gm en t is proper when, viewed in the light most favorable to the non-moving party, the pleadings, d ep o sitio n s, answers to interrogatories, and admissions on file, together with the affidavits, if any, sh o w that there is no genuine issue as to any material fact." Smith v. Xerox Corp., 866 F.2d 135, 137 (5 th Cir. 1989) (citations omitted); Fed. R. Civ. P. 56(c). O n ce the movants make a showing that there is no genuine material fact issue to support the n o n m o v an t's case, the nonmovant cannot survive a motion for summary judgment by resting on the allegatio n s in his pleadings. Isquith v. Middle South Utilities, Inc., 847 F.2d 186, 199 (5th Cir.), cert. d e n ie d , 488 U.S. 926 (1988); see also Celotex, 477 U.S. at 324. Rather, he must direct the court's atten tio n to evidence in the record sufficient to establish that there is a genuine issue of material fact fo r trial. Celotex, 477 U.S. at 324. To carry this burden, the nonmovant must present evidence s u ffic ien t to support a resolution of the factual issues in his favor. Anderson, 477 U.S. at 257. Summary judgment is proper if the affidavits, depositions, answers, and admissions on file fail to estab lish the existence of an element essential to the plaintiff's case and as to which he will bear the b u rd en of proof at trial. Celotex, 477 U.S. at 322-23. T h e thrust of the lawsuit is the Plaintiffs' challenge to the right of CitiMortgage to foreclose o n the property. The competent summary judgment evidence reveals that Southside Bank transferred all of its rights to CitiMortgage, although the transfer of lien in 2009 was made via MERS. When S o u th sid e Bank endorsed the Note to CitiMortgage, then CitiMortgage became entitled to enforce the

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Note. Tex. Bus. & Comm. Code § 3.205. Southside Bank's transfer of the Note to CitiMortgage made C itiM o rtgage a "successor and assign" of the "Lender," and a "Note Holder" as those terms are defined in the Note, who is entitled to enforce the Note. Tex. Bus. & Comm. Code § 3.201. Also, in the loan d o cu m en ts, the Plaintiffs expressly acknowledged and agreed that CitiMortgage was the Loan servicer, th at it was entitled to receive payments on the Note, and that it was entitled to enforce the Note. C itiM o rtgage is entitled to enforce the loan agreements, which may include foreclosure. The Plaintiff's argu m en ts presented in an effort to stop foreclosure lack merit. C itiM o rtgage also appropriately argued that the Plaintiffs are judicially estopped from denying its right to enforce the Note and Deed of Trust. The Plaintiffs represented to the United States B an k ru p tcy Court for the Eastern District of Texas that CitiMortgage was the creditor on the property. Mr. Richardson represented that it was his intention to surrender the property to CitiMortgage. As a resu lt of these representations, on July 20, 2009, the bankruptcy trustee acknowledged and agreed, and th e Bankruptcy Court found that the Plaintiffs could not pay for casualty insurance for the property or p ro p erty taxes on the property, that it was in the best interest of Mr. Richardson's estate that the p ro p erty be sold, and that the automatic stay should be lifted. CitiMortgage argued that the Plaintiffs a c k n o w led ged and agreed in the Bankruptcy Court, under penalty of perjury and in separate court p ro ceed in gs, that CitiMortgage has a valid, undisputed lien on the property for the remaining balance o f the Note. C itiM o rtgage appropriately cited In re Coastal Plains, Inc., 179 F.3d 197 (5th Cir. 1999), in argu in g that the Plaintiffs are judicially estopped from taking the position that it may not foreclose on th e property. In re Coastal Plains, like the present case, concerned judicial estoppel in the context of a bankruptcy proceeding. The Fifth Circuit made the following comments:

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Judicial estoppel is "a common law doctrine by which a party who has assumed one position in his pleadings may be estopped from assuming an inconsistent position. Brandon v. Interfirst C o rp ., 858 F.2d 266, 268 (5th Cir. 1988). The purpose of the doctrine is "to protect the in tegrity of the judicial process", by "prevent[ing] parties from playing fast and loose with the co u rts to suit the exigencies of self interest". Id. . . . Because the doctrine is intended to p ro tect the judicial system, rather than the litigants, detrimental reliance by the opponent of th e party against whom the doctrine is applied is not necessary. . . . T h e doctrine is generally applied where "intentional self-contradiction is being used as a means o f obtaining unfair advantage in a forum provided for suitors seeking justice." Scarano v. C en tra l R. Co., 203 F.2d 510, 513 (3rd Cir. 1953). . . . M o st courts have identified at least two limitations on the application of the doctrine: (1) it m ay be applied only where the position of the party to be estopped is clearly inconsistent with its previous one; and (2) that party must have convinced the court to accept the previous p o s i t io n . Id. at 206-06 (footnotes omitted). A debtor is required to disclose all potential claims in a bankruptcy p etitio n and must amend his schedules if circumstances change. Id. at 205. When a debtor fails to d isclo se a pending or potential claim in his bankruptcy petition, he is judicially estopped from bringing th at claim later. In the present case, the Plaintiffs failed to include their present claims in the prior b an k ru p tcy proceedings, even though these claims on their face are claims that would have accrued b efo re they filed the bankruptcy proceedings. T h e Plaintiffs' position in this lawsuit is the opposite of the representations they made to the B an k ru p tcy Court, and they should not be allowed to advance such positions. They should not be allo w ed to "play fast and loose" with the courts in order to avoid foreclosure. The Bankruptcy Court lifted the automatic stay and permitted CitiMortgage to foreclose on the loan because of the Plaintiff's rep resen tatio n s. As a matter of law, the Plaintiffs are judicially estopped from challenging the right o f CitiMortgage to foreclose on the loan. The Plaintiffs also complained about the role of MERS with respect to the enforcement of the N o te and Deed of Trust. The role of MERS was clearly established in the Deed of Trust, as follows:

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Borrower understands and agrees that MERS holds only legal title to the interests granted by B o rro w er in this Security Interest, but, if necessary to comply with the law or custom, MERS (as nominee for Lender and Lender's successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; an d to take any action required of Lender, including but not limited to, releasing and canceling th is Security Instrument. U n d er Texas law, where a deed of trust, as here, expressly provides for MERS to have the power of sale, then MERS has the power of sale. Athey v. MERS, 314 S.W.3d 161, 166 (Tex. App. - Eastland 2 0 1 0 ). MERS was the nominee for Southside Bank and its successors and assigns. MERS had the au th o rity to transfer the rights and interests in the Deed of Trust to CitiMortgage. The Plaintiffs' co m p lain ts about the role of MERS in this matter lacks merit. It is further noted that the role of MERS has been the subject of federal multidistrict litigation in In re: Mortgage Electronic Registration Systems (MERS) Litigation, 659 F.Supp.2d 1368 (U.S. Jud. P an . Mult. Lit. 2009). The MERS system is merely an electronic mortgage registration system and clearin gh o u se that tracks beneficial ownerships in, and servicing rights to, mortgage loans. Id. at 1370. The system is designed to track transfers and avoid recording and other transfer fees that are otherwise asso ciated with the sale. Id. at 1370 n.6. MERS is defined in Texas Property Code § 51.0001(1) as a "book entry system," which means a "national book system for registering a beneficial interest in secu rity instrument and its successors and assigns." As noted in Athey, mortgage documents provide fo r the use of MERS and the provisions are enforceable to the extent provided by the terms of the d o cu m en ts. The role of MERS in this case was consistent with the Note and Deed of Trust. Finally, the Plaintiff's sought to stop the foreclosure sale of April 6, 2010. The sale was p o stp o n ed due to the filing of this lawsuit. "[A] case is moot when the issues presented are no longer `liv e' or the parties lack a legally cognizable interest in the outcome." Powell v. McCormack, 395 U.S. 4 8 6 , 496 (1969); Rocky v. King, 900 F.2d 864, 867 (5th Cir. 1990). The issue of the foreclosure sale

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on April 6, 2010, is moot. However, in light of the conclusion that CitiMortgage had every right to fo reclo se on the property, CitiMortgage may schedule another foreclosure sale, which should not be p o stp o n ed due to the pendency of any lawsuit in this Court. It is therefore O R D E R E D that the motions to dismiss filed by Southside Bank (docket entry #16) and Brice, V an d er Linden and Wernick, P.C., (docket entry #31) are GRANTED. It is further O R D E R E D that the motion for summary judgment filed by CitiMortgage and MERS (docket en try #17) is GRANTED. It is further O R D E R E D that the complaint is DISMISSED with prejudice. It is finally O R D E R E D that all motions not previously ruled on are DENIED.

So ORDERED and SIGNED this 22 day of November, 2010.

____________________________ JUDITH K. GUTHRIE UNITED STATES MAGISTRATE JUDGE

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