Kittler et al v. GMAC Mortgage LLC
Filing
28
MEMORANDUM OPINION AND ORDER granting 25 MOTION for Summary Judgment and Incorporated Brief in Support Thereof. (Signed by Judge Sim Lake) Parties notified. (aboyd)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
JANICE K. KITTLER and
LESLIE KITTLER,
§
§
§
§
Plaintiffs,
§
§
§
§
§
§
v.
GMAC MORTGAGE, LLC,
Defendant.
CIVIL ACTION NO. H-12-0902
MEMORANDUM OPINION AND ORDER
Plaintiffs,
Janice
K.
Kittler
and
Leslie
Kittler
(~the
Kittlers"), bring this action against defendant, GMAC Mortgage, LLC
(~GMACM"),
for declaratory judgment.
Pending before the court is
GMAC Mortgage, LLC's Motion for Summary Judgment and Incorporated
Brief in Support Thereof (Docket Entry No. 25).
For the reasons
stated below, GMACM's motion for summary judgment will be granted,
and this action will be dismissed with prejudice.
I.
Procedural Background
This action was filed on June 10, 2011, in the District Court
of Harris County, Texas, 333rd Judicial District (Cause No. 201134928),
transferred
to
the
295th Judicial
removed to this court on March 26,
2012.1
District,
Plaintiffs'
and
then
Original
Petition alleged that the Kittlers executed a Texas home equity
1Notice of Removal, Docket Entry No.1.
promissory note in February of 2008 in the amount of $200,100.00,
which was secured by a security instrument,
attached to their Original
June 10,
2011,
the Kittlers
Petition. 2
also
both of which were
On the
same day,
filed Respondents'
i .e . ,
Notice of
Petition Contesting Applicant's Right to Foreclosure in the case
styled, In re Order for Foreclosure, Concerning Janice K. Kittler
and Leslie Kittler and 21051 Flaming Arrow Trail,
Crosby,
Texas
77532 (Cause No. 2011-10755) in the 295th Judicial District Court
of Harris County, Texas. 3
Plaintiffs' Original Petition contested
GMACM's right to foreclose on their home at 21051 Flaming Arrow
Trail,
Crosby,
negligent
Texas
77532,
misrepresentation,
by asserting causes of action for
breach
of
duty,
and
declaratory
judgment. 4
On March 26, 2012, GMACM removed this action to federal court
asserting that "[t]his case is properly removable pursuant to 28
u.S.C.
§§
1332 and 1441 because complete diversity of citizenship
exists between Plaintiffs on one hand, and GMACM on the other hand.
2See Plaintiffs' Original Petition, ~ 6, Texas Home Equity
Note, and Texas Home Equity Security Instrument, Exhibits A-C,
respectively, to Notice of Removal, Docket Entry No.1. See also
Puig v. Citibank, N.A., 2013 WL 657676, *1 (5th Cir. February 22,
2013) (recognizing Texas Home Equity Security Instrument as a Deed
of Trust encumbering property used to secure a home equity loan in
Texas) .
3Exhibit D to Notice of Removal, Docket Entry No.1.
4Plaintiffs' Original Petition, Exhibit A to Notice of
Removal, Docket Entry No. I, pp. 3-4 ~~ 15-28.
See also
Respondents' Notice of Petition, Exhibit D to Notice of Removal,
Docket Entry No. I, p. 1 ~ 1.
-2-
Further, the amount in controversy exceeds $75,000.00, exclusive of
interest and costs."s
On April 13, 2012, GMACM filed a Rule 12© Motion for Judgment
on the Pleadings (Docket Entry No.5).
denied
GMACM's
Motion
for
Judgment
On May 30, 2012, the court
on
the
Pleadings
without
prejudice, explaining that plaintiffs had failed to state a claim
for relief.
But instead of dismissing the case, the court ordered
plaintiffs to file an amended complaint (Docket Entry No. 10).6
On June 11, 2012, the Kittlers filed a Notice of Suggestion of
Bankruptcy
(Docket Entry No.
11)
stating that on May 14,
2012,
GMACM and its affiliates filed voluntary petitions under Chapter 11
of the United States Code in the Southern District of New York.
On
June 14, 2012, the court entered an Order of Dismissal stating that
"[a] petition filed under 11 U.S.C.
§
301, et
~,
operates as a
stay of the commencement or continuation of a judicial proceeding
against the debtor that was or could have been commenced before the
initiation
of
the
bankruptcy
Dismissal also stated,
case."7
The
court's
Order
of
"Plaintiffs may reinstate this action upon
notice to this court of the discontinuance of the stay pursuant to
11 U.S.C. § 362(c) (2), provided such notice is filed within 30 days
SNotice of Removal, Docket Entry No.1, p. 2
~
60r der, Docket Entry No. 10.
70 r der of Dismissal, Docket Entry No. 12, p. 1.
-3-
5.
after the bankruptcy stay is discontinued."8
On July 31, 2012, the
court reinstated the case and ordered the Kittlers to file
an
amended complaint (Docket Entry No. 16).
On August
14,
2012,
the
Kittlers
filed
Plaintiffs'
First
Amended Complaint in which they asserted a single cause of action
for declaratory judgment (Docket Entry No. 18).
On August 15, 2012, GMACM answered Plaintiffs' First Amended
Complaint (Docket Entry No. 19).
On January 25, 2013, GMACM filed a motion for summary judgment
(Docket Entry No. 25), to which the Kittlers have responded (Docket
Entry No. 26), and GMACM has replied (Docket Entry No. 27)
II.
Standard of Review
Summary judgment is authorized if the movant establishes the
absence of a genuine dispute about any material fact and the law
entitles it to judgment.
material
facts
are
Fed. R. Civ. P. 56(c).
"genuine"
if
the
evidence
Disputes about
is
such
that
a
reasonable jury could return a verdict for the nonmoving party.
Anderson v. Liberty Lobby, Inc., 106 S. Ct. 2505, 2511 (1986).
The
Supreme Court has interpreted Rule 56(c) to mandate the entry of
summary
judgment
"after
adequate
time
for
discovery
and
upon
motion, against a party who fails to make a showing sufficient to
establish the existence of an element essential to that party's
case,
and on which that party will bear the burden of proof at
8Id.
at 2.
-4-
trial.
Celotex Corp. v. Catrett, 106 S. Ct. 2548, 2552 (1986).
II
A party moving for summary judgment "must 'demonstrate the absence
of a genuine issue of material fact,'
elements of the nonmovant's case.
F.3d 1069,
S.
Ct.
1075
(5th Cir.
at 2553-2554)
Rule 56(c)
Little v. Liquid Air Corp., 37
1I
1994)
but need not negate the
(en banc)
(quoting Celotex,
106
If the moving party meets this burden,
requires the nonmovant to go beyond the pleadings and
show by admissible evidence that specific facts exist over which
there
is a genuine issue for trial.
S. Ct. at 2553-2554)
Id.
(citing Celotex,
106
In reviewing the evidence "the court must
draw all reasonable inferences in favor of the nonmoving party, and
it may not make credibility determinations or weigh the evidence.
II
Reeves v. Sanderson Plumbing Products, Inc., 120 S. Ct. 2097, 2110
(2000).
Factual controversies are to be resolved in favor of the
nonmovant,
"but
only when
both parties
evidence of contradictory facts.1I
III.
In 1992
the
have
submitted
Little, 37 F.3d at 1075.
Undisputed Facts
Kittlers purchased property located at
Flaming Arrow Trail,
Crosby,
Texas 77532
21051
("the Property"), 9 by
obtaining a mortgage loan in the amount of $90,000.00. 10
91992 Warranty Deed, Exhibit A to GMAC Mortgage, LLC's Motion
for Summary Judgment ("GMACM's MSJ
Docket Entry No. 25.
II
)
,
1°1992 Deed of Trust, Exhibit B to GMACM's MSJ, Docket Entry
No. 25.
-5-
In April of 2006 the Kittlers refinanced and took out a home
equity loan on the Property in the amount of $180,000.00. 11
In October of 2007 the Kittlers sought to refinance their
loan.12
Security
On February I, 2008, the Kittlers signed a new Home Equity
Instrument
$200,100.00
and
a
Promissory
Note
in
the
amount
of
(the "Loan").13
The original beneficiary under the Security Instrument was
Mortgage Electronic Registration Systems, Inc.
for GMACM. 14
("MERS") as nominee
The Loan was subsequently assigned to GMACM via formal
assignment. 15
The Kittlers defaulted on the Loan by failing to make the
required monthly payments. 16
On November I,
2010,
a Notice of Default was
sent to the
Kittlers informing them that they were delinquent by $5,120.26. 17
llTexas Home Equity Security Interest,
MSJ, Docket Entry No. 25.
Exhibit C to GMACM's
12Declaration of Michael S. Batson ("Batson Declaration"),
Uniform Residential Loan Application, and Settlement Statement,
Exhibits D, D-l, and D-2 to GMACM's MSJ, Docket Entry No. 25.
13Plaintiffs'
First
Amended
Complaint
("First
Amended
Complaint"), ~~ 6-9, Note and Security Instrument, Exhibits D-3 and
D-4 to GMACM's MSJ, Docket Entry No. 25.
14Security Instrument, Exhibit D-4 to GMACM' s MSJ, Docket Entry
No. 25.
15Assignment, Exhibit D-5 to GMACM's MSJ, Docket Entry No. 25.
16Batson Declaration, Exhibit D to GMACM's MSJ, Docket Entry
No. 25.
17Notice of Default, Exhibit D-6 to GMACM's MSJ, Docket Entry
No. 25.
-6-
On December 30, 2010, a Notice of Acceleration was sent to the
Kittlers declaring all indebtedness on the Note due and payable. 1B
On February 18, 2011, GMACM filed a Rule 736 Application for
Order
for
Foreclosure
in the
295th Judicial
District
Court
of
Harris County, Texas (Cause No. 2011-10755) .19
The total amount due on the Loan as of January 25, 2013, was
$51,812.69. 20
IV.
Analysis
The Kittlers seek an order declaring that "(a) Defendant is
not the holder of the Note,
(b) a declaration of which party is the
current holder of the Note if such information can be obtained, and
(c)
A.
the amount owed on the Note.,,21
Plaintiffs Fail to Cite Any Evidence Raising a Fact Issue as
to the Note Holder's Identity or to GMACM's Right to Foreclose
Asserting that "Defendant has alleged that it is the legal
owner of the Note and related Security Instrument with authority to
receive payments and to foreclose on Plaintiffs' Home,,,22 and that
"Defendant and other parties asserting to be acting on behalf of
18Notice of Acceleration, Exhibit D-7 to GMACM's MSJ, Docket
Entry No. 25.
19Rule 736 Application, Exhibit E to GMACM's MSJ, Docket Entry
No. 25.
20See Batson Declaration,
Entry No. 25, p. 3 ~ 13.
Exhibit D to GMACM's MSJ,
21First Amended Complaint, Docket Entry No. 18, pp. 4-5
22Id.
~
10.
-7-
Docket
~
26.
Defendant
have
foreclosure,
allege that
that
it
is
collected
payments
and disparaged
from
Plaintiffs'
Plaintiff,
credit, ,,23
threatened
the
Kittlers
"Defendant has failed to produce evidence to
the
current
holder
of
the
Note
or
the
[them]
Security
Instrument, ,,24 that "[e] ven in the event it were determined that
Defendant is the current holder of the Note, Plaintiffs believe and
submit that [Defendant] still does not hold the Security Agreement
and thus
has an unsecured claim to the debt
evidenced by the
Note,,,25 and that they "dispute and deny the Defendant's right to
foreclose on the Property." 26
1.
Applicable Law
Texas law differentiates between enforcement of a promissory
note and a security interest.
"Where there is a debt secured by a
note, which is, in turn, secured by a lien, the lien and the note
constitute separate obligations."
372, 374 (Tex. App.
Aguero v.
Ramirez,
70 S.W.3d
Corpus Christi 2002, pet. denied)
In such
situations the right to recover on the promissory note and the
right to foreclose may be enforced separately.
Stephens v. LPP Mortgage, Ltd., 316 S.W.3d 742,
Austin 2010, pet. denied)
23Id.
~ 12.
25Id.
747
(Tex. App. -
(finding that the promissory note and the
~ 13.
24Id.
See also
~ 19.
26Id.
-8-
lien that secures it "constitute separate obligations" that "may be
litigated in separate lawsuits"); Carter v. Gray, 81 S.W.2d 647,
648 (Tex. 1935)
("It is so well settled as not to be controverted
that the right to recover a personal judgment for a debt secured by
a lien on land and the right to have a foreclosure of lien are
severable, and a plaintiff may elect to seek a personal judgment
without foreclosing the lien,
lien.") .
and even without a waiver of the
While enforcement of a promissory note is a personal
action against the signatory that requires a judicial proceeding,
foreclosure is an independent action against the collateral that
may be conducted without judicial supervision.
BAC
Home
Loans
WL 3793190,
at *4
Servicing,
(Tex.
L. P. ,
App.
-
property
(W.D. Tex. July 25, 2011))
derives
30,
2012,
solely
2012
no pet. )
Inc., No. A-11-CA-420-SS,
v. Quails, 162 S.W.2d 671,675 (1942)
debtor's
03-11-00644-CV,
Austin Aug.
(citing Reardean v. CitiMortgage,
WL 3268307, at *3
No.
See Bierwirth v.
2011
See also Slaughter
(a trustee's power to sell a
from
the
deed
of
trust).
Non-judicial foreclosures are governed by Chapter 51 of the Texas
Property Code, which authorizes either a mortgagee or a mortgage
servicer acting on behalf of a mortgagee to sell real property
under a "power of sale conferred by a deed of trust."
Prop. Code.
§§
51.002, 51.0025.
See Tex.
Under Texas law "a deed of trust
is a mortgage with a power to sellon default."
Starcrest Trust v.
Berry, 926 S.W.2d 343, 351 (Tex. App. - Austin 1996, no writ).
Property
Code
defines
a
"mortgagee"
-9-
as
" (A)
the
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."
2.
Tex. Prop. Code
§
51.0001(4).
Application of the Law to the Facts
Attached to GMACM's MSJ is evidence showing that GMACM is not
only the holder and owner of the Note and the Security Interest,
but also is the mortgagee and servicer of the Loan with right to
foreclose and sell the Property.
This evidence consists of the
Declaration of Michael
("Batson"),
S.
Batson
Senior Litigation
Analyst for GMACM,27 and records of the Loan attached thereto that
"are
kept
by
GMACM
business, "28 and are
in
the
Batson Declaration are:
Statement;31
(3)
and
course
of
The Loan records attached to the
(1) Uniform Residential Loan Application
Kittler on October 31,
Texas Home Equity Note;32
Security Instrument,
ordinary
"true and complete copies of the original
records maintained by GMACM. "29
signed by Janice
regular
2007;30
(4)
(2)
Settlement
Texas Home Equity
signed and acknowledged by the Kittlers on
27Batson Declaration, Exhibit D to GMACM's MSJ, Docket Entry
No. 25.
28Id.
~
2.
29Id.
~
6, and Exhibits D-1 through D-5 attached thereto.
30Exhibit D-1 to GMACM's MSJ, Docket Entry No. 25.
31Exhibit D-2 to GMACM's MSJ, Docket Entry No. 25.
32Exhibit D-3 to GMACM's MSJ, Docket Entry No. 25.
-10-
February 1, 2008i 33 and (5) Assignment of the Security Instrument
from MERS to GMACM. 34
The Kittlers do not contest that Janice Kittler signed the
Note,
that
Janice
Kittler
and
Lesl ie
Kittler
both
signed
the
Security Instrument, that the Security Instrument named MERS as the
beneficiary,35 or that they have defaulted on the Loan.
Instead,
3.
Plaintiffs
object
to
the
Declaration
of
Michael S. Batson as he clearly does not have personal
knowledge of the assignment at issue in this case.
As
stated in his Declaration, Mr. Batson's knowledge is
limited to his review of certain records in Defendant's
Loan file.
He does not purport to have any actual
involvement
whatsoever
in,
or
personal
knowledge
concerning, the assignment of the Loan at issue.
Accordingly,
Plaintiffs
respectfully
submit
that
Mr. Batson's testimony is not competent to establish the
authenticity of the purported Loan assignment.
4.
Additionally, Defendant has failed and/or refused to
produce the original Loan documents for Plaintiff to
review,
including the promissory note and related
Securi ty Instrument at issue in this case.
Although
Mr. Batson's Declaration states that the documents
attached to his Declaration are copies of Defendant's
original records, he does not state that they are
genuine, true and correct copies of the original Loan
documents. Accordingly, there is no evidence whatsoever
submitted that he reviewed original Loan documents or had
any personal knowledge whatsoever of the purported
assignment of the original Loan documents to the
Defendant.
5.
In view of the above, Plaintiff respectfully submits
that Defendant has not established it is the current
owner and holder of the Loan and/or Loan documents and
33Exhibit D-4 to GMACM's MSJ, Docket Entry No. 25.
34Exhibit D-5 to GMACM's MSJ, Docket Entry No. 25.
35See Security Instrument, Exhibit D-4 to GMACM's MSJ, Docket
Entry No. 25, p. 1 ~ (E) .
-11-
enti tled to foreclose on Plaintiffs' home
Security Instrument at issue in this case. 36
(a)
under
the
The Batson Declaration and the Exhibits Attached
Thereto Are Competent Summary Judgment Evidence
The Fifth Circuit has "held that an affidavit can adequately
support a motion for summary judgment when the affiant's personal
knowledge is based on a review of her employer's business records
and the affiant's position with the employer renders her competent
to testify on the particular issue which the affidavit concerns. H
Carson v. Perry,
Cir.
Inc.,
113
1996)
91 F.3d 138
(per curiam)
(table),
(citing F.D.I.C.
937 F.2d 1249, 1254-55 n.12
S.
Ct.
1944
(1993)
1996 WL 400122, at *1
(per
v.
(5th
Selaiden Builders,
(5th Cir. 1992), cert. denied,
curiam)
(rejecting
challenge
to
affidavits where affiants had personal knowledge that RTC took over
assets of failed institution but had no precise personal knowledge
of the particular note at issue)
Camp,
965
F.2d
25,
29
(5th
i
Cir.
and Resolution Trust Corp. v.
1992)
(rej ecting plaintiffs'
attempt to defeat summary judgment by challenging an affidavit as
untrue without pointing to any
"evidence in the
record to the
effect that they had a legitimate fear that RTC was not the owner
and holder of the note in question and that some other entity might
later approach them demanding payment H
See also Cuevas v. BAC
)).
Home Loans Servicing LP, 648 F.3d 242, 250 (5th Cir. 2011)
(citing
36Plaintiffs' Response in Opposition to Defendant's Motion for
Summary Judgment ("Plaintiffs' Response
Docket Entry No. 26,
~~ 3-5.
H
-12-
),
with approval the affidavit of a corporate officer submitted in
support of summary judgment stating that she was testifying from
her personal knowledge of the defendant bank's structure, and her
review of relevant business records) .
Batson
states
in
his
Declaration
that
he
has
personal
knowledge of GMACM's "business practices and procedures concerning
the servicing of loans," including the Kittlers' Loan, through his
position as
Senior Litigation Analyst
for GMACM,
and that
the
statements in his Declaration are based on his review of GMACM's
records
related
to
the
Kittlers'
Loan.
The
bulk of Batson's
Declaration merely describe the documents attached as exhibits
thereto -
two
of
which are
referenced
in the
Kit tIers'
First
Amended Complaint, i.e., the Texas Home Equity Promissory Note, and
the Texas Home Equity Security Instrument. 37
The
facts Batson
recites are facts that a GMACM representative would naturally know,
such as
the fact
that
the Kittlers have a
Loan that
is being
serviced by GMACM, that the Loan was assigned to GMACM, that the
Kittlers defaulted on the Loan by failing to make their monthly
mortgage payments,
that notices of default and acceleration have
37Plaintiffs' First Amended Complaint, Docket Entry No. 18,
p. 2 ~ 7 (stating that "[o]n or about February 1, 2008, Plaintiffs
executed a Texas home equity promissory note (hereinafter the
"Note") in the original principal amount of $200,100.00 and payable
to the order of Mortgage Electronic Registration Systems"), and ~ 8
(stating that "Plaintiffs also executed a security instrument (the
"Security Instrument") granting Mortgage Electronic Registration
Systems a lien on Plaintiffs' Home.
The Security Instrument
purportedly grants Mortgage Electronic Registration Systems, its
successors and assigns, a deed of trust lien on the Property. ") .
-13-
been sent to the Kittlers, and that the debt remains unpaid in a
specific amount.
Moreover,
Batson also states
facts
that
the
Kittlers freely admit in their pleadings such as the facts that
they signed the Loan papers, they made payments to GMACM and/or to
agents acting on GMACM's behalf, GMACM has alleged that they are in
default and threatened them with
foreclosure, and that they have
tried to work out a resolution of the claimed default with GMACM. 38
The
Kittlers
object
to
Batson's
Declaration
as
not
based
on
personal knowledge, but they have failed to point to any evidence
in the record showing that they have a legitimate fear that GMACM
is not the owner and holder of the Note in question and that some
other entity might later approach them demanding payment.
Because
the Kittlers have failed to cite any evidence indicating that any
of the statements in Batson's Declaration are inaccurate or untrue,
the court concludes that Batson's Declaration is competent summary
judgment evidence,
merit.
and the
Kittlers'
objections
to
it have no
See Bittinger v. Wells Fargo Bank NA, Civil Action No. H-
10-1745, 2011 WL 5415664, *3 (S.D. Tex. November 8, 2011)
affidavit
of
mortgage
servicer's
assistant
(finding
secretary competent
summary judgment evidence of transfers, possession, and servicing
of the mortgage loan at issue)
records
The Kittlers' objections to the
attached to Batson's declaration are
merit.
38rd.
~~
13 and 15.
-14-
similarly without
Batson states that the documents
[a] ttached hereto are certain documents from the Loan
File. All of the documents discussed below and attached
hereto are kept by GMACM in the regular and ordinary
course of business.
The documents attached hereto
(identified below) are true and complete copies of the
original records by GMACM. 39
Without citing any authority, the Kittlers argue that GMACM
has failed and/or refused to produce the original Loan
documents
for
Plaintiff
to review,
including the
promissory note and related Security [I] nstrument at
issue in this case.
Although Mr. Batson's Declaration
states that the documents attached to his Declaration are
copies of Defendant's original records, he does not state
that they are genuine, true and correct copies of the
original Loan documents.
Accordingly, there is no
evidence whatsoever submitted that he reviewed original
Loan documents or had any personal knowledge whatsoever
of the purported assignment of the original Loan
documents. 4o
The Kittlers'
the original
assertions that GMACM was required to produce
loan documents to prove it could foreclose on the
Property implicate the "show-me-the-note" theory.
JPMorgan Chase,
NO.3: 12-CV-212-N,
See Bennett v.
2012 WL 2864751,
at *3
(N.D.
Tex. June 12, 2012), recommendation adopted, 2012 WL 2864467 (N.D.
Tex. July 12, 2012).
"Advocates of this theory believe that only
the holder of the original wet-ink signature note has the lawful
power to initiate a non-judicial foreclosure.
II
~v....!._--"B~A~C,---=.H~o~m~e~--=L:.::o~a~n:..!:..----2:S~e::.:r=-v~i.::::c:..=i,.:.n~g;:l....l.-'_-"=L,-,.--=P,--,-. ,
W 0 - CA - 0 03 5 0 ,
-1
WL 2163987, at *2
No .
(W.D. Tex. April 26, 2011)).
Id.
(citing Wells
2011
The Fifth Circuit
39Batson Declaration, Exhibit D to GMACM's MSJ, Docket Entry
No. 25, p. 2 ~ 6.
4°Plaintiffs' Response, Docket Entry No. 26, p. 2 ~ 4.
-15-
---_._-----
has rej ected the "show-me-the-note" theory as having no merit.
See
Martins v. BAC Home Loans Servicing, L.P., No. 12-20559, ___ F.3d
See also Bennett,
--, 2013 WL 3213633 (5th Cir. June 26, 2013).
2012 WL 2864751,
repeatedly
at *3
rej ected
(recognizing that "[t] he theory has been
in
this
circuit
and
has
no
merit")
i
and
Cervantes v. u.S. Bank National Association, No. 3:12-CV-0661-D,
2012 WL 1605558, at *3 (N.D. Tex. May 8, 2012)
Recognizing
that
"[i]n
Texas,
existence
(collecting cases) .
of
a
note
may
be
established by '[a] photocopy of the promissory note, attached to
an affidavit in which the affiant swears that the photocopy is a
true and correct copy of the original note, '" the Fifth Circuit has
recently said that \\ [w] e find no contrary Texas authority requiring
production of the 'original' note," and held that "[t]he original,
signed note need not be produced in order to foreclose.
___ F.3d at ___ ,
2013 WL 3213633,
*4
II
Martins,
(quoting Blankenship v.
Robins, 899 S.W.2d 236, 238 (Tex. App. - Houston [14th Dist.] 1994,
no writ)).
Accordingly,
the Kittlers'
objections to the Batson
Declaration and to the documents attached thereto as exhibits are
overruled.
(b)
The Security Agreement Has Been Assigned to GMACM
The Kittlers' contention that GMACM cannot foreclose on the
Property because they "believe and submit that
hold the Security Agreement,
p.
4
41Plaintiffs'
~ 19.
1141
[GMACM]
does not
challenges the assignment of the
First Amended Complaint,
-16-
Docket Entry No.
18,
Security Interest from MERS to GMACM.
repeatedly held
that
plaintiffs
Courts in this circuit have
have
no
assignments unless they become a party,
party,
or
a
third-party
beneficiary
of
standing
to
challenge
agent or assignee of a
the
agreement.
See
Bittinger v. Wells Fargo Bank NA, 744 F. Supp. 2d 619, 625-26 (S.D.
Tex. 2010).
See also James v. Wells Fargo Bank, N.A., No. 3:11-CV-
2228-B, 2012 WL 778510, at *2
(N.D. Tex. March 12,2012)
(citing
Eskridge v. Federal Home Loan Mortgage Corp., No. W-10-CA-285, 2011
WL 2163989, at *5 (W.D. Tex. February 24, 2011)
("Plaintiff has no
standing to contest the various assignments as she was not a party
to
the
assignments. ") .
Moreover,
even
if
the
Kittlers
have
standing to challenge MERS' assignment of the Security Instrument
to GMACM, their challenge would have no merit because any argument
that the Security Instrument was not properly assigned to GMACM is
contradicted by the Security Instrument and the Assignment.
The Security Instrument identifies the borrower and grantor as
Janice K. Kittler and husband, Leslie Kittler, the lender as GMAC
Mortgage, LLC, the trustee as George M. Shanks, Jr., and provides:
(E)
"MERS" is Mortgage Electronic Registration Systems,
Inc.
MERS is a separate corporation that is acting
solely as a nominee for Lender and Lender's successors
and assigns. MERS is the beneficiary under this Security
Instrument.
MERS is organized and existing under the
laws of Delaware .
(F)
"Note" means the promissory note signed by Borrower
and dated FEBRUARY 1, 2008.
The Note states that
Borrower owes Lender TWO HUNDRED THOUSAND ONE HUNDRED AND
00/100ths Dollars (U.S. $200,100.00) plus interest.
Borrower has promised to pay this debt in regular
Periodic Payments and to pay the debt in full not later
than MARCH 1, 2038.
-17-
(G)
"Property" means the property that is described
below under the heading "Transfer of Rights in the
Property. ,,42
The paragraph titled "TRANSFER OF RIGHTS IN THE PROPERTY" provides:
The beneficiary of this Security Instrument is MERS
(solely as nominee for Lender and Lender's successors and
assigns) and the successors and assigns of MERS.
This
Security Instrument secures to Lender: (i) the repayment
of the Extension of Credit, and all extensions and
modifications of the Note; and (ii) the performance of
Borrower's covenants and agreements under this Security
Instrument and the Note.
For this purpose, Borrower
irrevocably grants and conveys to Trustee, in trust, with
power of sale, the following described Property located
in the COUNTY of HARRIS:
LOT FIFTEEN (15), IN BLOCK TWENTY (20), IN
INDIAN SHORES, SECTION FOUR (4), A SUBDIVISION
IN HARRIS COUNTY, TEXAS, ACCORDING TO THE MAP
OR PLAT THEREOF RECORDED IN VOLUME 144,
PAGE 43, OF THE MAP RECORDS OF HARRIS COUNTY,
TEXAS,
which currently has the address of 21051 FLAMING ARROW
TRAIL, CROSBY, Texas 77532 ("Property Address") :
TOGETHER WITH all the improvements now or hereafter
erected on the Property, and all easements, appurtenances
and fixtures now or hereafter a part of the Property.
All replacements and additions shall also be covered by
this Security Instrument.
All of the foregoing is
referred to
in this
Security Instrument
as
the
"Property" :
provided however, that the Property is
limited to homestead property in accordance with Section
50 (a) (6) (11), Article XVI of the Texas Constitution.
Borrower understands and agrees that MERS holds only
legal title to the interests granted by Borrower in this
Security Instrument, but, if necessary to comply with 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; and to take
42Security Instrument, Exhibit D-4 to GMACM' s MSJ, Docket Entry
No. 25, p. 1 ~~ (E)-(G).
-18-
any action required of Lender including but not limited
to, releasing and canceling this Security Instrument. 43
Because the Security Instrument executed by the Kittlers named
MERS as beneficiary and nominee for the original lender, GMACM and
its successors and assigns, and granted MERS the right to foreclose
and
sell
the
Property,
MERS
had
the
authority
to
assign
the
Security Instrument to another party that would then be able to
sell and foreclose the property.
See Lamb v. Wells Fargo Bank,
N.A., No. 3:12-CV-00680-L, 2012 WL 1888152, at *5
24, 2012)
(N.D. Tex. May
(holding that MERS could assign the deed of trust because
the deed of trust
~on
its face H granted MERS
~the
right to sell and
foreclose the propertyH) .
The Assignment attached to Batson's Declaration states:
FOR VALUE RECEIVED, the undersigned as Beneficiary,
hereby grants, conveys, assigns and transfers to GMAC
Mortgage, LLC, c/o GMAC Mortgage, LLC,
all
beneficial interest under that certain Deed of Trust,
dated February 01, 2008, executed by Janice K. Kittler
and husband, Leslie Kittler, Grantor, to George M.
Shanks, Jr., Trustee, . . . Clerks File No. 20080062560,
Records of HARRIS County, State of Texas, described land
therein as:
LOT FIFTEEN (15), IN BLOCK TWENTY (20), IN INDIAN
SHORES,
SECTION FOUR
(4),
A SUBDIVISION
IN
HARRIS COUNTY, TEXAS, ACCORDING TO THE MAP OR PLAT
THEREOF RECORDED IN VOLUME 144, PAGE 43, OF THE MAP
RECORDS OF HARRIS COUNTY, TEXAS.
As set forth in said Deed of Trust and incorporated by
reference herein. 44
43Security Instrument, Exhibit D-4 to GMACM' s MSJ, Docket Entry
No. 25, pp. 2-3.
44Assignment, Exhibit D-5 attached to GMACM' s MSJ, Docket Entry
No. 25.
-19-
Attached to the Assignment is a notarized signature page signed by
MERS' Assistant Secretary, Anthony McLaughlin, on January 19, 2011.
Both the Assignment and its notarized signature page were filed
with the Harris County Clerk on February 2, 2011.
Moreover, Batson
states in his Declaration that the Assignment attached thereto as
Exhibi t
5 is
"[a]
true and correct copy of the Assignment. 1145
Because the Assignment conveys MERS'
rights under the Security
Instrument to GMACM, and because MERS'
rights under the Security
Instrument included the right to sell and foreclose the Property,
pursuant to MERS' assignment of the Security Instrument to GMACM,
GMACM acquired the same rights that MERS had to sell and foreclose
the Property.
See Lamb, 2012 WL 1888152, at *5 {citing Wiggington
v. Bank of New York Mellon, No. 3:10-CV-2128-G, 2011 WL 2669071, at
*3 (N.D. Tex. July 7, 2011))
Accordingly, the Kittlers' challenge
to MERS' assignment of the Security Instrument to GMACM fails to
give rise to a reasonable inference that GMACM does not hold the
Security Instrument.
(c)
GMACM is Entitled to Enforce the Security Instrument
The Kittlers'
allegations
that
GMACM is not
the
owner or
holder of the Note and/or the Security Instrument are irrelevant
with respect to GMACM's right to enforce the Security Instrument
through non-judicial foreclosure under Texas law.
foreclosure
sales
of
real
property
under
Non-judicial
contract
liens
are
45Batson Declaration, Exhibit D to GMACM's MSJ, Docket Entry
No. 25.
-20-
governed by Chapter 51 of the Texas Property Code.
§
51.0025
a
"mortgagee"
or
a
Tex.
foreclosure proceedings.
"mortgage
servicer"
Prop. Code. Ann.
§
Pursuant to
may
conduct
The
51.0025.
"mortgagee" is defined as
(A)
the grantee, beneficiary,
security instrument;
(B)
owner,
or holder of a
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. Prop. Code Ann.
Texas
law
is
§
found
51.0001(4)
in
A good explanation of MERS and
Richardson
v.
CitiMortgage,
Inc. ,
No. 6:10-cv-119, 2010 WL 4818556, *5 (E.D. Tex. November 22, 2010),
where United States Magistrate Judge Judith K. Guthrie explained as
follows:
Under 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. Athev v. MERS, 314
S.W.3d 161, 166 (Tex.App.-Eastland 2010). MERS was the
nominee for Southside Bank and its successors and
assigns.
MERS had the authority to transfer the rights
and interests in the Deed of Trust to CitiMortgage. The
Plaintiffs' complaints about the role of MERS in this
matter lack 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 (United States Judicial
Panel Multi-district Litigation 2009) .
The MERS system
is merely an electronic mortgage registration system and
clearinghouse 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 associated
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 [entry] system for
-21-
registering a beneficial interest in security instrument
and its successors and assigns.
As noted in Athey,
mortgage documents provide for the use of MERS and the
provisions are enforceable to the extent provided by the
terms of the documents.
II
GMACM is entitled to enforce the Security Instrument because
MERS,
§
as
a
book entry
Property.
qualifies
as
a
mortgagee
under
of the Texas Property Code, and because the Security
51.0001(4)
Instrument
system,
granted
MERS
the
power
to
foreclose
and
sell
the
For the reasons explained above, the court has already
concluded that MERS assigned the Security Instrument and all the
interest secured thereby to GMACM.
Accordingly, even if true, the
Kittlers' allegations that GMACM is not the holder or the owner of
the Note do not give rise to a reasonable inference that GMACM
lacks authority to foreclose and sell the Property.
B.
The Kittlers Fail to Cite Evidence Capable of Raising a Fact
Issue as to Whether They Have Been Overcharged or Whether the
Amount Owing on the Note is Not as Represented by GMACM
Asserting that "it is unclear what amounts are owed and how
the
payments
have
been
applied,"46
and
that
"they
have
been
overcharged,"47 the Kittlers seek declaratory judgment reflecting
"the amount owed on the Note. 1148
Citing the Batson Declaration and
the Payment History of the Kittlers' Loan, GMACM argues that when
its motion for summary judgment was filed on January 25, 2013, "the
46Plaintiffs'
First Amended Complaint,
p. 4 ~ 23.
47Id.
~
24.
48Id. at 4-5
~
26.
-22-
Docket Entry No.
18,
total
amount
due
on
the
Loan
[wa]s
$51,812.69,"49
and
that
"Plaintiffs' payments were applied in accordance with the terms of
the Security Instrument." 50
Al though the Kit tIers have alleged in
response to GMACM's motion for summary judgment 51 that "Defendant
and other parties asserting to be acting on behalf of Defendant
have overcharged Plaintiff on the loan evidenced by the Note, "52 the
Kittlers have neither offered any argument nor cited any evidence
from which a reasonable fact-finder could conclude that the loan
payments they have made were not applied in accordance with the
terms of the Security Instrument, that they have been overcharged,
or that the amount due on the Loan when GMACM filed its motion for
summary
judgment
was
not
$51,812.69.
Accordingly,
the
court
concludes that the Kittlers have failed to raise a genuine issue of
material fact for trial that they have been overcharged or that the
amount owing on the Note is not the amount claimed by GMACM.
C.
The Kittlers' Have Failed to Raise a Fact Issue as to Whether
GMACM Violated a Duty to Deal Fairly or Act in Good Faith
Asserting that "the entire process of attempting to work out
a
resolution with
[GMACM]
has been frustrating, "53 the Kittlers
49GMACM's MSJ, Docket Entry No. 25, p. 6 (citing the Batson
Declaration, Exhibit D thereto, and the Payment History for the
Loan, Exhibit D-8 thereto) .
50Id.
51Plaintiffs' Response, Docket Entry No. 26.
52Plaintiffs'
First Amended Complaint,
Docket Entry No.
18,
First Amended Complaint,
Docket Entry No.
18,
p. 3 ~ 14.
53Plaintiffs'
p. 3 ~ 17.
-23-
assert that they "believe that
[GMACM] has failed to deal fairly
and/or act in good faith with respect to [them] ."54
The Kittlers
explain that while they
were attempting to work out a resolution of the claimed
default with the Defendant and other parties working on
behalf of the Defendant, without prior notice to the
Plaintiffs, the Defendant commenced legal action to
obtain a non-j udicial foreclosure on Plaintiffs' property
and, in connection therewith, filed an Application for
Foreclosure under Cause No. 2011-10755, in the 295 th
Judicial District Court of Harris County, Texas, pursuant
to Rule 736 of the Texas Rules of Civil Procedure.
Plaintiffs obj ected to and challenged Defendant's actions
by bringing [this] suit.
55
Asserting
that
"[n]othing
whether
in
the
Security
Instrument or the law -- provides support for the argument that a
foreclosure
is
wrongful
under
Texas
law
if
it
occurs
while
borrowers are requesting a modification of their loan terms, "56
GMACM argues that "Plaintiffs' claims about alleged defects in the
foreclosure process have no merit and should be dismissed as a
mat ter of law." 57
The Kittlers have responded to GMACM's motion for summary
judgment, 58 but
they have
not
cited any evidence
from which a
reasonable fact-finder could conclude that "Defendant has failed to
54Id.
56GMACM's MSJ, Docket Entry No. 25, p. 7.
58Plaintiffs' Response, Docket Entry No. 26.
-24-
~~~- ~~---~-----------
deal fairly and/or act in good faith with respect to [them] ."59
Nor
have they offered an argument or cited any legal authority from
which the court could conclude that GMACM owed them a duty either
to
modify
the
foreclosure,
terms
or
of
suspend
their
Loan,
foreclosure
refrain
from
activities.
initiating
See
Federal
Deposit Insurance Corp. v. Coleman, 795 S.W.2d 706, 709 (Tex. 1990)
("The relationship of mortgagor and mortgagee ordinarily does not
invol ve
a
duty of
good faith.").
Moreover,
the
terms of
the
Security Instrument are to the contrary:
11. Borrower Not Released; Forbearance By Lender Not a
Waiver.
Extension of the time for payment or modification of amortization of the sums secured by this Security
Instrument granted by Lender to Borrower or any Successor
in Interest of Borrower shall not operate to release the
liability of Borrower or any Successors in Interest of
Borrower.
Lender shall not be required to commence
proceedings against any Successor in Interest of Borrower
or to refuse to extend time for payment or otherwise
modify amortization of the sums secured by this Security
Instrument by reason of any demand made by the original
Borrower or any Successors in Interest of Borrower. Any
forbearance by Lender in exercising any right or remedy
including, without limitation, Lender's acceptance of
payments from third persons, entities or Successors in
Interest of Borrower or in amounts less than the amount
then due, shall not be a waiver of or preclude the
exercise of any right or remedy.60
Accordingly, the Kittlers have failed to present any evidence from
which a reasonable fact-finder could conclude either that GMACM has
failed to deal fairly and/or act in good faith with respect to the
59Plaintiffs'
First Amended Complaint,
Docket Entry No.
18,
p. 3 ~ 17.
6°Securi ty Instrument, Exhibit D-4 to GMACM' s MSJ, Docket Entry
No. 25, p. 8 ~ 11.
-25-
Kittlers
by
failing
to
modify
their
refraining
loan,
from
initiating foreclosure, or suspending foreclosure activities.
D.
The Kittlers' Claim for Declaratory Judgment Fails
The only cause of action asserted in Plaintiffs' First Amended
Complaint
is
for
declaratory
judgment.
"When
a
declaratory
judgment action is filed in state court and is subsequently removed
to federal court, it is converted to one brought under the federal
Declaratory Judgment Act, 28 U.S.C.
of
America
WL 568755,
Home
at
Loan
*8
Servicing
(S.D.
Tex.
§§
2201, 2202./1
LP,
No.
February 21,
Declaratory Judgment Act provides that
controversy within its jurisdiction,
Bell v. Bank
4:11-CV-02085,
2012)
"[iJ n
a
The
2012
federal
case of actual
. any court of the United
States, upon the filing of an appropriate pleading, may declare the
rights and other legal relations of any interested party seeking
such declaration,
sought./I
whether or not further relief is or could be
28 U.S.C.
§
2201 (a)
The federal Declaratory Judgment
Act does not create a substantive cause of action but, instead, is
merely a procedural vehicle that allows a party to obtain an early
adjudication
of
substantive law.
an
actual
controversy
arising
See Bell, 2012 WL 568755, at *8.
under
other
See also Aetna
Life Insurance Co. of Hartford, CT v. Haworth, 57 S. Ct. 461, 463
(1937)
("the
operation
procedural only/l)
i
of
Lowe v.
the
Declaratory
Judgment
Ingalls Shipbuilding,
-~------"----------
is
A Division of
Litton Systems, Inc., 723 F.2d 1173, 1179 (5th Cir. 1984)
-26-
Act
(same).
In a declaratory judgment action,
"[b]ased on the facts alleged,
there must be a substantial and continuing controversy between two
adverse parties."
2003).
Bauer v.
Texas,
341 F.3d 352,
358
(5th Cir.
For the reasons described in this Memorandum Opinion and
Order, the facts alleged in the Kittlers' First Amended Complaint
fail
to
raise
a
"substantial
and continuing
controversy"
GMACM's entitlement to foreclose on the Property.
over
Because GMACM
has submitted undisputed summary judgment evidence establishing not
only that it is the holder of the Note and the assignee of the
Security Instrument, but also that it is entitled to enforce the
Security Instrument by foreclosing on the Property, the Kittlers'
requests for declaratory judgment must be denied.
v.
Conclusions and Order
For the reasons stated above, GMAC Mortgage, LLC's Motion for
Summary Judgment and Incorporated Brief in Support Thereof (Docket
Entry No. 25)
is GRANTED, and this action will be dismissed with
prejudice.
SIGNED at Houston, Texas, on this the 28th day of June, 2013.
7'
SIM LAKE
UNITED STATES DISTRICT JUDGE
-27-
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