Antony et al v. United Midwest Savings Bank et al

Filing 28

MEMORANDUM AND ORDER entered DENYING 24 MOTION for New Trial.(Signed by Judge Lee H Rosenthal) Parties notified.(leddins, 4)

United States District Court
Southern District of Texas

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
ANDREW ANTONY and
JENSY ANTONY,
Plaintiffs,
VS.
UNITED MIDWEST SAVINGS BANK,
et al.,
Defendants.

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ENTERED
May 19, 2016
David J. Bradley, Clerk

CIVIL ACTION NO. H-15-1062

MEMORANDUM AND ORDER DENYING MOTION FOR RECONSIDERATION
I.

Background
Andrew Antony and Jensy Antony challenge the foreclosure of their home. On March 12,

2010, Jensy Antony signed a Texas Home Equity Note in the amount of $129,000 in favor of United
Midwest Savings Bank. Both Jensy Antony and Andrew Antony signed a Texas Home Equity
Security Instrument granting Mortgage Electronic Registration Systems, Inc. (“MERS”), as nominee
for United Midwest and its successors and assigns, a security interest in the property they borrowed
the money to purchase. (Docket Entry No. 11, Exs. A-1, A-2). On March 22, 2010, the Antonys
were given notice that the ownership of, and the servicing rights to, the loan secured by the Note
were transferred from United Midwest to Flagstar Bank. (Docket Entry No. 11, Ex. A-3).
The Antonys defaulted in May 2012. (Docket Entry No. 11, Ex. A-7). On August 23, 2012,
James Abbas, a Flagstar employee and a MERS signing officer authorized to transfer mortgages on
MERS’s behalf, assigned the Deed of Trust from MERS to Flagstar. (Docket Entry No. 11, Exs.
A-4, A-5). On August 31, 2012, the assignment was recorded in the Harris County real-property
records. (Docket Entry No. 11, Ex. A-4). Flagstar began foreclosure in December 2012 and
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foreclosed in September 2013. (Docket Entry No. 14, Ex. A). The property was sold to the Federal
Home Loan Mortgage Corporation (“Freddie Mac”). (Docket Entry No. 11, Ex. A-6).
In February 2014, the Antonys sued United Midwest, Flagstar, MERS, and Freddie Mac in
Texas state court. In an amended petition filed in April 2014, the Antonys asserted causes of action
for wrongful foreclosure based on lack of standing to foreclose, quiet title, breach of contract, and
violations of the Truth In Lending Act (“TILA”), 15 U.S.C. § 1601, et seq. (Docket Entry No. 1,
Ex. 4 p. 9–27). They also sought a declaratory judgment that the defendants did not have an interest
in their property. The defendants removed to federal court under 12 U.S.C. § 1452(f).
The defendants moved for summary judgment. (Docket Entry No. 11). The court granted
the motion and entered a final judgment. (Docket Entry Nos. 22, 23). The Antonys have moved for
reconsideration, and the defendants responded. (Docket Entry Nos. 24, 27). Based on a careful
review of the motions, the briefs and submissions, the pleadings, the record, and the applicable law,
the court denies the motion for reconsideration. The reasons are explained below.
II.

The Legal Standard for a Motion for Reconsideration
The Federal Rules of Civil Procedure do not specifically provide for motions for

reconsideration. See St. Paul Mercury Ins. Co. v. Fair Grounds Corp., 123 F.3d 336, 339 (5th Cir.
1997) (“[T]he Federal Rules of Civil Procedure do not recognize a general motion for
reconsideration.”). A court retains the power to revise an interlocutory order before entering
judgment adjudicating the parties’ claims, rights, and liabilities. FED. R. CIV. P. 54(b). A motion
that asks the court to change an order or judgment is generally considered a motion to alter or amend
under Rule 59(e). T-M Vacuum Products, Inc. v. TAISC, Inc., No. 07-cv-4108, 2008 WL 2785636,
at *2 (S.D. Tex. July 16, 2008). A Rule 59(e) motion “calls into question the correctness of a
judgment.” Templet v. HydroChem Inc., 367 F.3d 473, 478–79 (5th Cir. 2004) (citing In re
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Transtexas Gas Corp., 303 F.3d 571, 581 (5th Cir. 2002)). A Rule 59(e) motion “‘must clearly
establish either a manifest error of law or fact or must present newly discovered evidence’ and
‘cannot be used to raise arguments which could, and should, have been made before the judgment
issued.’” Rosenzweig v. Azurix Corp., 332 F.3d 854, 863–64 (5th Cir. 2003) (quoting Simon v.
United States, 891 F.2d 1154, 1159 (5th Cir. 1990)). Changing an order or judgment under Rule
59(e) is an “extraordinary remedy” that courts should use sparingly. Templet, 367 F.3d at 479; see
also 11 WRIGHT & MILLER, FEDERAL PRACTICE & PROCEDURE § 2810.1 at 124 (2d ed. 1995). The
Rule 59(e) standard “favors denial of motions to alter or amend a judgment.” S. Constructors Grp.,
Inc. v. Dynalectric Co., 2 F.3d 606, 611 (5th Cir. 1993). A motion to reconsider may not be used
to relitigate matters or to raise arguments or present evidence that could have been raised before the
entry of the judgment or order. 11 WRIGHT & MILLER § 2810.1 at 127–28 (footnotes omitted).
III.

Discussion
The Antonys challenge the court’s conclusion that there is no factual dispute material to

determining that Flagstar had standing to foreclose under the Deed of Trust and the Note. The
Antonys do not rely on newly discovered evidence. They argue that the court’s legal conclusions
were manifestly erroneous.
The Antonys first argue that the court manifestly erred in concluding that they did not have
standing to challenge Abbas’s lack of signing authority. Although the court expressed doubt that
the Antonys had standing, it assumed standing and analyzed the merits of their claim. (Docket Entry
No. 22 at p. 6).
The Antonys next argue that the “notice of transfer of mortgage loan” sent by Flagstar to
Jensy Antony on March 22, 2010 does not show that Flagstar held the Note when Abbas assigned
the Deed of Trust on MERS’s behalf on August 23, 2012, as required under MERS’s corporate
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resolution. The Antonys contend that the notice shows only a loan-servicing rights transfer, not a
note-ownership transfer. They point to the fact that the notice does not explicitly refer to the Note
and that correspondence from United Midwest shows that it remained the lender despite the
servicing transfer. (Docket Entry No. 24 at p. 6).
Flagstar’s “notice of transfer of mortgage loan” states that Jensy Antony’s “mortgage loan
. . . has been transferred to us.” (Docket Entry No. 11, Ex. A-3 at p. 6). The notice states that “[t]he
date of the transfer of your mortgage loan [is March 22, 2010]” but that “[t]he transfer of ownership
is not recorded in the public records at this time.” It further states that Flagstar “also” became the
loan servicer. Although it does not explicitly refer to the Note, the notice makes clear that the
ownership of, and the servicing rights to, the loan secured by the Note were transferred from United
Midwest to Flagstar Bank on March 22, 2010.
The notice from United Midwest is consistent. That notice, dated March 12, 2010, informed
Antony of the servicing-rights transfer. The notice stated that the current lender was United
Midwest. The notice did not state, as the Antonys argue, that United Midwest would “remain” the
lender despite the servicing transfer. (Docket Entry No. 11, Ex. 3-A at p. 2).
The Antonys respond that under Texas law, the notice cannot be evidence that United
Midwest transferred the Note to Flagstar. The question is whether, under MERS’s corporate
resolution, the notice is evidence that Flagstar was the “current promissory note-holder” when James
Abbas signed the assignment of the Deed of Trust on MERS’s behalf. There is no record evidence
disputing the validity of the notice. Nor is there record evidence raising a factual dispute about
when ownership of the Note was transferred. The record does not give rise to a factual dispute
material to determining that the ownership of, and the servicing rights to, the loan secured by the
Note were transferred to Flagstar before Abbas assigned the Deed of Trust.
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Even if the assignment of the Deed of Trust from MERS to Flagstar was void, the record
shows that Flagstar was the holder of the Note at foreclosure and had standing to foreclose on that
basis. The defendants submitted the Note indorsement from United Midwest to Flagstar. (Docket
Entry No. 11, Ex. A-1). They also submitted an affidavit from Vanessa Ellison, a Flagstar loanadministration analyst, stating that based on her review of Flagstar’s records, United Midwest
indorsed the Note to Flagstar, and Flagstar possessed it, when Flagstar foreclosed on the Antonys’
property. (Docket Entry No. 14, Ex. A ¶¶ 8(a), 8(f)). These statements are uncontroverted by
competent evidence.
Under the Texas Property Code, two parties have standing to initiate a non-judicial
foreclosure sale: the mortgagee and the mortgage servicer acting on behalf of the mortgagee. Farkas
v. GMAC Mortg., L.L.C., 737 F.3d 338, 342–43 (5th Cir. 2013) (per curiam); see TEX. PROP. CODE
§§ 51.002, 51.0025. A mortgagee is “the grantee, beneficiary, owner, or holder of a security
instrument”; “a book entry system”; or “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 § 51.0001(4).
Texas law defines a “holder” as “the person in possession of a negotiable instrument that is payable
either to bearer or an identified person that is the person in possession[.]” TEX. BUS. & COM. CODE
§ 1.201(b)(21)(A). “A person can become the holder of an instrument when the instrument is issued
to that person; or he can become a holder by negotiation.” Leavings v. Mills, 175 S.W.3d 301, 309
(Tex. App.—Houston [1st Dist.] 2004, no pet.) (citing TEX. BUS. & COM. CODE. § 3.201 cmt. 1
(2002)). “[N]egotiation requires transfer of possession of the instrument and its indorsement by the
holder.” TEX. BUS. & COM. CODE. § 3.201(b) (emphasis added).
The Ellison affidavit established both elements required to show that Flagstar held the Note:
Ellison stated that United Midwest indorsed the Note to Flagstar, and that Flagstar possessed it,
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when Flagstar foreclosed on the Antonys’ property. The case law is clear that “testimony is
sufficient” to prove note transfer and ownership. See, e.g., Christian v. Univ. Fed. Sav. Ass’n, 792
S.W.2d 533, 534 (Tex. App.—Houston [1st Dist.] 1990, no writ). The Antonys do not make
arguments or submit evidence disputing the accuracy of Ellison’s statements. There is no factual
dispute material to determining that Flagstar had standing to foreclose as a mortgagee.
The Antonys finally argue that the court manifestly erred in “substituting itself for the
factfinder” by “finding” a typographical error in the indorsement. The court made a legal
conclusion, not a factual finding. The court reasoned that the Antonys had identified an error in the
Note indorsement that, at most, made the Note voidable, and that the Antonys did not have standing
to challenge the assignment on that basis. Reinagel v. Deutsche Bank Nat’l Trust Co., 735 F.3d 220,
225 (5th Cir. 2013).
IV.

Conclusion
The Antonys have not shown that manifest legal error entitles them to the relief they seek.

The motion for reconsideration is denied. (Docket Entry No. 24).
SIGNED on May 19, 2016, at Houston, Texas.

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Lee H. Rosenthal
United States District Judge

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