Schaffer, Jr. v. Alexander et al
ORDER DENYING 29 Motion to Stay; GRANTING 19 Motion to Dismiss ; DENYING 27 Motion to Remand to State Court. Signed by Judge Robert Pitman. (dm)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
JOSEPH M. SCHAFFER, JR.,
U.S. BANK TRUST, N.A., as trustee for LSF9
Master Participation Trust;
WENDY ALEXANDER; STEVE UTLEY;
TOBEY LATHAM; MICHAEL ZEINTZ;
and MACKIE, WOLF, ZEINTZ,
AND MANN, P.C.;
Before the Court are several motions. The first is Plaintiff’s Verified Memorandum in
Support of Motion to Remand (“Motion to Remand”). (Dkt. 27). The second is Plaintiff’s Opposed
Motion to Stay Consideration of Defendant U.S. Bank Trust, N.A., Trustee for LSF9 Master
Participation Trust’s Motion to Dismiss (“Motion to Stay”). (Dkt. 29). The third is Defendant’s
Motion to Dismiss Amended Original Petition and Brief in Support (“Motion to Dismiss”). (Dkt.
19). Having considered the parties’ submissions, the record, and the applicable law, the Court issues
the following order.
Plaintiff alleges the following facts. Plaintiff bought a piece of property in Hays County,
Texas, in January 2007. (Am. Compl., Dkt. 14, ¶ 16). As part of the purchase, Plaintiff executed a
deed of trust and note with Bank of America (“BOA”). (Id. ¶¶ 16, 22). In November 2014, BOA
assigned all of its interest in the deed of trust to LSF9 Mortgage Holdings, LLC. (Id. ¶ 24). In March
2015, LSF9 Mortgage Holdings, LLC assigned all of its interest in Plaintiff’s deed of trust to
Defendant U.S. Bank Trust, N.A., (“USBTNA”) as trustee for LSF9 Master Participation Trust (the
“LSF9 Trust”). (Id. ¶ 25).
On March 9, 2017, Defendant Mackie Wolf Zeintz & Mann, P.C. (“MWZM”) mailed a letter
to Plaintiff notifying him that because he failed to cure his default, 1 his loan was being accelerated
and his home would be foreclosed if he could not pay the full outstanding balance of the loan.
(Notice of Reposting and Sale, Dkt. 14-2, at 32). On April 14, 2017, MWZM posted a notice of
foreclosure sale naming Defendants Wendy Alexander, Tobey Latham, or Michael Zeintz 2 as
substitute trustees. (Notice of Foreclosure Sale, Dkt. 14-2, at 33).
On April 3, 2017, Plaintiff filed a petition in Hays County District Court alleging a number
of claims related to the foreclosure. (State Pet., Dkt. 1-1, at 5). USBTNA removed to this Court
several days later. (Not. Rem., Dkt. 1). In July 2017, Plaintiff filed his Amended Complaint, (Dkt.14),
in which he alleges a number of claims: (1) Plaintiff received no notice of default from an entity with
the right to enforce his note, (2) fraudulent foreclosure, (3) breach of contract, (4) breach of the
implied covenant of good faith and fair dealing, (5) violations of the Texas Deceptive Trade
Practices Act (“DTPA”), (6) a demand to produce the original promissory note, (7) a request for
unspecified injunctive relief, (8) slander of title, and (9) a request for a declaratory judgment to quiet
title in his favor. (Dkt. 14, at 15–37). USBTNA moved to dismiss Plaintiff’s claims against it,
(USBTNA Mot. Dismiss, Dkt. 19); Plaintiff then moved to remand the case to Hays County District
Court, (Pl.’s Mot. Remand, Dkt. 27). While USBTNA’s motion to dismiss was pending, Plaintiff
Plaintiff does not admit that he failed to make his loan payments and in fact offers the affirmative defense of payment.
(Dkt. 14, ¶ 27). That said, while Plaintiff “alleges that his Note has in fact been paid,” he bases this allegation on the
speculation that “third parties, government guarantees, or private insurance such as credit default swaps have paid any
sums due on his Note.” (Id.). Plaintiff offers no support for the proposition that this allegation, even if it were true,
would cure Plaintiff’s default under the deed of trust.
2 Defendant Steve Utley had previously been named a substitute trustee in January 2014 by BOA. (Appointment of
Substitute Trustee, Dkt. 14-4, at 17). The Court will collectively refer to Defendants Utley, Alexander, Latham, and
Zeintz as the “Substitute Trustees.”
asked the Court to stay its ruling on the motion until Plaintiff could conduct a limited amount of
discovery. (Pl.’s Mot. Stay, Dkt. 29).
Neither MWZM nor the Substitute Trustees have appeared in this case, nor has Plaintiff
served them with his Amended Complaint. Moreover, USBTNA’s Notice of Removal civil cover
sheet indicates that neither MWZM nor the Substitute Trustees were served prior to removal.
(Supplement to JS-44 Civil Cover Sheet, Dkt 1-3, at 2). After more than 90 days had elapsed since
Plaintiff filed his Amended Complaint, the Court ordered Plaintiff to show cause as to why neither
MWZM nor the Substitute Trustees had been served. (Dkt. 35). Instead of doing so, Plaintiff filed a
voluntary dismissal signed by USBTNA in which he dismissed his claims against MWZM and the
Substitute Trustees without prejudice under Federal Rule of Civil Procedure 41(a)(1)(A)(ii). (Dkt.
39). 3 At the time of this order, therefore, the only parties to this action are Plaintiff and USBTNA.
I. PLAINTIFF’S MOTION TO REMAND
Because Plaintiff’s Motion to Remand concerns the Court’s subject matter jurisdiction over
this action, the Court will first address Plaintiff’s Motion to Remand before addressing USBTNA’s
Motion to Dismiss.
Plaintiff’s state court petition and Amended Complaint allege claims only under Texas law,
and USBTNA removed on the basis of the Court’s diversity jurisdiction. (Dkt. 1, ¶ 5). USBTNA
argues that complete diversity exists because Plaintiff is a citizen of Texas and USBTNA is a citizen
of Delaware.4 (Id. ¶¶ 6–7; USBTNA Response to Mot. Remand, Dkt. 34, at 4 n.4). Further,
USBTNA points out that Plaintiff’s state court petition and Amended Complaint each request
“Stipulated dismissals under Rule 41(a)(1)(A)(ii), like unilateral dismissals under Rule 41(a)(1)(A)(i), require no judicial
action or approval and are effective automatically upon filing.” Yesh Music v. Lakewood Church, 727 F.3d 356, 362 (5th Cir.
For diversity jurisdiction purposes, a national bank is a citizen of the state where its main office, as designated in its
articles of association, is located. Wachovia Bank, N.A. v. Schmidt, 546 U.S. 303, 307 (2006). Although USBTNA initially
averred that its main office is located in Cincinnati, Ohio, (Dkt. 1, ¶ 7), it later filed with the Court its articles of
association, which state that USBTNA’s main office is located in Wilmington, Delaware, (USBTNA Response to Mot.
Remand, Dkt. 34, at 4 n.4; see also USBTNA’s Certified Articles of Association, Dkt. 34-1 (listing Wilmington as the
location of USBTNA’s main office)).
damages of “over $100,000.00 but not more than $2,000,000.00.” (See Dkt. 14-1, at 39). Accordingly,
if this case were only between Plaintiff and USBTNA, the Court would have diversity jurisdiction
and remand would be improper. See 28 U.S.C. § 1332(a); Cuevas v. BAC Home Loans Servicing, LP, 648
F.3d 242, 250 (5th Cir. 2011) (“When the district court has original subject matter jurisdiction over
state law claims, the exercise of that jurisdiction is mandatory.”).
Plaintiff nonetheless argues that this case should be remanded for two reasons: (1) because
USBTNA’s citizenship should be determined by the citizenship of the LSF9 Trust’s
certificateholders, which USBTNA has failed to establish; and (2) because the Substitute Trustees
and MZWM are Texas residents. (Dkt. 27; Dkt. 14, ¶ 14). USBTNA responds that only its
citizenship matters and that MWZM and the Substitute Trustees were improperly joined. (Dkt. 34, ¶
1 n.2; Dkt. 1, ¶¶ 8–23). For the reasons discussed below, the Court holds that remand is
A. USBTNA’s Citizenship
Plaintiff sued USBTNA in its capacity as trustee for the LSF9 Trust. For the purposes of
establishing diversity jurisdiction, “a federal court must disregard nominal or formal parties and rest
jurisdiction only upon the citizenship of real parties to the controversy.” Navarro Sav. Ass’n v. Lee,
446 U.S. 458, 461 (1980). In Navarro, the U.S. Supreme Court stated that “a trustee is a real party to
the controversy for purposes of diversity jurisdiction when he possesses certain customary powers
to hold, manage, and dispose of assets for the benefit of others.” Id. at 464. On the other hand, an
unincorporated legal entity such as a trust “possesse[s] the citizenship of its members.” Americold
Realty Tr. v. Conagra Foods, Inc., 136 S. Ct. 1012, 1016 (2016). As the Fifth Circuit recently explained,
Navarro’s rule “coexists” with Americold’s, and that “if the trustee . . . is sued in the trustee’s own
name, then Navarro’s rule controls.” Bynane v. Bank of N.Y. Mellon for CWMBS, Inc. Asset-Backed
Certificates Series 2006-24, 866 F.3d 351, 358 (5th Cir. 2017).
Plaintiff’s position is that USBTNA is “not an active trustee whose control of the assets held
in [its name] is real and substantial,” and thus that USBTNA is not a real party to the controversy.
(Dkt. 27, ¶ 12). To support his position, Plaintiff makes two arguments. The first is that USBTNA
has not provided evidence that it has sufficient control over the LSF9 Trust to be a real party to the
controversy. (Id. ¶ 8.I (“USBTNA has failed to produce the trust agreement that showed it had any
active control over the trust.”)). The second is that USBTNA actually has “no authority or
responsibility over the loans in the Trust,” and that the true authority lies with the mortgage servicer,
Caliber Home Loans, Inc. (“Caliber”). (Id. ¶ 10.B.c).
Plaintiff’s first argument is based on two cases from New York federal district courts that
Plaintiff contends are significant for the present case: U.S. Bank Tr., N.A. v. Monroe, No.
115CV1480LEKDJS, 2017 WL 923326, at *1 (N.D.N.Y. Mar. 8, 2017) and U.S. Bank Tr., N.A. v.
Dupre, No. 615CV0558LEKTWD, 2016 WL 5107123, at *1 (N.D.N.Y. Sept. 20, 2016). (Id. ¶¶ 7–9).
In Monroe, USBTNA (there as plaintiff) failed to provide its articles of incorporation to establish its
citizenship or allege anything concerning “the type of trust at issue [or] its degree of control over the
trust assets.” 2017 WL 923326, at *3–5. In Dupre, the court noted the same deficiency with
USBTNA’s trust agreement—it was “almost completely redacted,” showing only a portion of text
“stat[ing] that U.S. Bank shall have only such rights, powers and duties as are specifically and
expressly required by this Agreement.” 2016 WL 5107123, at *3–4 (quotation marks omitted). In
both cases, the court dismissed USBTNA’s complaint because USBTNA provided insufficient
information for the court to determine if it had subject matter jurisdiction. Monroe, 2017 WL 923326,
at *5; Dupre, 2016 WL 5107123, at *4.
Contrary to Plaintiff’s urging, neither case informs the disposition of this case. Even if the
Court were to find those cases persuasive, the facts here are critically different. Unlike Monroe,
USBTNA in this case has provided its articles of association to establish its own citizenship.
(USBTNA’s Certified Articles of Association, Dkt. 34-1). Unlike both Monroe and Dupre, USBTNA
has provided the Court with a complete and unredacted copy of the trust agreement. (See Dkt. 43
(requesting in camera review); Dkt. 44 (agreeing to conduct in camera review)).
More importantly, neither Monroe nor Dupre controls this Court’s analysis. Instead, the Court
looks to the Fifth Circuit, which has recently issued guidance about how to analyze diversity
jurisdiction in cases such as this. See Bynane, 866 F.3d at 355–59. In Bynane, the Fifth Circuit made it
clear that “if the trustee . . . is sued in the trustee’s own name, then Navarro’s rule controls.” Id. at
358. There, because the defendant bank “was sued in its capacity as trustee,” the court held that
“Navarro controls, and the only remaining question” was whether the defendant bank had “real and
substantial control under Navarro’s test. Id. at 357. Here, the Court agrees with USBTNA that,
because Plaintiff sued USBTNA as trustee, the only remaining question is whether USBTNA is a
“real part[y] to the controversy” under Navarro’s test. Navarro, 446 U.S. at 465.
This brings the Court to Plaintiff’s second argument—that Caliber, not USBTNA, is the real
party to the controversy. Plaintiff bases this argument on a May 2015 email from USBTNA to
Plaintiff. (Dkt. 27, ¶¶ 10–11). In that email, an employee in USBTNA’s Mortgage Research division
told Plaintiff that USBTNA is “merely the trustee” and has “no involvement with the foreclosure
process.” (May 2015 Email, Dkt. 27-6, at 2). USBTNA states that it “has no authority or
responsibility to review and[/]or approve or disapprove” of the servicer’s foreclosure action. (Id.).
USBTNA then directs Plaintiff to contact Caliber with any questions about the foreclosure. (Id.).
From this email, Plaintiff concludes that “the ROLE of the Trustee is being performed by the
alleged servicer without any information, input, or feedback” from USBTNA, and that USBTNA is
therefore not “a real party to the controversy.” (Dkt. 27, ¶¶ 10.B.c).
Defendant responds that the email is irrelevant to the Fifth Circuit’s analysis in these sorts of
cases. (Dkt. 34, ¶ 8). The Court agrees that the degree to which USBTNA has delegated foreclosure
decisions to the mortgage servicer is irrelevant to the jurisdictional analysis here.
Instead of looking at the decisions a trustee delegates to a mortgage servicer, the Fifth
Circuit focuses its Navarro analysis on the powers and limitations that the trust agreement vests in
the trustee and the trust’s beneficiaries. See Bynane, 866 F.3d at 357. In Bynane, the Fifth Circuit
determined that the trustee was the real party in interest because the pooling and service agreement
transferred “all right, title, and interest” in the pooled mortgage loans to the trustee. Id. The Fifth
Circuit also considered the fact that “the certificateholders ha[d] only limited rights to vote or
otherwise control the operation of the trust.” Id. In another post-Americold case, the Fifth Circuit
similarly focused on the powers and limitations of the trustee and the trust beneficiaries. See Justice v.
Wells Fargo Bank Nat’l Ass’n, 674 F. App’x 330, 332 (5th Cir. 2016), as revised (Mar. 22, 2017) (holding
that the trustee was the real party in interest because it held “all the right, title and interest” in the
trust). Moreover, district courts in this circuit have looked to the pleadings and to the trust
agreement to determine subject matter jurisdiction under Navarro and Americold. See Lewis v. Deutsche
Bank Nat’l Tr. Co., No. 3:16-CV-133, 2017 WL 1354098, at *4 (S.D. Tex. Apr. 13, 2017) (holding
that trustee was the real party to the controversy where plaintiff sued the trustee and where the trust
agreement gave the trustee full title to the trust assets and the power to sue and be sued); Rodriguez v.
Deutsche Bank Nat’l Tr. Co., No. CV H-16-1597, 2017 WL 371141, at *2 (S.D. Tex. Jan. 26, 2017)
(holding that the trustee was the real party to the controversy where the trustee had legal title and
investment control and certificateholders had limited veto power).
Here, using the jurisdictional analysis under Navarro and Bynane, there are factors both for
and against each party’s position. On one hand, the LSF9 Trust Agreement grants significant powers
to USBTNA as trustee. Among other things, the agreement gives USBTNA the “power and
authority to conduct the business of the [trust], make and execute contracts and other instruments
on behalf of the [trust], and sue and be sued on behalf of the [trust].” (LSF9 Trust Agreement, Dkt.
34-2, § 2.01). 5 USBTNA is empowered to execute certificates, receive and dispose of loans, assign or
convey trust assets, and manage and distribute trust income. (Id. § 2.03). On the other hand, legal
title is vested in the trust, not in USBTNA as trustee. (Id. § 2.08). Additionally, an ownership-interest
majority of certificateholders may take “any action or direction” in writing, which the trustee must
then implement (subject to certain limitations). 6 (Id. §§ 4.03, 6.03).
All things considered, the Court finds that USBTNA is a real party to the controversy such
that its citizenship determines diversity jurisdiction under Navarro. Although USBTNA lacks legal
title—unlike the Navarro trustees—USBTNA both “manage[s] the assets [and] control[s] the
litigation” like the Navarro trustees. Navarro, 446 U.S. at 465. USBTNA has broad management
powers that can be overcome by a certificateholders only in circumscribed instances. And,
significantly, Plaintiff sued USBTNA in its capacity as trustee. See Americold Realty Tr. v. Conagra Foods,
Inc., 136 S. Ct. at 1016 (“[W]hen a trustee . . . is sued in her own name, her citizenship is all that
matters for diversity purposes.”). The Court is thus satisfied that USBTNA possesses sufficiently
“real and substantial” control that it is a real party to the controversy. Navarro, 446 U.S. at 465.
Accordingly, Plaintiff is diverse from USBTNA. The Court therefore has subject matter over this
action because Plaintiff and USBTNA are the only two parties to this action, as clarified in the next
Although the Court reviewed a complete and unredacted version of the LSF9 Trust Agreement, this and the other
provisions described in the Court’s order were disclosed previously by USBTNA in the redacted copy filed as an exhibit
to its response to Plaintiff’s motion to remand. (See Dkt. 34-2).
6 The Court takes note, however, of USBTNA’s argument that the trust agreement places various limitations on
certificateholder action, such as permitting the trustee to ignore a certificateholder instruction if the trustee determines
that the instruction is contrary to the terms of the trust agreement. (See Dkt. 34-2, § 6.03).
B. The Substitute Trustees’ and MWZM’s Citizenship
Plaintiff’s second argument for remand7 is that the Court lacks subject matter over this
action because the Substitute Trustees and MZWM are Texas residents. (Dkt. 14, ¶ 14). USBTNA
responds that the Court has subject matter jurisdiction because the Substitute Trustees and MZWM
were improperly joined. (Dkt. 34, ¶ 1 n.2; Dkt. 1, ¶¶ 8–23). As it happens, subsequent developments
have rendered the parties’ disagreement on this point moot.
Plaintiff filed his state-court petition on April 3, 2017, (Dkt. 1-1, at 5), USBTNA removed to
this Court on April 6, (Dkt. 1), and Plaintiff filed his Amended Complaint on July 26, 2017,
(Dkt.14). Plaintiff never served the Substitute Trustees or MWZM with either his state-court
petition or his federal complaint, and the Court eventually ordered Plaintiff to show cause as to why
he had neglected to timely serve those parties. (Dkt. 35). Rather than respond to the Court’s order,
Plaintiff filed a voluntary dismissal signed by USBTNA in which he dismissed his claims against the
Substitute Trustees and MWMZ without prejudice under Federal Rule of Civil Procedure
41(a)(1)(A)(ii). (Dkt. 39). Accordingly, neither MWMZ nor the Substitute Trustees are currently
parties to this action,8 leaving only Plaintiff (a Texas resident) and USBTNA (a Delaware resident).
Thus, the Court currently has subject matter jurisdiction over this action. And because the Court
Plaintiff does not raise this argument in his motion to remand, but because Plaintiff raised the issue in his amended
complaint and because it implicates the Court’s subject matter jurisdiction, the Court will address it here.
Because Plaintiff dismissed its claims against the in-state defendants, the Court needs not consider whether they were
improperly joined at the time USBTNA filed its notice of removal. Although “the jurisdiction of the court depends upon
the state of things at the time of the action brought,” this time-of-filing rule pertains to “the state of facts that existed at
the time of filing.” Grupo Dataflux v. Atlas Glob. Grp., L.P., 541 U.S. 567, 570–71 (2004). By contrast, an “established
exception” to the time-of-filing rule is “the dismissal of the party that had destroyed diversity.” Id. at 572–73. For
example, the Supreme Court has upheld a district court’s judgment where complete diversity existed at trial—after the
diversity-destroying defendant settled and was dismissed—but not at removal. Id. at 573 (discussing Caterpillar Inc. v.
Lewis, 519 U.S. 61 (1996)). The Court reaffirmed Caterpillar’s holding that “a statutory defect—‘[a defendant’s] failure to
meet the [28 U.S.C.] § 1441(a) requirement that the case be fit for federal adjudication at the time the removal petition is
filed’—did not require dismissal once there was no longer any jurisdictional defect.” Id. at 574 (quoting Caterpillar, 519
U.S. at 73).
Thus, even assuming arguendo that the Substitute Trustees and MWZM are both (a) Texas residents and (b) not
improperly joined, the Caterpillar exception operates here to supply the Court with subject matter jurisdiction. That is,
even if complete diversity did not exist when USBTNA removed this case, Plaintiff’s voluntary dismissal of every other
defendant—following its own neglect to timely serve those defendants—has cured any jurisdictional defect that may or
may not have existed at removal.
now has subject matter jurisdiction over this case, “the exercise over that jurisdiction is mandatory”
and remand is improper. Cuevas, 648 F.3d at 250.
II. PLAINTIFF’S MOTION TO STAY
Plaintiff asks the Court to stay its consideration of USBTNA’s motion to dismiss while he
conducts limited discovery. (Dkts. 29, 31). Specifically, Plaintiff asks that the defendant produce the
following documents before the Court rules on the motion to dismiss: (1) the LSF9 Trust
agreement, (2) “any power of attorney or limited power of attorney that the defendant has executed
affecting the enforcement of the power sale [sic] clause in the Plaintiff’s deed of trust,” and (3) the
“Loan Participation Agreement that describes the defendant’s role as the participating/participation
agent.” (Dkt. 31, ¶ 8). USBTNA responds that not only is Plaintiff’s limited discovery irrelevant, but
that the Court should in fact stay discovery altogether while until it decides USBTNA’s motion to
dismiss. (Dkt. 42). The Court agrees with USBTNA that Plaintiff’s motion is properly denied.
Plaintiff’s motion to stay is without merit. His need for the trust agreement is based on two
layers of speculation. First, Plaintiff speculates that the redacted trust agreement in Dupre, 2016 WL
5107123, established that the trustee lacked “the authority to exercise the non-judicial power of sale
to enforce a note or under a deed of trust.” (Dkt. 31, ¶ 10.a) (“If that Trust Agreement had such
authority in the Dupre case, then the document would not have been redacted.”). Based on his theory
of the Dupre trust agreement, Plaintiff then further guesses “that the trust involved in this case [and
the Dupre trust] have identical terms.” (Id.). Plaintiff’s theory is an insufficient basis on which to stay
the Court’s decision on USBTNA’s motion to dismiss, especially when USBTNA has provided the
Court with an unredacted copy of the LSF9 Trust agreement (and thereby resolving the deficiency at
issue in Dupre).
Plaintiff’s request that the Court delay its ruling until he can review a power of attorney or
loan participation agreement is also without merit. As explained more fully below, neither document
is relevant to the merits of Plaintiff’s claims. Neither Plaintiff nor the Court needs to review either
document to decide whether Plaintiff has stated a claim for which relief can be granted under Rule
12(b)(6). Accordingly, Plaintiff’s motion to stay is denied.
The Court has subject matter jurisdiction and does not find good cause to stay its decision of
USBTNA’s motion to dismiss. It will decide that motion now. As it will become clear below,
USBTNA’s request to stay discovery is moot.
III. USBTNA’S MOTION TO DISMISS
A. Standard of Review
Pursuant to Rule 12(b)(6), a court may dismiss a complaint for “failure to state a claim upon
which relief can be granted.” Fed. R. Civ. P. 12(b)(6). “To survive a Rule 12(b)(6) motion to dismiss,
a complaint ‘does not need detailed factual allegations,’ but must provide the [plaintiffs’] grounds for
entitlement to relief—including factual allegations that when assumed to be true ‘raise a right to
relief above the speculative level.’” Cuvillier v. Taylor, 503 F.3d 397, 401 (5th Cir. 2007) (quoting Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). That is, “a complaint must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570).
“[T]he tenet that a court must accept as true all of the allegations contained in a complaint is
inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported
by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678. “[W]here the well-pleaded
facts do not permit the court to infer more than the mere possibility of misconduct, the complaint
has alleged—but it has not ‘show[n]’—that the pleader is entitled to relief.” Id. at 679 (quotation
marks and citation omitted).
The Supreme Court has held that in deciding a motion to dismiss, a court may consider
documents incorporated into the complaint by reference. Tellabs, Inc. v. Makor Issues & Rights, Ltd.,
551 U.S. 308, 322 (2007). A court may also consider any documents attached to the complaint and
any documents attached to the motion to dismiss that are central to the claim and referenced by the
complaint. Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010); see
also Sullivan v. Leor Energy, LLC, 600 F.3d 542, 546 (5th Cir. 2010) (quoting Scanlan v. Tex. A&M
Univ., 343 F.3d 533, 536 (5th Cir. 2003)) (holding that while the court generally must not go outside
the pleadings, “the court may consider documents attached to a motion to dismiss that ‘are referred
to in the plaintiff’s complaint and are central to the plaintiff’s claim’”). Finally, a court may also take
judicial notice of matters of public record. Funk v. Stryker Corp., 631 F.3d 777, 783 (5th Cir. 2011); see
also Norris v. Hearst Trust, 500 F.3d 454, 461 n.9 (5th Cir. 2007) (“[I]t is clearly proper in deciding a
12(b)(6) motion to take judicial notice of matters of public record.”).
B. Affirmative Defense of Payment
Plaintiff “pleads the affirmative defense of payment,” in which he alleges that “his Note has
in fact been paid” by “third parties, government guarantees, or private insurance such as credit
default swaps.” (Dkt. 14, ¶ 27). USBTNA points out that Plaintiff’s allegation does not constitute a
cause of action. (Dkt. 19, at 20 n.11). The Court agrees. Plaintiff has cited no authority for the
proposition that his speculative claim about third-party payment, even if it were true, would entitle
him to any relief. Accordingly, even if the Court were to construe Plaintiff’s “affirmative defense of
payment” as a claim for relief, it would dismiss that cause of action for failure to state a claim upon
which relief can be granted.
C. No Notice of Default from the Holder of the Note
Plaintiff states that he “has not received notice of default from any entity showing that it has
the right to enforce [P]laintiff’s note as provided for in [Texas Business & Commerce Code
§ 3.308(b)].” (Dkt. 14, ¶ 28). Plaintiff also claims that he “has not received from the entity holding
the note with the right to enforce that there . . . is an unsatisfied obligation secured by [P]laintiff’s
deed of trust.” (Id. (citing Tex. Bus. & Com. Code § 3.301)). Plaintiff insists that, despite his
demands to produce the note, this is not simply another one of the “show-me-the-note” cases that
have been “roundly rejected.” (Pl.’s Resp. Mot. Dismiss, Dkt. 28, ¶ 10); Martins v. BAC Home Loans
Servicing, L.P., 722 F.3d 249, 253 (5th Cir. 2013) (rejecting the “theory . . . that only the holder of the
original wet-ink signature note has the lawful power to initiate a non-judicial foreclosure. . . because
foreclosure statutes simply do not require possession or production of the original note.”). In an
attempt to distinguish his claim, Plaintiff says that his complaint alleges that “if there is a default in
the payment of the note, the person entitled to payment may enforce the note with the power of sale
. . . [subject to] certain obligations under the [Uniform Commercial Code].” (Dkt. 28, ¶ 10).
USBTNA replies that “there is not a distinction with a difference” between Plaintiff’s demand that
the note be produced and the “roundly rejected show-me-the-note theory.” (USBTNA Reply Mot.
Dismiss, Dkt. 33, ¶ 4). The Court agrees with USBTNA.
The fundamental premise of courts’ rejection of the show-me-the-note theory is that a deed
of trust may be enforced independent of the note. See Morlock, L.L.C. v. Bank of New York, 448
S.W.3d 514, 518 (Tex. App.—Houston [1st Dist.] 2014, pet. denied) (confirming “the principle that
the note and deed of trust are severable and the fact that the provisions of the Texas Property Code
governing nonjudicial foreclosure do not require possession or production of the original note”). As
a result, whatever regulations the Texas Business and Commerce Code place on the holder of a note
are irrelevant; all that matters is that the foreclosing party can establish its ownership of the deed of
trust. See id. at 519 (“Since the Bank proved that it is the owner of the deed of trust, it established its
interest in the property and right to foreclose as a matter of law regardless of whether it was also a
holder or the owner of the note.”).
Here, Plaintiff attached to his complaint the assignments of his deed of trust from (1) BOA
to LSF9 Mortgage Holdings, LLC and (2) LSF9 Mortgage Holdings, LLC to USBTNA as trustee for
the LSF9 Trust. (Assignments, Dkt. 14-4 (exhibits J and K)). “A mortgage can be foreclosed upon
by either the mortgage servicer or the mortgagee.” Sigler v. Caliber Home Loans, Inc., No. SA-16-CV717-XR, 2017 WL 74756, at *4 (W.D. Tex. Jan. 5, 2017) (citing Tex. Prop. Code §§ 51.002, 51.0025).
A mortgagee is “the grantee, beneficiary, owner, or holder of a security instrument.” Tex. Prop.
Code § 51.0001(4)(a). If a deed of trust has been assigned, the Texas Property Code defines a
mortgagee as “the last person to whom the security interest has been assigned of record.” Id.
§ 51.0001(4)(C). The deed of trust is a security interest; if the assignments are valid, then USBTNA
(in its capacity as trustee for the LSF9 Trust) is a mortgagee with the authority to foreclose Plaintiff’s
property under the Texas Property Code. See Martins, 722 F.3d at 255 (“[T]he Texas Property Code
contemplates and permits [a mortgagee to] either (1) to grant the mortgage servicer the authority to
foreclose or, if [the mortgagee] is its own mortgage servicer, (2) to bring the foreclosure action
Plaintiff disputes the validity of the second assignment, alleging that Caliber forged the
assignment because it lacked the authority to execute the assignment on behalf of LSF9 Mortgage
Holdings, LLC. (Dkt. 14-1, ¶¶ 39–40; Dkt. 28 ¶ 8). Plaintiff argues that because a forged assignment
is void, he has standing to challenge the validity of the assignment. (Id.). USBTNA responds that
Plaintiff’s allegation establishes at most that the assignment is voidable. (Dkt. 19, at 5 n.5). Again, the
Court agrees with USBTNA.
“As a general rule, a non-party to a contract cannot enforce the contract unless she is an
intended third-party beneficiary.” Vazquez v. Deutsche Bank Nat. Tr. Co., 441 S.W.3d 783, 787 (Tex.
App.—Houston [1st Dist.] 2014, no pet.) (quotation marks and citation omitted). “However, that
rule does not apply when a party, rather than seeking to enforce the contract, instead alleges that the
contract was void from the outset.” Id. Thus, a non-party to a contract who is not an intended thirdparty beneficiary has standing to contest a contract on the grounds that it is void, but not on the
grounds that it is merely voidable. See Reinagel v. Deutsche Bank Nat. Tr. Co., 735 F.3d 220, 226 (5th
Cir. 2013) (“[Texas] law is settled that the obligors of a claim . . . may not defend [against an
assignee’s effort to enforce the obligation] on any ground which renders the assignment voidable
only.”) (quoting Tri-Cities Const., Inc. v. Am. Nat. Ins. Co., 523 S.W.2d 426, 430 (Tex. Civ. App.—
Houston [1st Dist.] 1975, no writ).
A forged deed is void, Vazquez, 441 S.W.3d at 787, and a plaintiff who properly alleges that
an assignment was forged has standing to contest the assignment. See EverBank, N.A. v. Seedergy
Ventures, Inc., 499 S.W.3d 534, 542 (Tex. App.—Houston [14th Dist.] 2016, no pet.) (“Standing
would exist, for instance, if a homeowner alleged that an assignment was forged, because a forged
deed is void.”). However, the Fifth Circuit has held that a plaintiff in a foreclosure case lacks
standing to contest the validity of an assignment between third parties when the plaintiff alleges that
the signatory merely lacked authority. Reinagel, 735 F.3d at 226. Here, that is all Plaintiff alleges.
Plaintiff’s forgery allegation is based on the fact that “there is no Power of Attorney
authorizing [Caliber] to act for LSF9 Mortgage Holdings, LLC recorded in the Real Property
Records of Hays County, Texas.” (Dkt. 14-1, ¶ 39). On that basis, Plaintiff asserts that “[w]ithout
these powers of attorney, then the assignment and/or the actions of [Caliber] in its attempt to
foreclose on plaintiff’s [property] would be based on forged documents.” (Id.). Plaintiff’s allegation,
however, misconstrues the concept of forgery.
“[O]ne who signs his true name, purporting to act as the agent of another, has not
committed a forgery.” Nobles v. Marcus, 533 S.W.2d 923, 926 (Tex. 1976). Following this rule, this
Court has in other cases held that a plaintiff does not allege forgery by alleging that the signatory
lacked authority but nonetheless signed his or her own name. See Tyler v. Bank of Am., N.A., No. SA12-CV-00909-DAE, 2013 WL 1821754, at *6 (W.D. Tex. Apr. 29, 2013) (holding that the plaintiffs
“fail[ed] to plausibly allege that the assignment of the Deed of Trust was forged” because they “d[id]
not allege that the power of attorney was forged; they merely assert[ed] that signing the document
without proper authority would constitute a forgery”).
Here, Plaintiff alleges simply that Caliber lacked the authority to sign the second assignment
of Plaintiff’s deed of trust to USBTNA in its capacity as trustee for the LSF9 Trust. Plaintiff
nowhere alleges that Caliber’s signatory failed to sign his or her true name. Accordingly, Plaintiff has
merely alleged facts that render the deed of trust voidable, which is insufficient to confer upon
Plaintiff the standing to challenge the assignment. See Allen v. Bank of America, N.A., No. EP-14-CV429-KC, 2015 WL 1726986, at *8 (W.D. Tex. Apr. 15, 2015) (“Like in Reinagel, Plaintiff cannot
challenge a facially valid assignment on the basis that the individual who assigned the mortgage to
[the defendant bank] lacked actual authority to execute the transaction.”).9 Without standing to
challenge the assignment, Plaintiff has no basis by which to contest USBTNA’s status as mortgagee.
Because USBTNA’s status as mortgagee gives it authority to foreclose under the deed of trust,
Plaintiff’s note-based cause of action fails to state a claim upon which relief can be granted.10
D. Fraudulent Foreclosure
Plaintiff asserts a cause of action that he characterizes as a “fraudulent foreclosure” claim. As
part of this claim, Plaintiff complains that: (a) “LSF9 is not the Lender” and therefore “does not
have the right to declare a foreclosure,” (Dkt. 14, ¶ 30); (b) the LSF9 Trust is a participating lender
that lacks an ownership interest in Plaintiff’s property, (id. ¶ 32); (c) the notice of sale was deficient,
Plaintiff’s claim that he is “entitled to have the power of attorney produced,” (Dkt. 14-1, ¶ 39), likewise lacks merit.
Plaintiff bases his argument for entitlement on the proposition that “[t]he party alleging agency has the burden to prove
its existence.” (Id. ¶ 40). Plaintiff’s argument is beside the point. The question here is whether Plaintiff even has the
standing to contest the second assignment. Plaintiff’s standing (or lack thereof) is based entirely on his own allegations,
not on what another party asserts. Here, Plaintiff lacks standing because he failed to allege facts that could establish that
the assignment is void, rather than voidable.
Later in his amended complaint, Plaintiff “demand[s] that all defendant show to represent [sic] the holder of the
plaintiff’s note and that the entity that each defendant represents is the holder of plaintiff’s note with the right to enforce
the note as provided in under [sic] [Texas Business and Commerce Code §] 3.308(b).” (Dkt. 14-1, ¶ 58). Plaintiff also
“makes demands on the defendants to exhibit the Note” under Texas Business and Commerce Code § 3.501(2)(b)(2)(A)
and (B). (Id. ¶ 66). Nothing in either statute requires production of the note in this case. As discussed in this section, the
note is irrelevant to USBTNA’s authority to foreclose on Plaintiff’s property. Plaintiff’s subsequent note demands fail
for the same reasons as the first.
(id. ¶¶ 33–37); and (d) the assignment of Plaintiff’s deed of trust to USBTNA in its capacity as
trustee for the LSF9 Trust was void, (id. ¶¶ 39–40).
Plaintiff cites no authority for “fraudulent foreclosure” as a cause of action, nor does he cite
any law under which he might be entitled to relief. To the extent that Plaintiff’s claim might be
construed as a claim for wrongful foreclosure—which is a recognized cause of action under Texas
law—Plaintiff fails to state a claim for which relief can be granted because no party has yet
foreclosed on Plaintiff’s property. See Foster v. Deutsche Bank Nat’l Tr. Co., 848 F.3d 403, 406 (5th Cir.
2017) (“A claim of wrongful foreclosure cannot succeed, however, when no foreclosure has
E. Breach of Contract
Plaintiff also asserts a cause of action for breach of contract. (Dkt. 14-1, ¶¶ 41–44). Plaintiff
asserts that because “there is nothing in the record to show that the alleged holder of the note and
deed of trust has authorized anyone to enforce the Note using the non-judicial power of sale,” and
that USBTNA’s failure to appoint a substitute trustee “constitutes a breach of the Deed of Trust.”
(Id. ¶ 42).
“In Texas, performance or tendered performance by the plaintiff is an essential element of a
breach of contract claim.” Golden v. Wells Fargo Bank, N.A., 557 F. App’x 323, 327 (5th Cir. 2014).
Moreover, “a party to a contract who is himself in default cannot maintain a suit for its breach.” Id.
at 327–28 (quoting Dobbins v. Redden, 785 S.W.2d 377, 378 (Tex. 1990)). Plaintiff’s “affirmative
defense of payment,” (Dkt. 14, ¶ 27), which is predicated not on Plaintiff’s own payments but on
speculations about government guarantees and credit default swaps, is a tacit admission that he has
defaulted on his obligations under the deed of trust. Plaintiff also asks the Court to “take judicial
notice of the fact that at the time of [the March 2015 assignment], plaintiff’s note was nonperforming.” (Dkt. 14-1, ¶ 59). Finally, Plaintiff does not dispute Defendant’s claim that he was not
performing his obligations under the deed of trust. (See Dkt. 19, ¶ 19). Without deciding whether
other grounds may exist to dismiss Plaintiff’s breach-of-contract claim, it is sufficient to find that
Plaintiff has defaulted on his own obligations under the deed of trust to hold that he fails to state a
breach of contract claim. See Golden, 557 F. App’x at 328 (holding that because the plaintiffs’ “breach
of contract claim [was] premised upon their own prior default,” it “was properly dismissed under
F. Breach of the Implied Covenant of Good Faith and Fair Dealing
Plaintiff alleges that “even if the Note and Deed of Trust were validly and properly assigned
to defendant USBTNA, USBTNA did not act in good faith and did not deal fairly with Plaintiff”
because USBTNA “attempt[ed] to foreclose on [Plaintiff’s property] even though [it] did not have
standing to do so.” (Dkt. 14-1, ¶ 47). According to Plaintiff, USBTNA’s unauthorized foreclosure
constituted “a bad faith breach of contract.” (Id.).
Although Plaintiff’s allegations are controverted by the documents attached to his amended
complaint, Plaintiff’s good-faith-and-fair-dealing claim fails as a matter of law on its own terms.
“Under Texas law, there is ‘no special relationship between a mortgagor and mortgagee’ that would
give rise to a stand-alone duty of good faith and fair dealing.” Milton v. U.S. Bank Nat. Ass’n, 508 F.
App’x 326, 329 (5th Cir. 2013) (quoting UMLIC VP LLC v. T & M Sales & Envtl. Sys., Inc., 176
S.W.3d 595, 612 (Tex. App.—Corpus Christi 2005, pet. denied)). Some federal district courts in this
circuit have stated that “evidence of active participation on the part of the mortgagor . . . might . . .
give rise to a duty of good faith and fair dealing.” Levels v. Merlino, 969 F. Supp. 2d 704, 718 (N.D.
Tex. 2013) (citing Omrazeti v. Aurora Bank FSB, No. 12-CV-00730-DAE, 2013 WL 3242520, at *14
(W.D. Tex. June 25, 2013), which found “active participation” where a defendant “went beyond its
conventional role as a loan servicer by offering [the p]laintiff a loan modification”). Plaintiff’s goodfaith-and-fair-dealing claim contains no evidence of the kind of active participation by any party that
might alter the normal duties that attend the mortgagor-mortgagee relationship. Instead, Plaintiff’s
good-faith-and-fair-dealing claim is predicated entirely on the allegations about USBTNA’s lack of
authority to foreclose. Accordingly, Plaintiff fails to state a claim for breach of the covenant of good
faith and fair dealing.
G. Texas Deceptive Trade Practices Act
Plaintiff’s cause of action under the Texas Deceptive Trade Practices Act (“DTPA”) is based
on the actions of the Substitute Trustees and MWZM. (Dkt. 14-1, ¶¶ 51–56). Accordingly, Plaintiff
fails to state a DTPA claim against USBTNA.
H. Slander of Title
Plaintiff also brings a claim for slander of title. (Dkt. 14-1, ¶¶ 73–81). The basis for Plaintiff’s
claim is his allegation that the March 2015 assignment from LSF9 Mortgage Holdings, LLC to
USBTNA as trustee for the LSF9 Trust, which was recorded, “is a communication to a third party
of a false statement derogatory to Plaintiff’s title made with malice causing special damages to
Plaintiff.” (Id. ¶ 75). USBTNA objects that Plaintiff’s pleading is insufficient in several ways and that
the statute of limitations bars Plaintiff’s slander of title claim. (Dkt. 19, ¶¶ 22–25). The Court agrees
with USBTNA that Plaintiff’s slander of title claim must be dismissed.
Among other things, a plaintiff is “required to prove the loss of a specific sale or sales in
order to recover on [the plaintiff’s] slander of title action.” Ellis v. Waldrop, 656 S.W.2d 902, 905
(Tex. 1983); see also Hill v. Heritage Res., Inc., 964 S.W.2d 89, 116 (Tex. App.—El Paso 1997, pet.
denied) (“[A] claim for slander of title does not accrue until there has been a loss of a specific sale.”).
Because Plaintiff has not pleaded the loss of a specific sale, he fails to state a slander of title claim.
I. Quiet Title
Buried in his slander of title claim, Plaintiff asks the Court to quiet title by declaring that the
property at issue in this case “is vested in Plaintiff” and that no defendant has any interest in the
property. (Dkt. 14-1, ¶ 78). USBTNA responds that Plaintiff’s quiet title theory fails as a matter of
law because it is not premised on the strength of Plaintiff’s own title. (Dkt. 19, ¶¶ 26–27). The Court
agrees with USBTNA.
“A suit to quiet title is an equitable action . . . [and a] plaintiff in a suit to quiet title must
prove and recover on the strength of his own title, not the weakness of his adversary’s title.” Fricks v.
Hancock, 45 S.W.3d 322, 327 (Tex. App.—Corpus Christi 2001, no pet.). “[A] plaintiff asserting a
quiet title claim has the burden of establishing his superior right to the property.” Mason v. Fremont
Inv. & Loan, 671 F. App’x 880, 883 (5th Cir. 2016) (citing Fricks, 45 S.W.3d at 327). The Fifth Circuit
has repeatedly held that challenges to the validity of an assignment of a deed of trust are not a
sufficient basis for a quiet title action under Texas law. Mason, 671 F. App’x at 883; Warren v. Bank of
Am., N.A., 566 F. App’x 379, 383 (5th Cir. 2014); Morlock, L.L.C. v. JP Morgan Chase Bank, N.A., 586
F. App’x 631, 633 (5th Cir. 2013). The Fifth Circuit has similarly rejected—as a matter of law—quiet
title actions premised on the theory that a defendant “is not the present owner of the note” and
therefore lacks “the right to sell the property at a foreclosure sale.” Warren, 566 F. App’x at 381, 383.
Here, Plaintiff’s quiet title is based not on the strength of his own title but on allegations
about ownership of the note and the validity of the assignments of Plaintiff’s deed of trust. As the
Fifth Circuit has explained, these allegations are insufficient to state a quiet title claim under Texas
J. Requests for Declaratory and Injunctive Relief
Finally, Plaintiff seeks declaratory and injunctive relief. (Dkt.14-1, ¶¶ 82–88 (seeking a
declaration that no defendant has the authority to foreclose on Plaintiff’s property); id. ¶¶ 67–72
(asking the court to enjoin any defendant from foreclosing on Plaintiff’s property)). Plaintiff seeks
declaratory relief under the Texas Declaratory Judgment Act. (Id. ¶ 83). “When a declaratory
judgment action is filed in state court and is later removed to federal court, it is converted to an
action brought under the federal Declaratory Judgment Act.” Anderson v. Wells Fargo Home Mortg.,
No. 5:16-CV-433-DAE, 2016 WL 4197606, at *4 (W.D. Tex. Aug. 8, 2016) (quotation marks and
citation omitted). Because the federal Declaratory Judgment Act is a procedural mechanism, it
requires “a substantial and continuing controversy between two adverse parties.” Bauer v. Texas, 341
F.3d 352, 358 (5th Cir. 2003)). Therefore, because this Court has dismissed all of Plaintiff’s claims,
his declaratory judgment claim must also be dismissed.
Similarly, “[u]nder Texas law, a request for injunctive relief is not itself a cause of action but
depends on an underlying cause of action.” Marsh v. Wells Fargo Bank, N.A., 760 F. Supp. 2d 701,
708 (N.D. Tex. 2011); see also Massey v. EMC Mortg. Corp., 546 Fed. App’x. 477, 483 (5th Cir. 2013)
(“Because the [plaintiffs’] request for injunctive relief depends on the success of their other claims,
we find that it was properly dismissed.”). Because the Court dismisses all of Plaintiff’s underlying
causes of action, Plaintiff cannot receive injunctive relief. Plaintiff’s claims for declaratory
and injunctive relief are therefore denied.
K. Dismissal With Prejudice
Because the Court holds that Plaintiff, in his Amended Complaint, has failed to state a claim
for every cause of action in his complaint, this case is dismissed. Furthermore, the Court dismisses
the case with prejudice and without leave to amend. Although Federal Rule of Civil Procedure
15(a)(2) permits a court to grant leave to amend pleadings and “evinces a bias in favor of granting
leave to amend, it is not automatic.” Matter of Southmark Corp., 88 F.3d 311, 314 (5th Cir. 1996)
(internal quotation marks and citation omitted). Among other things, “a party must ‘expressly
request’ leave to amend.” Law v. Ocwen Loan Servicing, L.L.C., 587 F. App’x 790, 796 (5th Cir. 2014)
(quoting United States ex rel. Willard v. Humana Health Plan of Tex. Inc., 336 F.3d 375, 387 (5th Cir.
2003)). Even though “[a] formal motion is not always required,” the requesting party must still “set
forth with particularity the grounds for the amendment and the relief sought.” Willard, 336 F.3d at
387. When a plaintiff fails to request leave to amend or indicate what might be added to the
complaint if amendment were allowed, a district court may dismiss the cause of action with
prejudice. See Joseph v. Bach & Wasserman, L.L.C., 487 F. App’x 173, 178 (5th Cir. 2012). Here,
because Plaintiff has neither requested leave to amend his complaint nor indicated in what he might
add to a second amended complaint, the Court declines to sua sponte permit Plaintiff to amend his
complaint a second time.
For these reasons, Plaintiff’s Verified Memorandum in Support of Motion to Remand
(“Motion to Remand”), (Dkt. 27), is DENIED. Plaintiff’s Opposed Motion to Stay Consideration
of Defendant U.S. Bank Trust, N.A., Trustee for LSF9 Master Participation Trust’s Motion to
Dismiss, (Dkt. 29), is DENIED. Defendant’s Motion to Dismiss Amended Original Petition and
Brief in Support, (Dkt. 19), is GRANTED.
Accordingly, Plaintiff’s Amended Complaint, (Dkt. 14), is DISMISSED WITH
PREJUDICE. This case is CLOSED.
SIGNED on December 5, 2017.
UNITED STATES DISTRICT JUDGE
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