Maliciously Contrived Federal Court Decision Paves Way for Continued Homestead Theft in Texas

OPINION AND ORDER

Pending before me is a Motion for Summary Judgment filed by Specialized Loan Servicing, LLC (“SLS”) and Deutsche Bank National Trust Company (“Deutsche Bank”), as Trustee for FFMLT Trust 2005-FF2, Mortgage Pass- Through Certificates, Series 2005-FF2 (the “FFMLT Trust 2005-FF2”). See Dkt. 30.

In this Opinion and Order, I will refer to SLS and Deutsche Bank, collectively, as “Defendants.”

Having considered the summary judgment briefing, the record, and the applicable law, I GRANT the Motion for Summary Judgment.

BACKGROUND

In 2004, Charles and Jo Ann Jones (“the Joneses”) executed a home equity loan from First Franklin Financial Corporation (“First Franklin”), encumbering the property at 901 Landing Boulevard, League City, Texas 77573 (“the Property”) with a Texas Home Equity Security Instrument.

In 2005, the Joneses conveyed the Property to a living trust.

Charles Jones died in 2007.

Jo Ann Jones died on September 2, 2010. Janet Brecheen (“Brecheen”) served as the successor trustee.

On September 29, 2010, Brecheen conveyed the Property to herself in her individual capacity.

In November 2010, the loan fell into default.

In April 2012, First Franklin assigned the Texas Home Equity Security Instrument to Deutsche Bank, as trustee for the FFMLT Trust 2005-FF2.1

On June 4, 2012, Deutsche Bank filed a lawsuit seeking an order authorizing foreclosure.

The 56th Judicial District Court in Galveston County, Texas authorized foreclosure in August 2013 (“the August 2013 Judgment”).

In March 2018, Brecheen sold the Property to Donna and Curtis Holcomb (“the Holcombs”).2

The loan remains in default.

In late 2018 and August 2021, Deutsche Bank attempted to foreclose on the Property based on the August 2013 Judgment.

One day before the scheduled August 2021 foreclosure sale, the Holcombs filed suit against Deutsche Bank and SLS—the mortgage servicer for Deutsche Bank—in the 212th Judicial District Court in Galveston County.

Defendants timely removed the case to federal court.

In their Amended Complaint, the Holcombs assert three claims:

(1) quiet title based on the statute of limitations;

(2) violations of the Texas fraudulent lien statute;

and

(3) declaratory relief.

Defendants have filed a counterclaim for judicial foreclosure against the Holcombs.

LEGAL STANDARD

Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”

FED. R. CIV. P. 56(a).

A fact issue is material only “if its resolution could affect the outcome of the action.”

Wyatt v. Hunt Plywood Co., 297 F.3d 405, 409 (5th Cir. 2002).

A dispute of material fact is genuine if the evidence would allow a reasonable jury to find for the nonmovant.

See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

The moving party bears the burden of demonstrating the absence of a genuine issue of material fact.

See Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986).

1 For some unexplained reason, First Franklin assigned, for a second time, its rights under the Texas Home Equity Security Instrument to Deutsche Bank in March 2014.

2 Donna Holcomb died on January 22, 2023.

Once satisfied, the burden shifts to the nonmovant to show the existence of a genuine fact issue for trial.

See id. at 324.

To do so, the “nonmovant must identify specific evidence in the record and articulate how that evidence supports that party’s claim.”

Brooks v. Houston Indep. Sch. Dist., 86 F. Supp. 3d 577, 584 (S.D. Tex. 2015).

In ruling on a motion for summary judgment, I must construe “the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in that party’s favor.”

Cadena v. El Paso Cnty., 946 F.3d 717, 723 (5th Cir. 2020).

THE HOLCOMBS’ CLAIMS FOR AFFIRMATIVE RELIEF

A.               Quiet Title

The Holcombs’ first cause of action is a suit to quiet title.

“A suit to quiet title is an equitable action to clear a clouded title.”

Middaugh v. InterBank, 528 F. Supp. 3d 509, 560 (N.D. Tex. 2021) (quotation omitted).

“Title to property is clouded when a party has an invalid claim to the property that serves to diminish the property’s value.”

Carter v. Bank of Am., N.A., No. 3:12-cv-4550, 2013 WL 1482610, at *2 (N.D. Tex. Apr. 9, 2013) (quotation omitted).

To quiet title in their favor, the Holcombs must show:

(1) [their] right, title, or ownership in real property;

(2) that [Defendants have] asserted a ‘cloud’ on [their] property, meaning an outstanding claim or encumbrance valid on its face that, if it were valid, would affect or impair the property owner’s title;

and

(3) that [Defendants’] claim or encumbrance is invalid.

Warren v. Bank of Am., N.A., 566 F. App’x 379, 382 (5th Cir. 2014).

The Holcombs offer several arguments as to why Defendants have asserted a cloud on the Holcombs’ title.

None are persuasive.

1.                 The Statute of Limitations Is Satisfied.

The Holcombs argue that the four-year statute of limitation bars Defendants from foreclosing on the Property. This argument fails.

Texas has a four-year statute of limitations for foreclosure actions.

See TEX. CIV. PRAC. & REM. CODE § 16.035;

Rose v. Select Portfolio Servicing, Inc., 945 F.3d 226, 229 (5th Cir. 2019).

The statute provides:

(a)             A person must bring suit for the recovery of real property under a real property lien or the foreclosure of a real property lien not later than four years after the day the cause of action accrues.

(b)             A sale of real property under a power of sale in a mortgage or deed of trust that creates a real property lien must be made not later than four years after the day the cause of action accrues.

TEX. CIV. PRAC. & REM. CODE § 16.035. Failure to comply with the four-year limitations period results in voidance of “the real property lien” and the “power of sale to enforce the real property lien.” Id. § 16.035(d).

“A party seeking foreclosure needn’t comply with both section 16.035 (a) and (b). It must instead either bring an action within four years or sell the property within four years.”

Strange v. Deutsche Bank Nat’l Tr. Co., No. 4:21-cv-03298, 2022 WL 889274, at *2 (S.D. Tex. Mar. 25, 2022).

Defendants thus had four years, once the limitations period was triggered, to either file suit or sell the property.

A foreclosure “action accrues only when the holder actually exercises its option to accelerate” the note’s maturity.

Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 566 (Tex. 2001).

In this case, Bank of America, N.A.—as mortgage servicer for First Franklin—triggered the four-year statute of limitations when it accelerated the loan on August 30, 2011.

See Dkt. 30-6 at 40–41.

Thus, Defendants had to satisfy either § 16.035(a) or (b) not later than August 30, 2015 to comply with the applicable statute of limitations.

Deutsche Bank satisfied § 16.035(a) when it filed suit on June 4, 2012 in the 56th Judicial District Court of Galveston County, seeking an order authorizing foreclosure.

See Dkt. 30-6 at 7.

That lawsuit, brought by Deutsche Bank less than a year after the limitations period began, unquestionably qualifies as a suit for “the foreclosure of a real property lien” under § 16.035(a).

See, e.g., Strange, 2022 WL 889274, at *3 [Judge Charles Eskridge]

(holding that a counterclaim for an order authorizing foreclosure “qualifies as a suit for ‘the foreclosure of a real property lien’ under section 16.035(a)”);

Maluski v. Rushmore Loan Mgmt. Servs., LLC, No. 14-17-00233-cv, 2018 WL 4780794, at *8 (Tex. App.—Houston [14th Dist.] Oct. 4, 2018, no pet.)

(holding that a claim “seeking an order permitting foreclosure of the property under the security instrument and an order for judicial foreclosure, prevented the four-year limitations period in section 16.035 from expiring and the real property lien and power of sale from becoming void”).

That lawsuit ultimately resulted in the August 2013 Judgment.3

The Holcombs take the position that, to be timely, a foreclosure sale had to occur within four years of the entry of the August 2013 Judgment.

This is simply not the law.

To the contrary, it is well-settled that so long as a party seeking foreclosure brings an action within the four-year limitations period, “the plain language of section 16.035(a) does not require that the actual foreclosure occur within the four-year limitations period.”

Metcalf v. Wilmington Sav. Fund Soc’y, FSB, No. 03-16-00795-cv, 2017 WL 1228886, at *4 (Tex. App.—Austin Mar. 29, 2017, pet. denied).

A number of other courts have followed this line of reasoning.

In Strange, as here, Deutsche Bank was awarded a final judgment authorizing a non-judicial foreclosure sale in July 2015.

Yet, the actual foreclosure sale in Strange was not noticed until October 2021—seven years after the final judgment authorizing a non-judicial foreclosure sale.

The court in Strange granted summary judgment in Deutsche Bank’s favor because the counterclaim that led to the July 2015 final judgment was filed “well within four years of the acceleration of the loan,” and that is all that was required under § 16.035(a).

Strange, 2022 WL 889274 at *3;

see also

Santiago v. Bank of N.Y. Mellon, No. 4:18-cv-00533, 2018 WL 7138389, at *8 (E.D. Tex. Dec. 27, 2018);

Maluski, 2018 WL 4780794, at *8;

Slay v. Nationstar Mortg., L.L.C., No. 2-09-052-cv, 2010 WL 670095, at *3 (Tex. App.—Fort Worth Feb. 25, 2010, pet. denied).

The same result is warranted here.4

3 Even if I look, as the Holcombs do, to the date of the August 2013 Judgment (August 9, 2013), instead of the date that Defendants filed suit (June 4, 2012), the August 2013 Judgment—issued prior to August 30, 2015—still falls within the limitations period triggered by the August 30, 2011 acceleration.

4 This is not to say, however, that a lender can obtain a final judgment authorizing non-judicial foreclosure and wait an indeterminate period of time before actually foreclosing.

Rather, once a final judgment has issued, the lender has 10 years to execute the judgment

In sum, Deutsche Bank preserved the validity of the real property lien under § 16.035(a) by filing suit for non-judicial foreclosure within the four-year limitations period.

2.                The Note Has Not Been Cancelled.

Citing 26 U.S.C. § 108(i)(4)(B), the Holcombs argue that, as a matter of law, the loan was forgiven and the promissory note “cancelled” when the loan was securitized.

Dkt. 33 at 2.

As Defendants correctly note, “[t]here is no authority for this position and nothing in Section 108 leads to this conclusion.”

Dkt. 34 at 4.

“Securitization is the process whereby mortgage loans are turned into securities, or bonds, and sold to investors. . . . The alleged purpose of securitization is to provide a large supply of money to lenders for originating loans and to provide investments to bond holders which were expected to be relatively safe.”

Christmas v. CitiMortgage, Inc., No. 3:14-cv-71, 2014 WL 2117453, at *1 n.5 (S.D. Ohio May 21, 2014).

Section 108 is an Internal Revenue Code provision concerning income from discharge of indebtedness.5

“There is absolutely nothing in Section 108, or anywhere else, that mandates the ‘cancelation’ or ‘forgiveness’ of the indebtedness when a Note is transferred into a securitization trust.”

Dkt. 34 at 6.

The Holcombs’ contention that the transfer of a note into a securitization trust cancels the debt created by the note would render the entire securitization process meaningless.

I will not become the first judge in America to accept the Holcombs’ argument.

3.                The Joneses Were the Actual Borrowers.

Finally, the Holcombs argue that Defendants do not have a claim or encumbrance on the Property because, under 12 U.S.C. § 374a, the broker that before it becomes dormant.

See TEX. CIV. PRAC. & REM. CODE ANN. § 34.001; see also Cox v. Nelson, 223 S.W.2d 84, 85 (Tex. App.—Texarkana 1949, writ ref’d)

(permitting foreclosure of judgment lien against real property where writ of execution did not issue for more than nine years—but still within 10 years—after judgment was issued).

5 If a holder of an “applicable debt instrument” forgave the amount owed at any point between December 31, 2009 and January 1, 2011, the forgiveness of indebtedness “income” realized by the Joneses could have been spread over four or five years for the purposes of paying income taxes.  26 U.S.C. § 108(i)(4)(B); see id. § 108(i)(1).

originated the loan to the Joneses was actually the borrower, and the Joneses were merely third-party “accommodations” to an investment contract, per 12 U.S.C. § 371c.6 Dkt. 33 at 4.

Section 374a provides:

“No member bank shall act as the medium or agent of any nonbanking . . . individual in making loans on the security of stocks, bonds, and other investment securities.” 12 U.S.C. § 374a.

This statutory provision has no application here because this case involves a loan made on real estate.

No loan was made “on the security of stocks, bonds, and other investment securities.” Id.

* * *

The Holcombs’ quiet title claim thus fails as matter of law.

Accordingly, I grant summary judgment on the Holcombs’ quiet title claim in Defendants’ favor.

The Holcombs’ second cause of action is for an alleged violation of the Texas fraudulent lien statute.

To prevail on this claim, the Holcombs must show that Defendants “(1) made, presented, or used a document with knowledge that it was a fraudulent lien, claim against, or an interest in real property; (2) intended the document be given legal effect; and (3) intended to cause [the Holcombs] financial injury.”

Funke v. Deutsche Bank Nat’l Tr. Co., No. 5:14-cv-307, 2014 WL 3778831, at *4 (W.D. Tex. July 31, 2014).

The Holcombs’ fraudulent lien claim is, according to the Amended Complaint, based on a Notice of Substitute Trustee’s Sale, which the Holcombs maintain was fraudulent because Defendants knew that they did not have the right to foreclose on the property due to the expiration of the statute of limitations.

This argument is dead on arrival because, as explained above, Deutsche Bank satisfied the four-year statute of limitations when it filed its June 4, 2012 lawsuit.

Reading the writing on the wall, the Holcombs did not even bother to respond to

6 Section 371c is of no relevance here. Section 371c establishes the terms under which banks that belong to the Federal Reserve System may transact with affiliates. See 12 U.S.C. § 371c(a)(1).

Defendants’ arguments as to why summary judgment is appropriate on the fraudulent lien claim. Accordingly, I grant summary judgment on the Holcombs’ fraudulent lien claim in Defendants’ favor.

C.            Declaratory Judgment

Last but not least, the Holcombs seek declaratory relief.7 Specifically, the Holcombs seek declarations that (1) Defendants lack standing to foreclose because they cannot demonstrate injury; (2) the August 2013 Judgment represents the start of the four-year limitations period, which ended on August 12, 2017; and

(3) Defendants “do not have the unilateral authority to set aside the [August] 2013 [Judgment authorizing foreclosure] by merely claiming to have rescinded” the acceleration of the note. Dkt. 18 at 11.

“The [federal] Declaratory Judgment Act, which authorizes a federal court to ‘declare the rights and other legal relations of any interested party seeking such declaration,’ is merely a procedural device and does not create any substantive rights or causes of action.”

Smitherman v. Bayview Loan Servicing, LLC, 727 F. App’x 787, 792 (5th Cir. 2018)

(quoting 28 U.S.C. § 2201(a)); see also Okpalobi v. Foster, 244 F.3d 405, 423 n.31 (5th Cir. 2001)

(“[A]lthough the Declaratory Judgment Act provides a remedy different from an injunction—it does not provide an additional cause of action with respect to the underlying claim.”).

“Where all the substantive, underlying claims have been dismissed, a claim for declaratory judgment cannot survive.”

Davis v. Silver State Fin. Servs., No. H-13-1432, 2014 WL 713235, at *10 (S.D. Tex. Feb. 20, 2014)

(collecting cases).

Because I have already determined that Defendants are entitled to summary judgment in their

7 The Holcombs’ live pleading seeks declaratory relief under the Texas Declaratory Judgment Act, located in Chapter 37 of the Texas Civil Practice and Remedies Code. The Fifth Circuit, however, has held that the Texas Declaratory Judgment Act is a procedural rule that does not apply in federal court.

See Utica Lloyd’s of Tex. v. Mitchell, 138 F.3d 208, 210 (5th Cir. 1998).

“When a declaratory judgment action filed in state court is removed to federal court, that action is in effect converted into one brought under the federal Declaratory Judgment Act”

Redwood Resort Props., LLC v. Holmes Co., No. 3:06-cv-1022, 2007 WL 1266060, at *4 (N.D. Tex. Apr. 30, 2007).

favor on the underlying claims for quiet title and violations of the Texas fraudulent lien statute, the declaratory relief claim must be dismissed.

Nonetheless, I will explain why each request for declaratory relief—which are really defenses to Defendants’ effort to foreclose—fails on its merits as well.

1.                 Standing to Foreclose

The Holcombs first seek a declaration that Deutsche Bank, as trustee, has no standing to foreclose.

In advancing this argument, the Holcombs claim that the certifcateholders of the FFMLT Trust 2005-FF2 are the real parties in interest.

Defendants disagree, claiming that Deutsche Bank “is the real party in interest, not the certificateholders.” Dkt. 34 at 15.

“To determine whether the trustee is the real party to the controversy, Deutsche Bank must show that the declaration of the trust ‘authorize[s] the trustees to take legal title to trust assets, to invest those assets for the benefit of the shareholders, and to sue and be sued in [its] capacity as trustee.”

Rodriguez v. Deutsche Bank Nat’l Tr. Co., No. CV H-16-1597, 2017 WL 371141, at *2 (S.D. Tex. Jan. 26, 2017) (quoting Navarro Savs. Ass’n v. Lee, 446 U.S. 458, 464 (1980)).

At my request, Defendants have submitted a copy of the Pooling Service Agreement for the FFMLT Trust 2005-FF2.

See Dkt. 41-1.

After reviewing the Pooling Service Agreement, I am convinced that the record conclusively establishes that Deutsche Bank has the customary powers to hold “legal title to trust assets, to invest those assets for the benefit of the shareholders, and to sue and be sued in [its] capacity as trustee.”

Navarro, 446 U.S. at 464.

In examining a virtually identical Pooling Service Agreement also involving Deutsche Bank, Judge Gray Miller relied on four specific contractual provisions to hold that the trustee was the real party in interest.

See Rodriguez, 2017 WL 371141, at *3.

Those same four provisions can be found, word-for-word, in the Pooling Services Agreement that governs the FFMLT Trust 2005-FF2.

Accordingly, I have no hesitation in holding that Deutsche Bank is the real party in interest and has standing to foreclose.

2.                The Four-Year Limitations Period

Next, the Holcombs ask me to declare that the August 2013 Judgment signifies the start of the four-year statute of limitations.

I have already resolved this issue, holding that the limitations period began when Bank of America, N.A. accelerated the loan on August 30, 2011.

I also have concluded that Deutsche Bank satisfied the statute of limitations when it filed suit on June 2, 2012 seeking authorization to proceed with foreclosure.

There is simply no authority supporting the Holcombs’ argument that the actual sale of the Property had to take place within four years of the August 2013 Judgment to satisfy the statute of limitations.

Summary judgment is awarded in favor of Defendants on this request for declaratory relief.

3.                Setting Aside the August 2013 Judgment by Rescinding Acceleration of the Note

The Holcombs’ third request for declaratory relief asks that I declare that Defendants cannot unilaterally set aside the August 2013 Judgment by rescinding the acceleration of the note.

As to this request, no dispute exists.

The parties wholeheartedly agree that the August 2013 Judgment is a valid judgment from a court of competent jurisdiction, and any subsequent rescission of the notice of acceleration had no effect on the finality of the August 2013 Judgment.

As such, there is no live case or controversy regarding the validity of the August 2013 Judgment.

Declaratory relief on this topic is moot.

DEFENDANTS’ COUNTERCLAIM FOR JUDICIAL FORECLOSURE

Defendants have also moved for summary judgment on their claim for judicial foreclosure.

The Fifth Circuit has stated that Texas law allows a district court to order judicial foreclosure if the movant proves:

(1) “a financial obligation”;

(2) “the lien securing it”;

(3) “a default on the loan”;

and

(4) “that the property subject to foreclosure is the same property subject to the lien.”

Maldonado v. CitiMortgage, Inc., 676 F. App’x 282, 284 (5th Cir. 2017).

The first two elements are easily met, as the promissory note and the Texas Home Equity Security Instrument constitute the obligation and the lien securing the obligation.

As for the third element, there is no dispute that the loan is in default.

The summary judgment evidence establishes that no payments have been made on the loan since November 1, 2010.

Finally, the property subject to foreclosure is the same property subject to the lien.

Defendants are entitled to a judicial foreclosure of the Property.

CONCLUSION

Defendants’ Motion for Summary Judgment (Dkt. 30) is GRANTED.

Defendants are entitled to judicial foreclosure.

Defendants are ordered to submit a proposed judgment by September 13, 2024.

SIGNED this 9th day of September 2024.

ANDREW M. EDISON
UNITED STATES MAGISTRATE JUDGE

DEFENDANTS, SPECIALIZED LOAN SERVICING, LLC AND DEUTSCHE BANK NATIONAL TRUST COMPANY’S MOTION FOR SUMMARY JUDGMENT

TO THE HONORABLE JUDGE OF SAID COURT:

Specialized Loan Servicing, LLC (“SLS”) and Deutsche Bank National Trust Company, as Trustee for FFMLT Trust 2005-FF2, Mortgage Pass-Through Certificates, Series 2005-FF2 (“Deutsche Bank,” and with SLS, collectively, “Defendants”) ask the Court to enter summary judgment in their favor on Plaintiff’s Claims and Defendants’ Counterclaim pursuant to Rule 56 of the Federal Rules of Civil Procedure, and will show

(1) Plaintiff’s quiet title claim relies on an incorrect interpretation of Tex. Civ. Prac. & Rem. Code Section 16.035 that has been rejected by courts throughout Texas and by the Fifth Circuit;

(2) Plaintiff’s fraudulent lien claim fails because the Notice of Substitute Trustee’s Sale filed by Anthony Garcia is

(a) not fraudulent

and

(b) did not constitute a “fraudulent lien or claim against real or personal property or an interest in real or personal property;”

and

(3) Plaintiff’s declaratory judgment action cannot stand alone as an independent cause of action,

Deutsche Bank and SLS have standing to foreclose,

limitations have not run,

and

even if the servicer pays principal and interest to the securitization trust, the provisions relating to payment of ad valorem property taxes and the “due-on-sale” clause in the Deed of Trust has been breached giving rise to an independent justification for foreclosure.

Respectfully submitted,

HUGHES WATTERS ASKANASE, LLP
By:     //s// Damian W. Abreo

Damian W. Abreo
Texas Bar No. 24006728
Total Plaza
1201 Louisiana Street, 28th Floor
Houston, Texas 77002
(713) 759-0818 (Telephone)
(713) 759-6834 (Facsimile)
dabreo@hwa.com (E-mail)

ATTORNEYS FOR DEFENDANTS, SPECIALIZED LOAN SERVICING, LLC AND DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE FOR FFMLT 2005-FF2, MORTGAGE PASS-THROUGH CERTIFICATES SERIES 2005-FF2

TABLE OF CONTENTS

TABLE OF CONTENTS………………………………………………………………………… 3
TABLE OF
AUTHORITIES…………………………………………………………………………………… 4
NATURE AND STAGE OF THE PROCEEDING………………………………………. 9
ISSUES TO BE RULED UPON AND STANDARD OF REVIEW……………….. 11
UNDISPUTED FACTS………………………………………………………………………… 13
SUMMARY OF THE ARGUMENT……………………………………………………….. 17
ARGUMENT AND AUTHORITY…………………………………………………………. 18
A.     The Statute of Limitations did not run; Plaintiffs’ attempt to quiet title and fraudulent lien claim fail as a matter of law…………………………………………………………… 18
B.     The Notice of Substitute Trustee’s Sale signed by Garcia did not violate the fraudulent lien statute……………………………………………………………………………………….. 22
1.     The notice of sale was not fraudulent……………………………………………… 24
2.     A Notice of Sale is not a court record and is not meant to be a court record.
………………………………………………………………………………………………….. 29
3.     Garcia’s actions were not undertaken with intent to cause injury………….. 32
C.     Defendants have standing to foreclose………………………………………………. 35
1.     Deutsche Bank has an interest in the Deed of Trust; SLS authorized to foreclose. 35
2.     Defendants have concrete and particularized and actual, non-conjectural injury.   36
3.     Plaintiff’s declaratory judgment action cannot stand alone………………….. 41
D.     Even if Defendants’ right to foreclose were barred by limitations the Counterclaim Savings Statute applies………………………………………………………………………. 42
E.     Defendants are entitled to Summary Judgment on their counterclaim………. 47
CONCLUSION…………………………………………………………………………………… 49
CERTIFICATE OF SERVICE……………………………………………………………….. 51

TABLE OF AUTHORITIES

CASES:

Amstadt v. U.S. Brass Corp.,
919 S.W.2d 644 (Tex. 1996)………………………………………………………………. 28
Bartolowits v. Wells Fargo Bank, N.A,
2016 U.S. Dist. LEXIS 48186 (N.D. Tex. April 11, 2016)………………………… 39
Boren v. U.S. National Bank,
807 F.3d 99 (5th Cir. 2015)………………………………………………………………… 41
Bowman v. Cenlar FSB,
2021 U.S. Dist. LEXIS 219812 (N.D. Tex. Nov. 15, 2021)………………….. 20, 26
Cain v. Balcom,
109 S.W.2d 1044 (Tex. 1037)…………………………………………………………….. 29
Centurian Planning Corp., Inc. v. Seabrook Venture II,
176 S.W.3d 498 (Tex. App. – Houston [1st Dist.] 2004, no pet.)………………… 26
Cross v. Bank of N.Y. Mellon,
2021 U.S. Dist. LEXIS 117033 (S.D. Tex. June 23, 2021)………………. 44, 45, 46
Data Foundry, Inc. v. City of Austin,
620 S.W.3d 692 (Tex. 2021)………………………………………………………………. 39
Funke v. Deutsche Bank Nat’l Trust Co.,
2014 U.S. Dist. LEXIS 104438 (W.D. Tex. July 31, 2014)……………………….. 22
Getty Oil C. v. Insurance Co. of N. Am.,
845 S.W.2d 794 (Tex. 1992)………………………………………………………………. 28
Gilliam v. JPMorgan Chase Bank, N.A.,
2019 U.S. Dist. LEXIS 108086 at *11 (S.D. Tex. June 27, 2019)……………….. 35
Golden v. Wells Fargo Bank, N.A.,
557 Fed. Appx. 323 (5th Cir. 2014)……………………………………………………… 34
Hacienda Records, LP v. Ramos,
2015 U.S. Dist. LEXIS 147855 (S.D. Tex. Nov. 2, 2015)…………………………. 45
Havins v. CitiMortgage, Inc.,
2016 U.S. Dist. LEXIS 155982 (N.D. Tex. Feb. 17, 2016)……………………. 45,46
Hays v. Freedom Fin.,
2021 U.S. Dist. LEXIS 231594 (S.D. Tex. Nov. 10, 202)………………………….. 24
Hill v. PHH Mortg. Corp.,
2020 U.S. Dist. LEXIS 265877 at *6 (S.D. Tex. April 23, 2020)………………… 42
Holman Street Baptist Church v. Jefferson,
317 S.W.3d 540 (Tex. App. — Houston [14th Dist.] 2010, pet. denied)………… 45
Holy Cross Church of God in Christ v. Wolf,
44 S.W.3d 562 (Tex. 2001)…………………………………………………………… 18, 26
Huston v. U.S. Bank, N.A.,
359 S.W.3d 679 (Tex. App. – Houston [1st Dist.] 2011, no pet.)………………… 24
In re Cowin,
492 B.R. 858 (Bankr. S.D. Tex. 2013)………………………………………………….. 26
J.M.K. 6, Inc. v. Gregg & Gregg, P.C.,
192 S.W.3d 189 (Tex. App. – Houston [14th Dist.] 2006, no pet.)………………. 43
Jackson v. Wells Fargo N.A.,
2020 U.S. Dist. LEXIS 233053 at *14 (S.D. Tex. Dec. 11, 2020)……………….. 35
Kee v. City of Rowlett,
247 F.3d 206 (5th Cir. 2001)………………………………………………………………. 12
Latimer v. Smithkline & French Lab.,
919 F.2d 301 (5th Cir. 1990)………………………………………………………………. 12
Little v. Liquid Air Corp.,
37 F.3d 1069 (5th Cir. 1994)…………………………………………………………. 12, 13
Livingston v. Wells Fargo Bank, N.A.,
2014 U.S. Dist. LEXIS 128874 at *17 (E.D. Tex. Aug. 20, 2024)……………….. 33
Lopez v. Bank of Am., N.A.,
2018 U.S. Dist. LEXIS 173070 (S.D. Tex. July 30, 2018)…………………………. 42
Martins v. BAC Home Loans Servicing, LP,
722 F.3d 249 (5th Cir. 2013)………………………………………………………………. 36
Matsushita Elec. Ind. v. Zenith Radio Corp.,
475 U.S. 574 (1986)…………………………………………………………………………. 13
MFG Fin., Inc. v. Hamlin,
2021 Tex. App. LEXIS 4331 (Tex. App. – Austin June 3, 2021, pet. denied) . 24
Munoz v. Orr,
200 F.3d 291 (5th Cir. 2000)………………………………………………………………. 13
Murphree v. Godshall,
2014 U.S. Dist. LEXIS 134718 (S.D. Tex. Sept. 24, 2014)……………………….. 45
Nationstar Mort. LLC v. Barefoot,
654 S.W.3d 440 (Tex. App. – Houston [14th Dist.] 2021, pet. denied)………… 37
Navarro Sav. Ass’n v. Lee,
446 U.S. 458 (1980)…………………………………………………………………………. 37
Pittman v. Seterus, Inc.,
2019 U.S. Dist. LEXIS 97796 (N.D. Tex. May 10, 2019)…………………………. 19
Pitts & Collard, L.L.P. v. Schechter,
369 S.W.3d 301 (Tex.App. – Houston [1st Dist.] 2011, no pet.)…………………. 43
Ray v. Ocwen Loan Servicing, LLC,
2014 U.S. Dist. LEXIS 202271 (W.D. Tex. Oct. 10, 2014)……………………….. 30
Rodriguez v. CitiMortgage, Inc.,
2015 U.S. Dist. LEXIS 181808 (W.D. Tex. Feb. 4, 2015)…………………………. 44
Santiago v. Bank of N.Y. Mellon,
2018 U.S. Dist. LEXIS 221901 (E.D. Tex. Dec. 27, 2018)………………………… 18
Schultz v. Deutsche Bank Nat’l Trust Co.,
2023 U.S. Dist. LEXIS 121113, 11 (S.D. Tex. May 1, 2023………………………. 18
Sid Richardson Carbon & Gasoline Co. v. Interenergy Res., Ltd.,
99 F..3d 746 (5th Cir. 1996)……………………………………………………………….. 43
Sonny Arnold, Inc. v. Sentry Sav. Assoc.,
633 S.W.2d 811 (Tex. 1982)………………………………………………………………. 39
Southmark Corp. v. Coopers & Lybrand
(In re Southmark Corp.), 163 F.3d 925 (5th Cir. 1999)…………………………….. 28
Spokeo, Inc. v. Robins,
136 S.Ct. 1540 (2016)………………………………………………………………………. 39
Stevens v. Deutsche Bank Nat’l Trust Co.,
570 Fed. Appx. 402 (5th Cir. 2014)………………………………………………… 33, 34
Strange v. Deutsche Bank Nat’l Trust Co.,
2022 U.S. Dist. LEXIS 53968 at *4-6 (S.D. Tex. Mar. 25, 2022)………….. passim
Texas Water Rights Cmm’n. v. Crow Iron Works,
582 S.W.2d 768 (Tex. 1979)………………………………………………………………. 28
Vanderbilt Mortg. & Fin., Inc. v. Flores,
735 F. Supp. 2d 679 (S.D. Tex. 2010)…………………………………………………… 32

STATUTES AND RULES:

Fed. R. Civ. P. 17………………………………………………………………………………… 37
Tex. Civ. Prac. & Rem. Code §12.02………………………………………………….. 23, 30
Tex. Civ. Prac. & Rem. Code §16.035………………………………………………… 18, 19
Tex. Civ. Prac. & Rem. Code §12.001……………………………………………………… 30
Tex. Civ. Prac. & Rem. Code §16.0069……………………………………………… passim
Tex. Civ. Prac. & Rem. Code §16.038……………………………………………………… 41
Tex. Const. Art. XVI, §50(a)(6)(A) and (D)………………………………………………. 24
Tex. Gov’t Code §311.011…………………………………………………………………….. 30
Tex. Prop. Code §51.0001…………………………………………………………… 34, 3, 385
Tex. Prop. Code §51.0002…………………………………………………………………….. 31
Tex. Prop. Code §51.0025…………………………………………………………………….. 38
Tex. Tax Code §32.01…………………………………………………………………………… 37
Tex. Tax Code §32.05…………………………………………………………………………… 37

NATURE AND STAGE OF THE PROCEEDING

1.                 This is a suit to prevent foreclosure of Deutsche Bank’s lien against property at 901 Landing Blvd., League City, Texas 77573 (the “Property”).

Deutsch Bank is the assignee and owner of a valid Home Equity Security Instrument dated October 26, 2004, and executed by the original borrowers, Jo Ann M. Jones and Charles E. Jones (collectively, the “Joneses” or “Borrowers”).

Plaintiff claims that while looking for a home, Donna Holcomb researched the Galveston County real property records, located an error relating to the ownership of the Property, identified a means by which she could game the system and acquire the much-sought-after but rarely-attained “free house,” and “obtained their rights through a deed without warranty.”1

Plaintiff and Donna Holcomb purchased the Property from the heir of the deceased Borrowers with no intention of actually satisfying Deutsche Bank’s lien.

2.                 In August, 2013, Deutsche Bank secured a summary judgment authorizing foreclosure.

That judgment is final for all purposes.

Plaintiff contends that judgment caused Defendants “claim” for foreclosure to accrue and that limitations on the foreclosure “claim” therefore ran in 2017.

Plaintiff contends that Defendants have no damages and lack standing because the prospectus by which the

1 See generally Plaintiffs’ Amended Complaint, Dkt. No. 18, p. 2-3, ⁋ 8.

FFMLT 2005-FFT trust was created requires a servicer to tender principal and interest payments when a borrower does not pay their mortgage (if the servicer has a good faith belief that funds it advances will be recoverable when the Property is liquidated, a condition that Plaintiff neglects to mention).

Finally, Plaintiff argues that Anthony Garcia, an attorney employed by Hughes Watters Askanase, LLP (“HWA”) violated the Texas Fraudulent Lien statute by signing a Notice of Substitute Trustee’s Sale in June, 2021, because Garcia knew “that the 2013 Foreclosure Order was outside Limitations because Limitations expired on or about August 12, 2017, as the latest.”2

3.                 On these allegations, Plaintiff urges claims for

(1) quiet title based on limitations,

(2) violation of the Texas Fraudulent Lien Statute based on Garcia’s signing and filing of the Notice of Substitute Trustee’s Sale,

and

(3) claims for declarations that

(i) Defendants lack standing to foreclose,

(ii) the 2013 Foreclosure Order is the basis for accrual, limitations began to run on Augus 12, 2013, and ran on August 12, 2017,

and

(iii) Defendants do not have unilateral authority to set aside the 2013 Foreclosure Order by claiming to have rescinded the acceleration of the Note.

4.                 This case was filed on August 2, 2021, in the 212th District Court of Galveston County, Texas.

Defendants answered, counterclaimed for foreclosure,

2 Plaintiffs’ Amended Complaint, Dkt. No. 18, p. 5, ⁋ 14.

and removed the lawsuit to this Court on August 10, 2021.

The Court entered an initial docket control order on November 12, 2021, but has graciously continued those settings twice at the request of the parties, then vacated all docket control deadlines on November 22, 2022.

Ms. Holcomb, formerly a Plaintiff in this matter, passed away unexpectedly on January 22, 2023.3

There is no Docket Control Order in effect and there is currently no trail setting.

On August 23, 2023, the Court conducted a status conference and ordered Defendants to file this motion by September 22, 2023.4

Plaintiff is to file his Response by October 22, 2023, with the understanding that additional time will be freely given.

Should Defendant require additional time to respond, Defendants are not opposed to an extension.

ISSUES TO BE RULED UPON AND STANDARD OF REVIEW

5.                 Defendants ask the Court to enter summary judgment on the following issues:

i.                   Plaintiff’s quiet title action fails as a matter of law. Defendants satisfied Section 16.035(a) of the Texas Civil Practices and Remedies Code by filing suit for foreclosure within four years after a right to foreclose accrued and securing a judgment authorizing non-judicial foreclosure.

Defendants are not required to also satisfy Section 16.035(b) by foreclosing within four years of the judgment. Summary judgment in Defendants’ favor is warranted.

ii.                 The Notice of Substitute Trustee’s Sale was not fraudulent, did not constitute a “lien or claim against real… property” or “an

3 See Dkt. No. 25. Defendants and their counsel extend their sincere condolences to the Holcomb family.

4 Due to unforeseen issues, Defendants anticipate filing this Motion on September 25, 2023, concurrently with a Motion to Extend the Deadline.

interest in real property” and does not give rise to a cause of action under Chapter 12 of the Texas Civil Practice and Remedies Code.

Defendants right to foreclose was not barred by limitations.

Plaintiffs’ fraudulent lien claim fails as a matter of law and summary judgment in favor of Defendants is warranted.

iii.              Deutsche Bank and SLS have standing to foreclose because they can demonstrate that they are the mortgagee and mortgage servicer, respectively, that Deutsche Bank is the last assignee of record, and that a default exists under the terms of the Note and Deed of Trust.

SLS’s duties under the Prospectus and Pooling and Servicing Agreement are irrelevant as Plaintiffs have violated the “due-on-sale” clause in the Deed of Trust and failed to pay property taxes.

Payment of taxes by SLS and/or Deutsche Bank constitute damages that provide standing and vitiate Plaintiff’s argument.

Plaintiff’s challenge to Defendants’ standing to foreclose fails as a matter of law.

iv.               Even if Defendants ability to foreclose were barred by limitations, and it is not, Defendants filed their counterclaim for foreclosure within thirty days of the date on which their answers were required, thereby reviving their right to foreclose under Texas Civil Practice and Remedies Code Section 16.069.

Summary judgment in favor of Defendants as to their counterclaims is warranted.

6.                 Defendants are entitled to summary judgment if they can establish that there is no genuine issue of material fact and that they are entitled to judgment as a matter of law.

Kee v. City of Rowlett, 247 F.3d 206, 210 (5th Cir. 2001).

Movants bear the burden of proving that no genuine issue of material fact exists.

Latimer v. Smithkline & French Lab., 919 F.2d 301, 303 (5th Cir. 1990).

7.                 Once the movants meet their burden, the non-movants must show that summary judgment is not appropriate.

Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).

This burden is not satisfied by expression of metaphysical doubt as to material facts, by conclusory allegations, by unsubstantiated assertions, or by only a scintilla of evidence.

Id.

Instead, the non-moving party must come forward with specific facts showing that there is a genuine issue for trial.

Matsushita Elec. Ind. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).

The non-moving party must show that the evidence is sufficient such that a reasonable jury could return a verdict for the non-movant.

Munoz v. Orr, 200 F.3d 291, 302 (5th Cir. 2000).

UNDISPUTED FACTS

8.                 On October 26, 2004, the Joneses signed a Texas Home Equity Note (the “Note”) payable to First Franklin Financial Corporation (“First Franklin”).

Exhibit A.

The Note’s maturity date is November 1, 2034, and contains an optional acceleration clause. First Franklin indorsed the Note in blank. SLS, as the loan servicer for Deutsche Bank, has possession of the Note.

9.                 The Joneses signed a Texas Home Equity Security Instrument (First Lien) (the “Deed of Trust”) conveying the Property to Matthew Haddock for the benefit of First Franklin.

Exhibit B.

10.             On April 4, 2005, the Joneses conveyed the Property to “Charles E. Jones and Jo Ann M. Jones as Trustees of the Charles E. and Jo Ann M. Jones Revocable Living Trust (the “Living Trust”).” Exhibit C.

11.             Charles Jones died on March 24, 2007.

Jo Ann Jones died on September 2, 2010.5

12.             On September 29, 2010, Janet Brecheen, as successor trustee of the Living Trust, conveyed the Property to herself in her individual capacity.

Exhibit D.

13.             On July 28, 2011, Bank of America, N.A., as mortgage servicer, served a Notice of Default and Intent to Accelerate Letter by certified mail on Charles Jones and on Jo Ann M. Jones, Deceased at the Property address.

See Exhibit E, pp. 42-43.

14.             On August 30, 2011, Bank of America, N.A. accelerated the maturity of the Note.

See Exhibit E, pp. 40-41.

15.             On April 26, 2012, First Franklin assigned the Deed of Trust to Deutsche Bank.

Exhibit F.

16.             On June 4, 2012, Deutsche Bank filed suit against Janet Brecheen in 56th District Court of Galveston County, Texas, as Cause No. 12CV1321, seeking a declaration that Deutsche had a lien against the Property, an order authorizing foreclosure, a declaration of the effect of that foreclosure on Janet Brecheen’s interest in the Property. A true and correct copy of the Plaintiff’s Original Petition filed on June 4, 2012, along with all exhibits is attached hereto as Exhibit E.

5 The deaths of the Joneses are not in contention. See Plaintiff’s First Amended Petition, p. 3, § 10.

On August 9, 2013, the District Court entered summary judgment in favor of Deutsche Bank authorizing foreclosure of Deutsche Bank’s lien.

Exhibit G.

17.             On February 18, 2014, SLS mailed a “Notice of Default and Notice of Intent to Accelerate” letter to the Estate of Jo Ann M. Jones at the Property address.

Exhibit H.

18.             On March 4, 2014, First Franklin assigned its rights under the Deed of Trust to “Deutsche Bank National Trust Company as Trustee for the Certificateholders of the FFMLT Trust 2005-FF2 Mortgage Pass-Through Certificates, Series 2005-FF2.”

The Assignment was recorded on March 11, 2014.

Exhibit I.

This was the second assignment from First Franklin to Deutsche Bank.

19.             On June 16, 2014, SLS, mailed correspondence styled “Recission of Acceleration of Loan Maturity” to “Jo Ann M. Jones, Deceased” and “Charles E. Jones, Deceased” to the Property address by certified mail.

Exhibit J.

The Recission of Acceleration stated “Mortgagee under the Deed of Trust referenced below hereby rescinds the notice of acceleration dated 8/30/11 and all prior notices of acceleration.”

20.             On March 21, 2018, Janet Brecheen conveyed the Property to Plaintiffs by Deed Without Warranty.

Exhibit K.

21.             On July 31, 2018, HWA prepared and mailed correspondence styled “Notice of Maturity/Acceleration of Texas Non-Recourse Loan to Jo Ann Jones and Charles Jones at the property address by regular first-class U.S. Mail and by certified mail, return receipt requested.

Exhibit L.

22.             HWA scheduled the foreclosure sale for November 6, 2018.

A copy of the file-marked Notice of Substitute Trustee’s Sale as filed in the Galveston County real property records is attached hereto as Exhibit M.

23.             On October 22, 2018, Plaintiff served a “Dispute of Right to Foreclose” letter on HWA.

Exhibit N.

Plaintiff stated in the letter that he did not receive “any evidence that either First Franklin Financial Corp. or Deutsche Bank National Trust Company has a debt against the Property allowing foreclosure.”

Naturally, Plaintiff referenced no authority that would impose a duty on SLS or Deutsche Bank to prove anything.

As HWA, SLS, and Deutsche Bank were previously unaware of Plaintiff’s claim to an interest in the Property, the November 6, 2018, foreclosure sale was not conducted and SLS commenced a review of the file.

24.             After reviewing the loan and a new title search, and waiting out the Covid moratorium and the Great Texas Freeze of 2021, HWA scheduled a foreclosure sale for August 3, 2021, and mailed notice of the sale to Jo Ann Maxine Jones, Charles E. Jones, Janet L. Brecheen, the Heirs and Beneficiaries of Jo Ann Maxine Jones, the Heirs and Beneficiaries of Charles E. Jones, Curtis Holcomb, and Donna Holcomb, on June 15, 2021. Exhibit O.

Each letter was addressed to the respective recipient at the Property address and mailed by regular first-class U.S. Mail and by certified mail with return receipt requested.

This lawsuit followed.

SUMMARY OF THE ARGUMENT

25.             Defendants satisfied limitations when Deutsche Bank filed suit and secured a judgment authorizing foreclosure within four years of the accrual of the foreclosure action.

Even if foreclosure were barred by limitations (it is not), the counterclaim savings statute in the Texas Civil Practice and Remedies Code would allow Deutsche Bank and SLS to counterclaim for foreclosure in this proceeding.

Plaintiffs’ fraudulent lien claim fails because the Notice of Substitute Trustee’s Sale on which the claim is premised is not fraudulent and is not a lien or claim against property, was not intended to have the effect of a court document, and was not generated or served with intent to cause injury.

Plaintiffs’ requests for a declaration that Deutsche Bank and SLS lack standing to foreclose cannot stand alone as a cause of action.

Deutsche Bank and SLS can prove that they have standing and are entitled to foreclose as a result of a payment default and the breach of the due-on-sale provision in the Deed of Trust.

The Prospectus provision on which Plaintiff relies addresses only payment of principal and interest under the Note.

Assuming, without conceding, that Plaintiff’s argument has merit, Defendants can still show damages because SLS has paid ad valorem property taxes on the Property since 2013.

The Court must enter summary judgment in favor of Defendants.

ARGUMENT AND AUTHORITY

26.             As set forth below, Plaintiff’s claims fail as a matter of law and summary judgment in favor of Defendants is warranted.

A.               The Statute of Limitations did not run; Plaintiffs’ attempt to quiet title and fraudulent lien claim fail as a matter of law.

27.             The statute of limitations for the foreclosure of a lien on real property runs four years after the day the cause of action for foreclosure accrues.

TEX. CIV. PRAC. & REM. CODE §16.035.

A foreclosure action accrues when the Note reaches its maturity date or when a holder exercises its option to accelerate the Note’s maturity.

Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 566 (Tex. 2001).

Bank of America, N.A. as mortgage servicer for Deutsche Bank, first accelerated the loan on August 30, 2011.

See Exhibit E, pp. 40-41.

The statute of limitations would have run on August 30, 3015.

28.             On June 4, 2012, three years before limitations would run, Deutsche Bank filed a lawsuit seeking a judgment permitting foreclosure or, in the alternate, judicial foreclosure.

Exhibit E.

The 2012 lawsuit resulted in an August 9, 2013, Final Judgment authorizing foreclosure.

Exhibit G.

The entry date of the judgment preceded the limitations date by two years.

29.             Plaintiffs allege that “…using the 2013 Foreclosure Order and the 2012 Lawsuit accelerating and maturing the alleged 2004 N&DT, that the 2013 Foreclosure Order was outside Limitations because Limitations expired on or about August 12, 2017, at the latest.”6

This argument ignores the August 9, 2013, final judgment and its effect on the running of limitations.

30.             Under Section 16.035(a), a “person must bring suit for the recovery of real property under a real property lien or the foreclosure of a real property lien not later than four years after the day the cause of action accrues.”

TEX CIV. PRAC. & REM. CODE § 16.035(a).

Under Section 16.035(b), a “sale of real property under a power of sale in a mortgage or deed of trust that creates a real property lien must be made not later than four years after the day the cause of action accrues.”

TEX. CIV. PRAC. & REM. CODE § 16.035(b).

Plaintiffs’ position assumes that a mortgagee must comply with both sections.

Texas Courts have reached the opposite conclusion.

31.             A mortgagee seeking to avoid the running of limitations must comply with either Section 16.035(a) or Section 16.035(b) of the Civil Practice and Remedies Code, but not both.

Requiring adherence to both sections would render Section 16.035(a) meaningless.

See Maluski v. Rushmore Loan Mgmt. Services, LLC, 2018 Tex. App. LEXIS, at *7 (Tex. App. – Houston [14th Dist.] Oct. 4, 2018, no pet.); Santiago v. Bank of N.Y. Mellon, 2018 U.S. Dist. LEXIS 221901, at *21- 23 (E.D. Tex. Dec. 27, 2018); 7  Pittman v. Seterus, Inc., 2019 U.S. Dist. LEXIS

6 Plaintiff’s Amended Complaint, p. 5, ⁋ 14.

Plaintiff’s limitations argument is premised on the notion that a foreclosure sale must occur within four years of the entry of the judgment authorizing foreclosure.

This is an incorrect statement of Texas law.

7 Judge Nowak’s Report and Recommendation was adopted by Judge Mazzant in Santiago v. Bank of N.Y. Mellon, 2019 U.S.Dist. LEXIS 153578 (E.D. Tex. Sept. 10, 2019).

On appeal, the Fifth Circuit affirmed the summary judgment entered by Judge Mazzant in a one-page opinion, stating “The magistrate judge issued a carefully detailed twenty-page Report and Recommendation, impressively setting forth the law and the facts… The district judge 97796, at *13-15 (N.D. Tex. May 10, 2019);

Bowman v. Cenlar FSB, 2021 U.S. Dist. LEXIS 219812 at *4-6 (N.D. Tex. Nov. 15, 2021)

and Strange v. Deutsche Bank Nat’l Trust Co., 2022 U.S. Dist. LEXIS 53968 at *4-6 (S.D. Tex. Mar. 25, 2022).

32.             In each referenced case, the court concluded that the plain language of Section 16.035(a) does not require that the actual sale occur within the four-year limitations period and that by filing a claim or counterclaim before limitations runs and securing a judgment authorizing non-judicial foreclosure, the mortgagee satisfied the relevant statute of limitations.

In Santiago, Judge Nowak concluded “As the Maluski court makes clear, in reliance on Metcalf, Defendants’ counterclaim for non-judicial foreclosure preserved the validity of the real property lien under section 16.035(a) and therefore Defendants are not time-barred from pursuing foreclosure.

Accordingly, Defendants need not satisfy both sections 16.035(a) and 16.035(b) to preserve the validity of their real property lien.”

Santiago, 2018 U.S. Dist. LEXIS 221901, at *23.

33.                        In Strange, Judge Eskridge granted summary judgment in favor of Deutsche Bank in a strikingly similar case.

Strange v. Deutsche Bank Nat’l Trust Co., 2022 U.S. Dist. LEXIS 53968 (Mar. 25, 2022).

Robert and Lana Strange too wrote a comprehensive fourteen-page Memorandum, filed September 10, 2019, denying the objections and adopting the Report and Recommendations as the court’s findings and conclusions.

We agree with the district court and the magistrate judge.”

Santiago v. Bank of N.Y. Mellon, 802 Fed. Appx. 855, 855 (5th Cir. Apr. 28, 2020).

a home equity loan in 2004 and granted a lien on their home.

Strange, 2022 U.S. Dist. LEXIS 53968, at *1.

Deutsche Bank’s servicer sent a notice of default in July, 2013, and accelerated the loan on February 27, 2014.

Id. at *1-2.

Strange sued Deutsche bank in 2014 and Deutsche Bank counterclaimed for an order authorizing judicial foreclosure and a declaratory judgment stating that Deutsche Bank had met the requirements to proceed with non-judicial foreclosure.

Id. at *2.

In July, 2015, the court granted summary judgment in favor of Deutsche Bank and entered judgment authorizing non-judicial foreclosure.

Id.

Then, in December, 2018, Deutsche Bank filed an expedited foreclosure action under Texas Rule of Civil Procedure 736 which resulted in an order authorizing foreclosure.

Id.

Deutsche Bank then noticed a foreclosure sale for October 5, 2021, which prompted Strange to file suit seeking quiet title by limitations.

Id.

Deutsche Bank moved for summary judgement on Strange’s claims.

Id.

Judge Eskridge noted the Texas statute of limitations governing foreclosure actions and the authority governing accrual of such actions, then began his analysis with

“Importantly, a party seeking foreclosure needn’t comply with both section 16.035(a) and (b).”

Strange, 2022 U.S. Dist. LEXIS 53968, at *5 (citing Maluski, 2018 Tex. App. LEXIS 8092 at *8, and Santiago, 2018 U.S. Dist. LEXIS 221901, at *8)

He further states

“It must instead either bring an action within four years or sell the property within four years. And so long as it brings action within the limitations period, “the plain language of section 16.035(a) does not require that the actual foreclosure occur within the four-year limitations period.”

Id., citing Maluski, 2018 Tex App. LEXIS 8032 at *8.

Noting that Deutsche Bank brought its counterclaim for foreclosure within four years of the acceleration of the loan, Judge Eskridge granted summary judgment for Deutsche Bank on Strange’s quiet title claim.

Strange, 2022 U.S. Dist. LEXIS 53968, at *6.

34.             Under well-established precedent, the August 9, 2013, Final Judgment preserved Deutsche Bank’s right to foreclose the lien. Deutsche Bank satisfied the statute of limitations.

The Court must grant summary judgment in favor of SLS and Deutsche Bank on Plaintiffs’ claims for quiet title and for violation of the fraudulent lien statute.

Each claim is premised on the (incorrect) assertion that limitations bars Defendants’ ability to foreclose.

Each claim, therefore, fails as a matter of law.

B.                The Notice of Substitute Trustee’s Sale signed by Garcia did not violate the fraudulent lien statute.

35.             To prevail on a fraudulent lien claim, Plaintiff must plead and prove that Garcia, acting on behalf of Defendants,

(1) made, presented, or used a document with knowledge that it was a fraudulent lien, claim against, or an interest in real property;

(2) intended the document to be given legal effect,

and

(3) intended to cause Plaintiff financial injury.

Funke v. Deutsche Bank Nat’l Trust Co., 2014 U.S. Dist. LEXIS 104438, at *10 (W.D. Tex. July 31, 2014)

(denying motion to remand).

36.             The text of the statute reads:

(a)  A person may not make, present, or use a document or other record with:

(1)  knowledge that the document or other record is a fraudulent court record or a fraudulent lien or claim against real or personal property or an interest in real or personal property;

(2)  intent that the document or other record be given the same legal effect as a court record or document of a court created by or established under the constitution or laws of this state or the Unites States or another entity listed in Section 37.01, Penal Code, evidencing a valid lien or claim against real or personal property or an interest in real or personal property; and

(3)   intent to cause another person to suffer:

(A)   physical injury;

(B)   financial injury; or

(C)   mental anguish or emotional distress. TEX. CIV. PRAC. & REM. CODE §12.002 (emphasis added).

37.             Plaintiff’s fraudulent lien claim fails for several reasons.

The Notice of Sale was not a fraudulent document because it was perfectly valid; limitations had not run.

Neither Defendants, nor Garcia intended that the Notice of Sale “be given the same legal effect as a court record or document of a court created or established under the constitution or laws of this state of the United States or another entity listed ins Section 37.01, Penal Code….”

Finally, the Notice of Sale was filed to facilitate the foreclosure of Deutsche Bank’s lien.

Courts that have considered the act of foreclosure vis-à-vis financial injury and emotional distress have concluded that the mere act of foreclosing does not give rise to a presumption of any intent.

Apart from such a presumption, there is no evidence of any intent to cause injury on the part of Defendants or Garcia.

1.     The notice of sale was not fraudulent.

38.             In the context of a Section 12.002 claim, “fraudulent” means “a knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment.”

MFG Fin., Inc. v. Hamlin, 2021 Tex. App. LEXIS 4331, at *12 (Tex. App. – Austin June 3, 2021, pet. denied) (collecting cases).

As demonstrated in Section A, supra, the June 4, 2012, Original Petition and the August 9, 2013, Final Judgment satisfied the statute of limitations.

There is no argument that the August 9, 2013, Final Judgment was not a valid judgment entered by the 56th District Court of Galveston County, Texas; that it is not a final judgment; or that the 56th District Court is not a court of competent jurisdiction.

39.             The Texas Constitution provides that a homestead is protected from forced sale, save for limited exceptions set out in the Constitute.

A Texas Home Equity loan is one such exception.

A home equity lien may be foreclose upon only by a court order.

Tex. Const. Art. XVI, §50(a)(6)(A) and (D).

“[A] party seeking to foreclose a home equity loan has three options:

file (1) a suit seeking judicial foreclosure;

(2) a suit or counterclaim seeking a final judgment which includes an order allowing foreclosure under the security instrument and Tex. Prop. Code §51.002;

or (3) an application under Rule 736 for an order allowing foreclosure.”

Huston v. U.S. Bank, N.A., 359 S.W.3d 679, 682 (Tex. App. – Houston [1st Dist.] 2011, no pet.);

Hays v. Freedom Fin., 2021 U.S. Dist. LEXIS 231594, at *6 (S.D. Tex. Nov. 10, 202) report and recommendation adopted at 2021 U.S. Dist. LEXIS 230725 (S.D. Tex. Dec. 2, 2021).

Deutsche Bank chose to file a suit seeking a judgment authorizing foreclosure under the security instrument.

40.             Plaintiff acknowledges:

i.       That the “Foreclosure Order” was entered Auguste 12, 2013.8

ii.     That Defendants attempted to use the 2013 “Foreclosure Order” to foreclose on November 6, 2018.9

iii.  That after Donna Holcomb “notified Defendants that they did not have the right to foreclose” Defendants passed the November 6, 2018, sale and filed an application under Texas Rule of Civil Procedure 736, as Cause NO. 20-CV-1723 in Galveston County District Court.10

iv.   That Defendants non-suited the 2020 Rule 736 proceeding and Garcia represented to Donna Holcomb that Defendants would proceed to foreclosure under the 2013 “Order.”11

41.             The trouble with Plaintiff’s analysis is that the 2013 “Foreclosure Order” was not an order, it was a final judgment authorizing foreclosure under the Deed of Trust and Chapter 51 of the Texas Property Code.

Plaintiff argues that “Garcia… knew when he signed the Notice of Substitute Trustee’s Sale and filed it with the GCRPR on June 17, 2021, using the 2013 Foreclosure Order and the 2012 Lawsuit accelerating and maturing the alleged 2004 N&DT, that the 2013 Foreclosure Order was outside Limitations because limitations expired on or about

8 Plaintiff’s Amended Complaint, p. 4, § 10.

9 Id.

10 Plaintiff’s Amended Complaint, p. 4, § 11.

11 Id.

August 12, 2017, at the latest.”12

A final judgment does not start the running of limitations; an acceleration or maturity of a Note does.

Wolf, 44 S.W.3d at 566.

Deutsche Bank’s filing of the lawsuit satisfied limitations.

There is no requirement that a lien be foreclosed within four years of the entry of a judgment authorizing foreclosure.

Strange, 2022 U.S. Dist. LEXIS 53968 at *5.

Accordingly, Garcia did not know and could not have known that limitations had run when he signed and filed the June 15, 2021, Notice of Acceleration and Sale, because the statute of limitations had not run.

42.             The Civil Practice and Remedies Code does not define “fraudulent.”

Courts applying the statute have applied a standard consistent with the definition contained in Black’s Law Dictionary:

“Conduct involving bad faith, dishonesty, a lack of integrity, or moral turpitude.”

Fraudulent Act, Black’s Law Dictionary (11th ed. 2019);

see also Nationstar Mort. LLC v. Barefoot, 654 S.W.3d 440, 445-46 (Tex. App. – Houston [14th Dist.] 2021, pet. denied)

(“a lien is fraudulent if created in bad faith or with dishonesty, a lack of integrity, or moral turpitude.”);

Centurian Planning Corp., Inc. v. Seabrook Venture II, 176 S.W.3d 498, 507 (Tex. App. – Houston [1st Dist.] 2004, no pet.);

In re Cowin, 492 B.R. 858, 900 (Bankr. S.D. Tex. 2013)

(surveying Texas case law and concluding that liens were “fraudulent” when, among other things, they ‘were created with a fraudulent purpose”).

12 Plaintiff’s Amended Complaint, p. 5, § 14.

43.             Deutsche Bank holds a lien on the Property in the form of a Texas Home Equity Security Instrument recorded as Document No. GAC 2004074053 in the Galveston County Real Property Records on November 5, 2004.

Exhibit B.

On August 9, 2013, the 56th District Court of Galveston County entered a final judgment stating

“On or about October 26, 2004, Charles E. Jones and Jo Ann M. Jones executed a Texas Home Equity Note and Texas Home Equity Security Instrument on the Property.”

Exhibit G.

Janet Brecheen filed an answer in Cause No. 12-CV-1321.

Exhibit P.

The judgment entered by the 56th District Court was not a default judgment, but a summary judgment entered at the urging of Deutsche Bank.

Exhibit G.

Plaintiff is, of course, free to aver in his pleadings that

“On or about October 26, 2004, SLS and Deutsche allege that Charles Jones and Jo Ann Jones obtained a Texas home equity loan through a note and deed of trust from First Franklin Financial Corporation.”13

Plaintiff’s unwillingness to directly acknowledge the Note and Deed of Trust does not alter the fact that their existence and validity was litigated and finally determined by the 56th District Court in 2012 and 2013.

Collateral estoppel bars Plaintiff from now challenging the existence or validity of the Note and Deed of Trust.

44.             Collateral estoppel, or issue preclusion, applies when

(1) the issue at stake is identical to the one involved in a prior action,

(2) the issue was actually

13 Plaintiff’s Amended Complaint, p. 3, § 10.

litigated in the prior action, and (3) the determination of the issue in the prior action must have been a part of the judgment in the earlier action.

Southmark Corp. v. Coopers & Lybrand (In re Southmark Corp.), 163 F.3d 925, 932 (5th Cir. 1999).

Generally, Plaintiff would not be bound by a judgment in a suit to which he was not a party.

Collateral estoppel (and res judicata) create an exception to this rule by forbidding a second suit arising out of the same subject matter of an earlier suit by those in privity with the parties to the original suit.

Texas Water Rights Cmm’n. v. Crow Iron Works, 582 S.W.2d 768, 771-72 (Tex. 1979).

The purpose of the exception is to make sure that a defendant (like Deutsche Bank) “is not twice vexed for the same acts, and to achieve judicial economy by precluding those who have had a fair trial from relitigating claims.”

Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 653 (Tex. 1996) citing Benson v. Wanda petroleum Co., 468 S.W.2d 361, 363 (Tx. 1971).

Privity can exist in three ways;

(1) a party can control an action even though it is not a party;

(2) the party’s interests can be represented by a party to the action;

or

(3) the party can be a successor in interest to a party to the action, deriving its claims through the party to the prior action.

Getty Oil C. v. Insurance Co. of N. Am., 845 S.W.2d 794, 800 (Tex. 1992); Amstadt, 919 S.W.2d at 653.

45.             Plaintiff’s claim to any interest in the Property arises from the deed from Janet Brecheen.

Exhibit K.

Brecheen was a party to the 2012 lawsuit, appeared and answered in that lawsuit, and had every opportunity to litigate the legitimacy of the Note and Deed of Trust.

The 56th District Court considered the summary judgment record, concluded that there were no fact issues as to the legitimacy of the Note and Deed of Trust, and based on the Note and Deed of Trust, entered judgment authorizing foreclosure.

As plaintiff is in privity with Breechen, Plaintiff cannot challenge the Note and Deed of Trust in this lawsuit.

See Cain v. Balcom, 109 S.W.2d 1044, 1045-46 (Tex. 1037).

46.             Plaintiff cannot challenge the validity of the Note and Deed of Trust.

Plaintiff has not challenged the validity of the August 9, 2013, Judgment.

That judgment satisfied the statute of limitations. Garcia’s reliance on the judgment in signing and filing the June 15, 2021, Notice of Sale did not constitute “conduct involving bad faith, dishonesty, a lack of integrity, or moral turpitude.”

There is simply no set of circumstances under which Garcia’s actions can be found to be fraudulent and violative of Chapter 12.

The Court must grant summary judgment in favor of Defendants on Plaintiff’s fraudulent lien claim.

2.     A Notice of Sale is not a court record and is not meant to be a court record.

47.             The second statutory element is not met.

The fraudulent lien statute prohibits a person from making, presenting, or using a document with

(1) knowledge that the document is a fraudulent court record, lien, or claim against real or personal property;

(2) intent that the document be given the same legal effect as a court record or document of a court created under the laws or constitution of Texas or the United

States, another state, a foreign country or international convention, an Indian tribe, or any U.S. territory or protectorate;

and

(3) intent to cause physical or financial injury, or mental anguish or emotional distress.

Tex. Civ. Prac. & Rem. Code §12.002.

“Court record” means “a decree, judgment, order, subpoena, warrant, minutes, or other document issued by a court…”

Tex. Civ. Prac. & Rem. Code §12.001(3) (incorporating Tex. Penal Code §37.01(1)).

48.             When construing a code “words and phrases shall be read in context and construed according to the rules of grammar and common usage.”

Tex. Gov’t Code §311.011(a).

The Civil Practice and Remedies Code prohibits making, presenting or using a document or other record with the “intent that the document or other record be given the same legal effect as a court record or document of a court created by or established under the constitution or laws of this state of the United States or another entity listed in Section 37.01, Penal Code, evidencing a valid claim against real or personal property or an interest in real or personal property.”

Tex. Civ. Prac. & Rem. Code §12.002(a)(2).

49.             Courts that have considered claims under Section 12.002 have largely limited their review to whether that section is limited to documents creating a fraudulent lien or claim and whether recorded assignments of security interests fall within the statute.

See e.g. Ray v. Ocwen Loan Servicing, LLC, 2014 U.S. Dist. LEXIS 202271, at *11-12 (W.D. Tex. Oct. 10, 2014) (collecting cases, recognizing split of authority, and declining to resolve the split of authority).

Defendants are unable to locate a single decision that addresses what constitutes a “court record or document of a court” for the purposes of Section 12.002.

What is certain is that in common usage, “court record” or “document of a court” does not encompass a notice of substitute trustee’s sale that does not originate from a court, is not filed with a court, and does not require action by a court.

Defendants are not aware of any instance and have not found any reference to a court originating, issuing, or serving a notice of trustee’s sale.

Rather, notice of a substitute trustee’s sale is customarily prepared and served by the mortgage servicer, its agent or attorney.

See Tex. Prop. Code §51.002(d) (servicer shall serve debtor with notice of default); §51.002(b)(3) (notice of sale to be served by certified mail on each debtor who is obligated to pay the debt according to the servicer’s records).

While Texas courts have not definitively decided whether a notice of sale constitutes a claim against real property, no authority suggests that a notice of sale is a court document.

Because a notice of sale is not a court document, Garcia could not possibly have filed the notice of sale with the “intent that the document be given the same legal effect as a court record or document of a court.”

Plaintiff’s fraudulent lien claim fails on this point alone and the Court should grant summary judgment on this claim in favor of defendants.

3.     Garcia’s actions were not undertaken with intent to cause injury.

50.             There is no showing of intent to cause injury and the Court must not impute one.

Plaintiff alleges that Garcia signed and filed a notice of sale in reliance on a 2013 “Foreclosure Order” that he knew was barred by limitations.14

Plaintiff further alleges that Garcia and Defendants knew that foreclosure was time-barred and that the notice of sale was a fraudulent lien or claim against Plaintiff’s homestead “with the intent to defraud causing financial injury, mental anguish and/or emotional distress.”15

Texas courts required a showing that the person filing a fraudulent document was aware of the harmful effects of his actions.

Vanderbilt Mortg. & Fin., Inc. v. Flores, 735 F. Supp. 2d 679, 689 (S.D. Tex. 2010) citing Taylor Elec. Servs., Inc. v. Armstrong Elec. Supply Co., 167 S.W.3d 522, 531-32 (Tex. App. – Ft. Worth 2005).

Plaintiff has failed to plead any facts that would demonstrate an intent to cause injury.

Plaintiff has, in essence, accused Garcia of failing to recognize a limitations bar, which may be negligence, but is not demonstrative of an intent to cause injury.

51.             Even if the Court assumes that Garcia’s Notice of Sale is a fraudulent court record that creates or asserts an interest in real property, Plaintiff’s claim fails as a matter of law because Section 12.002 requires a showing that the Defendants

14 Plaintiff’s Amended Complaint, p. 5, § 14.

15 Id.

(through Garcia) made, presented, or used the Notice of Sale with the intent to cause Plaintiff to suffer physical injury, financial injury, or mental anguish or emotional distress.

Stevens v. Deutsche Bank Nat’l Trust Co., 570 Fes. Appx. 403, 403 (5th Cir. 2014).

52.             In the Amended Complaint, Plaintiff makes two statements regarding Defendants’ intent:

“Since the lien and power of sale under which the 2013 Order of Foreclosure was issued became void after August 12, 2017, Garcia and Defendants were aware that the Notice of Substitute Trustee’s Sale was a fraudulent lien or fraudulent claim against Plaintiffs’ Homestead with the intent to defraud causing financial injury, mental anguish and/or emotional distress.”16

Later, Plaintiff contends, “Defendant violated Tex. Civ. Prac, & Rem. Code §12.02(a) by making and presenting the Notice of Substitute Trustee’s sale with the intent to harm Plaintiffs and defraud them.”17

53.             Plaintiff makes no attempt to elaborate on how Garcia’s actions injured him.

Standing alone, Plaintiff’s statements are conclusory and insufficient to establish a plausible claim to relief.

See Livingston v. Wells Fargo Bank, N.A., 2014U.S. Dist. LEXIS 128874 at *17 (E.D. Tex. Aug. 20, 2024) citing Bell Atlantic Corp., 550 U.S. at 544.

Like the plaintiff in Livingston, Plaintiff has not alleged that

16 Amended Complaint, p. 5, § 14.

17 Amended Complaint, p. 11, § 26.

he made payments, that he made payments in excess of the amounts required by the Note, or that in the absence of payments, the Property is subject to being foreclosed upon by parties holding conflicting claims.

The foreclosure is not time barred, and Defendants are entitled to enforce their lien.

It is clear that Garcia filed the Notice of Sale for the purpose of complying with the Texas Property Code and to facilitate the foreclosure sale.

In reviewing a Rule 12(b)(6) dismissal of a fraudulent lien claim based on an assignment, the Fifth Circuit observed ‘[Defendant’s] use of the assignment for business purposes hardly equate to an argument that it intended to inflict financially injury or mental anguish.

[Plaintiffs] have not alleged any facts showing that their property would not be subject to foreclosure, even absent the assignment of the deed of trust to [Defendant].

Therefore, they have failed to state a claim under Section 12.002.”

Golden v. Wells Fargo Bank, N.A., 557 Fed. Appx. 323, 327 (5th Cir. 2014);

accord Stevens v. Deutsche Bank Nat’l Trust Co., 570 Fed. Appx. 402, 403 (5th Cir. 2014).

Here, Plaintiff fails to allege facts that demonstrate an intent on the part of Defendants or Garcia to cause injury beyond the natural consequences of a lien foreclosure.

Rather, Plaintiff urges an incorrect legal conclusion (that foreclosure is time barred) as a basis for his assertion that the filing of the Notice of Sale was done with the intent to cause injury.

Summary judgment in favor of Defendants on this claim is warranted.

C.               Defendants have standing to foreclose.

1.     Deutsche Bank has an interest in the Deed of Trust; SLS is authorized to foreclose.

54.             On April 26, 2022, First Franklin Financial Corp. executed an Assignment of Deed of Trust conveying “all rights accrued and to secure under said Loan Agreement (defined as one certain loan agreement evidenced by a promissory note and security instrument or deed of trust dated 10/26/2004”)” to Deutsche Bank.

Exhibit F.

The Assignment was recorded on May 9, 2012.  Id.

First Franklin executed a second assignment on March 4, 2014, conveying “the described deed of trust with all interest, all liens, any right due r to become due thereon” to Deutsche Bank.

Exhibit I.

The second assignment was recorded on March 11, 2014.

55.             Section 51.0001 of the Texas Property Code defines “Mortgagee” as 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).

As the last assignee of record, Deutsche Bank is the last assignee of record and is a “Mortgagee” as that term is defined in the Property Code.

See Jackson v. Wells Fargo N.A., 2020 U.S. Dist. LEXIS 233053 at *14 (S.D. Tex. Dec. 11, 2020) (Rosenthal, J.);

Gilliam v. JPMorgan Chase Bank, N.A., 2019 U.S. Dist. LEXIS 108086 at *11 (S.D. Tex. June 27, 2019) (Lake, J.).

Deutsche Bank has standing to conduct a non-judicial foreclosure.

There is no evidence to the contrary.

56.             SLS is the mortgage servicer for Deutsche Bank.18 Exhibits O and I.

Section 51.00025 of the Texas Property Code authorizes a “Mortgage Servicer” for conduct a non-judicial foreclosure sale.

TEX. PROP. CODE §51.0025.

A “Mortgage Servicer” means the last person to whom a mortgagor has been instructed by the current mortgagee to send payment for the debt secured by a security instrument.”

TEX. PROP. CODE § 51.001(3).

As the mortgage servicer, SLS has standing to conduct a non-judicial foreclosure sale.

Martins v. BAC Home Loans Servicing, LP, 722 F.3d 249, 254-55 (5th Cir. 2013);

Bowman v. CitiMortgage, Inc., 768 Fed. Appx. 220, 224 (5ht Cir. 2019).

There is no evidence to the contrary.

2.     Defendants have concrete and particularized and actual, non-conjectural injury.

57.             Plaintiff argues that the certificate holders of the First Franklin Mortgage loan Trust 2005-FF2 are the real parties in interests because they are the actual beneficiaries of the Deed of Trust.19

He further alleges that the certificate holders have not sustained injury because the mortgage servicer is obligated to make payments of principal and interest to the trust if the borrower does not remit payments.

On these premises, Plaintiff contends that no harm has been incurred and that Deutsche Bank and SLS therefore lack standing.

While earning points for creativity, this argument is absurd.

18 Amended Complaint, p. 2, § 4.

19 Amended Complaint, p. 7, § 18.

58.             Deutsche Bank and SLS are the real parties in interest, not the certificateholders.

The express language of the Deed of Trust states “Lender is First Franklin Financial Corporation… Lender included any holder of the Note who is entitled to receive payments under the Note.

Lender is the beneficiary under this Security Instrument.”  Exhibit B, p. 1, §  C.

It further states, “This Security Instrument secures the 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.”

Exhibit B, p. 2.

All rights under the Deed of Trust were assigned by First Franklin to Deutsche Bank.

Exhibits F, and I.

The Deed of Trust and the Assignments do not reference the certificate holders.

Plaintiff asks the Court to ignore the plain language of the Deed of Trust, look to the securitization documents, and posit that the trust’s certificate holders are the real party in interest.

There is no basis in law for the Court to do so.

See FED. R. CIV. P. 17(a)(1)(E).

(“An action must be prosecuted in the name of the real party in interest. The following may sue in their own names without joining the person for whose benefit the action is brought: (E) a trustee of an express trust.); Navarro Sav. Ass’n v. Lee, 446 U.S. 458, 465 (1980)

(“… 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.”)

Deutsche Bank is the beneficiary of the Deed of Trust and the real party in interest.

59.             SLS can show injury.

The Deed of Trust states:

Borrower shall pay all taxes, assessments, charges, fines, and impositions attributable to the Property which can attain priority over this Security Instrument…

Exhibit B, p. 4, §4.

It also states:

If all or any part of the Property or any Interest in the Property is sold or transferred… without lender’s prior written consent, Lender may require immediate payment in full of all sums secured by this Security Instrument…

If Lender exercise this option, Lender shall give Borrower notice of acceleration.

The notice shall provide a period of not less than 30 days from the date the notice is given in accordance with Section 14 within which Borrower must pay all sums secured by this Security Instrument.

If Borrower fails to pay these sums prior to the expiration of this period, Lender may invoke any remedies permitted by this Security Instrument without further notice or demand on Borrower.

Exhibit B, p. 8, §17.

60.             Borrowers, and subsequently Plaintiff, breached covenants under the Deed of Trust by failing to pay taxes.

Between 2013 and 2022, SLS paid $14,272.67 in ad valorem property taxes to Galveston County.

Exhibit Q.

Liens for ad valorem property taxes automatically arise on January 1 of each year.

TEX. TAX CODE §32.01(a).

Liens for ad valorem property taxes take priority over home equity security interests.

TEX. TAX CODE §32.05(b)(1).

As demonstrated by the tax receipt records of Galveston County, SLS paid the ad valorem property taxes assessed on the Property for the years 2013 through 2022.

Plaintiff’s failure to pay the property taxes, standing alone, constitutes a breach of the Deed of Trust and is a “concrete and particularized and actual or imminent, not conjectural or hypothetical” injury that is “traceable to the alleged party’s challenged action” (in this case the failure by Plaintiff to pay anything toward the Note or the taxes), that can be redressed by a favorable decision.

Data Foundry, Inc. v. City of Austin, 620 S.W.3d 692, 696 (Tex. 2021). An injury is “particularized” for standing purposes if it “affect[s] the plaintiff in a personal and individual way.”

Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1548 (2016).

Failure to pay ad valorem property taxes is a material breach of the Deed of Trust, giving rise to a right to foreclose.

See Bartolowits v. Wells Fargo Bank, N.A, 2016 U.S. Dist. LEXIS 48186 at *12 (N.D. Tex. April 11, 2016)

(“… the court holds that a reasonable jury could only find that [plaintiff’s] failure to pay taxes on his secured property was a material breach of the deed of trust.)

This constitutes a default under the Deed of Trust and give rise to Defendants’ right to foreclose, whether or not SLS pays principal and interest to the certificate holders.

61.             Additionally, the Joneses and Plaintiff (and Brechen) breached the due-on-sale clause in the Deed of Trust when the Jones conveyed the Property into the trust, when Brechen conveyed the Property to herself, and when Brechen conveyed the Property to Plaintiff.

Due-on-sale clauses are enforceable under Texas law.

Sonny Arnold, Inc. v. Sentry Sav. Assoc., 633 S.W.2d 811, 816 (Tex. 1982).

Like SLS’s payment of taxes on the Property for ten years, Plaintiff’s violation of the due-on-sale clause constitutes a breach of the Deed of Trust that gives rise to injury apart from the certificate holder’s receipt of payments from SLS.

Like Plaintiff’s failure to pay taxes, this breach vitiates his standing argument.

62.             Finally, Plaintiff’s standing argument ignores the plain language of the (excerpt of the) Prospectus Supplement attached to his own pleadings.

The Prospectus does, in fact, require servicers to pay principal and interest payments into the trust on each Servicer Remittance Date for each mortgage it services.

The Prospectus also states:

The applicable servicer will be required to foreclose upon, or otherwise comparably convert to ownership, mortgage properties securing such of the mortgage loans as come into default when, in the opinion of that servicer, no satisfactory arrangements can be made for the collection of delinquent payments.20

63.             The very document on which Plaintiff’s argument is based contemplates foreclosure by the servicer of loans that fall into default despite the servicer’s duty to tender payments of principal and interest.

The prospectus goes on to state “Each servicer may recover P&I Advances and servicing advances to the extent permitted by the pooling and serving agreement. This reimbursement may come from late collections on the related mortgage loan, including Liquidation Proceeds….”21

Plaintiff is not a party to the pooling and servicing agreement.

20 Original Petition, Exhibit 3, p. 2, third paragraph.

21 Original Petition, Exhibit 3, p. 3.

Borrowers were not parties to the pooling and servicing agreement.

The contract that governs the rights and obligations running between Plaintiff and Defendants it the Deed of Trust, and to a more limited extent, the Note.

To the extent SLS is obligated to pay principal and interest out of its own funds under the pooling and servicing agreement, SLS incurs harm: the loss of those funds.

To the extent SLS pays principal and interest from its own funds to the trust, SLS is entitled to reimbursement upon collection of payments or upon foreclosure of the Property.

Assuming everything in Plaintiff’s argument is correct, the argument still fails because it ignores the financial injury that non-payment of the Note imposes on SLS.

The Court must enter summary judgment in favor of Defendants on Plaintiff’s claim for declaratory judgment.

3.     Plaintiff’s declaratory judgment action cannot stand alone.

64.             Plaintiff’s declaratory judgment action seeks three declarations:

(1) that Defendants lack standing,

(2) that the 2013 judgment started the running of limitations,

and

(3) that Defendants cannot unilaterally set aside the 2013 judgment by rescinding acceleration of the Note.

The first two requests fail as a matter of law as set forth above.

Defendants agree with the third request.

Defendants can absolutely unilaterally abandon the acceleration of the loan, and did on June 16, 2014.

Exhibit J. TEX. CIV. PRAC. & REM. CODE § 16.038;

Boren v. U.S. National Bank, 807 F.3d 99, 105 (5th Cir. 2015).

Defendants re-accelerated the loan on July 31 2018, and June 15, 2021.

Exhibits I and O.

Neither the rescission nor either subsequent notice of acceleration had any effect on the finality of the 2013 final judgment authorizing foreclosure.

The parties agree that the 2013 judgment remains a valid, final judgment of a court of competent jurisdiction.

The sole issue, then, is whether the entry of that judgment started the running of limitations, as urged by Plaintiff.

As demonstrated above, it did not.

65.             Plaintiff’s claims for quiet title and fraudulent lien fail because limitations has not run. A declaratory judgment claim cannot stand alone.

The Texas Uniform Declaratory Judgments Act is merely a procedural device; it does not create any substantive rights or cause of action.

Sid Richardson Carbon & Gasoline Co. v. Interenergy Res., Ltd., 99 F..3d 746, 752 n.3 (5th Cir. 1996).

When all underlying substantive claims fail, a claim for declaratory judgment cannot survive.

Lopez v. Bank of Am., N.A., 2018 U.S. Dist. LEXIS 173070, at *16-17 (S.D. Tex. July 30, 2018);

Hill v. PHH Mortg. Corp., 2020 U.S. Dist. LEXIS 265877 at *6 (S.D. Tex. April 23, 2020).

For this reason, the Court should grand summary judgment on Plaintiff’s claim for declaratory judgment in favor or Defendants, or in the alternate, dismiss the claim with prejudice.

D.               Even if Defendants’ right to foreclose were barred by limitations the Counterclaim Savings Statute applies.

66.             Even assuming arguendo that limitations ran on Defendants’ right to foreclose, Plaintiff’s lawsuit seeks more than mere declaratory relief and thus triggers Texas’ counterclaim savings statute, TEX. CIV. PRAC. & REM. CODE § 16.069.

The statute provides:

(a)    If a counterclaim or cross claim arises out of the same transaction or occurrence that is the basis of an action, a party to the action may file the counterclaim or cross claim even though as a separate action it would be barred by limitations on the date the party’s answer is required.

(b)   The counterclaim or cross claim must be filed not later than the 30th day after the date on which the party’s answer is required.”

TEX. CIV. PRAC. & REM. CODE §16.069.

67.             “If a counterclaim or cross claim arises out of the same transaction or occurrence that is the basis of an action, a party to the action may file the counterclaim or cross claim even though as a separate action it would be barred by limitation.”

Tex. Civ. Prac. & Rem. Code §16.069(a).

“The counterclaim or cross claim must be filed not later than the 30th day after the date on which the party’s answer is required.”

Tex. Civ. Prac. & Rem. Code §16.069(b).

“Where the requirements of the statute are met, section 16.069 allows those who are already parties to the action to assert claims against one another that would otherwise be time-barred.

J.M.K. 6, Inc. v. Gregg & Gregg, P.C., 192 S.W.3d 189, 199 (Tex. App. – Houston [14th Dist.] 2006, no pet.).

“The statute is a savings clause, ‘intended to prevent a plaintiff from waiting until an adversary’s valid claim arising from the same transaction was barred by limitations before asserting his own claim.”

Pitts & Collard, L.L.P. v. Schechter, 369 S.W.3d 301, 323-24 (Tex.App. – Houston [1st Dist.] 2011, no pet.) (quoting Hobbs Trailers v. J.T. Arnett Grain Co., 560 S.W.2d 85, 88 (Tex. 1997).

68.             In this case, citation was issued as to both Defendants on August 3, 2021.22

Defendants filed their Answer and Counterclaim on August 6, 2021.23

It is undisputed that Deutsche Bank and SLS filed their counterclaims within thirty days of when their original answer was due. Nor is there any dispute that Defendants’ counterclaims “arise [] out of the same transaction or occurrence that is the basis of [Plaintiffs’] action” for declaratory judgment:

Defendants’ efforts to enforce the Deed of Trust and Plaintiffs’ failure to redeem the property upon “purchasing” it from Janet Brecheen. Tex. Civ. Prac. & Rem. Code §16.0069(a);

Rodriguez v. CitiMortgage, Inc., 2015 U.S. Dist. LEXIS 181808, at *4 (W.D. Tex. Feb. 4, 2015)

(holding that a lender’s claims for breach of contract and judicial foreclosure arose from the same transaction as a borrower’s quiet title action);

Cross v. Bank of N.Y. Mellon, 2021 U.S. Dist. LEXIS 117033, at *24-2 (S.D. Tex. June 23, 2021) (same).

Because the conditions set by the statute are met, Deutsche Bank and SLS are free to pursue claims for judicial foreclosure.

69.             Texas courts have found that if a plaintiff files a lawsuit merely seeking a declaration that a defendants’ potential claims are barred by the statute limitations

22 See Docket No. 1, Exhibit 4.

23 Id.

as a matter of law then TEX. CIV. PRAC. & REM. CODE § 16.069 does not apply.

See, e.g., Havins v. CitiMortgage, Inc., 2016 U.S. Dist. LEXIS 155982, at *3 (N.D. Tex. Feb. 17, 2016)

(“Texas courts have interpreted § 16.069 to revive time-barred claims when a plaintiff seeks affirmative relief, but not to those claims only seeking a declaratory judgment.”);

Murphree v. Godshall, 2014 U.S. Dist. LEXIS 134718, *5 (S.D. Tex. Sept. 24, 2014)

(“if a plaintiff files an action seeking only a declaration that the defendant would be barred by a statute of limitations if it chose to bring a particular cause of action, the defendant could not use § 16.069 to then bring the otherwise time-barred cause of action.”);

Holman Street Baptist Church v. Jefferson, 317 S.W.3d 540, 545-46 (Tex. App. — Houston [14th Dist.] 2010, pet. denied)

(“Courts have interpreted section 16.069 as permitting a party’s otherwise time- barred counterclaims or cross claims only when the opposing party has sought ‘affirmative relief,’ rather than just a declaration on a dispute between the parties.”).

70.             However, when a plaintiff seeks any relief other than mere declaratory relief, Texas courts have found that TEX. CIV. PRAC. & REM. CODE § 16.069 operates to revive time barred claims.

Cross v. Bank of N.Y. Mellon, No. 2021 U.S. Dist. LEXIS 117033, at *25-27 (S.D. Tex. 2021).

This is true even if the additional relief is merely a claim for attorney’s fees.

Hacienda Records, LP v. Ramos, 2015 U.S. Dist. LEXIS 147855, at *4 (S.D. Tex. Nov. 2, 2015), aff’d sub nom. Hacienda Records, LP v. Ramos, 718 F. App’x 223 (5th Cir. 2018).

71.             In Havins a plaintiff sought a declaratory judgment that the defendants could not foreclose on her home because the limitations period had run. 2016 U.S. Dist. LEXIS 155982, at *1.

The plaintiff also sought damages, forgiveness of debt, attorney’s fees, and costs. Id. at 3.

The defendants counterclaimed, arguing that TEX. CIV. PRAC. & REM. CODE § 16.069 preserved their otherwise time-barred claims. Id.

The plaintiff responded that all her claims for affirmative relief were “subsumed” into her request for declaratory judgment, and therefore she was not seeking the kind of affirmative relief that would trigger application of TEX. CIV. PRAC. & REM. CODE § 16.069. Id.

The court held that “[e]ven if these claims are ‘subsumed’ into the declaratory judgment, as Plaintiff argues, she seeks attorney’s fees in connection with her request for declaratory relief

Seeking attorney’s fees is affirmative relief to which § 16.069 applies.” Id.

72.             Judge Lake reached the same conclusion in Cross.

Cross sued seeking a judgment for quiet title, a declaration that limitations had run on BONY’s right to foreclose, and an award of attorney’s fees.

Cross v. Bank of New York Mellon, 2021 U.S. Dist. LEXIS 117033, *7 (S.D. Tex. June 23, 2021) aff’d 2022 U.S. App. LEXIS 9550 (5th Cir. April 8, 2022).

Judge Lake noted that there was no dispute that BONY filed its counterclaims within thirty days of when its answer was due and that the counterclaim arose from the same transaction or occurrence as Cross’ quiet title action.

Cross, 2021 U.S. Dist. LEXIS 117033, *24-25.

Then, analyzing whether the savings statute was applicable, Judge Lake looked to Havins, Holman Street Baptists Church, Murphree, and Hacienda Records to conclude “[b]ecause Plaintiff is seeking attorney’s fees in connection with her request for declaratory relief, §16.069 applies.

The court concludes that §16.069 therefore saves BONYM’s counterclaims from being barred by limitations.”

Cross, 2021 U.S. Dist. LEXIS 117033, *27.

73.             Like Cross, Plaintiff asserted claims for quiet title, fraudulent lien, declaratory judgment and an award of attorney’s fees in connection with those claims.

TEX. CIV. PRAC. & REM. CODE § 16.069 applies to Defendants’ counterclaim for judicial foreclosure.

BONY’s counterclaim is therefore not barred by the statute of limitations.

E.                Defendants are entitled to Summary Judgment on their counterclaim.

74.             A claim for judicial foreclosure consists of

(1) the existence of a financial obligation secured by real property,

(2) a default on the loan,

and

(3) that the property subject to the lien is the same property the party seeks to foreclose.

Schultz v. Deutsche Bank Nat’l Trust Co., 2023 U.S. Dist. LEXIS 121113, 11 (S.D. Tex. May 1, 2023) (citing Montoya v. AmCap Mortg. Ltd., 2022 Tex. App. LEXIS 5781, at *7 (Tex. Ap. – Houston [1st Dist.] Aug. 11, 2022, pet. denied).

Defendants can conclusively establish each element of this claim.

75.             An obligation secured by real property exists. This is not in dispute.

The Note and Deed of Trust constitute the obligation and the security. Exhibits A and B.

The lien that secures the obligation is the same lien that Plaintiff seeks to avoid satisfying by filing this lawsuit.

76.             There is no dispute that the Joneses’ loan is in default. See Exhibits G, H, L, and O.

The summary judgment evidence demonstrates that the loan is contractually due for the November 1, 2010, payment and all subsequent payments.

Exhibit H. Plaintiff does not allege that he made payments, or that any other person or entity made payments to SLS or Deutsche Bank.

There is no dispute that payments under the Note are in default.

77.             The Property that Plaintiff seeks to own free and clear of Deutsche Bank’s lien is the same Property that Defendants seek to foreclose.

The Property Plaintiff acquired is described as Lot One (1) in Block Nine (9) of The Landing, Section One (1), a Subdivision in Galveston County, Texas According to the map or plat thereof recorded in Volume 15, page 159 in the office to the county clerk of Galveston County, Texas and known a 901 Landing Blvd., League City, Texas 77573. Exhibits B and O.

The Property is also identified in Plaintiff’s Amended Petition.

The Property encumbered by Deutsche Bank’s Deed of Trust is described in identical terms and known by the same address. Exhibits B and O.

There can be no doubt that Defendants are seeking to foreclose on the same Property in which Plaintiff claims an interest.

78.             The summary judgment evidence conclusively establishes the existence of the debt and that the debt is secured against the Property, the existence of a default, and that the Property that Defendants seek to foreclose is the same Property that is subject to the lien.

Consequently, Defendants are entitled to a judgment for foreclosure.

CONCLUSION

Plaintiff’s entire case is premised on the assertion that the statute of limitations expired with respect to Defendants’ right to foreclose.

However, the evidence and Texas law conclusively establish that the statute of limitations did not expire because Deutsche Bank filed suit seeking authorization to foreclose and secured a judgment authorizing foreclosure before limitations ran.

Alternatively, Plaintiffs’ request for fees and other relief triggered Texas’ counterclaim savings statute thereby reviving Defendants’ claim for judicial foreclosure to the extent it was previously barred by limitations.

TEX. CIV. PRAC. & REM. CODE § 16.069.

In either case, Plaintiff’s claims fail as a matter of law.

The evidence conclusively establishes that Plaintiff’s interest in the Property is subject to the rights of Deutsche Bank under the Deed of Trust and that Deutsche Bank’s interest is superior.

The Court should

(i) grant summary judgment in favor of Defendants;

(ii) order that Plaintiff take nothing by his claims;

(iii) enter judgment authorizing judicial foreclosure of Deutsche Bank’s lien;

and,

(iii) award Defendants such further relief at law or in equity to which it has shown itself entitled.