Fifth Circuit

Texas “Consumer” Attorney Behind “Squatter Rights” Lawsuits to Stop Foreclosure

Senior U.S. District Judge Harry Lee Hudspeth found two of DTND’s lawsuits to be frivolous and filed in bad faith for the purposes of harassment and delay. Hudspeth sanctioned DTND $20,000 in each case. 

In a recent BitterRoot case, Plaintiff seeks declaratory relief to preserve its alleged foreclosed interest, if any, in the Property. Plaintiff does not allege a value to the Property, but according to the Bexar County Appraisal District, the 2018 appraised value of the Property is $866,280 (the “CAD Value”). – Bitterroot Holdings, LLC v. BANK OF NEW YORK MELLON F/K/A THE BANK OF NEW YORK, AS TRUSTEE FOR THE CERTIFICATEHOLDERS OF THE CWABS, INC., ASSET-BACKED CERTIFICATE, SERIES 2006-22 Filed January 18, 2019.

State Bar of Texas: David P. Shafer; Licensed to Operate in Texas  – View Online

The principals behind DTND Sierra Investments LLC — the company that bought houses foreclosed on by homeowner associations for pennies on the dollar and then sued the mortgage lenders to prevent them from foreclosing — are back.

Now using the name Bitterroot Holdings LLC, the principals are using a new legal argument in asking a court to grant it ownership of a house on the far North Side.

The company is essentially claiming, in common parlance, “squatter’s rights” to get the property.

A lawsuit filed Tuesday in Bexar County District Court says Bitterroot and DTND before it have controlled and maintained the house at 21718 Beaver Bend Court for more than three years and therefore the court should declare Bitterroot the owner. The suit was filed against Fannie Mae, the property’s mortgage lender. The property is assessed by the county at $225,510.

Jon Lowe, a San Antonio real estate lawyer who reviewed the suit, agreed with Fannie Mae.

“Based on my knowledge of how these statutes are interpreted, (Bitterroot has) got no chance of succeeding on their theory,” Lowe said. “To me, it’s crystal clear.”

Lawyer Brian Trenz, who filed the lawsuit, had no comment. Trenz works for the Law Offices of David Schafer PLLC.

Schafer and his wife, Terri, are DTND’s officers. She also is the sole officer for Bitterroot, while David Schafer is its registered agent, state corporate records show.

A Fannie Mae spokesman called the court filing “frivolous and without merit” in a brief emailed statement.

Jon Lowe, a San Antonio real estate lawyer who reviewed the suit, agreed with Fannie Mae.

“Based on my knowledge of how these statutes are interpreted, (Bitterroot has) got no chance of succeeding on their theory,” Lowe said. “To me, it’s crystal clear.”

DTND gained notoriety for buying close to 250 homes from homeowner associations that foreclosed on homeowners for unpaid dues. The purchases usually were at sharply discounted prices. DTND’s buying binge was chronicled in the San Antonio Express-News last year.

Often, DTND would evict the homeowners and then rent the properties. When the mortgage lenders, who held a superior lien on the property, moved to foreclose, DTND would sue them to stop the actions.

The tactic allowed DTND to continue to collect rent from tenants. Meanwhile, the mortgage loans the former homeowners used to buy the properties often would go unpaid.

DTND filed nearly 100 lawsuits, using dubious legal arguments. The suits were later dropped or were tossed by judges. Among DTND’s claims: that a lender’s first mortgage lien is “inferior” to the HOA lien acquired by DTND; that it never was given notice of a foreclosure sale; and that it wasn’t given the opportunity to cure the prior homeowners’ loan defaults.

Earlier this year, Senior U.S. District Judge Harry Lee Hudspeth found two of DTND’s lawsuits to be frivolous and filed “in bad faith for the purposes of harassment and delay.” Hudspeth sanctioned DTND $20,000 in each case.  DTND gave notice last month that it will appeal the rulings.

Bitterroot, in its lawsuit filed last week against Fannie Mae, cites a Texas statute dealing with “adverse possession” in arguing it should be awarded ownership of the house at 21718 Beaver Bend Court, in Stone Oak’s Promontory Pointe neighborhood.

Adverse possession is a means of acquiring title to a property when the party making the claim has been in control of the property for a period required by state law. Texas has different periods of time, depending on the facts in a case, Lowe said.

In this case, the Promontory Pointe HOA foreclosed on the property and then sold it to DTND in February 2011. A couple of months later, DTND rented the house to the current occupant. In August 2011, Fannie Mae was the high bidder at a foreclosure auction conducted by JPMorgan Chase Bank, the mortgage servicer.

The following February, DTND sued Fannie Mae to have state district court set aside the foreclosure sale and award title to DTND. The case was removed to federal court a month later, but was ultimately dropped by DTND in July 2012. At some point, the suit says, DTND transferred its interest in the property to Bitterroot.

Bitterroot contends that it “took and enjoyed .. . possession peaceably” and without Fannie Mae contesting its interest for more than three years. It claims either it or DTND performed all maintenance and repairs and made improvements to the property.

It wasn’t until April of this year that Fannie Mae moved to evict Bitterroot’s tenant — three years and two months after DTND purchased the house from the HOA, the suit notes.

Bitterroot adds Fannie Mae needed to bring its eviction action no later than three years after the date that DTND bought the house from the HOA.

Lowe, the real estate attorney with the firm Martin & Drought, said Bitterroot is misinterpreting the law. The portion of the law dealing with a three-year limitations period doesn’t apply in this case, he said. He believes Bitterroot and/or DTND would have had to own the property for at least five years before it could claim adverse possession.

Bitterroot can only make a claim under the three-year statute if its “chain of title” begins with one of the following types of grants: from the King of Spain; from the Republic of Texas under an 1839 law; or from the state to a Civil War soldier, Lowe added.

To claim ownership after five years, a party would have had to have paid the property taxes. The Bexar County Tax Assessor-Collector’s website shows Chase has been paying the taxes on the Beaver Bend Court property.

John Heasley, general counsel for the Texas Bankers Association, reviewed the lawsuit and said it might simply be another legal maneuver so Bitterroot can continue to collect rent.

“I’m not aware of any cases where a person who knowingly has an inferior lien position has asserted adverse possession,” Heasley said. “I’ve never seen anything like this before.”

Caught in the middle of the dispute is Bitterroot’s tenant, Lisa Griffin, who has lived in the house since April 2011. She’s now trying to move out.

“I don’t want to be involved in their litigation and their issues,” she said.

Credit: San Antonio Express News (2014).

Shafer Law Website: Visit Helping Texas (2014).

Bitterroot Holdings, LLC v. MTGLQ Investors, L.P. et al;

Before the Court are a Motion to Remand (Dkt. # 4) and a Motion for Leave to Amend Complaint (Dkt. # 3) filed by Plaintiff Bitterroot Holdings, LLC (“Plaintiff”). The Court held a hearing on the Motions on January 21, 2015. At the hearing, Brian J. Trenz, Esq., represented Plaintiff; Jeremy J. Overby, Esq., represented Defendant MTGLP Investors, L.P. (“MTGLP”); and Mark D. Hopkins, Esq., represented Defendant Barrett, Frappier, Turner & Engel, L.L.P. (“Barrett”).

Upon careful consideration of the arguments asserted at the hearing and in the supporting and opposing memoranda, the Court DENIES Plaintiff’s Motion to Remand and DENIES Plaintiff’s Motion for Leave to Amend Complaint.

On November 4, 2010, Citimortgage assigned the note and security interest to Defendant MTGLQ. (Ex. A-4, Dkt. #10-1 at 44; Handville Aff. ¶ 8.) In 2011, in a proceeding unrelated to the outstanding loan held by MTGLQ, the property was sold at auction to DTND Sierra Investments, LLC (“DTND”) at a Homeowner’s Association foreclosure sale due to Harvey’s failure to pay the homeowner’s association assessments and dues. (“Am. Pet.,” Dkt. # 1-5 ¶ 12.) Plaintiff was ultimately assigned the interest purchased by DTND. (Id.)

On June 28, 2012, Defendant Barrett, acting as counsel for MTGLQ, sent Harvey a new Notice of Default and opportunity to cure by paying the past due balance.

Attorney Immunity Breaches;

A lawyer’s protection from liability arising out of the representation of a client is not without limits. See McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests, 991 S.W.2d 787, 793 (Tex. 1999).

Where a lawyer acting for his client participates in fraudulent activities, his action is “foreign to the duties of an attorney.” Poole v. Hous. & T.C. Ry., 58 Tex. 134, 137 (1882).

A cause of action may exist against an attorney who knowingly commits a fraudulent act outside the scope of his legal representation of the client. Alpert, 178 S.W.3d at 406.

An attorney cannot avoid liability on the ground that he was acting as an agent for his client if he knowingly commits a fraudulent act that injures a third person. Toles v. Toles, 113 S.W.3d 899, 911 (Tex. App. 2003); Likover v. Sunflower Terrace II, Ltd., 696 S.W.2d 468, 472 (Tex. App. 1985).

Credit: Read Opinion (2015).

There’s Still Cowboys Left in Texas, Though Not

The housing market collapse back in 2008 wasn’t exactly the prettiest (or possibly legal) thing that Americans have experienced as property owners, consumers, and citizens participating in the world’s wealthiest economy (at the time, that is).

But just because the big banks were dealing under the table doesn’t give just anyone from real estate attorneys in San Antonio, Texas or the courts processing their lawsuits the right to do as they like within tenuous applications of the law. Or does it?

One company in San Antonio is certainly acting as though it does: DDTND Sierra Investments LLC, now known as  Bitterroot Holdings LLC, are playing fast and loose with property statutes in Texas to try to get what they want.

Invoking what’s commonly known as “squatter’s rights” in order to claim ownership of a house on the far north side of San Antonio, Bitterroot is contending in a lawsuit filed in Bexar County District Court that it has “controlled and maintained the house” in question for three years, signifying that it should be declared owner by law.

Given how the house was acquired, most real estate attorneys in San Antonio would disagree. S. Lee Stevenson, a lawyer in the city, would likely agree that this lawsuit aligns with the nearly a 100 others filed by Bitterroot’s attorneys and dubbed by Senior U.S. District Judge harry Lee Hudspeth to be frivolous and without merit, and filed “in bad faith for the purpose of harassment and delay.” Judge Hudspeth sanctioned DTND $20,000 in both cases. DTND plans to appeal.

But the $40,000 worth of sanctions imposed on DTND (now Bitterroot) seems like small bucks when you consider their whole scheme: they’ve been buying up properties across San Antonio—almost 250 of them—from homeowners associations “that had foreclosed on homeowners for unpaid dues…

When the mortgage lenders, who held a superior lien on the property, moved to foreclose, DTND would sue them to stop the actions.” Any of the principled real estate attorneys in San Antonio like Stevenson can see this scheme for what it is: leveraging shaky legal arguments, at best, to tie up our court system in a move to shirk responsibility for nearly ill-gained assets.

Now, Bitterroot is grasping at straws in an effort to continue their loose cannon legal scheme: squatter’s rights. DTND bought the house in question back in 2011 and is claiming that Fannie Mae’s attempts to evict the tenant are void, legally, since it acquired the property by “adverse possession,” supposedly entitling it to ownership.

Not so fast, though, some real estate attorneys in San Antonio warn: “Bitterroot is misinterpreting the law.” The lawsuit is most likely “simply another legal maneuver so Bitterroot can continue to collect rent,” but maybe not for long, as the tenant of the house in question is trying to get out, not wanting to be caught in the middle.

The most ironic part of the whole thing? According to the statute invoked, “Bitterroot can only make a claim under the three-year statute if its ‘chain of title’ begins with one of the following types of grants: from the King of Spain; from the Republic of Texas under an 1839 law; or from the state to a Civil War soldier.”

Not exactly through a foreclosure under the nose of Fannie Mae.

Bitterroot Holdings LLC (Cross-Appellee) v. HB Properties I LLC (Cross-Appellant) Appeal from 73rd Judicial District Court of Bexar County (memorandum opinion)

Credit: Read Opinion (2018).

Debt Collectors Using Illegal Tactics

We learned recently of debt collectors calling from telephone number 949-270-1901. They identify the company as Legal Affidavit Office and claim to be collecting a debt owed to US National Bank. They allegedly threaten to file charges for fraud, check fraud, theft, and threaten arrest if payment is not made quickly. Additionally, this company does not appear to have a collection bond on file with the Texas Secretary of State.

If you are contacted by this company, do not give in to the pressure they try to create by threatening criminal charges and arrest. You still have rights to request validation of the debt. Never make payments over the telephone unless you have first validated the debt. In the case of this company, I also suggest you contact a consumer attorney because it may be violating numerous collection laws.

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Laws In Texas is a blog about the Financial Crisis and how the banks and government are colluding against the citizens and homeowners of the State of Texas and relying on a system of #FakeDocs and post-crisis legal precedents, specially created by the Court of Appeals for the Fifth Circuit to foreclose on homeowners around this great State. We are not lawyers. We do not offer legal advice. We are citizens of the State of Texas who have spent a decade in the court system in Texas and have been party to during this period to the good, the bad and the very ugly.

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