Santiago v. BAC Home Loans Servicing, L.P.

Citations: 20 F. Supp. 3d 585; 2014 U.S. Dist. LEXIS 70778; 2014 WL 2075994Docket: No. EP-13-CV-170-PRM

Court: District Court, W.D. Texas; March 17, 2014; Federal District Court

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Defendants BAC Home Loans Servicing, L.P. and the Bank of New York Mellon filed a Motion for Summary Judgment on December 5, 2013, regarding a foreclosure suit initiated by Plaintiff Jose Santiago on May 7, 2013, in Texas state court. After removal to federal court, Santiago amended his petition, alleging lack of notice regarding default and foreclosure, as well as challenges to the Defendants' standing and claims of breach of contract and fraud. The case involved a loan of $647,500 taken by Santiago and his spouse in 2006, secured by a Deed of Trust on their property. Defendants asserted that Santiago defaulted on the loan and provided evidence of a Notice of Default sent on April 16, 2009, and subsequent Notices of Acceleration and Sale dated March 31, 2013, notifying Santiago of the impending foreclosure sale. Santiago contested receiving these notices. The court's legal standard for granting summary judgment requires the absence of genuine disputes over material facts, enabling judgment as a matter of law. The Court granted Defendants' Motion on January 31, 2014, and provided reasoning for this decision in the memorandum.

In a motion for summary judgment, the moving party must initially demonstrate that no genuine issue exists for trial, which they can achieve by highlighting the lack of evidence supporting the nonmoving party's claims. If the moving party meets this burden, the nonmovant must present specific facts to show a genuine issue for trial. The nonmovant's burden is not satisfied by mere doubts, conclusory statements, or minimal evidence. The court must interpret facts in favor of the nonmoving party and resolve factual disputes when both parties provide contradictory evidence, but it cannot assume the nonmoving party will prove necessary facts without evidence.

In the case concerning the authority of the Bank of New York Mellon (BONY) to enforce a loan, the plaintiff contends that BONY lacks such authority, claiming it only acts as a trustee for CWALT. In contrast, the defendants assert that their evidence, including the Deed of Trust and an assignment document, confirms BONY as the loan's owner. The Deed of Trust identifies Mortgage Electronic Registration Systems, Inc. (MERS) as a beneficiary, and the assignment document shows the transfer from MERS to BONY. Under Texas law, a current mortgagee can initiate nonjudicial foreclosure, which includes the grantee or beneficiary of a security instrument. The Fifth Circuit acknowledges MERS and its assigns' right to bring foreclosure actions. Therefore, with a valid recorded assignment of the Deed of Trust, BONY qualifies as the mortgagee and is entitled to initiate the foreclosure process.

Plaintiff contends that BONY lacks legal authority to transfer any authority to BAC for servicing the Loan, arguing that since BONY cannot initiate foreclosure, it cannot authorize BAC to do so. However, the Court concludes BONY is an appropriate party to initiate foreclosure actions per established law. Consequently, the Court grants Defendants’ motion for summary judgment regarding the authority to enforce the Loan.

Regarding Plaintiff's standing to enforce the Pooling and Services Agreement (PSA), he asserts that the PSA's closing date for adding mortgages was September 28, 2009, and since his note was added on September 29, 2009, he claims the PSA is void, barring any legal remedies. Defendants counter that Plaintiff lacks standing to enforce the PSA as he is neither a party to it nor an intended third-party beneficiary. The Court agrees, noting that under Fifth Circuit precedents, non-parties cannot enforce the PSA without such status, and Plaintiff has not provided evidence to support any claim of intended beneficiary status.

On the issue of notice, Plaintiff alleges improper foreclosure notification. However, Defendants argue these claims are unfounded, providing evidence of a Notice of Default sent on April 16, 2009, which complied with Texas law requirements for notifying a debtor in default. The notice detailed the default amount and provided the debtor with adequate time to cure the default, fulfilling the statutory requirements for service of notice.

An affidavit from a knowledgeable individual confirming that service was completed serves as prima facie evidence of service, as established in legal precedent (Gossett v. Fed. Home Loan Mortg. Corp.). Actual receipt of notice is not required. Defendants submitted a declaration from Jessica L. Eisenhuth, indicating that Countrywide sent a Notice of Default and Intent to Accelerate to the Plaintiff via certified mail on April 16, 2009. This satisfies the burden of proof regarding service. Under Texas law, notice of sale must be provided at least twenty-one days before the sale via certified mail to each debtor (Tex. Prop. Code § 51.002(b)(3)). Defendants provided a Notice of Acceleration and Sale sent to the Plaintiff on March 31, 2013, by certified mail, notifying that the property would be sold on May 7, 2013. A sworn declaration from Becky Howell confirmed that Notices of Acceleration and Sale were sent, detailing the status of the loan and impending foreclosure. The court concluded that Defendants have met their burden of proof regarding mailing the notices, and Plaintiff's receipt of the notices is not necessary. Therefore, summary judgment is appropriate for Plaintiff's claim of improper foreclosure notices.

Regarding the breach of contract claim, Defendants argue that it fails legally as Plaintiff must establish a valid contract's existence, performance by Plaintiff, breach by Defendants, and resulting damages (Worldwide Asset Purchasing, LLC v. Rent-A-Ctr. E. Inc.). Defendants assert they acted within their rights based on the Note, Deed of Trust, and applicable law, providing evidence of these documents. Plaintiff contends that since AWL surrendered ownership of the deed of trust and the note, no Defendant can deliver an unencumbered deed, leaving Plaintiff without an entity to contractually make payments to or receive the unencumbered deed.

Defendants are authorized to foreclose on the Property, rendering Plaintiff's breach-of-contract claim legally insufficient. They argue that Plaintiff has neither alleged nor provided evidence of performance regarding the Loan, highlighting that Plaintiff has defaulted. Under Texas law, a party in default cannot pursue a breach-of-contract claim. To seek equitable relief, such as specific performance, a plaintiff must show readiness and ability to perform contractual obligations, which Plaintiff has failed to do. Consequently, Defendants are entitled to summary judgment on this claim. 

Regarding Plaintiff's request for a declaratory judgment to declare the foreclosure invalid, the Texas Declaratory Judgment Act does not apply in federal court, as established in Fifth Circuit precedent. Even under the Federal Declaratory Judgment Act, Plaintiff must demonstrate an "actual controversy" between the parties, which is absent in this case. Therefore, the request for declaratory relief is denied. 

The Court grants summary judgment for Defendants, dismissing Plaintiff's claims with prejudice. Although the Amended Petition mentions a fraud claim, Plaintiff indicates he is only pursuing declaratory judgment and breach of contract claims. The document also notes that MERS was established to manage ownership interests in residential mortgages, facilitating the mortgage process by eliminating the need for recording assignments and transferring physical promissory notes.

In *Calderon v. Bank of Am. N.A.*, the court clarifies the role of MERS as the beneficiary in the Deed of Trust, which secures the Lender's interests, including loan repayment and borrower obligations. The Borrower irrevocably conveys property to the Trustee with power of sale. The argument that BONY lacks authority to enforce the Loan due to its role as trustee for CWALT is rejected, as BONY is indeed authorized to enforce it. The plaintiff does not invoke the "split the note theory," which contends that separating the note from the deed of trust renders both unenforceable. The court notes that this theory is not applicable under Texas law if the foreclosing party is a properly assigned mortgage service provider. Here, MERS assigned the mortgage to BAC, which was designated with foreclosure power. The plaintiff's assertion regarding servicing by BAC is supported by an affidavit indicating BAC services the loan on BONY's behalf. The plaintiff's new claim about the enforceability of the Loan concerning only the Texas portion of the property lacks context and is deemed irrelevant by the court, which emphasizes that foreclosure authority is determined by the Note and Deed of Trust, not by state lines. Additionally, the court references other cases establishing that mortgagors do not have standing to challenge mortgage assignments based on alleged violations of a pooling and servicing agreement (PSA) if they are not parties to the PSA.

In Metcalf v. Deutsche Bank Nat. Trust Co., the court ruled that the plaintiffs did not have standing to contest alleged non-compliance with the Pooling and Servicing Agreement (PSA) due to insufficient pleading of facts indicating privity or third-party beneficiary status with the PSA. The court noted that even under New York law, the plaintiffs could not challenge an assignment to which they were not a party, referencing Calderon v. Bank of America for support. Additionally, the plaintiffs failed to specify which provisions of the Texas Property Code they were relying on regarding alleged deficiencies in foreclosure notices. The court will focus on whether the defendants complied with the notice requirements outlined in Texas Property Code § 51.002(b) and (d). For further details on these requirements, the court referred to Gossett v. Fed. Home Loan Mortg. Corp.