Opinion
CASE NO. 4:11-CV-223
06-10-2011
NOMATHEMBA P. ALLEN v. CHASE HOME FINANCE, LLC, ET AL.
Judge Schneider/ Judge Mazzant REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
Pending before the Court is Defendants' Motion to Dismiss or alternatively Motion for More Definite Statement (Dkt. #7). The Court, having considered the relevant pleadings, finds that Defendants' Motion to Dismiss should be granted.
BACKGROUND
Plaintiff Nomathemba P. Allen filed this lawsuit in state court against Chase Home Finance LLC ("Chase"), Mortgage Electronic Registration Systems, Inc. ("MERS"), and Thomas Black, Jr. Plaintiff alleges that Chase wrongfully foreclosed on Plaintiff's home located at 1617 Bluebird Drive, Little Elm, Texas 75068 (the "Property"). On April 21, 2011, Defendants removed this action to this Court. On April 28, 2011, the Court entered an Order that gave Plaintiff the opportunity to file an amended complaint, but Plaintiff did not file a new complaint.
On or about July 31, 2008, Plaintiff admits executing a Note payable to Shelter Mortgage Company, L.L.C. ("Shelter") in furtherance of a loan for the purchase of the Property. On or about the same day, a Deed of Trust to secure payment of the Note was executed by Plaintiff. The Deed of Trust named MERS as the beneficiary under the Deed of Trust. Plaintiff also admits that "by virtue of the Deed of Trust, MERS became the legal title holder." The Note does not make any reference to MERS.
On or about July 19, 2010, MERS assigned its interest in the Property to Chase. The assignment identifies MERS as the "payee" in the amount of $191,514, the original amount of the Note. On Tuesday, October 5, 2010, Chase purportedly purchased the Property at a foreclosure sale and then sued Plaintiff for forcible detainer.
Plaintiff asserts that Chase lacked authority to foreclose on the Property, asserting that MERS was not the true owner of the Note and could not have assigned any interest in the Property to Chase and that Chase is incapable of producing the original Note.
On April 28, 2011, Defendants filed their motion to dismiss (Dkt. #7). On May 15, 2011, Plaintiff filed a response (Dkt. #9).
LEGAL STANDARD
Defendants move for dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure, which authorizes certain defenses to be presented via pretrial motions. A Rule 12(b)(6) motion to dismiss argues that, irrespective of jurisdiction, the complaint fails to assert facts that give rise to legal liability of the defendant. The Federal Rules of Civil Procedure require that each claim in a complaint include "a short and plain statement . . . showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The claims must include enough factual allegations "to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 570).
Rule 12(b)(6) provides that a party may move for dismissal of an action for failure to state a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6). The Court must accept as true all well-pleaded facts contained in the plaintiff's complaint and view them in the light most favorable to the plaintiff. Baker v. Putnal, 75 F.3d 190, 196 (5th Cir. 1996). In deciding a Rule 12(b)(6) motion, "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007); Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir. 2009). "The Supreme Court recently expounded upon the Twombly standard, explaining that '[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Gonzalez, 577 F.3d at 603 (quoting Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. "It follows, that 'where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not 'shown' - 'that the pleader is entitled to relief.'" Id.
In Iqbal, the Supreme Court established a two-step approach for assessing the sufficiency of a complaint in the context of a Rule 12(b)(6) motion. First, the Court identifies conclusory allegations and proceeds to disregard them, for they are "not entitled to the assumption of truth." Iqbal, 129 S.Ct. at 1951. Second, the Court "consider[s] the factual allegations in [the complaint] to determine if they plausibly suggest an entitlement to relief." Id. "This standard 'simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of' the necessary claims or elements." Morgan v. Hubert, 335 F. App'x 466, 469 (5th Cir. 2009). This evaluation will "be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 129 S.Ct. at 1950.
In determining whether to grant a motion to dismiss, a district court may generally not "go outside the complaint." Scanlan v. Tex. A & M Univ., 343 F.3d 533, 536 (5th Cir. 2003). When ruling on a motion to dismiss a pro se complaint, however, a district court is "required to look beyond the [plaintiff's] formal complaint and to consider as amendments to the complaint those materials subsequently filed." Howard v. King, 707 F.2d 215, 220 (5th Cir. 1983); Clark v. Huntleigh Corp., 119 F. App'x 666, 667 (5th Cir. 2005) (finding that because of plaintiff's pro se status, "precedent compels us to examine all of his complaint, including the attachments"); Fed. R. Civ. P. 8(e) ("Pleadings must be construed so as to do justice."). Furthermore, a district court may consider documents attached to a motion to dismiss if they are referred to in the plaintiff's complaint and are central to the plaintiff's claim. Scanlan, 343 F.3d at 536.
DISCUSSION AND ANALYSIS
Plaintiff's state court petition asserts claims for violations of the Texas Property Code and the Texas Debt Collection Practices Act. Plaintiff also seeks a declaration that Defendants "violated the terms of the Deed of Trust and Note" and asked for a judgment quieting "title and possession of the Property to Plaintiff." Defendants assert that all of Plaintiff's claims are based on an erroneous belief that MERS did not have an interest in the Note and Deed of Trust to convey Chase and that Chase lacked authority to conduct foreclosure.
Plaintiff alleges that MERS never held the Note and purportedly split the Note and the Deed of Trust, which resulted in a subsequent faulty assignment of the Note and Deed of Trust to Chase. Defendant asserts that MERS as mortgagee could authority Chase to foreclose on the Property and that MERS was not required to be the true owner of the Note. Plaintiff asserts that MERS did not own the note. Plaintiff asserts that Defendants fail to address the issue that Defendants' interest in the Property was unsecured.
A good explanation of MERS and Texas law can be found in Richardson v. CitiMortgage, Inc., No. 6:10cv119, 2010 WL 4818556 *5 (E.D. Tex. Nov. 22, 2010). U.S. Magistrate Judge Judith K. Guthrie explained as follows:
Under Texas law, where a deed of trust, as here, expressly provides for MERS to have the power of sale, then MERS has the power of sale. Athey v. MERS, 314 S.W.3d 161, 166 (Tex. App.-Eastland 2010). MERS was the nominee for Southside Bank and its successors and assigns. MERS had the authority to transfer the rights and interests in the Deed of Trust to CitiMortgage. The Plaintiffs' complaints about the role of MERS in this matter lack merit.
It is further noted that the role of MERS has been the subject of federal multidistrict litigation in In re: Mortgage Electronic Registration Systems (MERS) Litigation, 659 F. Supp.2d 1368 (U.S. Jud. Pan. Mult. Lit. 2009). The MERS system is merely an electronic mortgage registration system and clearinghouse that tracks beneficial ownerships in, and servicing rights to, mortgage loans. Id. at 1370. The system is designed to track transfers and avoid recording and other transfer fees that are otherwise associated with the sale. Id. at 1370 n. 6. MERS is defined in Texas Property Code § 51.0001(1) as a "book entry system," which means a "national book system for registering a beneficial interest in security instrument and its successors and assigns." As noted in Athey, mortgage documents provide for the use of MERS and the provisions are enforceable to the extent provided by the terms of the documents. The role of MERS in this case was consistent with the Note and Deed of Trust.
Under the Texas Property Code, a mortgagee may authorize a mortgage servicer to service a mortgage and conduct a foreclosure sale. See Tex. Prop. Code. Ann. § 51.0025. MERS is a mortgagee under the Texas Property Code. See Tex. Prop. Code Ann. § 51.0001(4). Since the Deed of Trust identifies MERS as the beneficiary and the nominee for the original lender and its successors and assigns, this makes MERS a mortgagee under the Texas Property Code. As a mortgagee, MERS could authorize Chase to service the loan and foreclose, regardless of whether MERS was the true owner of the Note. In addition, Plaintiff points to no provision of the Texas Property Code that requires a mortgagee or mortgage servicer to produce the original note or deed of trust before conducting a non-judicial foreclosure. See Sawyer v. Mortgage Electronic Registration Systems, Inc., No. 3-09-CV-2303-K, 2010 WL 996768 *3 (N.D. Tex. Feb. 1, 2010). Moreover, Plaintiff fail to plead any facts indicating that the lender or lender's successors and assigns never held the note, or that the note has been lost or stolen. A court recently addressed this issue and found as follows:
Plaintiff has no standing to contest the various assignments as she was not a party to the assignments. Even if she has standing, her allegations are without merit because MERS was given the authority to transfer the documents in the Deed of Trust. The Restatement (3d) of Property offers no support for Plaintiff's claims. As MERS is a beneficiary and nominee for both the originating lender and its successors and assigns by the express language in the Deed of Trust, the situation falls within an exception to the general rule that a party holding only the deed of trust cannot enforce the mortgage. See Comment e to the Restatement (3d) of Property (Mortgages) § 5.4. Section 5.4 additionally notes that a "transfer of an obligation secured by a mortgage also transfers the mortgage unless the parties to the transfer agree otherwise." Plaintiff makes no allegations that the parties in this case agreed otherwise. Finally, while the Note may not specifically mention MERS, the Note and Deed of Trust must be read together in evaluating the terms...thus, the Note and Deed of Trust are construed together as a single instrument.Eskridge v. Fed. Home Loan Mortgage Corp. et al., No. 6:10-CV-00285-WSS, 2011 WL 2163989 *5 (W.D. Tex. Feb. 24, 2011).
Plaintiff asserts a violation of the Texas Property Code, asserting that Chase wrongfully foreclosed on the Property in violation of the Texas Property Code based upon the fact that the mortgagee did not have a valid and enforceable lien. Defendants move to dismiss this claim, arguing that it this claim is solely based on an erroneous legal theory that Chase could not conduct a foreclosure because MERS was never the true owner of the Note and had no interest to convey to Chase. Defendants assert that MERS was the mortgagee and could authorize Chase to service the mortgage and conduct a foreclosure sale. The Court agrees. Plaintiff fails to allege any facts that would support a violation of the Texas Property Code. In fact, Plaintiff fails to cite to any provision of the Texas Property Code that has been violated. Therefore, this claim should be dismissed.
Plaintiff next asserts that Defendants violated the Texas Debt Collection Act based upon the theory that MERS had no interest in the Property and could not authorize Chase to conduct a foreclosure sale. Defendants move to dismiss this claim asserting that Plaintiff's claim is based solely on the unsupported legal theory that MERS had no interest in the Property and could not authorize Chase to conduct a foreclosure sale. The Court agrees. Plaintiff fails to allege any facts that would make his theories plausible.
Plaintiff also seeks a declaratory judgment, asking the Court to consider whether MERS and/or Chase waived their right to accelerate and foreclose. Defendants move to dismiss, asserting that MERS had authority to authorize Chase to conduct the foreclosure on the Property. The Court agrees. Plaintiff offers no facts that would support the theory that there is any current controversy with respect to the validity of the loan documents that subject Plaintiff to an identifiable injury.
Plaintiff next asserts that Chase's claim to ownership and possession of the Property is improper and asks for a declaration of clear and uncontested title and possession of the Property to Plaintiff.
"To prevail in a trespass-to-try-title action, Plaintiff must usually (1) prove a regular chain of conveyances from the sovereign, (2) establish superior title out of a common source, (3) prove title by limitations, or (4) prove title by prior possession coupled with proof that possession was not abandoned." Martin v. Amerman, 133 S.W.3d 262, 265 (Tex. 2004)(citation omitted). "The pleading rules are detailed and formal, and require a plaintiff to prevail on the superiority of his title, not on the weakness of a defendant's title." Id. (citation omitted).
Plaintiff does not assert a superior title to Chase, and Plaintiff alleges no facts that would support this claim. Plaintiff merely asserts legal conclusions. Furthermore, the Court has rejected Plaintiff's theory as not plausible under the facts of this case.
Plaintiff does make the statement that there are a number of courts that have considered the issues raised in this case and determined that assignments involving MERS present a bona fide conflict over the enforceibility of the Deed of Trust and the Note. However, Plaintiff makes this statement but fails to cite the Court to any cases. The only cases cited in the response with regard to MERS arise from other jurisdictions. Plaintiff has failed to allege any facts that would make any of his claims plausible.
Furthermore, there is no evidence in the record that Plaintiff ever served Defendant Thomas Black, Jr. The requirements of Rule 4(m) of the Federal Rules of Civil Procedure provide that if service upon a defendant has not been made within 120 days after the filing of the complaint, "the court, upon motion or on its own initiative after notice to the plaintiff, shall dismiss the action without prejudice as to that defendant or direct that service be effected within a specified time." Fed. R. Civ. P. 4(m). The 120-day time period for service has clearly passed. Therefore, the Court finds all causes of action against Defendant Thomas Black, Jr. should be dismissed without prejudice due to a lack of service of process.
RECOMMENDATION
Based upon the findings discussed above, the Court RECOMMENDS that Defendants' Motion to Dismiss or alternatively Motion for More Define Statement (Dkt. #7) be GRANTED and all claims should be DISMISSED.
Within fourteen (14) days after service of the magistrate judge's report, any party may serve and file written objections to the findings and recommendations of the magistrate judge. 28 U.S.C. § 636(b)(1)(C).
Failure to file written objections to the proposed findings and recommendations contained in this report within fourteen days after service shall bar an aggrieved party from de novo review by the district court of the proposed findings and recommendations and from appellate review of factual findings accepted or adopted by the district court except on grounds of plain error or manifest injustice. Thomas v. Arn, 474 U.S. 140, 148 (1985); Rodriguez v. Bowen, 857 F.2d 275, 276-77 (5th Cir. 1988).
SIGNED this 10th day of June, 2011.
/s/_________
AMOS L. MAZZANT
UNITED STATES MAGISTRATE JUDGE