Opinion
No. 14-10-00733-CV
Opinion filed August 4, 2011.
On Appeal from the 281st District Court Harris County, Texas, Trial Court Cause No. 2008-74695.
Panel consists of Chief Justice HEDGES and Justices SEYMORE and BOYCE.
OPINION
Capital One, N.A. appeals from a final judgment in favor of appellee, Nationstar Mortgage LLC, on Nationstar's claim for conversion of a check. The check at issue was made payable to a homeowner and a loan-servicing company, neither of whom are parties to the lawsuit. In its first issue, Capital One contends that the evidence is legally insufficient to show that Nationstar had been assigned the loan-servicing company's rights to the check at the time that the loan servicing was transferred. In three other issues, Capital One argues that the trial court abused its discretion by admitting certain exhibits at trial. We sustain Capital One's first issue, reverse the judgment of the trial court, and render judgment that Nationstar take nothing.
I. BACKGROUND
In June 2005, Whitney Augustine, Jr. purchased property in New Orleans. Augustine received a loan from Centex Home Equity Company LLC ("Centex") and secured insurance coverage for the property through Fidelity National Property and Casualty Insurance Company ("Fidelity"). In August 2005, the property was damaged by Hurricane Katrina.
In September 2005, Centex sold and assigned its rights, title, and interest in the loan to Greenwich Capital Financial Products as part of a bundle of loans. HomEq Servicing Corporation ("HomEq") began servicing the loan. Augustine gave notice to Fidelity and HomEq that his property had been damaged by Katrina. Fidelity forwarded a check to Augustine in the amount of $84,000 to pay for the property losses. The check was made payable jointly to Augustine and HomEq.
In December 2005, after Augustine presented the check for deposit at a Hibernia Bank, N.A. branch in Houston, the check was deposited into Augustine's account. Hibernia is a predecessor-in-interest to Capital One. Nationstar argued at trial that HomEq did not consent to any endorsement of the check on its behalf.
In February 2006, Harwood Street Funding II, LLC, a subsidiary of Centex used for securitization of loans, repurchased the Augustine loan from Greenwich because it was a "nonconforming loan" and subject to repurchase under the terms of Centex and Greenwich's purchase agreement. On May 31, 2006, Augustine received what the parties referred to as a "goodbye letter," notifying Augustine that the "right to collect payments from you, is being assigned, sold or transferred from [HomEq] to [Centex]." In June 2006, HomEq officially transferred the servicing of the Augustine loan to Centex. In July 2006, Centex changed its name to Nationstar.
In December 2008, Nationstar sued Capital One for conversion of a negotiable instrument pursuant to Texas Business and Commerce Code section 3.420. After denying motions for summary judgment filed by the parties, the trial court conducted a bench trial. During that proceeding, the parties disputed whether the transfer of servicing rights included an assignment of rights to the check. Dennis DiMaggio, a consultant with Nationstar, testified that he had become involved with the Augustine loan in June 2007 because there was a problem with the check. A Nationstar representative communicated with HomEq about executing an affidavit of forgery requested by Fidelity. When asked whether Nationstar obtained a "documented" assignment of the check from HomEq before filing suit, DiMaggio responded that "we were assigned the rights to the collateral; and the insurance proceeds are part and parcel of the underlying collateral. . . ." He surmised that because Nationstar was assigned the servicing rights and one of its subsidiaries repurchased the loan, it followed that Nationstar could sue Capital One for conversion.
In January 2010, Nationstar also initiated a lawsuit against Augustine in a Civil District Court in Louisiana.
Nationstar does not argue that it has a right to sue Capital One for conversion because one of its subsidiaries repurchased the loan from Greenwich. It argues that the right exists as part of the transfer of the servicing of the loan from HomEq to Nationstar.
In addition, Nationstar introduced, and the trial court admitted, deposition testimony on written questions by Angel T. Berry, operations/litigation manager and assistant vice president of HomEq. According to Berry's responses, there was no formal assignment of the rights to the check at the time servicing was transferred. In her view, the "goodbye letter" supported the intent to transfer all rights and "[c]onsidering that the servicing was released to a new servicer, the thought was that any recovery rights that we would have/had as servicer would follow the mortgage and we would help to address any issues." Berry stated that she became involved when a law firm contacted HomEq requesting an assignment to Nationstar to facilitate the recoupment of the insurance proceeds. Her written responses indicate that she signed the "assignment" in June 2009, after suit was filed. In July 2009, Berry was told that the original document did not include language that was specific enough for purposes of pursuing the recoupment of the insurance proceeds. She agreed to execute another document. She stated that it was "common that we would assist in completing assignments of mortgage to a new holder/owner if same was not handled upon transfer."
Without explanation, both parties have agreed to a corrected exhibit for appellate purposes. The corrected exhibit contains Berry's deposition by written questions, the 2009 "Assignment," and the 2009 "Acknowledgement of Assignment." The corrected exhibit is in the record as summary-judgment evidence. We will not consider the corrected exhibit because it was not admitted into evidence at trial. See Celadon Trucking Servs., Inc. v. Titan Textile Co., 130 S.W.3d 301, 307 (Tex. App.-Houston [14th Dist.] 2004, pet. denied) (stating that on appeal from a trial on the merits, appellate court cannot consider summary-judgment evidence that was not admitted in evidence at trial).
The trial court rendered judgment in favor of Nationstar on the conversion claim and ordered that Nationstar recover from Capital One $84,000 in actual damages, in addition to pre-judgment and post-judgment interest and court costs. Capital One timely requested, and the trial court issued, findings of fact and conclusions of law. Pertinent to the issue of the assignment, the trial court found that HomEq "transferred all of its rights, interests, responsibilities and duties as servicer of the Augustine Loan to Nationstar, including its right to the proceeds of the Check, on or before June 15, 2006." The trial court concluded that "Nationstar obtained HomEq's rights to and interest in the proceeds from the Check by June 15, 2006." This appeal followed.
II. ANALYSIS
In issue one, Capital One challenges the legal sufficiency of the evidence to prove that Nationstar was entitled to assert HomEq's rights to the check by way of an assignment at the time that the loan servicing was transferred.
In an appeal of a judgment rendered after a nonjury trial, a trial court's findings of fact have the same weight as a jury's verdict, and we review the legal sufficiency of the evidence used to support them just as we would review a jury's findings. See Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994). In conducting a legal-sufficiency review, we must consider all of the evidence in the light most favorable to the verdict and indulge every reasonable inference that would support it. City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005). In determining whether legally sufficient evidence supports the finding under review, we must consider evidence favorable to the finding if a reasonable fact-finder could consider it, and disregard evidence contrary to the finding unless a reasonable fact-finder could not disregard it. Id. at 821.
The elements of a claim for conversion of an instrument are set out in section 3.420 of the Texas Business and Commerce Code. See Tex. Bus. Com. Code Ann. § 3.420 (West 2002). That section provides in relevant part:
(a) The law applicable to conversion of personal property applies to instruments. An instrument is also converted if it is taken by transfer, other than a negotiation, from a person not entitled to enforce the instrument or a bank makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment. An action for conversion of an instrument may not be brought by:
(1) the issuer or acceptor of the instrument; or
(2) a payee or indorsee who did not receive delivery of the instrument either directly or through delivery to an agent or a co-payee.
Id. § 3.420(a)(1)-(2). "Delivery" in this context is defined by the Code as "voluntary transfer of possession." Id. § 1.201(15) (West 2009). The parties presume that HomEq had a right to sue Capital One for conversion under this section. Although the record reflects that HomEq never received the check, it is clear that Augustine, a co-payee, did. The question, then, is whether HomEq's rights to the check were assigned to Nationstar with the transfer of the loan servicing, either by an express or equitable assignment.
An assignment is a manifestation by the owner of a right of his intention to transfer the right to an assignee. Pape Equip. Co. v. I.C.S., Inc., 737 S.W.2d 397, 399 (Tex. App.-Houston [14th Dist.] 1987, writ ref'd n.r.e.). To recover on an assigned cause of action, one must plead and prove that a cause of action capable of being assigned existed and was assigned to the party alleging the theory of assignment. Id. If no express assignment can be established, a party may argue equitable assignment. See id. at 402. To constitute equitable assignment, the agreement must evidence an intent to transfer the interest, and the transferor must relinquish control over the interest. Id.
Capital One first contends that Nationstar did not plead any assignment, either express or equitable. A review of Nationstar's original petition shows that Nationstar alleged that the check in question was issued while HomEq was servicing the loan, and that servicing of the loan was transferred from HomEq to Nationstar. Assuming without deciding that this assertion was enough to plead an assignment, Nationstar was required to prove that a cause of action capable of being assigned existed and was assigned to it. Pape Equip. Co., 737 S.W.2d at 399.
Nationstar contends that it was not required to prove the existence of an express assignment. There was no "assignment" prior to suit introduced into evidence. In addition, Berry testified that there was not an actual assignment drafted before she became involved.
The record is unclear on whether a June 2009 "assignment" was admitted at trial. The signature page of the assignment was attached to Berry's deposition testimony on written questions. The trial court stated that "the deposition itself is in evidence," but did not address whether the signature page from the purported assignment was also admitted. Neither party offered the assignment into evidence separate from the deposition testimony. Even if the June 2009 assignment was admitted into evidence, it is not evidence of an intent to assign the rights to the check at the time of transfer of the loan servicing.
Nationstar asserts that the "goodbye letter," DiMaggio's testimony, the acknowledgment of assignment, and Berry's deposition testimony on written questions are sufficient to show an equitable assignment, that is, that HomEq intended to assign the rights to the check to Nationstar when HomEq transferred the loan servicing in June 2006. We disagree for several reasons. First, the acknowledgment of assignment was not admitted into evidence for the truth of the matter asserted. Second, the "goodbye letter" notifies Augustine that the right to collect payments from him is being assigned by HomEq to Nationstar. It does not expressly assign the rights to the check or demonstrate an intent to assign the rights to the check. Third, neither DiMaggio nor Berry was involved in the transfer of the loan-servicing rights. Although both testified that the assumption when transferring the servicing of a loan is that the new servicer acquires the rights that the transferring servicer had, this testimony amounts to industry expectation in such transactions and is not evidence of the intent to assign the rights to the check in this case.
The parties had a lengthy discussion with the trial court about whether the acknowledgment of assignment was hearsay or whether it was exempt from the hearsay rule because it was part of Berry's deposition testimony on written questions. The trial court sustained the hearsay objection.
Therefore, we sustain Capital One's first issue. Because of our disposition, we need not address Capital One's remaining issues. See Tex. R. App. P. 47.1.
III. CONCLUSION
Because the evidence is legally insufficient to show that Nationstar had an express or equitable assignment of the rights to the check, we reverse the judgment of the trial court and render that Nationstar take nothing.