Case 4:12-cv-00098-RAS Document 63 Filed 02/07/17 Page 1 of 16 PageID #: 1142
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`SHERMAN DIVISION
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`Case No. 4:12-CV-98
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`TERRY PATRICK GORMAN and
`KAREN GORMAN,
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`Plaintiffs,
`
`v.
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`FIRST CONSOLIDATED MORTGAGE
`COMPANY; MORTGAGE ELECTRONIC
`REGISTRATION SYSTEMS, INC.;
`DEUTSCHE BANK NATIONAL TRUST
`COMPANY, AS INDENTURE TRUSTEE
`UNDER THE INDENTURE RELATING
`TO IMH ASSETS, CORP.,
`COLLATERALIZED ASSET-BACKED
`BONDS, SERIES 2005-7;
`RAY T. DEWITT, III; and
`GMAC MORTGAGE, LLC,
`
`Defendants.
`
`MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS MORTGAGE
`ELECTRONIC REGISTRATION SYSTEMS, INC. & DEUTSCHE BANK
`NATIONAL TRUST COMPANY’S MOTION FOR SUMMARY JUDGMENT AND
`DEFENDANT GMAC MORTGAGE, LLC’S MOTION TO DISMISS
`
`The following are pending before the court:
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`1.
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`2.
`
`3.
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`Defendants Deutsche Bank National Trust Company (“Deutsche”), Mortgage
`Electronic Registration Systems, Inc. (“MERS”), and GMAC Mortgage, LLC’s
`(“GMAC”) motion to dismiss Plaintiffs’ first amended complaint under Rule
`12(b)(6) (docket entry #12);
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`Plaintiffs’ response to second motion to dismiss (docket entry #14); and
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`Defendants’ reply to Plaintiffs’ response to second motion to dismiss (docket entry
`#16).
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`Case 4:12-cv-00098-RAS Document 63 Filed 02/07/17 Page 2 of 16 PageID #: 1143
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`1.
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`2.
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`3.
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`Defendants MERS & Deutsche’s motion for summary judgment and incorporated
`brief in support thereof (docket entry #30);
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`Plaintiffs’ response to the MERS and Deutsche motion for summary judgment and
`incorporated brief in support thereof (docket entry #36); and
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`Defendants MERS & Deutsche’s reply to Plaintiffs’ response to Defendants’ motion
`for summary judgment (docket entry #38).
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`
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`1.
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`2.
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`Plaintiffs’ motion to strike Defendants’ MSJ evidence and brief in support thereof
`(docket entry #35); and
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`Defendants MERS & Deutsche’s response to Plaintiffs’ motion to strike Defendants’
`MSJ evidence (docket entry #39).
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`
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`1.
`
`2.
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`3.
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`4.
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`5.
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`Plaintiffs’ motion to extend time under Rule 4(m) as to Defendant DeWitt (docket
`entry #24);
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`Plaintiffs’ motion for substituted service as to Defendant DeWitt (docket entry #25);
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`Plaintiffs’ motion to extend time under Rule 4(m) as to Defendant First Consolidated
`(docket entry #26);
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`Plaintiffs’ motion for substituted service as to Defendant First Consolidated (docket
`entry #27); and
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`Defendants’ objection to Plaintiffs’ motions to extend time for service and for
`substituted service upon Defendants DeWitt and First Consolidated Mortgage Co.
`(docket entry #29).
`
`
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`1.
`
`2.
`
`3.
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`Plaintiffs’ motion to add newly involved indispensable parties in accord with Rule
`35(c) and brief in support thereof (docket entry #53);
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`Defendants Deutsche & MERS’s opposition and response to Plaintiffs’ motion to add
`newly involved indispensable parties (docket entry #56); and
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`Plaintiffs’ reply to Defendants’ response to Plaintiffs’ motion to add newly involved
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`Case 4:12-cv-00098-RAS Document 63 Filed 02/07/17 Page 3 of 16 PageID #: 1144
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`indispensable parties (docket entry #58).
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`Having considered the pending motions and the responsive briefing thereto, the court finds that (1)
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`the Plaintiffs’ motions to extend time for service and for substituted service on Defendants DeWitt
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`and First Consolidated should be denied, (2) the Plaintiffs’ motion to add newly involved
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`indispensable parties should be denied, (3) the Plaintiffs’ motion to strike the Defendants’ summary
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`judgment evidence should be denied, and (4) the Defendants’ motion to dismiss and motion for
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`summary judgment should be granted.
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`PROCEDURAL HISTORY
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`On January 17, 2012, the Plaintiffs filed their original petition against the above-referenced
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`Defendants in the 401st Judicial District Court of Collin County, Texas. On February 17, 2012,
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`Defendants Deutsche Bank National Trust Company, Mortgage Electronic Registration Systems,
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`Inc., and GMAC Mortgage, LLC removed this action to this court based on diversity jurisdiction.
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`In doing so, the removing Defendants stated that the Plaintiffs fraudulently joined Texas citizens
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`Defendants Ray T. Dewitt and First Consolidated Mortgage Company (hereafter “First
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`Consolidated”). Accordingly, the removing Defendants argued that the court should disregard the
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`non-removing Defendants’ citizenship for purposes of determining jurisdiction. The Plaintiffs did
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`not file a motion to remand.
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`On October 11, 2012, the court issued a notice of impending dismissal. In its notice, the
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`court stated that its records indicated that more than 120 days had passed from the filing of the
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`complaint and that Defendant Ray T. Dewitt, III had not been served. The Plaintiffs were informed
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`that the action would be dismissed without prejudice as to Defendant Dewitt unless the Plaintiffs
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`could show cause for the failure to timely complete service of process.
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`On October 23, 2012, the Plaintiffs responded to the court’s notice of impending dismissal.
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`Additionally, the Plaintiffs filed a motion to extend time to serve Defendant Dewitt as well as a
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`motion for substituted service as to Defendant Dewitt. Thereafter, on October 25, 2012, the
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`Plaintiffs advised the court that the court’s docket sheet incorrectly reflected that Defendant First
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`Consolidated Mortgage Company entered an appearance in this matter. The Plaintiffs advised the
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`court that Defendant First Consolidated had not been served with process because Defendant First
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`Consolidated’s registered agent, Defendant Dewitt, was evading service of process. Accordingly,
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`the Plaintiffs filed a motion to extend time to serve Defendant First Consolidated as well as a motion
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`for substituted service as to Defendant First Consolidated.
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`In response to the Plaintiffs’ motions, Defendants Deutsche Bank National Trust Company,
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`Mortgage Electronic Registration Systems, Inc., and GMAC Mortgage, LLC filed an objection,
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`arguing that, among other things, because the Plaintiffs fraudulently joined Defendants Dewitt and
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`First Consolidated, the Plaintiffs have no viable causes of action against them. The Plaintiffs did
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`not respond to the removing Defendants’ argument.
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`On February 28, 2013, the court ordered the Plaintiffs to file a brief in response to the
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`removing Defendants’ fraudulent joinder argument raised in the notice of removal by March 29,
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`2013. The Plaintiffs timely filed their brief. In their brief, the Plaintiffs state that they did not
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`initially challenge the Defendants’ fraudulent joinder argument because the Plaintiffs were unable
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`to locate DeWitt and First Consolidated.
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`The court notes that the Plaintiffs did not challenge the Defendants’ fraudulent joinder
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`argument until prompted to do so by the court. The court further notes that it was not necessary for
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`the Plaintiffs to locate DeWitt and First Consolidated before challenging the Defendants’ fraudulent
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`joinder argument. Finally, even if the Plaintiffs had timely filed a motion to remand by challenging
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`the Defendants’ fraudulent joinder argument, the motion would have been denied. As explained
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`more fully below, the Plaintiffs have failed to demonstrate a reasonable basis for recovery against
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`any of the Defendants. Accordingly, the Plaintiffs’ motions to extend time for service and for
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`substituted service on Defendants DeWitt and First Consolidated (docket entry #’s 24, 25, 26 and
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`27) are DENIED.
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`On May 16, 2013, the Plaintiffs filed a motion to “add,” or actually substitute, allegedly
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`indispensable parties Ocwen Loan Servicing, LLC (“Ocwen”) and IMPACT Funding Corporation
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`(“IMPACT”) pursuant to Rule 25(c) of the Federal Rules of Civil Procedure. According to the
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`Plaintiffs, the underlying note and mortgage were transferred from GMAC to Ocwen. Further, the
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`Plaintiffs claim that IMPACT is the owner of the Plaintiffs’ note and mortgage. The Plaintiffs seek
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`to file a second amended complaint substituting Ocwen and IMPACT as parties for GMAC.
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`The court is not inclined to grant the Plaintiffs’ motion to substitute parties. As noted by the
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`Defendants, the Plaintiffs have no basis to substitute IMPACT because the transfer of the mortgage
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`loan occurred prior to the filing of this lawsuit. Harris v. Nat’l Seal Co. Enhanced Severance Pay
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`Plan, 2007 WL 1643225, at *2 (S.D. Tex. 2007) (“Rule 25(c) does not apply to transfers of interest
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`that occur ‘prior to the commencement of a lawsuit.’ ELCA Enters., Inc. v. Sisco Equip. Rental &
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`Sales, Inc., 53 F.3d 186, 190 (8th Cir. 1995). Rule 25's provisions all address changes to a party that
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`occur after a lawsuit is filed, not before.”). Further, in light of the bankruptcy court’s ruling, as more
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`fully discussed below, and the fact that GMAC’s interest as the loan servicer was merely transferred
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`to Ocwen, the Plaintiffs’ proposed substitution would be futile. In re Covington Grain Co., Inc., 638
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`F.2d 1357, 1361 (5th Cir. 1981) (“Under Rule 25(c), the court may direct that the person to whom
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`the interest has been transferred be substituted. The Rule, however, is procedural only and does not
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`affect the substantive rights of the parties which are determined by state law.”); Fed. Sav. & Loan
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`Ins. Corp. v. McLean, 1988 WL 220584, at *2 (N.D. Tex. 1988). As more fully explained below,
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`the Plaintiffs are not relieved from their obligation to pay their mortgage simply because GMAC’s
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`interest as the loan servicer was transferred to Ocwen. Therefore, the Plaintiffs’ “Motion to Add
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`Newly Involved Indispensable Parties in Accord with Rule 35(c) [sic]” (docket entry #53) is
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`DENIED.
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`On May 4, 2016, Defendant GMAC filed “GMAC Mortgage, LLC’s Bankruptcy Status
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`Report” (docket entry #62). The Plaintiffs did not file any objections to the status report. Therefore,
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`the court adopts the status report and restates portions of the status report (not necessarily in the same
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`order) as follows:
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`On May 14, 2012 (the “Petition Date”), Residential Capital, LLC and certain
`of its direct and indirect subsidiaries, including GMACM (collectively, the
`“Debtors”), filed voluntary petitions for relief under Chapter 11 of the Bankruptcy
`Code in the United States Bankruptcy Court for the Southern District of New York
`(the “Bankruptcy Court”). The Debtors’ Chapter 11 cases (the “Bankruptcy Cases”)
`are being jointly administered, indexed at case number 12-12020 (MG).
`
`On July 27, 2012, the undersigned caused to be filed in this present matter a
`Notice of Bankruptcy and Suggestion of Automatic Stay (the “Bankruptcy Notice”)
`that informed [this court] and the parties of the status of the Bankruptcy Cases and
`the automatic stay imposed by section 362 of the United States Bankruptcy Code.
`Specifically, the Bankruptcy Notice indicated that all causes of action in the First
`Amended Complaint, but for the Declaratory Relief, were stayed by the Automatic
`Stay. Thereafter, on October 12, 2012, [this court] formally stayed the entire matter
`as to GMACM.
`
`By Order dated November 21, 2012, the [Bankruptcy] Court approved the
`sale of the Debtors’ mortgage origination and servicing platform to Ocwen Loan
`Servicing LLC (“Ocwen”) and its designee, Walter Investment Management Corp.
`(“Walter”) [Docket No. 2246] (the “Ocwen Sale Order”). The transactions
`comprising the sale of the Debtors’ mortgage origination and servicing platform (the
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`“Sale”) closed in two parts: the sale to Walter closed on January 31, 2013, and the
`sale to Ocwen closed on February 15, 2013.
`
`On December 11, 2013, the Bankruptcy Court entered its Order Confirming
`Second Amended Joint Chapter 11 Plan Proposed by Residential Capital, LLC et al.
`and the Official Committee of Unsecured Creditors (the “Confirmation Order”)
`[Bankruptcy Docket 6065] approving the terms of the Chapter 11 plan, as amended
`(the “Plan”). The effective date under the Plan occurred on December 17, 2013 (the
`“Effective Date”).
`
`Both the Plan and Confirmation Order provide for the extension of the
`automatic stay through the Effective Date and provide that the injunctive provisions
`of the Plan and Confirmation Order will remain in full force and effect following the
`Effective Date. (Confirmation Order, ¶ 63(g); Plan, Art. XIII.K). Moreover, both
`Section G of Paragraph 40 of the Confirmation Order and Article IX.I of the Plan
`contain an “Injunction” provision that, among other things, enjoins all parties from
`“commencing or continuing in any manner or action or other proceeding of any kind”
`relating to claims that are released under the Plan.
`
`Based on a review of the Debtors’ claims register, Plaintiffs, Terry Patrick
`Gorman and Karen Gorman, filed a proof of claim in Debtors’ Bankruptcy Cases,
`being claim 4834 (“Claim 4834”). The basis of Claim 4834 was premised on the
`allegations set forth in the First Amended Complaint filed in the present action. (A
`Copy of Claim 4834 is attached as Exhibit “A.”) Claim 4834 was expunged and
`dismissed with prejudice pursuant to the Order Sustaining ResCap Borrower Claims
`Trust’s Objection to Proof of Claim No. 4834 Filed by Terrance P. Gorman and
`Karen Gorman (the “Order”) [Bankruptcy Docket 9773], filed in the Bankruptcy
`Cases on March 22, 2016, as full and final adjudication of all causes of action for
`damages asserted in the First Amended Complaint against GMACM. Accordingly,
`Plaintiffs are barred from any continued prosecution of all claims for damages, but
`as noted in the Bankruptcy Notice, may pursue the claim for Declaratory Relief, as
`against GMACM. However, as a result of the Sale, no Debtor services the loan that
`is the subject of this proceeding and GMACM is unable to provide any non-monetary
`relief sought.
`
`On March 13, 2015, the Bankruptcy Court entered the Order Granting the
`Motion for Entry of an Order Establishing Procedures Enforcing Injunctive
`Provisions of Plan and Confirmation (“Procedures Order”) [Bankruptcy Docket
`8303]. The Procedures Order, (i) bars Plaintiffs from continuing to prosecute this
`action against GMACM under the injunction provisions of the Plan and Confirmation
`Order, and (ii) permits the Liquidating Trust to seek further relief from the
`Bankruptcy Court in the dismissal of this action with respect to the GMACM.
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`Accordingly, Plaintiffs are barred from continuing to pursue the damages
`claims set forth in the First Amended Complaint against GMACM as such claims are
`Released Claims pursuant to the injunction provided in the Confirmation Order and
`Plan as a result of the Order. As a result of the Sale, GMACM is not the loan
`servicer of the loan that is subject of this proceeding and GMACM is unable to
`provide any non-monetary relief sought by Plaintiffs. Accordingly, Plaintiffs cannot
`pursue any of the causes of action in the First Amended Complaint against GMACM
`and dismissal of GMACM from this matter is therefore appropriate.
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`PLAINTIFFS’ MOTION TO STRIKE SUMMARY JUDGMENT EVIDENCE
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`The Plaintiffs have moved the court to strike the Defendants’ summary judgment evidence.
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`Attached to the Defendants’ motion for summary judgment is the affidavit of Juan Aguirre. Mr.
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`Aguirre references seven documents in his affidavit. Mr. Aguirre is the Manager-Litigation Support
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`for GMAC. GMAC is the servicer of the Plaintiffs’ mortgage loan. Mr. Aguirre is responsible for
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`reviewing GMAC’s business records to confirm facts in certain litigated cases. Mr. Aguirre is the
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`custodian of the business records attached to his affidavit. According to the affidavit, Mr. Aguirre’s
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`testimony is based on his personal knowledge or knowledge derived from his review of the business
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`records of which he is the custodian.
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`The Plaintiffs argue that Mr. Aguirre’s affidavit does not comply with FED. R. CIV. P.
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`56(c)(4) and is hearsay. The court disagrees. The Defendants’ summary judgment evidence meets
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`the standards set forth in Rule 56(c)(4) as well as the Federal Rules of Evidence. The Plaintiffs’
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`motion to strike summary judgment evidence (docket entry #35) is DENIED.
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`FACTUAL BACKGROUND
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`On May 9, 2005, the Plaintiffs executed a Texas Home Equity Adjustable Rate Note (“the
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`Note”) in the principal amount of $262,500.00. The lender was First Consolidated Mortgage
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`Company. The Note provides, in pertinent part, as follows:
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`1.
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`BORROWER’S PROMISE TO PAY
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`I understand that Lender may transfer this Note. Lender or anyone who takes
`this Note by transfer and who is entitled to receive payments under this Note is called
`the “Note Holder.”
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`2.
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`INTEREST
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`Interest will be charged on unpaid principal until the full amount of Principal
`has been paid. I will pay interest at a yearly rate of 9.490%. The interest rate I will
`pay may change in accordance with Section 4 of this Note.
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`4.
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`INTEREST RATE AND MONTHLY PAYMENT CHANGES
`
`(A)
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`Change Dates
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`The initial interest rate I will pay may change on the first day of June, 2007,
`and on that day every 6th month thereafter. Each date on which my interest rate
`could change is called a “Change Date.”
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`(D)
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`Limits on Interest Rate Changes
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`The interest rate I am required to pay at the first Change Date will not be
`greater than 12.4900% or less than 9.4900%. Thereafter, my interest rate will never
`be increased or decreased on any single Change Date by more than ONE and
`ONE/HALF percentage points (1.50%) from the rate of interest I have been paying
`for the preceding 6 months. My interest rate will never be greater than 16.4900% or
`less than 9.4900%.
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`7.
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`BORROWER’S FAILURE TO PAY AS REQUIRED
`
`(B)
`
`Default
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`If I do not pay the full amount of each monthly payment on the date it is due,
`I will be in default.
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`(C)
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`Notice of Default
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`If I am in default, the Note Holder may send me a written notice telling me
`that if I do not pay the overdue amount by a certain date, the Note Holder may require
`me to pay immediately the full amount of Principal that has not been paid and all the
`interest that I owe on that amount. That date must be at least 30 days after the date
`on which the notice is mailed to me or delivered by other means. This Note may not
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`be accelerated because of a decrease in the market value of the property described
`above or because of the property owner’s default under any indebtedness not
`evidenced by this Note or the Security Instrument.
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`8.
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`GIVING OF NOTICES
`
`Unless applicable law requires a different method, any notice that must be
`given to me under this Note will be given by delivering it or by mailing it by first
`class mail to me at the Property Address above or at a different address if I give the
`Note Holder a notice of my different address.
`
`9.
`
`OBLIGATIONS OF PERSONS UNDER THIS NOTE
`
`Subject to the limitation of personal liability described below, each person
`who signs this Note is responsible for ensuring that all of my promises and
`obligations in this Note are performed, including the payment of the full amount
`owed. Any person who takes over these obligations is also so responsible.
`
`I understand that Section 50(a)(6)(C), Article XVI of the Texas Constitution
`provides that this Note is given without personal liability against each owner of the
`property described above and against the spouse of each owner unless the owner or
`spouse obtained this Extension of Credit by actual fraud. This means that, absent
`such actual fraud, the Note Holder can enforce its rights under this Note solely
`against the property described above and not personally against any owner of such
`property or the spouse of an owner.
`
`If not prohibited by Section 50(a)(6)(C), Article XVI of the Texas
`Constitution, this Section 9 shall not impair in any way the right of the Note Holder
`to collect all sums due under this Note or prejudice the right of the Note Holder as
`to any promises or conditions of this Note.
`
`11.
`
`SECURED NOTE
`
`In addition to the protections given to the Note Holder under this Note, the
`Security Instrument, dated the same date as this Note, protects the Note Holder from
`possible losses that might result if I do not keep the promises that I make in this Note.
`
`Concurrent with the execution of the Note, the Plaintiffs executed a Texas Home Equity
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`Security Instrument which granted a lien on the property located at 2812 Browning Drive, Plano,
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`Texas 75093. The security instrument was assigned to Deutsche on January 2, 2009. The Plaintiffs
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`also executed the following documents: (1) a Texas Home Equity Adjustable Rate Rider; (2) a Texas
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`Home Equity Affidavit and Agreement; (3) a Disclosure Statement regarding the Note’s adjustable
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`interest rate; and (4) a Notice Concerning Extensions of Credit Defined by Section 50(a)(6), Article
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`XVI, Texas Constitution.
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`The Plaintiffs defaulted on the Note by failing to make their monthly payments. It appears
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`from the summary judgment evidence that the Plaintiffs have not made a loan payment since May
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`2008.
`
`On July 6, 2011, the Defendants filed an application for expedited foreclosure proceeding
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`pursuant to Rule 736 of the Texas Rules of Civil Procedure in Collin County, Texas. The
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`foreclosure action was ultimately dismissed due to the filing of the instant lawsuit. As such, no
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`foreclosure sale occurred.
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`In their first amended complaint, the Plaintiffs alleged 34 counts. Since the court is not
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`permitting the Plaintiffs to belatedly serve Defendants DeWitt and First Consolidated, counts 1, 5,
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`9, 13, 20, 24, and 31 are no longer viable since they pertain solely to DeWitt and First Consolidated.
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`Additionally, the court notes that since the case was stayed as to GMAC at the time the remaining
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`Defendants filed their motion for summary judgment, GMAC did not participate in the motion for
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`summary judgment. However, GMAC’s motion to dismiss is ripe for consideration on the same
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`grounds as the remaining Defendants’ motion for summary judgment.
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`LEGAL STANDARD
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`DISMISSAL STANDARD
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`In passing on a Rule 12(b)(6) motion, a court must accept all of the plaintiff's allegations as
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`true. Ballard v. Wall, 413 F.3d 510, 514 (5th Cir. 2005). A claim will survive an attack under Rule
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`12(b)(6) if it “may be supported by showing any set of facts consistent with the allegations in the
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`complaint.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 562 (2007). In other words, a claim may
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`not be dismissed based solely on a court's supposition that the pleader is unlikely “to find evidentiary
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`support for his allegations or prove his claim to the satisfaction of the factfinder.” Id. at 563 n.8.
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`Although detailed factual allegations are not required, a plaintiff must provide the grounds of its
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`entitlement to relief beyond mere “labels and conclusions;” “a formulaic recitation of the elements
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`of a cause of action will not do.” Id. at 555. The complaint must be factually suggestive, so as to
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`“raise a right to relief above the speculative level,” id. at 555, and into the “realm of plausible
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`liability.” Id. at 557 n.5. Facial plausibility is achieved “when the plaintiff pleads factual content
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`that allows the court to draw the reasonable inference that the defendant is liable for the misconduct
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`alleged.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). “Threadbare recitals of the elements of
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`a cause of action, supported by mere conclusory statements, do not suffice.” Id.
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`SUMMARY JUDGMENT STANDARD
`
`The purpose of summary judgment is to isolate and dispose of factually unsupported claims
`
`or defenses. See Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986). Summary judgment is proper
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`“if the movant shows that there is no genuine dispute as to any material fact and the movant is
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`entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a). A dispute about a material fact is
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`genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving
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`party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The trial court must resolve all
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`reasonable doubts in favor of the party opposing the motion for summary judgment. Casey
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`Enterprises, Inc. v. American Hardware Mut. Ins. Co., 655 F.2d 598, 602 (5th Cir. 1981)(citations
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`omitted). The substantive law identifies which facts are material. See id. at 248.
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`Both parties have a responsibility in the summary judgment process. Celotex, 477 U.S. at
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`323–24. First, the party seeking summary judgment must show that the admissible evidentiary
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`material of record and any affidavits submitted by the nonmoving party are insufficient to permit the
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`nonmoving party to carry its burden of proof. The nonmoving party must then set forth specific facts
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`showing that there is a genuine issue for trial and may not rest upon the mere allegations or denials
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`of his pleadings. FED. R. CIV. P. 56(e); Anderson, 477 U.S. at 248. “Conclusional allegations and
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`denials, speculation, improbable inferences, unsubstantiated assertions, and legalistic argumentation
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`do not adequately substitute for specific facts showing a genuine issue for trial.” Roach v. Allstate
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`Indemnity Co., 2012 WL 1478745 (5th Cir. 2012), citing SEC v. Recile, 10 F.3d 1093, 1097 (5th Cir.
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`1993).
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`DISCUSSION AND ANALYSIS
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`1.
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`NONRECOURSE PROVISIONS OF THE NOTE AND SECURITY AGREEMENT
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`According to the first amended complaint, the Plaintiffs allege that GMAC, acting as the
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`agent for MERS and Deutsche, demanded that the Plaintiffs make personal payments on the Note
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`when the Plaintiffs failed to make their monthly note payments. The Plaintiffs claim that such
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`demands were made despite the fact that the Plaintiffs are not personally liable on this nonrecourse
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`note.
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`The Plaintiffs’ argument, however, is not tenable. While the Plaintiffs’ note is, in fact, a
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`nonrecourse note, the Note itself provides that the Defendants may demand payment on the same.
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`“A nonrecourse note has the effect of making a note payable out of a particular fund or source,
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`namely, the proceeds of the sale of the collateral securing the note.” Murphy v. Wells Fargo Bank,
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`N.A., 2013 WL 510129, *5 (Tex. App. – Houston [14th Dist.] 2013, pet. filed), citing Fein v. R.P.H.,
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`Case 4:12-cv-00098-RAS Document 63 Filed 02/07/17 Page 14 of 16 PageID #: 1155
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`Inc., 68 S.W.3d 260, 266 (Tex. App. – Houston [14th Dist.] 2002, pet. denied). “‘[U]nder a
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`nonrecourse note, the maker does not personally guarantee repayment of the note and will, thus, have
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`no personal liability.’” Id., quoting Fein, 68 S.W.3d at 266. “If a maker of a nonrecourse note elects
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`to not repay the note, he is not exposed to personal liability, but instead, takes the risk that the
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`collateral securing the note will be lost if the holder decides to enforce its security interest in the
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`collateral.” Id., citing Fein, supra.
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`Here, the Defendants initiated foreclosure proceedings against the Plaintiffs’ property after
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`the Plaintiffs defaulted on the Note. It appears that the Plaintiffs, in turn, brought the instant action
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`to prevent the impending foreclosure. The Plaintiffs’ untenable argument that the Defendants were
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`not permitted to demand payment on the Note is nonsensical. Further, since the foreclosure has yet
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`to occur, and the Plaintiffs have apparently been living at the property for a number of years now
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`without making any payments on the Note, the court finds that the Plaintiffs have failed to offer any
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`summary judgment evidence or any set of facts, taken as true, that would support the Plaintiffs’
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`argument.
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`The following claims rely on this faulty nonrecourse theory: (1) Count 10 – Usury by MERS;
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`(2) Count 11 – Usury by Deutsche; (3) Count 12 – Usury by GMAC; (4) Count 14 – Breach of
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`Contract by MERS; (5) Count 15 – Breach of Contract by Deutsche; (6) Count 16 – Breach of
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`Contract by GMAC; (7) Count 17 – Violation of the Texas Debt Collection Practices Act by MERS;
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`(8) Count 18 – Violation of the Texas Debt Collection Practices Act by Deutsche; (9) Count 19 –
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`Violation of the Texas Debt Collection Practices Act by GMAC; (10) Count 21 – Predatory and
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`Unconscionable Lender Practices Act by MERS; (11) Count 22 – Predatory and Unconscionable
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`Lender Practices Act by Deutsche; (12) Count 23 – Predatory and Unconscionable Lender Practices
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`Case 4:12-cv-00098-RAS Document 63 Filed 02/07/17 Page 15 of 16 PageID #: 1156
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`Act by GMAC; (13) Count 25 – Lender Liability-Special Relationship violation by MERS; (14)
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`Count 26 – Lender Liability-Special Relationship violation by Deutsche; (15) Count 27 – Lender
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`Liability-Special Relationship violation by GMAC; (16) Count 28 – Conspiracy between First
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`Consolidated, MERS and Deutsche; and (17) Count 29 – Conspiracy between MERS, Deutsche and
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`GMAC. Based on the foregoing, all of the above-referenced claims must fail; the motion for
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`summary judgment (docket entry #30) and motion to dismiss (docket entry #12) said claims are
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`GRANTED.
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`2.
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`FRAUD AND FRAUD IN THE INDUCEMENT
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`The Defendants argue that the economic loss rule bars the Plaintiffs’ claims for fraud (Counts
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`2-4) and fraud in the inducement (Counts 6-8). The court agrees. Parties to a contract may breach
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`duties in tort or contract or both. Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617, 618 (Tex. 1986).
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`However, tort obligations “are in general obligations imposed by law—apart and independent of
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`promises made.” Sw. Bell Tel. Co. v. Delanney, 809 S.W.2d 493, 494 (Tex. 1991) (internal quotation
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`omitted). Therefore, “if the defendant’s conduct . . . would give rise to liability independent of the
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`fact that a contract exists between the parties, the plaintiff’s claims may also sound in tort.” Id.
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`(emphasis added). But if a tort claim arises solely from the parties’ contractual relationship, Texas
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`courts disallow such a claim. See, e.g., Ortega v. City Nat’l Bank, 97 S.W.3d 765, 777 (Tex.
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`App.—Corpus Christi 2003, no pet.); Southstar Corp. v. St. Paul Surplus Lines Ins. Co., 42 S.W.3d
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`187, 193–94 (Tex. App.—Corpus Christi 2001, no pet.). Here, Plaintiffs’ tort claims flow solely
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`from the Note and the security agreement, because they would not exist but for the contractual
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`relationship between the parties. Accordingly, the motion for summary judgment (docket entry #30)
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`and the motion to dismiss (docket entry #12) the Plaintiffs’ claims for fraud and fraud in the
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`Case 4:12-cv-00098-RAS Document 63 Filed 02/07/17 Page 16 of 16 PageID #: 1157
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`inducement are GRANTED.1
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`CONCLUSION
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`Based on the foregoing, the court finds as follows:
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`1.
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`2.
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`3.
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`4.
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`5.
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`6.
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`7.
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`8.
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`Defendants Deutsche Bank National Trust Company (“Deutsche”), Mortgage
`Electronic Registration Systems, Inc. (“MERS”), and GMAC Mortgage, LLC’s
`(“GMAC”) motion to dismiss Plaintiffs’ first amended complaint under Rule
`12(b)(6) (docket entry #12) is GRANTED;
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`Defendants MERS & Deutsche’s motion for summary judgment (docket entry #30)
`is GRANTED;
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`Plaintiffs’ motion to strike Defendants’ MSJ evidence (docket entry #35) is
`DENIED;
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`Plaintiffs’ motion to extend time under Rule 4(m) as to Defendant DeWitt (docket
`entry #24) is DENIED;
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`Plaintiffs’ motion for substituted service as to Defendant DeWitt (docket entry #25)
`is DENIED;
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`Plaintiffs’ motion to extend time under Rule 4(m) as to Defendant First Consolidated
`(docket entry #26) is DENIED;
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`Plaintiffs’ motion for substituted service as to Defendant First Consolidated (docket
`entry #27) is DENIED; and
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`Plaintiffs’ motion to add newly involved indispensable parties in accord with Rule
`35(c) [sic] (docket entry #53) is DENIED.
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`IT IS SO ORDERED.
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`1The remaining claims are as follows: (1) Count 30 – Request for Declaratory Judgment Relief;
`(2) Count 32 – Attorneys’ Fees; (3) Count 33 – Exemplary Damages; and (4) Count 34 – Pre and Post
`Judgment Intere