## NO. 12

- 1 2

- 00261

- CV

IN THE COURT OF APPEALS

TWELFTH COURT OF APPEALS DISTRICT

TYLER, TEXAS

LARRY A. MERCHANT, APPELLANT

V.

PHH MORTGAGE CORPORA TION AND FEDERAL NATIONAL MORTGAGE ASSOCIATION , APPELLEE S §

§

§ APPEAL FROM THE 402 ND

JUDICIAL DIS TRICT COURT

WOOD COUNTY, TEXAS

MEMORANDUM OPINION Larry A. Merchant appeals from the trial court‟s summary judgment in favor of PHH Mortgage Corporation and Federal National Mortgage Association (FNMA) in Merchant‟s suit for wrongful foreclosure , brea ch of fiduciary duty, common law fraud, fraud in a real estate transaction, and to quiet title to real property . In three issues, Merchant contends there are fact issues concerning the foreclosure process. We affirm.

B ACKGROUND Merchant and his wife pu rchased a home in 2000. A portion of the purchase was financed by a loan payable to PHH Mortgage Services. In 2003, they divorced and Merchant acquired his wife‟s interest in the home. Thereafter, Merchant defaulted on the loan and PHH
foreclosed on the property in 2008. Merchant sued to recover the property. The trial court granted PHH and FNMA‟s motion for summary judgment and this appeal ensued.

S UMMARY J UDGMENT PHH and FNMA filed a combined traditional and no evidence motion for summary judgment. They argued that there is no evidence of any of the elements of wrongful foreclosure,2

breach of fiduciary duty, common law fraud, or statutory fraud, and regarding the cause of action to quiet title, no evidence that the trustee‟s deed is invalid or unen forceable. As evidence, they presented affidavits of an employee of PHH Mortgage Services, an employee of PHH‟s attorney, and Merchant. They also presented the note, deed of trust, notice of intention to foreclose, notice of acceleration, notice of trust ee‟s sale, the appointment of substitute trustee, the substitute trustee‟s deed, reinstatement letters, and the letter with which Merchant‟s checks were returned
to him.
Standard of Review After an adequate time for discovery has passed, a party without t he burden of proof at trial may move for summary judgment on the ground that the nonmoving party lacks supporting
evidence for one or more essential elements of his claim. See T EX

. R. C IV

. P. 166a(i). A no evidence motion for summary judgment is essentia lly a motion for a pretrial directed verdict, which may be supported by evidence. Timpte Indus., Inc. v. Gish , 286 S.W.3d 306, 310 (Tex. 2009). Once a no evidence motion has been filed in accordance with Rule 166a(i), the burden
shifts to the nonmovant t o bring forth evidence that raises a fact issue on the challenged
evidence. See Ford Motor Co. v. Ridgway , 135 S.W.3d 598, 600 (Tex. 2004). We review a no evidence motion for summary judgment under the same legal sufficiency
standards as a directed verd ict. King Ranch, Inc. v. Chapman , 118 S.W.3d 742, 750

- 51 (Tex. 2003). A no evidence motion is properly granted if the nonmovant fails to bring forth more than a scintilla of probative evidence to raise a genuine issue of material fact as to an essential element of the nonmovant‟s claim on which the nonmovant would have the burden of proof at
trial. Id . at 751. If the evidence supporting a finding rises to a level that would enable reasonable, fair minded persons to differ in their conclusions, more than a scintilla of evidence
exists. Id . Less than a scintilla of evidence exists when the evidence is so weak as to do no more than create a mere surmise or suspicion of a fact, and the legal effect is that there is no
evidence. Id . Review of a summary ju dgment is de novo and requires that the evidence presented by both the motion and the response be viewed in the light most favorable to the nonmovant, crediting evidence favorable to that party if reasonable jurors could and disregarding all contrary evide nce and inferences unless reasonable jurors could not. Gish , 286 S.W.3d at
310.3 W RONGFUL F ORECLOSURE In his first issue, Merchant contends the trial court erred in granting judgment against him because the evidence raises issues of fact with respect to PHH‟s standing to foreclose, appointment of multiple trustees, notice of default, demand and acceleration, and posting of
notice. In his second issue, Merchant asserts that the evidence raises a fact question regarding whether PHH waived its right to acce lerate and for e close. Standing to Foreclose Merchant argues that there is a question whether the proper party was acting to enforce
the terms of collection under the n ote and deed of t rust. He explains that although PHH Mortgage Services was the note hol der and beneficiary under the deed of trust , t he original trustee was replaced by an appointment of a substitute trustee executed by PHH Mortgage Corporation . Merchant argues that the substitute trustee was therefore improperly appointed rendering the sal e void. He contends there is no evidence to show PHH Mortgage Corporat ion
was ever the lender or holder of Merchant‟s note or that there had been any assignment or
transfer of the d eed of t rust. Also, there is no evidence of a mortgage servicing agreemen t entered between PHH Mortgage Services as lender and PHH Mortgage Corporation as mortgage
servicer. He contends that the notice of intention to foreclose stated that PHH Mortgage Services was acting as the mortgage loan servicer for “ Fannie Ma e ” and asse rts that this conflicts with the 2008 appointment of substitute trustee that names PHH Mortgage Corporation as the owner of
the note. PHH responds that Merchant, through his pleadings, has judicially admitted that PHH Mortgage Corporation and PHH Mortgage Services are the same corporate entity. We agree. The record shows that PHH Mortgage Corporation was a named defendant
, was served,
and filed an answer. PHH Mortgage Services was not named as a defendant, and was not served.
Merchant also named FNMA a s a defendant. In his petition, Merchant stated that “PHH Mortgage Corporation, defendant, is a foreign corporation formerly doing business under the name of PHH Mortgage Services. It will be referred t o herein, individually, as „PHH

. ‟ ” Later in the pet ition
, he stated that “PHH, at all times was acting either for itself or as the alleged corporate successor for PHH Mortgage Services (the original noteholder) or for and on behalf of FNMA as its servicer, for which PHH and FNMA or [ sic ] jointly and severa lly liable.”4

Assertions of fact, not pled in the alternative, in the live pleadings of a party are regarded as formal judicial admissions. Houston First Am. Savs. v. Musick , 650 S.W.2d 764, 767 (Tex. 1983). Any fact admitted is conclusively establis hed in the case without the introduction of the pleadings or presentation of other evidence. Id

. Here, Merchant‟s assertion that PHH Mortgage Corporation was not the proper party to enforce the terms of collection under the note and deed
of trust is in d irect conflict with his assertions in his petition. He admitted that PHH Mortgage Corporation has done business under the name of PHH Mortgage Services and that PHH Mortgage Corporation acts for itself and PHH Mortgage Services, as well as on behalf of
F N M A. These statements are binding on Merchant and taken as true by the court. Kaplan v. Kaplan , 129 S.W.3d 666, 669 (Tex. App.

– Fort Worth 2004, pet. denied). Merchant seems to complain that PHH Mortgage Corporation and PHH Mortgage Services use their own names interchangeably. It appears from the record that they are essentially the same company, consistent with Merchant‟s petition. Merchant cannot now complain that the wrong entity foreclosed on his mortgage. Merchant quotes from the December 7, 2007 notice letter, stating that the letter disclosed that PHH Mortgage Services was “acting as the Mortgage Loan Servicer for Fannie Mae, which is the owner of the note and deed of trust.” He argues that there is no evidence to show who
Fannie Mae is or how i t is related to the lawsuit or loan documents , contributing to a “ conflict of standing

. ” Again, in his petition, Merchant admitted that PHH acted on behalf of FNMA as its servicer. To the extent Merchant is arguing that the summary judgment evidence does not identify “Fannie Mae,” we conclude that is not necessary as it is common kno wledge that
FNMA , a defendant in this case, is referred to as “Fannie Mae.”
Merchant also complains in this section of his brief that the December 7, 2007 notice
failed to dis close the names and addresses of the substitute and successor substitute trustees in compliance with Section 51.0075(e) of the property code. The name and address of the trustee
and substitute trustee must be disclosed on the notice of the sale. T EX

. P RO P

. C ODE A NN

. §§ 51.002(b), 51.0075(e) (West Supp. 2012). The December 7, 2007 notice was a notice of intent to accelerate and foreclose, not a notice of the foreclosure sale. Therefore, the requirement
to disclose the name and address of the trustee and substitute trustee does not apply.5

Appointment of Multiple Trustees Merchant asserts that PHH Mortgage Corporation‟s appointment of substitute trustee s failed to strictly comply with the terms of the deed of trust because PHH appointed multiple

trustees to serve jointly rather than “a” successor trustee. He argues that there is no indication that the property code authorizes the appointment of multiple trustee s at one time. He argues that the designation of multiple persons to conduct the foreclosure c aused the defective sale because one did not know what the others were doing or saying.
Merchant did not raise this argument at trial and therefore presented no evidence raising a fact question on whether the appointment of multiple trustees invalidates th e sale. See T EX

. R.
C IV

. P. 166a(i). Additionally, he provides no authority for the proposition that the appointment of multiple trustees is in violation of the property code. See T EX

. R. A PP

. P. 38.1(i). Procedural Requirements
Merchant contends there were numerous flaws in the procedure used by PHH to foreclose
on his home. He complains that he was not given appropriate notices and that certain letters he
received in March and April providing reinstatement figures were contradictory. He argues that there is a fact question regarding whether the letters constituted a waiver of acceleration and the right to foreclose. He further argues that there is a fact question regarding whether notice was posted at the courthouse or filed in the clerk‟s office. Applicable Law The elements of a wrongful foreclosure claim are (1) a defect in the foreclosure sale proceedings; (2) a grossly inadequate selling price; and (3) a causal connection between the defect and the grossly inadequate selling price. Sauceda v. GMAC Mortg. Corp. , 268 S.W.3d 135, 139 (Tex. App.

– Corpus Christi 2008, no pet. ). The property code provides as follows :

(b) Except as provided by Subsection (b

- 1), notice of the sale, which must include a statement of the earliest time at which the sale will begin, must be given at least 21 days before the date of the sale by: (1) posting at the courthouse door. . . a written notice . . . ; (2) filing in the office of the county clerk of each county in which the property is located a copy of the notice po sted under Subdivision (1); and (3) serving written notice of the sale by certified mail on each debtor who, according to the records of the mortgage servicer of the debt, is obligated to pay the debt.

. . . .6 (d) Notwithstanding any agreement to the con trary, the mortgage servicer of the debt shall serve a debtor in default under a deed of trust or other contract lien on real property used as the debtor‟s residence with written notice by certified mail stating that the debtor is in default under the deed of trust or other contract lien and giving the debtor at least 20 days to cure the default before notice of sale can be given under Subsection (b).

T EX

. P ROP

. C ODE A NN

. § 51.002(b), (d) (West Supp. 2012). Analysis The deed of trust require d the l ender to give notice to Merchant prior to acceleration following Merchant‟s breach of any covenant or agreement in the deed of trust. Fur ther, the deed of trust provided that the notice must specify the default ; the action required to cure the
default ; a date, not less than thirty days from the date the notice is given to him, by which the
default must be cured ; and that failure to cure the default on or before the date specified in the notice will result in acceleration of the sums secured by the deed of trust and sale of the property. PHH Mortgage Services sent a letter to Merchant by certified mail , dated December 7, 2007, stating that the mortgage wa s past due and advising him to pay $2
, 335.07 within thirty days from the date of the letter to avoid foreclo sure. The letter specifically stated that if he did not cure the default within thirty days, payment of the current balance would be accelerated and foreclosure proceedings would be initiated. PHH Mortgage Corporation, through its attorney,
sent Merchant , by certified mail, a notice of acceleration and posting dated April 14, 2008. The letter explained that, because of Merchant‟s default in payment of the monthly mortgage payments due under the note, PHH Mortgage Corporation ha d elected to accelerate the m aturity
of the debt and declared all sums due under the note immediately due and payable

. The letter also informed Merchant that PHH Mortgage Corporation was proceeding to foreclose and sell the property under the terms of the deed of trust at public au ction. A notice of trustee‟s sale was
enclosed with the notice of acceleration. The notice of trustee‟s sale stat ed that the foreclosure sale would be conducted at the Wood County courthouse on May 6, 2008. The s ubstitute

t rustee‟s d eed, executed under oath on May 6, 2008 by Doyle Cain
, recites that written notices were posted in accordance with the terms of the deed of trust and th e laws of Texas. Further, the

s ubstitute t rustee stated under oath that Merchant was served timely, written notice and that the notice of sale was timely filed with the county clerk. There wa s no requirement that the notice

state t h e total amount owed, which changes daily. Thus, the summary judgment evidence shows that PHH complied with the terms of the deed of trust and the property code. See T EX

. P ROP

.7

C ODE A NN

. § 51.002(b), (d). In other words, there is no evidence of a defect in the foreclosure sale proceedings. See Sauceda , 268 S.W.3d at 139. Because PHH show ed entitlement to judgment on the wrongful foreclosure caus e of action, the burden shifted to Merchant to raise a fact question. See Ridgway , 135 S.W.3d at 600. In response to PHH‟s motion for summary judgment, Merchant presented a publication by a local abstr act and title company called Wood County Flo

- Clo

- Info . It purports to be a summary of foreclosure notices filed in the Wood County Clerk‟s office in April 2008. There is no entry on the publication referring to the foreclosure of Merchant‟s home. Merchant contends this raises a fact question regarding whe ther there is a defect in the foreclosure proceedings. We disagree. The publication is not an official Wood County publication. There is no way to verify that it is complete and accurate. This evidence is so weak as to do no more than create a mere

sus picion that the notice of trustee‟s sale was not filed in the office of the Wood County C lerk in April 2008. Thus, it amounts to no evidence. See King Ranch, Inc. , 118 S.W.3d at 751. Referencing two letters sent to him by a law firm on behalf of PHH Mor tgage Corporation, Merchant asserts that he was misled

. The letters are dated March 10, 2008
, and April 18, 2008. Each provides, pursuant to Merchant‟s request, the reinstatement figures for the loan through the end of the month in which the letter was s ent. Each letter includes an explanation that the amount due changes daily and instructions for him to call for the exact
amount due. The letter also advise s him that “[o]nce funds are received, the foreclosure action will be discontinued upon verificati on with the mortgage company that the funds are sufficient to reinstate your account.” Merchant argue s that these letters contradict the assertion that his loan
had been accelerated and raise a fact question as to whether PHH waived its right to accelerat e and foreclose

. We disagree. The letters , which were in response to Merchant‟s inquiries, offered Merchant the opportunity to have the foreclosure process discontinued. They did not abrogate the effectiveness of the previous notices. Further, there is no requirement that the three consecutive weeks‟ notice required by the statute be immediately prior to the sale. See Koehler
v. Pioneer A m. Ins. Co. , 425 S.W.2d 889, 892 (Tex. Civ. App.

– Fort Worth 1968 , no writ ). Thus, the March 10 and April 18 letters do not raise a fact question on the issue of a defect in the
f oreclosure proceedings or waiver of the right to accelerate and foreclose

. Merchant also asserts that signing the special warranty deed
, by which PHH conveyed the property to FNMA , two weeks b efore the foreclosure sale was an irregularity that raised an issue8

of fact

. Again, w e disagree. Title to transferred property will vest upon execution and delivery
of the deed. Stephens Cnty

. Museum, Inc. v. Swenson , 517 S.W.2d 257, 261 (Tex. 1974). T he fact that PHH prepared and signed the d eed before the sale doe s no more than create a mere suspicion, and is no evidence. See King Ranch, Inc. , 118 S.W.3d at 751. Suit to Quiet Title
In the motion for summary judgment, PHH argued entitlement to judgme nt on Merchant‟s cause of action for suit to quiet title based on standing. As explained above, t he evidence shows that the trial court correctly rule d against Merchant on his cause of action for wrongful foreclosure. Because Merchant wa s no longer the o wner of the subject property, he did not have standing to bring a suit to quiet title. See Njuku v. Middleton , 20 S.W.3d 176, 177 (Tex. App.

– Dallas 2000, pet. denied). The trial court correctly ruled against Merchant on his cause of action for suit to qu iet title.
Fraud To prevail on his causes of action for common law fraud and statutory fraud
, Merchant was required to prove, among other elements, that PHH made a false representation. See T EX

. B US

. & C OM

. C ODE A NN

. § 27.01(a) (West 2009 ); T.O. Stanl ey Boot Co. v. Bank of El Paso
, 847 S.W.2d 218, 2 22 (Tex. 1992). Merchant argues that because PHH Mortgage Corporation was not the owner of the note, all of its actions were fraudulent. As explained above, Merchant judicially admitted that PHH Mortgage C orporation and PHH Mortgage Services are essentially the same entity. Thus, there is no evidence of any false representation. The trial court did not err in granting summary judgment for PHH on Merchant‟s fraud causes of action. See T EX

. R. C IV

. P. 166a (i). To summarize, PHH showed that there is no evidence of a defect in the proceedings o r a false representation , and , accordingly, Merchant had no standing to assert a suit to quiet title. Merchant failed to bring forth evidence raising any fact questi ons. Thus, PHH wa s entitled to judgment on Merchant‟s causes of action for wrongful foreclosure, common law fraud, statutory
fraud , and suit to quiet title . We overrule Merchant‟s first and second issues.

B REACH OF F IDUCIARY D UTY In his third issue, Me rchant contends the trial court erred in granting judgment against
him on his cause of action for breach of fiduciary duty. He argues that the evidence raised issues9

of fact related to the conduct of the substitute trustees. He refers to the use of the p redated deed, misrepresentations that the default could be cured, and the failure of the trustee to provide an accounting for the sales proceeds. Merchant sued for breach of trust and violation of fiduciary duty. Although he named
two substitute trustees as defendants, neither were served and therefore they are not parties to the
lawsuit. As to PHH , there is generally no fiduciary relationship between a borrower and a
lender. See Bank One, Tex., N.A. v. Stewart , 967 S.W.2d 419, 442 (Tex. App.

– Houston [14 th Dist.] 1998, pet. denied) (op. on reh‟g)

. Therefore, the trial court correctly ruled against Merchant on his cause of action for breach of fiduciary duty. We overrule Merchant‟s third
issue.

D ISPOSITION Because there is no evidence of a defect in the foreclosure proceedings or of any false representations, no fiduciary relationship between Merchant and PHH, and because Merchant did

no t have standing to bring a suit to quiet title, the trial court did not err in granting PHH and
F N MA‟s motion for no ev idence summary judgment. 1
We affirm the trial court‟s judgment. 

### S AM 

### G RIFFITH Justice

Opinion delivered Octo ber 9 , 2013. Panel consisted of Worthen, C.J., Griffith, J., and Hoyle, J.

( PUBLISH )

1 Because the no evidence summary judgment was proper, we need not address PHH and FNMA‟s tradit ional motion for summary judgment. See Ridgway , 135 S.W.3d at 600.

## COURT OF APPEALS

TWELFTH COURT OF APPEALS DISTRICT OF TEXAS

JUDGMENT

OCTOB ER 9 , 2013

NO. 12

- 12

- 00261

- CV

LARRY A. MERCHANT, Appellant V. PHH MORTGAGE CORPORA TION AND FEDERAL NATIONAL MOR TGAGE ASSOCIATION , Appellee s

Appeal from the 402nd District Court of Wood County, Texas (Tr.Ct.No. 2008

- 394)

THIS CAUSE came on to be heard on the appellate record and briefs filed herein, and the same being considered, it is the opinion of this court that there was no error in the judgment.

It is therefore ORDER ED, ADJUDGED and DECREED that the judgment of
the court below be in all things affirmed , and that all costs of this appeal are hereby adjudged against the appellant, LARRY A. MERCHANT , for which execution may issue, and that this
decision be certified to t he court below for observance.

Sam Griffith, Justice. Panel consisted of Worthen, C.J., Griffith, J., and Hoyle, J

.