NO. 12-12-00261-CV

IN THE COURT OF APPEALS

TWELFTH COURT OF APPEALS DISTRICT

TYLER, TEXAS

LARRY A. MERCHANT, 

APPELLANT

V.

PHH MORTGAGE CORPORATION

AND FEDERAL NATIONAL

MORTGAGE ASSOCIATION,

APPELLEES

§

§

§

APPEAL FROM THE 402ND

JUDICIAL DISTRICT 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, breach 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.

BACKGROUND

Merchant and his wife purchased 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.

SUMMARY JUDGMENT

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, 
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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 unenforceable. 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 trustee‟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 the 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 TEX. R. CIV. P. 166a(i). A no 

evidence motion for summary judgment is essentially 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 to 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 verdict. 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 judgment 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 evidence and inferences unless reasonable jurors could not. Gish, 286 S.W.3d at 

310.
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WRONGFUL FORECLOSURE

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 accelerate and foreclose.

Standing to Foreclose

Merchant argues that there is a question whether the proper party was acting to enforce 

the terms of collection under the note and deed of trust. He explains that although PHH 

Mortgage Services was the note holder and beneficiary under the deed of trust, the 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 sale void. He contends there is no evidence to show PHH Mortgage Corporation 

was ever the lender or holder of Merchant‟s note or that there had been any assignment or 

transfer of the deed of trust. Also, there is no evidence of a mortgage servicing agreement 

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 Mae” and asserts 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 as 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 to herein, individually, as „PHH.‟” Later in 

the petition, 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 severally liable.” 
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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 established 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 direct 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 

FNMA. 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 it 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 knowledge 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 disclose 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. TEX. PROP. CODE ANN.

§§ 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.
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Appointment of Multiple Trustees

Merchant asserts that PHH Mortgage Corporation‟s appointment of substitute trustees

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 trustees at one time. He argues 

that the designation of multiple persons to conduct the foreclosure caused 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 the sale. See TEX. R.

CIV. 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 TEX. R. APP. 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 posted 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.

. . . .
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(d) Notwithstanding any agreement to the contrary, 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).

TEX. PROP. CODE ANN. § 51.002(b), (d) (West Supp. 2012).

Analysis

The deed of trust required the lender to give notice to Merchant prior to acceleration 

following Merchant‟s breach of any covenant or agreement in the deed of trust. Further, 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 was past due and advising him to pay $2,335.07 within thirty 

days from the date of the letter to avoid foreclosure. 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 had elected to accelerate the maturity 

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 auction. A notice of trustee‟s sale was 

enclosed with the notice of acceleration. The notice of trustee‟s sale stated that the foreclosure 

sale would be conducted at the Wood County courthouse on May 6, 2008. The substitute 

trustee‟s deed, 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 the laws of Texas. Further, the 

substitute trustee stated under oath that Merchant was served timely, written notice and that the 

notice of sale was timely filed with the county clerk. There was no requirement that the notice 

state the 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 TEX. PROP.
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CODE ANN. § 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 showed entitlement to 

judgment on the wrongful foreclosure cause 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 abstract 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 whether 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 

suspicion that the notice of trustee‟s sale was not filed in the office of the Wood County Clerk 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 Mortgage 

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 sent. 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 advises him that “[o]nce funds are received, the foreclosure action 

will be discontinued upon verification with the mortgage company that the funds are sufficient to 

reinstate your account.” Merchant argues 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 accelerate 

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 Am. 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 

foreclosure 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 before the foreclosure sale was an irregularity that raised an issue 
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of fact. Again, we 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). The 

fact that PHH prepared and signed the deed before the sale does 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 judgment on 

Merchant‟s cause of action for suit to quiet title based on standing. As explained above, the 

evidence shows that the trial court correctly ruled against Merchant on his cause of action for 

wrongful foreclosure. Because Merchant was no longer the owner 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 quiet 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 TEX.

BUS. & COM. CODE ANN. § 27.01(a) (West 2009); T.O. Stanley Boot Co. v. Bank of El Paso, 

847 S.W.2d 218, 222 (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 Corporation 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 TEX. R. CIV.

P. 166a(i).

To summarize, PHH showed that there is no evidence of a defect in the proceedings or 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 questions. Thus, PHH was 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.

BREACH OF FIDUCIARY DUTY

In his third issue, Merchant 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 issues 
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of fact related to the conduct of the substitute trustees. He refers to the use of the predated 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 [14th 

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.

DISPOSITION

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

not have standing to bring a suit to quiet title, the trial court did not err in granting PHH and 

FNMA‟s motion for no evidence summary judgment.1

We affirm the trial court‟s judgment.

SAM GRIFFITH

 Justice

Opinion delivered October 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 

traditional motion for summary judgment. See Ridgway, 135 S.W.3d at 600.
COURT OF APPEALS

TWELFTH COURT OF APPEALS DISTRICT OF TEXAS

JUDGMENT

OCTOBER 9, 2013

NO. 12-12-00261-CV

LARRY A. MERCHANT,

Appellant

V.

PHH MORTGAGE CORPORATION AND 

FEDERAL NATIONAL MORTGAGE ASSOCIATION,

Appellees

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 ORDERED, 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 the court below for observance.

Sam Griffith, Justice.

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