Court Opinion

ID: 2670524
Source: CourtListenerOpinion
Date Created: 2014-04-19 00:01:10.785926+00
Date Added: 2024-06-11T09:19:10.309533
License: Public Domain

Case: 13-40061      Document: 00512599874         Page: 1    Date Filed: 04/17/2014

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT
                                                                        United States Court of Appeals
                                                                                 Fifth Circuit

                                      No. 13-40061                             FILED
                                                                           April 17, 2014
                                                                          Lyle W. Cayce
ROGER SINGHA; AMARJIT SINGHA,                                                  Clerk

                                                 Plaintiffs – Appellants
v.

BAC HOME LOANS SERVICING, L.P.; FEDERAL NATIONAL
MORTGAGE ASSOCIATION,

                                                 Defendants – Appellees

                   Appeal from the United States District Court
                        for the Eastern District of Texas
                             USDC No. 4:10-CV-692

Before STEWART, Chief Judge, and GARZA and SOUTHWICK, Circuit
Judges.
PER CURIAM:*
       Roger and Amarjit Singha brought this action against BAC Home Loans
Servicing, L.P. under the Texas Property Code, Texas Debt Collection Act, and
theories of contract and property law. The district court dismissed or granted
summary judgment on each of the Singhas’ claims. We AFFIRM.

       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
    Case: 13-40061    Document: 00512599874    Page: 2   Date Filed: 04/17/2014

                                No. 13-40061
              FACTUAL AND PROCEDURAL BACKGROUND
      Robert and Amarjit Singha purchased a home in the Dallas, Texas
suburb of Murphy on June 1, 2007. Amarjit Singha signed a promissory note.
Both of the Singhas signed a deed of trust. The deed of trust lists Countrywide
Home Loans, Inc. d/b/a America’s Wholesale Lender as the lender and the
Mortgage Electronic Registration System (“MERS”), including its successors
and assigns, as beneficiary and lender’s nominee. MERS would later assign
the note and deed of trust to BAC pursuant to its status as the beneficiary of
the deed of trust.
      In May 2009 the Singhas defaulted on the loan. Beginning September
1, 2009, the Singhas and BAC entered into a “Forbearance Agreement,”
whereby the Singhas would make reduced loan payments for six months, after
which BAC could (1) require the Singhas to resume making their original
payments, (2) require the Singhas to reinstate the loan in full, (3) offer a
modification to the Singhas, (4) offer the Singhas some other foreclosure
alternative, or (5) proceed with foreclosure. The Singhas allege, though, that
BAC promised them that their loan would be modified if they made the six
payments.
      The Singhas made all six reduced payments from September 1, 2009
through February 1, 2010.      They also made a seventh payment at the
forbearance amount which BAC accepted. On April 1, 2010, BAC rejected the
Singhas’ next attempted forbearance payment and asserted it would only
accept full reinstatement of the loan, which would require payment of a large
sum to bring current the loan and all fees and costs. The Singhas requested
modification in April 2010 after the eighth forbearance payment was rejected,
and BAC sent the modification application in June. It was during this time
that the Singhas allege the promise to modify their loan was made. In any
event, the Singhas did not complete all the required paperwork. They also only
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submitted their partially-completed application on September 24, 2010, a mere
two weeks before the October 5, 2010 scheduled foreclosure sale. BAC denied
the Singhas modification. The property was sold to the Federal National
Mortgage Association (“Fannie Mae”) at the October 5 foreclosure sale.
      The Singhas filed suit in Texas state court. BAC removed the case to the
United States District Court for the Eastern District of Texas. After removal,
the Singhas filed the operative Second Amended Complaint, then BAC filed a
motion to dismiss. The magistrate judge recommended the motion be granted
in part to dismiss the breach of contract claim, claims under the Texas Debt
Collection Act (“TDCA”), trespass to try title, common law unreasonable
collection efforts, negligent misrepresentation, and gross negligence.      The
district court dismissed those claims in July 2011. The district court denied
the motion to dismiss the following: a request for an accounting and for a
declaratory judgment, and claims for anticipatory breach of contract, waiver of
the breach of contract, and quiet title.        Following another report and
recommendation by the magistrate judge and another set of objections, the
district court granted summary judgment on the remaining claims in
September 2012. This appeal followed.

                                DISCUSSION
      The Singhas raise the following challenges on appeal: (1) BAC was not
a proper mortgagee and therefore could not foreclose pursuant to the note and
deed of trust, (2) the forbearance agreement represents waiver by BAC of any
right it had to foreclose, (3) claims under the TDCA should not have been
dismissed, and (4) genuine issues of material fact should have prevented the
grant of summary judgment on their quiet title and trespass to try title claims.
      The district court granted a motion to dismiss as to some claims, and
entered summary judgment on others. A grant of a motion to dismiss under
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Rule 12(b)(6) of the Federal Rules of Civil Procedure is reviewed de novo. In re
Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007). A complaint
must contain “enough facts to state a claim to relief that is plausible on its
face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Facial plausibility
arises when the complaint raises a reasonable expectation that the defendant
is liable for the misconduct alleged. Id. at 556. A summary judgment is
reviewed de novo, “applying the same legal standards as do the district courts.”
Vuncannon v. United States, 711 F.3d 536, 538 (5th Cir. 2013). Summary
judgment is proper when viewing the evidence in the light most favorable to
the non-movant, “there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a).

I.    BAC’s Authority to Foreclose under the Mortgage
      The district court dismissed the Singhas’ claim that BAC breached the
promissory note and deed of trust by declaring default, demanding the loan be
brought current, and foreclosing. This argument is framed in terms of BAC’s
lacking standing under the deed of trust to foreclose. The success of this claim
depends on our determining that BAC was not a proper mortgagee under the
Texas Property Code and the common law of property, meaning it did not have
the right to foreclose pursuant to the loan documents. The Singhas argue that
any holder of a deed of trust must also possess the note secured by the deed of
trust before it can exercise the rights of a mortgagee.
      We have already held that “Texas recognizes assignment of mortgages
through MERS and its equivalents as valid and enforceable.” Martins v. BAC
Home Loans Servicing, L.P., 722 F.3d 249, 253 (5th Cir. 2013). “A mortgagee
includes both ‘the grantee, beneficiary, owner, or holder of a security
instrument’ and ‘a book entry system.’” Id. at 255 (citing TEX. PROP. CODE §
51.0001(4)). MERS is a “book entry system” as defined in the Texas Property
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Code; consequently it may assign a deed of trust just as any other holder or
beneficiary. Martins, 722 F.3d at 255.
       The Singhas are incorrect that the note must be possessed by the holder
of the deed of trust. Notes and deeds of trust “constitute separate obligations”
under Texas law. Aguero v. Ramirez, 70 S.W.3d 372, 374 (Tex. App. — Corpus
Christi 2002, pet. denied). A properly empowered mortgage servicer does not
need to possess the note in order to foreclose. Martins, 722 F.3d at 255. Here,
MERS was an original beneficiary of the deed of trust. MERS, then, had the
right to and did assign its interest in that instrument to BAC. Because a
“mortgagee” can be a “beneficiary, owner, or holder of a security instrument,”
BAC as holder of the deed of trust is a proper mortgagee and may exercise any
rights available to the beneficiary or holder, including that of foreclosure. Id.;
TEX. PROP. CODE § 51.0001(4).
       The Singhas’ argument may also be read as a challenge to the validity of
the assignment of the deed of trust from MERS to BAC. The Singhas have no
standing to challenge the assignment because it does not clearly appear they
were intended to be third-party beneficiaries of it. See Reinagel v. Deutsche
Bank Nat’l Trust Co., 735 F.3d 220, 228 (5th Cir. 2013). The Singhas make no
such claim. The argument that the assignment was ineffective fails. The
Singhas have failed to allege a breach of any provision of the promissory note
or deed of trust and the district court’s dismissal of this claim was not error.

II.    Waiver of the Right to Declare Default or Foreclose

       The district court granted summary judgment on the claim that even if
BAC did have the right to foreclose, it had waived that right. The district court
listed ten items of evidence that the Singhas claimed supported a finding of
waiver. Included were representations the Singhas stated had been made by

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BAC that they qualified for a loan modification and that the documentation
would be sent for them to sign. The district court held that the evidence of
BAC’s conduct during the loan modification process did not show that BAC
“unequivocally manifested” an intent to waive its rights to foreclose.
      Under Texas law, a showing of waiver requires: “(1) an existing right,
benefit, or advantage held by a party; (2) the party’s actual knowledge of its
existence; and (3) the party’s actual intent to relinquish the right, or
intentional conduct inconsistent with the right.” See Ulico Cas. Co. v. Allied
Pilots Ass’n, 262 S.W.3d 773, 778 (Tex. 2008). “Waiver is largely a matter of
intent; thus, for implied waiver to be found through a party’s actions, intent
must be clearly demonstrated by the surrounding facts and circumstances.”
Motor Vehicle Bd. v. El Paso Indep. Auto. Dealers Ass’n, Inc., 1 S.W.3d. 108,
111 (Tex. 1999).
      There is no dispute that the loan documents stated that the mortgagee
has the right to declare default, demand full reinstatement in the event of
default, or foreclose. BAC was fully aware of that right. There is no evidence,
though, that BAC made an explicit waiver of its rights under the loan
documents. Thus, the only question is whether the Singhas are correct that
two actions by BAC waived its right to declare default and foreclose.
      First, the Singhas assert that the forbearance agreement itself, along
with the acceptance of a seventh forbearance payment, represented assent by
BAC to nonperformance of the original loan agreement and therefore a waiver
of strict compliance. Second, the Singhas argue that BAC’s considering their
request for modification represented a waiver of the right to foreclose. In their
view, when BAC ultimately denied their application for modification, the
Singhas should have been given a reasonable opportunity to comply with the
original provisions of the loan documents. The Singhas additionally allege that
various BAC employees orally represented to them that their loan would be or
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was in the process of being modified and did not allow them to make payments
while they awaited the bank’s decision on their modification.
      BAC responds that the forbearance agreement’s plain language
specifically states that “nothing in [the forbearance agreement] shall be
understood or construed to be a satisfaction or release in whole or in part of
the obligations contained in the Loan Documents.”          BAC contends the
forbearance was a gratuity to allow the Singhas a chance to “get their financial
affairs in order” before a foreclosure. BAC further argues that the forbearance
agreement specifically disclaims that it is a modification and also disclaims
any guarantee that complying with that agreement will result in a later
modification. BAC also argues that, whatever oral representations were made,
the clear language of the forbearance agreement explicitly states that it is not
a modification and that modification is not guaranteed.
      There is no evidence in the record showing when or by whom the alleged
oral representations were made.      Further, Roger Singha stated that the
forbearance agreement would make them eligible to be “considered” for
modification. On appeal, the Singhas assert that the foreclosure occurred
while they were under review for modification, not after modification had
already been granted. Ultimately, the Singhas’ burden is to show that BAC’s
conduct clearly demonstrated a waiver of its right to foreclose. See El Paso
Indep. Auto. Dealers Ass’n, 1 S.W.3d. at 111. The district court determined
that none of this evidence was sufficient to show an unequivocal manifestation
of intent on the part of BAC to relinquish the rights and remedies in the loan
documents, especially in light of the fact that the parties never agreed to a
modification.
      Despite the Singhas’ evidence of oral representations made by BAC
about the likelihood or possibility of modification, we agree with the district
court that they failed to show a genuine issue of material fact as to whether
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BAC unequivocally manifested an intent to waive its rights to declare default,
demand reinstatement, and foreclose. Id. Thus, the district court did not err
in granting BAC summary judgment on the Singhas’ waiver claim.

III.    Texas Debt Collection Act Claims
        The district court dismissed the Singhas’ claims under the Texas Debt
Collection Act (“TDCA”). The TDCA prohibits “threatening to take an action
prohibited by law” pursuant to the collection of a debt. TEX. FIN. CODE §
392.301(a)(8).    It also prohibits “using any other false representation or
deceptive means to collect a debt.” TEX. FIN. CODE § 392.304(a)(19). The TDCA
does not prohibit debt collectors from “exercising or threatening to exercise a
statutory or contractual right of seizure, repossession, or sale that does not
require court proceedings.” TEX. FIN. CODE § 392.301(b)(3).
        The Singhas on appeal make arguments only about Sections
392.301(a)(8) and 392.304(a)(19). 1 They allege that since BAC was not a valid
mortgagee and thus did not have a right to foreclose, BAC’s representations
regarding the impending foreclosure violated these two subsections.
Alternatively, they urge that waiver destroys BAC’s right to foreclose.
According to the Singhas, a party with no right to foreclose “threaten[s] to take
an action prohibited by law” by notifying the debtor of that foreclosure. TEX.
FIN. CODE § 392.301(a)(8). Such a foreclosing party would also be “falsely
represent[ing]” that it had such a right if it notified a debtor of that foreclosure.
TEX. FIN. CODE § 392.304(a)(19).          The Singhas argue that the protracted

        1The Singhas suggest in their briefing that the magistrate judge did “not even
address” three subsections of the TDCA: 392.303(a)(2), 3.92.301(a)(8), and 392.304(a)(19).
Nonetheless, the Singhas failed to object to this oversight in the district court and their
briefing discusses only Sections 392.301(a)(8) and 392.304(a)(19). Because the Singhas’
briefing does not cite or address the other, apparently overlooked, provision, we limit our
discussion of the alleged facts to their application to the provisions actually briefed.
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modification negotiations “result[ed] in deceptive conduct.”       The alleged
deceptive conduct is the same as complained of with regard to waiver; that is,
the Singhas allege a representative of BAC made some representation to them
that it would modify the Singhas’ loan if they made all payments required
under the forbearance agreement and later that the loan had been modified.
      As discussed above, the Singhas’ claim that BAC was not a proper
mortgagee fails as a matter of law. Martins, 722 F.3d at 255. We also decided
above that BAC did not clearly manifest any intent to waive its right of
foreclosure. See El Paso Indep. Auto. Dealers Ass’n, 1 S.W.3d. at 111. Since
BAC is a proper mortgagee, threatening foreclosure is expressly permitted by
the TDCA. TEX. FIN. CODE § 392.301(b)(3). A proper mortgagee, further, is
not making a misrepresentation if it initiates foreclosure proceedings. See id.
      Also discussed above were the Singhas’ statements that various BAC
agents represented to them that making the forbearance payments would
result in modification of the loan. BAC cites numerous district court cases from
around the country for the proposition that loan-modification discussions are
not debt collection activities. In addition, we stated in an unpublished opinion
that “[d]iscussions regarding loan modification or a trial payment plan are not
representations, or misrepresentations, of the amount or character of [a] debt.”
Thomas v. EMC Mortg. Corp., 499 F. App’x 337, 343 (5th Cir. 2012) (alterations
in original). While this particular passage referred to Section 392.304(a)(8),
that provision of the TDCA appears to be analogous to Section 392.304(a)(19).
      We do not announce a rule that modification discussions may never be
debt collection activities. We do conclude, though, that the Singhas’ particular
factual allegations here – allegations of what occurred during the course of
what they describe as more than fifty phone calls and other contacts during a
protracted loan modification process – are not communications in connection
with collection of a debt. See TEX. FIN. CODE § 392.304(a)(19). These were
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communications in connection with negotiating the modification of a debt.
Therefore, even if there had been a promise to modify a loan when no such
modification decision had been approved, that at most would be a
misrepresentation. What the Singhas have failed to allege is any basis on
which to decide that their modification discussions were debt collection
activities for TDCA purposes. 2 See FED. R. CIV. P. 12(b)(6).

IV.     Quiet Title and Trespass to Try Title; Breach of Contract
        A suit to quiet title is an equitable action in which a plaintiff must prove
and recover on the strength of his own title, not the weakness of his
adversary’s. Fricks v. Hancock, 45 S.W.3d 322, 327 (Tex. App. — Corpus
Christi 2001, no pet.). Trespass to try title is a statutory action with specific
pleading requirements. TEX. PROP. CODE ANN. § 22.001; TEX. R. CIV. P. 783.
To succeed, the “Plaintiff must usually (1) prove a regular chain of conveyances
from the sovereign, (2) establish superior title out of a common source, (3) prove
title by limitation, or (4) prove title by prior possession coupled with proof that
possession was not abandoned.” Martin v. Amerman, 133 S.W.3d 262, 265
(Tex. 2004). Like in a suit to quiet title, the plaintiff must “prevail on the
superiority of his title, not the weakness of a defendant’s.” Id.
        The district court dismissed the Singhas’ trespass to try title claim and
granted summary judgment to BAC on their quiet title claim. Both claims rest
only on the argument that BAC was not a proper mortgagee, which, as
discussed above, fails as a matter of law. See Martins, 722 F.3d at 255. We

        2The district court concluded that the TDCA did not apply because BAC was not a
“debt collector” within the meaning of the act. The district court analogized the TDCA to the
Fair Debt Collection Practices Act. This court, in a published opinion, has since held that the
definition of “debt collector” under the TDCA is broader than that under the FDCPA. See
Miller v. BAC Homes Loans Servicing, L.P., 726 F.3d 717, 722-23 (5th Cir. 2013) (discussing
comparatively broader definition of “debt collector” under TDCA as opposed to FDCPA).
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have concluded that BAC was a proper mortgagee who may exercise the power
of sale under the deed of trust and that it did not waive its right to do so. BAC
foreclosed on the Singhas’ home on October 5, 2010 and sold the property to
Fannie Mae. Since the foreclosure was valid and extinguished the Singhas’
interest in the property, their title to the property is not greater than Fannie
Mae’s and the district court did not err in granting summary judgment to
Fannie Mae on the Singhas’ suit to quiet title. See Fricks, 45 S.W.3d at 327.
Similarly, the Singhas cannot prove a superior title to Fannie Mae for the
purposes of establishing any of the elements of their claim for trespass to try
title. See Martin, 133 S.W.3d at 265.
      Various other arguments were made in the district court that have not
been reargued on appeal. Filtering out some arguments in order to focus the
court’s attention on the seemingly most compelling ones on appeal is valid
advocacy. One such argument was a claim of anticipatory breach of contract
for BAC’s breach of an alleged oral contract to modify the Singhas’ loan formed
by the complained-of representations that the loan was or would be modified.
The magistrate judge granted summary judgment to BAC on this claim. We
will not discuss any arguments not fully briefed, and certainly will not disturb
the district court’s rejection of such arguments. See Yohey v. Collins, 985 F.2d
222, 224 (5th Cir. 1993).
      AFFIRMED.

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