Court Opinion

ID: 7797278
Source: CourtListenerOpinion
Date Created: 2022-08-03 06:10:50.357696+00
Date Added: 2024-06-11T16:28:35.691751
License: Public Domain

Affirmed and Opinion Filed August 1, 2022

                                   S  In The
                            Court of Appeals
                     Fifth District of Texas at Dallas
                               No. 05-21-00287-CV

                 DHI HOLDINGS, LP, Appellant
                              V.
 DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE FOR
      GSAMP TRUST 2006-SD1, MORTGAGE PASS-THROUGH
 CERTIFICATES, SERIES 2006-SD1; OCWEN LOAN SERVICING, LLC;
  AND MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.,
                           Appellees

                    On Appeal from the 113th District Court
                            Harris County, Texas
                      Trial Court Cause No. 2018-58282

                        MEMORANDUM OPINION
                   Before Justices Myers, Osborne, and Nowell
                           Opinion by Justice Nowell
      DHI Holdings, LP (DHI) appeals from a summary judgment denying its

claims against appellees. DHI purchased the subject property at a constable’s sale.

At the time of the sale, the property was burdened by a recorded deed of trust.

Appellees are the lienholder and servicers of the debt and lien securing the debt who

sought to foreclose on the property after DHI purchased it. DHI filed suit to enjoin

the foreclosure sale and alleged several causes of action claiming that appellees
lacked standing to foreclose on the property. The trial court granted appellees’

traditional and no-evidence motion summary for summary judgment. We affirm.

                                     Background
      The loan originated in 2005 when Benita Gaines executed a promissory note

(the Note) to Fremont Investment & Loan (Fremont) for the purchase of a house.

Fremont later indorsed the Note in blank. Gaines also executed a Deed of Trust on

the house (the Property) to secure repayment of the Note. The Deed of Trust names

Mortgage Electronic Registration Systems, Inc. (MERS) as beneficiary acting as

nominee for Fremont and its successors and assigns. The Deed of Trust was recorded

on March 9, 2005.

      Ocwen Loan Servicing, LLC (Ocwen) began servicing the Note and Deed of

Trust in September 2005. According to the affidavit of an Ocwen representative,

Goldman Sachs Mortgage Company (GSMC) acquired the Note and Deed of Trust

from Fremont pursuant to a Flow Mortgage Loan Purchase and Warranties

Agreement. GSMC conveyed all of its right, title, and interest in the Note and Deed

of Trust to GS Mortgage Securities Corp. pursuant to a Mortgage Loan Purchase and

Sale Agreement dated as of December 1, 2005. GS Mortgage Securities Corp.,

Ocwen, and Deutsche Bank National Trust Company (Deutsche Bank) created the

GSAMP Trust 2006-SD1 pursuant to a Pooling and Servicing Agreement (PSA)

dated as of December 1, 2005. Pursuant to the PSA, GS Mortgage Securities Corp.

conveyed all of its right, title, and interest in the Note and Deed of Trust to Deutsche

                                          –2–
Bank as Trustee. In connection with the sale of the Note and Deed of Trust to

Deutsche Bank, the Note was delivered to Deutsche Bank. In January 2019, Ocwen

on behalf of Deutsche Bank sent the original Note to appellees’ attorney in this case,

who holds the Note as bailee for Deutsche Bank.

      On October 21, 2005, pursuant to a Transfer of Lien, MERS, its successors

and assigns, as nominee for Fremont, its successors and assigns, transferred all of its

right, title, and interest in the Deed of Trust and Note to Deutsche Bank “as Trustee

for the Registered Holders of GSAMP Trust 2006-SD1, Mortgage Pass-Through

Certificates, Series 2006-SD1.” This Transfer of Lien was filed in the property

records on March 26, 2006. A Corrective Transfer of Lien was executed on August

29, 2013 and recorded on February 6, 2017, by MERS to correct the name of the

assignee by removing the reference to the “Registered Holders of” from the name of

the assignee.

      DHI purchased the Property on May 1, 2018 at a constable’s sale pursuant to

a default judgment granting Gaines’s homeowner’s association the right to foreclose

on an assessment lien against the Property. The constable’s deed to DHI was

recorded on May 30, 2018.

      In July 2018, Ocwen on behalf of Deutsche Bank filed a notice of substitute

trustee’s sale for a foreclosure sale in September 2018. DHI filed this suit on August

28, 2018 and obtained a temporary restraining order stopping the sale of the

                                         –3–
Property. DHI sought a declaratory judgment that appellees lacked standing to

foreclose on the Property and asserted several other causes of action.

        Appellees1 filed a combined traditional and no-evidence motion for summary

judgment against all of DHI’s claims. DHI filed a response and appellees filed a

reply in support of their motion. The trial court granted summary judgment to

appellees on all but DHI’s claim for an equitable right of redemption. DHI later

nonsuited that claim and the trial court rendered a final judgment based on the

summary judgment. DHI appeals.

                                       Standard of Review

        We review a trial court’s summary judgment de novo. Travelers Ins. Co. v.

Joachim, 315 S.W.3d 860, 862 (Tex. 2010). When reviewing a traditional summary

judgment motion, we must determine whether the movant met its burden to establish

that (1) no genuine issue of material fact exists, and (2) the movant is entitled to

judgment as a matter of law. TEX. R. CIV. P. 166a(c); Provident Life and Accident

Ins. Co. v. Knott, 128 S.W.3d 211, 215–16 (Tex. 2003). In a no-evidence motion for

summary judgment, the movant must assert that there is no evidence to support an

essential element of the nonmovant’s claim on which the nonmovant would have the

burden of proof at trial. See TEX. R. CIV. P. 166a(i); Hahn v. Love, 321 S.W.3d 517,

523–24 (Tex. App.—Houston [1st Dist.] 2009, pet. denied). The burden then shifts

    1
      For convenience we refer to appellees collectively as Deutsche Bank or appellees unless necessary to
identify them specifically.
                                                  –4–
to the nonmovant to present evidence raising a genuine issue of material fact as to

each of the elements specified in the motion. Mack Trucks, Inc. v. Tamez, 206

S.W.3d 572, 582 (Tex. 2006).

                                               Discussion
        DHI contends the trial court erred by granting summary judgment on its claim

for a declaratory judgment that appellees lack standing to foreclose, its suit to quiet

title, and its claims for a fraudulent lien, fraud, and negligence per se.

    A. Standing to Foreclose
        To have standing2 to foreclose a party must show it is either (1) the mortgagee

or (2) a holder of the note. See TEX. PROP. CODE §§ 52.002, .0025; TEX. BUS. & COM.

CODE § 9.203(g) (“The attachment of a security interest in a right to payment or

performance secured by a security interest or other lien on personal or real property

is also attachment of a security interest in the security interest, mortgage, or other

lien.”); EverBank, N.A. v. Seedergy Ventures, Inc., 499 S.W.3d 534, 538–39, 543

(Tex. App.—Houston [14th Dist.] 2016, no pet.) (holding even if party does not have

recorded interest in security instrument, party has standing to foreclose if party is

    2
      The parties refer to this concept as standing to foreclose. We use the term “standing” in this case to
refer to the legal right to foreclose on a lien securing repayment of a debt as opposed to the concept of
standing as a component of subject matter jurisdiction. See Pike v. Tex. EMC Management, LLC, 610
S.W.3d 763, 773–74 (Tex. 2020) (noting Texas courts sometimes apply the label “standing” to statutory or
prudential considerations that do not implicate subject matter jurisdiction); id. at 773 (standing “is a word
of many, too many, meanings”) (quoting Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 90 (1998));
Morlock, L.L.C. v. Bank of New York, 448 S.W.3d 514, 520 (Tex. App.—Houston [1st Dist.] 2014, pet.
denied) (contrasting substantive law regarding ability of third party to challenge assignment with justiciable
interest requirement of jurisdictional standing).
                                                    –5–
holder or owner of note secured by security instrument); Campbell v. Mortg. Elec.

Registration Sys., Inc., No. 03–11–00429–CV, 2012 WL 1839357, at *4 (Tex.

App.—Austin May 18, 2012, pet. denied) (mem. op.); see also SGK Properties,

L.L.C. v. U.S. Bank N.A., 881 F.3d 933, 941–42 (5th Cir. 2018) (“U.S. Bank was, as

holder, entitled to foreclose on the property as holder of the note even if the

assignment of the Deed of Trust was void.”); Kiggundu v. Mortg. Elec. Registration

Sys. Inc., 469 Fed. Appx. 330, 331–32 (5th Cir. 2012) (“It was sufficient for the

Bank of New York to establish that it was in possession of the note; it was not

required to show that the deed of trust had been assigned to it.”).

      Appellees’ summary judgment evidence established that the Note was

indorsed in blank by Fremont and that Deutsche Bank has possession of the original

Note. A holder is a “person in possession of a negotiable instrument that is payable

either to bearer or to an identified person that is the person in possession.” TEX. BUS.

& COM. CODE § 1.201(b)(21)(A). A bearer is a person in possession of a negotiable

instrument that is payable to bearer or indorsed in blank. Id. § 1.201(b)(5).

Negotiation means the transfer of possession, whether voluntary or involuntary, of

an instrument by a person other than the issuer to a person who thereby becomes its

holder. Id. § 3.201(a). “If an instrument is payable to bearer, it may be negotiated by

transfer of possession alone.” Id. § 3.201(b). “When indorsed in blank, an instrument

becomes payable to bearer and may be negotiated by transfer of possession alone

                                          –6–
until specially indorsed.” Id. § 3.205(b). Thus, Deutsche Bank proved that it is a

holder of the Note.

      Relying on Leavings v. Mills, 175 S.W.3d 301 (Tex. App.—Houston [1st

Dist.] 2004, no pet.), DHI argues that Deutsche Bank failed to prove the transaction

by which it acquired the Note. Leavings involved a retail installment contract for a

solar water heating system and an associated mechanic’s and materialman’s lien, not

a negotiable instrument. Id. at 311. As the court in EverBank recognized, Leavings

is distinguishable as well because the contract there was not indorsed in blank.

EverBank, 499 S.W.3d at 543 (“However, the court in Leavings did not mention that

the note there had been indorsed in blank, which makes that case distinguishable.”).

The Note here was indorsed in blank; therefore, Deutsche Bank was not required to

show the chain of transfers of the Note. Id.

      Next DHI argues that the indorsement on the Note does not meet the terms of

the PSA between GS Mortgage Services, Ocwen, and Deutsche Bank. But DHI is

not a party to or third-party beneficiary of the PSA and cannot assert its terms to

alter the legal effect of Fremont’s blank indorsement. See Ybarra v. Ameripro

Funding, Inc., No. 01-17-00224-CV, 2018 WL 2976126, at *4–5 (Tex. App.—

Houston [1st Dist.] June 14, 2018, pet. denied) (mem. op.) (holding mortgagors were

not parties to or third-party beneficiaries of PSA and could not enforce its terms);

see also Ferguson v. Bank of N.Y. Mellon Corp., 802 F.3d 777, 782 (5th Cir. 2015);

(“home-loan borrowers—such as the Fergusons—ha[ve] no standing under Texas
                                         –7–
law to enforce a PSA because they were neither parties to the PSA nor intended

third-party beneficiaries under it”); Reinagel v. Deutsche Bank Nat’l Tr. Co., 735

F.3d 220, 228 (5th Cir. 2013) (same).

        DHI also claims that under New York law, an assignment in violation of the

terms of the PSA is void. However, we agree with the Fifth Circuit Court of Appeals

that this appeal to New York law is “unavailing.” Ferguson, 802 F.3d at 782

(rejecting mortgagor’s argument that assignment of mortgage was void under New

York law for violating terms of PSA, citing Wells Fargo Bank, Nat’l Ass’n v.

Erobobo, 127 A.D.3d 1176, 9 N.Y.S.3d 312, 314 (2015) (“[A] mortgagor whose

loan is owned by a trust[] does not have standing to challenge the [assignee’s]

possession or status as assignee of the note and mortgage based on purported

noncompliance with certain provisions of the PSA.”)); Reinagel, 735 F.3d at 228;

See also Ybarra, 2018 WL 2976126, at *4–5 (rejecting similar arguments regarding

PSA).

        Because appellees conclusively proved Deutsche Bank was a holder of the

Note, they were entitled to summary judgment on DHI’s claim that they lacked

standing to foreclose on the Property. We need not discuss DHI’s arguments

regarding the transfer of the Deed of Trust. See TEX. R. APP. P. 47.1.

   B. Suit to Quiet Title

        DHI contends that because the trial court erred by granting summary judgment

that Deutsche Bank had standing to foreclose, the court also erred by granting

                                         –8–
summary judgment on its claim to quiet title. We overrule this issue because the trial

court did not err by granting summary judgment on the standing to foreclose issue.

   C. Other Causes of Action
      DHI argues summary judgment on its fraudulent lien and fraud claims was

erroneous. The fraudulent lien claim is based on civil practice and remedies code

section 12.002(a). TEX. CIV. PRAC. & REM. CODE § 12.002(a). The elements of a

claim under section 12.002(a) are that the defendant (1) made, presented, or used a

document with knowledge that it was a “fraudulent lien or claim against real or

personal property or an interest in real or personal property,” (2) intended that the

document be given legal effect, and (3) intended to cause the plaintiff physical

injury, financial injury, or mental anguish. Id.; Henning v. OneWest Bank FSB, 405

S.W.3d 950, 963 (Tex. App.—Dallas 2013, no pet.)

      The elements of common law fraud are “(1) that a material representation was

made; (2) the representation was false; (3) when the representation was made, the

speaker knew it was false or made it recklessly without any knowledge of the truth

and as a positive assertion; (4) the speaker made the representation with the intent

that the other party should act upon it; (5) the party acted in reliance on the

representation; and (6) the party thereby suffered injury.” Aquaplex, Inc. v. Rancho

La Valencia, Inc., 297 S.W.3d 768, 774 (Tex. 2009) (per curiam).

      Common to both these causes of action is the element of intent: intent to cause

physical or financial injury or mental anguish for section 12.002(a) and intentional

                                         –9–
misrepresentation for fraud. DHI presented no evidence that appellees intended the

Transfer of Lien and Corrective Transfer of Lien to cause DHI physical or financial

injury or mental anguish or to defraud DHI. The Transfer and Corrective Transfer

of Lien were recorded in 2009 and 2013, years before DHI acquired the Property in

2018, and there is no evidence that appellees had any knowledge of DHI at the time

of the alleged misrepresentations. We conclude the trial court properly granted

summary judgment on DHI’s fraudulent lien and fraud claims. See Ybarra, 2018 WL

2976126, at *7–8 (concluding plaintiffs produced no evidence assignees knowingly

or recklessly misrepresented their rights in assignment of lien or that assignment was

executed with intent to cause plaintiffs physical injury, financial injury, or mental

anguish); see also Suniverse, LLC v. Universal Am. Mortgage Co., No. 09-19-

00090-CV, 2021 WL 632603, at *13–14 (Tex. App.—Beaumont Feb. 18, 2021, pet.

denied) (mem. op.) (same).

      Next, DHI argues summary judgment was improper on its claim for

negligence per se. The basis for the negligence per se claim is local government code

section 192.007(a). TEX. LOC. GOV’T CODE § 192.007(a). Chapter 192 relates to

instruments to be recorded by counties. See id. §§ 192.001–.007. Section 192.007(a)

states that “[t]o release, transfer, assign, or take another action relating to an

instrument that is filed, registered, or recorded in the office of the county clerk, a

person must file, register, or record another instrument relating to the action in the

                                        –10–
same manner as the original instrument was required to be filed, registered, or

recorded.” TEX. LOCAL GOV’T CODE § 192.007(a).

      To establish negligence per se, a plaintiff must prove: (1) the defendant’s act

or omission is in violation of a statute or ordinance; (2) the injured person was within

the class of persons which the ordinance was designed to protect; and (3) the

defendant’s act or omission proximately caused the injury. Ambrosio v. Carter’s

Shooting Ctr., Inc., 20 S.W.3d 262, 265 (Tex. App.—Houston [14th Dist.] 2000, pet.

denied).

      DHI has cited no authority expressly holding that section 192.007 is a valid

basis for a negligence per se claim. See Ybarra, 2018 WL 2976126, at *9

(recognizing appellant cited no authority for this proposition). Indeed, this

contention has been rejected because nothing indicates the statute establishes a

standard of conduct different from the common law standard of ordinary care. See

Trevarthen v. U.S. Bank Nat’l Ass’n, No. A-13-CA-154-SS, 2013 WL 12099974, at

*3 (W.D. Tex. Apr. 29, 2013) (negligence per se claim failed because “there is

simply no indication” section 192.007 establishes “a specific standard of conduct

different from the common-law standard of ordinary care”), aff’d sub nom.

Trevarthen v. U.S. Bank Nat. Ass’n, 551 Fed. Appx. 148 (5th Cir. 2014); see also

Reinagel, 735 F.3d at 227 n.27 (noting section 192.007 is “obscure provision” and

is “best read as a procedural directive to county clerks, not as a prerequisite to the

validity of assignments”); Dallas Cty., Tex. v. MERSCORP, Inc., 2 F. Supp. 3d 938,
                                         –11–
946 (N.D. Tex. 2014) (holding section 192.007 does not provide a private right of

action), aff'd sub nom. Harris Cty. Tex. v. MERSCORP Inc., 791 F.3d 545 (5th Cir.

2015); Standiford v. CitiMortgage, Inc., No. 03-14-00344-CV, 2015 WL 6831578,

at *5 (Tex. App.—Austin Nov. 3, 2015, pet. denied) (mem. op.) (section 192.007 is

procedural directive to county clerks about how to record subsequent documents and

imposes no duty to record). We conclude the trial court did not err by granting

summary judgment on DHI’s negligence per se claim.

                                    Conclusion

      We join the other courts that have rejected the issues and claims raised by

DHI. See, e.g., SGK Properties 881 F.3d at 941–42; Reinagel, 735 F.3d at 228;

Trevarthen, 2013 WL 12099974, at *3; Suniverse, 2021 WL 632603, at *13–14;

Ybarra, 2018 WL 2976126, at *4–5; EverBank, 499 S.W.3d at 543. DHI has failed

to show there was reversible error in the trial court’s judgment. Accordingly, we

overrule DHI’s issues and affirm the trial court’s judgment.

                                           /Erin A. Nowell//
                                           ERIN A. NOWELL
                                           JUSTICE

210287f.p05

                                       –12–
                                    S
                            Court of Appeals
                     Fifth District of Texas at Dallas
                                   JUDGMENT

DHI HOLDINGS, LP, Appellant                    On Appeal from the 113th District
                                               Court, Harris County, Texas
No. 05-21-00287-CV           V.                Trial Court Cause No. 2018-58282.
                                               Opinion delivered by Justice Nowell.
DEUTSCHE BANK NATIONAL                         Justices Myers and Osborne
TRUST COMPANY, AS TRUSTEE                      participating.
FOR GSAMP TRUST 2006-SD1,
MORTGAGE PASS-THROUGH
CERTIFICATES, SERIES 2006-
SD1; OCWEN LOAN SERVICING,
LLC; AND MORTGAGE
ELECTRONIC REGISTRATION
SYSTEMS, INC., Appellees

       In accordance with this Court’s opinion of this date, the judgment of the trial
court is AFFIRMED.

     It is ORDERED that appellees DEUTSCHE BANK NATIONAL TRUST
COMPANY, AS TRUSTEE FOR GSAMP TRUST 2006-SD1, MORTGAGE
PASS-THROUGH CERTIFICATES, SERIES 2006-SD1; OCWEN LOAN
SERVICING, LLC; AND MORTGAGE ELECTRONIC REGISTRATION
SYSTEMS, INC. recover their costs of this appeal from appellant DHI
HOLDINGS, LP.

Judgment entered this 1st day of August, 2022.

                                        –13–