Kittler et al v. GMAC Mortgage LLC, No. 4:2012cv00902 - Document 28 (S.D. Tex. 2013)

Court Description: MEMORANDUM OPINION AND ORDER granting 25 MOTION for Summary Judgment and Incorporated Brief in Support Thereof. (Signed by Judge Sim Lake) Parties notified. (aboyd)
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Kittler et al v. GMAC Mortgage LLC Doc. 28 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION JANICE K. KITTLER and LESLIE KITTLER, § § § § Plaintiffs, § § § § § § v. GMAC MORTGAGE, LLC, Defendant. CIVIL ACTION NO. H-12-0902 MEMORANDUM OPINION AND ORDER Plaintiffs, Janice K. Kittler and Leslie Kittler (~the Kittlers"), bring this action against defendant, GMAC Mortgage, LLC (~GMACM"), for declaratory judgment. Pending before the court is GMAC Mortgage, LLC's Motion for Summary Judgment and Incorporated Brief in Support Thereof (Docket Entry No. 25). For the reasons stated below, GMACM's motion for summary judgment will be granted, and this action will be dismissed with prejudice. I. Procedural Background This action was filed on June 10, 2011, in the District Court of Harris County, Texas, 333rd Judicial District (Cause No. 201134928), transferred to the 295th Judicial removed to this court on March 26, 2012.1 District, Plaintiffs' and then Original Petition alleged that the Kittlers executed a Texas home equity 1Notice of Removal, Docket Entry No.1. Dockets.Justia.com promissory note in February of 2008 in the amount of $200,100.00, which was secured by a security instrument, attached to their Original June 10, 2011, the Kittlers Petition. 2 also both of which were On the same day, filed Respondents' i .e . , Notice of Petition Contesting Applicant's Right to Foreclosure in the case styled, In re Order for Foreclosure, Concerning Janice K. Kittler and Leslie Kittler and 21051 Flaming Arrow Trail, Crosby, Texas 77532 (Cause No. 2011-10755) in the 295th Judicial District Court of Harris County, Texas. 3 Plaintiffs' Original Petition contested GMACM's right to foreclose on their home at 21051 Flaming Arrow Trail, Crosby, negligent Texas 77532, misrepresentation, by asserting causes of action for breach of duty, and declaratory judgment. 4 On March 26, 2012, GMACM removed this action to federal court asserting that "[t]his case is properly removable pursuant to 28 u.S.C. §§ 1332 and 1441 because complete diversity of citizenship exists between Plaintiffs on one hand, and GMACM on the other hand. 2See Plaintiffs' Original Petition, ~ 6, Texas Home Equity Note, and Texas Home Equity Security Instrument, Exhibits A-C, respectively, to Notice of Removal, Docket Entry No.1. See also Puig v. Citibank, N.A., 2013 WL 657676, *1 (5th Cir. February 22, 2013) (recognizing Texas Home Equity Security Instrument as a Deed of Trust encumbering property used to secure a home equity loan in Texas) . 3Exhibit D to Notice of Removal, Docket Entry No.1. 4Plaintiffs' Original Petition, Exhibit A to Notice of Removal, Docket Entry No. I, pp. 3-4 ~~ 15-28. See also Respondents' Notice of Petition, Exhibit D to Notice of Removal, Docket Entry No. I, p. 1 ~ 1. -2- Further, the amount in controversy exceeds $75,000.00, exclusive of interest and costs."s On April 13, 2012, GMACM filed a Rule 12© Motion for Judgment on the Pleadings (Docket Entry No.5). denied GMACM's Motion for Judgment On May 30, 2012, the court on the Pleadings without prejudice, explaining that plaintiffs had failed to state a claim for relief. But instead of dismissing the case, the court ordered plaintiffs to file an amended complaint (Docket Entry No. 10).6 On June 11, 2012, the Kittlers filed a Notice of Suggestion of Bankruptcy (Docket Entry No. 11) stating that on May 14, 2012, GMACM and its affiliates filed voluntary petitions under Chapter 11 of the United States Code in the Southern District of New York. On June 14, 2012, the court entered an Order of Dismissal stating that "[a] petition filed under 11 U.S.C. § 301, et ~, operates as a stay of the commencement or continuation of a judicial proceeding against the debtor that was or could have been commenced before the initiation of the bankruptcy Dismissal also stated, case."7 The court's Order of "Plaintiffs may reinstate this action upon notice to this court of the discontinuance of the stay pursuant to 11 U.S.C. § 362(c) (2), provided such notice is filed within 30 days SNotice of Removal, Docket Entry No.1, p. 2 ~ 60r der, Docket Entry No. 10. 70 r der of Dismissal, Docket Entry No. 12, p. 1. -3- 5. after the bankruptcy stay is discontinued."8 On July 31, 2012, the court reinstated the case and ordered the Kittlers to file an amended complaint (Docket Entry No. 16). On August 14, 2012, the Kittlers filed Plaintiffs' First Amended Complaint in which they asserted a single cause of action for declaratory judgment (Docket Entry No. 18). On August 15, 2012, GMACM answered Plaintiffs' First Amended Complaint (Docket Entry No. 19). On January 25, 2013, GMACM filed a motion for summary judgment (Docket Entry No. 25), to which the Kittlers have responded (Docket Entry No. 26), and GMACM has replied (Docket Entry No. 27) II. Standard of Review Summary judgment is authorized if the movant establishes the absence of a genuine dispute about any material fact and the law entitles it to judgment. material facts are Fed. R. Civ. P. 56(c). "genuine" if the evidence Disputes about is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 106 S. Ct. 2505, 2511 (1986). The Supreme Court has interpreted Rule 56(c) to mandate the entry of summary judgment "after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at 8Id. at 2. -4- trial. Celotex Corp. v. Catrett, 106 S. Ct. 2548, 2552 (1986). II A party moving for summary judgment "must 'demonstrate the absence of a genuine issue of material fact,' elements of the nonmovant's case. F.3d 1069, S. Ct. 1075 (5th Cir. at 2553-2554) Rule 56(c) Little v. Liquid Air Corp., 37 1I 1994) but need not negate the (en banc) (quoting Celotex, 106 If the moving party meets this burden, requires the nonmovant to go beyond the pleadings and show by admissible evidence that specific facts exist over which there is a genuine issue for trial. S. Ct. at 2553-2554) Id. (citing Celotex, 106 In reviewing the evidence "the court must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence. II Reeves v. Sanderson Plumbing Products, Inc., 120 S. Ct. 2097, 2110 (2000). Factual controversies are to be resolved in favor of the nonmovant, "but only when both parties evidence of contradictory facts.1I III. In 1992 the have submitted Little, 37 F.3d at 1075. Undisputed Facts Kittlers purchased property located at Flaming Arrow Trail, Crosby, Texas 77532 21051 ("the Property"), 9 by obtaining a mortgage loan in the amount of $90,000.00. 10 91992 Warranty Deed, Exhibit A to GMAC Mortgage, LLC's Motion for Summary Judgment ("GMACM's MSJ Docket Entry No. 25. II ) , 1°1992 Deed of Trust, Exhibit B to GMACM's MSJ, Docket Entry No. 25. -5- In April of 2006 the Kittlers refinanced and took out a home equity loan on the Property in the amount of $180,000.00. 11 In October of 2007 the Kittlers sought to refinance their loan.12 Security On February I, 2008, the Kittlers signed a new Home Equity Instrument $200,100.00 and a Promissory Note in the amount of (the "Loan").13 The original beneficiary under the Security Instrument was Mortgage Electronic Registration Systems, Inc. for GMACM. 14 ("MERS") as nominee The Loan was subsequently assigned to GMACM via formal assignment. 15 The Kittlers defaulted on the Loan by failing to make the required monthly payments. 16 On November I, 2010, a Notice of Default was sent to the Kittlers informing them that they were delinquent by $5,120.26. 17 llTexas Home Equity Security Interest, MSJ, Docket Entry No. 25. Exhibit C to GMACM's 12Declaration of Michael S. Batson ("Batson Declaration"), Uniform Residential Loan Application, and Settlement Statement, Exhibits D, D-l, and D-2 to GMACM's MSJ, Docket Entry No. 25. 13Plaintiffs' First Amended Complaint ("First Amended Complaint"), ~~ 6-9, Note and Security Instrument, Exhibits D-3 and D-4 to GMACM's MSJ, Docket Entry No. 25. 14Security Instrument, Exhibit D-4 to GMACM' s MSJ, Docket Entry No. 25. 15Assignment, Exhibit D-5 to GMACM's MSJ, Docket Entry No. 25. 16Batson Declaration, Exhibit D to GMACM's MSJ, Docket Entry No. 25. 17Notice of Default, Exhibit D-6 to GMACM's MSJ, Docket Entry No. 25. -6- On December 30, 2010, a Notice of Acceleration was sent to the Kittlers declaring all indebtedness on the Note due and payable. 1B On February 18, 2011, GMACM filed a Rule 736 Application for Order for Foreclosure in the 295th Judicial District Court of Harris County, Texas (Cause No. 2011-10755) .19 The total amount due on the Loan as of January 25, 2013, was $51,812.69. 20 IV. Analysis The Kittlers seek an order declaring that "(a) Defendant is not the holder of the Note, (b) a declaration of which party is the current holder of the Note if such information can be obtained, and (c) A. the amount owed on the Note.,,21 Plaintiffs Fail to Cite Any Evidence Raising a Fact Issue as to the Note Holder's Identity or to GMACM's Right to Foreclose Asserting that "Defendant has alleged that it is the legal owner of the Note and related Security Instrument with authority to receive payments and to foreclose on Plaintiffs' Home,,,22 and that "Defendant and other parties asserting to be acting on behalf of 18Notice of Acceleration, Exhibit D-7 to GMACM's MSJ, Docket Entry No. 25. 19Rule 736 Application, Exhibit E to GMACM's MSJ, Docket Entry No. 25. 20See Batson Declaration, Entry No. 25, p. 3 ~ 13. Exhibit D to GMACM's MSJ, 21First Amended Complaint, Docket Entry No. 18, pp. 4-5 22Id. ~ 10. -7- Docket ~ 26. Defendant have foreclosure, allege that that it is collected payments and disparaged from Plaintiffs' Plaintiff, credit, ,,23 threatened the Kittlers "Defendant has failed to produce evidence to the current holder of the Note or the [them] Security Instrument, ,,24 that "[e] ven in the event it were determined that Defendant is the current holder of the Note, Plaintiffs believe and submit that [Defendant] still does not hold the Security Agreement and thus has an unsecured claim to the debt evidenced by the Note,,,25 and that they "dispute and deny the Defendant's right to foreclose on the Property." 26 1. Applicable Law Texas law differentiates between enforcement of a promissory note and a security interest. "Where there is a debt secured by a note, which is, in turn, secured by a lien, the lien and the note constitute separate obligations." 372, 374 (Tex. App. Aguero v. Ramirez, 70 S.W.3d Corpus Christi 2002, pet. denied) In such situations the right to recover on the promissory note and the right to foreclose may be enforced separately. Stephens v. LPP Mortgage, Ltd., 316 S.W.3d 742, Austin 2010, pet. denied) 23Id. ~ 12. 25Id. 747 (Tex. App. - (finding that the promissory note and the ~ 13. 24Id. See also ~ 19. 26Id. -8- lien that secures it "constitute separate obligations" that "may be litigated in separate lawsuits"); Carter v. Gray, 81 S.W.2d 647, 648 (Tex. 1935) ("It is so well settled as not to be controverted that the right to recover a personal judgment for a debt secured by a lien on land and the right to have a foreclosure of lien are severable, and a plaintiff may elect to seek a personal judgment without foreclosing the lien, lien.") . and even without a waiver of the While enforcement of a promissory note is a personal action against the signatory that requires a judicial proceeding, foreclosure is an independent action against the collateral that may be conducted without judicial supervision. BAC Home Loans WL 3793190, at *4 Servicing, (Tex. L. P. , App. - property (W.D. Tex. July 25, 2011)) derives 30, 2012, solely 2012 no pet. ) Inc., No. A-11-CA-420-SS, v. Quails, 162 S.W.2d 671,675 (1942) debtor's 03-11-00644-CV, Austin Aug. (citing Reardean v. CitiMortgage, WL 3268307, at *3 No. See Bierwirth v. 2011 See also Slaughter (a trustee's power to sell a from the deed of trust). Non-judicial foreclosures are governed by Chapter 51 of the Texas Property Code, which authorizes either a mortgagee or a mortgage servicer acting on behalf of a mortgagee to sell real property under a "power of sale conferred by a deed of trust." Prop. Code. §§ 51.002, 51.0025. See Tex. Under Texas law "a deed of trust is a mortgage with a power to sellon default." Starcrest Trust v. Berry, 926 S.W.2d 343, 351 (Tex. App. - Austin 1996, no writ). Property Code defines a "mortgagee" -9- as " (A) the The grantee, beneficiary, owner, or holder of a security instrument; (B) a book entry system, or (C) if the security interest has been assigned of record, the last person to whom the security interest has been assigned of record." 2. Tex. Prop. Code § 51.0001(4). Application of the Law to the Facts Attached to GMACM's MSJ is evidence showing that GMACM is not only the holder and owner of the Note and the Security Interest, but also is the mortgagee and servicer of the Loan with right to foreclose and sell the Property. This evidence consists of the Declaration of Michael ("Batson"), S. Batson Senior Litigation Analyst for GMACM,27 and records of the Loan attached thereto that "are kept by GMACM business, "28 and are in the Batson Declaration are: Statement;31 (3) and course of The Loan records attached to the (1) Uniform Residential Loan Application Kittler on October 31, Texas Home Equity Note;32 Security Instrument, ordinary "true and complete copies of the original records maintained by GMACM. "29 signed by Janice regular 2007;30 (4) (2) Settlement Texas Home Equity signed and acknowledged by the Kittlers on 27Batson Declaration, Exhibit D to GMACM's MSJ, Docket Entry No. 25. 28Id. ~ 2. 29Id. ~ 6, and Exhibits D-1 through D-5 attached thereto. 30Exhibit D-1 to GMACM's MSJ, Docket Entry No. 25. 31Exhibit D-2 to GMACM's MSJ, Docket Entry No. 25. 32Exhibit D-3 to GMACM's MSJ, Docket Entry No. 25. -10- February 1, 2008i 33 and (5) Assignment of the Security Instrument from MERS to GMACM. 34 The Kittlers do not contest that Janice Kittler signed the Note, that Janice Kittler and Lesl ie Kittler both signed the Security Instrument, that the Security Instrument named MERS as the beneficiary,35 or that they have defaulted on the Loan. Instead, 3. Plaintiffs object to the Declaration of Michael S. Batson as he clearly does not have personal knowledge of the assignment at issue in this case. As stated in his Declaration, Mr. Batson's knowledge is limited to his review of certain records in Defendant's Loan file. He does not purport to have any actual involvement whatsoever in, or personal knowledge concerning, the assignment of the Loan at issue. Accordingly, Plaintiffs respectfully submit that Mr. Batson's testimony is not competent to establish the authenticity of the purported Loan assignment. 4. Additionally, Defendant has failed and/or refused to produce the original Loan documents for Plaintiff to review, including the promissory note and related Securi ty Instrument at issue in this case. Although Mr. Batson's Declaration states that the documents attached to his Declaration are copies of Defendant's original records, he does not state that they are genuine, true and correct copies of the original Loan documents. Accordingly, there is no evidence whatsoever submitted that he reviewed original Loan documents or had any personal knowledge whatsoever of the purported assignment of the original Loan documents to the Defendant. 5. In view of the above, Plaintiff respectfully submits that Defendant has not established it is the current owner and holder of the Loan and/or Loan documents and 33Exhibit D-4 to GMACM's MSJ, Docket Entry No. 25. 34Exhibit D-5 to GMACM's MSJ, Docket Entry No. 25. 35See Security Instrument, Exhibit D-4 to GMACM's MSJ, Docket Entry No. 25, p. 1 ~ (E) . -11- enti tled to foreclose on Plaintiffs' home Security Instrument at issue in this case. 36 (a) under the The Batson Declaration and the Exhibits Attached Thereto Are Competent Summary Judgment Evidence The Fifth Circuit has "held that an affidavit can adequately support a motion for summary judgment when the affiant's personal knowledge is based on a review of her employer's business records and the affiant's position with the employer renders her competent to testify on the particular issue which the affidavit concerns. H Carson v. Perry, Cir. Inc., 113 1996) 91 F.3d 138 (per curiam) (table), (citing F.D.I.C. 937 F.2d 1249, 1254-55 n.12 S. Ct. 1944 (1993) 1996 WL 400122, at *1 (per v. (5th Selaiden Builders, (5th Cir. 1992), cert. denied, curiam) (rejecting challenge to affidavits where affiants had personal knowledge that RTC took over assets of failed institution but had no precise personal knowledge of the particular note at issue) Camp, 965 F.2d 25, 29 (5th i Cir. and Resolution Trust Corp. v. 1992) (rej ecting plaintiffs' attempt to defeat summary judgment by challenging an affidavit as untrue without pointing to any "evidence in the record to the effect that they had a legitimate fear that RTC was not the owner and holder of the note in question and that some other entity might later approach them demanding payment H See also Cuevas v. BAC )). Home Loans Servicing LP, 648 F.3d 242, 250 (5th Cir. 2011) (citing 36Plaintiffs' Response in Opposition to Defendant's Motion for Summary Judgment ("Plaintiffs' Response Docket Entry No. 26, ~~ 3-5. H -12- ), with approval the affidavit of a corporate officer submitted in support of summary judgment stating that she was testifying from her personal knowledge of the defendant bank's structure, and her review of relevant business records) . Batson states in his Declaration that he has personal knowledge of GMACM's "business practices and procedures concerning the servicing of loans," including the Kittlers' Loan, through his position as Senior Litigation Analyst for GMACM, and that the statements in his Declaration are based on his review of GMACM's records related to the Kittlers' Loan. The bulk of Batson's Declaration merely describe the documents attached as exhibits thereto - two of which are referenced in the Kit tIers' First Amended Complaint, i.e., the Texas Home Equity Promissory Note, and the Texas Home Equity Security Instrument. 37 The facts Batson recites are facts that a GMACM representative would naturally know, such as the fact that the Kittlers have a Loan that is being serviced by GMACM, that the Loan was assigned to GMACM, that the Kittlers defaulted on the Loan by failing to make their monthly mortgage payments, that notices of default and acceleration have 37Plaintiffs' First Amended Complaint, Docket Entry No. 18, p. 2 ~ 7 (stating that "[o]n or about February 1, 2008, Plaintiffs executed a Texas home equity promissory note (hereinafter the "Note") in the original principal amount of $200,100.00 and payable to the order of Mortgage Electronic Registration Systems"), and ~ 8 (stating that "Plaintiffs also executed a security instrument (the "Security Instrument") granting Mortgage Electronic Registration Systems a lien on Plaintiffs' Home. The Security Instrument purportedly grants Mortgage Electronic Registration Systems, its successors and assigns, a deed of trust lien on the Property. ") . -13- been sent to the Kittlers, and that the debt remains unpaid in a specific amount. Moreover, Batson also states facts that the Kittlers freely admit in their pleadings such as the facts that they signed the Loan papers, they made payments to GMACM and/or to agents acting on GMACM's behalf, GMACM has alleged that they are in default and threatened them with foreclosure, and that they have tried to work out a resolution of the claimed default with GMACM. 38 The Kittlers object to Batson's Declaration as not based on personal knowledge, but they have failed to point to any evidence in the record showing that they have a legitimate fear that GMACM is not the owner and holder of the Note in question and that some other entity might later approach them demanding payment. Because the Kittlers have failed to cite any evidence indicating that any of the statements in Batson's Declaration are inaccurate or untrue, the court concludes that Batson's Declaration is competent summary judgment evidence, merit. and the Kittlers' objections to it have no See Bittinger v. Wells Fargo Bank NA, Civil Action No. H- 10-1745, 2011 WL 5415664, *3 (S.D. Tex. November 8, 2011) affidavit of mortgage servicer's assistant (finding secretary competent summary judgment evidence of transfers, possession, and servicing of the mortgage loan at issue) records The Kittlers' objections to the attached to Batson's declaration are merit. 38rd. ~~ 13 and 15. -14- similarly without Batson states that the documents [a] ttached hereto are certain documents from the Loan File. All of the documents discussed below and attached hereto are kept by GMACM in the regular and ordinary course of business. The documents attached hereto (identified below) are true and complete copies of the original records by GMACM. 39 Without citing any authority, the Kittlers argue that GMACM has failed and/or refused to produce the original Loan documents for Plaintiff to review, including the promissory note and related Security [I] nstrument at issue in this case. Although Mr. Batson's Declaration states that the documents attached to his Declaration are copies of Defendant's original records, he does not state that they are genuine, true and correct copies of the original Loan documents. Accordingly, there is no evidence whatsoever submitted that he reviewed original Loan documents or had any personal knowledge whatsoever of the purported assignment of the original Loan documents. 4o The Kittlers' the original assertions that GMACM was required to produce loan documents to prove it could foreclose on the Property implicate the "show-me-the-note" theory. JPMorgan Chase, NO.3: 12-CV-212-N, See Bennett v. 2012 WL 2864751, at *3 (N.D. Tex. June 12, 2012), recommendation adopted, 2012 WL 2864467 (N.D. Tex. July 12, 2012). "Advocates of this theory believe that only the holder of the original wet-ink signature note has the lawful power to initiate a non-judicial foreclosure. II ~v....!._--"B~A~C,---=.H~o~m~e~--=L:.::o~a~n:..!:..----2:S~e::.:r=-v~i.::::c:..=i,.:.n~g;:l....l.-'_-"=L,-,.--=P,--,-. , W 0 - CA - 0 03 5 0 , -1 WL 2163987, at *2 No . (W.D. Tex. April 26, 2011)). Id. (citing Wells 2011 The Fifth Circuit 39Batson Declaration, Exhibit D to GMACM's MSJ, Docket Entry No. 25, p. 2 ~ 6. 4°Plaintiffs' Response, Docket Entry No. 26, p. 2 ~ 4. -15- ---_._----- has rej ected the "show-me-the-note" theory as having no merit. See Martins v. BAC Home Loans Servicing, L.P., No. 12-20559, ___ F.3d See also Bennett, --, 2013 WL 3213633 (5th Cir. June 26, 2013). 2012 WL 2864751, repeatedly at *3 rej ected (recognizing that "[t] he theory has been in this circuit and has no merit") i and Cervantes v. u.S. Bank National Association, No. 3:12-CV-0661-D, 2012 WL 1605558, at *3 (N.D. Tex. May 8, 2012) Recognizing that "[i]n Texas, existence (collecting cases) . of a note may be established by '[a] photocopy of the promissory note, attached to an affidavit in which the affiant swears that the photocopy is a true and correct copy of the original note, '" the Fifth Circuit has recently said that \\ [w] e find no contrary Texas authority requiring production of the 'original' note," and held that "[t]he original, signed note need not be produced in order to foreclose. ___ F.3d at ___ , 2013 WL 3213633, *4 II Martins, (quoting Blankenship v. Robins, 899 S.W.2d 236, 238 (Tex. App. - Houston [14th Dist.] 1994, no writ)). Accordingly, the Kittlers' objections to the Batson Declaration and to the documents attached thereto as exhibits are overruled. (b) The Security Agreement Has Been Assigned to GMACM The Kittlers' contention that GMACM cannot foreclose on the Property because they "believe and submit that hold the Security Agreement, p. 4 41Plaintiffs' ~ 19. 1141 [GMACM] does not challenges the assignment of the First Amended Complaint, -16- Docket Entry No. 18, Security Interest from MERS to GMACM. repeatedly held that plaintiffs Courts in this circuit have have no assignments unless they become a party, party, or a third-party beneficiary of standing to challenge agent or assignee of a the agreement. See Bittinger v. Wells Fargo Bank NA, 744 F. Supp. 2d 619, 625-26 (S.D. Tex. 2010). See also James v. Wells Fargo Bank, N.A., No. 3:11-CV- 2228-B, 2012 WL 778510, at *2 (N.D. Tex. March 12,2012) (citing Eskridge v. Federal Home Loan Mortgage Corp., No. W-10-CA-285, 2011 WL 2163989, at *5 (W.D. Tex. February 24, 2011) ("Plaintiff has no standing to contest the various assignments as she was not a party to the assignments. ") . Moreover, even if the Kittlers have standing to challenge MERS' assignment of the Security Instrument to GMACM, their challenge would have no merit because any argument that the Security Instrument was not properly assigned to GMACM is contradicted by the Security Instrument and the Assignment. The Security Instrument identifies the borrower and grantor as Janice K. Kittler and husband, Leslie Kittler, the lender as GMAC Mortgage, LLC, the trustee as George M. Shanks, Jr., and provides: (E) "MERS" is Mortgage Electronic Registration Systems, Inc. MERS is a separate corporation that is acting solely as a nominee for Lender and Lender's successors and assigns. MERS is the beneficiary under this Security Instrument. MERS is organized and existing under the laws of Delaware . (F) "Note" means the promissory note signed by Borrower and dated FEBRUARY 1, 2008. The Note states that Borrower owes Lender TWO HUNDRED THOUSAND ONE HUNDRED AND 00/100ths Dollars (U.S. $200,100.00) plus interest. Borrower has promised to pay this debt in regular Periodic Payments and to pay the debt in full not later than MARCH 1, 2038. -17- (G) "Property" means the property that is described below under the heading "Transfer of Rights in the Property. ,,42 The paragraph titled "TRANSFER OF RIGHTS IN THE PROPERTY" provides: The beneficiary of this Security Instrument is MERS (solely as nominee for Lender and Lender's successors and assigns) and the successors and assigns of MERS. This Security Instrument secures to Lender: (i) the repayment of the Extension of Credit, and all extensions and modifications of the Note; and (ii) the performance of Borrower's covenants and agreements under this Security Instrument and the Note. For this purpose, Borrower irrevocably grants and conveys to Trustee, in trust, with power of sale, the following described Property located in the COUNTY of HARRIS: LOT FIFTEEN (15), IN BLOCK TWENTY (20), IN INDIAN SHORES, SECTION FOUR (4), A SUBDIVISION IN HARRIS COUNTY, TEXAS, ACCORDING TO THE MAP OR PLAT THEREOF RECORDED IN VOLUME 144, PAGE 43, OF THE MAP RECORDS OF HARRIS COUNTY, TEXAS, which currently has the address of 21051 FLAMING ARROW TRAIL, CROSBY, Texas 77532 ("Property Address") : TOGETHER WITH all the improvements now or hereafter erected on the Property, and all easements, appurtenances and fixtures now or hereafter a part of the Property. All replacements and additions shall also be covered by this Security Instrument. All of the foregoing is referred to in this Security Instrument as the "Property" : provided however, that the Property is limited to homestead property in accordance with Section 50 (a) (6) (11), Article XVI of the Texas Constitution. Borrower understands and agrees that MERS holds only legal title to the interests granted by Borrower in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender's successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take 42Security Instrument, Exhibit D-4 to GMACM' s MSJ, Docket Entry No. 25, p. 1 ~~ (E)-(G). -18- any action required of Lender including but not limited to, releasing and canceling this Security Instrument. 43 Because the Security Instrument executed by the Kittlers named MERS as beneficiary and nominee for the original lender, GMACM and its successors and assigns, and granted MERS the right to foreclose and sell the Property, MERS had the authority to assign the Security Instrument to another party that would then be able to sell and foreclose the property. See Lamb v. Wells Fargo Bank, N.A., No. 3:12-CV-00680-L, 2012 WL 1888152, at *5 24, 2012) (N.D. Tex. May (holding that MERS could assign the deed of trust because the deed of trust ~on its face H granted MERS ~the right to sell and foreclose the propertyH) . The Assignment attached to Batson's Declaration states: FOR VALUE RECEIVED, the undersigned as Beneficiary, hereby grants, conveys, assigns and transfers to GMAC Mortgage, LLC, c/o GMAC Mortgage, LLC, all beneficial interest under that certain Deed of Trust, dated February 01, 2008, executed by Janice K. Kittler and husband, Leslie Kittler, Grantor, to George M. Shanks, Jr., Trustee, . . . Clerks File No. 20080062560, Records of HARRIS County, State of Texas, described land therein as: LOT FIFTEEN (15), IN BLOCK TWENTY (20), IN INDIAN SHORES, SECTION FOUR (4), A SUBDIVISION IN HARRIS COUNTY, TEXAS, ACCORDING TO THE MAP OR PLAT THEREOF RECORDED IN VOLUME 144, PAGE 43, OF THE MAP RECORDS OF HARRIS COUNTY, TEXAS. As set forth in said Deed of Trust and incorporated by reference herein. 44 43Security Instrument, Exhibit D-4 to GMACM' s MSJ, Docket Entry No. 25, pp. 2-3. 44Assignment, Exhibit D-5 attached to GMACM' s MSJ, Docket Entry No. 25. -19- Attached to the Assignment is a notarized signature page signed by MERS' Assistant Secretary, Anthony McLaughlin, on January 19, 2011. Both the Assignment and its notarized signature page were filed with the Harris County Clerk on February 2, 2011. Moreover, Batson states in his Declaration that the Assignment attached thereto as Exhibi t 5 is "[a] true and correct copy of the Assignment. 1145 Because the Assignment conveys MERS' rights under the Security Instrument to GMACM, and because MERS' rights under the Security Instrument included the right to sell and foreclose the Property, pursuant to MERS' assignment of the Security Instrument to GMACM, GMACM acquired the same rights that MERS had to sell and foreclose the Property. See Lamb, 2012 WL 1888152, at *5 {citing Wiggington v. Bank of New York Mellon, No. 3:10-CV-2128-G, 2011 WL 2669071, at *3 (N.D. Tex. July 7, 2011)) Accordingly, the Kittlers' challenge to MERS' assignment of the Security Instrument to GMACM fails to give rise to a reasonable inference that GMACM does not hold the Security Instrument. (c) GMACM is Entitled to Enforce the Security Instrument The Kittlers' allegations that GMACM is not the owner or holder of the Note and/or the Security Instrument are irrelevant with respect to GMACM's right to enforce the Security Instrument through non-judicial foreclosure under Texas law. foreclosure sales of real property under Non-judicial contract liens are 45Batson Declaration, Exhibit D to GMACM's MSJ, Docket Entry No. 25. -20- governed by Chapter 51 of the Texas Property Code. § 51.0025 a "mortgagee" or a Tex. foreclosure proceedings. "mortgage servicer" Prop. Code. Ann. § Pursuant to may conduct The 51.0025. "mortgagee" is defined as (A) the grantee, beneficiary, security instrument; (B) owner, or holder of a a book entry system; or (C) if the security interest has been assigned of record, the last person to whom the security interest has been assigned of record. Tex. Prop. Code Ann. Texas law is § found 51.0001(4) in A good explanation of MERS and Richardson v. CitiMortgage, Inc. , No. 6:10-cv-119, 2010 WL 4818556, *5 (E.D. Tex. November 22, 2010), where United States Magistrate Judge Judith K. Guthrie explained as follows: Under Texas law, where a deed of trust, as here, expressly provides for MERS to have the power of sale, then MERS has the power of sale. Athev v. MERS, 314 S.W.3d 161, 166 (Tex.App.-Eastland 2010). MERS was the nominee for Southside Bank and its successors and assigns. MERS had the authority to transfer the rights and interests in the Deed of Trust to CitiMortgage. The Plaintiffs' complaints about the role of MERS in this matter lack merit. It is further noted that the role of MERS has been the subject of federal multidistrict litigation in In re: Mortgage Electronic Registration Systems (MERS) Litigation, 659 F.Supp.2d 1368 (United States Judicial Panel Multi-district Litigation 2009) . The MERS system is merely an electronic mortgage registration system and clearinghouse that tracks beneficial ownerships in, and servicing rights to, mortgage loans. Id. at 1370. The system is designed to track transfers and avoid recording and other transfer fees that are otherwise associated with the sale. Id. at 1370 n. 6. MERS is defined in Texas Property Code § 51.0001(1) as a "book entry system," which means a "national book [entry] system for -21- registering a beneficial interest in security instrument and its successors and assigns. As noted in Athey, mortgage documents provide for the use of MERS and the provisions are enforceable to the extent provided by the terms of the documents. II GMACM is entitled to enforce the Security Instrument because MERS, § as a book entry Property. qualifies as a mortgagee under of the Texas Property Code, and because the Security 51.0001(4) Instrument system, granted MERS the power to foreclose and sell the For the reasons explained above, the court has already concluded that MERS assigned the Security Instrument and all the interest secured thereby to GMACM. Accordingly, even if true, the Kittlers' allegations that GMACM is not the holder or the owner of the Note do not give rise to a reasonable inference that GMACM lacks authority to foreclose and sell the Property. B. The Kittlers Fail to Cite Evidence Capable of Raising a Fact Issue as to Whether They Have Been Overcharged or Whether the Amount Owing on the Note is Not as Represented by GMACM Asserting that "it is unclear what amounts are owed and how the payments have been applied,"46 and that "they have been overcharged,"47 the Kittlers seek declaratory judgment reflecting "the amount owed on the Note. 1148 Citing the Batson Declaration and the Payment History of the Kittlers' Loan, GMACM argues that when its motion for summary judgment was filed on January 25, 2013, "the 46Plaintiffs' First Amended Complaint, p. 4 ~ 23. 47Id. ~ 24. 48Id. at 4-5 ~ 26. -22- Docket Entry No. 18, total amount due on the Loan [wa]s $51,812.69,"49 and that "Plaintiffs' payments were applied in accordance with the terms of the Security Instrument." 50 Al though the Kit tIers have alleged in response to GMACM's motion for summary judgment 51 that "Defendant and other parties asserting to be acting on behalf of Defendant have overcharged Plaintiff on the loan evidenced by the Note, "52 the Kittlers have neither offered any argument nor cited any evidence from which a reasonable fact-finder could conclude that the loan payments they have made were not applied in accordance with the terms of the Security Instrument, that they have been overcharged, or that the amount due on the Loan when GMACM filed its motion for summary judgment was not $51,812.69. Accordingly, the court concludes that the Kittlers have failed to raise a genuine issue of material fact for trial that they have been overcharged or that the amount owing on the Note is not the amount claimed by GMACM. C. The Kittlers' Have Failed to Raise a Fact Issue as to Whether GMACM Violated a Duty to Deal Fairly or Act in Good Faith Asserting that "the entire process of attempting to work out a resolution with [GMACM] has been frustrating, "53 the Kittlers 49GMACM's MSJ, Docket Entry No. 25, p. 6 (citing the Batson Declaration, Exhibit D thereto, and the Payment History for the Loan, Exhibit D-8 thereto) . 50Id. 51Plaintiffs' Response, Docket Entry No. 26. 52Plaintiffs' First Amended Complaint, Docket Entry No. 18, First Amended Complaint, Docket Entry No. 18, p. 3 ~ 14. 53Plaintiffs' p. 3 ~ 17. -23- assert that they "believe that [GMACM] has failed to deal fairly and/or act in good faith with respect to [them] ."54 The Kittlers explain that while they were attempting to work out a resolution of the claimed default with the Defendant and other parties working on behalf of the Defendant, without prior notice to the Plaintiffs, the Defendant commenced legal action to obtain a non-j udicial foreclosure on Plaintiffs' property and, in connection therewith, filed an Application for Foreclosure under Cause No. 2011-10755, in the 295 th Judicial District Court of Harris County, Texas, pursuant to Rule 736 of the Texas Rules of Civil Procedure. Plaintiffs obj ected to and challenged Defendant's actions by bringing [this] suit. 55 Asserting that "[n]othing whether in the Security Instrument or the law -- provides support for the argument that a foreclosure is wrongful under Texas law if it occurs while borrowers are requesting a modification of their loan terms, "56 GMACM argues that "Plaintiffs' claims about alleged defects in the foreclosure process have no merit and should be dismissed as a mat ter of law." 57 The Kittlers have responded to GMACM's motion for summary judgment, 58 but they have not cited any evidence from which a reasonable fact-finder could conclude that "Defendant has failed to 54Id. 56GMACM's MSJ, Docket Entry No. 25, p. 7. 58Plaintiffs' Response, Docket Entry No. 26. -24- ~~~- ~~---~----------- deal fairly and/or act in good faith with respect to [them] ."59 Nor have they offered an argument or cited any legal authority from which the court could conclude that GMACM owed them a duty either to modify the foreclosure, terms or of suspend their Loan, foreclosure refrain from activities. initiating See Federal Deposit Insurance Corp. v. Coleman, 795 S.W.2d 706, 709 (Tex. 1990) ("The relationship of mortgagor and mortgagee ordinarily does not invol ve a duty of good faith."). Moreover, the terms of the Security Instrument are to the contrary: 11. Borrower Not Released; Forbearance By Lender Not a Waiver. Extension of the time for payment or modification of amortization of the sums secured by this Security Instrument granted by Lender to Borrower or any Successor in Interest of Borrower shall not operate to release the liability of Borrower or any Successors in Interest of Borrower. Lender shall not be required to commence proceedings against any Successor in Interest of Borrower or to refuse to extend time for payment or otherwise modify amortization of the sums secured by this Security Instrument by reason of any demand made by the original Borrower or any Successors in Interest of Borrower. Any forbearance by Lender in exercising any right or remedy including, without limitation, Lender's acceptance of payments from third persons, entities or Successors in Interest of Borrower or in amounts less than the amount then due, shall not be a waiver of or preclude the exercise of any right or remedy.60 Accordingly, the Kittlers have failed to present any evidence from which a reasonable fact-finder could conclude either that GMACM has failed to deal fairly and/or act in good faith with respect to the 59Plaintiffs' First Amended Complaint, Docket Entry No. 18, p. 3 ~ 17. 6°Securi ty Instrument, Exhibit D-4 to GMACM' s MSJ, Docket Entry No. 25, p. 8 ~ 11. -25- Kittlers by failing to modify their refraining loan, from initiating foreclosure, or suspending foreclosure activities. D. The Kittlers' Claim for Declaratory Judgment Fails The only cause of action asserted in Plaintiffs' First Amended Complaint is for declaratory judgment. "When a declaratory judgment action is filed in state court and is subsequently removed to federal court, it is converted to one brought under the federal Declaratory Judgment Act, 28 U.S.C. of America WL 568755, Home at Loan *8 Servicing (S.D. Tex. §§ 2201, 2202./1 LP, No. February 21, Declaratory Judgment Act provides that controversy within its jurisdiction, Bell v. Bank 4:11-CV-02085, 2012) "[iJ n a The 2012 federal case of actual . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, sought./I whether or not further relief is or could be 28 U.S.C. § 2201 (a) The federal Declaratory Judgment Act does not create a substantive cause of action but, instead, is merely a procedural vehicle that allows a party to obtain an early adjudication of substantive law. an actual controversy arising See Bell, 2012 WL 568755, at *8. under other See also Aetna Life Insurance Co. of Hartford, CT v. Haworth, 57 S. Ct. 461, 463 (1937) ("the operation procedural only/l) i of Lowe v. the Declaratory Judgment Ingalls Shipbuilding, -~------"---------- is A Division of Litton Systems, Inc., 723 F.2d 1173, 1179 (5th Cir. 1984) -26- Act (same). In a declaratory judgment action, "[b]ased on the facts alleged, there must be a substantial and continuing controversy between two adverse parties." 2003). Bauer v. Texas, 341 F.3d 352, 358 (5th Cir. For the reasons described in this Memorandum Opinion and Order, the facts alleged in the Kittlers' First Amended Complaint fail to raise a "substantial and continuing controversy" GMACM's entitlement to foreclose on the Property. over Because GMACM has submitted undisputed summary judgment evidence establishing not only that it is the holder of the Note and the assignee of the Security Instrument, but also that it is entitled to enforce the Security Instrument by foreclosing on the Property, the Kittlers' requests for declaratory judgment must be denied. v. Conclusions and Order For the reasons stated above, GMAC Mortgage, LLC's Motion for Summary Judgment and Incorporated Brief in Support Thereof (Docket Entry No. 25) is GRANTED, and this action will be dismissed with prejudice. SIGNED at Houston, Texas, on this the 28th day of June, 2013. 7' SIM LAKE UNITED STATES DISTRICT JUDGE -27-