BAC Home Loans Servicing, LP v. Tex. Realty Holdings, LLC

• Decision Date: 28 September 2012
• Docket Number: Civil Action No. H–09–2539.
• Citation: 901 F.Supp.2d 884
• Parties: BAC HOME LOANS SERVICING, LP, Plaintiff, v. TEXAS REALTY HOLDINGS, LLC, et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

901 F.Supp.2d 884

BAC HOME LOANS SERVICING, LP, Plaintiff,

v.TEXAS REALTY HOLDINGS, LLC, et al., Defendants.

Civil Action No. H–09–2539.

United States District Court,

S.D. Texas,

Houston Division.

Sept. 28, 2012.

C. Charles Townsend, Michael J. McKleroy, Jr., Akerman Senterfitt, LLP, Dallas, TX, for Plaintiff.

Gaynell Paul Matherne, Attorney at Law, Spring, TX, Cuong Minh Le, Law Office of Cuong M. Le, PLLC, Houston, TX, for Defendants.

Annie Lee, Sugar Land, TX, pro se.

Memorandum Opinion & Order

GRAY H. MILLER, District Judge.

Pending before the court are the following: (1) Charles P. Cowin's (“Cowin”) motion for summary judgment (Dkt. 173); (2) BAC Home Loans Servicing, LP's (“BAC” or “plaintiff”) motion for partial summary judgment (Dkt. 174); (3) G.P. Matherne's (“Matherne”) motion for partial summary judgment (Dkt. 177); (4) Susan Shen (“Shen”) and Annie Lee's (“Lee”) motion for partial summary judgment (Dkt. 180); & (5) Nancy Groves's motion for summary judgment (Dkt. 194).¹ Also pending is Cowin's motion to dismiss Nick Tran's (“Tran”) cross-claims (Dkt. 154). Having reviewed the briefing, record, and applicable law, the court GRANTS IN PART & DENIES IN PART Cowin's motion for summary judgment, GRANTS IN PART & DENIES IN PART BAC's motion, GRANTS IN PART & DENIES IN PART Shen and Lee's motion, DENIES Matherne's motion, DENIES Nancy Groves's motion, and DENIES Cowin's motion to dismiss.

I. Background

BAC filed this lawsuit against defendants based on an allegedly fraudulent scheme involving the purchase and sale of real property. See Dkts. 1, 66. BAC alleges violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”),² the Texas Uniform Fraudulent Transfer Act (“TUFTA”), ³ and damages pursuant to the Texas Theft Liability Act (“TTLA”), ⁴ as well as common-law causes of action for wrongful foreclosure, money had and received, and civil conspiracy. Id. BAC based its allegations of damages on direct and imputed liability.

A. Factual History

1. The Mortgage Loans

BAC is the mortgage servicer for three mortgage loans: (1) loan number ending in 9008 (the “Watthuber Loan”), which is secured by a lien against the property located at 6007 Memorial Drive, Unit 202, Houston, Texas (the “Watthuber Property”); (2) loan number ending in 5928 (the “Wright Loan”), which is secured by a lien against the property located at 3311 Yupon Street, Unit 611, Houston, Texas (the “Wright Property”); and (3) loan number ending in 5928 (the “Willis–Pomares Loan”), which is secured by a lien against the property located at 3015 Chenevert Street, Unit 14, Houston, Texas (the “Willis–Pomares Property”). Dkt. 174–2 (Aff. of Sharon Mason) at 1–4.

BAC's counsel has possession of each of the original notes. Dkt. 126–2 (Aff. of Jon McKeown) at 4–5; Dkt. 185–1 (Aff. of Michael J. McKleroy, Jr.) at 2. They are all three endorsed in blank. See Dkt. 174–2 (Watthuber Note); Dkt. 174–3 (Wright Note); Dkt. 174–4 (Willis–Pomares Note). Each of these loans is included in a pooling and servicing agreement (“PSA”). Dkt. 174–2 (Aff. of Sharon Mason) at 2–4.

The Watthuber Loan. The deed of trust securing the Watthuber Loan was executed on October 24, 2006, and recorded in Harris County on October 26, 2006. Dkt. 174–2 (Watthuber Loan Documents). A PSA executed on March 1, 2007, conveyed the Watthuber Loan, along with numerous other mortgage loans, to the Soundview Home Loan Trust 2007–WMC1, Asset–Backed Certificates, Series 2007–WMC1 and named Deutsche Bank National Trust Company (“Deutsche Bank”) as the trustee. See Dkt. 126–1 (Watthuber PSA); Dkt. 174–2 (Aff. of Sharon Mason) at 2. The depositor, Financial Asset Securities Corporation:

concurrently with the execution and delivery hereof, ... does hereby transfer, assign, set over and otherwise convey in trust to the Trustee without recourse for the benefit of the Certificateholders all [its] right, title and interest ..., including any security interest therein for the benefit of [Financial Asset Securities Corporation], in and to (I) each Mortgage Loan identified on the Mortgage Loan Schedule....

Dkt. 126–1 (Watthuber PSA) at 51 § 2.01. Financial Asset Securities Corporation delivered to the trustee loan documents for each loan that included the original note: “endorsed either (A) in blank, in which case the Trustee shall cause the endorsement to be completed or (B) in the following form: ‘Pay to the order of Deutsche Bank ... without recourse’....” Dkt. 126–1 (Watthuber PSA) at 52 § 2.01.

The Watthuber PSA authorized BAC ⁵ to act as the mortgage servicer for the loan. Dkt. 174–2 (Aff. of Sharon Mason) at 2; see also Dkt. 126–1 (Watthuber PSA) at 60 § 3.01. BAC's general responsibilities as servicer included acting on behalf of the owner in the collection and application of loan payments. Dkt. 174–2 (Aff. of Sharon Mason) at 4. According to the Watthuber PSA, BAC should “seek to maximize the timely and complete recovery of principal and interest on the Mortgage Notes” and was given “full power and authority, acting alone ... to do or cause to be done any and all things in connection with such servicing and administration which it may deem necessary or desirable.” Dkt. 126–1 (Watthuber PSA) at 61 § 3.01. The PSA specifically indicated that BAC's powers included bringing or responding to civil actions or complaints in its own name or that of the trust fund or the trustee on behalf of the trust fund related to any mortgage loan or mortgaged property held by the trust fund. Id.

BAC was paid a servicing fee and was entitled to recover unpaid servicing fees out of liquidation and other proceeds. Dkt. 126–1 (Watthuber PSA) at 71 § 3.18. The Watthuber PSA stated, “[T]his agreement shall be construed in accordance with the laws of the state of New York, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws.” Dkt. 126–1 (Watthuber PSA) at 116 § 11.04.

The Wright Loan. The deed of trust securing the Wright Loan was executed on August 8, 2006, and recorded in Harris County on November 1, 2006. Dkt. 174–3 (Wright Loan Documents). A PSA executed on December 1, 2006, conveyed the Wright Loan, along with numerous other mortgage loans, to the Certificates Holders CWALT, Inc. (“CWALT”) Alternative Loan Trust 2006–OC11, Mortgage Pass Through Certificates, Series 2006–OC11 and named The Bank of New York Mellon ⁶ as the trustee. See Dkt. 126–6 (Wright PSA); Dkt. 174–2 (Aff. of Sharon Mason) at 3. The PSA stated:

(a) Each Seller, concurrently with the execution and delivery hereof, hereby sells, transfers, assigns, sets over and otherwise conveys to the Depositor [CWALT], without recourse, all its respective right, title and interest in and to the related Initial Mortgage Loans .... (b) Immediately upon the conveyance of the Initial Mortgage Loans referredto in clause (a), the Depositor sells, transfers, assigns, sets over and otherwise conveys to the Trustee for the benefit of the Certificateholders, without recourse, all the right, title and interest of the Depositor in and to the Trust Fund.

Dkt. 126–1 (Wright PSA) at 53 § 2.01. CWALT delivered loan documents to the trustee for each loan that included the original note: “endorsed by manual or facsimile signature in blank in the following form: ‘Pay to the order of ______ without recourse,’ with all intervening endorsements showing a complete chain of endorsement from the originator to the Person endorsing the Mortgage Note ....” Id. at 53–54 § 2.01.

The Wright PSA authorized BAC to act as the mortgage servicer for the loan. Dkt. 174–2 (Aff. of Sharon Mason) at 3; see also Dkt. 126–6 (Wright PSA) at 69 § 3.01. BAC's general responsibilities as servicer included acting on behalf of the owner in the collection and application of loan payments. Dkt. 174–2 (Aff. of Sharon Mason) at 3. According to the Wright PSA, BAC was given “full power and authority, acting alone ... subject to the terms of the Agreement” to collect liquidation proceeds, as well as to perform other acts in connection with servicing the loans. Dkt. 126–6 (Wright PSA) at 69 § 3.01. BAC was tasked with representing and protecting the interests of the trust “in the same manner as it protects its own interests in mortgage loans in its own portfolio in any claim, proceeding or litigation regarding a Mortgage Loan.” Id.

In addition to a servicing fee, BAC was compensated by retaining liquidation proceeds that exceeded the unpaid principal and interest on any liquidated loan. Id. at 86 § 3.14; see also id. at 22. New York law governed the Wright PSA and its interpretation. Dkt. 126–6 (Wright PSA) at 145 § 10.03. The obligations, rights and remedies of the contracting parties and the certificateholders were to be determined according to New York law. Id.

The Willis–Pomares Loan. The deed of trust securing the Willis–Pomares Loan was executed on July 13, 2006, and recorded in Harris County on July 14, 2006. Dkt. 174–4 (Willis–Pomares Loan Documents). A PSA executed on November 1, 2006, conveyed the Willis–Pomares Loan, along with numerous other mortgage loans, to the Morgan Stanley ABS Capital 1 Inc. (“Morgan Stanley”) Trust 2006–NC5, Mortgage Pass–Through Certificates, Series 2006–NC5 and named Deutsche Bank as the trustee. See Dkt. 126–7 (Willis–Pomares PSA); Dkt. 174–2 (Aff. of Sharon Mason) at 4. Morgan Stanley “concurrently with the execution and delivery hereof, hereby sells, transfers, assigns, sets over and otherwise conveys to the Trustee for the benefit of the Certificateholders, without recourse, all the right, title and interest of the Depositor in and to the Trust Fund, and the Trustee, on behalf of the Trust, hereby accepts the Trust Fund.” Dkt. 126–7 (Willis–Pomares PSA) at 59 § 2.01. Morgan Stanley “delivered or caused to be delivered” loan documents for each transferred loan, which included:

(I) the original Mortgage Note bearing all intervening endorsements showing a complete chain of endorsement from...