Hayes v. Bank of Am., Civil Action No. H-12-377
| Decision Date | 23 September 2013 |
| Docket Number | Civil Action No. H-12-377 |
| Parties | DARROL HAYES, JR., Plaintiff, v. BANK OF AMERICA, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., and CORNERSTONE MORTGAGE COMPANY, Defendants. |
| Court | U.S. District Court — Southern District of Texas |
Pending before the court1 are Plaintiff's Motion for Summary Judgment (Doc. 19), Defendants' Motion for Summary Judgment (Doc. 26), and Plaintiff's Emergency Motion to Dismiss (Doc. 30). The court has considered the motions, Defendants' responses to Plaintiff's motions, all other relevant filings, and the applicable law. For the reasons set forth below, the court DENIES Plaintiff's motions and GRANTS Defendants' motion.
Plaintiff, proceeding pro se, this filed case in state court on October 31, 2011, to avoid foreclosure on his house.2 Defendants removed the action to this court on February 9, 2012.3
The dispute concerns the real estate commonly known as "1107 Imperial Lake Drive" in Harris County, Texas.4 On December 22, 2009, Plaintiff purchased the property from D.R. Horton-Texas, LTD, as reflected in a General Warranty Deed with Vendor's Lien.5 A "vendor's lien together with the superior title" to the property was created in favor of Cornerstone Mortgage Company ("Cornerstone"), which financed $129,609 of the purchase price.6
Plaintiff executed a promissory note ("Note") in favor of Cornerstone for the amount of the loan.7 Pursuant to the terms of the Note, Plaintiff was required to make monthly mortgage payments in the amount of $756.36 beginning on February 1, 2010.8 The Note was subsequently endorsed twice, first by Cornerstone to Defendant Bank of America, N.A., ("BANA") and then by Defendant BANA in blank.9 Defendant BANA is the "current owner, holder, and servicer of the Note" and possesses the original Note.10
Plaintiff also executed a deed of trust ("Deed"), which conveyed the property to a trustee for the benefit of Defendant Mortgage Electronic Registration Systems ("MERS") as nominee for Cornerstone.11 MERS assigned the Deed to Defendant BANA.12 The General Warranty Deed with Vendor's Lien, the Deed, and the Assignment of Deed of Trust were recorded in the real property records for Harris County, Texas.13
Plaintiff failed to make the payment due on May 1, 2010, or any payment thereafter.14 The substitute trustee conducted a foreclosure sale in March 2013.15 Defendant BANA bought the property for $167,292.16
In his original petition, Plaintiff alleged a variety of illegal acts in the loan and foreclosure processes.17 Plaintiff alleged that he "discovered certain bogus Instruments which purported to divest Plaintiff of all interest in the subjectproperty by way of Silent Fraud."18
Although his petition contained convoluted statements of law and no factual details, the court broadly reads the petition to have alleged violations of the Real Estate Settlement Procedures Act19 ("RESPA"), Regulation X,20 the Uniform Commercial Code21 ("UCC"), and the "REMIC LAW"22 as well as claims of quiet title, fraudulent concealment, breach of contract,23 and forgery.24 Plaintiff's original petition sought fee simple title to the property, a declaration that Defendants' interests were "invalid and forever [e]xtinguished, and a return of the property "to its rightful owner[] and double its value of . . . $129,609.00 for defending the fraudulent action and void Ab initio, void from the beginning."25 Plaintiff attached copies of several documents, among them the General Warranty Deed with Vendor's Lien, the Note, andtwo pages of the Deed.26
Defendants removed the case based on federal question jurisdiction and filed an answer in February 2012.27 Plaintiff filed an amended complaint within the time allowed under the scheduling order but without seeking leave of court.28
As the court can best discern from the amended complaint,29 Plaintiff's claims emanate from alleged fraud and/or irregularity in the loan documents, Defendants' alleged failure to respond to Plaintiff's request for validation of the loan, Defendants' alleged failure to record documents properly, Defendants' alleged failure to provide Plaintiff with "the alleged contract for review," Defendants' alleged poor bookkeeping, and Defendants' alleged failure to report to consumer reporting agencies the date of delinquency.30 Plaintiff's Amended Complaint specifically listed six causes of action (in his words): 1) breach of contract; 2) violation of contract also validation; 3) violation of the servicerperformance agreement; 4) violation under the UCC; 5) failure of validation is a REMIC violation; and 6) unjust enrichment.31 Plaintiff repeated his requests that the court find that he is the title holder of the property, that Defendants' interests be declared invalid, and that the property be returned to its rightful owner.32 In the amended complaint he requested monetary damages in the amount of $226,708.33 Plaintiff attached only the General Warranty Deed with Vendor's Lien to his amended complaint.34
Plaintiff filed a motion for summary judgment in February 2013, and Defendants filed their response after a brief extension.35 Defendants sought and received leave to file a motion for summary judgment out of time.36 The motion docket date was July 17, 2013, and Plaintiff did not respond to the motion.37
On August 14, 2013, Plaintiff filed a notice of appearance of counsel.38 The following day, Plaintiff filed an emergency motion to dismiss without prejudice, explaining that Plaintiff had filed the lawsuit "on the advice of an unlicensed individual from Michigan holding himself out as a paralegal," who promised Plaintiff the recovery of large sums of money for a fee.39 In the motion, Plaintiff's counsel acknowledged that Plaintiff's pleadings were "incoherent and unintelligible to read and understand" and stated that counsel advised Plaintiff "to dismiss this action to protect his future rights, should it be determined that there are claims that can be substantiated from real evidence rather than an abundance of conclusory statements."40
Defendants opposed Plaintiff's motion to dismiss, and the court set a hearing on the matter.41 On August 23, 2013, Plaintiff filed a petition for relief under Chapter 13 of the Bankruptcy Code.42 Five days later, which happened to be the day before thescheduled hearing, Plaintiff filed a Notice of Suggestion of Bankruptcy.43 At the hearing, the parties discussed the effect on this action of Plaintiff's filing for bankruptcy protection.44 The court allowed Defendants one week to brief the issue and Plaintiff two weeks to respond.45 Defendants timely filed a brief.46 Plaintiff failed to respond to Defendants' brief or to the court's telephonic inquiries regarding his intention to file a brief.
The court begins its analysis with the preliminary matters of the effect of Plaintiff's bankruptcy petition and Plaintiff's motion to dismiss.
Pursuant to the Bankruptcy Code, a voluntary petition filed with the bankruptcy court operates as a stay of a variety of actions against the debtor. 11 U.S.C. § 362(a). However, the stay does not apply to lawsuits initiated by the debtor that would inure to the benefit of the estate. Carley Capital Grp. v. Firemen's Fund Ins. Co., 889 F.2d 1126, 1127 (D.C. Cir. 1989); see also 11 U.S.C. § 362(a) (); In re Versoy, 306 F. App'x 65, 68-69 (5th Cir. 2009)(unpublished)(statingthat 11 U.S.C. § 362 has no effect on claims initially brought by the debtor); In re U.S. Abatement Corp., 39 F.3d 563, 568 (5th Cir. 1994)( that the automatic stay applies only to actions against the debtor).
When a debtor files for bankruptcy protection while a claim he initiated is pending, the claim becomes a part of the bankruptcy estate. See 11 U.S.C. §§ 541(a)(1), 1306; In re SI Restructuring Inc. , 714 F.3d 860, 864 (5th Cir. 2013)(defining "estate" in context of a Chapter 11 petition). A Chapter 13 debtor remains in possession of all property of the estate and has standing to bring claims in his own name on behalf of the bankruptcy estate. See 11 U.S.C. § 1306(b)( that the debtor retains possession of all property of the estate); Love v. Tyson Foods, Inc., 677 F.3d 258, 269 n.6 (5th Cir. 2012)(Haynes, J., dissenting)( that "[e]very circuit to have considered the question has held that the 'rights and powers' that the Chapter 13 debtor enjoys under [11 U.S.C.] § 1303 include the power to sue on claims that are property of the estate on behalf of the estate"); Smith v. Rockett, 522 F.3d 1080, 1081 (10th Cir. 2008)(collecting circuit court decisions that held Chapter 13 debtors have standing to bring claims in their own names for the benefit of the bankruptcy estates); Stangel v. Fetterly & Gordon, P.A., No. Civ. A. 3:00CV1509-L, 2001 WL 671466, at *6 (N.D. Tex. June 12, 2001)(quoting legislative history indicating a debtor has standing to pursue prepetition claims).
The present lawsuit was brought by Plaintiff against Defendants, and Defendants seek no affirmative relief. Thus, the automatic stay is not applicable to this case. Furthermore, Plaintiff has standing to pursue claims in his own name for the benefit of the bankruptcy estate. Nothing stands in the way of the court ruling on the pending dispositive motions.
Both parties moved for summary judgment. Rather than addressing each party's motion separately, the court contemplates the viability of each of Plaintiff's allegations within the context of the arguments raised by both parties.
Summary judgment is warranted when the evidence reveals that no genuine dispute exists regarding any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S....
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