Mortgage v. Flores

• Decision Date: 20 October 2010
• Docket Number: Civil Action No. C–09–312.
• Citation: 746 F.Supp.2d 819
• Parties: VANDERBILT MORTGAGE AND FINANCE, INC., Plaintiff,v.Cesar FLORES, et al, Defendants.
• Court: U.S. District Court — Southern District of Texas

746 F.Supp.2d 819

VANDERBILT MORTGAGE AND FINANCE, INC., Plaintiff,

v.Cesar FLORES, et al, Defendants.

Civil Action No. C–09–312.

United States District Court, S.D. Texas, Corpus Christi Division.

Oct. 20, 2010.

Jorge C. Rangel, Jaime Santiago Rangel, The Rangel Law Firm, James W. Upton, Kenneth Clifford Littlefield, Upton Mickits & Heymann, LLP, Corpus Christi, TX, Cristina Espinoza Rodriguez, Stephen G. Tipps, Baker & Botts, Jennifer Anne Powis, Senior Regional Representative, Beyond Coal Sierra Club, Houston, TX, Edward S. Sledge, IV, Thomas W. Thagard, III, Maynard Cooper et al., Birmingham, AL, Patton G. Lochridge, McGinnis Lochridge et al., Austin, TX, for Plaintiff.Baldemar F. Gutierrez, Attorney at Law, J. Javier Gutierrez, The Gutierrez Law Firm, Inc., Alice, TX, for Defendants.

ORDER

JANIS GRAHAM JACK, District Judge.

On this day came on to be considered Defendants/Counter–Plaintiffs Cesar Flores and Alvin E. King's Motion for Partial Summary Judgment on the issue of whether their debt has been “paid in full” (D.E. 125); and Plaintiff/Counter–Defendant Vanderbilt Finance and Mortgage Inc.'s Motion for Summary Judgment as to Flores and King's Counterclaims (D.E. 143). For the reasons stated herein, Defendants/Counter–Plaintiffs' Motion for Partial Summary Judgment (D.E. 125) is DENIED. Plaintiff/Counter–Defendant Vanderbilt's Motion for Summary Judgment (D.E. 143) is also DENIED.

I. Jurisdiction

This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1331, federal question, because Intervenors Maria and Arturo Trevino brought claims under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961–1968 (“RICO”), and Intervention–Defendant CMH Homes, Inc. properly removed this case to this Court pursuant to 28 U.S.C. § 1441. (D.E. 34.)

II. Factual and Procedural Background

The factual and procedural background relevant to the current summary judgment motions are as follows:

Defendants/Counter–Plaintiffs Cesar Flores and Alvin E. King entered into a Retail Installment Contract (the “Contract”) with Intervention–Defendant CMH Homes for the purchase of a manufactured home. Plaintiff/Counter–Defendant Vanderbilt Finance and Mortgage, Inc. (“Vanderbilt”) provided the financing for the Contract. When they signed the Contract at the Corpus Christi store of CMH Homes on January 5, 2002, Flores and King opted to finance the entire $40,815.19 purchase price, obligating themselves to make a total of $73,641.60 in payments. (D.E. 142, p. 4; Ex. 1; Ex. 2, (Flores Deposition), p. 49.) The debt was secured by two vacant lots in Jim Wells County, Texas owned by Intervenors Maria and Arturo Trevino, the sister and brother-in-law of Flores. (D.E. 142, Ex. 1.) A Deed of Trust (“DOT”) and a Mechanic's and Builder's Lien (“BML”), filed in the records of Jim Wells County on January 11, 2002, created security interests in the Trevinos' property. Specifically, the DOT created a security interest in favor of Vanderbilt; the BML created a security interest in favor of CMH Homes. According to Vanderbilt, CMH Homes immediately assigned the Contract to Vanderbilt, and Vanderbilt paid CMH Homes $40,815.19 as consideration for the assignment on January 16, 2002. (D.E. 142, Ex. 1, p. 4; Ex. 8 (Krupac Decl. ¶ 3.))

The Counter–Plaintiffs now contend that many of the property owners whose property secured these debts did not voluntarily pledge their property to secure the purchases of manufactured homes. Rather, they contend, CMH employees at the Corpus Christi store of CMH Homes (referred to as “Lot 214”) forged and then falsely notarized the signatures of property owners, including the Trevinos' signatures, in order to create liens on their property without adhering to proper verification procedures or ensuring they had property owners' permission to create the liens. (D.E. 98, p. 4; D.E. 144, Ex. 12, p. 38–39 (Maria Trevino deposition); Exhibit 25, p. 89 (Arturo Trevino deposition.)) Beginning in 2004, various lawsuits based on these allegations were brought on behalf of manufactured home purchasers and property owners.

In 2005 CMH and Vanderbilt released the liens created by BML's and DOT's for nearly 400 parcels of land, including the Trevinos' property. (D.E. 142, p. 4.) The Builder's and Mechanic's Lien Release (“BML Release”) provides, in relevant part:

CMH Homes, Inc.... declares that it is the true and lawful owner and holder of that certain note and indebtedness secured by a MECHANICS LIEN CONTRACT executed by Maria M. Trevino & Arturo Trevino, dated January 5, 2002, and recorded in OFFICIAL PUBLIC RECORDS ... in the office of the COUNTY CLERK for JIM WELLS COUNTY, Texas to which THE MECHANIC LIEN CONTRACT or specific reference is hereby made; and for a valuable consideration in hand paid, the said, CMH Homes, Inc. does hereby release the lien of said MECHANICS LIEN CONTRACT and has been paid in full.

(D.E. 125, Ex. H.) (emphasis added). The Deed of Trust Release (“DOT Release”) provides:

Vanderbilt Mortgage and Finance, Inc.... declares that it is the true and lawful owner and holder of that certain note and indebtedness secured by a deed of trust and/or mortgage executed by Maria M. Trevino & Arturo Trevino to Kevin T. Clayton, trustee, and dated January 7, 2002, filed for record in the office of the Register of Deeds for Jim Wells County, Texas ... to which deed of trust and/or mortgage or specific reference is hereby made; and for a valuable consideration in hand paid, the said Vanderbilt Mortgage and Finance, Inc., does hereby RELEASE the lien of said deed of trust and/or mortgage.

(D.E. 125, Ex. I (emphasis added)). Notably, the DOT release does not contain the phrase that Vanderbilt has been “paid in full.”

Flores and King, meanwhile, continued to live in their manufactured home until King moved out in the spring of 2009; Flores continued to live there until recently, when he moved in with his mother. (D.E. 145, p. 4.) Flores and King made 84 payments on their Contract until they defaulted. Payments in the amount of $25,000 were made after the BML and DOT releases were filed. (D.E. 143, p. 14; Ex. 20, at Interrog. No. 5.)

On August 4, 2009, Vanderbilt brought suit to foreclose on Flores and King's home. On September 18, 2009, Flores and King counter-sued, bringing the following causes of action: (1) common law unfair debt collection; (2) Texas Debt Collection Practices Act (“TDCA”); (3) fraud; (4); and claims under RICO. (D.E. 1, Ex. B.) Maria and Arturo Trevino subsequently intervened in the lawsuit, bringing similar causes of action and joining additional Intervention–Defendants, CMH Homes, Clayton Homes, Inc., Kevin T. Clayton, John Wells, and Benjamin Frazier (collectively, the “Intervention–Defendants.”) (D.E. 11, Ex. C; D.E. 98.) ¹ CMH Homes removed the entire action to this Court based on federal question jurisdiction under RICO and 28 U.S.C. § 1331. (D.E. 1.)

The Counter–Plaintiffs now move for partial summary judgment on the specific issue of whether their debt to Vanderbilt under the Contract for their manufactured home has been “paid in full.” They contend that Vanderbilt released their debt in October 2005 when it executed releases of the attendant liens placed on the Trevinos' property, and that they were subsequently forced to make payments on a debt they no longer owed. (D.E. 125.) There is no dispute that the underlying debt has not actually been paid. Flores and King admit that they have made only 84 payments of the 144 payments they owed on the Contract. (D.E. 142, Ex. 14 (David Barton Decl.), ¶ 4; D.E. 142, Ex. 2 (Flores Depo.), p. 67–68.) However, the Counter–Plaintiffs argue that the “paid in full” phrase in the BML Release has the effect of “releasing both the forged lien and deed of trust on the Trevinos' real property in Jim Wells County, and also releasing the debt purportedly secured by the forged real estate documents originally owed by Mr. Flores and Mr. King as “paid in full.” ” (D.E. 125, p. 4.) They assert that the summary judgment evidence “conclusively establishes that Clayton Homes intended to release, and did in fact, release the debt owed by Mr. Flores and Mr. King as ‘paid in full,’ as of October 8, 2005.” (D.E. 125, p. 4.)

Vanderbilt disputes this characterization of the intentions behind the Releases and of the Releases' legal effect based on a number of theories which the Court addresses more specifically below. (D.E. 142, p. 2–3.) Vanderbilt has moved for summary judgment on all the Counter–Plaintiffs' claims which include (1) common law unfair debt collection; (2) Texas Debt Collection Practices Act (“TDCA”); (3) fraud; and (4) RICO. (D.E. 143.)

III. DiscussionA. Summary Judgment Standard

Under Federal Rule of Civil Procedure 56, summary judgment is appropriate if the “pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c)(2). The substantive law identifies which facts are material. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Ellison v. Software Spectrum, Inc., 85 F.3d 187, 189 (5th Cir.1996). A dispute about a material fact is genuine only “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248, 106 S.Ct. 2505; Judwin Props., Inc. v. U.S. Fire Ins. Co., 973 F.2d 432, 435 (5th Cir.1992).

On summary judgment, “[t]he moving party has the burden of proving there is no genuine issue of material fact and that it is entitled to a judgment as a matter of law.” Rivera v. Houston Indep. Sch. Dist., 349 F.3d 244, 246 (5th Cir.2003); see also Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the moving party meets this burden, “the non-moving party must show that summary judgment is inappropriate by setting...