Miller et al v.

Homecomings Financial LLC et al
<excerpt>
Case 4:11-cv-04416 Document 16 Filed in TXSD on 08/08/12 Page 12 of 14
Analysis
Pg12
2. Standing to Challenge Assignment of Security Interest
Defendants' final (and weakest) argument is that homeowners like plaintiffs "will not
be prejudiced" if the chain of assignments from original lender to foreclosing entity were
immune to debtor challenge. After all, the argument apparently goes, the Millers owe the
money to somebody. In truth, the potential prejudice is both plain and severe - foreclosure
by the wrong entity does not discharge the homeowner's debt, and leaves them vulnerable
to another action on the same note by the true creditor. Banks are neither private attorneys
general nor bounty hunters, armed with a roving commission to seek out defaulting
homeowners and take away their homes in satisfaction of some other bank's deed of trust.
MasterCard has no right to sue for debts rung up on a Visa card, and that remains true even
if MasterCard has been assigned the rights of another third party like American Express.
Unless and until a complete chain of transactions back to the original lender is shown,
MasterCard remains a stranger to the original transaction with no claim against the debtor.
And that is a fair description of this case in its present posture. In sum, a standing issue is
lurking here, but only as to the defendants, not the plaintiffs. The court concludes that under
Texas law homeowners have legal standing to
Pg12
challenge the validity or effectiveness of any assignment or chain of assignments under
which a party claims the right to foreclose on their property. Accordingly, plaintiffs have
properly stated claims for declaratory and injunctive relief based on wrongful foreclosure,
trespass to try title and quiet title.
Just ia > Docket s & Filings > Texas > Texas Sout hern Dist rict Court > Real Propert y > Foreclosure > Miller et al v.
Homecomings Financial LLC et al
Mi l l er et al v. Homecomi ngs Fi nanci al LLC et al
Pl ai nt i f f s:
Joan Miller and David Miller
Def endant s:
Homecomings Financial LLC , GMAC Mortgage LLC , Bank of New York Mellon Trust Company NA ,
Don Ledbetter, Patricia Poston, Gabriel Ozel and Pite Duncan, LLP

Case Number :
4:2011cv04416
Fi l ed:
December 15, 2011

Cour t :
Texas Southern District Court
Of f i ce:
Houston Office
Count y :
Montgomery
Pr esi di ng Judge:
David Hittner

Nat ur e of Sui t :
Real Property - Foreclosure
Cause:
28:1446 Notice of Removal
Jur i sdi ct i on:
Diversity
Jur y Demanded
By :
None

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U.S. District Court
SOUTHERN DISTRICT OF TEXAS (Houston)
CIVIL DOCKET FOR CASE #: 4:11-cv-04416
Miller et al v. Homecomings Financial LLC et al
Assigned to: Magistrate Judge Stephen Smith
Case in other court
:
Montgomery County, TX, 9th Judicial
District, 11-00010-11705-CV
Cause: 28:1446 Notice of Removal
Date Filed: 12/15/2011
Jury Demand: None
Nature of Suit: 220 Real Property:
Foreclosure
Jurisdiction: Diversity
Plaintiff
Joan Miller represented by Jeffrey Scott Kelly
The Kelly Legal Group PLLC
PO Box 2125
Austin, TX 78768
512-505-0053
Email: jkelly@kellylegalgroup.com
LEAD ATTORNEY
ATTORNEY TO BE NOTICED
Plaintiff
David Miller represented by Jeffrey Scott Kelly
(See above for address)
LEAD ATTORNEY
ATTORNEY TO BE NOTICED
V.
Defendant
Homecomings Financial LLC represented by Graham W. Gerhardt
Bradley Arant et al
1819 5th Ave N.
Birmingham, AL 35203
205-521-8000
Email: ggerhardt@babc.com
LEAD ATTORNEY
ATTORNEY TO BE NOTICED
Keith Steven Anderson
Brandley Arant Boult Cummings LLP
1819 Fifth Avenue North
Birmingham, AL 35203
205-521-8714
Fax: 205-488-6714
Email: kanderson@babc.com
ATTORNEY TO BE NOTICED
Defendant
GMAC Mortgage LLC represented by Graham W. Gerhardt
(See above for address)
LEAD ATTORNEY
ATTORNEY TO BE NOTICED
Keith Steven Anderson
(See above for address)
ATTORNEY TO BE NOTICED
Defendant
Bank of New York Mellon Trust
Company NA
represented by Graham W. Gerhardt
(See above for address)
LEAD ATTORNEY
ATTORNEY TO BE NOTICED
Keith Steven Anderson
(See above for address)
ATTORNEY TO BE NOTICED
Defendant
Don Ledbetter
Defendant
Patricia Poston
Defendant
Gabriel Ozel
Defendant
Pite Duncan, LLP
Date Filed # Docket Text
12/15/2011 1 NOTICE OF REMOVAL from Montgomery County District Court, case
number 11-10-11705-CV (Filing fee $ 350 receipt number 0541-9014203) filed
by Homecomings Financial LLC, Bank of New York Mellon Trust Company
NA, GMAC Mortgage Group, LLC. (Attachments: # 1 Exhibit A, # 2 Exhibit
B, # 3 Civil Cover Sheet)(Anderson, Keith) (Entered: 12/15/2011)
12/16/2011 2 CERTIFICATE OF INTERESTED PARTIES by GMAC Mortgage Group,
LLC, filed.(Anderson, Keith) (Entered: 12/16/2011)
12/16/2011 3 CERTIFICATE OF INTERESTED PARTIES by Homecomings Financial
LLC, filed.(Anderson, Keith) (Entered: 12/16/2011)
12/16/2011 4 CERTIFICATE OF INTERESTED PARTIES by Bank of New York Mellon
Trust Company NA, filed.(Anderson, Keith) (Entered: 12/16/2011)
12/19/2011 5 ORDER for Initial Pretrial and Scheduling Conference and Order to Disclose
Interested Persons. Initial Conference set for 3/28/2012 at 02:00 PM in
Courtroom 703 before Magistrate Judge Stephen Smith.(Signed by Judge
David Hittner) Parties notified.(amaly) (Entered: 12/19/2011)
12/22/2011 6 MOTION to Dismiss and Incorporated Brief in Support Thereof by Bank of
New York Mellon Trust Company NA, Homecomings Financial LLC, filed.
Motion Docket Date 1/12/2012. (Attachments: # 1 Exhibit A, # 2 Proposed
Order)(Anderson, Keith) (Entered: 12/22/2011)
01/03/2012 7 RESPONSE to 6 MOTION to Dismiss and Incorporated Brief in Support
Thereof filed by David Miller, Joan Miller. (Attachments: # 1Exhibit A)(Kelly,
Jeffrey) (Entered: 01/03/2012)
01/09/2012 8 REPLY to Response to 6 MOTION to Dismiss and Incorporated Brief in
Support Thereof, filed by Bank of New York Mellon Trust Company NA,
GMAC Mortgage LLC, Homecomings Financial LLC. (Anderson, Keith)
(Entered: 01/09/2012)
03/27/2012 9 PROPOSED ORDER Proposed Scheduling Order, filed.(Kelly, Jeffrey)
(Entered: 03/27/2012)
03/27/2012 10 Request to Appear by Telephone by Joan Miller, filed.(Kelly, Jeffrey) (Entered:
03/27/2012)
03/27/2012 11 Defendants' Request to Appear by Telephone by Ally Financial Inc, Bank of
New York Mellon Corporation, Bank of New York Mellon Trust Company NA,
GMAC Inc., GMAC Mortgage LLC, Homecomings Financial LLC, filed.
(Gerhardt, Graham) (Entered: 03/27/2012)
03/27/2012 12 CONSENT to Proceed Before a Magistrate Judge by Ally Financial Inc, Bank
of New York Mellon Corporation, Bank of New York Mellon Trust Company
NA, GMAC Inc., GMAC Mortgage LLC, Homecomings Financial LLC, filed.
(Gerhardt, Graham) (Entered: 03/27/2012)
03/28/2012 13 CONSENT TO PROCEED BEFORE MAGISTRATE JUDGE by All Parties
and ORDER TRANSFERRING CASE to Magistrate Judge Stephen Smith.
Judge David Hittner no longer assigned to the case..(Signed by Judge David
Hittner) Parties notified.(ealexander, ) (Entered: 03/28/2012)
03/28/2012 14 Minute Entry for proceedings held before Magistrate Judge Stephen Wm
Smith. SCHEDULING CONFERENCE held on 3/28/2012. Scheduling order
issued. Appearances: Graham W. Gerhardt, Jeffrey Scott Kelly. (ERO:A.
Maly), filed. (jmarchand) (Entered: 03/29/2012)
03/28/2012 15 SCHEDULING ORDER. ETT: 1 day. Bench trial. Amended Pleadings due by
7/14/2012. Joinder of Parties due by 7/14/2012 Pltf Expert Witness List due by
10/12/2012. Pltf Expert Report due by 10/12/2012 Deft Expert Witness List
due by 11/12/2012. Deft Expert Report due by 11/12/2012 Discovery due by
11/30/2012. Dispositive Motion Filing due by 12/31/2012. Non-Dispositive
Motion Filing due by 12/31/2012. Joint Pretrial Order due by 2/28/2013. Bench
Trial set for 3/7/2013 at 09:30 AM in Courtroom 703 before Magistrate Judge
Stephen Wm Smith.(Signed by Magistrate Judge Stephen Wm Smith) Parties
notified.(jmarchand) (Entered: 03/29/2012)
08/08/2012 16 MEMORANDUM AND ORDER denying 6 MOTION to Dismiss and
Incorporated Brief in Support Thereof ( Amended Complaint due by 9/7/2012.)
(Signed by Magistrate Judge Stephen Smith) Parties notified.(chorace)
(Entered: 08/08/2012)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
JOAN MILLER and DAVID MILLER,
Plaintiffs,
HOMECOMINGS FINANCIAL, LLC,
GMAC MORTGAGE, LLC, BANK OF
NEW YORK MELLON TRUST CO., DON
LEDBETTER, PATRICIA POSTON,
GABRIEL OZEL, and PITE DUNCAN,
LLP,
Defendants.
MEMORANDUM AND ORDER
This is a suit to prevent foreclosure of real property. Defendants Homecomings
Financial, LLC ("Homecomings"), GMAC Mortgage, LLC ("GMAC"), and Bank of New
York Mellon Trust Company ("Mellon") have moved to dismiss for failure to state a claim
(Dkt. 6). The motion is denied, although plaintiffs are directed to replead several of their
causes of action as explained below.
In April 2003 Plaintiff Joan Miller took out a home equity loan from lender
Homecomings Financial Network, I ~ c . ~ in the amount of $184,800, secured by a home equity
1
These facts are taken from Plaintiffs' Original Petition, and are assumed as true for
purposes of this 12(b)(6) motion.
The record is not clear whether this entity is the same as the named defendant
Homecomings Financial, LLC, or, assuming they are not the same, how they are related to one
another, if at all.
Case 4:11-cv-04416 Document 16 Filed in TXSD on 08/08/12 Page 1 of 14
lien duly filed in the county clerk's office of Montgomery County, Texas. (Dkt. 1 - 1, Ex. B).
On July 19,2007, Joan Miller conveyed her interest in the property to plaintiff David ~ i l l e r l
by special warranty deed, also duly recorded. (Dkt. 1 - 1, Ex. C). Subsequently, plaintiffs "ran
in to financial hard times," and on June 10,20 1 1 defendant Mellon obtained an order under
Texas Rule of Civil Procedure 736 to proceed with a foreclosure sale under Texas Property
Code $ 5 1.002. (Dkt. 1 - 1, Ex. E). Earlier that year Mellon had received an assignment of a
deed of trust on the property from "JPMorgan Chase Bank as Trustee, c/o Residential
Funding Corporation," also filed with the county clerk (Dkt. 1 - 1, Ex. G). However, there is
no indication that the original lender, Homecomings Financial Network, Inc., ever assigned
the note or security interest to Chase, Mellon, or anyone else.
Plaintiffs brought this suit in state court for declaratory judgment and an injunction
preventing foreclosure on October 28,20 1 1. They argue that defendants lack the authority
to foreclose because they cannot show proper chain of title of the note and security
instrument. (Dkt. 1-1). The state court issued a temporary restraining order on December
1, 20 1 1. Defendants removed the case to federal court on December 15,201 1 (Dkt. I), and
the parties have consented to magistrate judge jurisdiction. (Dkt. 13).
Standard of Review
Rule 12(b)(6) allows a court to dismiss a plaintiffs complaint if it "fails to state a
claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). Rule 12(b)(6) dismissals
The petition does not describe the relationship, if any, between the two named plaintiffs.
Case 4:11-cv-04416 Document 16 Filed in TXSD on 08/08/12 Page 2 of 14
are proper only if the plaintiff fails to plead "enough facts to state a claim to relief that is
plausible on its face." Ashcroftv. Iqbal, 129 S. Ct. 1937,1960 (2009) (quoting BellAtl. Corp
v. Twombly, 550 U.S. 544, 570 (2007)). A claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged. Iqbal, 129 S. Ct. at 1949. It is the plaintiffs
responsibility to actually "plead specific facts, not mere conclusional allegations, to avoid
dismissal." Kane Enters. v. MacGregor (USA), Inc., 322 F.3d 371, 374 (5th Cir. 2003).
When the plaintiff does plead such specific facts, the court must assume that they are true,
Twombly, 550 U.S. at 555, and draw all reasonable inferences from them in the plaintiffs
favor. Elsensohn v. Tammany Parish Sherws OOfJice, 530 F.3d 368,37 1-72 (5th Cir. 2008).
As a general rule courts must "afford plaintiffs at least one opportunity to cure pleading
deficiencies before dismissing a case, unless it is clear that the defects are incurable or the
plaintiffs advise the court that they are unwilling or unable to amend in a manner that will
avoid dismissal." Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 3 13 F.3d
305,329 (5th Cir. 2002).
Analysis
Plaintiffs raise a number of theories of relief in their Original Petition, all of which
are premised on the same basic contention: that none of these defendants have the authority
to foreclose on plaintiffs' property. The institutional defendants move for dismissal under
Rule 12(b)(6) essentially on three grounds: (1) plaintiffs' claim that defendants lack the
Case 4:11-cv-04416 Document 16 Filed in TXSD on 08/08/12 Page 3 of 14
authority to foreclose is not based on a cognizable legal theory; (2) plaintiffs have no
standing to contest the assignment by which Mellon claims the right to foreclose; and (3)
plaintiffs' other state law causes of action are also insupportable as a matter of law.
1. A Cognizable Legal Claim
Texas recognizes a claim for wrongfbl foreclosure. See, e.g., League City State Bank
v. Mares, 427 S.W. 2d 336 (Tex. Civ. App.-Houston [ 1 4 ~ ~ ~ i s t . ] 1968) (affirming judgment
holding bank liable for wrongful foreclosure). Texas courts also permit debtors to sue for
injunctive and declaratory relief to prevent wrongful foreclosure. See e.g., Martin v. New
Century Mortgage Co., - S.W. 3d - > 2012 Tex. App. LEXIS 4705 at *3 (Tex. App. -
Houston 11" Dist.] June 14,2012); Wells Fargo Bank, NA. v. Ballestas, 355 S.W. 3d 187,
189-90 (Tex. App.- Houston [1" Dist.] 20 1 1, no pet.); Leavings v. Mills, 175 S.W. 3d 30 1,
306 (Tex. App.- Houston [l" Dist.] 2004, no pet.); see also TRCP 736.11 (providing for
automatic stay of foreclosure proceedings upon filing of an original proceeding in a court of
competent jurisdiction contesting the right to foreclose).
Debtors may challenge a foreclosure sale on various grounds: no default in payment
by the debtor, Slaughter v. Qualls, 162 S.W. 2d 67 1, 675 (Tex. 1942); violation of the
conditions and limitations of the trustee's power of sale under the deed of trust (id.); non-
compliance with the statutory notices and other requirements for a non-judicial sale, Lido
Intern., Inc. v. Lambeth, 6 1 1 S. W.2d 622 (Tex. 198 1); and, most significantly for the present
case, no "contractual standing" by the party seeking to foreclose, Martin, 2012 Tex. App.
Case 4:11-cv-04416 Document 16 Filed in TXSD on 08/08/12 Page 4 of 14
LEXIS 4705 at *3.
Under the Texas Property Code, the only party with standing to initiate a non-judicial
foreclosure sale is the m~r t gagee, ~ or the mortgage servicer acting on behalf of the current
mortgagee.' Determining mortgagee status is easy when the party is named as grantee or
beneficiary in the original deed of trust, mortgage, or contract lien. But factual disputes may
arise when the party seeking to foreclose is not the original mortgagee, as is most often the
case these days. In such cases the foreclosing party must be able to trace its rights under the
security instrument back to the original mortgagee. Leavings v. Mills, 175 S.W.3d 30 1, 3 10
(Tex. App. -Houston [1" Dist.] 2004, no pet.).
One way the foreclosing party can do this is by showing that it is the "holder" of the
note secured by the deed of trust. "A person can become the holder of an instrument when
the instrument is issued to that person; or he can become a holder by negotiation." Leavings
175 S.W.3d at 309. Negotiation is the "transfer of possession of the instrument . . . by a
person other than the issuer to a person who thereby becomes a holder." Tex. Bus. & Corn.
Mortgagee is defined as "(A) 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." 5 5 1.0001(4). In other
words, there are several ways by which an entity can acquire mortgagee status with the power to
foreclose. In this case, Mellon asserts that it has the right to foreclose as the owner of deed of
trust by virtue of an assignment from a third party.
A mortgage servicer is "the last person to whom the mortgagor has been instructed by
the current mortgagee to send payment for the debt secured by the security instrument." Tex.
Prop. Code 5 5 1.0001(3). A mortgagee may be the mortgage servicer. Id. A mortgage servicer
may administer the foreclosure on behalf of the current mortgagee provided there is a servicing
agreement disclosed to the debtor along with the other required notices. 5 5 1.0025.
Case 4:11-cv-04416 Document 16 Filed in TXSD on 08/08/12 Page 5 of 14
Code Ann. 5 3.20 1. If the instrument is payable to an identified person, negotiation requires
both transfer of possession and written indorsement by the holder. Id. at 5 3.20 l(b). In order
to enforce the note as a holder, a party who is not the original lender must prove "successive
transfers ofpossession and indorsement" establishing an "unbroken chain of title." Leavings,
175 S.W.3d at 310. Thus, with certain exce~t i ons, ~ possession of the note is typically
required in order for a holder to enforce it. Millet v. JP Morgan Chase, N.A. , 20 12 WL
1029497 at *3 (W.D. Tex. 2012).
Standing to foreclose may also be shown by proof that the foreclosing party is the
"owner" of the note under common law principles of assignment. Martin, 2012 Tex. App.
LEXIS 4705 at * 11. The owner of a note need not be a holder, because the two issues are
separate and distinct. SMS Financial, LLCv. ABCO Homes, Inc., 167 F.3d 235,239 (5th Cir.
1999). A person not identified in a note who is seeking to enforce it as the owner must prove
the transfer by which he acquired the note. Leavings, 175 S.W. 3d at 309. Such a transfer
may be proved by testimony as well as by documentation. Preismeyer v. PaciJc Southwest
Bank, F.S.B., 917 S.W.2d 937, 939 (Tex. App. - Austin 1996). In such cases a party is
"required to prove the note and an unbroken chain of assignments transferring to him the
right to enforce the note according to its terms." Leavings, 175 S.W. 3d at 3 10. An
unexplained gap in the chain of title may present a fact issue on the question of ownership.
The owner of a lost note may foreclose on property securing a debt, if there is evidence
showing why the missing note cannot be produced and what its terms were. See O.J. & C. Co. v.
Johnson, 1997 WL 167866 at *4 (Tex.App.- Houston [I" Dist.] 1997).
Case 4:11-cv-04416 Document 16 Filed in TXSD on 08/08/12 Page 6 of 14
See Martin, at "2;
First Gibraltar Bank, FSB v. Farley, 895 S.W.2d 425, 428-29
(Tex.App.- San Antonio 1995, writ denied); Jernigan v. Bank One, Tex., N.A., 803 S.W.2d
774,777 (Tex.App.-Houston [14th Dist.] 199 1, no writ).
As a matter of Texas law, then, homeowners such as the Millers do have a cognizable
cause of action7 to challenge a party's right to foreclose on their property. In their motion,
defendants ignore this well-established Texas precedent, and focus instead on recent federal
court decisions dealing with a legal theory dismissively dubbed as "show me the note." See,
e.g., Wells v. BAC Home Loans Servicing, L. P., 20 1 1 WL 2 163987, at *2 (W.D. Tex. April
26, 2011). Those cases are correct, so far as they go. As discussed above, holding the
original note is one way to establish the right to foreclose, but it is not the only way. See,
e.g., Crear v. JP Morgan Chase Bank N.A., No. 10-10875,2011 WL 1129574 (5th Cir. Mar.
28, 201 1) (Texas Property Code allows a mortgage servicer to administer a deed of trust
foreclosure without producing the original note). Defendants contend that plaintiffs' petition
is based on nothing more than the legal theory rejected by those cases.
While plaintiffs' petition at one point (7 24) does suggest that possession of the
original note is a necessary rather than a sufficient basis to foreclose, the balance of their
pleading (11 19-23,26) is broader than that. The crux of plaintiffs' claim is that none of the
defendants can show a proper chain of title to establish a right to foreclose under the Texas
Property Code as mortgagee or mortgage servicer. It is undisputed that defendant Mellon,
Variously termed wrongful foreclosure, trespass to try title, or quiet title.
7
Case 4:11-cv-04416 Document 16 Filed in TXSD on 08/08/12 Page 7 of 14
which obtained the order to proceed with the foreclosure, was neither the original lender or
mortgagee. Instead, Mellon claims to be the current mortgagee by virtue of an assignment
from a third party dated January 25, 20 1 1. (Dkt. 1- 1, Ex. G). Plaintiff claims (7 19) that
there is no public record of any assignment or transfer to that third party (or anyone else)
from the original mortgagee.
The traditional way to prove chain of title is via filings of record in the county clerk's
office. The Texas Property Code provides that "if the security interest has been assigned of
record, the last person to whom the security interest has been assigned of record" is the
mortgagee. 5 5 1.001(4)(C). A Texas statute declares that any transfer or assignment of a
recorded mortgage must also be recorded in the office of the county clerk:
To 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
same manner as the original instrument was required to be filed, registered,
or recorded.
Texas Local Government Code 5 192.007(a) (emphasis added.) No reported case has
interpreted this 1989 law. The legal consequences of failing to comply with this statutory
command are unclear, and the subject of current litigation. See Dallas County v. Merscorp,
Inc., 1 1-CV-2733 (N.D. Tex.). In any event, the absence of such required filings is arguably
some evidence that no such assignment or transfer has occurred, as the plaintiffs here
contend.
Case 4:11-cv-04416 Document 16 Filed in TXSD on 08/08/12 Page 8 of 14
It is true, as Mellon notes, that the last assignment of the deed of trust, from JP
Morgan Chase to Mellon, was filed and recorded in the county clerk's office. But that is only
one link in a chain of unknown length, and does nothing to bridge the remaining gap to the
original lender. If Mellon's assignor had no valid rights in the note or deed of trust, then no
such rights were conveyed to Mellon by the as~ignment. ~ When a party seeking to foreclose
fails to show an unbroken chain of title, then the homeowner may be entitled to an injunction
against the threatened foreclosure. Leavings v. Mills, 175 S.W.3d 301, 310 (Tex. App. -
Houston [I" Dist.], 2004, no pet.).
For these reasons, the Court finds that plaintiffs' petition states a claim for cognizable
legal relief based on theories of wrongful foreclosure, trespass to try title and quiet title.
2. Standing to Challenge Assignment of Security Interest
Defendants argue alternatively that plaintiffs have no standing to challenge an
assignment of the security interest because they were not parties to the assignment. In
support of their argument defendants cite nine recent decisions from federal district courts
in this state (six of which were issued by the same magistrate judge), which do indeed affirm
that propo~ition.~ However, none of these decisions cite any Texas case law or statute, and
* 6 Am. Jur.2d Assignments § 108 (assignee acquires no greater rights than were
possessed by assignor). The Latin phrase is "Nemo dat quod non habet."
Eskridge v. Fed. Home Loan Mortgage Corp., 20 1 1 WL 2 163989, at "5 (W.D. Tex.
Feb. 24,201 1 ; Spositi v. Fed. Nati ' I Mortgage Ass 'n, 201 1 WL 59773 19, at *2-3 (E.D. Tex.
Nov.3,2011); Malikyar v. BAC Home Loans Servicing, LP,. 201 1 WL 5837262, at *4 (E.D. Tex.
Oct. 28,201 1); Perry v. JP Morgan Chase, 201 1 WL 5837297, at "2-3 (E.D. Tex. Oct. 28,
201 1); Lackey v. Reliance Mortgage Co., 201 1 WL 5838189, at *3-4 (E.D. Tex. Oct. 28,201 1);
Case 4:11-cv-04416 Document 16 Filed in TXSD on 08/08/12 Page 9 of 14
all but one explicitly rely upon a single federal case, Eskridge v. Fed. Home Loan Mortgage
Corp, 201 1 WL 2163989, at *5 (W.D. Tex. Feb. 24,201 I), which cites no authority at all,
state or federal.
In fact, Texas has long followed the common law rule which permits a debtor to assert
against an assignee any ground that renders the assignment void or invalid. See Tri-Cities
Const., Inc. v. American Nat. Ins. Co., 523 S.W. 2d 426,430 (Tex. Civ. App. -Houston [Ist
Dist. 1975, no writ); Glass v. Carpenter, 330 S.W. 2d 530, 537 (Tex. Civ. App.- San
Antonio 1959, writ ref d n.r.e.). The Glass court endorsed as authoritative the following
summary of the rule, which still appears in the current version of Corpus Juris Secundum:
A debtor may, generally, assert against an assignee all equities or defenses
existing against the assignor prior to notice of the assignment, any matters
rendering the assignment absolutely invalid or ineffective, and the lack of
plaintiffs title or right to sue; but if the assignment is effective to pass
legal title, the debtor cannot interpose defects or objections which merely
render the assignment voidable at the election of the assignor or those
standing in his or her shoes.
6A C. J.S. Assignments tj 132 (database updated May 20 12) (emphasis added). The current
edition of American Jurisprudence states the same rule more succinctly, while adding the
rationale:
Schieroni v. Deutsche Bank Nat'I Trust Co., 201 1 WL 3652194, at *6 (S.D. Tex. Aug. 18,201 1);
DeFrancheschi v. Wells Fargo Bank, N.A. 201 1 WL 3875338, at *5 (N.D. Tex. Aug. 31,201 1);
McAllister v. BAC Home Loans Servicing, LP, 201 1 WL 2200672, at *5 (E.D. Tex. April 28,
201 1); Adams v. Bank ofAmerica, 201 1 WL 5080217 , at *4 (E.D. Tex. Oct. 26,201 1).
Defendants also rely on an unreported Sixth Circuit case, Livonia Properties Holdings, LLC, v.
12840-12976 Farmington Road Holdings, LLC, 2010 WL 4275305 (6th Cir. Oct. 28,2010), but
that case is inapposite because the lender there established chain of title based on public records.
Case 4:11-cv-04416 Document 16 Filed in TXSD on 08/08/12 Page 10 of 14
The obligor of an assigned claim may defend a suit brought by the assignee
on any ground that renders the assignment void or invalid, but may not defend
on any ground that renders the assignment voidable only, because the only
interest or right that an obligor of a claim has in the assignment is to ensure
that he or she will not have to pay the same claim twice.
6 Am.Jur. 2d Assignments 9 1 19 (database updated May 20 12). Examples of "voidable"
defenses include the statute of frauds, Harding Co. v. Sendero Res., Inc., 2012 Tex.App.
LEXIS 1754, *33 3.28 (Tex. App.- Texarkana 20 12); fraud in the inducement, Kansas Life
Ins. Co. v. First Bank of Truscott, 78 S.W. 2d 584, 587 (Tex. 1935); lack of capacity as a
minor, Dairyland County Mut. Ins. Co. v. Roman, 498 S.W. 2d 154, 158 (Tex. 1973); and
mutual mistake, Chase, Inc., v. Bostick, 55 1 S. W. 2d 1 16, 1 19 ( Tex. Civ. App. - Texarkana
1977, writ ref d n.r.e.).
Plaintiffs here do not assert these or any other "voidable" defenses to Mellon's
assignment. Instead, plaintiffs assert that, standing alone, this single assignment from a third
party is ineffective to establish a right to foreclose, because it does not show a proper
assignment of the original security instrument to the third party. Texas courts routinely
allow a homeowner to challenge the chain of assignments by which a party claims the right
to foreclose. See Martin v. New Century Mortgage Co., 20 12 Tex. App. LEXIS 4705 (Tex.
App Houston [I" Dist.] 20 12); Austin v. Countrywide Home Loans, 261 S.W. 3d 68 (Tex.
App.- Houston[lst Dist.] 2008); Leavings v. Mills, 175 S.W. 3d 301 (Tex. App.- Houston
[I" Dist.] 2004, no pet.); Shepard v. Boone, 99 S.W. 3d 263 (Tex. App. - Eastland 2003);
Priesmeyer v. PaczJic Southwest Bank, F.S.B., 917 S.W. 2d 937 (Tex. App. -Austin 1996).
Case 4:11-cv-04416 Document 16 Filed in TXSD on 08/08/12 Page 11 of 14
Federal district courts in this state have also entertained chain of title claims by mortgage
debtors challenging foreclosure proceedings. See Millet v. JP Morgan Chase, N. A., 20 12
WL 1029497, *4 (W.D. Tex. 2012); Nonvood v. Chase Home Finance LLC, 20 11 WL
197874 (W.D. Tex. 201 1). Nor is Texas alone among non-judicial foreclosure states in
permitting such suits. US. Bank Nat ' I Ass 'n v. Ibanez, 941 N.E. 2d 40, 53 (Mass. 201 1).
Defendants' final (and weakest) argument is that homeowners like plaintiffs "will not
be prejudiced" if the chain of assignments from original lender to foreclosing entity were
immune to debtor challenge. After all, the argument apparently goes, the Millers owe the
money to somebody. In truth, the potential prejudice is both plain and severe - foreclosure
by the wrong entity does not discharge the homeowner's debt, and leaves them vulnerable
to another action on the same note by the true creditor. Banks are neither private attorneys
general nor bounty hunters, armed with a roving commission to seek out defaulting
homeowners and take away their homes in satisfaction of some other bank's deed of trust.
MasterCard has no right to sue for debts rung up on a Visa card, and that remains true even
if MasterCard has been assigned the rights of another third party like American Express.
Unless and until a complete chain of transactions back to the original lender is shown,
MasterCard remains a stranger to the original transaction with no claim against the debtor.
And that is a fair description of this case in its present posture.
In sum, a standing issue is lurking here, but only as to the defendants, not the
plaintiffs. The court concludes that under Texas law homeowners have legal standing to
Case 4:11-cv-04416 Document 16 Filed in TXSD on 08/08/12 Page 12 of 14
challenge the validity or effectiveness of any assignment or chain of assignments under
which a party claims the right to foreclose on their property. Accordingly, plaintiffs have
properly stated claims for declaratory and injunctive relief based on wrongful foreclosure,
trespass to try title and quiet title.
3. Other claims
Plaintiffs' state court petition includes a variety of other causes of action, all more or
less centered upon the threatened foreclosure. These include breach of contract, tortious
interference with existing contract, violations of the Texas Deceptive Trade Practices Act,
statutory fraudlfraud in real estate, and violation of the federal Fair Debt Collection Practices
Act. Plaintiffs have requested the opportunity to replead these claims in accordance with the
federal rules. In light of the court's foregoing ruling, it may well be that some or all of these
claims are now superfluous and need not be pursued. Rather than engage in an extended and
possibly futile analysis of these vaguely pleaded claims, the court will simply order the
plaintiffs to replead any of these claims they still wish to pursue, paying careful attention to
Rule 11 of the Federal Rules of Civil Procedure as well as the substantive elements of these
state and federal causes of action.
Conclusion
For the foregoing reasons, defendants' motion to dismiss is denied. However, if
plaintiffs intend to seek relief based on any claims other than wrongful foreclosure, trespass
to try title and quiet title, they are directed to file an amended complaint asserting such claims
Case 4:11-cv-04416 Document 16 Filed in TXSD on 08/08/12 Page 13 of 14
on or before September 7, 20 12.
Signed at Houston, Texas on August 8,2012.
"
$tephen Wm. Smith
United States Magistrate Judge
Case 4:11-cv-04416 Document 16 Filed in TXSD on 08/08/12 Page 14 of 14
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Plaintiff’s Response to Motion to Dismiss
Page 1 of 15


IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION

JOAN MILLER, & DAVID MILLER §
Plaintiffs, §
§
§
v. § CIVIL ACTION NO. 4:11-CV-04416
§
HOMECOMING FINANCIAL, LLC, GMAC §
MORTGAGE, LLC, THE BANK OF NEW YORK §
MELLON TRUST COMPANY, §
DON LEDBETTER, PATRICIA POSTON, §
GABRIEL OZEL, & PITE DUNCAN, LLP,. §
Defendants. §


PLAINTIFFS JOAN MILLER AND DAVID MILLER RESPONSE TO
DEFENDANTS’ MOTION TO DISMISS PLAINTIFFS’ ORIGINAL PETITION FOR
FAILURE TO STATE A CLAIM



COMES NOW, Plaintiffs JOAN MILLER and DAVID MILLER (hereafter “Plaintiffs”)
and files this their Response to Defendants 12(b)(6) Motion to Dismiss, and in support thereof,
Plaintiff states the following:
I. FACTUAL AND PROCEDURAL BACKGROUND
1. Plaintiff filed suit in the Texas state district court on October 28, 2011 in the 9
th

Judicial District of Montgomery County, Texas with Cause No. 11-10-11705-CV.
2. On December 15, 2011 Defendants Homecoming Financial, LLC
(“Homecoming”), GMAC Mortgage, LLC (“GMAC”), and Bank of New York Mellon Trust
Company, LLC’s ( “New York Mellon Trust”) (collectively “Defendants”) removed the cause to
this court.
Case 4:11-cv-04416 Document 7 Filed in TXSD on 01/03/12 Page 1 of 15
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Plaintiff’s Response to Motion to Dismiss
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3. On December 22, 2011 – only one week after removal – Defendants submitted
their F.R.C.P. 12(b)(6) Motion to Dismiss. This response comes as a response to that motion.
II. ARGUMENT & AUTHORITIES
A. Plaintiff’s Chain of Title Argument is Valid and Supported by Case Law
4. Defendants fraudulently and without the proper documentation foreclosed on the
subject property known as 245 Springs Edge Drive, Montgomery, Montgomery County,
Texas 77356. (“Subject Property”).
5. This matter arose because Defendants wrongfully initiated the foreclosure process
without notifying Plaintiff David Miller, who had been deeded the Subject Property years prior.
1
6. When Plaintiff sued Defendants for their wrongful actions, Defendants removed
the case and is immediately attempting to obviate Plaintiffs constitutional rights of redress of
harm and a trial by jury by attempting a premature dismissal of the action. Defendant has used
the Motion to Dismiss to largely state the actions were not pled appropriately for the federal
court, when the Plaintiff filed in state court.

Notably, Defendants do not deny the deed to Mr. Miller, that it was illegitimate, or why they
could proceed with a foreclosure without notifying Mr. Miller without violation the requirements
of Texas Property Code § 51.002.
7. The crux of one of the arguments is that Defendant New York Mellon Trust,
without possession of the original Note and no power under the deed of trust, have wrongfully
instructed the Substitute Trustee to wrongfully foreclose on Plaintiffs.

1
See Plaintiff’s Original Petition, ¶ 14. Defendant acknowledged that David Miller had been deeded the Subject
Property prior to their attempts at wrongfully foreclosing the property without notifying him of said foreclosure. See
Defendants’ Motion to Dismiss, ¶ 3.
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Plaintiff’s Response to Motion to Dismiss
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8. Defendant New York Mellon Trust is claiming in the notices of foreclosure (See
Docket #1 Original Petition Exhibits) that it is the owner and holder of the Note and the Deed of
Trust when the original Deed of Trust does not designate New York Mellon Trust as the
Mortgagee. If a party is attempting to foreclose, the Mortgagor, here the Plaintiffs, has the right
to affirmation of the ability and right to foreclose.
9. Despite Plaintiffs’ requests and attempts, none of the Defendants has ever been
able to produce the original Note which Plaintiff signed at “closing” and therefore cannot prove
that a default has occurred, that a right to foreclosure pursuant to the Deed of Trust exists, or
which party has a right to foreclose. Further, there are no transfers or assignments in the real
property records in Montgomery County, Texas transferring the original Deed of Trust. For the
transfer of a Deed of Trust to be effective Texas Local Government Code §192.007 requires the
transfer or assignment to be recorded.
10. It is interesting that the Defendants in the motion failed yet again to affirm that
possession of the Note was vested with any one of the Defendants. If only they had done so, or if
they could prove they were in actual possession of the Note pursuant to the Texas Business and
Commerce Code, then Plaintiff’s primary argument would be discounted. Yet they did not.
Section 3.104 of the Texas Business & Commerce Code defines a negotiable instrument, under
which the currently disputed Mortgage agreement falls.
2

2
The Code reads in pertinent part: “NEGOTIABLE INSTRUMENT. (a) Except as provided in Subsections (c) and
(d), "negotiable instrument" means an unconditional promise or order to pay a fixed amount of money, with or
without interest or other charges described in the promise or order, if it:(1) is payable to bearer or to order at the
time it is issued or first comes into possession of a holder; (2) is payable on demand or at a definite time; and (3)
does not state any other undertaking or instruction by the person promising or ordering payment to do any act in
addition to the payment of money, but the promise or order may contain: (A) an undertaking or power to give,
maintain, or protect collateral to secure payment; (B) an authorization or power to the holder to
Section 3.110 of the Texas Business &
confess judgment or realize on or dispose of collateral; or (C) a waiver of the benefit of any law intended
for the advantage or protection of an obligor.” TEX BUS COMM. CODE § 3.104

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Plaintiff’s Response to Motion to Dismiss
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Commerce Code mandates that the identification of a person to whom the instrument is payable
is defined. If the “Note” is negotiated or transferred, certain rights follow. TEX. BUS. COMM.
CODE § 3.201. If there is no determination or confirmation of that transfer or delivery, the rights
in question cannot be considered. TEX. BUS. COMM. CODE § 3.203. Plaintiffs are fully within
their rights to inquire as to whether the transferor actually attached an Indorsement to the Note,
thereby signifying an actual transfer and delivery. TEX. BUS. COMM. CODE § 3.204.
11. Lastly, Enforcement of the Note is also determined under the Texas Business &
Commerce Code. TEX. BUS. COMM. CODE § 3.301. The Code defines a “Person Entitled to
Enforce Instrument” as:
(i) the holder of the instrument, (ii) a nonholder in possession of the instrument
who has the rights of a holder, or (iii) a person not in possession of the instrument
who is entitled to enforce the instrument pursuant to Section 3.309 [defined as a
note that is lost, destroyed, or stolen] or 3.418(d) [defined as payment by
acceptance or mistake]. Id. (emphasis added).

12. A person may be entitled to enforce the instrument even though the person is not
the owner of the instrument or is in wrongful possession of the instrument. Either way, the
noteholder or a party claiming rights pursuant to the note must prove its standing. Defendants
have failed to do so. Here, Defendants have not shown they are the holder of the instrument; that
they are a nonholder with the rights of a holder; or that the note has been lost, destroyed or
stolen.
13. Despite Defendants citing a number of cases, none are controlling on this Court.
Defendants’ lack of proof of who has the note and the lack of assignments of the Deed of Trust is
analogous to the cases of US Bank National Association (as Trustee) vs. Antonio Ibanez and


Case 4:11-cv-04416 Document 7 Filed in TXSD on 01/03/12 Page 4 of 15
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Plaintiff’s Response to Motion to Dismiss
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Wells Fargo vs. Mark and Tammy LaRace
3
14. Though Defendants in their 12(b)(6) Motion to Dismiss claim they have acted
properly and within the laws of the state throughout the mortgage process
both recent decisions out of Massachusetts. In each
case the Supreme Court found that the banks, because of securitization and assignments, could
not prove that they had ownership of the note and therefore did not have proof that they had the
right to foreclose.
4
, Attorneys General
across the nation have chosen to seek redress from foreclosing parties, including Texas Attorney
General Greg Abbott - who in October 2010 called for a halt to foreclosures across this state (see
Exhibit A).
5
As Delaware Attorney General Biden said, certain parties in the foreclosing process
were “engag[ing] and continu[ing] to engage in a range of deceptive trade practices that sow
confusion among consumers, investors and other stakeholders in the mortgage finance
system…and lead to unlawful foreclosure practices”.
6
This supposition has been supported by a
prevalence of case law reviewing the lack of legal power of MERS to assign ownership of the
note and deed of trust which affects the right to foreclose.
7

3
These cases were just decided out of the Supreme Court of Massachusetts SJC-10694 on January 7, 2011
The Supreme Court of Arkansas
4
See Defendants’ 12(b)(6) Motion to Dismiss Plaintiff’s Original Petition for Failure to State a Claim, at p. 4.
5
Bloomberg Business Week, October 5, 2010, “Texas AG Calls for Statewide Foreclosure Freeze”, available at
http://www.businessweek.com/ap/financialnews/D9ILJRE81.htm. (stating “The attorney general's office is
investigating mortgage lenders to determine the ‘full harm Texas homeowners have suffered,’ according to a letter
signed by Paul D. Carmona, the chief of the state consumer protection and public health division.”)
6
Bloomberg Business Week, October 28, 2011, “Mortgage Registry MERS sued by Delaware Attorney General,
available at http://www.businessweek.com/news/2011-10-27/mortgage-registry-mers-sued-by-delaware-attorney-
general.html

7
In re Sheridan, ___ B.R. ___, 2009 WL 631355, at *4 (Bankr. D. Idaho March 12, 2009) (MERS "acts not on its
own account. Its capacity is representative."); Mortgage Elec. Registration System, Inc. v. Southwest, ___ Ark. ___,
___, ___ S.W.3d ___, 2009 WL 723182 (March 19, 2009) ("MERS, by the terms of the deed of trust, and its own
stated purposes, was the lender's agent"); LaSalle Bank Nat. Ass'n v. Lamy, 2006 WL 2251721, at *2 (N.Y. Sup.
2006) (unpublished opinion) ("A nominee of the owner of a note and mortgage may not effectively assign the note
and mortgage to another for want of an ownership interest in said note and mortgage by the nominee.")
Mortgage Elec. Reg. Sys., Inc. v. Nebraska Depart. of Banking, 270 Neb. 529, 530, 704 N.W.2d 784 (2005) citing
Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W.3d 619, 623 (Mo. App. 2009)."The practical effect of splitting the
deed of trust from the promissory note is to make it impossible for the holder of the note to foreclose, unless the
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Plaintiff’s Response to Motion to Dismiss
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recently published an opinion that recites nearly the same outcome as to the Defendants lack of
power or authority to foreclose as did the Kansas and Missouri courts.
8
15. Defendants commenced a wrongful foreclosure action based on an inaccurate
balance on the Note and wrongfully alleged power to foreclose under a Deed of Trust for which
the Defendants did not have power to do so. If the foreclosure should be allowed to continue
Plaintiffs would suffer irreparable injury in that real property is unique and cannot be replaced
easily.

16. Thus, Plaintiffs have a cause of action, an actual controversy exists, and
Plaintiffs’ request for temporary restraining order and declaratory judgment causes of action
should not be dismissed.

B. Plaintiff has a cognizable cause of action because Defendants did not follow foreclosure
requirements of Texas Property Code 51.002.
17. Additionally, Defendants failed to notify Plaintiff David Miller of the foreclosing
proceedings, as required by Texas Property Code 51.002. Plaintiffs did not deny this contention
in their Motion to Dismiss, thus Plaintiffs have a cognizable claim, and the recognized wrongful
conduct of Defendants should prevent the dismissal of Plaintiffs’ claims.



holder of the deed of trust is the agent of the holder of the note. [Citation omitted.] Without the agency relationship,
the person holding only the note lacks the power to foreclose in the event of default. The person holding only the
deed of trust will never experience default because only the holder of the note is entitled to payment of the
underlying obligation. [Citation omitted.] The mortgage loan becomes ineffectual when the note holder did not also
hold the deed of trust." Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W.3d 619, 623 (Mo. App. 2009).

8
See Mortgage Elec. Registration Sys. v. Southwest Homes of Ark., Inc., 2009 Ark. LEXIS 458 (Ark., Apr. 23, 2009)
attached hereto.
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Plaintiff’s Response to Motion to Dismiss
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C. Plaintiff May Maintain Trespass to Try Title and Quiet Title Claims
18. It is Plaintiffs belief that a Trespass to Try Title action is appropriate because of
the unlawful claim which exists and is clouding the title of the Sbject Property. Again, this claim
must be supplemented with evidence which will be produced in discovery. To the extent
Plaintiffs did not fully plead either cause, Plaintiffs request leave of the Court to amend their
pleadings.

D. Plaintiff has Pled a Breach of Contract Claim
19. Texas follows a "fair notice" standard for pleading, which looks to whether the
opposing party can ascertain from the pleading the nature and basic issues of the controversy and
what testimony will be relevant. Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887, 896
(Tex. 2000). Rule 47 of the Texas Rule of Civil Procedure provides a pleading "shall contain… a
short statement of the cause of action sufficient to give fair notice of the claim involved…." TEX.
R. CIV. P. 47. Plaintiff, in his original petition, pled sufficiently to provide notice to Defendants
that a contract existed, the nature of the contract, and that it was breached. To the extent Plaintiff
has not pled all of the elements of the breach of contract, Plaintiff requests leave to amend its
pleadings.

E. Plaintiffs’ FDCPA Claim Should Stand Because Defendants may be “Debt Collectors”
20. Defendant broadly claims mortgage companies or servicers cannot be liable under
the DTPA.
9

9
Motion to Dismiss, p. 16.
Defendant, however, fails to properly apply precedential case law, including the
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Plaintiff’s Response to Motion to Dismiss
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very controlling law they cite.
10
The Court in Williams stated “a ‘debt collector’ does not
include the consumer's creditors, a mortgage servicing company, or an assignee of a debt, as
long as the debt was not in default at the time it was assigned.”
11
21. A debt is in default if one single payment has been late. Plaintiff originally
contracted with Homecoming for the mortgage at issue. Defendants admit in their own motion
that the Note was assigned after Plaintiffs supposedly defaulted.

12
22. The FDCPA claim does not fail as a matter of law, and Plaintiffs should be
allowed to move forward with discovery under the FDCPA claim to determine Defendants’
wrongful conduct as debt collectors for their mortgage. To the extent Plaintiffs have not pled all
of the elements of the FDCPA claim, Plaintiffs request leave to amend their pleadings.
Therefore, Defendant assignee
was a debt collector and may be liable under the FDCPA.

E. Plaintiffs’ DTPA Claim Should Stand
23. Because Defendants may be debt collectors under the FDCPA, Defendants may
be liable for DTPA claims. A violation by a debt collector of the FDCPA may be a violation of
the DTPA under Tex. F. Code §392.304(a)(8) and § 392.304(a)(19). Thus, a proper pleading of
the FDCPA claim, including facts that establish the violations of the debt collector, is fair and
proper notice of the DTPA claim. To the extent Plaintiff has not pled all of the elements of the
DTPA claim, Plaintiff requests leave to amend its pleadings.

F. Plaintiff’s Requests For Injunctive and Declaratory Relief Should Stand

10
Motion to Dismiss, p. 8, citing Williams v. Countrywide Home Loans, Inc..
11
Williams v. Countrywide Home Loans, Inc., 504 F. Supp. 2d 176, 190 (S.D. Tex 2007) (emphasis added).
12
Motion to Dismiss, p. 2, ¶ 2.
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Plaintiff’s Response to Motion to Dismiss
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24. The wrongful conduct of Defendants, unless restrained and enjoined by an order
of the court, will cause great and irreparable harm to Plaintiffs. Plaintiffs will not have the
beneficial use and enjoyment of the property and will lose their home.
25. Plaintiff has no other adequate remedy at law and the injunctive relief prayed for
is necessary and appropriate at this time to prevent irreparable loss to Plaintiff. Plaintiff has
suffered and will continue to suffer in the future unless Defendants’ wrongful conduct is
restrained and enjoined because real property is inherently unique and it is and will be
impossible for Plaintiffs to determine the precise amount of damage Plaintiffs will suffer.
26. For these reasons this Court must retain the status quo so as to allow the parties to
have an evidentiary hearing and put on evidence that it is actually entitled to foreclose and what
the actual balance of the note is. If this Court chooses to denies the request, Plaintiff will suffer
irreparable harm, for even when litigation is instituted a wrongful taking will be experienced if
the foreclosure is allowed. Defendants, once they wrongfully exercise dominion and control will
then evict the Plaintiff thereby divesting him completely of all possession rights and causing
extreme hardship upon the Plaintiff which cannot be overcome. And, as mentioned in Section B
supra, Defendants fail to assert when given the opportunity that they followed the requirements
of Texas foreclosure law, and Defendants should be restrained from moving forward with their
unlawful foreclosure.
27. The Court in eBay Inc v. Mecr-Exchange, L.L.C
13
a. irreparable injury: Clearly Plaintiffs, if the foreclosure is allowed to proceed
will suffer an imminent injury, one which will be irreparable and not be able to be overcome. If
states that injunctive relief is
based on well established principles of equity. Equitable factors for an injunction include;

13
547 U.S. 388, 391, 126 S.Ct. 1837, 1839 (2006)
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the foreclosure is allowed to go forward this litigation could take years to determine. During that
time the Plaintiffs would be divested of their home because of the wrongful acts of the
Defendants. Even after a full trial there is no amount of damages or recovery at law which
would rectify the wrongful taking of Plaintiffs’ house.
b. no adequate remedy at law: There is no adequate remedy or relief at law
which will prevent this wrong Plaintiffs are about to experience. In fact the filing of this citation
and the claims for relief alleged are only a small representation of the actual harm Plaintiff will
experience, the loss of ones homestead is devastating. Further, there is just no way to obtain
effective legal relief even with filing multiple lawsuits. Further, the District Courts in Texas
very rarely issue a TRO regardless of what is plead for a foreclosure even when there is fraud on
the face of the transaction like is evident here. By adhering to this policy Plaintiffs have no
redress for illegal and wrongful actions of the Substitute Trustees or the Defendants but to pursue
federal claims.
c. a likelihood of success on the merits: Clearly from the facts and the law cited
herein Plaintiff’s will prevail in their federal claims due to Defendants wrongful acts. Further,
just the lack of assignments or transfers of the rights conveyed in the deed of trust is enough to
show that the foreclosure is wrong.
d. the balance of hardship: Plaintiff’s injury clearly outweighs the injury if any
that the Defendants will experience. If assuming for argument sake this TRO is denied,
Defendants will foreclose and take the Subject Property back. Defendants will still not have a
performing note, cashflow etc, rather will only have a property that will not be maintained and
will deteriorate. As for Plaintiffs’ they will wrongfully be displaced, be forced to find another
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Plaintiff’s Response to Motion to Dismiss
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residence. The balance of hardship clearly strongly slants towards Plaintiffs, especially
considering that each of the Defendants are standing in front of this Court with unclean hands.
e. the effect on the public interest: The requested injunctive relief will not
adversely affect the public policy or the public interest, rather it would advance the overall public
interest by making the Defendants abide by the law. Everyday the news is filled with “Robo-
signors” and stories of wrongful foreclosures; the Attorney General of this state has recognized
the problems within the mortgage foreclosure industry, and this trend has to be stopped and
should not be allowed to occur in Texas.
28. The complaint on file is a verified complaint by Plaintiff alleging and proving that
they the Plaintiff’s will suffer immediate and irreparable injury, loss and extensive damage if this
Temporary Restraining Order does not issue therefore this Temporary Restraining Order may be
granted ex parte.
29. Below Plaintiffs’ attorney certified in writing that efforts were in fact made to
give notice to opposing counsel of this application for Temporary Restraining Order therefore
this application may issue pursuant to FRCP 65(b)(1).

G. Legal Standard
Amendment Should Be Favored Rather than Dismissal
30. Although Fed.R.Civ.P. 12(b)(6) provides for a motion to dismiss for failure to
state a claim upon which relief can be granted, the Texas Rules of Civil Procedure do not contain
any analogous provision. Under the Texas Rules of Civil Procedure, the proper way for a
defendant to urge that a plaintiff has failed to plead a cause of action is by special exception.
Massey v. Armco Steel Co., 652 S.W.2d 932, 934 (Tex.1983); Texas Dep't of Correction v.
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Plaintiff’s Response to Motion to Dismiss
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Herring, 513 S.W.2d 6, 10 (Tex. 1974); McFarland v. Reynolds, 513 S.W.2d 620, 626
(Tex.Civ.App.—Corpus Christi 1974, no writ). Although special exceptions are generally
considered to be the means by which an adverse party may force clarification of vague pleadings,
they may also question the sufficiency in law of a plaintiff's petition. McFarland, 513 S.W.2d at
626. When special exceptions are sustained by a trial court, the pleader must be given, as a
matter of right, an opportunity to replead. Moseley v. Hernandez, 797 S.W.2d 240, 242
(Tex.App.—Corpus Christi 1990, n.w.h.). Only after special exceptions have been sustained and
a party has been given an opportunity to amend its pleadings may a case be dismissed for failure
to state a cause of action. Massey, 652 S.W.2d at 934; Herring, 513 S.W.2d at 10. When there is
no action by the trial court sustaining special exceptions, an order granting a dismissal for failure
to state a cause of action must be reversed. Graefv. City of Galveston, 538 S.W.2d 816, 817, 818
(Tex.Civ.App.—Houston [14th Dist.] 1976, writ dism'd); Moseley, 797 S.W.2d at 242.
31. As discussed previously, this case was originally written specifically for and
submitted to the State court, and intended to be pursued fully in the State court by Plaintiffs. The
case was removed by the Defendants, and the Defendants now seek to dismiss the case under the
more onerous (12)(b)(6) standards, rather than seeking clarification under the State’s special
exception standards – a strategy no doubt in mind when Defendants sought removal, as they
sought the present motion to dismiss only one week after removal was granted.
32. When a plaintiff's complaint fails to state a claim, the court should generally give
the plaintiff at least one chance to amend the complaint under Rule 15(a) before dismissing the
action with prejudice. See Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313
F.3d 305, 329 (5th Cir. 2002) ("[D]istrict courts often afford plaintiffs at least one opportunity to
cure pleading deficiencies before dismissing a case, unless it is clear that the defects are
Case 4:11-cv-04416 Document 7 Filed in TXSD on 01/03/12 Page 12 of 15
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Plaintiff’s Response to Motion to Dismiss
Page 13 of 15


incurable or the plaintiffs advise the court that they are unwilling or unable to amend in a manner
that will avoid dismissal."); see also United States ex rel. Adrian v. Regents of the Univ. of Cal.,
363 F.3d 398, 403 (5th Cir. 2004) ("Leave to amend should be freely given, and outright refusal
to grant leave to amend without a justification . . . is considered an abuse of discretion." (internal
citation omitted)).
33. Any deficient pleading in State court would be allowed the opportunity of
amendment rather than dismissal. Plaintiffs seek leave of the court, to the extent any claims may
be insufficient, to amend their complaint to meet the standards of this Court as they would be
allowed as a matter of right if this claim were pursued as originally intended.

III. CONCLUSION
Plaintiffs have properly pled causes of action to survive a 12(b)(6) analysis and
requests this Court DENY Defendants’ Motion to Dismiss and, to the extent a claim does not
meet the standards, allow Plaintiff leave to amend their Complaint.


Respectfully submitted,
THE KELLY LEGAL GROUP, PLLC
PO BOX 2125
Austin, Texas 78768-2125
512-505-0053 tel
512-505-0054 fax
jkelly@kellylegalgroup.com


By:
JEFFREY S. KELLY
State Bar No. 24043749
Case 4:11-cv-04416 Document 7 Filed in TXSD on 01/03/12 Page 13 of 15
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Plaintiff’s Response to Motion to Dismiss
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ATTORNEYS FOR PLAINTIFFS
Case 4:11-cv-04416 Document 7 Filed in TXSD on 01/03/12 Page 14 of 15
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Plaintiff’s Response to Motion to Dismiss
Page 15 of 15


CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on January 3, 2012, I served a copy of the foregoing
by e-file electronic transmission pursuant to the Electronic Case Management system of the
United States for the Southern District of Texas, who will send an electronic copy to opposing
counsel.



______________________________
Jeffrey S. Kelly
Case 4:11-cv-04416 Document 7 Filed in TXSD on 01/03/12 Page 15 of 15
EXHIBIT B
Case 4:11-cv-04416 Document 7-1 Filed in TXSD on 01/03/12 Page 1 of 3
Ms. Janis Allen



ATTORNEY GENERAL OF TEXAS
GREG ABBOTT
October 4,2010
Senior Vice President, Assistant General Counsel
Bank of America
400 Countrywide Way
Simi Valley California 93065
RE: Bank of America Foreclosures in Texas
Dear Ms. Allen:
Recent troubling developments about the veracity of claims made on documents used by
Ally Financial, Inc. in its foreclosure filings have led to an inquiry by our office as to the full
harm Texas homeowners have suffered.
We know tbat you are aware of tbe issues raised when Ally Financial, Inc. announced
that it was suspending foreclosures on certain properties in 23 states. Bank of America
subsequently announced a similar move, again in tbe 23 "judicial foreclosure" states, apparently
because you discovered that you had the same issue with certain of your employees, referred to
as "robosigners." They had engaged in practices concerning the execution of documents which
were used in foreclosures, among which were tbese:
• Signing thousands of documents per month
• Signing documents without reading them
• Signing affidavits which falsely claim personal knowledge of facts
• Signing affidavits which falsely claim the affiant reviewed the attached documents
• Notarizing documents prior to signing by the signer
• Notarizing documents when the signer. was not present before the notary
• Filing documents with records attached that did not correctly reflect loan payments,
charges and advances
We are aware that Bank of America services a significant number of mortgage loans in
the State of Texas. It is likely that affidavits and other documents, such as assignments of deeds
of trust and appointments of substitute trustees,with the issues described, above may have been
used in connection with foreclosures in the State of Texas. Regardless ofwhetber the foreclosure
was a nonjudicial one or a judicial one in connection with a home equity loan, home equity line
of credit or reverse mortgage, if any of the practices described above were utilized in establishing
Bank of America's authority to conduct tbe sale or obtain a court order for a sale, such use would
have been a violation of Section 17.46(a) of the Texas Deceptive Trade Practices Act; Section
392.304, Texas Debt Collection Act; Section 37.02, Texas Penal Code; Section 12.001, Texas
Property Code; Section 406.009, Texas Government Code; Texas Constitution Article 16,
POST OfFICE Box !2548, AUSTIN, TEXAS 78711·2548 TEL:(5J2) 463·2100 WEB: WWW.TEXASAT.TORNEyGSNERAL,GOY
All Equal Emplflymellf Opperlunify !"Imp/oyer' Primed on Recycled Paper
EXHIBIT B
Case 4:11-cv-04416 Document 7-1 Filed in TXSD on 01/03/12 Page 2 of 3
Bank of America
October 4, 2010
Page 2
Section 50; and/or Rule 736(1), Texas Rules of Civil Procedure, and the document and therefore
the foreclosure sale would have been invalid.
The State of Texas hereby demands that in the State of Texas, Bank of America
immediately suspend all foreclosures, all sales of properties previously foreclosed upon, and all
evictions of persons residing in previously foreclosed upon properties, until Bank of America has
done the following:
1. Identify all Bank of America employees or agents who "robosigned," as described
above, affidavits and other documents which were recorded in the State of Texas;
2. Identify all foreclosures in the State of Texas in connection with which an
affidavit or other document with the characteristics listed above was used as part
of the foreclosure process;
3. Describe the measures taken by Bank of America to ensure that affidavits and
other documents are executed in compliance with Texas law;
4. Describe the measures taken by Bank of America to comply with the
Servicemembers Civil Relief Act in connection with foreclosures;
5. Identify all other loan servicers and/or MERS for whom the above described
employees or agents signed affidavits;
6. Provide assurances that all Banle of America foreclosures of properties in the State
of Texas which relied upon documents with the characteristics described above
will be rectified and the procedures by which they will be rectified;
7. Provide assurances that all future Banle of America foreclosures of properties in
the State of Texas will be done with legally correct documentation; and
8. Identify all Bank of America employees or agents who are or who signed as
officers of other non-related entities.
Please provide your response on or before October 15, 2010.
,/ /'

Paul D. Carmona
Chief, Consumer Protection and
Public Health Division




ATTORNEY GENERAL OF TEXAS
G R E G A B B O T T






P O S T OF F I C E B O X 1 2 5 4 8 , AU S T I N , T E X A S 7 8 7 1 1 - 2 5 4 8 T E L : ( 5 1 2 ) 4 6 3 - 2 1 0 0 WE B : WWW. T E X A S A T T O R N E Y G E N E R A L . G O V
An Equal Employment Opportunity Employer · Printed on Recycled Paper

Demand Letters sent to:

American Home Mortgage Servicing, Inc.
American General Finance, Inc.
AmTrust Mortgage Corporation
Aurora Loan Servicec, Inc.
Bank of America
Carrington Mortgage Services, LLC
Cenlar, FSB
JP Morgan Chase & Co.
CitiMortgage, Inc.
EMC Mortgage Corporation
First Horizon National Corp.
Ally Financial, Inc./GMAC
Home Loan Services
HomEq Servicing, Inc.
HSBC North America Holdings, Inc.
Litton Loan Servicing, Inc.
MGC Mortgage, Inc.
Midland Mortgage Company
MorEquity, Inc.
National City Mortgage c/o PNC Financial Services Group, Inc.
Nationstar Mortgage Company
Ocwen Loan Servicing, LLC
OneWest Bank Group LLC
PHH Mortgage Services Corporation
Saxon Mortgage Services, Inc.
Select Portfolio Servicing, Inc.
Vanderbilt Mortgage and Finance, Inc.
Washington Mutual
Wells Fargo & Company
Wilshire Credit Corporation



EXHIBIT B
Case 4:11-cv-04416 Document 7-1 Filed in TXSD on 01/03/12 Page 3 of 3

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