Oscar Melendez and Connie Melendez v. Citimortgage, Inc. Ernestine Williams And Wendy Alexander

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-14-0029-CV

Oscar Melendez and Connie Melendez, Appellants

v.

Citimortgage, Inc.; Ernestine Williams; and Wendy Alexander, Appellees

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 261ST JUDICIAL DISTRICT
NO. D-1-GN-12-002555, HONORABLE TIM SULAK, JUDGE PRESIDING

MEMORANDUM OPINION

Oscar and Connie Melendez appeal from summary judgment of their lawsuit against

Citimortgage, Inc. (Citi), Ernestine Williams, and Wendy Alexander (collectively, “defendants”).1

The Melendezes sued the defendants after Citi sought to foreclose on the Melendezes’ property in

Pflugerville, Texas. The Melendezes brought a variety of claims related to the foreclosure and

sought damages as well as a declaration that they hold superior title to the property. The trial court

granted Citi’s and Williams’s summary-judgment motions. For the reasons that follow, we will

affirm the trial court’s orders granting summary judgment.

1
Wendy Alexander was dismissed from the lawsuit before Citi and Williams filed their
summary-judgment motions. The Melendezes are not appealing the order dismissing Alexander, and
she is not a party to the appeal.
 BACKGROUND

In August 2005, Oscar Melendez executed a note for $179,249.00, payable to

Amtrust Mortgage Corporation (Amtrust) as lender “and its successors and assigns.”2 As part of the

loan transaction, both Melendezes signed a deed of trust, dated the same day as the note, which

created a lien on the property to secure payment of the note. About two weeks later, Amtrust sent

the Melendezes a letter notifying them that Amtrust had transferred the servicing rights of their

mortgage to Citi and instructing them to make their mortgage payments to Citi. Amtrust

subsequently assigned the note to Citi by special endorsement.

The deed’s beneficiary is “Mortgage Electronic Registration Systems, Inc. (MERS)

(solely as nominee for Lender, as hereinafter defined, and Lender’s successors and assigns).” The

deed provides that:

Borrower understands and agrees that MERS holds only legal title to the interests
granted by Borrower in this Security Instrument; but, if necessary to comply with law
or custom, MERS (as nominee for Lender and Lender’s successors and assigns) has
the right to exercise any or all of those interests, including, but not limited to, the
right to foreclose and sell the Property and to take any action required of Lender
including, but not limited to, releasing, canceling or assigning this Security
Instrument.

(Emphasis added.) In May 2011, MERS assigned the deed to Citi.

The Melendezes defaulted on the loan in 2011. They have not made a payment on

the loan since November 2011. In December 2011, Citi sent written notice of default to the

2
Unless otherwise noted, the facts cited herein are taken from the
summary-judgment evidence.

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Melendezes, warning them that failure to cure their default would result in acceleration of the loan

and potential sale of the property under the terms of the deed. In May 2012, Citi removed the

original trustee and appointed Wendy Alexander as substitute trustee. On June 8, 2012, Citi sent the

Melendezes notice that their loan had been accelerated and that Citi intended to effect a foreclosure

sale on July 3, 2012. Citi filed a copy of the posting of foreclosure sale with the county clerk on June

11, 2012. Alexander executed a substitute trustee’s deed on July 3, 2012, conveying the property

to Citi. Appellee Williams is the affiant on the substitute trustee’s deed.

After the foreclosure sale, the Melendezes filed this suit, asserting claims for breach

of contract; quiet title; violations of Texas Civil Practices and Remedies Code Section 12.002; and

negligence per se, based on alleged breaches of Texas Property Code Sections 51.001(3), 51.001(7),

51.000(b)(2), and 51.0025. The Melendezes asserted in their petition that “any document purporting

to allow MERS to transfer any document is fraudulent” because MERS never had any interest in the

note itself, which they asserted undermines the deed assignment and all subsequent appointments

and transactions.

Citi filed a traditional and no-evidence summary-judgment motion. Citi contended

that the deed assignment was valid and gave it authority to foreclose under the terms of the deed and

as mortgagee under the Texas Property Code. See Tex. Prop. Code. §§ 51.001(4)(C) (defining

mortgagee as the “last person to whom the security interest has been assigned of record”), .0075(c)

(mortgagee or mortgage servicer may appoint substitute trustee to conduct foreclosure). Citi also

explained that Amtrust had notified the Melendezes in 2005 that Amtrust had assigned, sold, or

transferred the mortgage-servicing rights to Citi and had instructed the Melendezes to make

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payments to Citi. See id. § 51.001(3) (“‘Mortgage servicer’ means the last person to whom a

mortgagor has been instructed by the current mortgagee to send payments for the debt secured by

a mortgagee instrument. A mortgagee may be the mortgage servicer.”). Citi’s summary-judgment

evidence included the note, bearing a special endorsement to Citi; the deed; the deed assignment

from MERS to Citi; the substitute trustee’s deed; the letter from Amtrust to the Melendezes notifying

them that Citi is the mortgage servicer; an affidavit of Citi’s employee, Carlos Arguedas, stating that

Citi is the mortgage servicer; the general notice of the substitute trustee’s sale; and Citi’s notices to

the Melendezes regarding acceleration, foreclosure, and the trustee’s sale.

Citi urged the trial court to grant summary judgment as to all claims premised on

defects in the assignment of the loan, deed, or servicing rights because the Melendezes lack standing

to challenge an assignment to which they were not a party. Citi argued that this lack of standing

disposed of all of the Melendezes’ claims except the breach-of-contract claim, which fails due to the

Melendezes’ material breach of nonpayment. In addition, Citi asserted that its summary-judgment

evidence demonstrated that it is the current mortgagee of the loan, and therefore, as a matter of law,

it has authority to foreclose against the property. Citi also argued that the Melendezes’ allegation

that Citi had violated Section 51.0025 because it lacked a servicing agreement with the current

mortgagee failed to state a valid claim, given that Citi was both the mortgage servicer and the

mortgagee. See Tex. Prop. Code § 51.0025 (establishing conditions under which mortgage servicer

may administer foreclosure on behalf of mortgagee). Finally, Citi urged the trial court to grant

summary judgment on a no-evidence basis because the Melendezes had no evidence to support

certain elements of their claims.

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 The Melendezes responded to Citi’s summary-judgment motion and filed an amended

petition, adding new claims for violations of the Texas Debt Collection Act, wrongful foreclosure,

and wrongful eviction, and for a declaratory judgment voiding the substitute trustee’s deed and sale

of the property. They also amended their breach-of-contract claim. In their amended petition, the

Melendezes relied more heavily on their theory that the deed assignment to Citi was invalid, arguing

that the assignment was deficient not only because MERS had no interest in the note, but also

because MERS’s assistant secretary lacked authority to sign the assignment. The Melendezes’

summary-judgment evidence included an affidavit of their attorney, a deposition of an officer of

MERS, and a letter from the Ohio Secretary of State to a United States Attorney. In both their

amended petition and their response to Citi’s summary-judgment motion, the Melendezes argued that

they have standing to challenge assignments and that the deed assignment’s defects prevented Citi

from being a mortgagee or mortgage servicer entitled to foreclose under the Texas Property Code.

Citi filed a reply to the Melendezes’ response arguing that all of the Melendezes’

claims, including the newly added claims and the amended breach-of-contract claim, stem from their

erroneous theory that the deed assignment was not valid. Citi reiterated that its summary-judgment

evidence established that MERS had assigned its interest under the deed to Citi and that Citi was the

mortgage servicer on the loan, meaning that it had authority to foreclose both as mortgagee and as

mortgage servicer. Citi did not amend its summary-judgment motion.

Williams filed a no-evidence summary-judgment motion. The Melendezes did not

file a response to Williams’s motion.

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 The trial court granted both Citi’s summary-judgment motion and Williams’s

summary-judgment motion. The Melendezes filed a motion to vacate judgment, which was

overruled by operation of law. This appeal followed.

STANDARD OF REVIEW

When a party moves for summary judgment under Texas Rules of Civil Procedure

166a(c) and 166a(i) and the trial court grants the motion without specifying the grounds, we usually

conduct our initial review under the no-evidence standard of Rule 166a(i). See Ford Motor Co.

v. Ridgway, 135 S.W.3d 598, 600 (Tex. 2004). If the nonmovant is unable to produce evidence that

raises a genuine issue of material fact, then we need not analyze whether the movant’s evidence

satisfied Rule 166a(c). Id. In the interest of efficiency, however, we may review under the

traditional standard of Rule 166a(c) first if that standard is dispositive, as it is in this case for Citi’s

summary-judgment motion. See Poag v. Flories, 317 S.W.3d 820, 825 (Tex. App.—Fort Worth

2010, pet. denied); see also Tex. R. App. P. 47.1 (appellate courts must hand down opinions that are

as brief as practicable but that address every issue raised and necessary to disposition of appeals).

We review traditional summary-judgment motions de novo, taking all evidence

favorable to the nonmovant as true, indulging every reasonable inference, and resolving any doubts

in the nonmovant’s favor. Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215-16

(Tex. 2003). In a traditional summary-judgment motion, the movant bears the initial burden to show

that it is entitled to judgment as a matter of law because there is no genuine issue of material fact.

Id. (citing Tex. R. Civ. P. 166a(c)). A defendant need negate only one essential element of a cause

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of action to be entitled to summary judgment on that claim. Randall’s Food Mkts., Inc. v. Johnson,

891 S.W.2d 640, 644 (Tex. 1995). Once the movant produces evidence entitling it to summary

judgment, the burden shifts to the nonmovant to present evidence that raises a fact issue. See Phan

Son Van v. Pena, 990 S.W.2d 751, 754 (Tex. 1999).

Williams filed her summary-judgment motion under the no-evidence standard of Rule

166a(i) alone. A no-evidence summary-judgment motion can be granted if, after adequate time for

discovery, the movant asserts that there is no evidence of an essential claim or defense for which the

nonmovant bears the burden of proof and the nonmovant fails to respond with evidence raising a fact

issue on the challenged elements. LMB, Ltd. v. Moreno, 201 S.W.3d 686, 688 (Tex. 2006)

(per curiam) (citing Tex. R. Civ. P. 166(a)(i)).

ANALYSIS

In three issues on appeal, the Melendezes argue that the trial court erred by granting

summary judgment because (1) Citi did not address all of the Melendezes’ claims in its

summary-judgment motion, (2) there was sufficient summary-judgment evidence to raise a fact issue

on one or more claims, and (3) the summary-judgment record shows that Williams was acting

without capacity. Citi responds that (1) its summary-judgment motion refutes any claims not

addressed in its motion by establishing the deed assignment’s validity and (2) its summary-judgment

evidence conclusively established that it was entitled to foreclose on the property. Williams

responds that the trial court properly granted her no-evidence summary-judgment motion because

the Melendezes failed to respond to it.

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Citi undermined the Melendezes’ claims

In their first point of error, the Melendezes argue that the trial court should have

denied summary judgment on the claims that they added in their amended petition because Citi’s

summary-judgment motion did not address these claims. Citi challenged the new claims in its reply

but did not amend its summary-judgment motion to address them. It is generally reversible error

for a trial court to grant summary judgment on a claim not explicitly addressed within the summary-

judgment motion, but there is a limited exception to this rule when the error is harmless because the

motion raises grounds that undermine the unaddressed claim. G & H Towing Co. v. Magee,

347 S.W.3d 293, 297-98 (Tex. 2011). This exception applies “(1) when the movant has conclusively

proved or disproved a matter (usually corresponding to a claim’s element or to an affirmative

defense) that would also preclude the unaddressed claim as a matter of law or (2) when the

unaddressed claim is derivative of the addressed claim, and the movant proved entitlement to

summary judgment on that addressed claim.” Wilson v. Davis, 305 S.W.3d 57, 73 (Tex.

App.—Houston [1st Dist.] 2009, no pet.).

As we will discuss in more detail below, Citi proved as a matter of law that the deed

assignment was valid, which disproved most of the Melendezes’ claims. Citi raised this ground for

summary judgment in its motion. The Melendezes’ claims for (1) filing a fraudulent lien, (2)

negligence per se based on violations of Property Code Chapter 51, (3) breach of contract, (4)

violations of the Texas Debt Collection Act, and (5) relief for wrongful foreclosure, wrongful

eviction, and forcible detainer are all based on their allegation that the deed assignment was invalid

and therefore Citi lacked authority to notice and conduct the foreclosure sale. Their other claims

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seeking to quiet title and to obtain injunctive relief and declaratory judgment are derivative of these

addressed claims. Consequently, Citi adequately proved its entitlement to summary judgment on

the basis of the deed assignment, and the trial court did not err by granting Citi’s summary-judgment

motion. Similarly, to the extent the Melendezes raised any new claims in their amended petition

asserting that Citi had not provided proper notice of the foreclosure (on a basis other than Citi’s

alleged lack of authority to provide notice), Citi had addressed these claims with its

summary-judgment evidence of the notices provided to the Melendezes. We overrule the

Melendezes’ first issue.

Citi’s summary-judgment evidence established its authority to foreclose

Virtually all of the Melendezes’ claims rest on their contention that Citi lacked

authority to foreclose as the mortgagee because MERS’s assignment of the deed to Citi was not

valid. Either a mortgagee or a mortgage servicer may initiate a nonjudicial foreclosure under the

Texas Property Code. Tex. Prop. Code §§ 51.0025 (mortgage servicer may administer foreclosure

on behalf of mortgagee), .0075(c) (mortgagee or mortgage servicer may appoint substitute trustee

to conduct foreclosure). The Property Code defines a mortgage servicer as “the last person to whom

a mortgagor has been instructed by the current mortgagee to send payments for the debt secured by

a security instrument,” and a mortgagee 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.”

Id. § 51.0001(3), (4).

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 Citi attached evidence of the mortgage-servicing-rights transfer and the deed

assignment to its summary-judgment motion. Amtrust’s letter to the Melendezes informed them that

Amtrust had transferred the servicing rights to Citi and instructed the Melendezes to make future

payments to Citi. Accordingly, in September 2005, Citi became the mortgage servicer as defined

by the Property Code, regardless of whether it later became the mortgagee. Id. § 51.0001(3)

(“‘Mortgage servicer’ means the last person to whom a mortgagor has been instructed by the current

mortgagee to send payments for the debt secured by a security instrument.”). Citi also submitted the

deed assignment as summary-judgment evidence, which established it as the mortgagee.

Id. § 51.0001(4)(C) (“[I]f the security interest has been assigned of record, the last person to whom

the security interest has been assigned of record” is the mortgagee.). This summary-judgment

evidence put the onus on the Melendezes to refute Citi’s status as mortgage servicer and mortgagee.

See Ayeni v. State, 440 S.W.3d 707, 709 (Tex. App.—Austin 2013, no pet.) (mem. op.) (when

movant meets initial burden of demonstrating that there is no genuine issue of material fact, burden

of raising genuine issue of material fact shifts to nonmovant).

The Melendezes did not submit any summary-judgment evidence refuting the validity

of either Amtrust’s transfer of the mortgage-servicing rights to Citi or MERS’s assignment of the

deed to Citi. In their summary-judgment response, the Melendezes’ only argument about Citi’s

status as the mortgage servicer is that it could not appoint itself as the mortgage servicer because it

was not the mortgagee. Citi, however, was already the mortgage servicer before it became the

mortgagee, and the Melendezes offered no evidence to refute the 2005 letter from Amtrust

instructing them to send payments to Citi. Likewise, the only evidence submitted by the Melendezes

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with their summary-judgment response—their attorney’s affidavit, the Ohio Secretary of State’s

letter, and the deposition of William Hultman—does not raise a fact issue about the validity of

MERS’s assignment of the deed to Citi. The letter and deposition refer to suspected notary fraud

in Ohio, not the specific facts of this case. The deposition was taken for an unrelated case before

MERS ever assigned the deed in this case. Moreover, the Melendezes do not explain how or why

these documents show that MERS’s assistant secretary lacked authority to sign the assignment.3

Consequently, Citi established as a matter of law that it had authority to foreclose as both mortgage

servicer and mortgagee.

3
Even if the Melendezes had submitted summary-judgment evidence raising a fact issue
about the validity of the assignment, they do not have standing to challenge the assignment. They
did not allege any grounds that would render the assignment void, which is the only circumstance
in which mortgagors who are not a party to a deed-of-trust assignment have standing to challenge
that assignment. Tri-Cities Constr., Inc. v. American Nat’l Ins. Co., 523 S.W.2d 426, 430 (Tex.
App.—Houston [1st Dist.] 1975, no writ) (“The law is settled that the obligors of a claim may defend
the suit brought thereon on any ground which renders the assignment void, but may not defend on
any ground which renders the assignment voidable only, because the only interest or right which an
obligor of a claim has in the instrument of assignment is to insure himself that he will not have to
pay the same claim twice.”). The Melendezes contended the assignment was defective because
(1) Amtrust had forfeited its corporate privileges in Texas before the assignment, rendering MERS
incapable of assigning the deed as Amtrust’s nominee or agent, (2) MERS lacked authority to assign
the deed because it had no interest in the note, and (3) the assistant secretary who signed the
assignment lacked authority. All of these arguments would render the assignment merely voidable,
not void. See Hinkle v. Adams, 74 S.W.3d 189, 193 (Tex. App.—Texarkana 2002, no pet.)
(forfeiture of corporate privileges does not extinguish corporation as entity); Bierwirth v. BAC Home
Loans Servicing, L.P., No. 03-11-00644-CV, 2012 WL 3793190, at *3-4 (Tex. App.—Austin
Aug. 30, 2012, pet. denied) (mem. op.) (nominee under deed of trust can assign deed of trust
separately from note); Morlock, L.L.C. v. Bank of New York, 448 S.W.3d 514, 517 (Tex.
App.—Houston [1st Dist.] 2014, pet. filed) (“When someone without authorization signs a
conveyance on behalf of a grantor corporation, the cause of action for fraud to set aside the
assignment belongs to the grantor. A third party lacks standing to challenge this voidable defect in
the assignment.” (citations omitted)). As a result, the Melendezes lack standing to challenge
the assignment.

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 In addition, Citi’s summary-judgment evidence conclusively established that it

provided proper notice under the Property Code. The 2005 letter from Amtrust to the Melendezes

instructing them to send payments to Citi satisfies the requirements of both Sections 51.0001(3) and

51.0025(1). See Tex. Prop. Code §§ 51.0001(3) (defining “mortgage servicer”); .0025(1) (requiring

agreement between mortgage servicer and mortgagee allowing mortgage servicer to severice

mortgage). Citi’s summary-judgment evidence also included a certified copy of the notice of the

substitute trustee’s sale, which indicated that the sale was to occur at the Travis County Courthouse,

and bears the Travis County Clerk’s stamp that it was filed and recorded. This notice complies with

Section 51.002(b)(2). See id. § 51.002(b)(2) (establishing notice requirements). Therefore, Citi’s

summary-judgment evidence established as a matter of law that it complied with the Property Code’s

notice requirements. We overrule the Melendezes’ second issue.

The Melendezes did not respond to Williams’s no-evidence summary-judgment motion

Williams was the affiant on the statement of facts attached to the substitute trustee’s

deed executed after the foreclosure sale. On appeal, the Melendezes argue that Williams was

charged with knowledge of the public record, i.e., with knowledge of the deed assignment’s defects.

Consequently, they assert, her actions on behalf of Citi violated the Texas Civil Practices and

Remedies Code and the Texas Debt Collections Act, were a breach of contract, and constituted a

wrongful foreclosure.

The Melendezes failed to respond in the trial court after Williams filed her no-

evidence summary-judgment motion. Williams asserts that this failure to respond is fatal. We agree.

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“In response to a no-evidence ground for summary judgment, the nonmovants need not marshal their

proof; however, their summary-judgment response needs to point out evidence that raises a genuine

issue of fact as to the challenged elements.” San Saba Energy, L.P. v. Crawford, 171 S.W.3d 323,

330 (Tex. App.—Houston [14th Dist.] 2005, no pet.). Under Rule 166a(i), the trial court “must grant

the motion unless the respondent produced summary-judgment evidence raising a genuine issue of

material fact.” Tex. R. Civ. P. 166a(i) (emphasis added). The Melendezes produced no evidence

in response to Williams’s motion. We overrule the Melendezes’ third issue.

CONCLUSION

Having overruled the Melendezes’ issues, we affirm the trial court’s orders granting

summary judgment for Citi and Williams.

_________________________________________

Cindy Olson Bourland, Justice

Before Chief Justice Rose, Justices Goodwin and Bourland

Affirmed

Filed: June 25, 2015

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