TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
ON MOTION FOR REHEARING
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
We withdraw the opinion and judgment dated June 25, 2015, and substitute the
following opinion and judgment in their place. We deny appellant’s motion for rehearing.
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
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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.
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.
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.
2
Unless otherwise noted, the facts cited herein are taken from the
summary-judgment evidence.
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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
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
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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
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
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summary judgment on a no-evidence basis because the Melendezes had no evidence to support
certain elements of their claims.
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.
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Williams filed a no-evidence summary-judgment motion. The Melendezes did not
file a response to Williams’s motion.
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.
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Id. (citing Tex. R. Civ. P. 166a(c)). A defendant need negate only one essential element of a cause
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
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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 contend the assignment was defective because
(1) Amtrust had forfeited its corporate privileges in Texas and ceased to exist prior to 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. These arguments could render the
assignment voidable at most. First, the Melendezes claim that Amtrust forfeited its corporate
privilege, and their attorney’s affidavit states that Amtrust’s right to do business in Texas was
terminated, but that alone does not mean that Amtrust ceased to exist or lost its ability to pursue its
rights under the deed. Tex. Bus. Orgs. Code § 9.251(12)(C) (entity need not maintain its right to do
business in Texas to enforce its right securing a debt); 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). Moreover, the Melendezes did not present summary-judgment evidence to establish that
Amtrust had ceased to exist, but even if Amtrust was truly defunct, the deed’s own terms allowed
MERS to act on behalf of Amtrust’s successors and assigns. Second, the nominee under a deed of
trust can assign that deed of trust separately from the note. 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.). Finally, “[w]hen 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.” Morlock,
L.L.C. v. Bank of New York, 448 S.W.3d 514, 517 (Tex. App.—Houston [1st Dist.] 2014,
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Consequently, Citi established as a matter of law that it had authority to foreclose as both mortgage
servicer and mortgagee.
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
pet. denied) (citations omitted)). Because the Melendezes failed to raise any grounds that would
render the assignment void, they lack standing to challenge the assignment.
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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. “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 on Motion for Rehearing
Filed: October 2, 2015
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