COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-13-00092-CV
VAUGHN L. BAILEY AND CELESTE APPELLANTS
BAILEY
V.
BANK OF AMERICA, N.A. F/K/A APPELLEE
BAC HOME LOAN SERVICING, LP
F/K/A COUNTRYWIDE HOME
LOANS SERVICING LP
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FROM THE 236TH DISTRICT COURT OF TARRANT COUNTY
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MEMORANDUM OPINION 1
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Vaughn L. and Celeste Bailey appeal from a summary judgment for Bank
of America, N.A., formerly known as BAC Home Loan Servicing, LP, which in
turn was formerly known as Countrywide Home Loans Servicing LP. In two
1
See Tex. R. App. P. 47.4.
points, the Baileys contend that the trial court erred by granting summary
judgment. We affirm.
Background
In 2005, Vaughn obtained a loan from America’s Wholesale Lender; the
note was secured by a deed of trust signed by both Baileys. The deed of trust
named Mortgage Electronic Registration Systems, Inc. (MERS) as the nominee
for the lender and its successors and assigns. A second deed of trust, with an
attached exhibit bearing a corrected legal description of the property, was
recorded in the Tarrant County property records on October 4, 2010. BAC, as
servicer of the loan, sent the Baileys a notice of default on October 19, 2009. On
January 15, 2010, an assignment of the Baileys’ deed of trust from MERS to
BAC was recorded in the Tarrant County property records; the assignment was
signed on behalf of MERS by Stephen Porter, as an assistant secretary, and was
dated effective November 26, 2009.
On December 30, 2010, the Baileys sued BAC. On January 5, 2011, BAC
sent notices to the Baileys that it had accelerated the debt and had scheduled a
foreclosure sale for February 1, 2011. Nothing in the record indicates that BAC
went forward with the sale. In October 2012, Bank of America 2 filed a combined
traditional and no-evidence motion for summary judgment, which the trial court
granted.
2
Bank of America is BAC’s successor-in-interest by merger.
2
Adequate Time for Discovery
In their second point, the Baileys contend that the trial court erred by
granting summary judgment because they did not have an adequate time for
discovery. In their brief, they argue specifically that
[i]nformation outside the formal discovery process that guides
counsel in the focused pursuit of certain items in discovery has been
in flux in this area of law, with developments over the past two years
constantly affecting the calculus of when and where discovery
should be pursued, and the preferred specificity of each request.
They also contend that they pled their claims in good faith.
A party claiming an inadequate time for discovery must file an affidavit
explaining the need for further discovery or a verified motion for continuance.
See Tex. R. Civ. P. 166a(g); Tenneco, Inc. v. Enter. Prods. Co., 925 S.W.2d 640,
647 (Tex. 1996); Reule v. Colony Ins. Co., 407 S.W.3d 402, 407 (Tex. App.––
Houston [14th Dist.] 2013, pet. denied). The Baileys did not file an affidavit or
verified motion for continuance explaining the need for further discovery.
Moreover, Bank of America filed its motion for summary judgment almost two
years after the Baileys filed suit and approximately a year and half after BAC had
filed its original answer, which also sought discovery. Thus, we conclude and
hold that the trial court did not err by granting summary judgment before an
adequate time for discovery had passed. We overrule the Baileys’ second point.
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Propriety of Summary Judgment
In their first point, the Baileys contend that they raised a fact issue on each
element of their claims, thereby defeating Bank of America’s summary judgment
motion.
Allegations in Baileys’ First Amended Petition
Assignment to BAC from MERS
In their first amended petition, the Baileys alleged that the recorded
assignment of the deed of trust from MERS to BAC is invalid because MERS had
no interest in the note and thus lacked capacity to assign the deed of trust.
Additionally, according to the Baileys, the assignment was fraudulent because
Porter knowingly and intentionally executed it without proper authorization from
MERS. Because Porter––on behalf of MERS acting as “attorney-in-fact” for
BAC––had also signed two other documents appointing substitute trustees under
the deed of trust, which were recorded in the Tarrant County property records,
the Baileys contend those documents are fraudulent as well. The Baileys sought
damages for the allegedly fraudulent documents under section 12.003(a)(8) of
the civil practice and remedies code and under the Texas deceptive trade
practices act (DTPA). Tex. Bus. & Com. Code Ann. § 17.50 (West 2011); Tex.
Civ. Prac. & Rem. Code Ann. § 12.003(a)(8) (West 2002).
Notices of Acceleration and Foreclosure
The Baileys also claimed that BAC had no capacity to threaten foreclosure
in its January 5, 2011 notice of substitute trustee’s sale. They alleged that BAC
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violated section 392.301(a)(8) of the finance code because it had no authority or
capacity to threaten foreclosure and its notices of acceleration and foreclosure
were therefore not in compliance with sections 51.002(d) and 51.0025(2) of the
property code. Tex. Fin. Code Ann. § 392.301(a)(8) (West 2006) (prohibiting
debt collector from “threatening to take an action prohibited by law” in attempt to
collect a debt); Tex. Prop. Code Ann. §§ 51.002(d) (setting forth method by which
mortgage servicer must provide notice of default), 51.0025(2) (West Supp. 2013)
(providing that mortgage servicer may administer foreclosure on behalf of
mortgagee if the required notices disclose the representation and address of
either the mortgagee or servicer). The Baileys also claimed damages for BAC’s
alleged negligent misrepresentation that it owned the loan secured by the deed
of trust, and the corresponding servicing rights, and that it had the capacity to
enforce the deed of trust lien.
Alleged Modification Plan
The Baileys further claimed that Vaughn had tried to contact BAC in
December 2009 about a modification or workout arrangement and that BAC told
him that if he paid $8,100.17 in certified funds, it would begin a workout process
and not attempt to foreclose. The Baileys allege that they relied on BAC’s
representations and hand delivered a cashier’s check for $8,100.17 to BAC’s
counsel but nevertheless received notice from BAC that it was returning the
check because it was an incorrect amount and was not certified funds. The
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Baileys claim that Bank of America proceeded to foreclose even after assuring
the Baileys that it would not do so.
The Baileys sought damages for BAC’s alleged misrepresentations about
the alleged loan modification under section 392.404 of the finance code and
section 17.46(b)(24) of the business and commerce code. They also sought
damages for negligent misrepresentation.
Summary Judgment Grounds
In its motion for summary judgment, Bank of America alleged that it was
the lawful beneficiary of the deed of trust, that the Baileys had been in default
since September 2009, that the Baileys had failed to timely cure the default after
receiving proper notice of default and opportunity to cure, and that BAC as the
mortgage servicer had properly served the Baileys notices of acceleration and
foreclosure. Bank of America also claimed that the applicable property records
showed its authority to proceed with foreclosure under the deed of trust, that
MERS validly assigned the deed of trust to BAC, that the Baileys were not
“consumers” such that they had standing to bring a DTPA claim, and that the
Baileys’ claim sounded in contract, not in tort, such that they could not maintain a
claim for negligence. Bank of America also contended that the Baileys could
produce no evidence that it had failed to comply with the Texas debt collection
practices act, that it had violated the DTPA, or that its negligence was the
proximate cause of any damages to the Baileys.
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Bank of America attached to its motion for summary judgment the affidavit
of its records custodian, with a copy of the note, deed of trust, assignment, and
October 2009 notice of default. It also attached an affidavit from the records
custodian for its counsel, with copies of the notices of acceleration and
foreclosure sale.
Response
The Baileys attached to their response an affidavit from Vaughn in which
he averred as follows:
In December, 2009, I approached BAC Home Loans
Servicing, LP fka Countrywide Home Loans Servicing LP (“BAC”)
about a modification or workout arrangement on the Loan. BAC
represented to me that if I made a payment of $8,100.17 in certified
funds, BAC would begin a workout process and not attempt to
foreclose on the Property. I relied on BAC’s representations, agreed
to provide the funds, and hand-delivered Frost National Bank
Cashier’s Check 714003094 dated December 31, 2009 in the
amount of $8,100.17 to BAC via their counsel, Barrett Daffin
Frappier Turner & Engel in Addison, Texas. I received a notice from
BAC dated January 13, 2010, that they were returning the cashier’s
check because it was (a) in an incorrect amount and (b) not in
certified funds, both of which allegations were plainly untrue.
Thereafter, I attempted numerous times to speak to BAC personnel
by phone to rectify the situation, but was never able to reach a BAC
representative who would pull up the file and address the problem;
instead, I was hung up on more than once.
Throughout the course of our dealings, BAC has presented
me a moving target, and despite my compliance with their series of
requests for information and attempt to pay them in the amount, form
and manner they requested, they did not stand by their promise to
accept payment from me and go through with the workout
arrangement they induced me to commence.
....
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I received a notice, issued on behalf of BAC as mortgagee, of
a substitute trustee’s sale of the Property for January 4, 2011,
despite BAC having assured me that they would not attempt to
foreclose on my Property.
Additionally, the Baileys attached a deposition excerpt from a suit in a New
Jersey trial court in which Countrywide was a third party defendant. The name
William Hultman is noted at the bottom of the title page, and the Baileys
represented in their response that the deposition is of William Hultman, the
secretary of MERS. In the deposition excerpt from April 7, 2010, Hultman states
that it was his belief that MERS’s bylaws, which authorized the Board of Directors
to appoint vice presidents, also provided authority for the Board to delegate to
him personally the authority to appoint such vice presidents. He also testified
that there were no minutes evidencing his appointment of a Mr. Hallinan as a
vice president of MERS.
Analysis
Validity of Assignment and Subsequent Foreclosure Notices
The Baileys contend that the deposition testimony they proferred creates a
fact issue as to Porter’s capacity to execute documents on behalf of MERS. This
argument has been made recently in a Texas appellate court to no avail. See
Lowery v. Bank of Am., N.A., No. 04-12-00729-CV, 2013 WL 5762227, at *2–3
(Tex. App.––San Antonio Oct. 23, 2013, no pet.) (mem. op.) (concluding that
Hultman’s deposition testimony is no evidence that Porter lacked authority to
assign deeds of trust for MERS); cf., e.g., Marsh v. JPMorgan Chase Bank, N.A.,
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888 F. Supp. 2d 805, 809 (W.D. Tex. 2012) (holding that borrowers lacked
standing to challenge authority of signatory of assignment from MERS because
they were not parties to the assignment). We agree with the San Antonio Court
of Appeals’s reasoning in Lowery: at most, the deposition excerpt attached to
the Baileys’ response shows that the Board of Directors of MERS may or may
not have, prior to the date of the deposition, delegated to Hultman, as secretary,
the authority to appoint vice presidents, specifically a Mr. Hallinan. It is not
evidence that Porter lacked authority to execute the January 2010 assignment of
the deed of trust on MERS’s behalf. Because the Baileys’ contentions about the
validity of the substitute trustee appointments and notices of acceleration and
foreclosure 3 are based on their argument that Porter lacked authority to execute
documents on behalf of MERS, those arguments also fail. See Robeson v.
MERS, No. 02-10-00227-CV, 2012 WL 42965, at *6 (Tex. App.––Fort Worth
Jan. 5, 2012, pet. denied) (mem. op.).
3
The Baileys also argue in their brief that the notices attached to Bank of
America’s motion for summary judgment were not “executed” for purposes of
compliance with section 51.002(b). We construe their argument to be that the
notices do not bear a handwritten signature. The Baileys cite an inapposite case
holding that unsigned documents may be construed with a signed document only
if the unsigned documents are specifically incorporated by reference into the
signed document. Caufmann v. Schroer, No. 03-08-00517-CV, 2010 WL
668869, at *2 n.12 (Tex. App.––Austin Feb. 26, 2010, no pet.) (mem. op.). The
Baileys have not cited, and we have not found, any authority requiring the notices
under section 51.002(b) to be signed to be valid. Atchley v. Chase Home Fin.
LLC, No. 02-12-00365-CV, 2013 WL 3064444, at *2 (Tex. App.––Fort Worth
June 20, 2013, no pet.) (mem. op.).
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The Baileys additionally complain that Bank of America did not properly
prove its ownership of the note. But Bank of America did not have to prove
ownership of the note to validly foreclose on the deed of trust. See, e.g., Farkas
v. Aurora Loan Servs., LLC, No. 05-12-01095-CV, 2013 WL 6198344, at *4 (Tex.
App.––Dallas Nov. 26, 2013, no pet.) (mem. op.); Kyle v. Countrywide Home
Loans, Inc., 232 S.W.3d 355, 361–62 (Tex. App.––Dallas 2007, pet. denied)
(holding that in suit for foreclosure under deed of trust, introduction of note into
evidence was unnecessary when other evidence showed borrower was in default
on the note).
Deed of Trust Copy Proferred by Bank of America
The Baileys contend that the deed of trust attached to Bank of America’s
motion for summary judgment is the original recorded deed of trust, which
identifies the wrong property addition in the legal description. According to the
Baileys, the deed of trust is therefore invalid and supportive of their fraudulent
document claim. The deed of trust is the only document attached by Bank of
America that contains the incorrect legal description; the records custodians’
affidavits, the assignment, and the notices of acceleration and foreclosure all
contain the correct description. The notice of foreclosure sale references two
recording numbers for the deed of trust: D205151708 “as affected by . . .
D201243345.” The second recording number corresponds to what the Baileys’
counsel described in his affidavit attached to their summary judgment response
as a “re-recorded” deed of trust with the correct legal description. Moreover, the
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note, original deed of trust, assignment, and statutory notices all list the property
address as 1428 Virginia Place, Fort Worth, Texas 76107-2466. See, e.g., AIC
Mgmt. v. Crews, 246 S.W.3d 640, 645 (Tex. 2008) (“A property description is
sufficient if the writing furnishes within itself, or by reference to some other
existing writing, the means or data by which the particular land to be conveyed
may be identified with reasonable certainty.”); Hebisen v. Nassau Dev. Co., 754
S.W.2d 345, 351 (Tex. App.––Houston [14th Dist.] 1988, writ denied) (holding
that mailing address described property with reasonable certainty), disapproved
of on other grounds by Formosa Plastics Corp. USA v. Presidio Eng’rs &
Contractors, Inc., 960 S.W.2d 41 (Tex. 1998).
Thus, we conclude and hold that the trial court did not err by granting
summary judgment on the Baileys’ fraudulent document claims and all of their
related claims for damages under the civil practice and remedies code, DTPA,
finance code, and for negligent misrepresentation as to those documents.
Alleged Modification Agreement
The Baileys argue that Vaughn’s affidavit establishes specific instances of
misconduct by BAC “in negligently or deceptively furnishing information on which
[the Baileys] relied in tendering certified funds, [which] BAC refused to accept . . .
in the manner in which BAC asked for them.” The Baileys essentially allege that
Bank of America refused to perform an agreement to modify an already-existing
loan. Because a person seeking to renew or extend a pre-existing loan is not
seeking goods or services, he or she does not qualify as a “consumer” under the
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definition of the DTPA; thus, this type of transaction is not subject to a DTPA
claim. See Tex. Bus. & Com. Code Ann. § 17.45(1)–(2), (4) (West 2011); Fix v.
Flagstar Bank, FSB, 242 S.W.3d 147, 160 (Tex. App.––Fort Worth 2007, pet.
denied); Ford v. City State Bank of Palacios, 44 S.W.3d 121, 135 (Tex. App.––
Corpus Christi 2001, no pet.); see also, e.g., Miller v. BAC Home Loans
Servicing, L.P., 726 F.3d 717, 725 (5th Cir. 2013) (relying on Fix and Ford to hold
that borrowers seeking modification of existing loan did not qualify as consumers
who could bring a DTPA cause of action).
Moreover, the Baileys failed to establish that BAC owed them any duty
independent of its obligations as the lender under the note and deed of trust;
therefore, they cannot recover for negligent misrepresentation in this context.
See Krudop v. Bridge City State Bank, No. 09-05-00111-CV, 2006 WL 3627078,
at *3 (Tex. App.––Beaumont Dec. 14, 2006, pet. denied) (mem. op.) (involving
alleged failure of bank president to adhere to verbal agreement to forego
threatened foreclosure); see also Sharyland Water Supply Corp. v. City of Alton,
354 S.W.3d 407, 417 (Tex. 2011) (“When the injury is only the economic loss to
the subject of a contract itself the action sounds in contract alone.” (quoting Sw.
Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 495 (Tex. 1991)).
Therefore, we conclude and hold that the trial court did not err by granting
summary judgment on the Baileys’ remaining DTPA, finance code, and negligent
misrepresentation claims arising from their allegations that BAC failed to comply
with an agreed loan modification.
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We overrule the Baileys’ first point.
Conclusion
Having overruled both of the Baileys’ points, we affirm the trial court’s
judgment.
/s/ Terrie Livingston
TERRIE LIVINGSTON
CHIEF JUSTICE
PANEL: LIVINGSTON, C.J.; MEIER and GABRIEL, JJ.
DELIVERED: March 13, 2014
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