Michael W. Schuetz and Jamie K. Schuetz v. Source One Mortgage Services Corporation Mortgage Electronic Registration Systems, Inc. Citimortgage, Inc. Barrett Daffin Frappier Turner & Engle Robert Ferguson, and Barbara Ferguson

ACCEPTED
03-15-00522-CV
8023248
THIRD COURT OF APPEALS
AUSTIN, TEXAS
11/30/2015 11:04:37 PM
JEFFREY D. KYLE
CLERK

No. 03-15-00522-CV FILED IN
3rd COURT OF APPEALS
AUSTIN, TEXAS
12/2/2015 9:03:00 AM
JEFFREY D. KYLE

In The Third Court of Appeals Clerk

MICHAEL W. SCHUETZ AND JAMIE K. SCHUETZ,
Appellants,
v.

SOURCE ONE MORTGAGE SERVICES CORPORATION;
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.;
CITIMORTGAGE, INC.; AND BARRETT DAFFIN FRAPPIER
TURNER & ENGLE, ROBERT FERGUSON, AND BARBARA
FERGUSON,
Appellees,
Appeal from Cause No. C2013-1445C,
274th Judicial District Court, Comal County; Hon. Dib Waldrip, Presiding

APPELLANTS’ BRIEF
CASEY LAW OFFICE, P.C.
Stephen D. Casey
State Bar No. 24065015
info@caseylawoffice.us
595 Round Rock West Drive, Suite 102
Round Rock, Texas 78681
 STATEMENT REGARDING ORAL ARGUMENT

The legal question here—applicability of the federal prohibition of

foreclosure without face-to-face counseling, appears to be a matter of first

impression for this Court. Second, the lower court misapplied the standard of

review in a specific way to the facts. For those two reasons, oral argument is

requested.

ii
 IDENTITIES OF PARTIES AND COUNSEL

Petitioners: Michael and Jamie Schuetz

Counsel for Petitioners: Casey Law Office, P.C.
Stephen D. Casey
info@caseylawoffice.us
State Bar No. 24065015
595 Round Rock West Drive, Suite 102
Round Rock, Texas 78681

Respondents: Citimortgage, Inc., as successor to Source
One Mortgage Corporation;
Mortgage Electronic Registration Systems,
Inc. (“Citi and MERS”)

Barret, Daffin, Frappier, Turner & Engel
(“BDFTE”)

Robert and Barbara Ferguson (“Fergusons”)

Counsel for Respondents: Citi and MERS
John Ellis
dfoster@lockelord.com
jellis@lockelord.com
jthomason@lockelord.com
LOCKE LORD LLP
600 Congress Avenue, Ste 2200
Austin, TX 78701

BDFTE
Mark Hopkins
mark@hopkinswilliams.com
12117 Bee Caves Road, Ste 260
Austin, TX 78738

iii
 Fergusons
David Pfeuffer
170 E. San Antonio Street
New Braunfels, TX 78130

Trial Court: Hon. Dib Waldrip,
374th District Court
Comal County

iv
 TABLE OF CONTENTS

INDEX OF AUTHORITIES .................................................................................. x
STATEMENT OF THE CASE ........................................................................... xiv
ISSUES PRESENTED .......................................................................................... xv

1. The standard of review on summary judgment prohibits
the trial court’s decision, in which a disputed factual
question arose regarding the identity of several directly
related corporate entities. Because factual disputes
require resolution at trial, should the trial court’s decision
be reversed? ........................................................................................ xv

2. Strict construction of the deed of trust demands that
Appellees follow federal law. As a question of first
impression, strict construction should have required the
Appellees follow HUD statutes to conduct a face-to-face
interview prior to foreclosure. Because a fact issue existed
as to whether such interview was required, should the
trial court be reversed on summary judgment? .................................. xv

3. The standard of review on summary judgment prohibits the
trial court’s decision, in which a nine-year gap in the
chain of title, admitted by Appellees, blocked any claim
to the property. Should the trial court be reversed on this
issue both as a matter of law and for a factual inquiry at
trial? .................................................................................................... xv

4. Appellee law firm constructed documents during the
foreclosure process that did not require the skill of an
attorney. Even broadly interpreted, the admissions by
BDFTE declared that BDFTE was not “retained” until
2013, more than 10 years after it fabricated the allegedly
fraudulent documents. Should the trial court be reversed
to determine the nature of the relationship between
BDFTE and foreclosing Appellees prior to 2013 under a
summary judgment standard of review? ............................................ xv

v
5. Appellant’s live pleading contained a claim under the Texas
DTPA tie-in statute. Because the tie-in has no
requirement to be brought under its tie-in Code as a
“consumer,” should the lower court be reversed on
summary judgment to permit a trial of the DTPA claim
brought through the Finance Code? .................................................. xv

6. The trial court erred in denying the motion to strike the
Nurse declaration and other inadmissible documents,
under this Court’s precedent, because such statements
must be made from personal knowledge and none was
presented. Should the motion to strike be granted and the
case reversed? ..................................................................................... xv

Issue 1: Deeds of trust are strictly construed in Texas and
have been for more than a century. Because this was a
HUD loan that must comply with FHA statutes, the
Appellee bank should have conducted face-to-face
counseling prior to foreclosure. As both the standard of
review and the deed of trust are construed against
Appellees below, this Court should reverse the lower
court as no Congressionally-mandated counseling
occurred prior to foreclosure. ............................................................... 3

Issue 2: Here, proper evidence submitted below raised a
factual question as to the full identity of Citimortgage vs.
Citibank as it pertains to federal pre-foreclosure
counseling requirements. The trial court should have
held the case for trial and this Court should remand for
trial on this narrow issue as it applies to the counseling
requirement under the summary judgment standard. ......................... 4

Issue 3: Texas law, being debtor friendly, requires a creditor
to prove the entire chain of title when challenged by a
debtor. Here, admissions in the record demonstrate a 9-
year gap in the chain of title. Given that gap, even on
summary judgment, the trial court should have resolved
the factual inference in Appellant’s favor. Thus, this
Court should reverse and remand the case. ......................................... 4

vi
 Issue 4: Attorney immunity is not absolute. BDFTE
admitted below to only being retained in 2013, which
was 10 years after the alleged fraud; however, it was
manufacturing documents that did not require the skill of
an attorney. The lower court should not have granted
summary judgment on this issue. ......................................................... 5

Issue 5: The DTPA tie-in statutes derive their authority from
other sections of the Texas Code. As those sections do
not require a party be a “consumer,” only a “claimant,”
the trial court should not have dismissed those claims as a
matter of law. ........................................................................................ 5

Issue 6: The trial court erred in permitting the Nurse
declaration and other conclusory documents when their
use contradicts this Court’s decision in Preismeyer v. Pacific
Southwest Bank; namely, the Nurse declarant had no
personal knowledge and the affidavits and other
documents should have been struck, requiring reversal by
this Court. ............................................................................................. 5

STANDARD OF REVIEW..................................................................................... 7

ARGUMENT ........................................................................................................... 8

I. Texas strictly construes deeds of trust. The trial court failed
to apply the standard of review when a factual question
arose regarding the relationship between Citibank and
Citimortgage as this determined, in part, relevance of
federal pre-foreclosure counseling statutes. This Court
should reverse the trial court and remand............................................ 8

A. The strict construction of the deed of trust, as well as
the standard of review, both favor reversal as they are
construed against the Appellees, movants below.................................. 8

B. FHA regulations at 24 CFR 203.604 demand a
face-to-face interview. This never happened with the
Schuetz, an undisputed fact that requires reversal. ............................ 10

vii
 2. A fact issue below precluded summary judgment when the
Schuetz’ supplemental motion showed a question
regarding the corporate nature of Citi. .............................................. 13

A. Appellant Citi offered judicial admissions elsewhere
that its identity is a fusion of Citibank and Citimortgage;
htus, it is judicially estopped from claiming they are
unrelated. ............................................................................................ 13

B. The Schuetz’ affidavits demonstrated the material
fact needed to preclude summary judgment. ..................................... 14

3. Texas law permits challenges by debtors to the chain of
assignments of an alleged creditor. Here, that challenge
revealed a 9-year gap in the chain of title. This Court
should reverse the lower court’s ruling on summary
judgment. ............................................................................................ 15

4. Attorney immunity is not absolute; that counsel below
conducted actions for years without being retained,
actions that did not necessarily require the skill of an
attorney did not permit immunity to attach as a matter of
law, a situation requiring reversal....................................................... 16

5. The DTPA tie-in statutes derive their authority from other
sections of the Texas Code. As those sections do not
require a party be a “consumer,” only a “claimant,” the
trial court should not have dismissed those claims as a
matter of law. ...................................................................................... 18

6. The trial court erred in permitting the Nurse declaration
and other conclusory documents when their use
contradicts this Court’s decision in Preismeyer v. Pacific
Southwest Bank; namely, the Nurse declarant had no
personal knowledge and the affidavits and other
documents should have been struck, requiring reversal by
this Court. ........................................................................................... 18

PRAYER FOR RELIEF ........................................................................................ 20

viii
CERTIFICATE OF COMPLIANCE ................................................................... 21

CERTIFICATE OF SERVICE ............................................................................. 22

ix
 INDEX OF AUTHORITIES

CASES
20801, Inc. v. Parker,
249 S.W.3d 392 (Tex. 2008).................................................................................... 7

Anderson v. U.S. Dep't of Hous. & Urban Dev.,
701 F.2d 112 (10th Cir. 1983) ............................................................................... 12

Austin v. Countrywide Home Loans,
261 S.W.3d 68 (Tex. App.—Houston [1st Dist.] 2008) ........................................ 16

Bierwirth v. BAC Home Loans Servicing, L.P.,
2012 Tex. App. LEXIS 7506 (Tex. App.—Austin 2014)...................................... 18

Brownlee v. Brownlee,
665 S.W.2d 111 (Tex. 1984).................................................................................. 22

Centeq Rlty., Inc. v. Siegler,
899 S.W.2d 195 (Tex. 1995).................................................................................... 8

Daughters of Charity Health Servs. of Waco v. Linnstaedter,
226 S.W.3d 409 (Tex. 2007).................................................................................. 18

Faine v. Wilson,
192 S.W. 2d 456 (Tex. App.—Galveston 1946) ................................................... 10

Fin. Comm'n of Tex. v. Norwood,
___ S.W.3d ___, 2013 Tex. LEXIS 491, at *4 (Tex. 2013) .................................... 9

Ford v. Emerich,
343 S.W. 2d 527 (Tex. App.—Houston 1961, writ ref’d n.r.e.) .............................. 9

Fuller v. O'Neal,
69 Tex. 349, 6 S.W. 181 (1887)............................................................................... 9

Gaines v. Hammon,
358 S.W.2d 557 (Tex. 1962).................................................................................... 8

Glass v. Carpenter,
330 S.W.2d 530 (Tex. Civ. App.—San Antonio 1959, writ ref’d n.r.e.) .............. 17

x
Harrell v. Patel,
225 S.W.3d 1 (Tex. App.—El Paso 2005, pet. denied). ........................................ 22

Henke v. First Southern Properties, Inc.,
586 S.W. 2d 617 (Tex. App.—Waco 1979, writ ref’d n.r.e.). .............................. 10

Leavings v. Mills,
175 S.W.3d 301 (Tex. App.—Houston [1st Dist.] 2004, no pet.) ......................... 17

Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding,
289 S.W.3d 844 (Tex. 2009).................................................................................... 7

Martin v. New Century Mortgage Co.,
2012 Tex. App. LEXIS 4705 (Tex. App.—Houston [1st Dist.] 2012) .................. 16

Mers. v. Nebraska Dept. of Finance,
704 N.W.2d 784 (Neb. 2005) ................................................................................ 17

Michael v. Crawford,
108 Tex. 352, 193 S.W. 1070 (1917)..................................................................... 11

Murchison v. Freeman,
127 S.W. 2d 369 (Tex. App.—El Paso 1939, writ ref’d) ...................................... 10

Perkins v. Sterne,
23 Tex. 561, 1859 Tex. LEXIS 106 (Tex. 1859) (same) ....................................... 18

Pope v. Beauchamp,
219 S.W. 447 (Tex. 1920)...................................................................................... 18

Priesmeyer v. Pacific Southwest Bank, F.S.B.,
917 S.W.2d 937 (Tex. App.—Austin 1996) .................................................... 16, 22

Provident Life & Acc. Ins. v. Knott,
128 S.W.3d 211 (Tex. 2003).................................................................................... 7

Radio Station KSCS v. Jennings,
750 S.W.2d 760 (Tex. 1988).................................................................................. 22

Rizkallah v. Conner,
952 S.W.2d 580 (Tex. App.—Houston [1st Dist.] 1997). ..................................... 21

xi
Duty v. Graham,
12 Tex. 427 (Tex. 1854) ........................................................................................ 18

Shepard v. Boone,
99 S.W.3d 263 (Tex. App.—Eastland 2003) ......................................................... 17

Slaughter v. Qualls,
139 Tex. 340 (Tex. 1942) .................................................................................. 9, 11

Taylor v. Brennan,
621 S.W.2d 592 (Tex. 1981).................................................................................. 10

Travelers Ins. Co. v. Joachim,
315 S.W.3d 860 (Tex. 2010).................................................................................... 7

Tri-Cities Const., Inc. v. American Nat. Ins. Co.,
523 S.W.2d 426 (Tex. Civ. App.—Houston [1st Dist.] 1975, no writ .................. 17

Turner v. Church of Jesus Christ of Latter-Day Saints,
18 S.W.3d 877 (Tex. App.—Dallas 2000, pet. denied) ........................................... 8

University Savings & Loan Ass’n v. Texas Lumber,
423 S.W.2d 287 (Tex. 1967).................................................................................. 18

University Savings Assoc. v. Springwood Shopping Center,
644 S.W.2d 705 (Tex. 1982).................................................................................. 10

West v. First Baptist Church,
71 S.W.2d 1090 (Tex. 1934).................................................................................. 18

STATUTES
24 C.F.R. §§ 203 ......................................................................................................... 13, 14
Art. § 51; Decree no. 70 (1829) (State of Coahuila and Texas), reprinted in 1 Early Laws
of Texas, at 77-78 (St. Louis, The Gilbert Book Co. 1891) .................................... 8

LEGAL ENCYCLOPEDIAS
28 Tex. Jur. Liens § 16 ...................................................................................................... 18
30 Tex. Jur. 2d Deeds of Trust and Mortgages § 119 ....................................................... 18
30 Tex. Jur. 3d Deeds of Trust and Mortgages § 119 ....................................................... 18

BOOKS

xii
Margaret Swett Henson, Samuel May Williams: Early Texas Entrepreneur (1976) .......... 9

xiii
 STATEMENT OF THE CASE

Nature of the case: A homeowner behind on a mortgage sought a
modification on a FHA loan. The bank
foreclosed. The homeowners alleged failure to
comply with federal prerequisites under FHA
rules prior to foreclosure, and gaps in the chain of
title against the foreclosing bank; document
fabrication claims against the law firm, and void
sale against the alleged foreclosure purchasers.

Course of Proceedings: The trial court denied the original law firm
motion for summary judgment. Then all parties
moved in cross-motions for summary judgment.

Trial Court’s Disposition The district court signed a final appealable order
in favor of Appellees. Appellant filed a notice of
appeal, and this case is now properly before this
Court.

xiv
 ISSUES PRESENTED

1. The standard of review on summary judgment prohibits the trial
court’s decision, in which a disputed factual question arose
regarding the identity of several directly related corporate
entities. Because factual disputes require resolution at trial,
should the trial court’s decision be reversed?

2. Strict construction of the deed of trust demands that Appellees
follow federal law. As a question of first impression, strict
construction should have required the Appellees follow HUD
statutes to conduct a face-to-face interview prior to foreclosure.
Because a fact issue existed as to whether such interview was
required, should the trial court be reversed on summary
judgment?

3. The standard of review on summary judgment prohibits the trial
court’s decision, in which a nine-year gap in the chain of title,
admitted by Appellees, blocked any claim to the property. Should
the trial court be reversed on this issue both as a matter of law
and for a factual inquiry at trial?

4. Appellee law firm constructed documents during the foreclosure
process that did not require the skill of an attorney. Even broadly
interpreted, the admissions by BDFTE declared that BDFTE was
not “retained” until 2013, more than 10 years after it fabricated
the allegedly fraudulent documents. Should the trial court be
reversed to determine the nature of the relationship between
BDFTE and foreclosing Appellees prior to 2013 under a summary
judgment standard of review?

5. Appellant’s live pleading contained a claim under the Texas
DTPA tie-in statute. Because the tie-in has no requirement to be
brought under its tie-in Code as a “consumer,” should the lower
court be reversed on summary judgment to permit a trial of the
DTPA claim brought through the Finance Code?

6. The trial court erred in denying the motion to strike the Nurse
declaration and other inadmissible documents, under this

xv
Court’s precedent, because such statements must be made from
personal knowledge and none was presented. Should the motion
to strike be granted and the case reversed?

xvi
 STATEMENT OF FACTS

Appellants Michael and Jamie Schuetz filed suit alleging wrongful

foreclosure for Defendant Citi’s failure to conduct counseling face-to-face as

required under federal statute. CR.402. Under the Schuetz’ theory of recovery, a

borrower in default on an FHA loan must receive a face-to-face interview under 24

CFR 203.606 at least 30 days prior to foreclosure. CR.402, 404. Based on this

theory of recovery, the foreclosure was void. CR.402, 404.

The Schuetz filed under other claims, identifying that when the foreclosure

law firm had conducted actions that, as alleged, did not require the skill of an

attorney, that the firm was liable under the Texas Finance Code tie-in statute to

the Texas Deceptive Trade Practices Act. CR.403-04. The Schuetz claimed that

the attorneys were not retained as legal counsel until after the fraudulent

documents were prepared. CR.403.

The Schuetz further claimed violations of Texas Civil Practices & Remedies

Code 12.002 and declaratory relief in identifying what is alleged to be a nine (9)

year gap in the chain of title.

Appellants also claimed a 9-year gap in the chain of title. CR.399-402. This

is because the lawsuit alleges, in the First Amended Petition, that Ginnie Mae

(GNMA) had the loan early on in the process and thus no assignments made, or

recorded, that purport another owner are or were possible as they had nothing to

1
grant. CR.165-67.

Lastly, Appellants claimed DTPA claims and a claim under the Texas

Finance Code. CR.403-04.

The attorney defendants filed a motion for summary judgment which was

denied. Then all parties filed cross-motions for summary judgment. CR.2-4

(Docket sheet).

The Schuetz filed affidavits raising a fact issue as to the identity and

corporate connectedness of CitiBank and Citimortgage, as well as the location of

those entities and the use of each other’s facilities and websites. CR.246-264. The

affidavits were supplied to the trial court again in the motion for new trial as they

had been part of the motions for summary judgment but one internal page was

missing from each when efiled. CR.506-525.

2
 SUMMARY OF THE ARGUMENT

Consumer debtor cases present an undeniable challenge for courts because

of the lack of sympathy for a debtor plaintiff in default, who is generally thought

undeserving of exacting legal protection having not paid on a debt. Yet even before

statehood, though, Texas law showed debtors favor and protection, applying

various debtor-friendly common law principles, and strictly requiring creditors to

prove their authority to collect and to rigorously follow the law. This is the case

here.

Issue 1: Deeds of trust are strictly construed in Texas and have been
for more than a century. Because this was a HUD loan that
must comply with FHA statutes, the Appellee bank should
have conducted face-to-face counseling prior to foreclosure.
As both the standard of review and the deed of trust are
construed against Appellees below, this Court should
reverse the lower court as no Congressionally-mandated
counseling occurred prior to foreclosure.

Texas law strictly construes deeds of trust, and has for more than 125 years.

It is a harsh remedy, but in a lien theory state, title remains in the hands of the

homeowner who is entitled to have the terms in the deed of trust followed. The

power of sale, here, incorporated HUD regulations under federal law that required

face-to-face counseling prior to foreclosure. That counseling never happened even

though Appellee had several branch locations within the 200 mile limit of

Appellant’s house. This Court should reverse the lower court because no

counseling was attempted.

3
Issue 2: Here, proper evidence submitted below raised a factual
question as to the full identity of Citimortgage vs. Citibank
as it pertains to federal pre-foreclosure counseling
requirements. The trial court should have held the case for
trial and this Court should remand for trial on this narrow
issue as it applies to the counseling requirement under the
summary judgment standard.

Reversal here turns on one clear, distinct legal question: in the summary

judgment context—where inferences are resolved against the non-movant—is it a

factual matter whether Citimortgage and Citibank are so closely related as to be

considered the same entity when Appellees presented the trial court with evidence

of judicial admissions by Appellees that the entities were closely related? The

answer is yes, and this ties directly to Issue 1 regarding face-to-face counseling.

Thus, the judgment should be reversed and remanded.

Issue 3: Texas law, being debtor friendly, requires a creditor to
prove the entire chain of title when challenged by a debtor.
Here, admissions in the record demonstrate a 9-year gap in
the chain of title. Given that gap, even on summary
judgment, the trial court should have resolved the factual
inference in Appellant’s favor. Thus, this Court should
reverse and remand the case.

Texas follows the common law rule where a debtor may challenge the chain

of assignments regarding the right of a party to foreclose. Here, Appellees admit to

a 9-year gap in the chain of title. The very motion of Appellees alleges that from

2000 until 2009 the loan was assigned to MERS. But MERS does not and cannot

own a loan of a deed of trust. That admission was provided below. That fact can be

4
decided without revisiting this Court’s decision in Bierwirth v. BAC Home Loans

Servicing, but should this Court believe that decision is implicated, it should reverse

Bierwirth.

Issue 4: Attorney immunity is not absolute. BDFTE admitted below
to only being retained in 2013, which was 10 years after the
alleged fraud; however, it was manufacturing documents
that did not require the skill of an attorney. The lower court
should not have granted summary judgment on this issue.

A bar card, while giving great privilege and requiring high levels of

integrity, is not an absolute grant of immunity. When actions taken by a licensed

attorney do not require the skill of attorney (i.e., they can be done by non-attorneys

without oversight as a matter of law), there is no immunity and the fraud claim

should not be dismissed on summary judgment.

Issue 5: The DTPA tie-in statutes derive their authority from other
sections of the Texas Code. As those sections do not require
a party be a “consumer,” only a “claimant,” the trial court
should not have dismissed those claims as a matter of law.

Texas consumer protection statutes are broadly construed. Unlike bringing a

DTPA claim, a tie-in statute speaks in terms of “claimant” rather than “consumer.”

The enabling statutes in other parts of the Code, such as the Finance Code, do not

require consumer status; thus, the trial court should be reversed as a matter of law.

Issue 6: The trial court erred in permitting the Nurse declaration
and other conclusory documents when their use contradicts
this Court’s decision in Preismeyer v. Pacific Southwest
Bank; namely, the Nurse declarant had no personal
knowledge and the affidavits and other documents should

5
 have been struck, requiring reversal by this Court.

All declarations must be made by personal knowledge. That must be

demonstrated by showing how the declarant arrived at that personal knowledge:

the basis of that knowledge. The Nurse affidavit clearly lacked that critical part that

this Court’s precedent requires. This Court should reverse the lower court on the

basis of that failed affidavit.

6
 STANDARD OF REVIEW

A trial court’s summary judgment is reviewed de novo. Travelers Ins. Co. v.

Joachim, 315 S.W.3d 860, 862 (Tex. 2010). The evidence presented must be

considered by the Court in the light most favorable to the non-movants, i.e., the

Schuetz, crediting evidence favorable to the Schuetzif reasonable jurors could, and

disregarding evidence contrary to the Schuetz, unless reasonable jurors could not.

see Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex.

2009). The Court must indulge every reasonable inference in favor of the Schuetz,

see Provident Life & Acc. Ins. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003), and resolve

any doubts of the existence of a material fact in their favor. See 20801, Inc. v. Parker,

249 S.W.3d 392, 399 (Tex. 2008).

There must be no issues of material fact. Tex. R. Civ. P. 166a(c). “The

purpose of Rule 166a(c),” the Dallas Court of Appeals explained in Turner v. Church

of Jesus Christ of Latter-Day Saints, 18 S.W.3d 877, 885-86 (Tex. App.—Dallas 2000,

pet. denied), citing Gaines v. Hammon, 358 S.W.2d 557, 563 (Tex. 1962), “is not to

provide either a trial by deposition or a trial by affidavit, but to provide a method

of summarily terminating a case when it clearly appears that only a question of law

is involved and no genuine issue of material fact remains.” If a fact issue exists that

is raised by the Schuetz in their motion or in defense of Appellees’ motions,

summary judgment may not issue as a matter of law. See Centeq Rlty., Inc. v. Siegler,

7
899 S.W.2d 195, 197 (Tex. 1995). It is the most important appellate concept. See

Jacques L. Wiener, Ruminations from the Bench: Brief Writing and Oral Argument at the

Fifth Circuit, 70 TUL. L. REV. 187, 189 (1995).

ARGUMENT

Texas garnered many people at its founding based on its debtor-protective

context. Early immigrants used to flee to Texas to avoid harsh debtor laws for these

protections, writing “G.T.T.” (Gone To Texas) on their doors.1

I. Texas strictly construes deeds of trust. The trial court failed to
apply the standard of review when a factual question arose
regarding the relationship between Citibank and Citimortgage
as this determined, in part, relevance of federal pre-foreclosure
counseling statutes. This Court should reverse the trial court and
remand.

A. The strict construction of the deed of trust, as well as the
standard of review, both favor reversal as they are
construed against the Appellees, movants below.

Texas law strictly construes deeds of trust, and has for more than 125 years.

“The course marked out for the trustee to pursue must be strictly followed by him

for the method of enforcing the collection through such deeds is a harsh one. The

1
See, e.g., Art. § 51; Decree no. 70 (1829) (State of Coahuila and Texas), reprinted in 1 Early
Laws of Texas, at 77-78 (St. Louis, The Gilbert Book Co. 1891) (protecting debtors’ homes in
Texas from any debts acquired prior to purchase of the land); Margaret Swett Henson, Samuel
May Williams: Early Texas Entrepreneur 3 (1976) (describing early flight of immigrants in the Panic of
1819, who often scrawled “G.T.T.”—Gone to Texas—on their door before they left); see also Fin.
Comm'n of Tex. v. Norwood, 418 S.W.3d 566, 570 (Tex. 2013) (discussing the debtor protective
context of Texas home lien laws).

8
grantor of the power is entitled to have his directions obeyed . . . .”2 Any irregularity making

the act void passed no title.3 And because Texas is a lien theory state, title remains

in the hands of the homeowner. Taylor v. Brennan, 621 S.W.2d 592, 593 (Tex. 1981).

In University Savings Assoc. v. Springwood Shopping Center,4 the Texas Supreme

Court held:

Texas courts have consistently held that the terms set out in a
deed of trust must be strictly followed. Slaughter v. Qualls, 139 Tex.
340, 162 S.W.2d 671 (1942); Michael v. Crawford, 108 Tex. 352, 193
S.W. 1070 (1917). As this Court has stated, “[a] trustee has no power
to sell the debtor's property, except such as may be found in the deed
of trust.” Slaughter v. Qualls, supra at 675. . . . . The reason that
“strictness” is required in following the terms of the power granted by
the deed of trust is to protect the property of the debtor. Walker v.
Taylor, 142 S.W. 31, 33 (Tex. Civ. App. -- San Antonio 1911, writ
ref'd). Failure to follow the terms of the deed of trust will give rise to a
cause of action to set aside the trustee's deed. Slaughter v. Qualls, supra.5

The required strict construction of the Deed of Trust may seem harsh. Strict

construction, though, does not leave the lender without remedies. The lender may

sue on the note or seek a judicial order of foreclosure. It is only the contractual

remedy of non-judicial foreclosure that is lost by the lender’s failure to abide by the

2 Fuller v. O'Neal, 69 Tex. 349, 6 S.W. 181 (1887) (emphasis added; see also University
Savings Assoc. v. Springwood Shopping Center, 644 S.W.2d 705 (Tex. 1982) (same strict
construction); Slaughter v. Qualls, 139 Tex. 340 (Tex. 1942) (same); Ford v. Emerich,
343 S.W. 2d 527, 531 (Tex. App.—Houston 1961, writ ref’d n.r.e.) (same); Faine v.
Wilson, 192 S.W. 2d 456, 458 (Tex. App.—Galveston 1946) (same); Murchison v.
Freeman, 127 S.W. 2d 369, 372 (Tex. App.—El Paso 1939, writ ref’d) (same).
3 Henke v. First Southern Properties, Inc., 586 S.W. 2d 617, 620 (Tex. App.—Waco

1979, writ ref’d n.r.e.).
4 644 S.W.2d 705 (Tex. 1982).
5 Id. at 706.

9
contract.

Thus, if the conditions and limitations on the trustee’s power to sell a note

and deed of trust at foreclosure, as set forth in the deed of trust, were never fulfilled,

then the trustee’s power to sell never lawfully came into being, and the foreclosure

sale and trustee’s deed are void.6 The trustee must strictly adhere to the terms of

the power for the power “admits of no substitution and no equivalent.”7

The deed of trust, recorded at multiple locations in the record, CR.22-26

wholly incorporates the provisions of FHA and HUD regulations. These demand

strict adherence. CR.179-183, esp. 181 at ¶9.d.

B. FHA regulations at 24 CFR 203.604 demand a face-to-face
interview. This never happened with the Schuetz, an
undisputed fact that requires reversal.

The Federal Housing Authority (FHA), which was created by the National

Housing Act of 1934, “is the largest government insurer of mortgages in the

world.”8 The FHA, which is a part of the Department of Housing and Urban

Development (HUD), provides mortgage insurance on, inter alia, single-family

homes made by FHA-approved lenders throughout the United States and its

territories.9

Under this program, mortgagee/lenders are induced to make essentially risk-

6 Slaughter v. Qualls, 162 S.W. 2d 671, 675 (Tex. 1942).
7 Michael v. Crawford, 108 Tex. 352, 193 S.W. 1070 (1917).
8 http://portal.hud.gov (last visited February 3, 2015).
9 Id.

10
free mortgages by being guaranteed against loss in the event of default by the

mortgagor.10 This program allows mortgagees to offer loans to low-income families

at a more favorable rate than would otherwise be available in the market. Id. The

availability of affordable mortgages, in turn, promotes Congress's “national goal” of

“a decent home and suitable living environment for every American family.” 12

U.S.C. § 1701t.

Pursuant to the authority conferred by Congress, HUD promulgated

regulations pertaining to HUD-insured mortgages. The regulations regarding a

mortgagee's servicing responsibilities of such mortgages are codified in Title 24,

Part 203 (Single Family Mortgage Insurance), Subpart C (Servicing

Responsibilities) (“Subpart C”) of the Code of Federal Regulations (“CFR”).11

In addition, “[i]t is the intent of the Department [HUD] that no mortgagee

shall commence foreclosure or acquire title to a property until the requirements of this

subpart [C] have been followed.” 12 To that end, 24 CFR 203.604 mandates that a

lender or servicer must provide face-to-face counseling before accelerating a home

loan and conducting foreclosure. In relevant part, 203.604 states:

. . . . The mortgagee must have a face-to-face interview with the
mortgagor, or make a reasonable effort to arrange such a meeting,
before three full monthly installments due on the mortgage are

10 Anderson v. U.S. Dep't of Hous. & Urban Dev., 701 F.2d 112, 113-14 (10th Cir.
1983).
11 24 C.F.R. §§ 203.500-.681.
12 24 C.F.R. § 203.500 (emphasis added).

11
 unpaid. If default occurs in a repayment plan arranged other than
during a personal interview, the mortgagee must have a face-to-face
meeting with the mortgagor, or make a reasonable attempt to arrange
such a meeting within 30 days after such default and at least 30 days
before foreclosure is commenced, . . . .13

Further, this regulation only permits five (5) exceptions, none of which are

met here. A face-to-face meeting is not required if (1) the mortgagor does not reside

in the property, (2) the property is “not within 200 miles of the mortgagee, its

servicer, or a branch office of either,” (3) the mortgagor has indicated he will not

cooperate in this interview, (4) the mortgagor is consistent with payments on a

situational based repayment plan, or (5) a reasonable effort to arrange a meeting is

not successful. 14

Here, the Schuetz resided in the property. No evidence has been offered at

this point by Defendant Citi that is has made a reasonable effort to arrange a

meeting prior to foreclosure. (Reasonableness is defined as at least one certified

letter to the mortgagor and a drive to the residence. See 24 C.F.R. 203.604(d).).

Neither does Citi have any evidence that Schuetz had indicated they would not

cooperate in an interview, nor that Schuetz were consistent with payments on a

situational based repayment plan.

Lastly, and most compelling, is the plain evidence in the record that

13 24 C.F.R. 203.604(a).
14 See 203.604(c).

12
Appellee Citi never interviewed nor attempted to contact the Schuetz despite there

being multiple branches of Citi 200 miles of the residence. CR. 246-54; 514-25.

Citi had the duty and the ability to follow federal law. CR.255-56. For this reason

the case should be reversed and remanded.

2. A fact issue below precluded summary judgment when the
Schuetz’ supplemental motion showed a question regarding the
corporate nature of Citi.

In their primary motion, the Schuetz identified to the trial court multiple

publicly known locations of Citi branches. CR.246-54; 514-525. At the summary

judgment hearing, Appellee’s counsel objected as to the separate nature of the

entities. The clerk’s record provided to Appellant’s counsel does not contain any

affidavits that refute this fact.

A. Appellant Citi offered judicial admissions elsewhere that its
identity is a fusion of Citibank and Citimortgage; thus, it is
judicially estopped from claiming they are unrelated.

At the summary judgment hearing Citi attempted to deny there was any

relationship between Citibank and Citimortgage. Yet the Schuetz provided to the

trial court judicial admissions by Appellee that Citi’s business arrangement

functionally intertwines Citibank and Citimortgage.15 This arrangement makes

them show up on common “Citi” government HAMP websites, 16 corporate

15 CR.511-513; Supp. CR. (forthcoming by way of a request to the Comal County
Clerk).
16 Id.

13
websites,17 parallel displays within Citi websites showing corporate structure,18 and

they even have mortgage payment options on a common website.19 This at a

minimum raised a fact issue regarding Citi’s identity in its circular corporate

“family tree,” enough to preclude the high burden of summary judgment when

construed against Citi both (1) under strict construction of the deed of trust, and (2)

the proper application of the standard of review. Further, the motion for new trial

also contained Citimortgage’s corporate disclosure statement in federal court, in

the case of Debish, et al. v. Fannie Mae and Citimortgage, Inc., that its corporate structure

and operations are wholly owned by CitiBank, N.A.20 This Court should reverse

the trial court.

B. The Schuetz’ affidavits demonstrated the material fact
needed to preclude summary judgment.

Citimortgage has a branch locator online. CR. 515-19. It also has phone

reception at its branches where the Schuetz contacted Citimortgage. CR. 515-19.

The Schuetz identified thirteen (13) separate locations within 200 miles of their

home whereby Citi had a duty to conduct a face-to-face interview. CR.514-25.

This at a minimum raised a genuine issue of material fact that precluded summary

judgment.

17 Id.
18 Id.
19 Id.
20 See CR.508, 511-12.

14
3. Texas law permits challenges by debtors to the chain of
assignments of an alleged creditor. Here, that challenge revealed
a 9-year gap in the chain of title. This Court should reverse the
lower court’s ruling on summary judgment.

Texas law permits challenging the chain of assignments regarding the right

of a party to foreclose.21 This stems from, in part, the settled Texas precedent

following the common law rule where a debtor may bring any ground against an

assignee to challenge an assignment as void or invalid.22 This is true regardless of

whether the Schuetz are third parties to the assignment. See Priesmeyer v. Pacific

Southwest Bank, F.S.B., 917 S.W.2d 937 (Tex. App.—Austin 1996). It simply raises a

disputed issue of material fact, one which cannot survive the standard of review.

The chain of title has an 9-year gap. CR.187-90. The very motion of

Appellees alleges that from 2000 until 2009 the loan was assigned to MERS. But

MERS does not and cannot own a loan or a deed of trust. MERS admitted

judicially in MERS v. Nebraska Department of Banking and Finance, where MERS denied

ever having ownership interests in any mortgage note.23 Thus, the mortgage could

21 See Priesmeyer v. Pacific Southwest Bank, F.S.B., 917 S.W.2d 937 (Tex. App.—Austin
1996); see also Martin v. New Century Mortgage Co., 2012 Tex. App. LEXIS 4705 (Tex.
App.—Houston [1st Dist.] 2012); Austin v. Countrywide Home Loans, 261 S.W.3d 68
(Tex. App.—Houston [1st Dist.] 2008); Leavings v. Mills, 175 S.W.3d 301 (Tex.
App.—Houston [1st Dist.] 2004, no pet.); Shepard v. Boone, 99 S.W.3d 263 (Tex.
App.—Eastland 2003).
22 See Tri-Cities Const., Inc. v. American Nat. Ins. Co., 523 S.W.2d 426, 430 (Tex. Civ.

App.—Houston [1st 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.).
23 CR. 192-219; See 704 N.W.2d 784 (Neb. 2005). Here, MERS stated it could not

15
never have been assigned to MERS.

This Court may require addressing its precedent in Bierwirth v. BAC Home

Loans Servicing, LP.24 To the degree this Court believes itself bound by that decision,

the Schuetz pray this Court reverse that decision as it contradicts 160 years of

Texas case law25 and all three editions of Texas Jurisprudence,26 abrogating the

common law without any citation to this vast precedent.

4. Attorney immunity is not absolute; that counsel below conducted
actions for years without being retained, actions that did not
necessarily require the skill of an attorney did not permit
immunity to attach as a matter of law, a situation requiring
reversal.

This Court should follow the learned reasoning of the Dallas Court of

Appeals, which explained the analysis well:

An attorney can be held liable by a third party for actions that
are not part of the discharge of his duties to his client. See Alpert, 178
S.W.3d at 406; see also Bradt, 892 S.W.2d at 71. As such, attorneys

acquire mortgage loans.
24 , 2012 Tex. App. LEXIS 7506 (Tex. App.—Austin 2014).

25 See Duty v. Graham, 12 Tex. 427, 434 (Tex. 1854) (“The assignment of the interest

of the mortgagee in the land, without an assignment of the debt, is considered to be
without meaning or use.”); see also Daughters of Charity Health Servs. of Waco v.
Linnstaedter, 226 S.W.3d 409, 411 n.10 (Tex. 2007) (lien is incident to debt);
University Savings & Loan Ass’n v. Texas Lumber, 423 S.W.2d 287, 292 (Tex. 1967)
(assignment is a nullity); West v. First Baptist Church, 71 S.W.2d 1090, 1098-1100
(Tex. 1934) (same, “settled principle”); Pope v. Beauchamp, 219 S.W. 447, 448-49
(Tex. 1920) (same); Perkins v. Sterne, 23 Tex. 561, 1859 Tex. LEXIS 106 (Tex. 1859)
(same).
26 30 Tex. Jur. 3d Deeds of Trust and Mortgages § 119; 30 Tex. Jur. 2d Deeds of Trust and

Mortgages § 119; 28 Tex. Jur. Liens § 16. Each edition states that a deed follows a
note and not vice versa.

16
 acting on behalf of their clients are not shielded from
liability for their fraudulent conduct because fraudulent acts are
entirely "foreign to the duties of an attorney." Poole, 58 Tex. at 137
(fraudulent assignment of bill of lading); see also Toles, 113 S.W.3d at
911-912 (holding that attorney who represented former husband in
divorce action was not immune from claim of former wife alleging
attorney aided and abetted a breach of fiduciary duty).
Furthermore, an attorney is also liable if he knowingly
enters into a conspiracy to defraud a third person in the
course of representing his client. See Likover, 696 S.W.2d at 472
(conspiracy to defraud purchaser of apartment complex). And under
certain circumstances, attorneys may also be liable to a third party for
other torts, [7] such as negligent misrepresentation, despite the
absence of a general negligence duty to non-clients. See McCamish,
Martin, Brown & Loeffler, 991 S.W.2d at 793-94. Thus, if the only
ground for summary judgment is attorney immunity, and
the plaintiff alleges claims that could arguably involve
fraudulent conduct, the trial court should deny a motion for
summary judgment based on attorney immunity as to those
claims. See Toles, 113 S.W.3d at 912 (argument that actions were
taken during representation of client was not sufficient to support
summary judgment on claim for aiding and abetting, breach of
fiduciary duty, and conspiracy).27

Further, the Houston Court of Appeals (1st Dist.) has never regarded

immunity absolute, but only in actions that “require[] the office, professional

training, skill, and authority of an attorney the skill of an attorney.”28

Filing documents, activities identified by Appellee BDFTE at CR. 456, are

by no means actions that require the skill of an attorney. Thus, the immunity claim

should be reversed.

27 Santiago v. Mackie Wolf Zientz & Mann, P.C., 2014 Tex. App. LEXIS 9165, 6-7
(Tex. App. Dallas Aug. 19, 2014) (emphasis added).
28 Dixon Fin. Servs. v. Greenberg, Peden, Siegmyer & Oshman, P.C., 2008 Tex. App.

LEXIS 2064, 21-22 (Tex. App. Houston 1st Dist. Mar. 20, 2008) (emphasis added).

17
5. The DTPA tie-in statutes derive their authority from other
sections of the Texas Code. As those sections do not require a
party be a “consumer,” only a “claimant,” the trial court should
not have dismissed those claims as a matter of law.

Unlike bringing a claim pursuant Texas Business and Commerce Code §

17.50(a), a tie-in claim under 17.50(h) has no requirement that it be brought by a

consumer. Section 17.50(h) speaks in terms of a “claimant.”29 There is not a single

use of the word “consumer” in subsection (h), but the word “claimant” is used three

times.

The Legislature knew what the term “consumer” meant because it was

defined within the Act and used so many times, and yet it chose to use another

term, “claimant,” in granting the enhanced rights of section 17.50 (h). The scheme

shows remarkable forethought by the Legislature in that by a change to the

enabling language in the tie-in statute, the legislature can and did change who

could bring an action and expand or diminish the claims that could be made while

still maintaining a basic consumer protection law for the benefit of its citizens. The

lower court should have granted a trial on the claim as a matter of law and should

be reversed.

6. The trial court erred in permitting the Nurse declaration and
other conclusory documents when their use contradicts this
Court’s decision in Preismeyer v. Pacific Southwest Bank;
namely, the Nurse declarant had no personal knowledge and the
affidavits and other documents should have been struck,

29 See TEX. BUS. & COMM. CODE § 17.50(h).

18
 requiring reversal by this Court.

Affidavits must not only (1) claim to be made on personal knowledge, but

also must (2) demonstrate the facts by which the party came to that personal

knowledge. “A conclusory statement is one that does not provide the underlying

facts to support the conclusion. Conclusory statements in affidavits are not proper

as summary judgment proof if there are no facts to support the conclusions.

Conclusory statements without factual support are not credible, and are not

susceptible to being readily controverted.”30

Further, “to obtain a summary judgment, affidavit testimony must

affirmatively show that it is based on personal knowledge.31 “The mere recitation

that the affidavit is based on personal knowledge is inadequate if the affidavit does

not positively show a basis for such knowledge.”32

Lastly, Exhibits J-4, J-5, and J-6 of Appellee’s MSJ were not certified records,

were not under seal, and did not come from any Texas entity. They were not

admissible.33 This Court should reverse the trial court’s denial of the Schuetz’

30 Rizkallah v. Conner, 952 S.W.2d 580, 587 (Tex. App.—Houston [1st Dist.] 1997).
31 Tex. R. Civ. P. 166a(f); see Brownlee v. Brownlee, 665 S.W.2d 111, 112 (Tex. 1984).
32 Priesmeyer, 917 S.W.2d at 939 (finding that bank Vice-President could not opine

as to any transfers or assignments generally without proving the basis for personal
knowledge of that exact assignment or acquisition)(citing to Radio Station KSCS v.
Jennings, 750 S.W.2d 760, 761-62 (Tex. 1988).
33 See Tex. R. Civ. P. 166(a)(f) (MSJ proof “shall set forth such facts as would be

admissible in evidence”). They are pure hearsay and should not be admitted. See
Harrell v. Patel, 225 S.W.3d 1, 6 (Tex. App.—El Paso 2005, pet. denied).

19
motion to strike and reverse the trial court.

PRAYER FOR RELIEF

Based on the foregoing, this Court should:

Ø Reverse the trial court on the grounds presented herein as a matter of
law;

Ø Where factual matters were raised below, this Court should remand
for a trial on the merits.

Respectfully submitted,

CASEY LAW OFFICE, P.C.

By: /s/ Stephen Casey
Stephen Casey
State Bar No. 24065015
stephen@caseylawoffice.us
595 Round Rock West Drive, Suite 102
Round Rock, Texas 78681
Telephone: 512-257-1324
Fax: 512-853-4098

COUNSEL FOR APPELLANTS

20
 CERTIFICATE OF COMPLIANCE

The preceding brief contains 4,493 words within the sections identified
under Tex. R. App. P. 9.4, typed upon Microsoft Word for Mac 2011, Baskerville
14 point font.

/s/ Stephen Casey

21
 CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing Petition for
Review and Appendix were served on Monday, November 30, 2015, on the
following via electronic transmission and/or first class mail:
John Ellis
dfoster@lockelord.com
jellis@lockelord.com
jthomason@lockelord.com
LOCKE LORD LLP
600 Congress Avenue, Ste 2200
Austin, TX 78701

Mark Hopkins
mark@hopkinswilliams.com
12117 Bee Caves Road, Ste 260
Austin, TX 78738

David Pfeuffer
170 E. San Antonio Street
New Braunfels, TX 78130

/s/ Stephen Casey

22
 No. 03-15-00522-CV

In The Third Court of Appeals
MICHAEL W. SCHUETZ AND JAMIE K. SCHUETZ,
Appellants,
v.

SOURCE ONE MORTGAGE SERVICES CORPORATION;
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.;
CITIMORTGAGE, INC.; AND BARRETT DAFFIN FRAPPIER
TURNER & ENGLE, ROBERT FERGUSON, AND BARBARA
FERGUSON,
Appellees,
Appeal from Cause No. C2013-1445C,
274th Judicial District Court, Comal County; Hon. Dib Waldrip, Presiding

APPELLANTS’ APPENDIX
 TABLE OF CONTENTS

Tab Name

A Trial Court judgment

B 24 CFR 203.604

C Deed of Trust incorporating 24 CFR 203.604
Tab A
500
501
502
503
504
Tab B
221
222
Tab C
22
23
24
25
26