Mid Pac Portfolio, LLC v. Paula Welch, Clyde Alan Ashworth and Wells Fargo Bank, Minnesota, NA Formerly Known as Norwest Bank, Minnesota, NA, as Trustee for Salomon Brothers Mortgage Securities VII, Inc. Floating Rate Mortgage Pass Through Certificates Series 1999-LBI

ACCEPTED
01-15-00404-CV
FIRST COURT OF APPEALS
HOUSTON, TEXAS
12/2/2015 11:04:12 AM
CHRISTOPHER PRINE
CLERK

FILED IN
1st COURT OF APPEALS
HOUSTON, TEXAS
CASE NO. 01-15-00404-CV 12/2/2015 11:04:12 AM
CHRISTOPHER A. PRINE
_________________________________ Clerk

IN THE COURT OF APPEALS
FIRST DISTRICT OF TEXAS
______________________________________________________
MID PAC PORTFOLIO, LLC
Appellant
VS.
PAULA WELCH AND CLYDE ALAN ASHWORTH
Appellees
______________________________________________________
On Appeal From the
405th Judicial District Court
Galveston County, Texas
______________________________________________________
REPLY BRIEF OF APPELLANT
______________________________________________________

Michael Burns
Attorney at Law
State Bar No. 03447980
P.O. Box 992
Allen, Texas 75013
Phone: (214) 354-1667
Attorney for Appellant

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 TABLE OF CONTENTS

TABLE OF AUTHORITES …………………………………………………….. ii

INTRODUCTION …………………………………………………………………1

ARGUMENT ………………………………………………………………………2

CERTIFICATE OF SERVICE……………………………………………………10

CEERTIFICATE OF COMPLIANCE……………………………………………10

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 TABLE OF AUTHORITIES
Cases
Elbaor v. Smith, 845 S.W.2d 240 (Tex.1992)............................................................3
Glenn v. Lucas, 376 S.W.3d 268 (Tex. App. 2012) ..................................................5
Global Drywall Systems, Inc. v. Coronado Paint Co., Inc., 104 S.W.3d 538 (2003)
.................................................................................................................................3
Howard v. Young, 210 S.W.2d 241, (Tex. Civ. App. 1948)......................................4
Huston v. U.S. Bank Nat. Ass’n, 359 S.W.3d 679 (1st Dist. Houston 2011). ............8
Mega Builders, Inc. v. American Door Products, Inc. 2013 WL 1136584 Houston
1st Dist. 2013) ..........................................................................................................6
Morrison v. Christie, 266 S.W.3d 89 (Tex.App.-Fort Worth 2008, no pet.) ............5
Rogers v. Ricane Enterprises, Inc., 772 S.W.2d 76 (Tex., 1989)…………………..8
Schanzle v. JPMC Specialty Mortg. LLC, WL 832170, (Austin 2011).....................8
Statutes
Tex. Civ. Prac. & Rem. Code §16.004(a)(1) .............................................................3
Tex. Civ. Prac. & Rem. Code §16.024 ..................................................................3, 7
Tex. Civ. Prac. & Rem. Code §16.024 (a)(1) ............................................................3
Tex. Civ. Prac. & Rem. Code §16.025…………………………………………...3,7
Tex. Civ. Prac. & Rem. Code §16.035(a) ..................................................................3
Tex. Civ. Prac. & Rem. Code § 37.009. ................................................................3, 9
Tex. Prop. Code § 51.006 (b) .....................................................................................4
Rules
TRCP 736.9. ...............................................................................................................8

Regulation
12 CFR 1024.17 .........................................................................................................7

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 INTRODUCTION
Appellees Ashworth and Welch’s Response brief fails to focus on any

specific legal argument or issue that may have been decisive to the trial court’s

judgment. Consequently, in this Reply, Mid Pac Portfolio, LLC (Mid Pac) will only

address issues raised in Ashworth and Welch’s brief that have not already been

covered in Mid Pac’s brief and supplement a few of the issues that Mid Pac has

already addressed.

One of the themes throughout Ashworth and Welch’s Response is that there

was some sort of illegal collusion between Mid Pac and Citigroup Global Markets

Realty Corp. (Citigroup) in the transfer of the Deed in Lieu. As has been stated in

Mid Pac’s brief and will be addressed again in this Reply, there is absolutely no legal

authority or summary judgment evidence to support this proposition.

Mid Pac’s undersigned counsel explained in his testimony during the trial

court’s hearing on the parties cross Motions for Summary Judgment that this is a

declaratory judgment suit filed by Mid Pac against Mr. Ashworth, Ms. Welch,

Citigroup and Wells Fargo Bank, Minnesota NA, formerly known as Norwest Bank,

Minnesota, NA as Trustee for Salomon Brothers Mortgage Securities VII, Inc.

Floating Rate Mortgage Pass Through Certificates, series 1999 –LB1 (Wells Fargo)

to clear the title to the property at issue into Mid Pac’s name. (RR 6-21, 33-36).

Citicorp was named as a Defendant to clear the title. Nothing more and nothing less.

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 ARGUMENT
MID PAC’S REPLY TO ISSUE 1:
The trial court was incorrect in granting Ashworth and Welch’s Motion for
Summary Judgment and denying Mid Pac’s Motion for Summary Judgment.
I. Mary Carter Agreement

Ashworth and Welch “Mary Carter” argument is confusing and unclear.

Despite that there is no summary judgment evidence to support their position,

Ashworth and Welch continue to claim that the “assignment” under which Mid Pac

claims the property is unenforceable because it is a “Mary Carter Agreement”. Mid

Pac is not claiming anything under any “assignment”. Mid Pac is trying to enforce

the Deed in Lieu which it has possession of. The Deed in Lieu is not an assignment.

Ashworth and Welch apparently consider the stipulation between Mid Pac and

Citigroup to be the “assignment”. They contend that the stipulation is a “Mary

Carter” agreement with Mid Pac as a “straw holder” of “a deed and mortgage

package” so that Citigroup could enforce the Deed in Lieu through Mid Pac. This

theory cannot be supported either factually or legally and is absolutely wrong.

A Mary Carter Agreement exists when a plaintiff enters into a settlement

agreement with a defendant and goes to trial against the remaining defendant(s). The

settling defendant remains a party in the case and retains a financial interest in a

Plaintiff’s recovery by guaranteeing the plaintiff a minimum payment which may be

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offset by a judgment recovered at trial against the remaining defendants. Elbaor v.

Smith, 845 S.W.2d 240 (Tex.1992); Global Drywall Systems, Inc. v. Coronado Paint

Co., Inc., 104 S.W.3d 538 (2003).

In this case, Ashworth and Welch have not produced any summary judgement

evidence of a “Mary Carter” type settlement agreement between Mid Pac and

Citigroup or that Citigroup retained any financial interest in the outcome of the

case. The stipulation between Mid Pac and Citigroup does not come close to being

a Mary Carter agreement because Citigroup disclaimed any interest in the Deed in

Lieu and the property (CR15). The stipulation a factual statement in the trial court

record that Citicorp had transferred its interest in the Deed in Lieu to Mid Pac and

did not claim any further interest in the Deed in Lieu or the property covered by it.

II. Limitations

Ashworth and Welch have raised Tex. Civ. Prac. & Rem. Code §16.004(a)(1)

(specific performance of a contract to convey property), Tex. Civ. Prac. & Rem.

Code §16.024 (3 year adverse statute), Tex. Civ. Prac. & Rem. Code §16.024 (a)(1)

(suit for specific enforcement), Tex. Civ. Prac. & Rem. Code §16.025 (5 year

adverse possession), Tex. Civ. Prac. & Rem. Code §16.035(a) (lien enforcement)

and Tex. Civ. Prac. & Rem. Code §16.051(four year residual statute) as statutes of

limitation defenses. The applicability of Tex. Civ. Prac. & Rem. Code §16.004(a)(1),

§16.024, §16.025 to this case have already been addressed by Mid Pac in its brief.

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 This is a suit by Mid Pac to clear the title to the property into its name. The

rule in Texas has been for a long time that a cause of action to remove a cloud from

the title to real estate is never barred by a limitation, including the four year statue

under Tex. Civ. Prac. & Rem. Code §16.051, as long as the cloud exists. See,

Howard v. Young, 210 S.W.2d 241, (Tex. Civ. App. 1948). Likewise, Tex. Civ. Prac.

& Rem. Code §16.035 applies to a suit to foreclose a lien on real property and is not

applicable to this case because Mid Pac is enforcing a Deed in Lieu not a lien.

The only statute of limitation relating to a Deed in Lieu is Tex. Prop. Code §

51.006 (b) which provides that the holder (Mid Pac) of a Deed in Lieu (as opposed

to the party who gives the Deed in Lieu, i.e Ms. Welch and Mr. Ashworth) has four

years to void the Deed in Lieu and foreclose under the deed of trust on which Deed

in Lieu is based. This is a limitation on the holder of the Deed in Lieu to void it not

enforce it.

III. Chain of Title into Mid Pac

Ashworth and Welch make an issue of lack of chain of title into Mid Pac.

From Mid Pac’s perspective, this suit has two distinct issues. The first is the interest

that Ashworth and Welch have in the title to the property based on the 2003

settlement agreement and the Deed in Lieu. The second is whatever interest

Citigroup and Wells Fargo have in the property.

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 Mid Pac has already addressed how title to real property is conveyed by

delivery of a deed and how it acquired the Deed of Lieu from Citigroup. The

undisputed summary judgment evidence is that Mid Pac acquired the Deed in Lieu

from Citigroup and that Mid Pac has possession of the original Deed in Lieu (RR 9).

Likewise, Wells Fargo failed to dispute Mid Pac’s title to the property by defaulting

in the suit.

Mid Pac is asking for a Declaratory Judgment which provides that it is the

owner of the property as to Ashworth, Welch, Citigroup and Wells Fargo. Whether

there is a break in the chain of title to the property prior to Citigroup acquiring the

Deed in Lieu is not an issue that needs to be resolved for Mid Pac to obtain the

judgment that it is requesting. In addition, Ashworth and Welch have not explained

why they can raise that issue to defeat Mid Pac’s claim to the property.

IV. Illegality

Ashworth and Welch contend that the Deed in Lieu was illegal and

unenforceable because the “only” way to foreclose a Texas Home Equity loan is

through a “judicially supervised” foreclosure and because the loan was “improperly

modified” when it was closed back in 1999.

Ashworth and Welch are wrong on both of these contentions. First, Texas

Constitution Art 16-50A only states how a Texas Home Equity loan may be

foreclosed. A Deed in Lieu is not a foreclosure. It is a method to transfer title to

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property upon the default of a debt. See, Glenn v. Lucas, 376 S.W.3d 268 (Tex. App.

2012) Morrison v. Christie, 266 S.W.3d 89 (Tex.App.-Fort Worth 2008, no pet.).

Second, Ashworth and Welch initiated the law suit and which led to the 2003

settlement. (CR 213) The Deed in Lieu was part of the settlement which resolved all

claims in the suit and issues with the Ashworth and Welch’s Texas Home Equity

loan. (CR 237, 241, 242). If Ashworth and Welch had any claim as to the illegality

of their loan, it was settled as part of the 2003 agreement.

MID PAC’S REPLY TO ISSUE 2

The statements of Paula Welch relating to the payment of taxes on the property
should not have been considered proper summary judgment evidence.

FIVE YEAR STATUTE OF LIMITATIONS AND
AND PAYMENT OF TAXES

Ashworth and Welch contend that the statements in Ms. Welch’s affidavit that

the funds used to pay the taxes on the property came from a suspense account and

that the funds in the suspense account were hers were competent summary judgment

evidence. This issue is covered in Mid Pac’s brief. The points here supplement those

in its brief.

A summary judgment affidavit is conclusory if it states a conclusion without

any explanation or asks the court to take the affiant’s word for it. Arkoma Basin Exp.

Co. v. FMF Assocs. 1990–A Ltd., 249 S.W.3d 380 (Tex.2008); Mega Builders, Inc.

v. American Door Products, Inc. 2013 WL 1136584 Houston 1st Dist. 2013). In their

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brief, Ashworth and Welch contend that the tax payments came from Welch’s

escrow account rather than a suspense account as she states in her affidavit. This

assumes that a lender’s escrow account for a borrower is the same as a suspense

account. This jump in logic is another illustration of why Ms. Welch’s statements in

affidavit are conclusory.

As Ashworth and Welch allude to their brief, it is common knowledge that

lenders use escrow accounts to collect a borrower’s taxes and insurance on property

and then use those funds to pay the taxes and insurance directly to the taxing

authority or insurance company when they are due. Escrow accounts are regulated

extensively by a set of federal regulations which dictate how a lender is supposed to

handle escrow accounts. See, 12 CFR 1024.17. There is no reference in the escrow

account regulatory scheme which indicates that an escrow account is the same as a

suspense account. Ms. Welch’s affidavit is conculsory because there is no factual

explanation in it explaining what an escrow account is, if one was set up in

connection with her loan or what, if any, relation an escrow account has to a suspense

account.

TITLE TO PROPERTY REQUIREMENT UNDER
TEX.CIV.PRAC. & REM CODE §16.024 AND §16.025

Ashworth and Welch have correctly pointed out in their brief that Ms. Welch

filed a supplement to her summary judgment affidavit attaching a 1991 deed of the

property into hers and Jerry Welch’s names and an Amended Order from 1994
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admitting the Will of Jerry to probate. However, Ashworth and Welch and Welch

have failed to explain in their brief how these documents satisfy the “title” or “color

of title” requirement for Tex. Civ. Prac. & Rem. Code §16.024 or the “duly

registered deed” for Tex. Civ. Prac. & Rem. Code §16.025.

In order for Ashworth and Welch to prevail on an adverse possession claim

under §16.024 or §16.025, there has to be summary judgment evidence that both

Ms. Welch and Mr. Ashworth satisfied the title requirements for these statutes.

Rogers v. Ricane Enterprises, Inc., 772 S.W.2d 76 (Tex., 1989) Even if the deed and

probate documents Ms. Welch produced can somehow satisfy the title requirements

of §16.024 or §16.025 for Ms. Welch, there is still no summary judgment evidence

in the trial court record of the title to the property being in Mr. Ashworth’s name at

any point in time.

MID PAC’S REPLY TO ISSUE 3:

The trial court should not have denied Mid Pac’s Motion for Summary Judgment
or granted and Ashworth and Welch’s Motion on the basis of collateral estoppel.

Ashworth and Welch have raised the issue of whether the ruling in Case No.

06CV0224, Citigroup Global Realty Markets Corp. v. Paula Welch and Clyde

Ashworth has any collateral estoppel effect on the issues in this suit under TRCP

736.9. Mid Pac has addressed this issue in its brief but will supplement the legal

authority on the issue.

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 This Court has held that a lender has three options to foreclose on a home

equity loan: (1) file a suit to judicially foreclose the loan; (2) file a suit or

counterclaim seeking a final judgment which includes an order allowing foreclosure

under the home equity security instrument and Tex. Prop. Code §51.002; or (3) an

application under TRCP 736. Huston v. U.S. Bank Nat. Ass’n, 359 S.W.3d 679 (1st

Dist. Houston 2011). The Austin Court of Appeals has also recognized that the

denial of an application for a Rule 736 foreclosure that does not have any res judicata

or collateral estoppel effect in any subsequent proceeding. Schanzle v. JPMC

Specialty Mortg. LLC, WL 832170, (Austin 2011). Consequently, the trial court was

clearly wrong if it based its ruling granting the Ashworth and Welch’s Motion for

Summary Judgment on some sort of res judicata collateral estoppel from the ruling

in Case No. 06CV0224.

CONCLUSION

Ashworth and Welch have failed to point out any conclusive summary

judgment evidence or present any legal authority to justify the trial court’s judgment

in this case. Consequently, Mid Pac again requests that this Court reverse the trial

court’s judgment and render judgment for Mid Pac, award the costs of this appeal to

Mid Pac and remand the case to the trial court to determine whether any of the parties

should be awarded reasonable attorney fees and court costs at the trial court level

pursuant to Tex. Civ. Prac. & Rem. Code § 37.009.

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 Respectfully submitted,

/s/ Michael Burns
State Bar No. 03447980
P.O. Box 992
Allen, Texas 75013
Phone: (214) 354-1667
E-mail: burnslaw@outlook.com
ATTORNEY FOR APPELLANT

CERTIFICATE OF SERVICE

I hereby certify that a copy of the above and foregoing pleading was
accomplished on the December 2, 2015 by the method and to the following as
indicated:

Mark W. Stevens
P.O. Box 8118
Galveston, Texas 77553
E-mail: markwandstev@sbcglobal.net

/s/ Michael Burns

CERTIFICATE OF COMPLIANCE

I hereby certify that this document was produced on a computer using
Microsoft Word 2013 and contains 2609 words, as determined by the computer
software’s word-count function excluding the sections of the document listed in
Texas Rule of Appellate Procedure 9.4(i)(1).

/s/ Michael Burns

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