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Birenbaum v. Bank of America

United States District Court, N.D. Texas, Dallas Division

March 21, 2017

DENNIS H. BIRENBAUM, Appellant,
v.
BANK OF AMERICA, Appellee.

          MEMORANDUM OPINION AND ORDER

          Sam A. Lindsay United States District Judge

         Before the court is Appellant Dennis H. Birenbaum's appeal of the bankruptcy court's August26, 2014 Order Granting the Defendant's Motion for Final Summary Judgment and February 17, 2016 Amended Final Judgment in favor of Appellee Bank of America ("BOA"). After careful consideration of the briefs, the record on appeal, and the applicable law, the court affirms the bankruptcy court's August 26, 2014 Order Granting the Defendant's Motion for Final Summary Judgment (App. 10-15) and February 17, 2016 Amended Final Judgment (App. 4-8), and dismisses with prejudice this appeal.

         I. Factual and Procedural Background

         This appeal arises from the bankruptcy court's entry of a final amended judgment on February 17, 2016, against Chapter 7 bankruptcy debtor Dennis H. Birenbaum ("Appellant" or "Birenbaum"), in Adversary Case No. 13-03129-HDH. Birenbaum initiated the underlying adversary case against BOA seeking a declaratory judgment regarding the validity of the lien held by BOA on property located at 9410 Alva Court, Dallas, Texas 75220 (the "Property") to secure a Note in the amount of $4, 297, 591.64 pursuant to a Deed of Trust signed by Birenbaum and his wife Brenda Birenbaum on August 23, 2005, In his Complaint, dated June 5, 2013, Appellant asserts that the lien on the Property is "invalid and unenforceable under the Texas Constitution [*]and other applicable laws" because:

the Note signed and made by Plaintiff is not the "note" described or identified in the Deed of Trust as evidencing the secured indebtedness. Defendant does not possess and is not the holder of the "note" described and identified in the Deed of Trust and therefore Defendant does not possess any lien on the Subject Property as security for the Note. The debt identified in the Deed of Trust as the "secured indebtedness" is different than the debt evidenced by the Note. There is no "secured indebtedness" because the "Note" and "Loan" described and defined in the Deed of Trust do not exist.
[] The Deed of Trust states on Page 3 that "This Security Instrument secures to Lender (i) the repayment of the Loan, and all renewals, extensions, and modifications of the Note, and (ii) the performance of Borrower's covenants and agreements under this Security Instrument and the Note." The term "Loan" is defined in Subsection (G), Page 2 as "the debt evidenced by the Note, plus interest, any prepayment charges and late charges due under the Note, and all sums due under this Security Instrument plus interest." The term "Borrower" is defined on Page 1, Subsection (B) of the Deed of Trust as "Dennis H. Birenbaum and Brenda Birenbaum" (Emphasis Added). Thus, the terms "Note" and "Loan" both refer to a promissory note jointly made by both Dennis H. Birenbaum and Brenda Birenbaum, who are the parties identified as the "borrower" obligated to Defendant within the defined term "Borrower" in the Deed of Trust. However, there is no promissory note jointly made by both Dennis H. Birenbaum and Brenda Birenbaum and therefore, by the express and specific terms of the Deed of Trust drafted and prepared by Defendant, the Note made and Dated:ly by Dennis H. Birenbaum is not the "note" identified in the Deed of Trust as evidencing the secured indebtedness. Consequently, the Deed of Trust does not grant or create any lien on the Subject Property and is invalid and unenforceable under long-standing Texas law. Waites v Osborne, 2 S.W.665, 667 (Tex. 1886) (holding that real property could not be liable for payment of any debt other than those specifically recited in deed containing vendor's lien).

Compl. ¶¶ 10-12 (App. 70-71) (emphasis in original).

         BOA filed a counterclaim in the adversary proceeding seeking to judicially foreclose on the Property and other relief. On April 2, 2014, BOA moved for summary judgment, contending that it possessed a valid lien on the Property, BOA asserted that the addition of Birenbaum's wife as a "Borrower" in the Deed of Trust did not render the lien on the Property defective under Texas law. BOA, therefore, argued that it was entitled to foreclose on the lien, which was in default. The bankruptcy court agreed, granted the summary judgment motion, and entered judgment in favor of BOA. On appeal, Birenbaum raises the following issues:

1. Did the Deed of Trust executed by Appellant grant Bank of America, NA a lien on Appellant's residence located at 9410 Alva Court, Dallas, Dallas County, Texas ("Homestead Property") when the secured indebtedness (as specifically and expressly defined in the Deed of Trust) differs from the indebtedness actually held by the beneficiary of the Deed of Trust?
2. Did the Bankruptcy Court en- by disregarding and failing to apply long-standing Texas authorities such as Waites v Osborne, 2 S.W. 665 (Tex. 1886), Bank of Woodson v Hibbitts, 626 S.W.2d 133 (Tex. App. - Eastland 1981) ref d n.r.e., and Kimberly Development Corp. v First State Bank of Greens Bayou, 404 S.W.2d 631 (Tex. App. - Houston 1966) ref d n.r.e. in deciding the issues presented by Appellant?
3. Did the Bankruptcy Court err by finding and concluding that "[T]he Parties do not dispute that the Debtor obtained a loan secured by the Property" when that was the primary issue involved in the Adversary Proceeding and there was no summary judgment evidence supporting such finding or conclusion?

Appellant's Br. 2.

         II. Standard of Review

         In a bankruptcy appeal, the district court reviews a bankruptcy court's findings of fact for clear error and its conclusions of law de novo, In re Dennis, 330 F.3d 696, 701 (5th Cir. 2003). A bankruptcy court's findings of fact are "clearly erroneous" only if, "on the entire evidence, the court is left with the definite and firm conviction that a mistake has been committed." In re Duncan,562 F.3d 688, 694 (5th Cir. 2009) (quoting/?! re Dennis, 330 F.3d at 701)). Ill. Analysis Boiled down to its essence, Birenbaum's argument to the bankruptcy court and this court is that the Note held by BOA is not the "Note identified in the Deed of Trust" because the Note held by BOA was not signed by his former wife Brenda Birenbaum. Birenbaum contends that, under Texas law, the lien granted under a deed of trust is contractual in nature and arises from the parties' contract, not by operation of law. Birenbaum asserts that the Deed of Trust or contract at issue in this case "identifies an entirely different promissory note (i.e. a note made by both Birenbaum and his ex-wife, Brenda Birenbaum) than that held by Bank of America (i.e. a note made only by Birenbaum as the sole and only maker)." Appellant's Br. 9. Based on Waites vOsborne, 2 S.W. 665 (Tex. 1886), Birenbaum contends that only the debt specifically recited in a deed of trust can support a lien. Birenbaum acknowledges that Texas law applies but contends, based on Texas and North Carolina authority, that inconsistencies in a note and deed of trust regarding the description of the secured indebtedness, the parties, or even a trustee's name will make a deed of trust on a note unenforceable. Birenbaum contends that, ...


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