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Rathbone v. The Bank of New York Mellon

United States District Court, S.D. Texas, Houston Division

January 9, 2018

Steven Charles Rathbone, Independent Executor of the Estate of William M. Rathbone, Plaintiff/Counter-Defendant,
v.
The Bank of New York Mellon, as Co-Trustee for RML Trust 2013-2, Defendant/Counter-Plaintiff.

          REPORT AND RECOMMENDATION

          Dena Hanovice Palermo United States Magistrate Judge

         Pending before this Court is The Bank of New York Mellon's (“BONY” or “Defendant”) motion to dismiss.[1] BONY seeks an order dismissing the Complaint, asserting that Plaintiff is neither the executor of the estate of William Rathbone (the “estate”) nor licensed to practice law, and therefore Plaintiff lacks the capacity to bring this action as a pro se plaintiff on behalf of the estate or other heirs. ECF No. 13. The Plaintiff has failed to respond. The Court finds that Defendant's motion has merit and should be granted.

         I. BACKGROUND

         Plaintiff Steven Charles Rathbone filed his original petition in state court, pro se, on behalf of himself and the estate of William Rathbone. Plaintiff asserts claims that arise out of a note (home equity conversion mortgage) and deed of trust that were issued in the name of William Rathbone and his wife, Betty Rathbone, both of whom are deceased. ECF No. 1 at 3-4, ECF No. 6 at 1.[2] BONY is the assignee of the mortgage. ECF No. 13 ¶1, ECF No. 6 at ¶ 2, ECF No. 1 at ¶ 9.

         Plaintiff's various claims are based on the contention that William Rathbone was not of sound mind and, therefore, lacked the capacity to enter a contract to mortgage his home at the time he executed the note. Consequently, Plaintiff claims that the note is a voidable contract. He seeks a declaratory judgment that the note is void. Id. at 13-14. Plaintiff also asserts that BONY's claims on the note were time-barred and any lien on the Property is void. Id. at 14-15. Plaintiff also seeks a declaratory judgment that he is entitled to exclusive possession of the Property and owns the Property in fee simple. Id. at 15-18.

         BONY removed this case to federal court on the basis of diversity jurisdiction. ECF No. 1. Defendant then filed a verified motion to show authority, claiming that Plaintiff lacks the capacity to bring this action pro se on behalf of the estate or other heirs. ECF No. 6. Plaintiff responded and requested an abatement to cure any defect in capacity. ECF No. 10. The Court abated the case, allowing Plaintiff until November 28, 2017 to cure the deficiencies. ECF No. 12. Plaintiff failed to cure any of the deficiencies.[3] After the Court-ordered deadlines passed without any cure, Defendant filed its motion to dismiss. Plaintiff has not responded.

         II. PLAINTIFF LACKS CAPACITY TO SUE ON BEHALF OF THE ESTATE OR OTHER HEIRS

         Defendant challenges Plaintiff's capacity to sue on behalf of the estate because (1) he has not been appointed its legal representative, and (2) he is a non-lawyer appearing pro se when there are other heirs and BONY is a creditor of the estate, precluding pro se representation. Defendant's arguments have merit.

         A. The Estate Has Standing to Assert Claims Based on the Note and Deed, But Lacks Capacity to Sue

         Under Rule 17, the issue of capacity must be decided under Texas law. Fed.R.Civ.P. 17(a) & (c). Standing and capacity are often confused. Rodgers v. Lancaster Police & Fire Dep't, 819 F.3d 205, 212 n.18 (5th Cir.) cert. denied, 137 S.Ct. 304, reh'g denied, 137 S.Ct. 545 (2016). “A plaintiff must have both standing and capacity to bring a lawsuit.” Austin Nursing Ctr., Inc. v. Lovato, 171 S.W.3d 845, 848 (Tex. 2005) (citation omitted) (emphasis added). Standing focuses on whether a party has a sufficient relationship with the lawsuit so as to have a “justiciable interest” in its outcome, whereas capacity “is conceived of as a procedural issue dealing with the personal qualifications of a party to litigate.” Id. (citing 6A Charles Alan Wright et al., Federal Practice and Procedure: Civil § 1559, at 441 (2d ed.1990)). “A plaintiff has standing when [he] is personally aggrieved, regardless of whether [he] is acting with legal authority; a party has capacity when [he] has the legal authority to act, regardless of whether [he] has a justiciable interest in the controversy.” Lovato, 171 S.W.3d at 848-49 (emphasis added).

         1. The estate has standing

         It is undisputed that the mortgage and deed for the Property were issued to William and Betty Rathbone. ECF No. 1 at 3-4, ECF No. 6 at 1. Any claims for breach of contract or other defenses to enforceability belong to them as the parties to the contract. Neese v. Lyon, 479 S.W.3d 368, 378 (Tex. App.-Dallas), reconsideration en banc denied (Nov. 19), reh'g overruled (Nov. 19, 2015) (voidable contract is valid and effective unless and until the party entitled to avoid it takes steps to disaffirm it.); Temple EasTex, Inc. v. Old Orchard Creek Partners, Ltd., 848 S.W.2d 724, 730 (Tex. App.-Dallas 1992, writ denied) (“Generally, only parties to a contract have the right to complain of its breach.”); see Restatement (Second) of Contracts § 7 (Am. Law Inst. 1981) (“A voidable contract is one where one or more parties have the power, by a manifestation of election to do so, to avoid the legal relations created by the contract, or by ratification of the contract to extinguish the power of avoidance.”).

         Thus, the estate would have standing to sue to void the note and deed of trust.[4] Glickstein v. Sun Bank Miami, 922 F.2d 666, 670 (11th Cir. 1991) (estate had standing to assert claim against trustee bank for plundering estate's assets); Lovato, 171 S.W.3d at 850 (estate had justiciable interest to confer standing in survival action). Although the estate has standing, it is not a legal entity and therefore does not have capacity to sue. Rodgers, 819 F.3d at 210. Thus, the estate is not a proper plaintiff to bring this suit.

         2. Plaintiff does not have capacity to sue as the ...


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