United States District Court, E.D. Texas, Sherman Division
JOHN PRIESTER, JR. and BETTIE PRIESTER, Plaintiffs,
LONG BEACH MORTGAGE COMPANY, ET AL., Defendants.
MEMORANDUM ADOPTING REPORT AND RECOMMENDATION OF
UNITED STATES MAGISTRATE JUDGE
L. MAZZANT UNITED STATES DISTRICT JUDGE.
for consideration the report of the United States Magistrate
Judge in this action, this matter having been heretofore
referred to the United States Magistrate Judge pursuant to 28
U.S.C. § 636. On January 23, 2018, the report of the
Magistrate Judge was entered containing proposed findings of
fact and recommendations (see Dkt. #168) that
Plaintiffs John Priester, Jr. and Bettie Priester's
(“Plaintiffs”) Motion to Dismiss (the
“Motion to Dismiss”) (Dkt. #123) be denied and
Defendants Deutsche Bank National Trust Company
(“Deutsche Bank”) and Select Portfolio Servicing,
Inc. (“SPS”) (collectively
“Defendants”) Motion for Summary Judgment (the
“Motion for Summary Judgment”) (Dkt. #143) be
granted in part and denied in part. Plaintiffs filed
objections to the report (Dkt. #185),  to which
Defendants filed a response (Dkt. #187). Defendants likewise
filed objections (Dkt. #183), to which Plaintiffs filed a
response (Dkt. #186). Plaintiffs also object to the
Magistrate Judge's Order (see Dkt. #168) denying
Plaintiffs' Motion to Strike Defendant's affirmative
defenses (the “Motion to Strike”) (Dkt. #122).
Court has made a de novo review of the objections
raised by both Plaintiffs and Defendants and is of the
opinion that the findings and conclusions of the Magistrate
Judge are correct and the objections are without merit as to
the ultimate findings of the Magistrate Judge. The Court
hereby adopts the findings and conclusions of the Magistrate
Judge as the findings and conclusions of the Court.
case involves an attempted foreclosure of Plaintiffs'
real property located at 1406 Oakwood Drive, Allen, Texas,
75013 (the “Property”). In November 2005,
Plaintiffs obtained from Long Beach Mortgage Company
(“Long Beach Mortgage”) a Home Equity Loan (the
“Loan”) encumbering the Property in the amount of
$180, 000.00. Defendant Deutsche Bank asserts it is the
beneficiary of the Security Instrument and Defendant SPS is
the current mortgage servicer. See Dkts. #119 and
#121-3. Defendants allege Plaintiffs have not made scheduled
monthly payments since January 1, 2010, and thus, are in
default. See Dkt. #143 at 22-23. Defendants further
allege the amount required to cure the default through
January 5, 2017, is at least $116, 897.56, and the amount to
pay off the Loan is at least $309, 679.74, as of November 3,
2016, with interest and other amounts continuing to accrue.
Id. Plaintiffs argue, as they have since 2010, that
the Loan is invalid.
case has a long procedural history in this Court, including a
lawsuit initiated in October 2010, against the prior lien
holder, JP Morgan Chase Bank, NA, and its loan servicer, JP
Morgan Chase & Co. (collectively, “Chase”).
See Priester v. Long Beach Mortgage Company, et al.
(Priester I), No. 4;10-cv-641. As explained in the
Magistrate Judge's report (the “Report”), the
present lawsuit and Priester I involve essentially
the same allegations, to-wit: the Loan was closed in
violation of the Texas Constitution, Defendants (and their
predecessors) have not cured the violations, and as a result,
the Loan and the lien on the Property are void, Defendants
are prohibited from foreclosing on the Property, Defendants
are required to forfeit all principal and interest on the
Loan, and Plaintiffs are entitled to a declaratory judgment
to that effect. See generally Dkt. #168.
Motion to Dismiss challenges the facial sufficiency of
Defendants' counterclaim seeking judicial foreclosure of
the Property, or their claim in the alternative for equitable
and/or contractual subrogation of the prior valid lien on the
Property, as well as a counterclaim for attorneys' fees.
See Dkt. #168; see also Dkt. #123.
main thrust of Defendants' Motion for Summary Judgment is
that Plaintiffs' claims are barred by res
judicata based on the final judgment in Priester
I, and thus, Defendants are entitled as a matter of law
to either an order of foreclosure or equitable subrogation.
See id. Plaintiffs counter that res
judicata is inapplicable here, primarily based on the
Texas Supreme Court's holdings in Wood v. HSBC Bank
USA, N.A., 505 S.W.3d 542 (Tex. 2016), and Garofolo
v. Ocwen Loan Servicing, LLC, 497 S.W.3d 474, 477 (Tex.
2016). The Motion for Summary Judgment also
argues Plaintiffs' affirmative defenses to foreclosure
are barred by estoppel and by the D'Oench, Duhme
Motion to Strike
take issue with the Magistrate Judge's Order denying the
Motion to Strike, arguing that the Magistrate Judge
disregarded the standard for a Rule 12(f) Motion to Strike.
This is simply incorrect. The Magistrate Judge expressly sets
out the standard for the application of a motion to strike in
the Report, noting that motions to strike a defense are
generally disfavored. See Dkt. #168 at 7 (citing
Kaiser Aluminum & Chem. Sales, Inc. v. Avondale
Shipyards, Inc., 677 F.2d 1045, 1057 (5th Cir. 1982)).
The Report goes on to explain that although striking of
allegations in a pleading “can be appropriate when they
have no possible relation to the controversy and may cause
prejudice to the one of the parties, ” that was not the
case here. See Dkt. #168, p. 17 (citing Am.
Southern Ins. Co. v. Buckley, 748 F.Supp.2d 610, 626
(E.D. Tex. 2010)). The Magistrate Judge determined that
Defendants pleaded their affirmative defenses with enough
factual particularity to give Plaintiffs “fair notice,
” which is all that is required. See Woodfield v.
Bowman, 193 F.3d 354, 362 (5th Cir. 1999). Because the
Court finds the Magistrate Judge's Order denying
Plaintiffs' Motion to Strike is not clearly erroneous or
contrary to law, Plaintiffs' objection is
OVERRULED. See Fed. R. Civ. P.
Standing and Ownership of the Note
also object to the Magistrate Judge's conclusion
regarding Defendants' standing to foreclose. See
Dkt. #185. According to Plaintiffs, the Magistrate Judge
should have understood Plaintiffs' jurisdictional
challenge as a constitutional issue without “any
further explanation.” Id. at 1. However, it is
Plaintiffs' obligation to articulate and provide support
for their arguments. The Court is not bound to divine a
constitutional argument where none was articulated. To the
extent that Plaintiffs now argue that their unsupported
allegations regarding Defendants' standing to foreclose
violates Article III of the Constitution, that argument is
unpersuasive. Article III of the Constitution gives the
federal courts jurisdiction only over cases and
controversies. See Whitmore v. Arkansas, 495 U.S.
149, 155 (1990). The difference between an abstract question
and a “case or controversy” is one of degree and
is not discernible by any precise test. See Babbitt v.
United Farm Workers Nat'l Union, 442 U.S. 289,
297-98 (1979). The basic inquiry is whether the conflicting
contentions of the parties present a real, substantial
controversy between parties having adverse legal interests, a
dispute definite and ...