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Christian v. Mortgage Electronic Registration Systems, Inc.

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

February 21, 2019

Reginald Christian and Tracie Christian, Plaintiffs,
Mortgage Electronic Registration Systems, Inc. Seterus, Inc., Federal National Mortgage Association, Mccarthy & Hothus, And Does 1-50, Defendants.



         Pursuant to 28 U.S.C. § 636 and Special Order 3, this case was referred to the undersigned United States magistrate judge for pretrial management. Now before the Court is Defendants' Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6), Doc. 5. For the reasons stated here, the Motion should be GRANTED, and this case should be DISMISSED.

         I. Background

         According to Plaintiff's Original Petition (“complaint”) and the attachments thereto, this cause of action was precipitated by the impending foreclosure sale of Plaintiffs' residence. In February 2007, Plaintiffs bought the home located at 1367 Ridgeview Drive, Cedar Hill, Texas 75104 (“the Property”). Doc. 1-1 at 8. To finance the purchase of the Property, Plaintiffs signed a promissory note (“Note”) for $180, 473, with GE Money Bank as the lender. Doc. 1-1 at 8, 29. The Note was secured by a deed of trust (“Deed of Trust”) that listed Defendant Mortgage Electronic Registration Systems, Inc. (“MERS”) as the nominee and beneficiary. Doc. 1-1 at 29. Subsequently, MERS assigned the Deed of Trust to Saxon Mortgage Services, which, years later, assigned it to Residential Credit Solutions, Inc.[1] Doc. 1-1 at 45; Doc. 1-1 at 49.

         Plaintiffs filed this action in state court on May 30, 2018, to halt the foreclosure sale of the Property. Doc. 1-1 at 7. On June 22, 2018, Defendants removed the case to this Court, based on diversity jurisdiction, and on July 17, 2018, filed the instant Motion seeking dismissal of all of Plaintiffs' claims for failure to state a viable claim and lack of standing.

         II. Analysis

         To defeat a motion to dismiss for failure to state a claim, a plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007); Reliable Consultants, Inc. v. Earle, 517 F.3d 738, 742 (5th Cir. 2008). A claim meets the plausibility test “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a ‘probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal citations omitted). When the allegations do not allow the Court to infer more than the mere possibility of wrongdoing, they fall short of showing that the pleader is entitled to relief. Iqbal, 556 U.S. at 679, 129 S.Ct. 1937.

         The ultimate question in a Rule 12(b)(6) motion is whether the complaint states a valid claim when viewed in the light most favorable to the plaintiff. Great Plains Trust Co. v. Morgan Stanley Dean Witter, 313 F.3d 305, 312 (5th Cir. 2002). While well-pleaded facts of a complaint are to be accepted as true, legal conclusions are not “entitled to the assumption of truth.” Iqbal, 556 U.S. at 679, 129 S.Ct. 1937 (citation omitted). Further, a court should not strain to make inferences favorable to the plaintiff; nor must it accept conclusory allegations, unwarranted deductions, or legal conclusions. R2 Invs. LDC v. Phillips, 401 F.3d 638, 642 (5th Cir. 2005).

         A. Standing

         As an initial matter, Defendants allege that Plaintiffs lack standing to contest Defendants' right to enforce the loan agreement, because “[a] mortgagor who is not a party to a deed-of-trust assignment must allege a ground that would render the assignment void to have standing to challenge the assignment.” Doc. 6 at 5. Article III of the United States Constitution requires that a litigant have standing to sue in federal court. Warth v. Seldin, 422 U.S. 490, 498 (1975). Moreover, standing is a question of jurisdiction. Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541-42 (1986). Thus, the Court must consider the issue of subject matter jurisdiction before addressing any other challenge. Moran v. Kingdom of Saudi Arabia, 27 F.3d 169, 172 (5th Cir. 1994).

         While recognizing an intra-circuit split of authority on this issue, this Court has held that mortgagors indeed have standing to contest the validity of the assignment where, as here, their claims derive from a note and a deed of trust to which they are parties. Preston v. Seterus, Inc., 931 F.Supp.2d 743, 754 (N.D. Tex. 2013) (Lindsay, J.) (citing Metcalf v. Deutsche Bank Nat'l Trust Co., No. 3:11-CV-3014-D, 2012 WL 2399369, at *4 (N.D.Tex. June 26, 2012) (Fitzwater, J.)); Miller v. Homecomings Fin., LLC, 881 F.Supp.2d 825 (S.D.Tex. 2012)). Quoting Miller, the Court “conclude[d] that under Texas law homeowners have legal standing to challenge the validity or effectiveness of any assignment or chain of assignments under which a party claims the right to foreclose on their property.” Preston, 931 F.Supp.2d at 754 (quoted case omitted). For the same reason, the Court finds that Plaintiffs have standing here.

         B. Wrongful Foreclosure Claim

         The elements of a wrongful foreclosure claim are: “(1) a defect in the foreclosure sale proceedings; (2) a grossly inadequate selling price; and (3) a causal connection between the defect and the grossly inadequate selling price.” Biggers v. BAC Home Loans Servicing, LP, 767 F.Supp.2d 725, 729 (N.D. Tex. 2011) (internal quotations omitted).

         As liberally construed, the complaint alleges that any foreclosure sale is defective since MERS lacked the authority to transfer the Note and Deed of Trust, as “perfection of the lien had been lost due to bifurcation.” Doc. 1-1 at 11, 16. Plaintiffs contend that a “Broken Chain of Assignments rendered the ‘Deed of Trust' void and unenforceable” under the Uniform Commercial Code, and the original lender's security interest unenforceable. Doc. 1-1 at 11. They conclude that Defendants thus lack legal authority to transfer or assign the Note and Deed of Trust and to foreclose on the Property.[2] Doc. 1-1 at ...

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