Case 1:13-cv LY Document 24 Filed 05/07/13 Page 1 of 19

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1 Case 1:13-cv LY Document 24 Filed 05/07/13 Page 1 of 19 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS AUSTIN DIVISION JERRENE L AMOREAUX AND CLARKE F. L AMOREAUX, Plaintiffs, V. A-13-CV-052 LY WELLS FARGO BANK, N.A.; MERSCORP HOLDINGS, INC.; AND BARRETT DAFFIN FRAPPIER TURNER & ENGEL, LLP, Defendants. REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE TO: THE HONORABLE LEE YEAKEL UNITED STATES DISTRICT JUDGE Before the Court are Defendant Barrett Daffin Frappier Turner & Engel, LLP s Motion to Dismiss Pursuant to Rule 12(b)(6), filed January 23, 2013 (Clerk s Dkt. #5); Defendants Motion to Dismiss Pursuant to Rule 12(b)(6) and Brief in Support, filed January 28, 2013 (Clerk s Dkt. #6); Plaintiffs Response to Defendant Barrett Daffin Frappier Turner & Engel, LLP s Motion to Dismiss Pursuant to Rule 12(b)(6), filed February 6, 2013 (Clerk s Dkt. #7); Plaintiffs Response to Defendants Wells Fargo Bank, N.A. and MERSCORP Holdings, Inc. s Motion to Dismiss Pursuant to Rule 12(b)(6), filed February 12, 2013 (Clerk s Dkt. #8); Defendant Barrett Daffin Frappier Turner & Engel, LLP s Reply to Plaintiffs Response to Motion to Dismiss Pursuant to Rule 12(b)(6), filed February 13, 2013 (Clerk s Dkt. #10); Defendants Reply in Support of Their Motion to Dismiss Pursuant to Rule 12(b)(6), filed February 19, 2013 (Clerk s Dkt. #11); Plaintiffs Motion for Sanctions Against Defendant Barrett Daffin Pursuant to Federal Rule of Civil Procedure 11(c), filed March 5, 2013 (Clerk s Dkt. #15); Defendant Barrett Daffin Frappier Turner & Engel, LLP s Response to Plaintiffs Motion for Sanctions, filed March 8, 2013 (Clerk s Dkt. #16); and Plaintiffs

2 Case 1:13-cv LY Document 24 Filed 05/07/13 Page 2 of 19 Reply to Defendant s Response to Motion for Sanctions Against Defendant Barrett Daffin Pursuant to Federal Rule of Civil Procedure 11(c), filed March 22, 2013 (Clerk s Dkt. #18). The motions were referred by United States District Judge Lee Yeakel to the undersigned for a Report and Recommendation pursuant to 28 U.S.C. 636(b), Rule 72 of the Federal Rules of Civil Procedure, and Rule 1(d) of Appendix C of the Local Rules of the United States District Court for the Western District of Texas. After reviewing the parties' pleadings, relevant case law, as well as the entire case file, the undersigned issues the following Report and Recommendation to the District Court. I. BACKGROUND Plaintiffs Jerrene L Amoreaux and Clarke F. L Amoreaux (jointly Plaintiffs ) filed this action in the 22nd Judicial District Court of Hays County, Texas on December 31, Plaintiffs named as defendants Wells Fargo Bank, N.A. ( Wells Fargo ), MERSCORP Holdings, Inc. ( MERS ) and Barrett Daffin Frappier Turner & Engel, LLP ( Barrett Daffin ). On January 21, 2013 Defendant Wells Fargo removed the action to this court. By way of their petition, filed in state court, Plaintiffs allege they purchased real property located in Hays County, Texas ( the Property ) on March 31, 2008 by executing a promissory note ( Note ) and Deed of Trust. Plaintiffs state the lender was Cornerstone Home Mortgage Corp., d/b/a MHI Mortgage ( Cornerstone ). They further state the Deed of Trust names Michael Riddle as Trustee and names MERS as the beneficiary, plus grants MERS the right to foreclose and sell the Property. Plaintiffs point out the Note does not mention or grant MERS any authority. According to Plaintiffs, Cornerstone was administratively dissolved on September 24, 2010 after its parent company entered into bankruptcy in January (Plf. Orig. Pet ). Plaintiffs allege on January 16, 2011, Wells Fargo sent them a Notice of Default. They further allege a diligent search of the Hays County property records revealed no document effecting any transfer of right to the Note or Deed of Trust to Wells Fargo. Plaintiffs state on May 20, 2011, 2

3 Case 1:13-cv LY Document 24 Filed 05/07/13 Page 3 of 19 in June 2011, on August 8, 2011, on September 6, 2011 and in November 2012 Barrett Daffin sent them a Notice of Acceleration and Notice of Trustee Sale allegedly on behalf of Wells Fargo. Plaintiffs claim on May 24, 2011 and August 25, 2011, Stephen Porter, an attorney for Barrett Daffin and as Vice President for Loan Documentation for Wells Fargo, filed an appointment of Substitute Trustee. Plaintiffs further assert it was not until July 25, 2011 that a document purporting to be an assignment of the Deed of Trust and Note from MERS to Wells Fargo was executed ( Assignment ). (Id ). Plaintiffs assert a cause of action for alleged violations by Defendants of the Texas statute prohibiting the filing of documents asserting a fraudulent lien or claim against real property. (Id ). Plaintiffs additionally assert a cause of action for breach of contract, as well as a quiet title action and a plea for injunctive relief. (Id ). Defendant Barrett Daffin has now filed a motion to dismiss, arguing it is entitled to immunity from the claims asserted against it. Wells Fargo and MERS have jointly filed a separate motion to dismiss, arguing the claims against them should all be dismissed for failure to state a claim. Plaintiffs have also filed a motion seeking sanctions against Barrett Daffin on the ground that Barrett Daffin s motion under Rule 12(b)(6) violated the Federal Rules of Civil Procedure. The parties have filed responsive pleadings and the matters are now ripe for review. II. MOTION FOR SANCTIONS Plaintiffs have moved for the imposition of sanctions against Barrett Daffin under Rule 11 of the Federal Rules of Civil Procedure. The Court may impose sanctions under Rule 11 if: (1) a document has been presented for an improper purpose; (2) the claims or defenses of the signer are not supported by existing law or by a good-faith requirement for an extension or change in existing law; or (3) the allegations and other factual contentions lack evidentiary support or are unlikely to do so after a reasonable opportunity for investigation. FED. R. CIV. P. 11(b)-(c). 3

4 Case 1:13-cv LY Document 24 Filed 05/07/13 Page 4 of 19 Plaintiffs argue Barrett Daffin s motion to dismiss is not warranted under existing law and thus violates Rule 11(b)(1). They correctly point out Barrett Daffin filed an answer in state court prior to the removal of this action. Plaintiffs further note Rule 12 directs that a motion to dismiss for failure to state a claim must be made prior to filing a responsive pleading. FED. R. CIV. P. 12(b) (motion asserting defense under rule must be made before pleading). They conclude, because Rule 81 applies the Federal Rules of Civil Procedure to removed actions, the motion to dismiss is thus not warranted under the law. This argument fails for two reasons. First, Rule 81 specifically states [t]hese rules apply to a civil action after it is removed from a state court. FED. R. CIV. P. 81(c) (emphasis added). Rule 12's directions on the timing of filing a motion to dismiss thus did not govern the actions of Barrett Daffin prior to removal. Second, courts have routinely treated Rule 12(b)(6) motions filed after an answer is filed as a motion for judgment on the pleadings under Rule 12(c). See Jones v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999) (motion to dismiss for failure to state claim filed after answer was untimely, but was properly construed as motion for judgment on the pleadings); Joseph v. Patterson, 795 F.2d 549, 563 (6th Cir. 1986) (noting Rule 12(b)(6) motion filed one year after answer appropriately treated as motion for judgment on the pleadings); Schy v. Susquehanna Corp., 419 F.2d 1112, 1115 (7th Cir.1970) ( a motion to dismiss made after the filing of an answer serves the same function as a motion for judgment on the pleadings and may be regarded as one ); Puckett v. United States, 82 F. Supp. 2d 660, 663 (S.D. Tex. 1999) (same, commenting courts do not mechanically or routinely deny any motion made after a responsive pleading as untimely ); Delta Truck & Tractor, Inc. v. Navistar Int l Transp. Corp., 833 F. Supp. 587, 588 (W.D. La. 1993) (same, noting [n]umerous other courts have arrived at the same judicially efficient answer ). As the Fifth Circuit applies the same standard to a motion under Rule 12(c) as it does for a motion under Rule 12(b)(6), the undersigned may properly, and will, consider the motion to dismiss as asserted under Rule 12(c). See Great Plains Trust Co. v. Morgan Stanley Dean Witter 4

5 Case 1:13-cv LY Document 24 Filed 05/07/13 Page 5 of 19 & Co., 313 F.3d 305, 313 n.8 (5th Cir. 2002) (same standard applied to Rule 12(c) motion as to Rule 12(b)(6) motion); Jones, 188 F.3d at 324 (same). Accordingly, Plaintiffs motion for sanctions is without merit and should be denied. III. MOTIONS TO DISMISS A. Standard of Review When evaluating a motion to dismiss for failure to state a claim under Rule 12(b)(6) the complaint must be liberally construed in favor of the plaintiff and all facts pleaded therein must be taken as true. Leatherman v. Tarrant Cnty. Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 164, 113 S. Ct. 1160, 1161 (1993); Baker v. Putnal, 75 F.3d 190, 196 (5th Cir. 1996). Although Federal Rule of Civil Procedure 8 mandates only that a pleading contain a short and plain statement of the claim showing that the pleader is entitled to relief, this standard demands more than unadorned accusations, labels and conclusions, a formulaic recitation of the elements of a cause of action, or naked assertion[s] devoid of further factual enhancement. Bell Atl. v. Twombly, 550 U.S. 544, , 127 S. Ct. 1955, (2007). Rather, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Id., 550 U.S. at 570, 127 S. Ct. at The Supreme Court has made clear this plausibility standard is not simply a probability requirement, but imposes a standard higher than a sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 1949 (2009). The standard is properly guided by "[t]wo working principles." Id. First, although "a court must accept as true all of the allegations contained in a complaint," that tenet is inapplicable to legal conclusions" and "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id., 556 U.S. at 678, 129 S. Ct. at Second, "[d]etermining whether a complaint states a plausible claim for relief will... be a context-specific task that requires the reviewing court to draw on its judicial experience and 5

6 Case 1:13-cv LY Document 24 Filed 05/07/13 Page 6 of 19 common sense." Id., 556 U.S. at 679, 129 S. Ct. at Thus, in considering a motion to dismiss, the court must initially identify pleadings that are no more than legal conclusions not entitled to the assumption of truth, then assume the veracity of well-pleaded factual allegations and determine whether those allegations plausibly give rise to an entitlement to relief. If not, the complaint has alleged but it has not show[n] that the pleader is entitled to relief. Id., 556 U.S. at 679, 129 S. Ct. at 1950 (quoting FED. R. CIV. P. 8(a)(2)). B. Claims Against Barrett Daffin Barrett Daffin has filed a motion to dismiss Plaintiffs claims against it in their entirety. Barrett Daffin contends, as a law firm, it is immune from suit as it was acting as legal counsel and representing a client in undertaking the actions on which this suit rests. Under Texas law, attorneys are generally not liable to a third party for actions taken in connection with representing a client. See FinServ Cas. Corp. v. Settlement Funding, LLC, 724 F. Supp. 2d 662, 671 (S.D. Tex. 2010) (so long as attorney is engaged in conduct as part of discharge of duties in representing client, conduct not independently actionable); Reagan Nat'l Adver. of Austin, Inc. v. Hazen, 2008 WL , at *2 (Tex. App. Austin July 29, 2008, no pet.) ( Texas courts have long held that attorneys cannot be held civilly liable for damages to non-clients, under any theory of recovery, for actions taken in connection with representing a client ); Alpert v. Crain, Caton & James, P.C., 178 S.W.3d 398, 406 (Tex. App. Houston [1st Dist.] 2005, pet. denied) (attorneys not generally liable to non-client third party for statements made or actions taken in course of representing client); Toles v. Toles, 113 S.W.3d 899, 910 (Tex. App. Dallas 2003, no pet.) (attorneys generally not liable to opposing party for conduct in representing client); Mendoza v. Fleming, 41 S.W.3d 781, 787 (Tex. App. Corpus Christi 2001, no pet.) ( A lawyer is generally authorized to practice law to perform his duties as a lawyer without making himself liable for damages ); Renfroe v. Jones & Assoc., 947 S.W.2d 285, 288 (Tex. App. Fort Worth 1997, writ denied) (under Texas law, 6

7 Case 1:13-cv LY Document 24 Filed 05/07/13 Page 7 of 19 attorneys cannot be held liable to non-client for wrongful litigation conduct). The purpose of the grant of qualified immunity is to protect the social interest in the duty of attorneys to provide their clients zealous legal representation, Alpert, 178 S.W.3d at 405; Chapman Children's Trust v. Porter & Hedges, L.L.P., 32 S.W.3d 429, 441 (Tex. App. Houston [14th Dist.] 2000, pet. denied); Renfroe, 947 S.W.2d at 288. A review of Plaintiffs state court petition makes clear they are suing Barrett Daffin for acts taken as attorneys in representing Wells Fargo. (Plf. Orig. Pet , ). Plaintiffs do not contest this characterization of their claims in their response to the motion to dismiss. Rather, Plaintiffs simply argue Barrett Daffin s motion should be denied because it is untimely. The undersigned has rejected this argument above in recommending the denial of Plaintitts motion for sanctions. Accordingly, as Plaintiffs have failed to contest the legal basis of Barrett Daffin s motion, the motion should be granted. C. Claims Against Wells Fargo and MERS In their joint motion to dismiss, Wells Fargo and MERS attack both the legal basis of Plaintiffs claims and the claims themselves. The undersigned will address those matters in turn. 1. Standing to Foreclose As Plaintiffs themselves make clear in their response to the motion to dismiss, the basis of their claims is their assertion that, for Wells Fargo to foreclose, it must be the holder of the promissory note which is secured by a lien on the Property. As set forth above, Plaintiffs allege the documentation does not establish Wells Fargo holds the note on which the right to foreclose is based. However, nothing in Texas law requires possession of the original note to enforce the power to foreclose. Foreclosure enforces the deed of trust, not the underlying note. See Slaughter v. Qualls, 139 Tex. 340, 346, 162 S.W.2d 671 (1942) (trustee's power to sell debtor's property derives solely 7

8 Case 1:13-cv LY Document 24 Filed 05/07/13 Page 8 of 19 from deed of trust); Aguero v. Ramirez, 70 S.W.3d 372, 375 (Tex. App. Corpus Christi 2002, pet denied) (different statutes of limitations govern actions seeking to enforce lien or deed of trust or to foreclose on property used as security and actions seeking to enforce promissory note). Accordingly, both state and federal courts in Texas have held nothing requires a mortgage servicer to possess the original promissory note as a prerequisite to foreclosure. See Wigginton v. Bank of New York Mellon, 2012 WL , at *1 (5th Cir. Sept. 14, 2012) (district court did not err in rejecting unenforceable split note theory because Texas law rejects this theory ); Martins v. BAC Home Loans Servicing, L.P., 2013 WL , at *2 (5th Cir. Apr. 26, 2013) (Texas law differentiates between enforcement of note and foreclosure, rejecting show-me-the-note theory); Defranceschi v. Wells Fargo Bank, N.A., 837 F. Supp. 2d 616 (N.D. Tex. 2011) (holding there is no merit to Plaintiffs' argument that the deed of trust and note were split, rendering any attempted foreclosure defective. ); Van Hauen v. Wells Fargo Bank, N.A., 2012 WL , at *6 (E.D. Tex. Aug. 24, 2012) ( In short, there is no merit to Plaintiff's argument that the Deed of Trust and Note were split, rendering any attempted foreclosure defective. ); Ray v. CitiMortgage, Inc., 2011 WL , at *3 (W.D. Tex. July 25, 2011) (right to recover on note and right to foreclose are severable and may be enforced separately); Eskridge v. Fed. Home Loan Mortg. Corp., 2011 WL , at *5 (W.D. Tex. Feb. 24, 2011) (plaintiff's allegations that note and deed of trust were split and she thus had superior title to property were without merit because MERS was given the authority to transfer the documents in the Deed of Trust. ); Sawyer v. Mortg. Elec. Registration Sys., Inc., 2010 WL , at *3 (N.D. Tex. Feb.1, 2010) (explaining Texas law does not require mortgage servicer to be holder of note and deed of trust or to produce original loan documents prior to foreclosure); Bierwirth v. BAC Home Loans Servicing, L.P., 2012 WL , at *3 (Tex. App. Austin Aug. 30, 2012, no pet.) (noting courts have roundly rejected the show-me-the-note theory and dismissed claims relying upon it because foreclosure statutes simply do not require possession or production of the original note ); Hornbuckle v. Countrywide Home Loans, Inc.,

9 Case 1:13-cv LY Document 24 Filed 05/07/13 Page 9 of 19 WL at *3 (Tex. App. Fort Worth May 10, 2011, no pet.) (rejecting show me the note theory, holding original note need not be produced to establish right to foreclose). Indeed, the Texas Property Code contemplates the mortgage servicer will often represent the mortgagee, who may or may not possess the note itself. See TEX. PROP. CODE ANN (4) (a mortgagee may be the holder of a security instrument or a book entry system ). Nor does the current Texas statutory procedure for a deed of trust foreclosure require mortgage servicers to produce or hold the note. The mortgage servicer need only provide notice of default, with an opportunity to cure, and notice of the actual foreclosure sale. TEX. PROP. CODE ANN (b) & (d). Production of the original promissory note is not necessary. Crear v. JP Morgan Chase Bank, N.A., 2011 WL , at *1 n.1 (5th Cir. Mar. 28, 2011) (either mortgagee or mortgage servicer may administer deed of trust foreclosure without production of original note). The Texas Property Code also specifically enables mortgage servicers to foreclose if they (1) are authorized to do so by agreement with the mortgagee, and (2) disclose their relationship to the mortgagee in the notices required by section TEX. PROP. CODE ANN Again, there is no requirement to produce or even possess the note, original or otherwise. Plaintiffs have thus shown no legal basis to demand production of the note. Further, the documents evidencing the indebtedness for the Property permit assignment of the rights of the lender. Specifically, the Deed of Trust dated March 2008, which was executed by Plaintiffs and identifies them as the Borrower, provides that Cornerstone is the Lender, and 1 MERS is the beneficiary and nominee for the Lender. (Def. Mot. to Dism. App. Ex. 2 at 1). The Deed of Trust states it secures to the Lender compliance with both its own terms and the terms of 1 In their response to the motion to dismiss Plaintiffs argue consideration of any evidence, including the Note, Deed of Trust and Assignment, is improper in the context of a motion to dismiss. This is an incorrect statement of the law. In deciding a motion to dismiss, courts must consider the complaint as well as documents incorporated into the complaint by reference and matters of which a court may take judicial notice. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322, 127 S. Ct. 2499, 2509 (2007). As Plaintiffs refer to the Note, Deed of Trust and Assignment in their original petition, those documents are properly considered in reviewing the motion to dismiss. 9

10 Case 1:13-cv LY Document 24 Filed 05/07/13 Page 10 of 19 the related promissory note. (Id. at 1-2). Further, the Deed of Trust provides, [Plaintiffs] understands and agrees that MERS holds only legal title to the interests granted by [Plaintiffs] in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender's successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender including, but not limited to, releasing and canceling this Security Instrument. (Id. at 3). In addition, the Deed of Trust provides, (Id. at 9). 20. Sale of Note; Change of Loan Servicer; Notice of Grievance. The Note or a partial interest in the Note (together with this Security Instrument) can be sold one or more times without prior notice to [Plaintiffs]. A sale might result in a change in the entity (known as the "Loan Servicer") that collects Periodic Payments due under the Note and this Security Instrument and performs other mortgage loan servicing obligations under the Note, this Security Instrument, and Applicable Law. Chapter 51 of the Texas Property Code provides the Texas law governing enforcement of a deed of trust which creates a lien against real property. TEX. PROP. CODE ANN Under Texas law, if a deed of trust expressly provides for the power of sale then a party to that deed of trust has such authority. See Slaughter, 162 S.W.2d at 675 (powers found in deed of trust must be strictly followed, trustee had power of sale granted in deed of trust); Athy v. Mortg. Elec. Reg. Sys, Inc., 314 S.W.3d 161, 166 (Tex. App. Eastland 2010, pet. denied) (MERS entitled to proceed with suit and nonjudicial foreclosure based on provisions of deed of trust). A "mortgagee" may enforce a security instrument through a foreclosure sale, either directly or through a mortgage servicer. See TEX. PROP. CODE ANN (mortgage servicer may administer foreclosure of property on behalf of mortgagee); see also id (3) (defining mortgage servicer and recognizing "mortgagee may be the mortgage servicer"). A mortgage servicer may foreclose if it is (1) authorized to do so by agreement with the mortgagee, and (2) discloses its relationship to the mortgagee in the notices required by the Texas Property Code. See id (requiring notice by mortgage servicer); Id (authorizing foreclosure by 10

11 Case 1:13-cv LY Document 24 Filed 05/07/13 Page 11 of 19 mortgage servicer). Further, under Texas law, a "mortgagee" means "if the security interest has been assigned of record, the last person to whom the security interest has been assigned of record." Id (4)(C). Because MERS had the power to seek foreclosure and sell the property under the Deed of Trust, and had the power to assign these rights to others, any assignment by MERS would be sufficient to give the assignee, "the last person," to whom the Deed of Trust has been assigned of record, the same authority. By the terms of the Deed of Trust, MERS had the authority to transfer its rights to the Property. The Assignment, dated July 13, 2011 and filed in the Hays County Property recods on July 15, 2011, establishes MERS assigned its interest to Wells Fargo. (Def. Mot. to Dism. App. Ex. 3). Further, to the degree Plaintiffs attack the validity of the Assignment, Wells Fargo and MERS maintain Plaintiffs lack standing to attack the assignment because they were not parties to the assignment. Numerous courts in this state have held a mortgagee lacks standing to challenge such assignments as he is not a party to the assignments. Marsh v. JPMorgan Chase Bank, N.A., 888 F. Supp. 2d 805, 808 (W.D. Tex. 2012) (plaintiff mortgagees were not parties to assignment of Deed of Trust therefore lack standing to challenge assignment); Morlock, L.L.C. v. JP Morgan Chase Bank, N.A., 2012 WL , at *5 (S.D. Tex. Aug 2, 2012) ( Courts in this circuit have repeatedly held that plaintiffs have no standing to challenge such assignments unless they become a party, agent or assignee of a party, or a third-party beneficiary of the agreement ); Willeford v. Wells Fargo Bank, N.A., 2012 WL , at *2 (N.D. Tex. July 12, 2012) (courts have consistently held borrowers do not have standing to challenge assignment of their mortgages because they are not parties to those assignments); Metcalf v. Deutsche Bank Nat'l. Trust Co., 2012 WL , at *5 (N.D. Tex. Jun. 26, 2012) ( Courts in this circuit have repeatedly held that borrowers do not have standing to challenge the assignments of their mortgages because they are not parties to those assignments ); Dempsey v. U.S. Bank Nat l, 2012 WL , at *5 (E.D. 11

12 Case 1:13-cv LY Document 24 Filed 05/07/13 Page 12 of 19 Tex. June 6, 2012) (plaintiffs lack standing to challenge assignment because they do not allege they are parties to assignment being contested); Eskridge, 2011 WL at *5 ( Plaintiff has no standing to contest the various assignments as she was not a party to the assignments. ). However, a growing number of courts have concluded that, under certain circumstances, a mortgagor-plaintiff may have standing to challenge a mortgage assignment. See Kramer v. Fed. Nat l Mortg. Ass'n, 2012 WL , at *5 (W.D. Tex. May 15, 2012) (under very limited circumstances party may assert defenses and claims of others in suit on negotiable instrument). The threshold question is whether the challenge renders the assignment void or voidable. See Routh v. Bank of Am., N.A., 2013 WL , at *8-9 (W.D. Tex. Feb. 4, 2013) (to determine whether plaintiffs had standing to challenge assignment court must consider whether challenge is based on allegations that assignment is void or merely voidable); Miller v. Homecomings Fin., LLC, 881 F. Supp. 2d 825, 832 (S.D. Tex. 2012) (mortgagor had standing to challenge assignments where gaps in chain of title allegedly rendered assignment void); Puente v. CitiMortgage, Inc., 2012 WL , at *6 (N.D. Tex. Aug. 29, 2012) (noting plaintiffs could have standing to challenge assignment if they were alleging assignment was void); Rice v. Bank of New York, 2012 WL , at *3 (S.D. Tex. Aug.24, 2012) (stating Texas has long followed common law rule allowing debtor to assert against assignee any ground that renders assignment void). Even under the more liberal strand of cases, Plaintiffs have not alleged facts sufficient to establish they have standing to challenge the Assignment because they have not alleged sufficient facts from which it could be determined that the Assignment was void. As set forth above, Plaintiffs assert the Assignment is not valid because MERS did not have any interest in the Note and thus lacked authority to separately validy assign any interest in the Deed of Trust. As explained above, Texas law does not prohibit the separation of the two interests. Accordingly, the undersigned finds the basis of Plaintiffs claims is without merit and the motion to dismiss should be granted for that reason alone. 12

13 Case 1:13-cv LY Document 24 Filed 05/07/13 Page 13 of Fraudulent Lien Wells Fargo and MERS next argue Plaintiffs claim under section of the Texas Civil Practices and Remedies Code ( Section ") should be dismissed for failure to state a claim. Section prohibits the use of fraudulent documents in relation to real property. In pertinent part, the statute provides: A person may not make, present, or use a document or other record with: (1) knowledge that the document or other record is a fraudulent court record or a fraudulent lien or claim against real or personal property or an interest in real or personal property; (2) intent that the document or other record be given the same legal effect as a court record or document of a court created by or established under the constitution or laws of this state or the United States or another entity listed in Section 37.01, Penal Code, evidencing a valid lien or claim against real or personal property or an interest in real or personal property; and (3) intent to cause another person to suffer: (A) physical injury; (B) financial injury; or (C) mental anguish or emotional distress. TEX. CIV. PRAC. & REM. CODE ANN (a) (Vernon 2002). Wells Fargo and MERS maintain Plaintiffs have failed to identify any documents subject to the strictures of Section Specifically, they contend Section is limited, in pertinent part, to documents which create a fraudulent lien or claim against real property. Wells Fargo and MERS argue the assignment which is the basis of Plaintiffs claims does not satisfy this standard. Rather, they maintain, although the assignment may provide some evidence of a claim of a lien, it does not constitute the creation of a lien. Thus, Wells Fargo and MERS contend the assignment cannot form the basis for a claim under Section Texas courts have not yet addressed this issue. Our sister federal district courts are split. Two of them have concluded assignments of a lien are not a sufficient basis for such a claim. See Jaimes v. Fed. Nat l Mortg. Ass'n, F. Supp. 2d, 2013 WL , at *3 (W.D. Tex. Mar. 19, 13

14 Case 1:13-cv LY Document 24 Filed 05/07/13 Page 14 of ) (claim that assignment of deed of trust was fraudulent under section fails because both plain language and legislative history of statute indicate it was never intended to apply to mortgage assignments); Perdomo v. Fed. Nat l Mortg. Ass'n, 2013 WL , at *5 (N.D. Tex. Mar. 18, 2013) (plaintiff fails to state a plausible claim for relief under section where challenged instrument merely purports to transfer an existing deed of trust from one entity to another ); Marsh, 888 F. Supp. 2d at 813 (party must allege challenged instrument purport[ed] to create a lien or claim against property, concluding assignment transferring existing deed of trust from one entity to another does not purport to create a lien or claim); Garcia v. Bank of New York Mellon, 2012 WL , at *1 (N.D. Tex. Mar. 5, 2012) (noting statutory definition of lien as a claim in property for the payment of a debt and includes a security interest, and concluding assignment of deed of trust was not lien). See also Perkins v. Bank of Am., 2013 WL , at *4 (S.D. Tex. Apr. 8, 2013) (concluding, where complaint did not allege substitute trustee's deed created a lien or claim, plaintiff had not stated claim under section ). At least one other court has concluded otherwise. See Kingman Holdings, LLC v. CitiMortgage, Inc., 2011 WL , at *4 6 (E.D. Tex. Apr.21, 2011) (mortgagor's claim under Section survived motion to dismiss where mortgagor alleged MERS did not properly appoint [the signatory of the assignment] as an officer of MERS and that [the signatory] did not have authority to bind MERS, and when [he] executed the assignment, it caused MERS to file a fraudulent document in the deed records. ). In the absence of a final decision by Texas' highest court, the undersigned must determine how that court would resolve the issue if presented with it. Citigroup, Inc. v. Fed. Ins. Co., 649 F.3d 367, 371 (5th Cir. 2011). Under Texas' rules of statutory construction, a court must construe statutes as written and, if possible, ascertain legislative intent from the statute's language. Helena Chem. Co. v. Wilkins, 47 S.W.3d 486, 493 (Tex. 2001). The starting point for this analysis is the plain and common meaning of the statute's words. Tex. ex rel. Tex. Dep't of Highways & Pub. Transp. v. Gonzalez, 82 S.W.3d 322, 327 (Tex. 2002). Even when a statute is not ambiguous on 14

15 Case 1:13-cv LY Document 24 Filed 05/07/13 Page 15 of 19 its face, the court may consider other factors to determine the Legislature's intent. Helena Chem., 47 S.W.3d at 493. For the purpose of Section , a lien is defined as a claim in property for the payment of a debt and includes a security interest. TEX. CIV. PRAC. & REM. CODE (3). This language does not by its plain language include an assignment of a claim. Nor does the use of the term claim suggest an intent to include assignments within the bounds of Chapter 12 of the Civil Practices and Remedies Code. This interpretation is supported by the legislative history of the chapter. The House Bill Analysis describes the purpose of the section as creat[ing] a private cause of action against a person who files fraudulent judgment liens or fraudulent documents purporting to create a lien or claim against real or personal property in favor of a person aggrieved by the filing. House Comm. On Criminal Jurisprudence, Bill Analysis, Tex. H.B. 1185, 75th Leg., R.S. (1997) (emphasis added); see also Senate Jurisprudence Committee, Bill Analysis, Tex. H.B. 1185, 75th Leg., R.S. (1997) ( This bill also provides for civil remedies by creating a private cause of action against a person who files fraudulent judgment liens or fraudulent documents purporting to create a lien against real or personal property ) (emphasis added). Although the language of Section is, on its face broad, the legislative history is clear that the intent of the Legislature was more narrow. The Texas Supreme Court has made clear the court s purpose in construing a statute is to determine the Legislature s intent. Marcus Cable Assocs., L.P. v. Krohn, 90 S.W.3d 697, 706 (Tex. 2002). In construing a statute, Texas law also specifically commands a court to consider the consequences of a particular construction. TEX. GOV T CODE ANN (5). In light of these factors, the undersigned concludes in order to state a claim under Section , a plaintiff must allege the challenged instrument purport[ed] to create a lien or claim against property. Here, the assignment challenged by Plaintiffs does not purport to create a lien or claim. Rather, the assignment simply purports to transfer an existing deed of trust from one entity to another. Plaintiffs challenge to the validity of the assignment is 15

16 Case 1:13-cv LY Document 24 Filed 05/07/13 Page 16 of 19 thus not sufficient to state a claim under Section Accordingly, the undersigned concludes Plaintiffs claim under Section should be dismissed. 3. Breach of Contract Wells Fargo and MERS further move to dismiss Plaintiffs breach of contract claim. Under Texas law, there are four elements for a breach of contract claim: (1) there was an enforceable valid contract between the parties; (2) the plaintiff performed its contractual obligations; (3) the defendant breached the contract; and (4) this breach caused plaintiff injury. Southwell v. Univ. of the Incarnate Word, 974 S.W.2d 351, (Tex. App.--San Antonio 1998, pet. denied); Lynx Exploration & Prod. Co. v. 4-Sight Operating Co., 891 S.W.2d 785, 788 (Tex. App.--Texarkana 1995, writ denied). As Wells Fargo and MERS point out, a party to a contract who is himself in default cannot maintain a suit for its breach. RE/MAX of Tex., Inc. v. Katar Corp., 989 S.W.2d 363, 365 n.4 (Tex. 1999) (quoting Gulf Pipe Line Co. v. Nearen, 135 Tex. 50, 138 S.W.2d 1065, 1068 (1940)). See also Perrotta v. Farmers Ins. Exch., 47 S.W.3d 569, (Tex. App. Houston [1st Dist.] 2001, no pet.) (plaintiff s own breach of contract precludes him from maintaining suit for breach of contract); D.E.W., Inc. v. Depco Forms, Inc., 827 S.W.2d 379, 382 (Tex. App. San Antonio 1992, no writ) (party in breach could not maintain suit for breach of contract). Wells Fargo and MERS assert, and Plaintiffs do not deny, that Plaintiffs have defaulted under the loan agreement by failing to make payments. Plaintiffs cannot assert a claim for breach of the very contract they have breached. Wells Fargo and MERS also contend the breach of contract claim fails because Plaintiffs have not alleged any conduct which is a breach of their contract. In making this claim Plaintiffs assert the foreclosure was not conducted in accordance with applicable law and the Deed of Trust terms. (Plf. Orig. Pet. 8.01). More specifically, Plaintiffs allege Defendants breached the 16

17 Case 1:13-cv LY Document 24 Filed 05/07/13 Page 17 of 19 contract by violating the substitute trustee provisions, improperly assigning Plaintiffs Note, failing to follow the contractual requirement to mail, post and file a notice of trustee sale, and by attempting to conduct a foreclosure sale without authority. (Id.). As Wells Fargo and MERS point out, the overarching flaw in Plaintiffs claim is that no foreclosure has actually occurred. Thus, any claim of a breach of contract based on improprieties in a foreclosure is premature The motion to dismiss of Wells Fargo and MERS as to Plaintiffs breach of contract claim should thus be granted. 5. Quiet Title Wells Fargo and MERS next move to dismiss Plaintiffs claim to quiet title in the Property. A suit to quiet title is an equitable action that involves clearing a title of an invalid charge against the title. Longoria v. Lasater, 292 S.W.3d 156, 165 n.7 (Tex. App. San Antonio 2009, pet denied). The elements of the cause of action to quiet title are: (1) an interest in a specific property; (2) title to the property is affected by a claim by the defendant; and (3) the claim, although facially valid, is invalid or unenforceable. Sadler v. Duvall, 815 S.W.2d 285, 293 n.2 (Tex. App. Texarkana 1991, writ denied). The plaintiff has the burden of establishing his superior equity and right to relief, and must prove right, title, or ownership in himself with sufficient certainty to enable the court to see that he has a right of ownership and that the alleged adverse claim is a cloud on the title that equity will remove. Hahn v. Love, 321 S.W.3d 517, 532 (Tex. App. Houston [1st Dist.] 2009, pet denied). Wells Fargo and MERS argue Plaintiffs claim seeking to quiet title fails because the basis of their claim is insufficient. Specifically, Plaintiffs attack is based on their allegation that the Assignment was not valid. As Wells Fargo and MERS point out, Plaintiffs allegations go to the perceived weakness of their title and not to the strength of Plaintiffs title. For this reason alone Plaintiffs allegations are an inadequate basis for their claim. See Fricks v. Hancock, 45 S.W.3d 322, 327 (Tex. App. Corpus Christi, 2001, no pet.) (plaintiff in suit to quiet title must rely on 17

18 Case 1:13-cv LY Document 24 Filed 05/07/13 Page 18 of 19 strength of his own title, not on weakness of defendant's). Moreover, as discussed above, Wells Fargo has authority to foreclose on the Property. Accordingly, the motion to dismiss of Wells Fargo and MERS should be granted as to Plaintiffs suit to quiet title. 6. Injunctive Relief Wells Fargo and MERS finally move to dismiss Plaintiffs claim for injunctive relief. They correctly point a request for injunctive relief is simply a remedy and not a free-standing claim. See Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002) (temporary injunction requires pleading cause of action against defendant); Brown v. Ke Ping Xie, 260 S.W.3d 118, 122 (Tex. App. Houston [1st Dist.] 2008, no pet.) ( injunction is an equitable remedy, not a cause of action ). See also Spady v. America's Servicing Co., 2012 WL , at *5 (S.D.Tex. May 21, 2012) (request for injunctive relief, absent cause of action supporting entry of judgment, is fatally defective and does not statelaim). As the undersigned has concluded Plaintiffs have failed to state an actionable claim against Wells Fargo and MERS, the request for injunctive cannot stand. IV. RECOMMENDATION The undersigned RECOMMENDS that the District Court DENY Plaintiffs Motion for Sanctions Against Defendant Barrett Daffin Pursuant to Federal Rule of Civil Procedure 11(c) (Clerk s Dkt. #15). The undersigned FURTHER RECOMMENDS that the District Court GRANT Defendant Barrett Daffin Frappier Turner & Engel, LLP s Motion to Dismiss Pursuant to Rule 12(b)(6) (Clerk s Dkt. #5) and Defendants Wells Fargo Bank, N.A. and MERSCORP Holdings, Inc, s Motion to Dismiss Pursuant to Rule 12(b)(6) (Clerk s Dkt. #6). V. OBJECTIONS The parties may file objections to this Report and Recommendation. A party filing objections must specifically identify those findings or recommendations to which objections are being made. The District Court need not consider frivolous, conclusive, or general objections. See 18

19 Case 1:13-cv LY Document 24 Filed 05/07/13 Page 19 of 19 Battle v. United States Parole Comm'n, 834 F.2d 419, 421 (5th Cir. 1987). A party's failure to file written objections to the proposed findings and recommendations contained in this Report within fourteen (14) days after the party is served with a copy of the Report shall bar that party from de novo review by the District Court of the proposed findings and recommendations in the Report and, except upon grounds of plain error, shall bar the party from appellate review of unobjected-to proposed factual findings and legal conclusions accepted by the District Court. See 28 U.S.C. 636(b)(1)(C); Thomas v. Arn, 474 U.S. 140, , 106 S. Ct. 466, (1985); Douglass v. United Servs. Auto. Ass n, 79 F.3d 1415, (5th Cir. 1996) (en banc). To the extent that a party has not been served by the Clerk with this Report and Recommendation electronically, pursuant to the CM/ECF procedures of this District, the Clerk is ORDERED to mail such party a copy of this Report and Recommendation by certified mail, return receipt requested. SIGNED on May 7, MARK LANE UNITED STATES MAGISTRATE JUDGE 19