Jose Juan Maldonado v. Yellowfin Loan Servicing Corp., as the Successor in Interest to Summit Mortgage Corporation ( 2023 )

Affirmed and Memorandum Opinion filed August 10, 2023
In The
Fourteenth Court of Appeals
NO. 14-22-00522-CV
JOSE JUAN MALDONADO, Appellant
V.
YELLOWFIN LOAN SERVICING CORP., AS THE SUCCESSOR IN
INTEREST TO SUMMIT MORTGAGE CORPORATION, Appellee
On Appeal from the County Court at Law No. 2
Tarrant County, Texas
Trial Court Cause No. 2020-004152-2
MEMORANDUM OPINION
This appeal stems from a promissory note made by appellant, Jose Juan
Maldonado, in favor of Summit Mortgage Corporation (Summit) and now held by
appellee Yellowfin Loan Servicing Corp. (Yellowfin). Yellowfin sued appellant for
breach of promissory note. The trial court granted Yellowfin’s hybrid motion for
summary judgment. Because Yellowfin conclusively established the required
elements to recover on a promissory note, we affirm.
Background
On January 27, 2006, appellant executed and delivered a promissory note (the
Note) in favor of Summit to obtain a mortgage loan in the amount of $27,771, at a
per annum interest rate of 9.875%. Summit retained the right to transfer the Note,
and “anyone who [took] possession of the Note . . . [would] be called the ‘Note
Holder.’” Beginning March 1, 2006, appellant agreed to pay a monthly installment
of $241.15, including interest and other charges, until the Note was satisfied. On
February 1, 2021, appellant acknowledged that he would make one balloon payment
of any outstanding balance remaining under the Note. In the event of a default, the
Note contained an acceleration clause, and attached to the Note were two allonges.
The first allonge transferred the Note to RCS Recovery Services, LLC, and the
second allonge transferred the Note to Yellowfin.
On July 13, 2020, Yellowfin sued appellant for breach of promissory note.
According to Yellowfin’s petition, Yellowfin is the current owner and holder of the
Note. Yellowfin sent a letter to appellant notifying him of the assignment of the
Note. At some point after the notice of assignment, appellant defaulted on the Note
by failing to pay the monthly installments or balloon payment as required.
Subsequently, Yellowfin sent a notice of acceleration to appellant and informed him
of his right to cure the default within thirty days. After appellant failed to cure the
default, Yellowfin accelerated all payments and alleged that $23,614.30 remained
due on the Note. On August 3, 2020, appellant submitted a letter to the trial court,
which amounted to a general denial, alleging, among other things, that (1) he
“operate[s] under the laws of the Republic”; he is the “beneficiary of the named
estate living upon the land in the Republic; and (3) Yellowfin failed to state a claim
against him because he is “a living person who is the beneficiary of this estate.”
On March 14, 2022, Yellowfin filed its combined traditional summary
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judgment motion and no-evidence summary judgment motion alleging that it was
seeking “only unpaid principal due,” and the Note was properly accelerated. On May
5, 2022, appellant submitted an affidavit presumably in response to Yellowfin’s
combined summary judgment motions. Appellant’s affidavit was wholly
nonsensical, but we interpret his affidavit to challenge a lender’s ability to lend
money rather than credit. His affidavit contained a “conditional acceptance of debt”
and requested “proof of claim of any debt [he was] liable for.” Appellant also
requested, among other things: (1) “[a] certified copy of the alleged Lenders’ balance
sheet and (Federal Reserve form ) FR2046”; (2) “[t]he IRS form 1099 OID relating
to this transaction”; (3) “[t]he canceled check or draft showing the asset transfer into
the account that funded the alleged ‘loan’”; (4) “[a]n affidavit from the party having
first hand [sic] knowledge that lawful money was advanced on behalf of [appellant]
and not credit in the form of unlawful bills . . . or non-redeemable privately issued
promissory notes”; (5) “[a]n affidavit from a party having first hand [sic] knowledge
swearing that [Summit and Yellowfin] suffered a loss when [appellant] did not repay
the alleged money advanced” on his behalf; and (6) “the lawful authority [Summit
and Yellowfin] . . . operated under to loan anything other than gold or silver coin
and create a debt obligation.”
On June 6, 2022, the trial court conducted a hearing on Yellowfin’s combined
summary judgment motions, and the trial court granted Yellowfin’s summary
judgment motions. On June 6, 2022, the trial court signed a final judgment awarding
Yellowfin a judgment against appellant for $23,614.30 as the principal balance owed
under the Note, $3,000 in reasonable and necessary attorney’s fees, costs of court,
and post-judgment interest at the contractual rate of 5% per annum.
Discussion
We review a summary judgment de novo. Mann Frankfort Stein & Lipp
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Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009); Wyly v. Integrity Ins.
Sol., 502 S.W.3d 901, 904 (Tex. App.—Houston [14th Dist.] 2016, no pet.). We
review the evidence presented in the motion and response in the light most favorable
to the party against whom the summary judgment was rendered, crediting evidence
favorable to that party if reasonable jurors could, and disregarding contrary evidence
unless reasonable jurors could not. See City of Keller v. Wilson, 168 S.W.3d 802,
824 (Tex. 2005); see also Fielding, 289 S.W.3d at 848. When, as here, the trial court
did not specify the exact basis for its ruling, we must affirm the “summary judgment
if any of the grounds asserted are meritorious.” Lightning Oil Co. v. Anadarko E&P
Onshore, LLC, 520 S.W.3d 39, 45 (Tex. 2017). In our review, we are restricted to
considering the arguments the nonmovant presented to the trial court in its written
motion or response. McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 343
(Tex. 1993).
To prevail on a no-evidence summary judgment, the movant must allege that
no evidence exists to support one or more essential elements of a claim for which
the nonmovant bears the burden of proof at trial. See PAS, Inc. v. Engel, 350 S.W.3d
602, 607 (Tex. App.—Houston [14th Dist.] 2011, no pet.) (citing Tex. R. Civ. P.
166a(i)); Kane v. Cameron Int’l Corp., 331 S.W.3d 145, 147 (Tex. App.—Houston
[14th Dist.] 2011, no pet.). The nonmovant must then present evidence raising a
genuine issue of material fact on the challenged elements. Timpte Indus., Inc. v. Gish,
286 S.W.3d, 306, 310 (Tex. 2009). A traditional motion for summary judgment
requires the moving party to show that no genuine issue of material fact exists and
that it is entitled to judgment as a matter of law. See Lujan v. Navistar, Inc., 555
S.W.3d 79, 84 (Tex. 2018); see also Fielding, 289 S.W.3d at 848 (citing Tex. R. Civ.
P. 166a(c)). If the movant carries this burden, the burden shifts to the nonmovant to
raise a genuine issue of material fact precluding summary judgment. Centeq Realty,
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Inc. v. Siegler, 899 S.W.2d 195, 197 (Tex. 1995).
On appeal, appellant raises four issues. As presented, we interpret appellant’s
issues to assert: (1) Yellowfin’s presentment of the Note as evidence was
insufficient; (2) the trial court improperly excluded his argument and testimony
regarding the “Professional Background Qualification of an Attorney and Legal
Officer for Legal Departments of the Federal Reserve Bank of New York and
Cleveland”; (3) the contract is ultra vires because a national bank can only lend
money (not credit); and (4) the trial court erred in failing to issue a Racketeer
Influenced and Corrupt Organizations (RICO) subpoena for “unsubstantiated claims
of obligation.” 1
In response, Yellowfin contends that appellant’s issues are “variants of ‘vapor
money’ arguments that have been repeatedly dismissed by courts across the
country.” Prior to the discussion of the merits of appellant’s appeal, the Court first
addresses Yellowfin’s argument that appellant’s underlying theory appears to be
related to the “vapor money” theory that derives from the sovereign citizen
movement.2
The “vapor money” theory was described by the United States District Court
for the Southern District of Ohio in Demmler v. Bank One NA:
Plaintiff alleges that the promissory note he executed is the equivalent
of “money” that he gave to the bank. He contends that [the lender] took
his “money,” i.e., the promissory note, deposited it into its own account
without his permission, listed it as an “asset” on its ledger entries, and
1
The court is mindful that appellant is a pro se litigant. We construe liberally pro se
pleadings and briefs; however, we hold pro se litigants to the same standards as licensed attorneys
and require them to comply with applicable laws and rules of procedure. Mansfield State Bank v.
Cohn, 573 S.W.2d 181, 184–85 (Tex. 1978).
2
“[S]overeign citizens are a loosely affiliated group who believe that the state and federal
governments lack constitutional legitimacy and therefore have no authority to regulate citizens’
behavior.” United States v. Ulloa, 511 F. App’x 105, 106 n.1 (2d Cir. 2013).
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then essentially lent his own money back to him. He contends that [the
lender] . . . “created” the money through its bookkeeping procedures.
No. 2:05-CV-322, 2006 WL 640499, at *3–4 (S.D. Ohio Mar.9, 2006).
The “vapor money” theory refers back to 1933 when the United States
discarded the gold standard, which, according to the theory, resulted in the federal
government’s bankruptcy, Goodwin v. Flagstar Bank, No. 1:19–cv–859, 2019 WL
7582866, at *3 (W.D. Mich. Dec. 23, 2019); see also Johnson v. Deutsche Bank
Nat’l Tr. Co., No. 09-21246-CIV, 2009 WL 2575703, at *1 (S.D. Fla. June 30,
2009), after which “lenders have been creating unenforceable debts because they are
lending credit rather than legal tender.” Goodwin, 2019 WL 7582866, at *3.
Accordingly, pursuant to the “vapor money” theory, a loan imposes no repayment
obligation on the recipient if the indebtedness was funded with credit as opposed to
hard currency. See Rodriguez v. Countrywide Home Loans, Inc., No. 08–23119–
CIV, 2008 WL 8980452, at *2 (S.D. Fla. Dec. 29, 2008) (noting the vapor money
theory holds that payments for economic obligations cannot be made by promissory
note or other similar instruments as they are illegal and do not create a legally
cognizable debt.) “The essence of the ‘vapor money’ theory is that the promissory
notes (and similar instruments) are the equivalent of ‘money’ that citizens literally
‘create’ with their signatures.” McLaughlin v. CitiMortgage, Inc., 726 F. Supp. 2d
201, 212 (D. Conn. 2010).
As Yellowfin notes, federal courts have uniformly rejected the “vapor money”
theory and similar arguments. See McLehan v. Mortg. Elec. Registration Sys., No.
08-12565, 2009 WL 1542929, at *2 (E.D. Mich. June 2, 2009) (“The vapor money
theory . . . and ‘similar arguments have been rejected by federal courts across the
country.’”); Demmler, 2006 WL 640499, at *1, 3–4 (determining that the no money
lent theory pleaded in the case was “utterly frivolous and lacks any legal foundation
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whatsoever,” and that “this patently ludicrous argument . . . ha[s] been rejected by
federal courts across the country”); Frances Kenny Family Tr. v. World Sav. Bank
FSB, No. C04-03724 WHA, 2005 WL 106792, at *5–6, (N.D. Cal. Jan. 19, 2005)
(awarding attorney fees against the plaintiffs and their attorneys for “abuse of the
judicial process” despite the plaintiffs’ voluntary dismissal of the complaints); Rene
v. Citibank NA, 32 F. Supp. 2d 539, 544–45 (E.D.N.Y. 1999) (rejecting claims that
because lender did not have an amount equal to the face value of the loan in its vault,
and merely “transferred some book entries,” lender had created illegal tender); Nixon
v. Individual Head of St. Joseph Mort. Co., 615 F. Supp. 898, 899–900 (N.D. Ind.
1985) (dismissing claims of breach of contract, fraud, usury, “illegality,” unjust
enrichment, and racketeering, stating that plaintiff’s “unlawful money” allegations
were “absurd,” and that “[p]rivate parties may enter into transactions to trade
whatever they agree on as having equal value,” so that a loan transaction is not
invalid merely because “credit” is issued); see also Alcorn v. Washington Mut. Bank,
F.A., 111 S.W.3d 264, 266 (Tex. App.—Texarkana 2003, no pet.) (stating that the
“vapor money” theory is a legally erroneous concept apparently based on the
misinterpretation of a publication of the Federal Reserve System).
This Court likewise rejects appellant’s claims rooted in the “vapor money”
theory because this theory has no basis in law. See, e.g., Winsey v. Nationstar Mortg.,
LLC, No. 8:17-cv-979-T-33AEP, 2017 WL 2812700, at *4 (M.D. Fla. June 29,
2017) (dismissing money vapor claims as “utterly meritless”); Sanford v. Robins
Fed. Credit Union, No. 5:12-CV-306, 2012 WL 5875712, at *3–4 (M.D. Ga. Nov.
20, 2012) (quoting case law denoting the vapor money theory as “equal parts
revisionist legal history and conspiracy theory” and dismissing the plaintiff’s
complaint for failing to state an actionable claim); Johnson, 2009 WL 2575703, at
*3 (finding complaint based on vapor money theory “lacks legal merit and should
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be dismissed”); Carrington v. Fed. Nat’l Mortg. Assoc., No. 05-73429, 2005 WL
3216226, at *2 (E.D. Mich. 2005) (recognizing that vapor money theory has been
“universally rejected by numerous federal courts.”).
As in the typical “vapor money” claim, appellant alleges that Summit issued
an invalid loan because the loan was backed by credit and not lawful money.
Appellant further posits that, by failing to provide “verified copies and or ‘originals’
of the required documents,” Summit and Yellowfin acquiesced that he was no longer
indebted to either corporation. However, appellant has provided no substantive basis
in the law to demonstrate that he is not indebted with respect to the Note or that the
Note has been otherwise satisfied.
The record reflects that appellant signed the Note, which provided that:
In return for a loan that I have received, I promise to pay U.S. $27,771
(this amount will be called the “principal”), plus interest, to the order
of the Lender. The Lender is [Summit]. I understand that the Lender
may transfer this Note. The Lender who takes this Note by transfer and
who is entitled to receive payments under this Note will be called the
“Note Holder.” I will pay interest at a yearly rate of 9.875%. . . . I will
pay principal and interest by making payments each month of U.S.
$241.15. I will make my payments on the 1st day of each month
beginning on March 1, 2006. I will make these payments every month
until I have paid all of the principal and interest and any other charges
. . . that I may owe under this Note. If, on February 1, 2021, I still owe
amounts under this Note, I will pay all those amounts, in full, on that
date.
Likewise, appellant has provided no substantive basis in the law to support
ultra vires claims against Yellowfin. An ultra vires action is one in which the
plaintiff seeks relief in an official-capacity suit against a government actor who
allegedly has violated statutory or constitutional provisions by acting without legal
authority or by failing to perform a purely ministerial act. See City of El Paso v.
Heinrich, 284 S.W.3d 366, 372–73 (Tex. 2009). There is no evidence on the record
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before us that Yellowfin is a government actor. Similarly, appellant’s claims that the
trial court erred in not “issuing a subpoena for unsubstantiated claims of obligations”
in violation of RICO is wholly without merit and not dispositive in determining
whether Yellowfin established the required elements to recover on a promissory
note.
On the record before us, appellant did not dispute (1) signing the Note, (2)
that Yellowfin is the current holder and owner of the Note, or (3) that the Note was
secured by a mortgage, deed of trust, or similar security instrument. Thus, appellant
has implicitly agreed that Yellowfin may use negotiable instruments to secure the
mortgage debt and has assented to this arrangement since 2006 by paying the
mortgage debt and enjoying the benefit of the property. Having concluded that
appellant’s complaints are rooted in the “vapor money” theory and lack legal merit,
we need only determine if Yellowfin carried its burden in either its no-evidence
summary judgment or traditional summary judgment motions.
When a person executes a promissory note, the note constitutes a written
promise by the maker to pay the amount specified in the note to the payee named in
the note. Tex. Bus. Com. Code § 3.104(a), (b); Texmarc Conveyor Co. v. Arts, 857
S.W.2d 743, 746 (Tex. App.—Houston [14th Dist.] 1993, writ denied). To recover
on a promissory note, the plaintiff must prove: (1) the note in question; (2) the party
sued signed the note; (3) the plaintiff is the owner or holder of the note, and (4) a
certain balance is due and owing on the note. Dorsett v. Hispanic Housing & Educ.
Corp., 389 S.W.3d 609, 613 (Tex. App.—Houston [14th Dist.] 2012, no pet.);
Blankenship v. Robins, 899 S.W.2d 236, 238 (Tex. App.—Houston [14th Dist.]
1994, no writ).
There is undisputed evidence that appellant executed the Note on January 27,
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2006, as evidenced by his signature. Yellowfin presented a true and correct copy of
the Note proving ownership and possession of the instrument and established its
status as the owner and holder of the note. See Life Ins. Co. of Va. v. Gar-Dal, Inc.,
570 S.W.2d 378, 380 (Tex. 1978). Yellowfin also presented evidence of the balance
owed on the Note. Appellant failed to present any evidence controverting the
evidence, and the documents requested by appellant were wholly irrelevant to any
material issue in this case because they relate only to a “completely spurious and
legally incorrect claim.” See Alcorn, 111 S.W.3d at 267. Thus, Yellowfin
conclusively established the required elements to recover on a promissory note. See
Dorsett, 389 S.W.3d at 613.
Accordingly, we overrule each of appellant’s issues on appeal.
Conclusion
We affirm the judgment of the trial court.
/s/ Frances Bourliot
Justice
Panel consists of Justices Bourliot, Hassan, and Poissant.
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