Mid Pac Portfolio, LLC v. Paula Welch, Clyde Alan Ashworth and Wells Fargo Bank, Minnesota, NA Formerly Known as Norwest Bank, Minnesota, NA, as Trustee for Salomon Brothers Mortgage Securities VII, Inc. Floating Rate Mortgage Pass Through Certificates Series 1999-LBI

ACCEPTED
01-15-00404-CV
FIRST COURT OF APPEALS
HOUSTON, TEXAS
11/12/2015 2:23:04 PM
CHRISTOPHER PRINE
CLERK
No. 01-15-00404-CV
In the First Court of Appeals FILED IN
at Houston, Texas 1st COURT OF APPEALS
HOUSTON, TEXAS
11/12/2015 2:23:04 PM
MID PAC PORTFOLIO LLC
CHRISTOPHER A. PRINE
Clerk
V.
PAULA WELCH AND CLYDE ASHWORTH
On Appeal from the 405th Judicial
District Court of Galveston County, Texas
Case No. No. 13CV0422
BRIEF OF APPELLEES
Mark W. Stevens
SBN 19184300
PO Box 8118
Galveston, TX 77553
409.765.6306
Fax 409.765.6469
Email: markwandstev@sbcglobal.net
ORAL ARGUMENT REQUESTED
November 12, 2015
1
Contents
Authorities……………………………………………………………………...…3
Overview………………………………………………………………….….……5
Request for Oral Argument………………………………………………...………6
Procedural History………………………………………………………………….6
Request for Supplementation……………………………………………….………6
Facts……………………………………………………………………..………….7
Reply Issue 1—Summary Judgment for Welch and Ashworth was
properly granted………………………………………..…19
Reply Issue 2--- The statements of Paula Welch concerning payment
of taxes was “proper summary judgment evidence.”……19
Reply Issue 3---Summary Judgment was proper because Mid Pac was
Collaterally stopped to claim that its predecessor ever
had authority to assert the note or the deed…………..….19
Summary of the Argument………………………………………………….…… 20
Arguments and Authorities…………………………………………….……..….. 20
Conclusion……………………………………………………………….………..32
Prayer……………………………………………………………………………..32
Signature…………………………………………………………………………..32
Certificate of Compliance………………………………………….………..…….33
Certificate of Service…………………………………………..………………….33
2
AUTHORITIES
Cases
Bradford v. Bradford, 971 S.W.2d 595 (Tex. App.—
Dallas 1998, no pet.)…………………………………………………………..…..23
Brown v. Brown, 145 S.W.3d 745 (Tex. App.—
Dallas 2004 , pet. denied)…………………………………….…………..……….29
Brownlee v. Brownlee, 665 S.W.2d 111 (Tex. 1984)……………..………..……..26
Elbaor v. Smith, 845 S.W.2d 240(Tex. 1992)………………………………...…. 20
Graebener v. Graebener, 2012 WL 1143590
(Tex. App.—Houston [1st Dist.] 2012)………………..…………………………..22
Johnson v. Bethesda Lutheran Homes and Services,
935 S.W.2d 235 (Tex. App.—Houston [1st Dist.] 1996, no writ)……….………..25
Mays v. Perkins, 927 S.W.2d 222, 225 (Tex. App.-
Houston [1st Dist.] 1996, no writ)……………………………………………..…..22
Rizkallah v. Conner, 952 S.W.2d 580
(Tex. App.—Houston [1st Dist.] 1997, no writ)……….………………………….26
Rockwall Commons Associates, Ltd. v. MRC Mortgage Grantor Trust,
331 S.W.3d 500 (Tex. App.—El Paso 2010, no pet.)………………………….…27
Seals v. Upper Trinity Reg’l Water District, 145 S.W.3d 291
(Tex. App.—Fort Worth 2004, pet. dism’d)………………………………………22
Serna v. Webster, 908 S.W.2d 487, 492 (Tex. App.—
San Antonio 1995, no writ)……………………………………….………………23
State Farm v. Gandy, 925 S.W.2d 696, 709 (Tex. 1996)…………...…………….20
Sysco Food Services, Inc. v. Trapnell, 890 S.W.2d 796 (Tex. 1994)……………31
Turoff v. McCaslin, 222 S.W.3d 665 (Tex. App.—Waco 2007)……...………20-21
3
Statute and Rules
Texas Constitution, art. 16a- 50………….……………………………………..25
Tex. Civ. Practice & Remedies Code Sec. 11.054(1)(A)………………………17
Texas Civil Practice & Remedies Code Sec. 16.004(a)(1)…..………………….23
Texas Civil Practice & Remedies Code Sec. 16.024…………………………….23
..
Texas Civil Practice & Remedies Code Sec. 16.025…………………………….23
Texas Civil Practice & Remedies Code Sec. 16.035…………….……………….23
Texas Civil Practice & Remedies Code Sec. 16.051……………….…………….23
Texas Rule of Appellate Procedure 34.5(b)(4)………...…………………………….6
Texas Rule of Appellate Procedure 34.5(c)(1)………………………………………6
Texas Rule of Civil Procedure 120…………………………………………….….22
Texas Rule of Civil Procedure 166a(c) ………………………………………..…28
Texas Rule of Civil Procedure 166a(i)……………………………………………28
Texas Rule of Civil Procedure 736.9…………………………………………….30
4
No. 01-15-00404-CV
In the First Court of Appeals
at Houston, Texas
MID PAC PORTFOLIO LLC
V.
PAULA WELCH AND CLYDE ASHWORTH
On Appeal from the 405th Judicial
District Court of Galveston County, Texas
Case No. No. 13CV0422
BRIEF OF APPELLEES
TO THE HONORABLE FIRST COURT OF APPEALS:
Men have been swindled by other men on many occasions.
The autumn of 1929 was, perhaps, the first occasion when
men succeeded on a large scale in swindling themselves.
John Kenneth Galbraith,
The Great Crash, 1929
Chapter VII, p. 130
Overview
This is a case study in how a “junk” mortgage, unenforceable and
previously rejected by courts on multiple occasions, has been being recycled in an
attempt to extort money from Appellees who have already been victimized with
over 10 years of litigation. The trial court recognized the scam, properly denied
what would have been a windfall for Appellant, and granted summary judgment to
5
Appellees. In purchasing the “deed in lieu” now asserted, Appellant Mid Pac has
succeeded only in swindling itself, and the summary judgment should be in all
things affirmed.
Request for Oral Argument
This case presents what appear to be novel questions about the means in
which defunct mortgages are being systematically and improperly asserted in
Texas Courts. Oral argument may therefore be beneficial, in the discretion of the
Court.
Procedural History
Both parties moved for summary judgment. Appellees moved to supplement
their motion for summary judgment and that motion was granted by the court’s
order at CR 738, attached as Tab D. The trial court granted what was styled a
Motion for “default” judgment but denied the requested effect of that judgment by
making it clear in the original and amended final judgments, Tabs A and B, that it
was not finding implicitly or otherwise that any effective conveyance by the
“defaulting” party had been made to Mid Pac.
Record Supplementation
In its Brief, Mid Pac claims that there is no deed under which Appellees
occupied the property in question. In fact, such a deed was filed on March 21, 2014
to correct an earlier omission. However, that filing and the certified copies of the
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deed and a subsequent Probate Judgment of muniment of title in favor of Paula
Welch, were not included in the Clerk’s Record. Supplementation was requested
under TRAP 34.5 on November 11, 2015. At this time, a copy of the 10-page
filing of March 21, 2015 is attached hereto as Tab C.
Facts
Appellant’s account of the facts leaves the impression that Mid Pac was
merely the innocent owner of pristine commercial paper. The truth is more
complex and disturbing.
Appellant never sued on a note. The basis of Mid Pac’s suit was a
purported “Deed in Lieu of Foreclosure” signed by Defendants Paula Welch and
Clyde Ashworth on March 21, 2003 CR 122, 158. The Deed in Lieu of
Foreclosure was given pursuant to a purported compromise and Settlement
Agreement attached to Plaintiff’s Original and Amended Petitions. CR 85.
However, the underlying obligation was a Home Equity Loan, which meant that
such transactions were subject to restrictions under the Texas Constitution, art.
16a-50.
Per the Affidavit of Paula Welch, CR 213, Para. 10, it was impossible to
comply with the terms of the purported settlement agreement because any
financing company contacted was claimed to have been an “affiliate” of Long
Beach Mortgage. Compromise & Settlement Agreement, CR 85 ff. For that
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reasons, the terms of the agreement were not met, i.e., the required sums were not
paid by 5:00 p.m on June 19, 2003.
IF the grantee of the deed of trust (i.e., present plaintiff’s alleged
predecessor in the dim and undocumented past) had any cause of action for
possession of the property in question, such cause of action accrued no later than
June 20, 2003 and limitations as to enforcement of the deed began to run on that
date.
What preceded and followed was reminiscent of Charles Dickens’ Jarndyce
v. Jarndyce.
On December 13, 1999, A suit was filed by Long Beach Mortgage Company
as a servicer for Norwest Bank Minnesota NA in Cause No. 99CV1209 in the
122nd District Court. See Documentation, 13 CR 281. According to the Docket
sheet and subsequent order, a hearing was held on February 9, 2000. The Court’s
Docket Sheet entry for that day reads:
2-9-00 Hearing conducted (Judy Hansen, Court Reporter).
Application for expedited foreclosure proceeding is denied. F.T.C.
An order to that effect, purporting to deny the application “without
prejudice.” See Order of March 20, 2000. CR 416.
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On February 22, 2000, the same parties –and the same attorneys-- filed a suit
against Welch and Ashworth styled “Plaintiff’s Original Petition for Judicial
Foreclosure” in Cause No. 00CV0173 in the 212th Judicial District Court of
Galveston County. CR 419-450. The Petition included a demand letter from
Counsel for Long Beach dated October 19, 1999. The letter goes on to note that,
“…if you fail to pay the total amount due on or before thirty (30) days from the
date hereof, Creditor will accelerate amounts owed on your loan secured by the
Deed of Trust, declare the entire balance of your loan due and payable without
further demand and proceed to judicial foreclosure and sell the property under the
terms of the deed of trust and Tex. Const. Art. XVI Sec. 50(a)(6).” CR 444.
In the Petition in No. 00CV0173, Long Beach claimed damages in the
amount of $270,280.12 (the original amount of the loan was $270,000), and further
stated, “Accordingly, Plaintiff elected to accelerate and mature the Loan
Agreement.” Exh. 14, Original Petition, p. 3, CR 421. This commenced
limitations for purposes of the four year limitation statute governing suits on notes,
although it does not appear that at any time Mid Pac has attempted to enforce the
note itself.
The Docket Sheet in No. 00CV0173 reflects that a status conference was set
for May 25, 2000. However, on July 20, 2000, an order of Dismissal without
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prejudice was entered at the behest of Plaintiff Long Beach. Docket Sheet and
Order of 7/20/2000. CR 450.
On March 6, 2000, Norwest Bank Minnesota, acting through the same
counsel as previously involved, filed suit against Defendants in Cause No.
00CV0222 in the 122nd District Court, again seeking “expedited” foreclosure and
again reciting that the debt had been accelerated. CR 452 ff. At the Petition p. 2,
Para. 6, CR 453, Norwest stated, “On October 15, 1999, Applicant gave the
requisite 30 day demand to cure the default and notice of acceleration of maturity
of the debt as provided for under the Security Instrument, Tex. Prop. Code Sec.
51.002, and applicable law.” The petition was verified by Raymond Agostini,
Vice president and “default manager” of Norwest. However, on March 20,
2000—about two weeks after filing—the same suit was dismissed “without
prejudice.” See Exhibit 22, final page. CR 468.
On March 10, 2000, a suit seeking foreclosure was again filed –even while
the previous suit was pending—in No. 00CV0241, CR 472, in the 212th District
Court. The docket Sheet, CR 472 shows that a hearing originally set for May 26,
2000 was reset to May 31, 2000. The 212th District Court also denied relief. CR
488.
Next, the lawsuit which gave rise to the “deed in lieu” asserted in the present
case was filed on April 24, 2000 in the 56th District Court in No. 00CV0409 by
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Welch and Ashworth against Long Beach Mortgage d/b/a Financing USA, Docket
Sheet, CR 499 (Nonsuit). Long Beach counterclaimed and thus the issue was
joined.
The purported settlement agreement and Deed in Lieu of Foreclosure were
signed on March 21, 2003. CR 494 ff. Certain claims were dismissed following
the execution of the Compromise Agreement and “Deed in Lieu”. See entry of
3/24/2003, CR 499-500, reciting agreed motions of partial dismissals. The Court’s
final order of May 9, 2008 (the day after Judge Ellisor’s final order in No.
06CV0224), makes clear that the Agreed Order of March 24, 2003 dismissed
Ashworth and Welch’s lawsuit in its entirety with prejudice, and dismissed Long
Beach Mortgage Company d/b/a Financing USA’s counterclaims against Ashworth
and Welch with prejudice. CR 494. Those orders of March 24, 2003 were “not
affected” by the Court’s order of May 9, 2008. CR 499. However, the Order of
May 9, 2008 in No. 00CV0409 did dismiss “without prejudice” the remaining
“breach of contract” claims of Long Beach Mortgage d/b/a Financing USA,
apparently at the Motion of Long Beach.
When Welch and Ashworth signed the Settlement Agreement and “Deed in
Lieu” on March 21, 2003, they had no way of knowing the “shell game” that was
beginning. As Paula Welch testifies in her affidavit, Exh. 1,Para. 11, 11A, 12, CR
213-14, the settlement required that Welch and Ashworth obtain financing to take
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out the “note” from an entity that was not “affiliated” with Long Beach. In the 90
day refinancing window, Welch and Ashworth learned that Long Beach claimed
that a financing company with whom they were dealing was “affiliated” with Long
Beach and thus was not available as a lender. This was exactly the kind of gambit
which was sought to be avoided by constitutional and statutory provisions
requiring that home equity mortgages be foreclosed only by judicial order.
Clyde Ashworth filed a proceeding in Bankruptcy on June 19, 2003. CR 257
When that proceeding was dismissed on or about November 12, 2003 (Entry 48,
final page, CR 262), a joint proceeding was filed the next day by both Paula
Welch and Clyde Ashworth in No. 03-46247, See Exh. 9, first entry. CR 264.
That proceeding, however, was also eventually dismissed on September 28,
2004. See Exh. 9, PACER docket Sheet, Entry No. 79, final page. See bankruptcy
Docket Sheets, CR 268. The last date on which either Welch or Ashworth were
under bankruptcy protection would have been September 28, 2004. See ,
Bankruptcy PACER docket sheet, Item 79, Order on Trustee’s Motion to Dismiss,
CR 268.
It was not over. On February 24, 2006, Citigroup Global Markets Realty
Corp. (i.e., “CGMRC” the entity from whom Mid Pac claims to have purchased the
paper in question), filed a suit seeking foreclosure against Welch and Ashworth in
Cause No. 06CV0224, in the 122nd District Court. Per the Docket Sheet, CR 330 ff
12
and related documents. The issues were joined, hearings conducted, and on March
28, 2008, Judge Ellisor denied the application for foreclosure precisely because
GCMRC could not establish its “title” to the deed or note. CR330-333 . CGMRC
sought leave to take additional time to obtain such proof. CR 337-38, lamely
requesting “…additional time to locate documents to prove that it is the proper
applicant.” CR 338.
On May 8, 2008, Judge Ellisor of the 122nd District Court entered an order
denying rehearing and confirming his original dismissal of CGMRC’s suit. CR
355. Cf. the Court’s emphatic docket sheet entry, CR 359 (“DENIED”). Thus, as
of May 8, 2008, GCMRC apparently could not even locate the paperwork
necessary to demonstrate its authority with respect to the deed or the property now
in question.,
As noted, there was no further action in No. 00CV0409 following the
dismissal of both bankruptcies and the lifting of the automatic stay in bankruptcy.
The last act in No. 00CV0409 was the order of the Court dismissing the contract
claims of Long Beach “without prejudice” on May 9, 2008. CR 494 From that
date to the date of filing of the present suit, March 13, 2013, four years and 307
days elapsed. From the date of accrual (at latest, June 20, 2003, at which time
possession was to have been relinquished) to the date of filing (March 18, 2013), a
period of nine years 271 days days elapsed.
13
CGMRC attempted to salvage something by selling---for an undisclosed
consideration --- the mortgage package to Mid-Pac. See “Purchase Agreement ”
Exh. 27, CR 505, 532 ff, with price redacted. Now Mid Pac is attempting to
enforce the same deed when that relief was specifically denied almost six years
ago, i.e., May 8, 2008, , CR 355.
For Mid Pac, the critical and unresolved problem was that there was no
chain of title from any incarnation of “Long Beach” mortgage to Mid Pac, and in
particular no indication of how “Long Beach” bequeathed the deed in lieu to Wells
Fargo or subsequently to GCMRC or Mid Pac. That problem led to an
embarrassing admission—which defeats any summary judgment in favor of Mid
Pac and which supports the summary judgment in favor of Welch and Ashworth:
19. When Mid Pac Portfolio acquired the home equity loan from
Citibank, it also acquired any interest that Wells Fargo may have
under the Deed in Lieu executed by Paula Welch and Clyde
Ashworth. Consequently, there exists a genuine controversy between
Mid Pac Portfolio and Wells Fargo as to whether Mid Pac Portfolio
or Wells Fargo is the actual owner of the property under the Deed in
Lieu.
Original Petition of Mid Pac, Para. 19, CR 8-9. (emphasis added).
In short, Mid Pac and Wells Fargo did not know who the owner of the deed
was, or what interest if any Wells Fargo “may” have had under the “deed in
lieu”—and they could not find out.
14
It wasn’t for want of trying. The record also reveals that a lawsuit in Dallas,
removed to federal court, resulted in an agreed judgment to the effect that Akin
Gump Hauer & Feld LLP, counsel for J P Morgan Chase Bank, NA, was to
“…immediately turnover [sic] the original Deed in Lieu … to Michael Burns…”
Federal Judgment, CR 664. That deed, if indeed it was turned over, is absent from
the record in this case, although in candor Counsel for Mid Pac has stated in court
in this case that he has the deed in lieu in his safe in the Dallas area.
The “stipulation” between Mid Pac and CGMRC, CR 502 is an audacious
document—not a thing done in a corner, but in broad daylight.
The “Stipulation”, CR 502 purports to disclaim any right, title or interest to
the Deed in Lieu which Mid Pac is asserting. (Para. 2). This does not cure the
underlying defect, i.e., that CGMRC and Mid Pac cannot produce an instrument
giving it title to property question. The ipse dixit of any affiant to that effect
would simply be an inadmissible “opinion of belief, i.e., a pure legal conclusion.
The “Stipulation” goes on to “consent” to a judgment against itself in favor
of Mid Pac, “…providing that [CGMRC] sold and transferred its interest in the
Deed in Lieu to Mid Pac Portfolio, LLC provided that the judgment as to Citgroup
Global Markets Realty Corp is IN REM only.” CR 502 (emphasis added). Mid-
Pac and its counsel in this case were thus doing the bidding of CGMRC, and
15
asking the courts to do the same even though the 122nd District Court denied any
relief in 2008.
This “stipulation” in paragraph 7t provides further that “…Mid Pac
Portfolio LLC agrees not to pursue, and waives the award of, any monetary
damages, attorney fees, court costs or discovery against CitiGroup Global Markets
Realtiy Corp, but not against any other defendant in this case.”
Also before the court was an email dated February 26, 2013 between Mid
Pac’s counsel at trial and on this appeal-- Mike Burns-- and Mr. Nathan Vaccaro of
Wells Fargo. That document, CR 764, demonstrates that a Special Warranty
Deed from Wells Fargo had been requested and apparently was not forthcoming.
There Mr. Burns stated:
I will have to record the Deed in Lieu into Wells [Fargo] name and
start a quiet title suit to transfer the title into Mid-Pac’s name. I’ll have
to name Wells Fargo as a Defendant. I hope you’ll be able to file a
disclaimer in the suit and get out of it without it getting too
complicated….Will your office accept service of the suit?
Thus, the subsequent “default” judgment was a sham, intended to somehow
substitute a collusive “stipulation” for a Special Warranty Deed which Wells
Fargo could not provide.
CGMRC had been “thrown out” of court in No. 06CV0224 when the basis
of its own claimed assignment was challenged. For that reason, CGMRC would be
potentially subject to sanctions as a vexatious litigant if it were determined that it
16
had on five occasions filed a suit which had been “finally determined adversely to
the plaintiff”. See Tex. Civ. Practice & Remedies Code Sec. 11.054(1)(A). The
packet containing the “assignment” of the “deed” in question had the other items
redacted—suggesting that this suit is potentially only one of many such abusive
salvage operations by Mid Pac and the vendors of dubious paper.
Thus, CGMRC simply purported to “assign” a deed Mid Pac. The
assignment, CR 51, contains no property description, no words of conveyance or
habendum clause, and in short is completely ineffective as a conveyance of title to
real property.
GGMRC apparently thought—along with Mid Pac—that it could avoid
exposure to attorneys fees, possible sanctions, and embarrassing discovery by
simply not filing an answer in the normal form. However, by offering testimony in
the form of an affidavit, i.e., the “stipulation”, and especially by consenting to any
outcome, CGMRC has entered a general appearance and is before this Court for all
purposes. See below at p. *** The conduct of GCMRC and Mid Pac raise serious
policy questions as the devices used in this suit and generally to resurrect defunct
loans.
The trial court refused to give effect to the bogus stipulation madquerading
as a default judgment . The Final Judgment and Amended Final Judgment, Tabs A
and B hereto, contain the same limiting language:
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The Motion of Mid Pac for a Default Judgment as against Citigroup
Global Markets Realty Corp. is Granted to the extent only that
Citigroup Global Markets Realty Corp. has at this time no right, title
or interest in the Deed in Lieu of Foreclosure or the property
described therein and further provided that the Court does not thereby
rule implicitly or otherwise that any effective conveyance by
Citigroup Markets Realty Corp. or Wells Fargo NA of the Deed in
Lieu or property described therein to Mid Pac Portfolio, LLC has
taken place at any time.
In short, CGMRC could relinquish or “quitclaim” any interest it had in the
deed—but CGMRC and Mid Pac could not enter into a collusive “stipulation”
which would bind Appellees—or Texas Courts.
Why these maneuvers? The answer is that even the weakest claims have
some extortion value where the defendants’ homestead is involved. The Affidavit
of Marcie Schoudt , generated in earlier litigation c. July of 2011, shows what is
going on . At that time, Ms. Schoudt concluded based assessed value upon local
tax rolls for the property in question was about $395,380. CR 645. As noted,
Appellant Mid Pac declined to reveal the amount paid for either the “package”
relating to this property or any other properties. CR 505 , 532 ff, with price
redacted. With arithmetic like that, Mid Pac and similar entities could profit if just
one suit out of many “panned out.”
One final odor attaches to Mid Pac’s dealings. In February of 2013, Ms.
Welch and Mr. Ashworth received an IRS 1099 form which advised in substance
that they were being credited with $ 268,893.72 in connection with the home in
18
question. See Tab E, CR 549-553. Mid Pac responded with an affidavit of one
April Smith, CR 562-563, which admitted that Mid Pac sent the 1099 and which
attempted to explain it away as an “REO” i.e., “…a term used in the mortgage
lending industry to mean “Real Estate Owned” which is property that has been
acquired by lenders through the foreclosure process which includes a Deed in
Lieu.”
That statement –which is purely a legal conclusion—misses the point
entirely. The effect of the 1099 was to impose on Appellees a recognize gain of
over $268,000. Mid Pac had written off the note as uncollectible and were
placing on appellees the burden of recognized gain with respect to the IRS.
Reply Issue 1
Summary Judgment for Welch and Ashworth was
properly granted and Summary Judgment for
Mid Pac was properly Denied
Reply Issue 2
The statements of Paula Welch concerning payment of taxes
was proper summary judgment evidence.
Reply Issue 3
Summary Judgment was proper because Mid Pac was
Collaterally stopped to assert that its predecessor
Ever had standing to assert the note or deed.
19
Summary of the Arguments
There was no evidence of any chain of title from the original grantee under
the “deed in lieu” to Mid Pac. The “assignment” which Mid Pac attempted to cure
that defect does not substitute for a conveyance of realty and in any event is
unenforceable as contrary to public policy. Mid Pac is collaterally stopped
particular the fact that its predecessor did not have standing was determined
adversely to CGMRC in Cause No. 06CR0224 in the 122nd District Court,
approximately 5 years before the present suit was filed. Mid Pac and CGMRC
are in violation of many fundamental principles of property and procedural law,
leading to the grounds which required summary judgment in favor of the Appellees
Welch and Ashworth:
ARGUMENTS AND AUTHORITIES
Under Issue 1—Summary Judgment Was Properly Granted to
Appellees Welch and Ashworth and Summary Judgment as to Mid Pac
Was properly denied.
Appellees will summarize the arguments made below both in opposition to
Mid Pac’s Motion for Summary Judgment and in support of their own Motion for
Summary Judgment.
Ground I—Void “Mary Carter” Assignment Unenforceable-- The
“assignment” under which Mid Pac claims is unenforceable because it violates the
considerations invalidating so-called “Mary Carter” Agreements. This suit was a
20
collusive effort between Mid Pac and Citigroup Global Markets Realty Corp.
(“CGMRC”) to revive a claim that was previously rejected by the 122nd District
Court in Galveston County, Texas. (final order of denial, May 8, 2008), CR ***.
The “stipulation” which makes it clear that CGMRC, having failed once in
Galveston County Courts to enforce its deed, simply purported to “assign” the
deed and mortgage package to a straw holder (Mid Pac) in an effort to seek more
favorable justice in another court.
The “assignment” of claims is prohibited when that assignment skews the
administration of justice. A classic “Mary Carter” agreement exists where a
settling defendant retains a financial stake in the Plaintiff’s recovery and remains a
party at the trial of the case. Elbaor v. Smith, 845 S.W.2d 240, 247 (Tex. 1992).
So called “Mary Carter” agreements are banned because they tend to promote
litigation rather than settling it, and distort the trial process against defendants.
State Farm v. Gandy, 925 S.W.2d 696, 709 (Tex. 1996).
However, the concept of Mary Carter agreements has grown far beyond the
original mold. In Turoff v. McCaslin, 222 S.W.3d 665 (Tex. App.—Waco 2007) a
“litigation trust” agreement was denied enforcement because it violated public
policy and in particular Mary Carter principles. The Waco Court of Appeals
explained:
Turoff asks this Court to apply the literal definition established by the
Supreme Court in Elbaor. But the law on Mary Carter Agreements in
21
Texas has evolved in include agreements that violate the principles
laid out in Elbaor even if the precise structure of the agreement does
not fit the precise pattern of an agreement previously determine[d] to
be in violation of public policy.
Turoff, supra, 222 S.W.3d at 666, citing cases.
The Litigation Trust Agreement in Turoff showed that the beneficiaries took
the “largest cut” of any proceeds and thus had a financial stake in the outcome of
the suit filed by Turoff. The agreement required those parties to assist Turoff in
prosecution of the suit, and mutually released claims against one another.
The “assignment” in the present case attempts to accomplish analogous
improper goals. For a consideration which is unstated—and which Plaintiff Mid-
Pac refuses to disclose -- Mid Pac is attempting to “enforce” the deed while
attempting to allow CGMRC to stand off at a distance—and attempting to enforce
a recent “stipulation” which purports to insulate CGMRC from the consequences
of filing suit for relief which it was denied over 5 years ago in Cause
No.06CV0224, May 8, 2008, CR ***.
The “Default Judgment” Ruse
Despite the claim by Mid-Pac that CGMRC is a defaulting defendant, the
very fact of that “stipulation” constitutes a general appearance in this court for all
purposes. Tex. R. Civ. P. 120; Mays v. Perkins, 927 S.W.2d 222, 225 (Tex. App.-
Houston [1st Dist.] 1996, no writ). A party offers testimony has entered a general
22
appearance. Graebener v. Graebener, 2012 WL 1143590 *2 (Tex. App.—Houston
[1st Dist.] 2012), citing Seals v. Upper Trinity Reg’l Water District, 145 S.W.3d
291, 296-97 (Tex. App.—Fort Worth 2004, pet. dism’d)(examining witnesses or
offering testimony constitutes general appearance); Bradford v. Bradford, 971
S.W.2d 595, 598 (Tex. App.—Dallas 1998, no pet.)(same); Serna v. Webster, 908
S.W.2d 487, 492 (Tex. App.—San Antonio 1995, no writ)(same).
Ground II—Limitations-- Limitations under TCPRC Secs. 16.035(a);
16.024; 16.004(a)(1) and 16.051 were all asserted in Appellees’ Motion for
Summary Judgment at CR 189. The Court permitted amendment (Tab D, CR 738)
to assert limitations under the five year provision of TCPRC 16.025, as well as
collateral estoppels.
A “deed” of any kind has to be enforced within 4 years of breach of
surrender of the property. Mid-Pac’s suit is barred by limitations under the three
year statute of limitations found at TCPRC Sec. 16.024; the general four year
statute of limitations found at Texas Civil Practice and Remedies Code Sec.
16.004(a)(1), or the Residual Statute of Limitations found at Texas Civil Practice
and Remedies Code Sec. 16.051. Additionally, an executor contract for the
conveyance of realty must be brought within four years of the date of accrual.
TCPRC Sec. 16.035(a).
23
Ground III—No Chain of Title from Original Recipient of Deed/TRCP
166a(i). You can’t buy something from somebody if they don’t own it. Mid Pac
claims “assignment” from another entity-- Citigroup Global Markets Realty Corp.
or “CGMRC”—which cannot prove their title back to the original recipient of the
deed. There is no instrument—and hence no evidence under TRCP 166a(i) ,
specifically raised at CR 189, before the court which records title or ownership of
the property, the deed, or indeed the mortgage and note from Citi Bank or any
other entity into CGMRC , and thus CGMRC’s purported “assignment” to Mid Pac
is without substance. Indeed, there appears to be no deed, assignment or other
conveyance from Washington Mutual (“WaMu”) into Citi Bank. Additionally,
there is NO conveyance in the record from the “Citi Group” entity which may have
received a conveyance at some time into the CGMRC entity which purports to
have assigned the deed and cause of action to Mid-Pac.
Ground IV—Illegality-- The “deed in lieu” was illegal and unenforceable
on at least two counts. First, it was obtained in settlement of a Home Equity Loan
Mortgage in violation of both that Mortgage’s terms and the Texas Constitution,
Art. 16-50A, because the only way a Home Equity Loan can be enforced is
through a judicially supervised foreclosure. See Note, Exhibit 5, Para. 20 (“The
lien evidenced by this security instrument may be foreclosed only by court
order.”), CR ***. There is no evidence, TRCP 166a(i), that any court specifically
24
approved the so-called Compromise Settlement Agreement, or even knew of its
existence or terms.
Second, at the inception the “loan” underlying the deed of trust was
improperly modified at closing .See Tab C, Affidavit of Paula Welch, Para. 14, CR
221. In effect, Appellees were “shorted” about $8,000 at closing, defeating the
entire purpose of the home equity loan in 199. This constituted “Fraud” in the
extension of home equity credit, mandating a forfeiture of all principle and interest
under the Texas Constitution, art. 16a-50.
Argument and Authorities under Reply Issue 2
The statements of Paula Welch concerning payment of taxes
was proper summary judgment evidence.
(
The Five Year Statute of Limitations and Payment of Taxes
The five year statute under TCPRC Sec.16.025 was pleaded in Appellees’
Original Answer, CR 52; Discussed at length in Mid Pac’s Motion for Summary
Judgment, CR 129 ff; Appellees Motion to Amend, CR 692, and Defendants’
Response to Mid Pac’s Supplemental response , 4/15/15, CR 725.
Before the trial court, Appellee Welch submitted and affidavit and
supporting documents demonstrating that she had paid taxes through escrow
accounts containing her money for some of the years in question. Mid Pac
25
concedes that error was not preserved, yet at pp. 19 and 21 ff. of its Brief
challenges Ms. Welch’s affidavit regarding taxes as being “conclusory” and hence
one that can be challenged on appeal without having made any effort to do so in
the trial court.
The flaw in Mid Pac’s challenge is a misreading of what “conclusory”
evidence actually is, and what the requirements are—and are not—under Tex. R.
Civ. P. 166a (c). Various courts have often commented on the frequent—and
frequently belated—claims that an affidavit is “conclusory. See, e.g., Johnson v.
Bethesda Lutheran Homes and Services, 935 S.W.2d 235 (Tex. App.—Houston
[1st Dist.] 1996, no writ):
An oft-repeated objection to summary judgment evidence….is that it
is conclusory. There is much confusion about what this objection
means. It does not mean that logical conclusions based on stated
underlying facts are improper. That type of conclusion is proper in
both lay and expert testimony. What is objectionable is testimony
that is nothing more than legal conclusions. Brownlee v. Brownlee,
665 S.W.2d 111, 112 (Tex. 1984). To allow such testimony is to
invade the province of the fact finder, which is the sole arbiter of what
used to be known as “ultimate issues,” or issues that by their legal
consequences control the disposition of the case…..
935 S.W.2d at 239 (Hedges, J., concurring)(emphasis added).
The affidavit of Ms. Welch regarding payment of taxes was exactly what the
boldfaced language contemplated, i.e., logical conclusions based on stated
underlying facts.
26
This case is to be distinguished from situations where bald assertions of
legal conclusions are found to be inadequate for summary judgment or other
purposes, e.g., Rizkallah v. Conner, 952 S.W.2d 580, 588 (Tex. App.—Houston
[1st Dist.] 1997, no writ)(bare conclusions laying blame on car’s condition on
actions by the owner).
See Rockwall Commons Associates, Ltd. v. MRC Mortgage Grantor Trust,
331 S.W.3d 500 (Tex. App.—El Paso 2010, no pet.). Rockwall first noted that a
complaint that an affidavit is not “clear, positive, direct, etc…” must be made
before the trial court, or is waived. 331 S.W.3d at 507. Here, Mid Pac attempts to
evade that clear principle my mischaracterizing Ms. Welch’s supplementary
affidavit as “conclusory”.
Rockwall further noted that items such as contracts are admissible because,
“…as contracts, they have legal effect independent of the truth of any statements
contained therein and are not hearsay.” 331 S.W.3d at 511.
In Rockwall, the trial court had overruled complaints that affidavits were
“conclusory” and the matter was asserted as error. The El Paso Court of Appeals
rejected that challenge, noting first that, “Conclusory statements are not susceptible
to being readily controverted…” 331 S.W.3d at 512. As noted above, Mid Pac
was able to controvert the affidavit of Ms. Welch regarding the source of tax
payments, but made no effort to do so.
27
Further, in Rockwall the challenged affidavit was accompanied by ample
documentation—just as in the present case. The affidavit was therefore not
“impermissibly conclusory.” 331 S.W.3d at 513.
Mid Pac ignores Tex. R. Civ. P. 166a(c)(final sentence):
… A summary judgment may be based on uncontroverted testimonial
evidence of an interested witness, or an expert witness as to subject
matter concerning which the trier of fact must be guided solely by the
opinion of testimony of experts, if the evidence is clear, positive and
direct, otherwise credible and free from contradictions and
inconsistencies and could have been readily controverted.
Mid Pac did not controvert Ms. Welch’s claims—or even to try to do so.
Why not? Exhibit 27 to Defendant’s Motion for Summary judgment, CR *** is a
lengthy document summarizing the agreement of purchase between Mid Pac and
CGMRC, and describing in detail Mid Pac’s access to the underlying papers of the
note and deed of trust. If the funds used to pay taxes were other than those
belonging to Defendants, Mid Pac would have access to that knowledge, or could
discover it if it knew who actually “owned” the deed. Simply put, the affidavit of
Ms. Welch regarding payment of taxes was admissible under TRCP 166a(c),
quoted above, and Mid Pac simply failed to controvert it.
28
Mid Pac’s argument against application of Sec. 16.025 amounts to an
assertion that the taxes had to be paid directly by Defendants, and that taxes paid
with defendants’ money in escrow somehow do not satisfy the statute. This
argument cannot be derived from the wording of Sec. 16.025.
Mid Pac’s argument flies in the face of ordinary commercial practice, as
reflected in the original deed of trust, Defendant’s MSJ Exhibit 5, and literally
millions of others like it. Taxes on encumbered property are invariably paid by
the note holder, using funds of the owner/borrower. Lenders as a class—and their
downstream confederates such as Mid Pac-- would certainly not contend that the
borrower had not paid taxes under this arrangement if title were challenged by a
third party and the lender’s interest had to be defended by application of the five
year statute.
The only case cited by Appellant in its challenge to Ms. Welch’s
supplementary affidavit on taxes is Brown v. Brown, 145 S.W.3d 745 (Tex. App.—
Dallas 2004, pet. denied). Brown did hold that defects in substance need not be
preserved. However, in that case the appellant was challenging the trial court’s
disallowance of his own expert’s affidavit, which (1) did not attach any supporting
documents, and (2) was excessively vague in alleging professional malpractice
without stating with precision exactly what the accused attorney had done
29
incorrectly. Brown, supra, 145 S.W.3d at 751-52. That was, of course, a classic
example of a truly conclusory and non – probative affidavit.
Here, however, Ms. Welch’s affidavit attached properly certified records of
the taxing authorities, and was more than specific in stating establishing that the
monies paid could only have come from her escrowed funds.
Mid Pac claims that no deed is in the record. In fact, the “deed” under which
Appellee Paula Welch has occupied the house was omitted in her affidavit
regarding payment of taxes, CR 665, but was supplemented by an additional
affidavit on March 21, 2014. That second affidavit with attachments was not
included in the original clerk’s record but a supplementation has been requested
under TRAPs 34.5(b)(4) and 34.5(c)(1). For convenience, a copy of that
supplementary affidavit and attachments (deed and order probating will as muniment
of title) are attached to this Brief as Tab C.
Mid Pac also overlooks that the Deed of Trust attached to its original and
amended pleadings could not ad would not have been entered into had Appellees, or
at least one of them, occupied the house under color of title since at least 1999. If it
were otherwise, the Deed of Trust and associated documents would be even more
worthless.
30
Arguments and Authorities under Reply Issue 3
Summary Judgment was proper because Mid Pac was collaterally
estopped to claim that its predecessor ever had authority to
assert the note or the deed
Mid Pac misapplies TRCP 736.9, which is cited at Mid Pac’s Brief, pp. 19
ff for the proposition that the order of the 122nd District Court in Case No.
06CV0224 has no collateral estoppel effect. First, in the context of TRCP 736, the
“order” referred to is an “order” for foreclosure. The precise basis of the Summary
Judgment motion filed by Defendants’ prior counsel was that Citigroup Global
Markets Realty Corp. (CGMRC) lacked standing. See Defendants’ MSJ Exhibit
14, CR 330. When CGMRC was granted leave to present additional evidence on
the issue of standing and attempted to do so, the 122d District Court adhered to its
earlier ruling to the effect that CGMRC had no standing.
Mid Pac necessarily claims that it is in privity of title with GCMRC.
However, in the earlier proceeding in the 122nd District Court, 878GCMRC could
not prove standing. That issue was fully and fairly litigated, Sysco Food Services,
Inc. v. Trapnell, 890 S.W.2d 796, 801 (Tex. 1994). A party suing on a note or for
foreclosure of a deed of trust must certainly, as a matter of minimal due diligence,
assure itself that it actually may assert such documents in court.
Collateral estoppel does not bar litigation of issues arising after the first suit.
However, nothing of probative force happened in the six years since GCMRC
31
suffered a dismissal in the 122nd District Court. No deed from GCMRC to Mid Pac
or any other entity was ever placed into evidence. The “stipulation” on which Mid
Pac relies was not probative of any fact except relinquishment of one entity to any
claim in the property; it did not confer title on Mid Pac directly or indirectly, and
the trial court properly and carefully refused to give such effect to it.
Conclusion
Mid Pac was either a knave or a fool. If Mid Pac filed suit knowing of the
infirmities described above, it was the former. If it bought the “package” without
even checking for a chain of title or consulting online records to determine any
litigation, the latter. In either case, Mid Pac has only itself to blame for urchasing
worthless paper and may not mitigate its loss by defying Texas’ historic protection
of homesteads.
Prayer
Appellees Paula Welch and Clyde Ashworth accordingly pray that the
Summary Judgment be in all things affirmed.
Respectfully submitted,
/s/ Mark W. Stevens
Mark W. Stevens
TBN 19184300
PO Box 8118
Galveston, TX 77553
409.765.6306
Fax 409.765.6469
Email: markwandstev@sbcglobal.net
Counsel for Appellees
32
Certificate of Compliance
The Foregoing instrument contains 6,228words in Times New Roman 14
point font double spaced, with extended quotations in single space.
/s/ Mark W. Stevens
Mark W. Stevens
Certificate of Service
A true and correct copy of the foregoing instrument was served via efiling
on Mr. Mike Burns at burnslaw@outlook.com on November 12, 2015.
/s/ Mark W. Stevens
Mark W. Stevens
Exhibits
A Final Judgment
B Amended Final Judgment
C Filing of Deed of Paula Welch
D Order on Motion to Supplement MSJ
E Form 1099’s and transmittal envelops
33
A
13-CII-0422
OCJUFNJ
Judgment - Final - Non Jury - OCA
1018557 .
111/1111111111111111111111111111111
No. 13CV0422
ts ~-2 "' ftl'
MID PAC PORTFOLIO LLC IN THE 40STH DISTRI~~ ~.~
VS.
PAULA WELCH,
CL¥DE ASHWORHT and
WELLS FARGO BANK, NA COURT OF GALVESTON.
AS TRUSTEE FOR SALOMON
BROTHERS MORTGAGE
SECURlTIES Vll, INC. FLOATING
RATE MORTGAGE PASS
THROUGH CERTIFICATES
SERIES 1999-LBI COUNTY, TEXAS
FINAL JUDGMENT
The Court, having considered the Motion for Summary Judgment of Plaintiff
Mid Pac Portfolio LLC ("Mid Pac") and the Motion and Amended Motion for
Summary Judgment of Defendants and Counter Plaintiffs Paula Welch and Clyde
Ashworth (collectively, "Welch and Ashworth") and respective objections thereto,
rules as follows:
The Motion for Summary Judgment of Mid Pac Portfolio LLC is hereby
OVERRULED.
The Motion for Summary Judgment and Amended Motion for Summary
Judgment of Welch and Ashworth is GRANTED.
The Motion of Mid Pac for a Default Judgment as against Citigroup Global
Markets Realty Corp. is Granted to the extent only that Citigroup Global Markets
Realty Corp. has at this time no right, title or interest in the Deed in Lieu of
Foreclosure or the property described therein and further provided that the Court
1
839
t ~ i~ ~ per stirpes to her
descendant, if any, otherwise to my then living descendants
in each share per stIrpes.
If my Executrix, PAULA A. WELCH or Alternate Executrix,
CYNTHIA SANFORD should not survive me, I hereby appoint
DAVI D HARVEL as Executor, who shall act wi thout bond and
free of the supel:vision of any court with all the powers
herein granted to my Executrix and Alternate Executrix.
I direct that no action shall be taken in any court in
the administration of my estate other than the probating and
recording of this Will.
No bond or other security shall be required of any
Executor or Executrix appointed in this Will.
V.
I f any person, whether or not related in any way by
blood to me, shall either directly or indirectly attempt to
oppose or set aside the probate of this Will or to impair or
invalidate any of the provlsions hereof and such person
shall establish a right to any part of my estate, I give and
bequeath to 5uch person the sum of One Dollar ($1.00) only
and no further interest whatsoever in my estate.
VI.
My wife, PAULA A. WELCH and I are executing Wills at
different time intervals, in which each of us is the primary
beneficiary of the Will of the other. These Wills are not
executed because of any agreement between my wife and
myself. Either Will may be revoked at any time at the sole
discretion of the maker thereof. Upon the untimely death of
my wife, PAULA A. WELCH, this Will shall become null and
void and her will shall take precedence.
VII.
If any provision of this Will or of any Codicil thereto
Is held to be inoperative, invalid, or 111e9al, it is my
intention that all of the remainlng provisions thereof shall
continue to be fully operative and effective 50 far as is
possible and reasonable.
I herewith affix my si9nature to this Will on this the
23rd day of December, 1992 at Santa Fe, Galveston County,
Texas In the presence of the undersigned witnesses, who have
attested this instrument at my request, and in my presence.
J LAN WELCH, Testator
CERTIFIED COPY CERTIFICATE
STATE OF TEXAS
COUNTY OF GALVESTON
The above is a full, true, and correct hotogra hie co y of the original record now in my lawful custody and possession. as the same is recorded in
On the date above written, JERRY NOLAN WELCH, well known
to us declared to us, and in our presence, that this
instrument, consisting of 3 pages, is his Last Will and
Testament, and that he then signed this instrument in our
presence, and at his request, we now sign this Will as
witnesses in each other's presence. Further that JERRY
NOLAN WELCH,' appeared to us to be of sound mind and lawful
age, and under no undue influence.
Wi t n e s s ( - , ,\ ,r"
V- Ii d-// j ~11,/...-!t L J
"
Address: • ~~- / ' / f ' Il
• -' 7 /:'/1 ,)
/,,':Iv,;o l.< lie (7 "V
Wi~S:
.L~-
STA'l'E OF TEXAS
COUNTY OF GALVESTON}
BEFORE HE, the unde:rs igned author tty, on th is date
personally appeared JERRY NOLAN WELCH, Testator;
-'Dc>N,,!!V;;;;'£R. and
WhI_L. __ f.d I the witnesses,
respectively, whose' names are subscribed to the annexed or
foregoing instrument in their respective capacities, and all
of said persons being by me duly sworn, the said JERRY NOLAN
WELCH, Testator declared to me and to the said witnesses in
my presence that sa1d instrument Is his LAST WILL AND
TESTAMENT, and that he had willingly made and executed it as
his free act and deed for the purposes therein expressed;
and the said witnesses, each on his oath stated to me, in
the presence and hearing of the said Testator, that the said
Testator had declared to them that said instrument is his
LAST WILt AND TESTAMENT, and the he executed same as such
and wanted each of them to s19n it as a witness; and upon
their oaths each witness stated further that they did slqn
the same as witnesses In the presence of the Testator and at
his request; that he was at that time eighteen (18) years of
age or over, and was of sound mind; and that each of said
witnesses was then at least fourteen (14) years of age.
H--1.Tl4 nv4t.. av;Ji
JE~RY NOLAN WELCH, TESTATOR
FrrED
CERTIFIED COpy CERTIFICATE
STATE OF TEXAS
COUNTY OF GALVESTON
~ 4~ \}I.!>+<;<--'r ~~ SrAA..b
l~vL -\0 C~\ -1Ur p~~ Wti~
-\0 r~ \.., ~ S\;Wl~~ ~
~~~ ~""..""" ~ ~ Gorrevr
No. 06CV0224-A ~-L 1\ ~v- u..P­
CL YDE ASHWORTH IN THE 122ND DISTRICT J3CVO"t~l,
AND PAULA WELCH
v. COURT,GALVESTON 1/0\//~
AMERIQUEST MORTGAGE
COMPANYFnuALONGBEACH
MORTGAGE COUNTY, TEXAS
ORDER ON MOTION TO
=-SUP~P-=L=EME=NT::..,.:...:....=-SUMMAR=:..:.=...:=-=Y,-,,----,,-JUDG==..;=ME,",-=NT:...;..::;....:M=O..:;;.;:TI::.=O:..::...N:"":"=..:..=.r.i?-=F-"'=":'" Co.)
......
The Motion of Defendants and Counter Plaintiffs Paula Welch and Clyde
Ashworth to supplement their Motion for Summary Judgment and Responses to
the Motion of Plaintiff Mid Pac is hereby GRANTED.
It is ORDERED that Defendants' Motion for Summary Judgment and
Responses to the Summary Judgment Motion of Plaintiff Mid Pac shall be deemed
to have included specific reference to and invocation of Texas Civil Practice &
Remedies Code Sec. 16.025.
Other Provisions: ------~-----------------------
Signed: March 31, 2014.
Michelle Slaughter
District Judge
3
CORRECTE.O
549
550
Acquisition or
Abandonment of
sa(:tr~~d Property
551
548