Summary
The Fifth Circuit affirmed dismissal of Jeffery and Gloria Stevens's claims challenging Deutsche Bank's authority to foreclose on their Texas home. The court held that alleged defects in the loan assignment rendered it voidable rather than void, depriving the Stevenses of standing to challenge it, and that their claims under Texas Civil Practice and Remedies Code § 12.002(a) and for breach of contract were inadequately pleaded.
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Practice areas
Questions Presented
- Whether the Stevenses, as nonparties to the assignment, had standing to challenge the assignment based on alleged violations of the pooling and servicing agreement and New Century's bankruptcy.
- Whether the Stevenses stated a claim under section 12.002(a) of the Texas Civil Practice and Remedies Code.
- Whether the Stevenses stated a breach-of-contract claim based on alleged credit-swap and insurance proceeds.
Holdings
- A nonparty to an assignment may challenge the assignment only if the alleged defect renders it void rather than merely voidable; alleged violations of a pooling and servicing agreement and post-petition bankruptcy transfers render the assignment voidable, so the Stevenses lacked standing to challenge it.
- The Stevenses failed to state a claim under section 12.002(a) because they did not allege that defendants intended to cause them physical injury, financial injury, or mental anguish.
- The Stevenses failed to state a breach-of-contract claim because they did not allege performance or tendered performance and did not dispute that they were in default.
Key quotations
“As a non-party to the assignment agreement, the Stevenses cannot challenge the Deutsche Bank’s enforcement of the agreement unless the assignment is void.” (at 2)
“The Stevenses have not alleged any facts showing that their property would not be subject to foreclosure, even absent the assignment of the deed of trust to [Deutsche Bank].” (at 3)
Factual background
The Stevenses obtained a $132,000 home-equity loan in 2006 and executed a security instrument naming New Century Mortgage Company as lender and MERS as nominee for the lender and its successors and assigns. The note was placed in a securitized trust, and the Stevenses later fell behind on their loan payments and entered into a forbearance agreement. In 2011, MERS transferred the note and deed of trust to Deutsche Bank, after which the Stevenses challenged Deutsche Bank's authority to foreclose, alleging violations of the pooling and servicing agreement and effects from New Century's bankruptcy.
Procedural history
The Stevenses sued in Texas state court, challenging Deutsche Bank's authority to foreclose on their home. Defendants removed the action to federal court and moved to dismiss. The United States District Court for the Western District of Texas granted the motion and dismissed the case. The Fifth Circuit affirmed.