Mortgage Servicing Fraud
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William A. Roper, Jr.
There is an interesting new decision out of the Texas Court of Appeals for the 1st District today.  The case is Wells Fargo Bank, N.A. v. Ballestas:
Wells Fargo Bank, N.A. v. Ballestas, Case No. 01-10-00020-CV, Texas Court of Appeals  for the First District (Houston), Decided May 12, 2011.
http://www.scribd.com/doc/55313743/Wells-Fargo-Bank-NA-v-Ballestas-Tex-App-1st-Dist-2011

Usually, a deed of trust is foreclosed non-judicially in Texas.  So very few judicial foreclosures see the inside of a Texas courtroom

In the Ballestas case, seemingly after some curious preliminary legal posturing, Ballestas brought a quiet title suit and then Wells Fargo brought counterclaims.  In the first suit, Wells Fargo was found to have failed to prove its ownership and Wells' claims were dismissed.

Very often in foreclosure dismissals elsewhere due to lack of standing, the dismissal is without prejudice to refiling.

After the first dismissal, Wells Fargo refiled.  It should probably be noted that Wells was still maintaining that it was the owner and holder of the alleged mortgage indebtedness.

The court found that the issue of Wells Fargo's ownership of the subject note had been fully litigated within the first proceeding, precluding relitigation.

This might be a helpful case to some Texas mortgage foreclosure litigants! 
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Bill

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In the Ballestas case, seemingly after some curious preliminary legal posturing, Ballestas brought a quiet title suit and then Wells Fargo brought counterclaims.  In the first suit, Wells Fargo was found to have failed to prove its ownership and Wells' claims were dismissed.Very often in foreclosure dismissals elsewhere due to lack of standing, the dismissal is without prejudice to refiling.

After the first dismissal, Wells Fargo refiled.  It should probably be noted that Wells was still maintaining that it was the owner and holder of the alleged mortgage indebtedness.

The court found that the issue of Wells Fargo's ownership of the subject note had been fully litigated within the first proceeding, precluding relitigation.



My first thought would be in regards to all the information floating around on filing a motion to dismiss to challenge standing.  While you may be able to have the case dismissed, this is most likely not going to be a decision on the MERITS of the case and therefore will not invoke a res judicata defense.  I think this case highlights the difference between winning a motion to dismiss where the Plaintiff can refile with many problems "fixed" and a stronger case vs. winning on a summary judgment or trial setting. 

I am not in a non-judicial state, but it does make me wonder if those who are can use a quiet title suit prior to a sale as a means to combat foreclosure.  Has anyone seen a case like this an any other jurisdictions? 

I also wonder what would be next for Wells Fargo.  I'm sure as we speak someone is in a little office with a MERS assignment trying to figure out who they can assign the NOTE and Deed of Trust to so this case can proceed in some fashion.    
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William A. Roper, Jr.
This seems very likely to be the end of the line for Wells Fargo in respect of the Ballestas mortgage.  Texas has a four year statute of limitations on mortgage debt.  Note that the decisions states that the note was accelerated in March 2007Time is up.

If Wells cooks up some new scheme to file again, they are very likely to find themselves on the losing end of an abuse of process tort complaint.  The Court of Appeals has spoken. Well's only choice is to appeal the decision to the Texas Supreme Court.

Ironically, even if Wells was to WIN an appeal arguing the standing issue, this might very well UNDERMINE its position in countless other cases!  Think about it.  It the Texas Supreme Court came down with any clearer and harsher rules generally on standing, this would benefit most borrowers to the determent of mortgage investors.

But in this case, it was Wells seeking to make the sanding argument!
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FnDoomed
I don't know about Texas law, but NH quiet title statues read that anybody claiming an interest can file an action and have a court determine proper title at any time.

I'm also thinking that a quiet title action works both ways.  In other words, could Wells get its ducks in a row and then file a quiet title action of its own?  

They would have different facts.  They would be plaintiff and not defendant or counter-claimant.  etc.



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Texas
The suit, Wells Fargo Bank, N.A. v. Ballestas, Case No. 01-10-00020-CV, was a product of a failed Expedited 735/736 involving a Home Equity Loan which requires adjudication and filed by Wells Fargo.

Article 16 of the Texas Constitution, (50)
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William A. Roper, Jr.
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FnDoomed said:
I'm also thinking that a quiet title action works both ways. In other words, could Wells get its ducks in a row and then file a quiet title action of its own?

In order to file a quiet title action, one really needs a title to quiet.  This is NOT an instance where the purported mortgage investor already conducted a foreclosure pursuant to a deed of trust and more than one party has a possible competing claim under different deeds and chains.

Rather, as pointed out correctly by Texas, this is a case arising out of a judicial foreclosure of a home equity line of credit.  I had not carefully investigated the underlying law, but I believe that Texas has the facts and the law correct in this case.
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William A. Roper, Jr.

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Bill said:

I think this case highlights the difference between winning a motion to dismiss where the Plaintiff can refile with many problems "fixed" and a stronger case vs. winning on a summary judgment or trial setting.


Bill:

I think you have hit the nail on the head here.  When a plaintiff brings a singularly muddled case, the suit can sometimes be defeated on the merits.  That inherently gives the defendant a better result that in instances where the borrower focuses more centrally on standing.  A standing defense in most instances affords an opportunity for a dismissal without prejudice.  

Ballestas is an interesting case and seemingly presents a rather interesting and possibly close issue.  Since the plaintiff has a burden of proving that it is the owner and the holder, in order to prevail on the merits, is the failure to demonstrate this a loss on the merits or a denial based upon lack of standing.

Since it was Ballestas who was plaintiff in the refiled suit, it cannot be validly argued that Ballestas lacked standing.
 
While I do not think that this case was wrongly decided on these facts, I also think that the case is very problematic.  A successful appeal by Wells Fargo might very well result in some greater clarity on Texas law on standing as it pertains to mortgages (home equity lines) and this is likely to be more helpful to borrowers than lenders!  Leaving this decision in place invites defendants to bring the action to quiet title, possibly litigating the ownership/holdership issue on the merits and extinguishing the lien by res judicata as demonstrated!
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Texas
No reason to file a quiet title if there was a violation under Article 16, (50) of the Texas Constitution, "it is a forfeit of all principle and interest".



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