     Case: 12-20668   Document: 00512456829     Page: 1   Date Filed: 12/02/2013




        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                 Fifth Circuit

                                                                  FILED
                                                               December 2, 2013

                                 No. 12-20668                    Lyle W. Cayce
                                                                      Clerk

JANOS FARKAS,

                                           Plaintiff-Appellant
v.

GMAC MORTGAGE, L.L.C.; DEUTSCHE BANK TRUST COMPANY
AMERICAS,
                               Defendants-Appellees



                 Appeal from the United States District Court
                      for the Southern District of Texas


Before JOLLY, DeMOSS, and SOUTHWICK, Circuit Judges.
PER CURIAM:
      Janos Farkas appeals the district court’s ruling granting the defendants’
motion for summary judgment on claims arising out of the threatened
foreclosure on two residential investment properties he owned. Farkas argues
that the district court had no jurisdiction because of an insufficient amount in
controversy under Section 1332. He also argues that it was not shown that these
defendants had the right to foreclose. We AFFIRM.
      Janos Farkas purchased two residential investment properties in 2006.
One of the properties is located on Claretfield Court in Humble, Texas, and the
other on Oakview Creek Lane in Houston. Cornerstone Mortgage Company was
the lender and the mortgage servicer at the time of the origination of the loans.
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The loans for each property were evidenced by a promissory note signed by
Farkas and secured by a deed of trust, also signed by Farkas. Each deed of trust
named Mortgage Electronic Registration Systems, Inc. (“MERS”), its successors
and assigns, as Cornerstone’s beneficiary with the right to enforce Cornerstone’s
legal interests. The purchase price was $87,288 for the Claretfield property and
$88,061 for the Oakview property.
      Cornerstone sold both the Claretfield and Oakview promissory notes in
2006 to Residential Funding Corporation (“RFC”), an affiliate of GMAC
Mortgage. Later in 2006, the promissory notes for both loans were securitized
and pooled with others in a trust, with Deutsche Bank National Trust Company
Americas named as the trustee. The deeds of trust were registered with MERS
and were not conveyed with the promissory notes. MERS subsequently assigned
the Claretfield Deed of Trust on May 31, 2011 and the Oakview Deed of Trust
on June 17, 2010 to Deutsche Bank. Each assignment was recorded in the real
property records of Harris County, Texas.
      The mortgage servicing rights were transferred separately from the deeds
of trust and the promissory notes. The servicing right for the Claretfield
promissory note was transferred from Cornerstone to Homecomings Financial,
LLC on July 1, 2006, who transferred it to GMAC on July 1, 2009. The servicing
right for the Oakview promissory note was transferred from Cornerstone to
Homecomings on August 1, 2006, then to GMAC on July 1, 2009. GMAC
continues to service both promissory notes.
      Farkas made monthly payments on each note until December 2010.
During this time, Farkas acknowledged receiving notice of the change in
mortgage servicer for both the transfer of servicing to Homecomings and the
transfer to GMAC.
      In August 2010, Farkas contacted GMAC as to each loan in separate
letters. He asked for confirmation under the Truth in Lending Act that GMAC

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was the “Rightful Holder in Due Course.” He also stated that if GMAC is “just
a servicer, I demand that you identify both the Holder in Due Course . . . and
written authorization that entitles you to service this instrument.” GMAC’s
responses, dated August 26, 2010 for the Claretfield note and August 27, 2010
for the Oakview note, did not provide the requested documentation proving the
right to service the loans. It provided the account’s payment history and the
basic originating documents for both loans. As to the Claretfield loan, GMAC
stated that the loan was registered with MERS. The response additionally said
the loan had been “transferred to GMAC Mortgage LLC for servicing on June 27,
2006,” and the current owner of the loan was Deutsche Bank. On the Oakview
loan, GMAC said that the “holder in due course” was Deutsche Bank.
      Farkas sent GMAC notice of an “Intent to Litigate” as to both mortgages
in September 2010 as a result of his dissatisfaction with GMAC’s response. He
ceased making payments on both loans in December 2010.
      GMAC sent Farkas notices of default and intent to accelerate payments
for the Claretfield note on May 16, 2011 and for the Oakview note on May 13,
2011. At the time Farkas suspended payment, the unpaid principal and interest
on the notes were $85,773.20 on the Claretfield property and $88,092.20 on the
Oakview property. Neither property, though, has been subject to a foreclosure
sale due to a restraining order granted by the state court prior to removal to
federal district court.
      Farkas brought suit in state court against GMAC and Deutsche Bank.
The defendants removed the case to the United States District Court for the
Southern District of Texas. The parties consented to proceed before a magistrate
judge pursuant to 28 U.S.C. § 636(c). We will refer to the magistrate judge’s
rulings as being those of the district court. In a detailed opinion, the district


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court granted the defendants’ motion for summary judgment, denied Farkas’
motion for partial summary judgment, and dismissed defendants’ motion for
judgment on the pleadings as moot. Farkas appeals.


                                 DISCUSSION
      We review a district court’s grant of summary judgment de novo. Onoh v.
Nw. Airlines, Inc., 613 F.3d 596, 599 (5th Cir. 2010). We view all evidence in the
light most favorable to the non-moving party. Id. Summary judgment should
be granted only if “there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a).
I.    Subject-Matter Jurisdiction
      Farkas argues that his claim did not meet the minimum amount in
controversy for removal to federal court. Our review of jurisdictional issues is
de novo. Volvo Trucks N. Am., Inc. v. Crescent Ford Truck Sales, Inc., 666 F.3d
932, 935 (5th Cir. 2012). Federal courts have original jurisdiction over civil
actions where the parties are diverse and the amount in controversy exceeds
$75,000. 28 U.S.C. 1332(a). In his initial claim, Farkas sought damages “not to
exceed $60,000,” a temporary restraining order, declaratory judgment, and a
permanent injunction to stop the foreclosure actions on both properties.
      “In actions seeking declaratory or injunctive relief, it is well established
that the amount in controversy is measured by the value of the object of the
litigation.” Hunt v. Wash. State Apple Adver. Comm’n, 432 U.S. 333, 347 (1977).
The purpose of the injunctive and declaratory relief, to stop the foreclosure sale
of the properties by GMAC and Deutsche Bank, establishes the properties as the
object of the present litigation. As this court has explained, “the amount in
controversy, in an action for declaratory or injunctive relief, is the value of the


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right to be protected or the extent of the injury to be prevented.” Leininger v.
Leininger, 705 F.2d 727, 729 (5th Cir. 1983). Farkas’ claimed injury was the
potential loss of use and ownership of the properties. In actions enjoining a
lender from transferring property and preserving an individual’s ownership
interest, it is the property itself that is the object of the litigation; the value of
that property represents the amount in controversy. Garfinkle v. Wells Fargo
Bank, 483 F.2d 1074, 1076 (9th Cir. 1973). Under any reasonable basis for
valuing the properties, whether purchase price, market value, or outstanding
principal and interest, the amount in controversy threshold is exceeded and
federal subject-matter jurisdiction exists.
II.    Validity of Defendants’ Foreclosure
       Farkas challenges the validity of the foreclosure action initiated by the
defendants. Farkas contends that Deutsche Bank is not a proper grantee,
beneficiary, owner, or holder of the deeds of trust; that the transfer of the notes
to Deutsche Bank was improper under the Pooling & Services Agreement
(“PSA”); that GMAC is not a proper servicer; and that no evidence supports
GMAC’s continued role as servicer after assignment to Deutsche Bank. We will
address each argument.
       A. Whether Deutsche Bank was a Mortgagee
       “[W]here federal jurisdiction is based on diversity of citizenship . . . a
federal court is in effect only another court of the state in which it sits and
applies the same law that would be applied if the action had been brought in
state courts.” Aerosonic Corp. v. Trodyne Corp., 402 F.2d 223, 229 (5th Cir.
1968). Under this principle, and applying Texas law, we conclude that the
district court was correct in its determination that Deutsche Bank was a
mortgagee and could proceed with the foreclosure action. Under Texas law, a


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non-judicial foreclosure may be initiated by the current mortgagee including:
“the grantee, beneficiary, owner, or holder of a security instrument;” a “book
entry system;” or “the last person to whom the security interest has been
assigned of record.” TEX. PROP. CODE § 51.0001(4). As the record demonstrates,
the deeds of trust named MERS the beneficiary of Cornerstone and MERS later
assigned the deeds of trust to Deutsche Bank. As this court has concluded,
“[b]ecause MERS is a book-entry system, it qualifies as a mortgagee.” Martins
v. BAC Home Loan Servicing, L.P., 722 F.3d 249, 255 (5th Cir. 2013). Our
holding in Martins permits MERS and its assigns to bring foreclosure actions
under the Texas Property Code. Deutsche Bank became the mortgagee as
defined under Section 51.0001(4) by valid and recorded transfer of the deeds of
trust and therefore was an appropriate party to initiate non-judicial foreclosure
actions against the Oakview and Claretfield properties.
      B. Challenge to the Assignment to Deutsche Bank Under the PSA
      Farkas next challenges the assignment of the notes to Deutsche Bank. He
asserts that they are void because they were in violation of the PSA governing
the RAI Series 2006-QS9 trust. He argues that the improper assignment
precludes Deutsche Bank from properly assuming the status of mortgagee and
foreclosing on the properties. Farkas concedes, though, that he is not a party to
the PSA, the terms of which he seeks to enforce. We have addressed a similar
challenge to a foreclosure action based on the violation of the terms of a PSA and
found that borrowers lacked standing to challenge the transfer of a note in
violation of the terms of the PSA. Reinagel v. Deutsche Bank Nat’l Trust Co., 12-
50569, 2013 WL 5832812, at *5 (5th Cir. Oct. 29, 2013). We explained that
borrowers, as non-parties to the PSA, “have no right to enforce its terms unless
they are its intended third-party beneficiaries.”     Id.   Further, the “Texas


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Supreme Court has established ‘a presumption . . . that parties contracted for
themselves,’ which applies ‘unless it clearly appears that they intended a third
party to benefit from the contract.’” Id. (internal citations omitted). As a non-
party mortgagor, and without any evidence showing Farkas to be an intended
third-party beneficiary, we conclude that Farkas lacks the requisite standing to
bring suit to enforce the terms of the PSA that govern the assignment of the
mortgagor’s note.
      C. Challenge to GMAC’s Status as Mortgage Servicer
      Finally, Farkas argues that the district court erred in concluding that
GMAC was the mortgage servicer under Section 51.0001(3) of the Texas
Property Code. See TEX. PROP. CODE § 51.0001(3). Farkas contends that GMAC
was not the mortgage servicer and was therefore incapable of initiating a
foreclosure proceeding under Section 51.0025.
      A “‘[m]ortgage servicer’ means the last person to whom a mortgagor has
been instructed by the current mortgagee to send payments for the debt secured
by a security instrument.” TEX. PROP. CODE § 51.0001(3). A later provision in
the same statute allows mortgage servicers to initiate and process foreclosures.
See TEX. PROP. CODE § 51.0025. Farkas argues that GMAC, who initiated the
challenged foreclosures, was not a valid mortgage servicer because he had never
been properly notified of that fact.
      We have already quoted Section 51.0001(3), which provides the
mechanism by which a debtor will come to know the identity of its mortgage
servicer: it is the entity that the current mortgagee identified in notice sent to
the mortgagor. The entity so identified has the rights and responsibilities
permitted mortgage servicers under the statutory scheme, including the ability
to foreclose on behalf of a mortgagee.


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      It is undisputed that Farkas made monthly payments on both the
Claretfield and Oakview mortgages to companies identified to him as mortgage
servicers beginning with the origination of the mortgages in 2006 and extending
until December 2010. The servicing for each mortgage was transferred from
Cornerstone to Homecomings in 2006 and to GMAC in 2009. In each case, the
preceding mortgage servicer and not the new mortgagee notified Farkas of the
identity of the succeeding mortgage servicer. When Deutsche Bank became the
“current mortgagee” of the Oakview property in 2010, no notice was given
Farkas by anyone that GMAC remained the servicer.         MERS remained the
mortgagee on the Claretfield deed of trust until after Farkas went into default.
      In his appellate brief, Farkas complains that he “has never been
instructed by the current mortgagee to make payments to GMAC,” and the
“notices contain no instructions by the current mortgagee to whom the
mortgagor needs to make payment to.”          The district court rejected the
complaints by emphasizing the notice that was provided, the unbroken chain
of assignment of interests for both loans, and Farkas’ acknowledged awareness
of having to make payments to GMAC. It found these facts, in concert with the
absence of evidence suggesting an alternate mortgage servicer or that GMAC
was no longer the mortgage servicer, to render Farkas’ argument untenable.
We do not disagree, but we conclude that the requirement in Section 51.0001(3)
that the current mortgagee provide the notice requires us also to consider the
defendants’ argument that quasi-estoppel under Texas law precludes Farkas
from challenging GMAC’s status as mortgage servicer. Even though the district
court did not address the estoppel argument, we may affirm summary judgment
“on any grounds supported by the record.” Lifecare Hosp., Inc. v. Health Plus
of Louisiana, Inc., 418 F.3d 436, 439 (5th Cir. 2005).

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      Texas courts apply the term “quasi-estoppel” to legal bars such as
ratification, election, acquiescence, waiver, or acceptance of benefits.       See
Steubner Realty 19, Ltd. v. Cravens Rd. 88, Ltd., 817 S.W.2d 160, 164 (Tex. App.
– Houston 1991) (citing 31 C.J.S. Estoppel § 107 (1964)).         Quasi-estoppel
“precludes a party from asserting, to another’s disadvantage, a right
inconsistent with a position previously taken. The doctrine applies when it
would be unconscionable to allow a person to maintain a position inconsistent
with one to which he acquiesced, or from which he accepted a benefit.” Lopez
v. Munoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 864 (Tex. 2000) (citations
omitted).
      At any point after the 2006 origination of the mortgages, Farkas could
have raised the issue that only the current mortgagee could provide effective
notice of the identity of the mortgage servicer. He did not do so until this
litigation.   Farkas made payments to GMAC, the entity whose status as
mortgage servicer is presently subject to challenge, from July 2009 until
December 2010. The duration and regularity of these continued payments to
mortgage servicers who had not been identified by current mortgagees
constitute acquiescence to the validity of notice of transfer from one mortgage
servicer to the next. The equitable relief afforded by quasi-estoppel assures
that a party’s position on a given issue is more than a matter of mere
convenience but is instead a stance to which it is bound.
      Quasi-estoppel is supported by different facts as to each property. As to
the Claretfield property, the preceding mortgage servicer provided notice to
Farkas of a new servicer each time the mortgage servicing for the property was
transferred. The mortgagee of the Claretfield loan did not change until after
Farkas defaulted on the loan, as MERS transferred its interest to Deutsche

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Bank in May 2011. The only possible defect in the notice provided to Farkas
prior to default was that the wrong entity, the preceding mortgage servicer,
twice provided the notice of a new mortgage servicer. Quasi-estoppel precludes
Farkas from pressing this claim after he defaulted on the loan because he did
not object on this basis after the preceding changes in mortgage servicers.
       As to the Oakview loan, though, MERS transferred its interest to
Deutsche Bank in July 2010. GMAC remained the mortgage servicer after the
transfer. GMAC’s August 2010 letter responding to Farkas’ inquiry assured
him that it was the current servicer. Farkas did not suggest in the course of his
exchange with GMAC that communications from a servicer were no longer
sufficient, though Farkas did demand that GMAC (not the current mortgagee)
provide documentation showing its status as servicer. The claimed statutory
violation, though, is not GMAC’s failure to document but Deutsche Bank’s
failure to notify Farkas of the identify of the mortgage servicer.1
       Quasi-estoppel applies to Farkas’s challenge to GMAC’s status as
mortgage servicer of each loan. AFFIRMED.




       1
         We find no doubt on this record that Deutsche Bank was the mortgagee and GMAC
the servicer, despite possible defects in the manner in which Farkas was notified. That clarity
distinguishes this case from a decision by a Texas federal court denying a motion to dismiss
under Rule 12(b)(6), when there was doubt on the pleadings as to the identity of the mortgagee
and the servicer. Shelton v. Flagstar Bank, F.S.B., No. 4:11-cv-03805, 2012 WL 1231756, *2
(S.D. Tex. Apr. 12, 2012).

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