ACCEPTED 03-14-00523-CV 3740835 THIRD COURT OF APPEALS AUSTIN, TEXAS 1/12/2015 6:12:12 PM JEFFREY D. KYLE CLERK No. 03-14-00523-CV
FILED IN 3rd COURT OF APPEALS IN THE THIRD COURT OF APPEALS OF TEXASAUSTIN, TEXAS 1/12/2015 6:12:12 PM JEFFREY D. KYLE Clerk GEORGEINE MIKE KOROMPAY Appellant
DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE FOR CARRINGTON MORTGAGE LOAN TRUST, SERIES 2005- NC3 ASSET BACKED PASS THROUGH CERTIFICATES Appellees
Appeal from the County Court at Law 1 Travis County, Texas Trial Court No. C-1-CV-14-003847
REPLY BRIEF OF APPELLANT
David Rogers Texas Bar No. 24014089 Law Office of David Rogers 1201 Spyglass Suite 100 Austin, TX 78746 Matthew Wilson Texas Bar No. 24079588 Telephone: (512) 923-1836 Fax: (512) 201-4082
ATTORNEY FOR APPELLANT
ORAL ARGUMENT NOT REQUESTED
i No. 03-14-00523-CV
IN THE THIRD COURT OF APPEALS OF TEXAS
GEORGEINE MIKE KOROMPAY Appellant
DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE FOR CARRINGTON MORTGAGE LOAN TRUST, SERIES 2005- NC3 ASSET BACKED PASS THROUGH CERTIFICATES Appellees
Appeal from the County Court at Law 1 Travis County, Texas Trial Court No. C-1-CV-14-003847
David Rogers Texas Bar No. 24014089 Law Office of David Rogers 1201 Spyglass Suite 100 Austin, TX 78746 Matthew Wilson Texas Bar No. 24079588 Telephone: (512) 923-1836 Fax: (512) 201-4082
ii IDENTITY OF PARTIES AND COUNSEL APPELLANT:
Georgeine Mike Korompay
COUNSEL:
David Rogers SBN 24014089 Law Office of David Rogers 1201 Spyglass Suite 100 Austin, TX 78746 (512) 923-1836 (512) 201-4082 [Facsimile] DARogers@aol.com
Matthew Wilson SBN 24079588 1201 Spyglass Suite 100 Austin, TX 78746 (512) 923-1836 (512) 201-4082 [Facsimile] MWilson@MatthewWilsonLaw.com
APPELLEES:
Deutsche Bank National Trust Company as Trustee for Carrington Mortgage Loan Trust, Series 2005-NC3 Asset Backed Pass Through Certificates
Travis H. Gray SBN 24044965 Jack O’Boyle & Associates P.O.Box 815369 Dallas, TX 75381 (972) 247-0653 (972) 247-0642 [Facsimile] Travis@jackoboyle.com
iii TABLE OF CONTENTS
Identity of Parties and Counsel……………………………………………..iii
Table of Contents…………………………………………………………...iv
Index of Authorities…………………………………………………......v-viii
Summary of Argument………………………………………………………1
Argument & Authorities…..………………………………………………....2
Prayer…….…..……………………………………………….....................16
iv INDEX OF AUTHORITIES FEDERAL CASES Train v. Natural Resources Defense Council, Inc., 421 U.S. 60, 87, (1975)..5 See Commissioner v. South Texas Lumber Co., 333 U.S. 496, 501, 92 L. Ed. 831, 68 S. Ct. 695 (1948)…………………………………..……..5
FEDERAL CIRCUIT APPEALS CASES Nalle v. Commissioner, 997 F.2d 1134, 1136 (5th Cir. 1993)………………5 Enron Gas Processing Co. v. United States, 1996 U.S. Dist. LEXIS 13750 (5th Cir. 1996)……………………………………………………………..…6 Elgin Nursing And Rehabilitation Center vs. U.S. Department Of Health And Human Services, 718 F.3d 488, (5th Cir. 2013)…………...……6 First Nat'l Bank v. Comptroller of Currency, 697 F.2d 674; 1983 U.S. App. LEXIS 30720………………………………………………9 Fidelity & Deposit Co. v. Conner, 973 F.2d 1236, 1241-42 (5th Cir. 1992)….10
U.S. SUPREME COURT CASES Chevron, U.S.A., Inc., v. Natural Resources Defense Council. Inc., 467 U.S. 837, 842-43, 81 L. Ed. 2d 694, 104 S. Ct. 2778 (1984)………….4 Mims v. Arrow Fin. Servs., LLC, 132 S. Ct. 740, 748; 181 L. Ed. 2d 881, 2012 U.S. LEXIS 906 (2012)………………………………………………6 Tafflin v. Levitt, 493 U.S. 455, 458-459, 110 S. Ct. 792, 107 L. Ed. 2d 887 (1990)…………………………………………………..6 Howlett v. Rose, 496 U.S. 356, 367, 110 S. Ct. 2430, 110 L. Ed. 2d 332 (1990)………………………………………………………….7 Maryland v. Louisiana, 451 U.S. 725, 746, 101 S. Ct. 2114, 68
v L. Ed. 2d 576 (1981)……………………………………………………….……………..7 Hurd v. Hodge, 334 U.S. 24; 68 S. Ct. 847; 92 L. Ed. 1187; 1948 U.S. LEXIS 2765………………………………………………….…8 W.R. Grace & Co. v. Local Union 759, Int'l Union of United Rubber, 461 U.S. 757; 103 S. Ct. 2177; 76 L. Ed. 2d 298; 1983 U.S. LEXIS 42.…9
TEXAS SUPREME COURT CASES Zachry Constr. Corp. v. Port of Houston Auth., 2014 Tex. LEXIS 768 (Tex. 2014)…………………………………………………..11 James v. Fulkrod, 5 Tex. 512, 520 (1851)………………………………..12 Bond v. Terrell Cotton & Woolen Mfg. Co., 82 Tex. 309, 313 (Tex. 1891)………………………………………………………………..14
TEXAS COURTS OF APPEAL Jaimes v. Fannie Mae, 2013 Tex. App. LEXIS 14615 (Tex. App.-Austin December 4, 2013)………………………………………1 Falcon v. Ensignia, 976 S.W.2d 336, 338 (Tex. [*558] App.-- Corpus Christi 1998, no pet.); Mitchell, 911 S.W.2d at 171…….…..2 Fandey v. Lee, 880 S.W.2d 164, 169 (Tex. App.--El Paso 1994, writ denied)……………………………………………………………….…2 Haith v. Drake, 596 S.W.2d 194, 196 (Tex. Civ. App.--Houston [1st Dist.] 1980, writ ref'd n.r.e.)……………………………………………2 Dormady v. Dinero Land & Cattle Co., 61 S.W.3d 555, 558-559 (Tex. App.--San Antonio 2001, pet. dism'd w.o.j.)………………………..…2 First Nat'l Collection Bureau, Inc. v. Walker, 348 S.W.3d 329, 336 (Tex.App. – Dallas 2011)…………………………………………………...7
vi see The Chair King, Inc. v. GTE Mobilnet of Houston, Inc., 184 S.W.3d 707, 712 (Tex. 2006)……………………………………………….8 In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 129 (Tex. 2004)………11 Sonny Arnold, Inc. v. Sentry Sav. Ass'n, 633 S.W.2d 811, 815 (Tex.1982)………………………………………………………………….11 Curlee v. Walker, 112 Tex. 40, 244 S.W. 497, 498 (Tex. 1922)………………………………………………………….………….....11 Miller v. Long-Bell Lumber Co., 148 Tex. 160, 222 S.W.2d 244, 246 (Tex. 1949)…………………………………………………………….12 Franklin v. Jackson, 847 S.W.2d 306, 310 (Tex. App.--El Paso 1992……………………………………………………………….………..12 TCA Bldg. Co. v. Northwestern Resources Co., 922 S.W.2d 629, 636 (Tex.App. – Waco 1996)…………………………………………………...12 Plaza Nat. Bank v. Monfrey, 706 S.W.2d 714, 717 (Tex. App.—San Antonio 1986, writ rf’d n.r.e.)…………………………………………………………………….…13 Jack v. State, 694 S.W.2d 391, 397 (Tex. App.—San Antonio 1985, writ ref’d n.r.e.)………………………………………………………………….……13 International Aircraft Sales, Inc. v. Betancourt, 582 S.W.2d 632, 635 (Tex. Civ. App. -- Corpus Christi 1979, writ ref'd n.r.e.)………………….14 Park v. Coulson, 139 S.W.2d 667, 668 (Tex. Civ. App. – Amarillo 1940, no writ)……………………………………………………14 Mayfield v. Troutman, 613 S.W.2d 339, 344 (Tex. Civ. App. – Tyler 1981, writ ref'd n.r.e.)……………………………………………….14 Peniche v. AeroMexico, 580 S.W.2d 152, 157 (Tex. Civ. App. -Houston [1st Dist.] 1979, no writ)………………………14
vii Continental Fire & Casualty Ins. Corp. v. American Mfg. Co., 221 S.W.2d 1006, 1009 (Tex. Civ. App. -Fort Worth 1949, writ ref'd)…..14 Roberts v. San Jacinto Shipbuilders, Inc., 198 S.W.2d 488, 492 (Tex. Civ. App. -Galveston 1946, writ ref'd n.r.e.)………………………..14 Mortgage Elec. Registration Sys. v. Young, No. 02-08-00088-CV, 2009 Tex. App. LEXIS 3937, 2009 WL 1564994, at *5 (Tex. App.—Fort Worth June 4, 2009, no pet.)………………………...…16
CODES 26 USC 860G(a)(3)(A)(ii)…………………..………………………………3 IRS Code 860G(a)(3)(ii)……………………….……………………………3 13 TEX. JUR.2D CONTRACTS, § 220………………..……………………….14
Tex. Gov't Code Ann. § 27.031(a)(2)………………………………………14
Tex. Prop. Code Ann. § 24.004…………………………………………….14
RULES Tex. R. Civ. P. 749 (West 2013, repealed 2013)…………………………...15 Tex. R. Civ. P. 751 (West 2013, repealed 2013)…………….………….….15
viii TO THE HONORABLE THIRD COURT OF APPEALS: 1. Appellant, Georgeine Korompay, hereby pleads that the honorable
Court of Appeals reverse the judgment of the County Court at Law #1 and
remand for further proceedings, and in support of this motion she shows the
Court:
SUMMARY OF ARGUMENT
2. The sole issue in this case is whether a title dispute exists precluding
the lower court’s jurisdiction. As the trial court properly outlined the issue:
“nemo dat quod non habet . . . You cannot give what you don't have.” RR
Vol002, p. 15, lines 12-19. The trial court, nevertheless, came to the
incorrect conclusion in granting possession to a party that did not own the
property.1 A title dispute exists in this case because the party seeking to
foreclose has no ownership interest, actual or by agency.
3. Appellees the CARRINGTON MORTGAGE LOAN TRUST,
SERIES 2005-NC3, are, based on their SEC filing, a "real estate mortgage
investment conduit" (or "REMIC" as defined in the Code.) (RR-Vol 003, p. 1 Ownership is the first of the five elements a plaintiff must prove in a forcible detainer suit. Jaimes v. Fannie Mae, 2013 Tex. App. LEXIS 14615 (Tex. App.-Austin December 4, 2013), at 4-5 (“To establish forcible detainer, Fannie Mae had to prove: (1) it was the owner of the property in question, (2) [Defendant] was an occupant at the time of foreclosure, (3) the foreclosure was of a lien superior to [Defendant]’s right to possession, (4) Fannie Mae made a written demand for possession in accordance with section 24.005 of the Property Code, and (5) [Defendant] refused to vacate.”)
p. 1 144) or REMIC trust, created for purposes of enjoying the federal IRS tax
benefits such trusts enjoy. The same code provides limits on what
constitutes a “qualified mortgage” (a mortgage conveyed into the trust
within a 3 month window after the trust “closing date”). The evidence
provided to the trial court was sufficient proof to notify the trial court that
inclusion of Appellants’ property into the REMIC Trust at the time of the
purported assignment, outside of the 3 month window, violated federal law.
A contract – including a contract for sale or transfer of a note – that violates
federal law is void ab initio. The state courts are bound to follow federal
law and so hold.
4. Consequently, a title dispute does exist. The justice and county courts
below lacked jurisdiction to consider, much less grant, possession.2 The
order of possession must be reversed. This case must be remanded, on
jurisdictional grounds, for dismissal by the Travis County Court.
2 “[I]f the question of title is so intertwined with the issue of possession, then possession may not be adjudicated without first determining title. Falcon v. Ensignia, 976 S.W.2d 336, 338 (Tex. [*558] App.-- Corpus Christi 1998, no pet.); Mitchell, 911 S.W.2d at 171; Fandey v. Lee, 880 S.W.2d 164, 169 (Tex. App.--El Paso 1994, writ denied). In such a case involving a genuine issue of title, neither the justice court, nor the county court on appeal, has jurisdiction. Mitchell, 911 S.W.2d at 171; Haith v. Drake, 596 S.W.2d 194, 196 (Tex. Civ. App.--Houston [1st Dist.] 1980, writ ref'd n.r.e.).” Dormady v. Dinero Land & Cattle Co., 61 S.W.3d 555, 558-559 (Tex. App.-- San Antonio 2001, pet. dism'd w.o.j.) (op. on reh'g).
p. 2 ARGUMENT & AUTHORITIES
Appellees are a "real estate mortgage investment conduit" or "REMIC"
trust
5. At the 736 hearing, Appellants (Defendants) proffered their Exhibit 1
(RR – VOL003, p. 80).3 Therein, it states:
FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Thacher Proffitt & Wood LLP, counsel to the depositor, assuming compliance with the provisions of the pooling and servicing agreement, for federal income tax purposes, each REMIC established under the pooling and servicing agreement will qualify as a REMIC under the Code.
6. As a REMIC trust, the trust fund is regulated by the U.S. Internal
Revenue Service pursuant to the mandate passed by Congress, 26 USC
860G. The statute sets forth the requirements for a mortgage to qualify as an
asset of Defendants in a REMIC trust. 26 USC 860G(a)(3)(A)(ii) states, in
pertinent part:
(a) Definitions For purposes of this part— (3) Qualified mortgage The term “qualified mortgage” means— (A) any obligation (including any participation or certificate of beneficial ownership therein) which is principally secured by an interest in real property and which—
3 http://www.secinfo.com/dr66r.z11c.f.htm?Show=All#TOT
p. 3 (ii) is purchased by the REMIC within the 3-month period beginning on the startup day if, except as provided in regulations, such purchase is pursuant to a fixed-price contract in effect on the startup day. (Emphasis added). 7. All REMIC loans must be acquired on the startup day of the REMIC
or within 3 months thereafter, according to IRS Code 860G(a)(3)(ii). The
Internal Revenue Service has issued an opinion interpreting this provision of
the Code. That opinion held:
B. Treatment of release of real property lien under section 860G Section 860D(a)(4) of the Code defines a REMIC in pertinent part as an entity substantially all of the assets of which consist of qualified mortgages and permitted investments as of the close of the third month beginning after the startup day and at all times thereafter. Section 860G(a)(3)(A) requires that an obligation be principally secured by an interest in real property to be considered a qualified mortgage. Section 860G(a)(3)(A) also requires that an obligation be transferred to the REMIC on the startup day in exchange for regular or residual interests in the REMIC or be purchased by the REMIC within the 3-month period beginning on the startup day to be considered a qualified mortgage. Internal Revenue Service Op. No. 200648023, Release Date: 12/1/2006 Index Number: 860G.03-00, 1001.00-00, William E. Coppersmith Chief, Branch 2 Office of Associate Chief Counsel Financial Institutions & Products.
8. Agency interpretation of laws they are required to execute are to be
given deference as to the meaning of a statute. In Chevron, U.S.A., Inc., v.
Natural Resources Defense Council. Inc., 467 U.S. 837, 842-43, 81 L. Ed.
p. 4 2d 694, 104 S. Ct. 2778 (1984), the Supreme Court forged the analytic
framework for assessing the validity of an administrative agency's
construction of the statute that it is charged with administering.
9. The Court in Chevron announced a two-step method of analysis.
Initially, a reviewing court must determine "whether Congress has directly
spoken to the precise question at issue." To the extent that this court is
asked to assess the relevant government agency's construction of a statutory
term, two inquiries are immediate: whether Congress has spoken directly to
the precise question at hand and, if not, whether the agency's proposed
answer to the question is based on a permissible construction of the statute.
See Chevron, id.
10. If the Congressional intent is clear, the matter ends and the court and
the agency must "give effect to the unambiguously expressed intent of
Congress". Chevron, 467 U.S. at 843. In the absence of such clear intent, or
in the face of an ambiguity, the court will assess the administrative
interpretation. "Such legislative regulations are given controlling weight
unless they are arbitrary, capricious, or manifestly contrary to the statute."
Chevron, 467 U.S. at 844 (citing INS v. Jong Ha Wang, 450 U.S. 139,
(1981); Train v. Natural Resources Defense Council, Inc., 421 U.S. 60, 87,
(1975).
p. 5 11. The proffered agency interpretation will not be "disturbed unless it
appears from the statute or its legislative history that the accommodation is
not one that Congress would have sanctioned." Chevron, 467 U.S. at 845
(citing United States v. Shimer, 367 U.S. 374, 382, 383, (1961) (citation
omitted)). In that regard, judicial deference is owed to the IRS interpretation
of a regulation when it constitutes a "contemporaneous construction" of the
statute. See Commissioner v. South Texas Lumber Co., 333 U.S. 496, 501,
92 L. Ed. 831, 68 S. Ct. 695 (1948). 12. In deciding whether a regulation
carries out its congressional mandate properly, the court must "look to see
whether the regulation harmonizes with the plain language of the statute, its
origin, and its purpose." Nalle v. Commissioner, 997 F.2d 1134, 1136 (5th
Cir. 1993) (quoting National Muffler Dealers Ass'n v. United States, 440
U.S. 472, 477, (1979)). Enron Gas Processing Co. v. United States, 1996
U.S. Dist. LEXIS 13750 (5th Cir. 1996). See also Elgin Nursing And
Rehabilitation Center vs. U.S. Department Of Health And Human Services,
718 F.3d 488, (5th Cir. 2013).
13. The provisions of this REMIC trust are not contested. The issue is
whether, based on the requirements of 26 USC 860G(a)(3)(ii), Appellants’
Note was a ‘qualified mortgage’ when it was included into the Trust more
p. 6 than five years after it legally could have been included. As a matter of
federal law and undisputed fact, it was not. The Note was not TIMELY
assigned to the Trust as required by federal law. The assignment is therefore
in violation of federal law.
State Courts Must Enforce Federal Law
14. The trial court, as well as all other state courts, must enforce federal
law. The U.S. Supreme Court has recently spoken on this issue. In Mims v.
Arrow Fin. Servs., LLC, 132 S. Ct. 740, 748; 181 L. Ed. 2d 881, 2012 U.S.
LEXIS 906 (2012), the Supreme Court held:
In cases “arising under” federal law, we note, there is a “deeply rooted presumption in favor of concurrent state court jurisdiction,” rebuttable if “Congress affirmatively ousts the state courts of jurisdiction over a particular federal claim.” Tafflin v. Levitt, 493 U.S. 455, 458-459, 110 S. Ct. 792, 107 L. Ed. 2d 887 (1990).
15. State courts are consistent with the federal courts’ interpretation of
state courts’ duty to enforce federal law. In First Nat'l Collection Bureau,
Inc. v. Walker, 348 S.W.3d 329, 336 (Tex.App. – Dallas 2011), the court
held:
According to the Supremacy Clause of the United States Constitution, "[t]his Constitution, and the Laws of the United States . . . shall be the supreme Law of the Land . . . any Thing in the Constitution or Laws of any state to the Contrary notwithstanding." U.S. Const. art. VI, cl.2. The United States
p. 7 Supreme Court has stated [T]he Constitution and laws passed pursuant to it are as much laws in the State as laws passed by the state legislature. The Supremacy Clause makes those laws "the supreme Law of the Land," and charges state courts with a coordinate responsibility to enforce that law according to their regular modes of procedure. Howlett v. Rose, 496 U.S. 356, 367, 110 S. Ct. 2430, 110 L. Ed. 2d 332 (1990). Thus, it is generally true that states may not decline to recognize or enforce federal law. Id. at 371; see The Chair King, Inc. v. GTE Mobilnet of Houston, Inc., 184 S.W.3d 707, 712 (Tex. 2006). Further, "the federal law that states are required to enforce must be applied according to its terms." Chair King, 184 S.W.3d at 712. State laws that conflict with federal law are generally without effect. Maryland v. Louisiana, 451 U.S. 725, 746, 101 S. Ct. 2114, 68 L. Ed. 2d 576 (1981). (Emphasis added)
16. In this case, Appellees CARRINGTON MORTGAGE LOAN
TRUST, SERIES 2005-NC3 claim ownership to Appellants’ property and a
right to foreclose. As a REMIC trust, ownership interests are circumscribed
by federal law. Only “qualified mortgages” can be assets of the Appellees, a
REMIC trust. According to Appellants’ Exhibit 1 (RR-Vol003, p. 10)4, the
closing date of the trust is listed as June 7, 2005. The trial court
acknowledged the fact that the assignment to Appellees was executed in
4 The trial court erred in failing to take judicial notice of Appellees’ U.S. Securities and Exchange Commission filing of its prospectus available from the internet. See http://www.secinfo.com/dr66r.z11c.f.htm?Show=All#TOT Pursuant to Texas Rule of Evidence 201(d) “a court shall take judicial notice if requested by a party and supplied with the necessary information”, Appellants request this honorable Court take judicial notice of the SEC report presented to the trial court.
p. 8 2010, five years after the closing date of the Trust.5 As a matter of federal
law, the assignment violates 26 U.S.C. 860G.
Statute Vitiates Assignment to Trust as an Illegal Contract
17. To the extent that the alleged assignment affects title to the property,
the undisputed fact is that the transaction is illegal as a matter of law and
public policy. Public policy vitiates illegal contracts regardless of whether
the parties agree to it. Courts cannot enforce contract terms which violate
federal law. The U.S. Supreme Court, in Hurd v. Hodge, 334 U.S. 24; 68 S.
Ct. 847; 92 L. Ed. 1187; 1948 U.S. LEXIS 2765, held:
The power of the federal courts to enforce the terms of private agreements is at all times exercised subject to the restrictions and limitations of the public policy of the United States as manifested in the Constitution, treaties, federal statutes, and applicable legal precedents. Where the enforcement of private agreements would be violative of that policy, it is the obligation of courts to refrain from such exertions of judicial power.
(Emphasis added)
18. The U.S. Supreme Court again in W.R. Grace & Co. v. Local Union
759, Int'l Union of United Rubber, 461 U.S. 757; 103 S. Ct. 2177; 76 L. Ed. 2d
298; 1983 U.S. LEXIS 42, the court, citing Hurd, held:
5 The assignment indicated that the transfer was effective on the date of the Assignment. Travis County Public Records # 2010177942. The Court is hereby requested to take judicial notice of this record in the Travis County Property Records, attached Appendix B.
p. 9 As with any contract, however, a court may not enforce a collective-bargaining agreement that is contrary to public policy. If the contract as interpreted by Barrett violates some explicit public policy, we are obliged to refrain from enforcing it. Such a public policy, however, must be well defined and dominant, and is to be ascertained "by reference to the laws and legal precedents and not from general considerations of supposed public interests." (Emphasis added)(Citing Hurd; also citing Muschany v. United States, 324 U.S. 49, 66 (1945)).
19. The 5th Circuit has followed the U.S. Supreme Court in weighing the
right to contract with the supremacy of public policy and statutory
enforcement. In First Nat'l Bank v. Comptroller of Currency, 697 F.2d 674;
1983 U.S. App. LEXIS 30720, it held:
The purpose of 12 U.S.C. § 29 is "to keep the capital of the banks flowing in the daily channels of commerce; to deter them [banks] from embarking in hazardous real- estate speculations; . . . The statute sets forth the four exclusive categories of real property a bank can purchase, hold or convey. . . If the five-year limitation is applied to property outside the four permissible categories (to property [which the bank is not authorized to hold) the effect would be to allow the bank to hold unauthorized property, which is held under mortgage or was purchased to secure debts due the bank, for five years. Such a construction would clearly be contrary to the intent of Congress. The five-year category was meant to limit the four permissible categories and not to expand them.
See also Fidelity & Deposit Co. v. Conner, 973 F.2d 1236, 1241-42 (5th Cir.
1992)(“Public policy is to be ascertained by reference to the laws and legal
precedents . . .”; citing Muschany).
p. 10 20. In the case at bar, Appellants’ evidence proffered to the trial court
established that the assignment Appellees rely on violates 26 USC
860G(a)(3)(ii). Defendants do not dispute the fact that the assignment of
Plaintiffs’ mortgage to the Trust was untimely nor that it violates 26 USC
860G(a)(3)(ii).
21. Texas courts hold the same position: an illegal transaction is void as a
matter of law. Zachry Constr. Corp. v. Port of Houston Auth., 2014 Tex.
LEXIS 768 (Tex. 2014)(“As a rule, parties have the right to contract as they
see fit as long as their agreement does not violate the law or public policy."
Enforcing such a provision to allow one party to intentionally injure another
with impunity violates the law) (citing In re Prudential Ins. Co. of Am., 148
S.W.3d 124, 129 (Tex. 2004); Sonny Arnold, Inc. v. Sentry Sav. Ass'n, 633
S.W.2d 811, 815 (Tex.1982) (recognizing "the parties' right to contract with
regard to their property as they see fit, so long as the contract does not
offend public policy and is not illegal"); Curlee v. Walker, 112 Tex. 40, 244
S.W. 497, 498 (Tex. 1922) ("The law recognizes the right of parties to
contract with relation to property as they see fit, provided they do not
contravene public policy and their contracts are not otherwise illegal.");
James v. Fulkrod, 5 Tex. 512, 520 (1851) ("That contracts against public
policy are void and will not be carried into effect by courts of justice are
p. 11 principles of law too well established to require the support of
authorities.") (Emphasis added).
22. Under Texas law, a contract is illegal, and thus void, if the contract
obligates the parties to perform an action that is forbidden by the law of the
place where the action is to occur. Miller v. Long-Bell Lumber Co., 148 Tex.
160, 222 S.W.2d 244, 246 (Tex. 1949). Contracts are presumptively legal, so
the party challenging the contract carries the burden of proving illegality.
Franklin v. Jackson, 847 S.W.2d 306, 310 (Tex. App.--El Paso 1992, writ
denied).
23. Because the assignment violates federal law, it is illegal. In TCA
Bldg. Co. v. Northwestern Resources Co., 922 S.W.2d 629, 636 (Tex.App. –
Waco 1996), the court held:
Illegal contracts, however, are void. Paragon Oil Syndicate v. Rhoades Drilling Co., 115 Tex. 149, 277 S.W. 1036, 1037 (1925); Texas Life, Accident, Health and Hosp. Serv. Ins. Guar. Ass'n v. Lorena State Bank, 911 S.W.2d 842, 844 (Tex. App.--Austin 1995, n.w.h.); Rogers v. Wolfson, 763 S.W.2d 922, 924 (Tex. App.--Dallas 1989, writ denied); Ben E. Keith Co. v. Lisle Todd Leasing, Inc., 734 S.W.2d 725, 727 (Tex. App.--Dallas 1987, writ ref'd n.r.e.); Jack, 694 S.W.2d at 397; Peniche, 580 S.W.2d at 157.
24. Appellants are not, nor do they claim, to be parties to the PSA.
Whether or not Appellants are a party to the PSA is irrelevant: the
p. 12 assignment in violation of statute is void on public policy grounds expressed
by Congress. This Court is therefore obligated to deny effect to such an
illegal and void assignment.
Assignment is Void and Not Voidable
25. Further, because the window for addition of mortgage assets to
Appellees closed three months after it was established, the assignment is not
voidable but void. The Texas Supreme court explained the distinction:
It is true that a distinction is made between the act of a corporation which is merely without authority and one which is illegal. In the one case, it is a question of authority; in the other, of legality. A corporate act becomes illegal when committed in violation of an express statute on a specific subject, or when it is malum in se or malum prohibitum, or when it is against public policy. Bond v. Terrell Cotton & Woolen Mfg. Co., 82 Tex. 309, 313 (Tex. 1891)
Void Contracts Cannot Be Ratified
26. Defendants cannot ratify the assignment to comport with federal law
after the fact. See Plaza Nat. Bank v. Monfrey, 706 S.W.2d 714, 717 (Tex.
App.—San Antonio 1986, writ rf’d n.r.e.); Jack v. State, 694 S.W.2d 391,
397 (Tex. App.—San Antonio 1985, writ ref’d n.r.e.). In Monfrey, the court
A demand connected with an illegal act cannot be enforced if plaintiff requires any aid from the illegal
p. 13 transaction to establish his cause of action. International Aircraft Sales, Inc. v. Betancourt, 582 S.W.2d 632, 635 (Tex. Civ. App. -- Corpus Christi 1979, writ ref'd n.r.e.). In this case, the consideration for the notes executed by defendants was the unlawful loan by Bank. It was the illegal loan, and not the giving of the promissory notes, which violated the statute. With respect to the conduct prohibited by the statute, the date of the promissory notes upon which Bank bases its claim is irrelevant. Since the loan of money was unlawful, it cannot furnish legal consideration and is insufficient to support the promise of defendants to pay. Where a prior note is based on an illegal consideration, a note given in renewal of such note cannot be enforced. Park v. Coulson, 139 S.W.2d 667, 668 (Tex. Civ. App. -- Amarillo 1940, no writ). Defendants did not waive the defense of illegality by executing the renewal notes. A contract that is made in violation of a statute cannot be ratified by subsequent conduct of the obligor. Mayfield v. Troutman, 613 S.W.2d 339, 344 (Tex. Civ. App. -- Tyler 1981, writ ref'd n.r.e.). (Emphasis added)
27. In Mayfield, the court held (emphasis added):
If, upon remand, it is found that appellees were guilty of fraud under § 29C of the Securities Act, ratification may not be raised to justify the making of an illegal contract. A contract which is made in violation of a statute is illegal and void and therefore not subject to ratification. Peniche v. AeroMexico, 580 S.W.2d 152, 157 (Tex. Civ. App. -Houston [1st Dist.] 1979, no writ); Continental Fire & Casualty Ins. Corp. v. American Mfg. Co., 221 S.W.2d 1006, 1009 (Tex. Civ. App. - Fort Worth 1949, writ ref'd); Roberts v. San Jacinto Shipbuilders, Inc., 198 S.W.2d 488, 492 (Tex. Civ. App. - Galveston 1946, writ ref'd n.r.e.); see 13 TEX. JUR.2D CONTRACTS, § 220. (Emphasis added)
28. The assignment to the Trust in this case is void and therefore
unenforceable. See Hurd (“Where the enforcement of private
agreements would be violative of that policy, it is the obligation of courts
p. 14 to refrain from such exertions of judicial power.”)
29. Since the issue of title is completely intertwined, the trial court lacked
jurisdiction. By statute, justice courts do not have jurisdiction over title
disputes, and by rule, a justice court may not adjudicate the question of title
in a forcible detainer action. Tex. Gov't Code Ann. § 27.031(a)(2) (West
Supp. 2013); Tex. Prop. Code Ann. § 24.004 (West Supp. 2013).
Accordingly, a justice court has no jurisdiction over a forcible detainer
action if the adjudication of the action requires resolution of a title dispute.
Tex. Gov't Code Ann. § 27.031(b); Rice, 51 S.W.3d at 708.
30. Because a county court conducting a trial de novo in an appeal from a
justice court is limited to the jurisdiction of the justice court, a county court
hearing an appeal in a forcible detainer action also has no jurisdiction over
the action if it requires resolution of a title dispute. Tex. R. Civ. P. 749
(West 2013, repealed 2013) (stating that an appeal in a forcible detainer
action is to the county court); Tex. R. Civ. P. 751 (West 2013, repealed
2013) (providing that the appeal must be tried de novo); Rice, 51 S.W.3d at
708-09 (stating that a county court hearing an appeal in a forcible detainer
action has no jurisdiction if the justice court had no jurisdiction).
31. But the mere existence of a title dispute does not deprive the court of
p. 15 jurisdiction. It is only when the right to immediate possession necessarily
requires resolution of the title dispute, that is, when the court's decision of
which party has a superior right of possession must rest on a determination
of title, that the justice court may not adjudicate the forcible detainer action.
Rice, 51 S.W.3d at 709; see, e.g., Mortgage Elec. Registration Sys. v. Young,
No. 02-08-00088-CV, 2009 Tex. App. LEXIS 3937, 2009 WL 1564994, at
*5 (Tex. App.—Fort Worth June 4, 2009, no pet.) (mem. op.) (finding a title
dispute when the evidence showed that the plaintiff in the forcible detainer
action had purchased the property but then conveyed it to another party).
CONCLUSION
The first duty of any court is to determine whether it has jurisdiction.
The trial court, due to the disputed title in this case, did not. Appellees were
not and are not owners of Appellants property as a matter of federal law,
which the trial court, as well as this Court, must enforce. As a result, the
assignment was void. To the extent that Appellees’ title is in dispute, the
trial court lacked jurisdiction to grant possession.
PRAYER
Appellant Korompay respectfully request that the Court reverse the judgment of the County Court in all things and remand for further action consistent with its opinion.
p. 16 RESPECTFULLY SUBMITTED,
__/s/ Matthew Wilson_________ Matthew L. Wilson Texas Bar No. 24079588 1201 Spyglass Drive, Suite 100 Austin, TX 78746 mwilson@matthewwilsonlaw.com (512) 923-1836 [Phone] (512) 201-4082 [Fax]
__/s/ David Rogers_____________ DAVID ROGERS Law Office of David Rogers State Bar No. 24014089 1201 Spyglass Drive, Suite 100 Austin, TX 78746 (512) 923-1836 (512) 201-4082 (fax) DARogers@aol.com
p. 17 CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing Appellant’s Brief was served upon counsel of record for Appellees on this 12th day of January, 2015 via this Court’s online filing system.
Travis H. Gray SBN 24044965 Jack O’Boyle & Associates P.O. Box 815369 Dallas, TX 75381 (972) 247-0653 (972) 247-0642 [Facsimile]
__/s/ Matthew Wilson_________ Matthew L. Wilson Texas Bar No. 24079588 1201 Spyglass Drive, Suite 100 Austin, TX 78746 mwilson@matthewwilsonlaw.com (512) 923-1836 [Phone] (512) 201-4082 [Fax]
__/s/__David Rogers___________ David Rogers SBN 24014089 Law Office of David Rogers 1201 Spyglass Suite 100 Austin, TX 78746 (512) 923-1836 (512) 201-4082 [Facsimile]
p. 18 CERTIFICATE OF COMPLIANCE
Pursuant to Texas Rule of Appellate Procedure 9.4(i), I hereby certify that this document contains 3,296 words.
__/s/ Matthew Wilson_________ Matthew L. Wilson Texas Bar No. 24079588 1201 Spyglass Drive, Suite 100 Austin, TX 78746 mwilson@matthewwilsonlaw.com (512) 923-1836 [Phone] (512) 201-4082 [Fax]
__/s/__David Rogers___________ David Rogers SBN 24014089 Law Office of David Rogers 1201 Spyglass Suite 100 Austin, TX 78746 (512) 923-1836 (512) 201-4082 [Facsimile]
p. 19 No. 03-14-00523-CV
DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE FOR CARRINGTON MORTGAGE LOAN TRUST, SERIES 2005- NC3 ASSET BACKED PASS THROUGH CERTIFICATES Appellees
Appeal from the County Court at Law 1 Travis County, Texas Trial Court No. C-1-CV-14-003847
APPELLANT’S APPENDIX B
ITEM 1 Instrument No. 2010177942 Travis County Public Records
p. 20 No. 03-14-00523-CV
DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE FOR CARRINGTON MORTGAGE LOAN TRUST, SERIES 2005- NC3 ASSET BACKED PASS THROUGH CERTIFICATES Appellees
Appeal from the County Court at Law 1 Travis County, Texas Trial Court No. C-1-CV-14-003847
ITEM 1
Travis County Public Records
Instrument No. 2010177942
Assignment of Lien
p. 21