William Paul Burch v. Nationstar Mortgage Holdings, Inc.

• Court: Court of Appeals of Texas
• Decided: May 12, 2022
• Docket: 02-21-00035-CV
• Status: Published

Opinion

In the Court of Appeals Second Appellate District of Texas at Fort Worth ___________________________ No. 02-21-00035-CV ___________________________

WILLIAM PAUL BURCH, Appellant

V.

NATIONSTAR MORTGAGE HOLDINGS, INC., Appellee

On Appeal from the 236th District Court Tarrant County, Texas Trial Court No. 236-307178-19

Before Sudderth, C.J.; Kerr and Walker, JJ. Memorandum Opinion by Justice Kerr MEMORANDUM OPINION

The trial court dismissed Appellant William Paul Burch’s claims against

Appellee Nationstar Mortgage Holdings, Inc. for lack of standing. Burch appealed.

Because Burch’s claims against Nationstar accrued before his later-filed bankruptcy

case was converted to a Chapter 7 proceeding, the bankruptcy estate owned those

claims, and only the Chapter 7 trustee had standing to assert them. We will thus affirm

the trial court’s dismissal based on Burch’s lack of standing.

I. Background

In June 2007, Burch’s wife Juanita signed a promissory note and deed of trust;

the deed of trust secured a lien on a home located on Waterford Drive in Grand

Prairie. In 2008, the Burches filed for Chapter 11 bankruptcy, and the bankruptcy

court approved a reorganization plan in December 2009. Under the plan, the Burches

retained the Waterford Drive property as their homestead and were required to

continue making monthly payments in accordance with the existing loan document’s

terms. The plan further called for the Burches to pay only principal and interest to the

then mortgage holder (Aurora Loan Services) and to pay insurance and taxes directly

rather than into an escrow account. The bankruptcy court closed the Burches’ case in

March 2010.

In 2012, Nationstar acquired Aurora Loan Services. That summer, in August—

and despite the Burches’ reorganization plan—Nationstar demanded that Juanita pay

monthly escrow amounts and shortly thereafter threatened to foreclose.

2 Burch (but not Juanita) then went through bankruptcy a second time: in

December 2012, he filed a Chapter 13 proceeding, which was converted to a Chapter

11 proceeding a year later. See 11 U.S.C. §§ 1301–1330; 11 U.S.C. §§ 1101–1195. In

February 2016, the bankruptcy court signed an “Order Confirming Debtor[’]s Plan of

Reorganization,” which provided that (1) Nationstar “shall retain its lien on the

property”; (2) Burch would retain the property as his homestead; and (3) Burch would

cure the arrears on the property and resume making tax escrow payments to

Nationstar. In January 2018, the bankruptcy court converted the case to a Chapter 7.

See 11 U.S.C. §§ 701–784. Burch did not list in his required Chapter 7 asset schedule,

which he filed in June 2018, any of the claims he has asserted against Nationstar in

this litigation. He received a bankruptcy discharge in June 2018.

Some ten months later, in April 2019, Burch 1 sued Nationstar seeking to quiet

title to the property and asserting claims alleging an invalid (and fraudulent) lien on

the Waterford Drive property, statutory fraud, breach of contract, and negligence. See

Tex. Civ. Prac. & Rem. Code Ann. § 12.003; Tex. Bus. & Com. Code Ann. § 27.01;

Tex. Prop. Code Ann. § 53.160. Burch sought “actual damages caused by the violation

[of the fraudulent-lien statute] of $2,081,216,” $750,000 in “compensatory damages,”

and $1,500,000 in punitive damages. 2

1 Juanita is not a party to this case. 2 In July 2020, after Burch had filed this lawsuit, the bankruptcy court designated him a vexatious litigant. Its order “notes that it warned the Debtor over a

3 Nationstar moved to dismiss Burch’s claims for lack of subject-matter

jurisdiction, arguing that because any such claims had accrued before Burch’s

bankruptcy case converted to a Chapter 7 case in January 2018, the Chapter

7 bankruptcy estate owned all his claims and thus the trustee—not Burch—had

exclusive standing to assert them. Alternatively, Nationstar argued that Burch did not

have standing to assert claims based on the note and deed of trust because only his

wife had signed them. Nationstar also moved for traditional summary judgment,

year ago that he needed to stop his abusive practice of filing more lawsuits premised in whole or in part on baseless allegations, including that various lenders’ liens were somehow invalidated in the Debtor’s 2008 Bankruptcy Case or 2012 Bankruptcy Case.” The bankruptcy court’s order included excerpts from that earlier hearing, among them its comment that “[a]ll of these issues have been litigated, time and time again, and you’ve lost in your underlying bankruptcy case, in now three different adversary proceedings, and when you lose, you continue to go back and file new lawsuits in state court, which frankly, is a bit offensive.” The vexatious-litigant order sanctioned Burch “by restricting his ability to file future lawsuits, motions, pleadings, or other requests for affirmative relief in any federal trial court, or Texas state or local trial court, against any party involving personal or real property that was included in the Debtor’s 2008 Bankruptcy Case or 2012 Bankruptcy Case (the ‘Restricted Subject Matter’) without first securing this Court’s prior written authorization to do so.” After the bankruptcy court entered that order in July 2020, Burch and Juanita “began filing lawsuits in her name only,” prompting an expanded vexatious-litigant order that encompassed both of them. Burch v. Freedom Mortg. Corp., No. 3:20-CV- 3086-M-BN, 2021 WL 2446962, at *2 (N.D. Tex. May 27, 2021), report and recommendation adopted, No. 3:20-CV-3086-M-BN, 2021 WL 2435125 (N.D. Tex. June 15, 2021), appeal dismissed, No. 21-10654, 2021 WL 5822941 (5th Cir. Nov. 16, 2021); see also In re Burch, No. 20-11171, 2022 WL 212836, at *1 (5th Cir. Jan. 24, 2022) (unpublished) (admonishing and sanctioning Burch for another in a line of frivolous proceedings and stating, “Burch is again warned that additional frivolous or abusive filings in this court, the district court, or the bankruptcy court will result in the imposition of further sanctions. Burch is once again admonished to review any pending appeals . . . and to withdraw any appeals that are frivolous”).

4 arguing res judicata and Burch’s lack of capacity because he was not a party to the

loan.

In November 2020, the trial court granted Nationstar’s motion to dismiss and

ordered that “Plaintiff’s claims are dismissed for lack of subject[-]matter jurisdiction

based on Plaintiff’s lack of standing.” The trial court simultaneously granted

Nationstar’s summary-judgment motion “in the alternative,” holding that “Plaintiff’s

claims are barred by res judicata and further alternatively, Plaintiff’s claims are barred by

Plaintiff’s lack of legal capacity to assert them.” Thus, the final order had three

separate foundations.

Burch timely appealed. 3

II. Applicable Law

A. Standing

“Standing is a constitutional prerequisite to suit,” and “[a] court has no

jurisdiction over a claim made by a plaintiff who lacks standing to assert it.” Heckman

v. Williamson Cnty., 369 S.W.3d 137, 150 (Tex. 2012). Because standing is a component

of subject-matter jurisdiction, its existence is a legal question that we review de novo.

See Farmers Tex. Cnty. Mut. Ins. Co. v. Beasley, 598 S.W.3d 237, 240 (Tex. 2020). In

Burch, appearing pro se in the trial court and in this appeal, has raised three 3

issues that we construe as challenging the trial court’s three alternative bases for disposing of Burch’s claims against Nationstar.

5 evaluating standing, we construe the pleadings in the plaintiff’s favor, and we consider

evidence relevant to the jurisdictional inquiry. See id.

A standing inquiry “focuses on the question of who may bring an action.”

Vernco Constr., Inc. v. Nelson, 460 S.W.3d 145, 149 (Tex. 2015) (quoting Patterson v.

Planned Parenthood of Hous. & Se. Tex., Inc., 971 S.W.2d 439, 442 (Tex. 1998)).

Generally, unless standing is conferred by statute, a plaintiff must show that it

“possesses an interest in a conflict distinct from that of the general public, such that

the defendant’s actions have caused the plaintiff some particular injury.” Williams v.

Lara, 52 S.W.3d 171, 178 (Tex. 2001). To have standing, a plaintiff must be personally

aggrieved. Nootsie, Ltd. v. Williamson Cnty. Appraisal Dist., 925 S.W.2d 659, 661 (Tex.

1996). Standing requires “a real controversy between the parties” that “will be actually

determined by the judicial declaration sought,” Austin Nursing Ctr., Inc. v. Lovato,

171 S.W.3d 845, 849 (Tex. 2005) (quoting Nootsie, 925 S.W.2d at 662), and “focuses

on whether a party has a sufficient relationship with the lawsuit so as to have a

‘justiciable interest’ in its outcome,” id. at 848.

B. Property of bankruptcy estate

Filing a petition for bankruptcy creates a bankruptcy estate. See 11 U.S.C.

§ 541(a); La. World Exposition v. Fed. Ins. Co., 858 F.2d 233, 245 (5th Cir. 1988). “[A]ll

legal or equitable interests of the debtor in property as of the commencement of the

case” become part of that estate, including any legal claims that belonged to the

debtor before the petition was filed. 11 U.S.C. § 541(a)(1); see Kahn v. Helvetia Asset

6 Recovery, Inc., 475 S.W.3d 389, 393 (Tex. App.—San Antonio 2015, pet. denied);

Antonov v. Walters, 168 S.W.3d 901, 904 (Tex. App.—Fort Worth 2005, pet. denied);

see also State Farm Life Ins. Co. v. Swift (In re Swift), 129 F.3d 792, 795 (5th Cir. 1997).

The bankruptcy trustee is “the representative of the estate” with the “capacity to sue

and be sued,” 11 U.S.C. § 323, and once a claim belongs to the estate, the trustee has

exclusive standing to assert the claim, Douglas v. Delp, 987 S.W.2d 879, 882 (Tex. 1999)

(citing Schertz–Cibolo–Universal City ISD v. Wright (In re Educators Grp. Health Tr.),

25 F.3d 1281, 1284 (5th Cir. 1994)); Antonov, 168 S.W.3d at 904–05.

A debtor may gain control over a pre-petition claim in two circumstances:

(1) by listing the legal claim as an item of personal property and by designating,

without objection, an available exemption for the claim, see generally McLain v. Newhouse

(In re McLain), 516 F.3d 301, 315 (5th Cir. 2008) (collecting cases discussing debtor’s

obligation to comply with statutory disclosures in order to validly exempt certain

property from bankruptcy estate); or (2) by listing a legal claim that the trustee does

not administer before the bankruptcy case is closed, in which case the claim can be

“abandoned” and revert to the debtor, see generally id. (discussing debtor’s “affirmative

duty” under bankruptcy code to schedule all assets; if debtor fails to do so, “those

assets continue to belong to the bankruptcy estate and do not revert to the debtor

upon discharge”). See also Shankles v. Gordon, No. 05-16-00863-CV, 2018 WL 4100030,

at *12 (Tex. App.—Dallas Aug. 27, 2018, no pet.) (mem. op.) (“Once an asset

becomes a part of the estate, the debtor’s rights in the asset are extinguished unless

7 the trustee abandons the asset pursuant to section 554 of the United States

Bankruptcy Code.” (citing 11 U.S.C. § 554)).

If a legal claim accrues or is acquired after the debtor files for bankruptcy but

before a conversion to Chapter 7, that claim is likewise part of the bankruptcy estate.

Id. at *8. “To determine whether a debtor had a property interest in the causes of

action at the time the debtor filed for bankruptcy, courts must determine when the

debtor’s causes of action accrued under state law.” Id. at *9. A claim accrues the

“moment the injury occurred,” id., even if a plaintiff does not learn of the injury until

later and even if resulting damages have yet to occur, S.V. v. R.V., 933 S.W.2d 1,

4 (Tex. 1996).

III. Analysis

The face of Burch’s petition shows that his claims against Nationstar accrued in

August 2012, when Burch contacted Nationstar over its demand for escrow payments

and told a Nationstar representative that it was in breach of contract. 4 Burch has not

4 Burch pleaded the following facts:

13. In August 2012 Plaintiff was informed that Nationstar would no longer except [sic] the payments of $1,153.27 that Plaintiff had been making to Aurora because it was not in compliance with the loan regarding the Note Terms. Plaintiff informed NHMI that under the court order that Plaintiff was required to make princip[al] and interest payments only and that they carried their own insurance. Plaintiff referred the Customer Service Representative to the bankruptcy plan. . . .

8 responded to Nationstar’s argument about when his claims accrued. Burch’s later-filed

bankruptcy case was converted to Chapter 7—with the attendant obligation for Burch

to list all his assets, including legal claims—in January 2018. Our review of the record

does not suggest any later point in time at which any of Burch’s pleaded claims might

have accrued.

Burch’s Chapter 7 asset schedule did not include any possible legal claims

against Nationstar, and Burch points us to nothing in the record showing that he had

made the trustee aware of his claims. As a result, the Chapter 7 trustee could not have

abandoned (and did not abandon) those claims when Burch’s bankruptcy case was

later closed and Burch was discharged; exclusive standing to pursue the claims against

Nationstar remained with the trustee. See Shankles, 2018 WL 4100030, at *7 (noting

that debtor–plaintiff agreed that her professional-negligence claims against her

attorneys were property of the bankruptcy estate if they arose or accrued before her

Chapter 11 was converted to Chapter 7); see also Douglas, 987 S.W.2d at 882 (“When

Billy filed his bankruptcy petition, his legal[-]malpractice claims became part of the

bankruptcy estate. Once the claims became part of the estate, only the bankruptcy

14. The Rep also informed us that we needed to send an extra payment of $4,273.04 to bring the Escrow up to date. The Rep said that NHMI was not a party to the bankruptcy and therefore did not have to comply [with] the Court Order. Plaintiff told the Rep that that was ridicul[ous]. . . . He also told the Rep that NHMI was in breach of contract.

9 trustee had standing to pursue them. By filing his bankruptcy petition, Billy

relinquished to the trustee any standing to prosecute or dispose of the claims.”).

Moreover, because standing is determined when an original petition is filed,

Burch cannot somehow cure his lack of standing and thereby revive this litigation. See

McMillan v. Aycock, No. 03-18-00278-CV, 2019 WL 1461427, at *2 (Tex. App.—

Austin Apr. 3, 2019, no pet.) (mem. op.) (“[I]f the plaintiff lacks standing at the time

suit is filed, the case must be dismissed, even if the plaintiff later acquires an interest

sufficient to support standing.”); Bell v. Moores, 832 S.W.2d 749, 754 (Tex. App.—

Houston [14th Dist.] 1992, writ denied) (“A trial court determines its jurisdiction at

the time a suit is filed. At that time, the court either has jurisdiction or it does not.

Jurisdiction cannot subsequently be acquired while the suit is pending.”).

Because only the Chapter 7 trustee could pursue the claims against Nationstar,

the trial court properly granted Nationstar’s motion to dismiss on Burch’s lack of

standing, and we overrule what we construe as Burch’s appellate issue attacking that

result. Our disposition obviates the need for us to analyze the trial court’s alternative

holding dismissing Burch’s claims because his name was not on the Waterford Drive

note or deed of trust and granting Nationstar’s summary-judgment motion based on

res judicata and lack of capacity.

10 IV. Conclusion

Having held that only Burch’s Chapter 7 trustee had standing to pursue any

claims against Nationstar, we overrule Burch’s issues and affirm the trial court’s order

of dismissal.

/s/ Elizabeth Kerr Elizabeth Kerr Justice

Delivered: May 12, 2022