Larry Wiley v. Deutsche Bank Natl Trust Co.Larry Wiley v. Deutsche Bank Natl Trust Co.
PER CURIAM:*
Larry and Tina Wiley ceased repaying on their mortgage loan, and when the holder of the deed of trust attempted to effect a non-judicial foreclosure, the Wileys sued to prevent the sale. The district court opined that “[t]he Wileys do not deny that they are in default, nor do they allege any equitable basis why they should be allowed to keep their property without paying for it. Rather, they invite the Court to scrutinize and second-guess various assignments from assorted lenders and services, in hope some technical defect will render that change of assignment invalid.” The district court therefore dismissed, and we affirm.
I.
The Wileys bought a property in 2002 with a purchase-money mortgage of $195,000. In 2006, after they had paid that loan off and the lien had been released, they took out a mortgаge on a portion of the property for $215,100 with a note payable to First NLC Financial Services, LLC. The deed of trust accompanying the note named Mortgage Electronic Registration Systems, Inc. (“MERS“), the “beneficiary” of the security instrument and the “nominee for Lender and Lender‘s
The Wileys paid their installments to Ocwen, Deutsche Bank‘s loan servicer, until October 1, 2011, when they defaulted. They were notified of the default and the possibility of foreclosure on January 26, 2012, and, on February 10, they were served notice of the acceleration of the debt and the foreclosure sale to occur on March 6. The Wileys sued in state court to halt the foreclosure, then the action was removed. The Wileys claimed breаch of contract, fraud, fraudulent lien, and negligence per se. After allowing the Wileys to amend their complaint, the district court granted defendants’ motion to dismiss under
II.
Dismissal under
III.
The Wileys claim that Deutsche Bank did not have authority to foreclose on their house because it possessed only the deed оf trust and not the underlying note.2 That argument rests on the murky legal theory, and mortgage defaulters’ claim du jour, known as the “split-the-note” theory. See Martins v. BAC Home Loans Servicing, L.P., 722 F.3d 249, 254-56 (5th Cir. 2013). The Wileys’ contention,
Texas law, as stated both by statute and in the courts, including our precedent, debunks the Wileys’ claim. Under the
MERS and its assigns were explicitly named аs the beneficiaries of the deed of trust and the nominee for the original note holder. MERS is also a book entry system. It unquestionably qualifies as a mortgagee under Texas Law, and it may foreclose as the beneficiary of the deed of trust.
MERS may also transfer the deed of trust securing the underlying note. Texas courts have explained on multiple occasions that a note and a deed of trust constitute separate actions. “It is so well settled as not to be controverted that the right to recover a personal judgment for a debt secured by a lien on land and the right to have a foreclosure of lien are severable, and a plaintiff may elect to seek a personal judgment without foreclosing the lien, and even without a waiver of the lien.” Carter v. Gray, 125 Tex. 219, 81 S.W.2d 647, 648 (Comm‘n App. 1935, writ dism‘d). Where a debt is “secured by a note, which is, in turn, secured by a lien, the note and lien constitute separate obligations.” Aguero v. Ramirez, 70 S.W.3d 372, 374 (Tex.App.-Corpus Christi 2002, pet. denied). The duality of the lien and the note means that the beneficiary of thе lien can be different from the holder of the note.
Although the lien is an “incident” to the debt, to the extent that the lien is extinguished by payment of the note, the Texas courts have “rejected the argument thаt a note and its security are inseparable by recognizing that the note and the deed-of-trust lien afford distinct remedies on separate obligations.” Bierwirth v. BAC Home Loans Servicing, L.P., No. 03-11-00644-CV, 2012 WL 3793190, at *3 (Tex.App.-Austin Aug.30, 2012, no pet.). A deed of trust “gives the lender as well as the beneficiary the right to invoke the power of sale” even though it would not be possible for both to hold the note. Robeson v. MERS, No. 02-10-00227-CV, 2012 WL 42965, at *6 (Tex.App.-Fort Worth Jan. 5, 2012, pet. denied). If so authorized by thе deed of trust, MERS or its assigns may exercise its interests, including foreclosing on the property without being the holder of the note. Id. at *5.
Applying these same sources of Texas law, we held in Martins that “the ‘split-the-note’ theory is . . . inapplicable under Texas law where the fоreclosing party is a [mortgagee] and the mortgage has been properly assigned. The party to foreclose need not possess the note itself.” Martins, 722 F.3d at 255. So long as it is a beneficiary named in the deed of trust or an assign, that party may exercise its authority even if it does not hold the note itself. That is contemplated in the deed of
In this case, the deed of trust unquestionably names MERS as its beneficiary; MERS transferred the deed of trust to Deutsche Bank and recorded that transfer. The Wileys’ claim that a transferee in Deutsche Bank‘s position does not have the power to foreclose is incorrect as a matter of Texas law. They therefore did not state a claim upon which relief can be granted, and the district court rightly dismissed the action under
Moreover, included in its assignment of the deed of trust on December 15 was an assignment of the note, and the accompanying allonge attachеd to the note transferring all interest in the note to Deutsche Bank; that transfer was notarized, filed, and recorded. The Wileys offer vague allegations of fraud, but they neither allege a fraudulent convеyance with the specificity required by
The Wileys’ claims are unsupported by Texas law, and the judgment of dismissal is AFFIRMED.
Notes
Where a party challenges the validity of a transfer and the authority of the transferee to foreclose, it must have standing to bring that challenge; the result would otherwise be absurd that any party could fraudulently foreclose and the homeowner would have no recourse to challenge that foreсlosure. See Reinagel, 722 F.3d at 705-06. “Though ‘the law is settled’ in Texas that an obligor cannot defend against an assignee‘s efforts to enforce the obligation on a ground that merely renders the assignment voidable at the еlection of the assignor, Texas courts follow the majority rule that the obligor may defend ” ‘on any ground which renders the assignment void.’ ” ” Id. (quoting Tri-Cities Constr., Inc. v. Am. Nat‘l Ins. Co., 523 S.W.2d 426, 430 (Tex.Civ.App.-Houston [1st Dist.] 1975, no writ)). Although the district court‘s holding to the contrary was error, the dismissal was based primarily on the issue of authority to foreclose, not on lack of standing, and, moreover, “it is an elementary proposition, and the supporting cases too numerous to cite, that this court may affirm the district court‘s judgment on any grounds supported by the record.” Palmer ex rel. Palmer v. Waxahachie Indep. Sch. Dist., 579 F.3d 502, 506 (5th Cir. 2009) (citation omitted).