IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 14-10392

HARRIS COUNTY TEXAS; BRAZORIA COUNTY TEXAS, on behalf of 

themselves and all other similarly situated counties in Texas; DALLAS 

COUNTY, TEXAS,

 Plaintiffs - Appellants

v.

MERSCORP INCORPORATED; MORTGAGE ELECTRONIC 

REGISTRATION SYSTEMS INCORPORATED; BANK OF AMERICA 

NATIONAL ASSOCIATION,

 Defendants - Appellees

Appeals from the United States District Court

for the Northern District of Texas

Before DENNIS, PRADO, and HIGGINSON, Circuit Judges.

STEPHEN A. HIGGINSON, Circuit Judge:

This appeal explores the tension between public and private systems for 

recording real property interests in Texas. Plaintiffs–Appellants—Dallas, 

Harris, and Brazoria Counties (collectively, “the Counties”)—filed this lawsuit 

against MERSCORP, Inc., Mortgage Electronic Registration Systems, Inc. 

(“MERS”), and Bank of America, N.A. (sometimes collectively, “Defendants”). 

The Counties alleged that Defendants violated Texas Local Government Code 

§ 192.007 and Texas Civil Practice and Remedies Code § 12.002, and alleged 

United States Court of Appeals

Fifth Circuit

FILED

June 26, 2015

Lyle W. Cayce

Clerk

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claims of fraudulent misrepresentation and unjust enrichment. The district 

court entered final judgment in favor of Defendants on all claims. We AFFIRM.

FACTS AND PROCEEDINGS

I. MERS

In Texas, when a borrower obtains a home loan, the borrower executes 

two documents in favor of the lender: (1) a promissory note that creates the 

borrower’s legal obligation to repay the lender, and (2) a deed of trust that 

grants the lender a lien on the property as security for the debt. To give notice 

to subsequent purchasers and creditors, the deed of trust may be recorded in 

the county where the property is located. Despite the legal significance of 

recording a deed of trust, recording is optional in Texas. See Tex. Prop. Code 

Ann. § 12.001(a).

MERS has changed this recording practice for millions of mortgages. 

MERSCORP is a privately held company that was created in the mid-1990s. It 

operates a national electronic registry called MERS that tracks servicing rights 

and mortgage ownership in the United States.1 MERS is a membership 

organization whose members include residential mortgage lenders and 

servicers, such as Bank of America. When a borrower obtains a home loan from 

a MERS-member bank, MERS is listed as the “beneficiary” on the deed of trust. 

The promissory note, however, is executed in favor of the bank. MERS does not 

loan money, hold the promissory note, service the mortgage, or collect 

payments. The bank registers the loan on the MERS system and submits the 

deed of trust to the county clerk to be recorded in county land records. Because 

MERS is listed as the beneficiary of the deed of trust, the county clerk will 

ordinarily index MERS in the land-records index as a grantee.

 

1 Because their corporate identities are not relevant in this appeal, we refer to MERS, 

MERSCORP, and the MERS system all as “MERS.”

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The borrower and the MERS-member lender contractually agree to this 

arrangement. The deed of trust that the parties execute contains language that 

states: “MERS is a separate corporation that is acting solely as a nominee for 

Lender and Lender’s successors and assigns. MERS is a beneficiary under 

this Security Instrument.” The deed of trust also states that “Borrower 

understands and agrees that MERS holds only legal title to the [secured] 

interests granted by Borrower in this Security Instrument” and that “MERS 

(as nominee for Lender and Lender’s successors and assigns) has the right . . . 

to foreclose and sell the Property.”

If the lender later transfers the promissory note (or its interest in the 

note) to another MERS member, no assignment of the deed of trust is created 

or recorded because, according to Defendants, MERS remains the nominee for 

the lender’s successors and assigns. Under this theory, because MERS is 

always listed as the beneficiary on any deed of trust that a MERS member 

originates, MERS-member banks and entities can repeatedly assign a 

promissory note secured by that deed of trust to other MERS members without 

recording those transfers in a public-records office. Because it is the promissory 

note (not the deed of trust) that is assigned, there is, in theory, nothing to 

record. These assignments are therefore tracked on the MERS system for 

priority purposes, but not necessarily in counties’ land records. If a promissory 

note is transferred or negotiated to a non-MERS member, only then is an 

assignment of the deed of trust created and executed from MERS to the nonMERS member, and the assignee (the new deed of trust beneficiary) files the 

assignment in the public land records.

In short, MERS streamlines successive sales of mortgages and makes 

these transfers cheaper. Banks no longer pay county recording fees after a 

MERS deed of trust is first recorded. Instead, they pay MERS membership and 

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transaction fees and record interim promissory-note assignments using the 

MERS system.

II. The Texas Recording System

In Texas, county clerks are elected officials responsible for recording 

instruments that are presented to the clerk’s office and maintaining these 

instruments as “public property.” Tex. Const. art. V, § 20; Tex. Prop. Code Ann. 

§ 11.004(a)(1); Tex. Loc. Gov’t Code Ann. § 201.005(a). A county clerk must 

record “within a reasonable time after delivery, any instrument authorized or 

required to be recorded in that clerk’s office that is proved, acknowledged, or 

sworn to according to law.” Tex. Prop. Code Ann. § 11.004(a)(1). “The county 

clerk shall record, exactly, without delay . . . the contents of each instrument 

that is filed for recording and that the clerk is authorized to record.” Tex. Loc. 

Gov’t Code Ann. § 191.001(c). Each time an instrument is accepted for 

recording, the county charges a recording fee for the service. Although deeds of 

trust are instruments that county clerks must record, promissory notes are 

not.

The Dallas County clerk acknowledged that his employees do not try to 

determine whether the statements in an instrument are true. If the instrument 

presented for recording is “normal on its face,” the Dallas County clerk or a 

cashier at the clerk’s office will accept it. Indeed, “[i]f a document covered by a 

filing statute is regular on its face, the clerk may not refuse to file it based on 

extraneous facts.” Tex. Att’y Gen. Op. LO98-016, at 3. By statute, however, a 

clerk “shall” refrain from recording a document that he “believe[s] in good 

faith” creates a fraudulent lien so that he can consult the county or district 

attorney. Tex. Gov’t Code Ann. § 51.901(d). Dallas County did not use this 

mechanism to investigate whether a MERS deed of trust is fraudulent. 

Instead, it filed this lawsuit and continued accepting MERS deeds of trust for 

recording.

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III. Procedural History

Dallas County originally filed this lawsuit in state court, and Defendants 

removed the case to federal court. Once removed, Dallas County amended its 

complaint to add class-action allegations,2 and Harris and Brazoria Counties 

joined as plaintiffs. In May 2012, the Counties filed a Second Amended 

Complaint.

The Counties’ claims are based on two overarching theories. First, the 

Counties allege that Bank of America and MERS fraudulently listed MERS as 

the beneficiary of deeds of trust that were recorded in the Counties’ land 

records. Second, the Counties allege that Defendants are required to record 

assignments of a deed of trust every time a MERS-member lender transfers its 

interest in a related promissory note to another MERS member. Based on these 

two theories, the Counties assert four claims that are relevant in this appeal3: 

(1) violation of Texas Local Government Code § 192.007, (2) violation of Texas 

Civil Practice and Remedies Code § 12.002, (3) fraudulent misrepresentation, 

and (4) unjust enrichment. The Counties seek monetary damages, exemplary 

damages, and declaratory and injunctive relief.

On May 23, 2012, the district court dismissed the Counties’ claim under 

section 12.002. After this dismissal, discovery continued on the Counties’ 

remaining claims. Harris and Brazoria Counties ultimately settled most of 

their claims, leaving only their request for declaratory relief under section 

192.007. The Dallas County Commissioners Court never voted to approve this 

settlement, so Dallas County’s remaining claims moved forward pending 

 

2 The district court struck the class allegations, and the Counties do not appeal that 

ruling.

3 The Counties also asserted claims for negligent misrepresentation, grossly negligent 

misrepresentation, negligent undertaking, grossly negligent undertaking, negligence per se, 

gross negligence per se, and conspiracy. The dismissal of these claims was not raised on 

appeal.

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summary judgment. Finally, in two separate orders in November 2013 and 

March 2014, the district court entered summary judgment on all of the 

remaining claims, including Dallas County’s claims for fraudulent 

misrepresentation and unjust enrichment, and Harris and Brazoria Counties’ 

section 192.007 claim. The district court entered final judgment in favor of 

Defendants on all claims. This timely appeal followed.

STANDARDS OF REVIEW

This court reviews a district court’s dismissal under Federal Rule of Civil 

Procedure 12(b)(6) de novo, “accepting all well-pleaded facts as true and 

viewing those facts in the light most favorable to the plaintiff.” Toy v. Holder, 

714 F.3d 881, 883 (5th Cir. 2013) (internal quotation marks omitted). This 

court also reviews a district court’s grant of summary judgment de novo, 

applying the same standards as the district court. Rogers v. Bromac Title 

Servs., L.L.C., 755 F.3d 347, 350 (5th Cir. 2014). We may affirm a district 

court’s Rule 12(b)(6) dismissal or grant of summary judgment on any grounds 

raised below and supported by the record. Id.; Raj v. La. State Univ., 714 F.3d 

322, 330 (5th Cir. 2013).

DISCUSSION

Before this court, Harris and Brazoria Counties appeal the district 

court’s grant of summary judgment on their claim seeking a declaration that 

Texas Local Government Code § 192.007 imposed a duty to record assignments 

of deeds of trust when the interests in related promissory notes are transferred. 

Dallas County separately appeals the district court’s dismissal of its Texas 

Civil Practice and Remedies Code § 12.002 claim and the grant of summary 

judgment on its claims for fraudulent misrepresentation and unjust 

enrichment. Texas substantive law and federal procedural law apply to these 

state-law claims. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). The 

Texas Supreme Court, however, has not addressed any of these issues in the 

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context of MERS, so we must make an “Erie guess” and “determine as best [we] 

can” what the Supreme Court of Texas would decide. United States v. Marshall, 

771 F.3d 854, 878 (5th Cir. 2014) (internal quotation marks and citation 

omitted). We discuss each claim in turn.

I. Section 192.007

Only Harris and Brazoria Counties appeal the entry of summary 

judgment on the section 192.007 claim. This claim presents two independent 

issues. The district court ruled on both. First, the district court held that it had 

no authority to grant the requested relief under the Declaratory Judgment Act, 

28 U.S.C. § 2201, because the Texas Legislature did not create a private right 

of action to enforce section 192.007. Second, the district court also held that 

even if there were a right of action, section 192.007 does not impose a duty to 

create and record assignments of deeds of trust when an interest in the related 

promissory note is transferred. We agree with the district court’s resolution of 

both issues.

A. Private Right of Action

We must first address the threshold issue of whether the Counties have 

identified a private right of action entitling them to declaratory relief under 

section 192.007. The Counties argue that if there is an actual controversy, then 

a declaratory action is automatically justiciable. In raising this argument, the 

Counties elide three basic concepts: jurisdiction, right of action, and remedy.

To raise a claim in federal court, plaintiffs must demonstrate both that 

a federal court will have jurisdiction over their claim, and also that they (the 

plaintiffs) have a right of action to initiate that claim. In other words, 

establishing the court’s jurisdiction and the litigants’ right of action are two 

requirements that must be satisfied independently. See Nat’l R.R. Passenger 

Corp. v. Nat’l Ass’n of R.R. Passengers, 414 U.S. 453, 455–56 (1974) 

(recognizing that whether a private right of action exists and whether a federal 

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court has jurisdiction are two separate threshold questions). Within this 

framework, the issue of party standing factors into the court’s jurisdictional 

limits under Article III of the Constitution. See Lujan v. Defenders of Wildlife,

504 U.S. 555, 560 (1992) (“[T]he core component of standing is an essential and 

unchanging part of the case-or-controversy requirement of Article III.”); see

also Bond v. United States, 131 S. Ct. 2355, 2362 (2011) (noting that “cause of 

action” and “standing” are “distinct concepts”); 13A Charles Alan Wright et al., 

Federal Practice & Procedure § 3531.6 (3d ed.) (noting the “general tendency 

to confuse cause-of-action concepts with standing”).

Here, the district court had diversity jurisdiction over the Counties’ 

state-law claims. See 28 U.S.C. § 1332. There was also an “actual controversy” 

between the parties over how to interpret section 192.007. The Counties 

therefore had Article III standing, and the district court had jurisdiction over 

their section 192.007 claim. The Counties nevertheless still have to show that 

they had a right of action to bring that claim in the first place. The Counties 

have failed to satisfy that requirement.

The Counties do not contend that section 192.007 itself creates a private 

right of action. Instead, the Counties believe that the Declaratory Judgment 

Act provides a right to relief because there is an “actual controversy.” This 

argument is flawed because the Declaratory Judgment Act alone does not 

create a federal cause of action. “In a case of actual controversy within its 

jurisdiction,” the Declaratory Judgment Act only authorizes a federal court to 

“declare the rights and other legal relations of any interested party seeking 

such declaration.” 28 U.S.C. § 2201(a). In other words, the Act “enlarged the 

range of remedies available in the federal courts,” but it did not create a new 

right to seek those remedies. Skelly Oil Co. v. Phillips Petrol. Co., 339 U.S. 667, 

671 (1950); see Okpalobi v. Foster, 244 F.3d 405, 423 n.31 (5th Cir. 2001) (“[T]he 

law makes clear that—although the Declaratory Judgment Act provides a 

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remedy different from an injunction—it does not provide an additional cause of 

action with respect to the underlying claim.”); Tex. Med. Ass’n v. Aetna Life Ins. 

Co., 80 F.3d 153, 158–59 (5th Cir. 1996) (holding that plaintiffs were not 

entitled to a declaratory judgment under the Texas Uniform Declaratory 

Judgment Act because they did not first identify a cause of action under the 

state statute that they were trying to enforce).

Finally, the Counties also try to identify a cause of action in the advisory 

committee notes of Federal Rule of Civil Procedure 57. The notes state: 

“Written instruments, including ordinances and statutes, may be construed 

before or after breach at the petition of a properly interested party, process 

being served on the private parties or public officials interested.” Fed. R. Civ. 

P. 57 advisory committee’s note. Again, this argument fails because this note 

and Rule 57, like the Declaratory Judgment Act itself, do not create a 

substantive right to pursue relief in federal court. Instead, they only provide a 

new remedy if it “is otherwise appropriate.” Fed. R. Civ. P. 57; see also 10B 

Wright, supra, § 2754 (“The [Declaratory Judgment] Act and Rule 57 are not 

jurisdictional. They are procedural only and merely grant authority to the 

courts to use a new remedy in cases over which they otherwise have 

jurisdiction.”).

Because the Declaratory Judgment Act is procedural and does not create 

an independent private right of action, the district court’s grant of summary 

judgment was therefore proper.

B. Duty to Record

Although Harris and Brazoria Counties’ section 192.007 claim 

independently fails because the Counties do not have a private right of action 

to seek declaratory relief under the statute, deciding whether section 192.007 

creates a duty to record is nevertheless central to resolving Dallas County’s 

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other claims. If there is no duty to record assignments, Dallas County’s claims 

must also fail.

The Counties argue that once a deed of trust is recorded, section 192.007 

requires that any and all assignments of that deed of trust must be recorded. 

The Counties also contend that every time the promissory note that is secured 

by that deed of trust is transferred or negotiated, a deed-of-trust assignment 

must also be created and recorded.

As primary support for these arguments, the Counties emphasize that 

the statute uses the word “must.” To be sure, the Counties are correct to orient 

their analysis on the plain language of the statute. “When we interpret a Texas 

statute, we follow the same rules of construction that a Texas court would 

apply—and under Texas law the starting point of our analysis is the plain 

language of the statute.” Forte v. Wal-Mart Stores, Inc., 780 F.3d 272, 277 (5th 

Cir. 2015) (internal quotation marks and citation omitted). Section 192.007 

states: 

(a) To release, transfer, assign, or take another action relating to 

an instrument that is filed, registered, or recorded in the office of 

the county clerk, a person must file, register, or record another 

instrument relating to the action in the same manner as the 

original instrument was required to be filed, registered, or 

recorded. 

(b) An entry, including a marginal entry, may not be made on a 

previously made record or index to indicate the new action.

Tex. Loc. Gov’t Code Ann. § 192.007 (emphasis added). The central question is 

therefore: “must” what? 

The Counties read the statute to require that “a person must . . . record 

another instrument.” In support of this interpretation, the Counties emphasize 

that the statute is directed at “a person,” instead of at a county clerk 

specifically. Therefore, the Counties argue, MERS must record all 

assignments. 

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The Counties’ reading of the statute is incomplete. Read more 

completely, subsection (a) states that if an “original instrument was required 

to be . . . recorded” in a particular manner, later documents “relating to” the 

original document must be recorded “in the same manner.” Id. § 192.007(a). 

The statute does not state that “a person must . . . record another instrument,” 

full stop. Subsection (a) dictates the “manner” in which subsequent documents 

must be recorded; it does not impose an affirmative duty to record those

instruments in the first place.4

This interpretation of subsection (a) is consistent with subsection (b). See 

Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1, 19 (Tex. 2007) 

(“In determining [a statute’s] meaning, we must also consider the statute as a 

whole and construe it in a manner which harmonizes all of its various 

provisions.”). Subsection (b) states: “An entry, including a marginal entry, may 

not be made on a previously made record or index to indicate the new action.” 

Tex. Loc. Gov’t Code Ann. § 192.007(b). Subsection (a)’s requirement that 

“another instrument” be recorded “in the same manner as the original 

instrument” is consistent with subsection (b)’s instruction not to make 

notations in the margins of existing records.5 Both subsections focus on the 

manner of recording.

 

4 Some state legislatures have imposed a duty to record. See, e.g., Ky. Rev. Stat. Ann. 

§ 382.360(3); Minn. Stat. Ann. § 580.02(3). But the Texas Legislature has not.

5 Defendants contend that these provisions were adopted when county clerks began 

microfilming land records. Separate instruments had to be filed because clerks could not 

write on microfilms. The Counties cite conflicting testimony from a county clerk who testified 

in 2012 about her involvement in drafting section 192.007, which she contends imposes a 

recording requirement. This testimony, however, is not relevant because the county clerk was 

not a member of the legislature that drafted the original provision and she made all of these 

statements after this lawsuit was filed, not before the provision was adopted. See In re 

Sullivan, 157 S.W.3d 911, 918 (Tex. App. 2005) (“[C]omments by nonlegislators, made after 

the Texas Legislature enacted the statute in question . . . are not legislative history, nor are 

they otherwise relevant to the statutory-construction issue at hand.”).

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Next, the placement of section 192.007 in Texas’s statutory code supports 

that it was a procedural directive to county clerks, not a recording mandate to 

the public. As the district court noted, the Texas Legislature placed section 

192.007 in the Local Government Code—which governs the operation of county 

and municipal governments—not the Property Code—which governs the 

public’s real-property rights and duties. Reinforcing this point, chapter 192, 

entitled “Instruments to be Recorded by Counties” (emphasis added), governs 

which instruments clerks must record and how clerks are required to record 

them. See, e.g., id. § 192.001 (“The county clerk shall record each deed . . . that 

is required or permitted by law to be recorded.”), § 192.002(a) (“The county

clerk shall record [military discharge records].”), § 192.006(b) (“The county 

clerk shall keep the records of the county court properly indexed and 

arranged.”). None of these provisions is directed to the public. 

Significantly, in dicta and in unpublished opinions, this court has 

already explained that it discerns no duty to record in the text of section 

192.007. See Reinagel v. Deutsche Bank Nat’l Trust Co., 735 F.3d 220, 228 n.27 

(5th Cir. 2013) (“[T]his obscure provision has never been cited in a state court 

decision and is best read as a procedural directive to county clerks, not as a 

prerequisite to the validity of assignments.”); see also Rojas v. Wells Fargo 

Bank, N.A., 571 F. App’x 274, 279 (5th Cir. 2014) (per curiam) (quoting 

Reinagel, 735 F.3d at 228 n.27); Green v. JP Morgan Chase Bank, N.A., 562 F. 

App’x 238, 241 (5th Cir. 2014) (per curiam) (same); Hudson v. JP Morgan 

Chase Bank, N.A., 541 F. App’x 380, 384 (5th Cir. 2013) (per curiam) (“[Section] 

192.007 does not impose upon [a lender] a duty to record the assignment of the 

deed of trust.”); cf. KCB Equities, Inc. v. HSBC Bank USA, Nat’l Ass’n, No. 05-

10-01648-CV, 2012 WL 1985899, at *2 (Tex. App. June 4, 2012) (recognizing 

that there is no legal authority that requires recording promissory-note 

assignments). Even though all of these cases involved foreclosure disputes, not 

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recording disputes, these cases are persuasive authority supporting our 

holding that section 192.007 does not impose a duty to record on the public. See 

United States v. Castellon-Aragon, 772 F.3d 1023, 1025 (5th Cir. 2014); Ayoub 

v. I.N.S., 222 F.3d 214, 215 (5th Cir. 2000) (per curiam).

This interpretation is also consistent with Texas property law generally. 

Texas’s recording system is a permissive, not a mandatory, system: 

“instrument[s] concerning real or personal property may be recorded.” Tex. 

Prop. Code Ann. § 12.001(a) (emphasis added). Unrecorded instruments 

relating to real property remain valid between the parties; however, the holder 

of the instrument may lose priority. See id. § 13.001(b); see also Denson v. First 

Bank & Trust of Cleveland, 728 S.W.2d 876, 877 (Tex. App. 1987) (“[I]t is a 

well-reasoned rule of law that neither the acknowledgment nor recordation of 

a deed of trust is necessary to make it a valid and binding obligation between 

the immediate parties thereto.”). If an original document is not required to be 

recorded, it would be inconsistent to hold that subsequent documents related 

to the original must be recorded.

Finally, this interpretation does not promote unperfected security 

interests or run afoul of the “split-the-note” theory, as the Counties contend. 

Under the split-the-note theory, transferring a note without the deed of trust 

“splits” the note from the deed and renders them both null. See Martins v. BAC 

Home Loans Servicing, L.P., 722 F.3d 249, 254 (5th Cir. 2013). “In order to 

foreclose, the [split-the-note] theory goes, a party must hold both the note and 

the deed of trust.” Id. But contrary to this theory, the Texas Supreme Court 

has held that the sale of a promissory note transfers the rights in the deed of 

trust to the new noteholder regardless of whether the deed is actually 

transferred as well. See Pope v. Beauchamp, 219 S.W. 447, 449 (Tex. 1920) 

(explaining that if an “executed contract” or promissory note is transferred, 

“the mortgage [deed of trust] passes with it, ipso facto, without assignment in 

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words, and, by the weight of authority, with the properties of the principal 

instrument itself” (citation omitted)). In other words, if the note is assigned, 

then the new noteholder has the right to foreclose on the property identified in 

the deed of trust that secures the note, whether or not the noteholder also 

possesses or is assigned the deed of trust. The beneficiary of the deed of trust 

likewise has the right to foreclose. Thus, in Texas, the holder of the promissory 

note and the beneficiary of the deed of trust can be two separate individuals or 

entities.

More recently, this court, interpreting Texas law, has explicitly rejected 

the split-the-note theory in the context of MERS transfers.6 See Martins, 722 

F.3d at 254. In Martins, we emphasized that Texas courts view the note and 

deed as separate obligations. See id. at 255. Thus, in Texas, a deed of trust 

gives both the lender (here, Bank of America) and the beneficiary (here, MERS) 

“the right to invoke the power of sale, even though it would not be possible for 

both to hold the note.” Id. (internal quotation marks and citation omitted). 

Transferring a promissory note among MERS members does not render the 

related deed of trust void, even if MERS, and not a MERS-member bank, is the 

beneficiary of the deed. As a result, MERS does not have to re-record a deed of 

trust to maintain a perfected security interest in the property. The Counties 

do not cite Martins in their briefs or make any effort to distinguish it.

In sum, section 192.007’s plain text, its placement in Texas’s statutory 

code, and basic Texas property law confirm that section 192.007 is a procedural 

directive to county clerks about how to record subsequent documents. It is not

an affirmative mandate to the public that deed-of-trust beneficiaries must 

 

6 Although there is variation on this issue state by state, Texas is not alone in its 

rejection of the split-the-note theory. See, e.g., In re Mortg. Elec. Registration Sys., Inc., 754 

F.3d 772, 786 (9th Cir. 2014) (interpreting Nevada law); Macon Cnty., Ill. v. MERSCORP, 

Inc., 742 F.3d 711, 712 (7th Cir. 2014) (interpreting Illinois law); Culhane v. Aurora Loan 

Servs. of Neb., 708 F.3d 282, 292 (1st Cir. 2013) (interpreting Massachusetts law).

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record assignments of either the deed of trust itself or the related promissory 

note. We therefore elevate Reinagel’s dictum to the holding of this case: section 

192.007 imposes no duty to record.

II. Section 12.002

Only Dallas County challenges the dismissal of the remaining claims 

raised on appeal. First, Dallas County contends that the district court erred by 

dismissing its fraudulent-lien claim. Texas Civil Practice and Remedies Code 

§ 12.002 authorizes statutory or actual damages for persons injured by 

fraudulent liens. A section 12.002 claim has three elements: 

[T]he defendant (1) made, presented, or used a document with 

knowledge that it was a “fraudulent lien or claim against real or 

personal property or an interest in real or personal property,”

(2) intended that the document be given legal effect, and 

(3) intended to cause the plaintiff physical injury, financial injury, 

or mental anguish.

Henning v. OneWest Bank FSB, 405 S.W.3d 950, 964 (Tex. App. 2013) (quoting 

Tex. Civ. Prac. & Rem. Code Ann. § 12.002(a)). The party asserting a claim 

under section 12.002 has the burden of proof. See James v. Calkins, 446 S.W.3d 

135, 149 (Tex. App. 2014). 

The district court dismissed Dallas County’s section 12.002 claim under 

Rule 12(b)(6), holding that Dallas County failed to plead the third element of 

the claim.7 The district court emphasized that, instead of alleging that 

Defendants intended to cause a cognizable financial injury to the County, 

Dallas County only alleged that Defendants intended to avoid the costs and 

filing fees associated with filing, registering, or recording subsequent 

documents. The district court further reasoned that Dallas County could not 

 

7 Because the district court dismissed this claim under Rule 12(b)(6), we limit our 

analysis to the allegations in the Counties’ Second Amended Complaint—the operative 

complaint when the district court ruled on the motion to dismiss.

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suffer injury under section 12.002 until someone filed a document. The district 

court therefore concluded that Defendants’ choice not to file a document did 

not injure the County.

The allegations in the Second Amended Complaint support the district 

court’s conclusion. Dallas County alleged that Defendants “intended . . . to 

financially injure Plaintiffs . . . by avoiding the costs and filing fees associated 

with filing, registering, or recording subsequent releases, transfers, 

assignments, or other action relating to such instrument as required by Texas 

law.” In other words, Dallas County alleged that it was injured by fraudulent 

MERS deeds of trust because they allowed Defendants to avoid filing future 

assignment documents in the county records.

Dallas County’s alleged injury is mistakenly premised on the argument 

that Texas law imposes a duty to record subsequent assignments. But as we 

resolved above, Defendants were not required to record assignments if a 

MERS-member sold its interest in a promissory note secured by a MERS deed 

of trust. Defendants were always entitled to choose not to make future filings, 

regardless of what filings they had made in the past. Because recording the 

original document is optional, it would defy logic and the statutory text to make 

recording future assignments mandatory.

The conclusion then follows that if Defendants can always choose not to 

record assignments, they could not have intended to injure Dallas County. 

Moreover, governmental entities are not entitled to compensation unless they 

first perform a public service. See Maverick Cnty. Water Control & 

Improvement Dist. #1 v. State, 456 S.W.2d 204, 207 (Tex. Civ. App. 1970) 

(adopting the view that a county agency could not assess a fee for a service 

“neither received nor requested”); Carpenter v. Arroyo-Colo. Nav. Dist. of 

Cameron & Willacy Cntys., 111 S.W.2d 822, 823 (Tex. Civ. App. 1937) (holding 

that a county commissioner could not receive compensation for services he did 

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not perform); Earnest v. Couch, 81 S.W.2d 761, 762 (Tex. Civ. App. 1935) 

(holding that county tax assessor was not entitled to a fee when he did “not . . . 

perform[] that duty, or actually earn[] that fee”). Because Dallas County was 

not entitled to a fee in the first place, it could not have suffered a financial 

injury. 

In reply, Dallas County argues that Defendants have conflated the 

County’s authority to charge a fee and its entitlement to damages. According 

to Dallas County, its authority to charge fees is irrelevant because it does not 

have to prove actual damages under the statute. See Vanderbilt Mortg. & Fin., 

Inc. v. Flores, 692 F.3d 358, 370, 372 (5th Cir. 2012) (holding that plaintiffs are 

still entitled to pursue section 12.002 claims even when they have not alleged 

actual damages). The problem, however, is not that the County failed to allege 

actual damages, but that it failed to allege a cognizable injury. The issue of 

how damages should be assessed—whether statutory damages or actual 

damages—is only reached if there is a violation of the statute. See Tex. Civ. 

Prac. & Rem. Code Ann. § 12.002(b). But because there is no duty to record, 

the Defendants did not violate the statute because they could not have 

intended to injure the County by avoiding future filing fees. Dallas County 

therefore failed to state a claim under section 12.002.8

III. Fraudulent Misrepresentation

Dallas County’s common law claim for fraudulent misrepresentation 

similarly fails. This claim is based on the provision in MERS deeds of trust 

that states: “MERS is a beneficiary under this Security Instrument.” 

Dallas County contends that this statement is false because MERS has no 

interest in the debt or the promissory note secured by the deed of trust and 

 

8 Because we can resolve this issue on the third element of the claim, we need not 

address whether Dallas County identified a private right of action to enforce section 12.002 

in the first place.

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therefore cannot be the beneficiary of the deed of trust. Dallas County further 

believes that it is injured by this alleged misrepresentation because it corrupts 

the County’s land records.

Under Texas law, a plaintiff seeking to prevail on a fraudulentmisrepresentation claim must prove: (1) a material misrepresentation; (2) the 

representation was false; (3) the defendant either knew the representation was 

false or recklessly asserted it without knowledge of its truth; (4) the defendant 

intended that the plaintiff should act upon the representation; (5) the plaintiff 

acted in reliance on the representation; and (6) the plaintiff was injured as a 

result. Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 

323, 337 (Tex. 2011). The district court granted summary judgment on the 

fraudulent-misrepresentation claim, focusing on the fifth and sixth elements: 

reliance and injury. We agree with the district court’s conclusion on these 

elements and also discuss whether the Defendants even made a false 

representation in the first place.

A. False Representation

First, designating MERS as a “beneficiary” of the deeds of trust was not 

a false representation.9 As a matter of basic contract law, MERS is a 

beneficiary. “Texas courts have consistently held that the terms set out in a 

deed of trust must be strictly followed.” Univ. Sav. Ass’n v. Springwoods 

Shopping Ctr., 644 S.W.2d 705, 706 (Tex. 1982); see also Mathis v. DCR Mortg. 

III Sub I, L.L.C., 389 S.W.3d 494, 507 (Tex. App. 2012) (“The rules of 

interpretation that apply to contracts also apply to notes and deeds of trust.”).

Here, MERS is explicitly designated as a beneficiary in the deeds of trust. The 

 

9 Dallas County also argues that MERS falsely identified itself as the “lender,” the 

“holder of note and lien,” and the “payee.” Even assuming these representations are false, 

Dallas County still has failed to raise a genuine issue of material fact on its fraudulentmisrepresentation claim because it has failed to identify a fact issue on the reliance and 

injury elements of the claim, as discussed below.

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borrowers who executed these deeds agreed to this arrangement. See Athey v. 

Mortg. Elec. Registration Sys., Inc., 314 S.W.3d 161, 162, 165–66 (Tex. App. 

2010) (affirming that MERS was the beneficiary of a deed of trust, even though 

it did not hold the promissory note that the deed secured, when the deed of 

trust named MERS the beneficiary).

Resisting this conclusion, Dallas County contends that, despite the 

language in the MERS deeds of trust, MERS knew that it was not a beneficiary 

because it has admitted that it acts only in a nominee capacity and has no 

interest in the debt or promissory note secured by the deed of trust. It is true 

that the deeds of trust state both that “MERS is a beneficiary under this 

Security Instrument,” and also that MERS acts “solely as a nominee for Lender 

and Lender’s successors and assigns.” But as discussed above, nothing is 

legally inconsistent with this arrangement because Texas courts do not apply 

the split-the-note theory. “The duality of the lien and note means that the 

beneficiary of the lien can be different from the holder of the note.” Wiley v. 

Deutsche Bank Nat’l Trust Co., 539 F. App’x 533, 536 (5th Cir. 2013) (per 

curiam). The borrower agrees to listing MERS as beneficiary of the deed of 

trust. MERS and the lender, in turn, agree that MERS will serve as the 

lender’s nominee. In other words, because of the duality of the note and lien, it 

is possible that MERS could simultaneously be the principal of the lien and the 

agent of the lender who holds the note. Thus, in Texas, it is not inconsistent 

for the deed of trust to label MERS both as a “nominee” and as a “beneficiary.”

Apart from the language in the deeds of trust themselves, the Texas 

Legislature has also granted MERS authority to serve as beneficiaries in deeds 

of trust. The Texas Legislature amended chapter 51 of the Texas Property 

Code—the chapter governing foreclosure proceedings—to include “book entry 

system” in the definition of “mortgagee,” thus reinforcing that MERS has the 

right to file foreclosure actions. See Tex. Prop. Code Ann. § 51.0001(1), (4)(B); 

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see also L’Amoreaux v. Wells Fargo Bank, N.A., 755 F.3d 748, 750 (5th Cir. 

2014) (per curiam); Farkas v. GMAC Mortg., L.L.C., 737 F.3d 338, 342 (5th Cir. 

2013) (per curiam); Martins, 722 F.3d at 255; Athey, 314 S.W.3d at 166. It is 

true that, as Amicus Bexar County points out, this definition only applies 

“[i]n . . . chapter [51].” But this limitation does not suggest that the Texas 

Legislature simultaneously intended to eliminate MERS’s right to serve as 

beneficiary of deeds of trust. Indeed, it would be inconsistent to assert that, 

although MERS is statutorily authorized to file foreclosure actions, it cannot 

at the same time record its interest in deeds of trust, which give it the right to 

foreclose in the first place. In short, Defendants have made no false 

representation by presenting deeds of trust that designate MERS as 

beneficiary.

B. Reliance

Next, as the district court held, Dallas County also offered no evidence 

that it detrimentally relied on the allegedly false MERS deeds of trust. The 

Dallas County clerk testified that county clerks and their cashiers will accept 

a deed of trust for recording as long as it appears “normal on its face.” Then, if

MERS is listed as the beneficiary, clerks file the deed of trust in the index with 

MERS listed as the grantee. As a result, Dallas County believes reliance “is 

inherent in the very ministerial nature of recording deed instruments” because 

the County “relies upon filers to truthfully and accurately represent each 

party’s interests.”

This type of reliance is not reliance sufficient to create an issue of fact on 

a fraud claim. Reliance requires a change in position based on an alleged 

misrepresentation. See Coffel v. Stryker Corp., 284 F.3d 625, 636 (5th Cir. 

2002) (“[F]raud does not exist unless the defendant’s representations induced 

the plaintiff to take a particular course of action.” (citing Johnson & Johnson 

Med., Inc. v. Sanchez, 924 S.W.2d 925, 930 (Tex. 1996))). “‘[D]etrimental 

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reliance does not consist of the performance of pre-existing obligations that are 

properly compensated.’” Thanksgiving Tower Partners v. Anros Thanksgiving 

Partners, 64 F.3d 227, 233 (5th Cir. 1995) (quoting Regent Int’l Hotels, Ltd. v. 

Las Colinas Hotels Corp., 704 S.W.2d 101, 105 (Tex. App. 1985)). Here, county 

clerks receive a fee for fulfilling their statutory obligation of recording 

documents exactly as they are presented. See Tex. Loc. Gov’t Code Ann. 

§ 191.001(c); Tex. Prop. Code Ann. § 11.004(a)(1), (b); see also Cobra Oil & Gas 

Corp. v. Sadler, 447 S.W.2d 887, 896 (Tex. 1968) (“The duties of a county clerk 

or other recorder of public documents are ministerial in nature.”). More to the 

point, what the county clerk does here—index a MERS deed of trust with 

MERS as grantee—is required by law. See Tex. Loc. Gov’t Code Ann. 

§ 193.002(b); id. § 193.009 (stating that instruments “must be alphabetically 

indexed and cross-indexed in the indexes to that official public record under 

the names of the parties identified in the instrument” (emphasis added)); see 

also Att’y Gen. Op. GA-0702, at 1. 

C. Injury

Finally, the district court also correctly held that there was no genuine 

issue of fact as to whether Dallas County suffered an injury arising from any 

reliance on the purported misrepresentation. “To recover for fraud, the plaintiff 

must plead and prove that a pecuniary loss was suffered as a result of reliance 

upon a false representation.” Coffel, 284 F.3d at 637 (emphasis added) (citing 

DiGrazia v. Atl. Mut. Ins. Co., 944 S.W.2d 731, 735 (Tex. App. 1997)). The 

district court first reasoned that Dallas County chiefly complained of lost 

recording fees, which, as it held earlier, were not an actionable pecuniary loss. 

The district court then rejected the County’s alternative theory that it was 

harmed because the allegedly false deeds corrupted the land records. The 

district court emphasized that the County could not be injured on this basis 

because it had no ownership interest in the land records themselves and also 

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because there was no evidence that the records had been corrupted. In 

particular, it noted that there was no evidence that the county clerk had 

received any complaints or suffered harm because of MERS deeds of trust 

being recorded.

Dallas County does not appeal the district court’s first rationale: that 

lost recording fees were not a compensable injury. Indeed, as discussed above, 

the government cannot recover a fee unless it first provides a service. And here, 

every time Dallas County recorded a MERS deed of trust, Dallas County 

received a fee for that service. Thus, based on fees alone, there is no pecuniary 

loss. 

Next, Dallas County continues to argue on appeal that the alleged 

misrepresentation corrupted county deed records.10 According to Dallas 

County, it has an interest in preserving the integrity of these records primarily 

because the county clerk is the records custodian for the County. See Hooten v. 

Enriquez, 863 S.W.2d 522, 530 (Tex. App. 1993). The reliability of the records 

is diminished, says Dallas County, because MERS filings are “opaque and 

inaccurate.”

The County, however, does not have an ownership interest in these 

records. Instead, it has a duty to maintain the records, which are, in turn, 

considered “public property.” Tex. Loc. Gov’t Code Ann. § 201.005(a); cf. Nobles 

v. Marcus, 533 S.W.2d 923, 927 (Tex. 1976) (recognizing that only a defrauded 

party can maintain a suit to set aside a fraudulent deed). Moreover, even 

 

10 Dallas County also argues that it is injured by MERS filings because it will have to 

remediate the records so that the correct entities are listed as having an interest in the 

property. Because Dallas County raised this argument for the first time in its motion for 

reconsideration in the district court, we will not consider it. See U.S. Bank Nat’l Ass’n v. 

Verizon Commc’ns, Inc., 761 F.3d 409, 425 (5th Cir. 2014) (“This court will typically not 

consider an issue or a new argument raised for the first time in a motion for reconsideration 

in the district court.”).

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setting aside the issue of ownership, there is nothing in the record that 

suggests that the land records are inaccurate. The clerk’s duty is to record 

documents “exactly” as they are filed. Tex. Loc. Gov’t Code Ann. § 191.001(c). 

If MERS is listed as a grantee for certain deeds of trust, that is because it is 

identified on those deeds as a beneficiary. Therefore, contrary to Dallas 

County’s argument, the land records are actually accurate because they are 

indexing these deeds under MERS’s name. Whether MERS actually has a legal 

right related to the property identified in the deed of trust is a different issue, 

independent from the issue of accurate land records. Therefore, because Dallas 

County was not injured by an alleged fraud, Dallas County’s fraudulent 

misrepresentation must fail.

IV. Unjust Enrichment

Finally, the district court also granted summary judgment on Dallas 

County’s unjust-enrichment claim. Texas courts recognize that “unjust 

enrichment is not an independent claim; rather it is a theory of recovery that 

characterizes the result of a failure to make restitution of benefits either 

wrongfully or passively received under circumstances which give rise to an 

implied or quasi-contractual obligation to repay.” McCullough v. Scarbrough, 

Medlin & Assocs., Inc., 435 S.W.3d 871, 891 (Tex. App. 2014) (internal 

quotation marks and citation omitted). “A party may recover under the unjust 

enrichment theory when one person has obtained a benefit from another by 

fraud, duress, or the taking of an undue advantage.” Heldenfels Bros. v. City of 

Corpus Christi, 832 S.W.2d 39, 41 (Tex. 1992).

In granting summary judgment, the district court reasoned that the 

unjust-enrichment claim must fail because any benefit from recording a 

mortgage was derived not from the county clerk, but from Texas law 

recognizing lien priority. This conclusion was correct. First, the Texas 

Legislature, not Dallas County, provided the “benefit” of lien priority. Lien 

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priority in Texas is determined by statute. If the beneficiary of a lien records a 

deed of trust, that beneficiary has priority over any other interests that were 

not previously recorded. See Tex. Prop. Code Ann. §§ 13.001(a), 13.002. 

On appeal, Dallas County argues that the benefit of first priority never 

would have accrued if the original deed of trust had not been recorded in the 

Dallas County land records. Defendants, however, paid for that benefit. Next, 

Dallas County also argues that because Defendants do not file deed-of-trust 

assignments when MERS members transfer promissory notes, Defendants

were unjustly enriched by avoiding the filing fees for recording these 

assignments. Again though, because there is no duty to record deeds of trust 

or assignments under Texas law, Defendants were entitled to make this choice. 

Their conduct therefore was not unjust.11 We therefore affirm summary 

judgment on Dallas County’s unjust-enrichment claim.

CONCLUSION

For these reasons, we AFFIRM the judgment of the district court, 

dismissing all of the Counties’ claims.

 

11 The Sixth, Seventh, and Eighth Circuits have reached similar conclusions when 

dealing with unjust-enrichment claims that counties and county clerks have filed against 

MERS. See Cnty. of Ramsey v. MERSCORP Holdings, Inc., 776 F.3d 947, 950–51 (8th Cir. 

2014); Macon Cnty., Ill., 742 F.3d at 713–14; Brown v. Mortg. Elec. Registration Sys., Inc., 

738 F.3d 926, 934–35 (8th Cir. 2013); Christian Cnty. Clerk ex rel. Kem v. Mortg. Elec. 

Registration Sys., Inc., 515 F. App’x 451, 459–60 (6th Cir. 2013).

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