Court Opinion

ID: 938987
Source: CourtListenerOpinion
Date Created: 2013-06-27 05:13:47.110834+00
Date Added: 2024-06-11T15:25:30.845299
License: Public Domain

Case: 13-40067       Document: 00512286557         Page: 1     Date Filed: 06/25/2013

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

                                                                            FILED
                                                                           June 25, 2013

                                     No. 13-40067                          Lyle W. Cayce
                                   Summary Calendar                             Clerk

CAROLYN CASTERLINE,

                                                  Plaintiff-Appellant
v.

ONEWEST BANK, F.S.B.,

                                                  Defendant-Appellee

                   Appeal from the United States District Court
                        for the Southern District of Texas
                                 No. 2:12-CV-150

Before KING, CLEMENT, and HIGGINSON, Circuit Judges.
PER CURIAM:*
       Carolyn Casterline filed suit in state court seeking a declaratory judgment
that OneWest Bank, F.S.B. was not entitled to foreclose on her property. After
the action was removed to federal court, the district court granted OneWest’s
motion for summary judgment. Casterline appealed. For the following reasons,
we AFFIRM.

       *
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
    Case: 13-40067      Document: 00512286557    Page: 2   Date Filed: 06/25/2013

                                  No. 13-40067

             I. FACTUAL AND PROCEDURAL BACKGROUND
         On June 14, 2007, Carolyn Casterline (“Casterline”) purchased a home
financed by IndyMac Bank, F.S.B. (“IndyMac”). As part of that transaction,
Casterline executed a home equity promissory note (“Note”) payable to IndyMac,
and a deed of trust (“Security Instrument”) identifying Charles A. Brown as
trustee, IndyMac as lender, and Mortgage Electronic Registration Systems, Inc.
(“MERS”) as beneficiary of the Security Instrument and as nominee for IndyMac,
its successors and assigns.
         The Federal Deposit Insurance Corporation (“FDIC”) became the receiver
of IndyMac’s assets, including the Note, beginning on July 11, 2008. FDIC then
transferred substantially all of IndyMac’s assets to OneWest Bank, F.S.B.
(“OneWest”). The parties dispute whether FDIC also transferred the Note.
         Subsequently, Casterline defaulted on her loan. On January 4, 2011,
MERS assigned the Security Instrument to OneWest effective May 5, 2010.
OneWest then filed an application for expedited foreclosure proceedings.
Casterline responded by commencing this action in state court, contesting
OneWest’s right to foreclose. OneWest removed to federal court on the basis of
diversity jurisdiction, and moved for summary judgment. The district court
granted OneWest’s motion. Casterline timely appealed.
                         II. STANDARD OF REVIEW
         “Summary judgments are reviewed de novo.” Moussazadeh v. Tex. Dep’t
of Criminal Justice, 703 F.3d 781, 787 (5th Cir. 2012). The district court’s
judgment should be affirmed “if, viewing the evidence in the light most favorable
to the non-moving party, there is no genuine dispute [as] to any material fact
and the movant is entitled to judgment as a matter of law.” U.S. ex rel. Jamison
v. McKesson Corp., 649 F.3d 322, 326 (5th Cir. 2011); see also Fed. R. Civ. P.
56(a).

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                              III. DISCUSSION
      On appeal, Casterline raises three arguments. First, she argues that
OneWest failed to establish ownership of the Note. Second, she contends that
the district court erred by finding enforceable a security instrument severed
from the underlying note. Third, she asserts that the district court ignored
Texas law by holding that OneWest was entitled to foreclose on the Security
Instrument even if it was not the owner of the Note. While Casterline presents
these as three separate arguments, we construe them as variants of her central
contention that OneWest had to show ownership of both the original Note and
the Security Instrument because mere possession of the Security Instrument
was insufficient to foreclose on the property.
      We recently addressed—and rejected—a similar argument in Martins v.
BAC Home Loans Servicing, L.P., No. 12-20559, 2013 WL 1777487, at *2 (5th
Cir. Apr. 26, 2013) (unpublished table decision) (“[Appellant] contends that
[Appellee] . . . cannot foreclose because it was only assigned the mortgage, and
not the note itself, by MERS.”). We described such arguments as falling under
the so-called “show-me-the-note” theory, which claims that “only the holder of
the original wet-ink signature note has the lawful power to initiate a non-judicial
foreclosure.” Id. (citation omitted); see Wigginton v. Bank of N.Y. Mellon, 488 F.
App’x 868, 870 (5th Cir. 2012) (per curiam) (unpublished) (addressing
“unenforceable split note” theory). However, courts repeatedly have rejected this
theory under Texas law. See, e.g., Martins, 2013 WL 1777487, at *2; Wigginton,
488 F. App’x at 870; Kan v. OneWest Bank, FSB, 823 F. Supp. 2d 464, 469–70
(W.D. Tex. 2011). Martins explains why:
      Texas differentiates between enforcement of a note and
      foreclosure—the latter enforces a deed of trust, rather than the
      underlying note, and can be accomplished without judicial
      supervision. Where a deed of trust confers such a power, a trustee
      may sell a debtor’s property. Texas courts have refused to conflate

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      foreclosure with enforcement of a promissory note. Where a debt is
      secured by a note, which is, in turn, secured by a lien, the lien and
      the note constitute separate obligations. All that matters, therefore,
      is that the mortgage be properly assigned.
2013 WL 1777487, at *2 (internal quotation marks and citations omitted); see
also Kan, 823 F. Supp. 2d at 469 (“[I]t bears repeating that foreclosure enforces
the deed of trust, not the underlying note. Accordingly, nothing requires a
mortgage servicer to possess the original promissory note as a prerequisite to
foreclosure.” (citations omitted)).
      As in Martins, “[h]ere, the mortgage was assigned by MERS, which had
been given such power, including the power to foreclose, by the deed of trust,”
and Casterline has not challenged the assignment of the Security Instrument to
OneWest. 2013 WL 1777487, at *2. Accordingly, we reject her theory that
OneWest could not foreclose on the property without also possessing the Note.
Having rejected her “show-me-the-note” theory, we also reject her argument that
splitting the Security Instrument from the underlying Note, and separately
assigning them, rendered the mortgage unenforceable. See Wigginton, 488 F.
App’x at 871; Helms v. Mortg. Elec. Registration Sys., Inc., No. H-11-3298, 2012
WL 43368, at *2 (S.D. Tex. Jan. 9, 2012) (“[E]ven if the note and the deed of trust
became somehow separated, that does not affect the rights of the lien-creditor
to foreclose based on the deed of trust.”).
      Although this reasoning disposes of the majority of Casterline’s
arguments, she raises one additional point that touches upon OneWest’s
ownership of the Note. In a footnote, Casterline asserts that “if OneWest cannot
show that it owns the Note, it has not shown its authority to foreclose under the
Security Instrument.” Setting aside whether Casterline has sufficiently briefed
this argument, Texas law provides that a mortgagee may authorize a mortgage
servicer to administer the foreclosure process. Tex. Prop. Code Ann. § 51.0025.
A mortgage servicer is defined as “the last person to whom the mortgagor has

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been instructed by the current mortgagee to send payment for the debt secured
by a security instrument.” Tex. Prop. Code Ann. § 51.0001(3). The Texas
Property Code contemplates that “[a] mortgagee may be the mortgage servicer.”
Id.
       Here, MERS, as the “beneficiary . . . of a security instrument” and “book
entry system,” was a mortgagee. Tex. Prop. Code Ann. § 51.0001(4)(A), (B).
Further, the Security Instrument provided MERS “the right to foreclose and sell
the Property.” As the report and recommendation adopted by the district court
correctly concluded, MERS had the authority to transfer the Security
Instrument to another party, including OneWest.               See Richardson v.
CitiMortgage, Inc., No. 6:10-cv-119, 2010 WL 4818556, at *5 (E.D. Tex. Nov. 22,
2010) (“Under Texas law, where a deed of trust, as here, expressly provide[d] for
MERS to have the power of sale . . . . MERS had the authority to transfer the
rights and interests in the Deed of Trust . . . .”).
       Nevertheless, OneWest appears to concede that its “authority to foreclose
is based on its ownership of the Note,” and that “if a fact issue existed regarding
OneWest’s ownership of the Note, the same fact issue would exist regarding its
authority to foreclose under the Security Instrument.” In light of OneWest’s
statements, we briefly address the evidence supporting OneWest’s ownership of
the Note.
       In support of its motion for summary judgment, OneWest submitted the
affidavit of Rebecca Marks, OneWest’s Manager of Default Litigation, together
with a copy of the Note, and two attached allonges. The affidavit stated that
FDIC became the receiver of IndyMac on July 11, 2008, and then transferred the
Note to the order of OneWest on March 19, 2009.              One of the allonges
demonstrates that the Note was transferred from FDIC to OneWest. The other
allonge contains a blank endorsement by OneWest. Each specifically references
the loan number, the original loan amount, the date of the note, and the

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borrower’s last name and address.
      Casterline contends that an unexplained gap in the chain of title precludes
summary judgment. She points out that although Marks’s affidavit states that
OneWest became the Note’s holder on March 19, 2009, the allonges themselves
are undated, and MERS’s January 2011 assignment of the Security Instrument
listed Indymac as the current owner and holder of the Note. Further, according
to Casterline, the order in which the allonges were attached is unclear, and the
note OneWest submitted in its expedited foreclosure proceeding differed from
that included with OneWest’s motion for summary judgment.
      We agree with the district court that Casterline’s challenges are
speculative, that Casterline has not submitted any controverting evidence, and
that she has offered no alternative explanation for how the Note was
transferred. Given the facts of this case, the mere fact that the allonges are
undated does not create a gap in the chain of title. Her reading of the MERS
assignment also omits that the owner of the Note included IndyMac’s “successors
and assigns,” which, at the time the Security Interest was transferred, meant
OneWest. As for any purported inconsistencies between the notes submitted in
the foreclosure proceeding and in federal court, we note that Texas law did not
require OneWest to present the original Note to foreclose on Casterline’s
property. See Crear v. JP Morgan Chase Bank N.A., No. 10-10875, 2011 WL
1129574, at *1 n.1 (5th Cir. Mar. 28, 2011) (per curiam) (unpublished) (“The
Texas Property Code provides that either a mortgagee or mortgage servicer may
administer a deed of trust foreclosure without production of the original note.”);
see also Tex. Prop. Code Ann. § 51.002(b), (d) (mortgage servicer must provide
notice of default, opportunity to cure, and notice of foreclosure sale). Moreover,
Casterline had the opportunity to conduct further discovery on any perceived
inconsistencies, but failed to do so. The district court thus correctly found that
OneWest was authorized to foreclose on Casterline’s property.

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                           IV. CONCLUSION
     For the aforementioned reasons, the district court’s grant of OneWest’s
motion for summary judgment is AFFIRMED.

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