Court Opinion

ID: 9393733
Source: CourtListenerOpinion
Date Created: 2023-05-11 00:00:35.671644+00
Date Added: 2024-06-11T17:18:55.118920
License: Public Domain

Case: 22-50584         Document: 00516745516             Page: 1      Date Filed: 05/10/2023

              United States Court of Appeals
                   for the Fifth Circuit                                         United States Court of Appeals
                                                                                          Fifth Circuit

                                      ____________                                      FILED
                                                                                      May 10, 2023
                                       No. 22-50584                                   Lyle W. Cayce
                                      ____________                                         Clerk

   PNC Bank, National Association,

                                                                       Plaintiff—Appellee,

                                             versus

   Sylvia Ruiz,

                                               Defendant—Appellant.
                      ______________________________

                      Appeal from the United States District Court
                           for the Western District of Texas
                                USDC No. 1:15-CV-770
                      ______________________________

   Before Higginbotham, Southwick, and Willett, Circuit Judges.
   Per Curiam: *
          PNC Bank’s predecessor in interest extended a loan to Sylvia Ruiz,
   secured by a deed of trust on her homestead, as permitted under the Texas
   Constitution Article XVI, Section 50. Ruiz fell into default and PNC initiated
   foreclosure. The district court rejected her challenge, and granted summary
   judgment to PNC, concluding that it was entitled to foreclose against
   defendant Ruiz. We AFFIRM.

          _____________________
          *
              This opinion is not designated for publication. See 5th Cir. R. 47.5.
Case: 22-50584         Document: 00516745516              Page: 2      Date Filed: 05/10/2023

                                          No. 22-50584

                                                I.
          On May 24, 2002, Sylvia Ruiz and her then-husband, Mark Rude,
   obtained a home equity loan from National City Mortgage Co. for
   $187,000.00. The loan was secured by a lien on the property. Both Ruiz and
   Rude signed a Texas Home Equity Note and Texas Home Equity Security
   Instrument granting a secured interest in the home to National City. Later
   that year when the couple divorced, the property that secured the loan went
   to Ruiz by way of special warranty deed, and in 2006 she asked National City
   to remove Rude from the loan.
          But Ruiz failed to satisfy her payment obligations, and in July 2009,
   National City sent Ruiz a notice of default, stating that, to avoid acceleration
   of the maturity date, she could cure the default by paying a certain amount by
   a specified date. Ruiz failed to cure the default. On December 24, 2013,
   National City transferred the loan to PNC. On April 28, 2014, and June 25,
   2014, PNC notified Ruiz that because of her failure to cure the default, it had
   elected to accelerate the loan. Ruiz remains in default, owing $167,765.91.
          In September 2015, PNC sued Ruiz in federal court seeking judicial
   foreclosure and declaratory judgment. A magistrate judge granted PNC’s
   motion for summary judgment, denied Ruiz’s motion for summary
   judgment, and entered final judgment. 1 Ruiz timely appealed. Because PNC
   had declined to proceed before a magistrate judge, this Court vacated the
   judgment and remanded. 2
          On remand, PNC asked the district court to treat the magistrate
   judge’s opinion as a report and recommendation. The district court granted
          _____________________
          1
           See PNC Bank, Nat’l. Ass’n. v. Ruiz, No. 1:15-CV-770, 2020 WL 836517, at *1
   (W.D. Tex. Feb. 20, 2020).
          2
              PNC Bank, Nat’l. Ass’n. v. Ruiz, 989 F.3d 397, 398 (5th Cir. 2021).

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                                            No. 22-50584

   the request, overruled Ruiz’s objections, and adopted the report and
   recommendation as its own order. 3 Ruiz then timely appealed.
                                                 II.
           We review applications of state substantive law and grants of summary
   judgment de novo. 4 Summary judgment is proper “if the movant shows that
   there is no genuine dispute as to any material fact and the movant is entitled
   to judgment as a matter of law.” 5 “The moving party is entitled to a judgment
   as a matter of law because the nonmoving party has failed to make a sufficient
   showing on an essential element of her case with respect to which she has the
   burden of proof.” 6
                                                 III.
           In Texas, to foreclose pursuant to a secured instrument,
           the lender must demonstrate that: (1) a debt exists; (2) the debt is
           secured by a lien created under Art. 16, § 50(a)(6) of the Texas
           Constitution; (3) plaintiffs are in default under the note and security
           instrument; and (4) plaintiffs received notice of default and
           acceleration. 7

           _____________________
           3
           See PNC Bank, Nat’l Ass’n. v. Ruiz, No. 1:15-CV-770, 2022 WL 2542371, at *1
   (W.D. Tex. June 3, 2022).
           4
               Renfroe v. Parker, 974 F.3d 594, 599 (5th Cir. 2020) (citations omitted).
           5
               Fed. R. Civ. Pro. 56(a).
           6
               Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (internal quotation marks
   omitted).
           7 Bracken v. Wells Fargo Bank, N.A., No. 05-16-01334-CV, 2018 WL 1026268, at *5

   (Tex. App.—Dallas Feb. 23, 2018, pet. Denied); see also Bowman v. CitiMortgage, Inc., 768
   F. App’x 220, 223 (5th Cir. 2019) (unpublished) (per curiam) (same); Kyle v. Countrywide
   Home Loans, Inc., 232 S.W.3d 355, 362 (Tex. App.—Dallas 2007, pet. denied) (holding that

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                                           No. 22-50584

   Appellant conceded below that: (1) she executed a home equity note and
   home equity security instrument granting a security interest in her home; (2)
   she has not made required payments under the terms of the Note and
   Security instrument; (3) because she has failed to make such payments, she
   is in default; and (4) she was provided with a notice of default, acceleration,
   and foreclosure by PNC. Therefore, the district court concluded PNC met
   its burden.
           On appeal, Appellant argues that there is an issue as to whether PNC
   has the authority to foreclose. Specifically, Appellant contends that PNC
   cannot foreclose because: (1) PNC did not plead or prove that the home
   equity loan was valid or foreclosure-eligible; and (2) the home equity loan
   failed to provide the constitutionally required language that permits
   forfeiture. We review each argument in turn.
           The Texas Property Code specifies that “if the security interest has
   been assigned of record, the last person to whom the security interest has
   been assigned of record” qualifies as a “mortgagee” with the right to
   foreclose. 8 And under Texas law, a party need not possess the note in order
   to foreclose on a property, as the power to foreclose may be assigned under
   the deed of trust to another party. 9 The record shows that the Security
   Instrument signed by Appellant was not only assigned to PNC but also
   publicly filed. Appellant, however, contends that the document is
   nevertheless invalid.

           _____________________

   a copy of the security instrument and a sworn affidavit stating that the borrowers stopped
   making payments on their mortgage were sufficient to support a judgment for judicial
   foreclosure).
           8
               Tex. Prop. Code § 51.0001(4).
           9
               See Martins v. BAC Home Loans Servicing, L.P., 722 F.3d 249, 255 (5th Cir. 2013).

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           “The general rule is that separate instruments or contracts executed
   at the same time, for the same purpose, and in the course of the same
   transaction are to be considered as one instrument, and are to be read and
   construed together.” 10 Here, when read together, it is plain that Appellant
   executed a single Note secured by the Security Instrument submitted by
   PNC. The documents admitted by Appellant and proffered by PNC match
   in all material respects. Texas law requires nothing more.
           Next Appellant contends that the lien is invalid because it failed to
   provide the constitutionally required language. Appellant parses the language
   of a Supreme Court of Texas case that the remedy of forfeiture must be
   included in a “home-equity loan . . . to be foreclosure-eligible.” 11 From this
   passage, Appellant gleans a broad-based rule that, to be valid, the loan itself
   must reference all the terms of Section 50(a)(6)(A)-(Q) of the Texas
   Constitution. But this brings no aid, for the Supreme Court of Texas later
   explained that references to forfeiture as a potential remedy need only be
   included in the “loan documents” at large, not in a specific or particular loan
   document. 12 PNC incorporated all terms of the section in the “loan
   documents,” including those claimed to have been omitted. In sum, the
   home equity loan suffered no constitutional defect and therefore the lien
   remains valid.

           _____________________
           10
                Jones v. Kelley, 614 S.W.2d 95, 98 (Tex. 1981).
           11
                Garofolo v. Ocwen Loan Servicing, L.L.C., 497 S.W.3d 474, 479 (Tex. 2016).
           12
              Wood v. HSBC Bank USA, N.A., 505 S.W.3d 542, 546 (Tex. 2016) (explaining
   that, in its Garofolo decision, it “explain[ed] that borrowers may access the forfeiture
   remedy through a breach-of-contract action based on the inclusion of those terms in their
   loan documents, as the Constitution requires to make the home-equity lien foreclosure-
   eligible”); see also Alexander v. Wells Fargo Bank, N.A., 867 F.3d 593, 599 (5th Cir. 2017)
   (noting that the Garofolo case “describes what a home-equity loan must look like if a lender
   wants the option to foreclose on a homestead upon borrower default”).

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                                               IV.
           Appellant also brings two evidentiary challenges to the district court’s
   consideration of an affidavit as well as Appellant’s bankruptcy records. We
   review the district court’s evidentiary rulings and use of judicial notice for
   abuse of discretion. 13 We address each in turn.
   1. Affidavit of William Hardwick
           Federal Rule of Civil Procedure 56(c)(4) states that “[a]n affidavit or
   declaration used to support or oppose a motion must be made on personal
   knowledge.” Yet under Fed. R. Evid. 803(6), evidence that would otherwise
   be inadmissible as hearsay is admissible under the business records exception
   if the requirements for admitting the evidence “are shown by the testimony
   of the custodian or another qualified witness.” 14 A witness may testify to a
   matter only if evidence is introduced sufficient to support a finding that the
   witness has personal knowledge of the matter. 15 Personal knowledge can be
   “demonstrated by showing that the facts stated reasonably fall within the
   sphere of responsibility of the affiant as a corporate employee.” 16 Personal
   knowledge may even be “reasonably inferred” from the affiant’s position
   with the company. 17 To qualify as a witness, the affiant must be able to
   “explain the record keeping system of the organization and vouch that the

           _____________________
           13
            See Smith v. Chrysler Grp., L.L.C., 909 F.3d 744, 748 (5th Cir. 2018); Taylor v.
   Charter Med. Corp., 162 F.3d 827, 829 (5th Cir. 1998).
           14
             Fed. R. Evid. 803(6)(D); see also United States v. Box, 50 F.3d 345, 356 (5th Cir.
   1995) (noting authentication requirement under Rule 803(6)).
           15
                Fed. R. Evid. 602.
           16
                DIRECTV, Inc. v. Budden, 420 F.3d 521, 530 (5th Cir. 2005).
           17
                Id.

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                                            No. 22-50584

   requirements of Rule 803(6) are met.” 18 And business records produced by
   another entity, but subsequently integrated into the records of the party
   offering them, are admissible. 19
           Appellant contends that the Hardwick’s affidavit was insufficient
   because Hardwick lacks personal knowledge of the loan documents and
   provides no foundation for his assertions concerning them outside of the fact
   that he has read them.
           Hardwick’s testimony sufficiently established that the records were
   made as part of PNC’s business practices. Specifically, Hardwick testified
   that the records were “kept in the course of PNC’ s regularly conducted
   business activities and . . . within the regular practice of PNC to make such
   records,” were made “by persons with personal knowledge of the
   information in the business record, or from information transmitted by
   persons with personal knowledge,” and were “made at or near the time of
   the occurrence of the matters recorded.” That is sufficient. 20
           Hardwick’s testimony sufficiently established his connection to the
   documents. Specifically, Hardwick testified that his statements are based on
   his review of the records and as “part of my job responsibilities for PNC, I
   am familiar with the type of records maintained by PNC in connection with
   the loan.” As there “is no requirement that the witness who lays the

           _____________________
           18
             United States v. Iredia, 866 F.2d 114, 120 (5th Cir. 1989). Moreover, a custodian
   of records is competent to testify as to business records simply just as a corporate
   representative. See Love v. Nat’l Med. Enters., 230 F.3d 765, 776 (5th Cir. 2000).
           19
                United States v. Duncan, 919 F.2d 981, 986 (5th Cir. 1990).
           20
              See also Fed. R. Evid. 803(6)(C); Iredia, 866 F.2d at 120 (finding no error where
   bank employees “testified that to [their] own knowledge the records were received and
   kept in the ordinary course of business activity, and it was each employee’s regular business
   practice to receive the business records”).

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                                           No. 22-50584

   foundation be the author of the record or be able to personally attest to its
   accuracy,” 21 and to qualify as a witness, the affiant must simply “explain the
   record keeping system of the organization and vouch that the requirements
   of Rule 803(6) are met,” 22 the district court did not err in considering this
   affidavit.
   2. Ruiz’s Bankruptcy Records
           Ruiz challenges the district court’s consideration of her bankruptcy
   records. The Bankruptcy Code provides that all papers filed in a bankruptcy
   case and the dockets of a bankruptcy court are public records except for
   certain limited, unrelated exceptions. 23 More succinctly, all bankruptcy
   records are a matter of public record. Judicial notice may be taken of a fact
   “not subject to reasonable dispute in that it is either (1) generally known
   within the territorial jurisdiction of the trial court or (2) capable of accurate
   and ready determination by resort to sources whose accuracy cannot be
   questioned.” 24 We think the records are relevant for the reasons PNC states,
   as they show that Ruiz was liable to PNC for the lien on her home. Since the
   bankruptcy records are matters of public record, and given that no exception
   applies, the district court did not err in taking judicial notice of them. 25

           _____________________
           21
             See United States v. Brown, 553 F.3d 768, 792 (5th Cir. 2008) (quoting Duncan,
   919 F.2d at 986).
           22
                Iredia, 866 F.2d at 120.
           23
               See 11 U.S.C. § 107(a) (“Except as provided in subsections (b) and (c) and
   subject to section 112, a paper filed in a case under this title and the dockets of a bankruptcy
   court are public records and open to examination by an entity at reasonable times without
   charge.”).
           24
             Taylor v. Charter Medical Corp., 162 F.3d 827, 829 (5th Cir. 1998); see also Gov’t
   of Canal Zone v. Burjan, 596 F.2d 690, 694 (5th Cir. 1979).
           25
            See Fed. R. Evid. 201(b)(2); Tu Nguyen v. Bank of Am., N.A., 728 F. App’x 387,
   388 (5th Cir. 2018) (unpublished) (per curiam) (“Because the proposed documents are

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                                          No. 22-50584

                                               V.
           Appellant challenges PNC’s right to enforce the deed of trust as
   barred by the statute of limitations because PNC accelerated the note in 2014
   but has yet to sell the property. This challenge also fails, for PNC seeks the
   remedy of a judicial foreclosure, not a non-judicial foreclosure. 26 To obtain
   the remedy of a judicial foreclosure, Texas law requires that a party, “must
   bring suit for . . . the foreclosure of a real property lien not later than four
   years after the day the cause of action accrues.” 27 “On the expiration of the
   four-year limitations period, the real property lien and a power of sale to
   enforce the real property lien become void.” 28 Where, as here, there is an
   option to accelerate, “the action accrues ‘when the holder actually exercises
   its option to accelerate.’” 29 To exercise this option, the holder must send
   “both a notice of intent to accelerate and a notice of acceleration.” 30 The
   record reflects a notice of intent to accelerate and a notice of acceleration was
   sent to Appellant, and PNC sued for declaratory judgment and judicial

           _____________________
   highly indisputable public records, we take judicial notice of them.”); Matter of Manges, 29
   F.3d 1034, 1042 (5th Cir. 1994) (taking judicial notice of certified copies of a deed in the
   public record).
           26
              See In re Erickson, 566 F. App’x 281, 284 (5th Cir. 2014) (unpublished) (“Both
   this court and the Texas Courts of Appeals have held that judicial foreclosure and [non-
   judicial foreclosure] under the power of sale in a deed of trust are separate and distinct
   remedies.”).
           27
              Boren v. U.S. Nat. Bank Ass’n., 807 F.3d 99, 104 (5th Cir. 2015) (quoting Tex.
   Civ. Prac. & Rem. Code § 16.035(a)).
           28
                Tex. Civ. Prac. & Rem. Code § 16.035(d).
           29
            Boren, 807 F.3d at 104 (quoting Holy Cross Church of God in Christ v. Wolf, 44
   S.W.3d 562, 566 (Tex. 2001)).
           30
           EMC Mortg. Corp. v. Window Box Ass’n., Inc., 264 S.W.3d 331, 336 (Tex. App.—
   Waco 2008, no pet.).

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                                           No. 22-50584

   foreclosure on September 2, 2015, well within the 4-year statute of
   limitations prescribed by Texas law. 31
                                                VI.
           Appellant forfeited her remaining claims. Appellant argues that the
   district court erred in assessing costs against her individually and issuing a
   final judgment for foreclosure without listing a final judgement amount. But
   we are “a court of review, not of first view.” 32 As Appellant did not press the
   issue before the district court, the claims have been forfeited.
                                             *****
           We AFFIRM.

           _____________________
           31
                See Tex. Civ. Prac. & Rem. Code § 16.035(a)).
           32
                Cutter v. Wilkinson, 544 U.S. 709, 718 n.7 (2005); see also Lackey v. Johnson, 116
   F.3d 149, 152 (5th Cir. 1997) (“[W]e decline to address those claims that Lackey has raised
   for the first time on appeal because those issues are deemed waived.”); United States v.
   Salerno, 77 F.3d 476 (5th Cir. 1995) (holding that claims “not presented to the district court
   . . . are not preserved for appeal”).

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