Court Opinion

ID: 1023939
Source: CourtListenerOpinion
Date Created: 2013-07-05 05:12:45.001176+00
Date Added: 2024-06-11T15:26:55.707010
License: Public Domain

Case: 13-40067      Document: 00512296892         Page: 1     Date Filed: 07/03/2013

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

                                                                            FILED
                                                                            July 3, 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
                              USDC No. 2:12-CV-150

     The opinion in this case issued on June 25, 2013, is withdrawn, and the
                         following is substituted thereto:

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

       *
         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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.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.
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                                 No. 13-40067

motion for summary judgment. Casterline appealed. For the following reasons,
we AFFIRM.
           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

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v. McKesson Corp., 649 F.3d 322, 326 (5th Cir. 2011); see also Fed. R. Civ. P.
56(a).
                              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, slip op. at 3, 2013 WL 3213633
(5th Cir. June 26, 2013) (“[Appellant] contends that [Appellee] cannot foreclose
because it was assigned only the mortgage, and not the note itself, by MERS.”).
We described such arguments as falling under two theories that have repeatedly
surfaced in the wrongful-foreclosure context. The first, the so-called “show-me-
the-note” theory, claims that “only the holder of the original wet-ink signature
note has the lawful power to initiate a non-judicial foreclosure.” Id. at 4–5
(citation omitted). The second, what we have described as the “split-the-note”
theory, asserts that “[i]n order to foreclose . . . a party must hold both the note
and the deed of trust,” because “a transfer of a deed of trust by way of MERS
‘splits’ the note from the deed of trust, thus rendering both null.” Id. at 5; 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).

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      As we explained in Martins, neither theory has merit under Texas law.
No. 12-20559, slip op. at 5, 8; see, e.g., Wigginton, 488 F. App’x at 870; Kan v.
OneWest Bank, FSB, 823 F. Supp. 2d 464, 469–70 (W.D. Tex. 2011). First, “[i]n
Texas, existence of a note may be established by ‘[a] photocopy of the promissory
note, attached to an affidavit in which the affiant swears that the photocopy is
a true and correct copy of the original note,” and “no contrary Texas authority
requir[es] production of the ‘original’ note. . . . in order to foreclose.” Martins,
No. 12-20559, slip op. at 5 (second alteration in original) (citation omitted).
Second, “Texas courts have ‘rejected the argument that a note and its security
are inseparable by recognizing that the note and the deed-of-trust lien afford
distinct remedies on separate obligations.’” Id. at 8 (quoting Bierwirth v. BAC
Home Loans Servicing, L.P., No. 03-11-644-CV, 2012 WL 3793190, at *3 (Tex.
App.—Austin Aug. 30, 2012, no pet.)).
      As in Martins, the mortgage in this case was assigned by MERS, and the
assignment included the power to foreclose. Casterline has not challenged the
assignment of the Security Instrument to OneWest and OneWest “did not need
to possess the note to foreclose.” No. 12-20559, slip op. at 8. In rejecting 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 id.; 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

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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
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 together with the power to foreclose 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

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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
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 again observe 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.”);

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

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