Islamic Ass'n of Desoto v. Mortg. Elec. Registration Sys., Inc.
| Decision Date | 16 January 2013 |
| Docket Number | Civil Action No. 3:12-CV-0613-D |
| Parties | ISLAMIC ASSOCIATION OF DESOTO, TEXAS, INC., Plaintiff, v. MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., ACTING SOLELY AS NOMINEE FOR ACCREDITED HOME LENDERS INC., et al., Defendants. |
| Court | U.S. District Court — Northern District of Texas |
In this removed action, the purchaser of a mortgaged residence asserts claims arising from the posting of the property for foreclosure. Concluding that defendants are entitled to summary judgment dismissing each claim, the court grants defendants' motion and dismisses this lawsuit with prejudice.
Mikhail Muhammad ("Muhammad") purchased real property located in DeSoto, Texas from Accredited Home Lenders, Inc. ("AHL").1 He financed the purchase, executinga promissory note and deed of trust. The deed of trust named defendant Mortgage Electronic Registration Systems, Inc. ("MERS") solely as nominee of AHL. MERS, as AHL's nominee, assigned the note and deed of trust to defendant HSBC Bank USA, N.A. ("HSBC") as trustee on behalf of Ace Securities Corporation Home Equity Loan Trust, Series 2005-SD2, Asset-Backed Pass-Through Certificates ("Ace").2 According to defendants, the original note is physically maintained by Ocwen Loan Servicing, LLC ("Ocwen") as servicing agent for HSBC. Muhammad later conveyed the property to plaintiff Islamic Association of DeSoto, Texas, Incorporated ("Islamic").
According to defendants, when Muhammad defaulted on the mortgage, Ocwen sent him a notice of default and intent to accelerate. Ocwen then appointed a substitute trustee and posted the property for foreclosure. Just days before the sale, Islamic sued Ace and MERS in state court seeking a temporary restraining order to prevent the foreclosure sale. Defendants removed the case and filed a Fed. R. Civ. P. 12(b)(6) motion to dismiss. The court granted the motion but permitted Islamic to replead. Islamic Ass'n of DeSoto, Tex., Inc. v. Mortg. Elec. Registration Sys., Inc., 2012 WL 2196040, at *4 (N.D. Tex. June 15, 2012) (Fitzwater, C.J.).
In its amended complaint, Islamic asserts claims for (1) breach of contract and anticipatory breach of contract; (2) violations of the Texas Debt Collection Practices Act ("TDCPA"), Tex. Fin. Code Ann. §§ 392.001-.404 (West 2006), and the Texas DeceptiveTrade Practices-Consumer Protection Act ("DTPA"), Tex. Bus. & Com. Code Ann. §§ 17.41-17.826 (West 2011); (3) unreasonable collection efforts; (4) negligent misrepresentation and gross negligence; (5) a request for an accounting; (6) suit to quiet title and trespass to try title; (7) bifurcation of the note; (8) trafficking in unfunded securities; and (9) a declaration that defendants' acceleration of the note was wrongful. Islamic also seeks an accounting. Defendants move for summary judgment, and Islamic opposes the motion.
When a party moves for summary judgment on a claim for which the opposing party will bear the burden of proof at trial, the moving party can meet its summary judgment obligation by pointing the court to the absence of admissible evidence to support the opposing party's claim. See Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). Once the moving party does so, the opposing party must go beyond its pleadings and designate specific facts showing there is a genuine issue for trial. See id. at 324; Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc) (per curiam). An issue is genuine if the evidence is such that a reasonable jury could return a verdict in the opposing party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The opposing party's failure to produce proof as to any essential element of a claim renders all other facts immaterial. See Trugreen Landcare, L.L.C. v. Scott, 512 F.Supp.2d 613, 623 (N.D. Tex. 2007) (Fitzwater, J.) (citations omitted). Summary judgment is mandatory if the opposing party fails to meet this burden. Little, 37 F.3d at 1076.
Islamic alleges claims for breach of contract and anticipatory breach of contract.3
Islamic first asserts that, because MERS was never the holder of the promissory note, when it assigned the note and deed of trust to Ace, it transferred only the deed of trust. According to Islamic, because MERS did not assign both the promissory note and the deed of trust to Ace, the note and deed of trust were impermissibly "split," the assignment to Ace had no "force," and Ace lacked the authority to foreclose on the property.
Defendants maintain that they are entitled to summary judgment because Islamic is not a party to the note or deed of trust—both of which are contracts between Muhammad and the defendants—and Islamic lacks privity of contract and has no standing to assert claims based on the note or deed of trust; even if Islamic has standing to assert claims on behalf of Muhammad (the original borrower), Islamic is not a party to any of the assignments and therefore lacks standing to bring any claim based on an allegedly invalid assignment; and the note and deed of trust were not split, because the deed of trust shows that AHL was the original lender and that MERS acted as AHL's nominee for holding the security interest inthe property. Accordingly, defendants argue that MERS was properly identified as the beneficial holder of the lender's interest in the deed of trust.
Islamic responds that a party must be the holder of the note to be entitled to enforce the note or foreclose on collateral; that to prove the transaction through which the note was acquired, HSBC or Ace must show that the note, as well as the deed of trust, were transferred to it via assignment; that it has pleaded in its amended complaint "sufficient factual allegations showing that HSBC or [Ace] [was] never the holder, transferee, or owner of the Note," P. Br. 7; that because neither HSBC nor Ace became the owner of the note, neither could become a holder of the note and seek to enforce it; and that the deed of trust does not provide that MERS could transfer or otherwise assign the note, and, because MERS never held the note, its assignment to Ace of the deed of trust separate from the note has no force or effect.
Assuming arguendo that Islamic has standing to assert claims on behalf of Muhammad,4 the court holds that Islamic has failed to raise a genuine issue of fact regarding whether the note and deed of trust were properly assigned to Ace and were thus enforceable by Ace. Even if the court assumes that Texas law permits borrowers to challenge theassignment of their mortgages, Islamic has failed to establish that the note and deed of trust were improperly "split."
Muhammad executed the note in favor of AHL, the original lender. Muhammad executed the deed of trust for the benefit of MERS, "acting solely as a nominee for [AHL]." Ds. App. 11.5 AHL, as lender, retained the security interest in the property. The deed of trust states that it "secures to [AHL]: (i) the repayment of the Loan, and all renewals, extensions and modifications of the Note; and (ii) the performance of Borrower's covenants and agreements under this Security Instrument and the Note." Id. at 12.
If Islamic is arguing that the assignment to Ace resulted in splitting the deed of trust from the note, this argument has been repeatedly rejected by this and other district courts in the Fifth Circuit. See, e.g., Enis v. Bank of Am., N.A., 2012 WL 4741073, at *2 (N.D. Tex. Oct. 3, 2012) (Fitzwater, C.J.); Cannon v. JPMorgan Chase Bank, N.A., 2011 WL 6838615, at *5 (E.D. Tex. Nov. 16, 2011); DeFranceschi v. Wells Fargo Bank, N.A., 837 F.Supp.2d 616, 623 (N.D. Tex. 2011) (Means, J.); Eskridge v. Fed. Home Loan Mortg. Corp., 2011 WL 2163989, at * 5 (W.D. Tex. Feb. 24, 2011). This is because the "transfer of an obligation secured by a note also transfers the note because the deed of trust and note are read together to evaluate their provisions." Cannon, 2011 WL 6838615, at *5 (quoting DeFranceschi, 837 F.Supp.2d at 623) (internal quotation marks omitted). Moreover, under Texas law, where"MERS is a beneficiary and nominee for both the originating lender and its successors and assigns by the express language in the Deed of Trust," and MERS assigns the deed of trust, "the situation falls within an exception to the general rule that a party holding only the deed of trust cannot enforce the mortgage." Wiley v. U.S. Bank., N.A., 2012 WL 1945614, at *4 (N.D. Tex. May 30, 2012) (Boyle, J.) (quoting Eskridge, 2011 WL 2163989, at * 5) (internal quotation marks omitted). In short, there is no merit to Islamic's argument that the deed of trust and note were "split," rendering any attempted foreclosure defective. DeFranceschi, 837 F.Supp.2d at 623. Accordingly, the court grants defendants' motion for summary judgment on this basis for Islamic's breach of contract and anticipatory breach of contract claims.6
Islamic alleges breach of contract and anticipatory breach of contract claims on the ground that Ace failed to satisfy a statutory requirement to give Islamic an opportunity to pay the past due installments before accelerating the entire indebtedness. Defendants move for summary judgment on this claim, contending, inter alia, that because Islamic's interest in the property arose subsequent to the lien created by the deed of trust, Islamic is an inferior lienholder and, as such, does not have the same rights to foreclosure notice as does amortgagee. Defendants also argue that they sent proper notice of default and intent to accelerate under the terms of the deed of trust and applicable law.7
Islamic offers no evidence or argument in response. Because it has failed to raise a genuine issue of material fact, the court grants defendants' motion for summary judgment on this basis for Islamic's contract claims.
Islamic alleges that the deed of trust did not authorize Ocwen, the mortgage servicer, to appoint a substitute trustee to conduct the foreclosure. Defendants contend they are...
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