Lurea Hornbuckle and William Hornbuckle, Sr. Estate v. Countrywide Home Loans, Inc. and Massachusetts Mutual Life Insurance Company

Opinion

COURT OF APPEALS SECOND DISTRICT OF TEXAS FORT WORTH

NO. 02-09-00330-CV

LUREA HORNBUCKLE AND APPELLANTS WILLIAM HORNBUCKLE, SR. ESTATE

V.

COUNTRYWIDE HOME LOANS, APPELLEES INC. AND MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY

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FROM THE 153RD DISTRICT COURT OF TARRANT COUNTY

MEMORANDUM OPINION1 ----------

This is an appeal from the trial court’s summary judgment in favor of

appellees Countrywide Home Loans, Inc. and Massachusetts Mutual Life

Insurance Company dismissing with prejudice all of the claims asserted against

1 See Tex. R. App. P. 47.4. them by appellants Lurea Hornbuckle and the estate of William Hornbuckle, Sr.

(collectively, appellant) and allowing appellees to judicially foreclose their loan on

appellant’s residence. We affirm.

Background

Appellant Lurea and her now-deceased husband, William, purchased a

home in Arlington on March 1, 2002. To purchase the home, they obtained an

FHA loan from Principal Residential Mortgage, Inc. (PRMI). The Hornbuckles

signed a note and deed of trust both dated March 1, 2002. The lender was

identified in both documents as PRMI, but the beneficiary in the deed of trust is

Mortgage Electronic Registration Systems, Inc. (MERS) as the nominee for

PRMI.

In late 2003 or early 2004, servicing of the loan was transferred to

Countrywide. Nothing in the record shows that the Hornbuckles were informed

that PRMI sold the note and deed of trust to Massachusetts Mutual. But a letter

to the Hornbuckles from Countrywide shows that the Hornbuckles knew PRMI

had transferred servicing of the loan as of at least February 10, 2004 and that

they knew Countrywide was the new servicer as of at least March 29, 2004.

Countrywide began crediting payments from the Hornbuckles in March 2004

although the Hornbuckles expressed their dissatisfaction with the transfer of the

servicing and questioned whether PRMI had transferred, or Countrywide had

credited, their entire escrow account. Countrywide’s records show that the

2 March 2004 payment was credited to the January 2004 note installment due, but

because PRMI transferred only $21.60 for the escrow account and Countrywide

paid the Hornbuckles’ home insurance in March, the escrow account had a

negative balance at that time. Accordingly, the Hornbuckles were two months

behind in payments until January 2005, when they brought their account current.

However, they still had a negative escrow balance, and they failed to make their

February 2005 payment. After that, they were at least one month past due on all

of their payments throughout 2005. Countrywide sent the Hornbuckles a letter

on November 16, 2005, telling them it would accelerate the note if they did not

cure the default by paying $6,417.49 on or before December 21, 2005.

Countrywide did not foreclose at that time.

William died intestate2 in late 2005, and Lurea filed a petition for

bankruptcy on May 1, 2006. Throughout 2006 and 2007, Lurea fell further and

further behind in making payments on the note; Countrywide’s records show that

she stopped making payments altogether in June 2007. Lurea’s bankruptcy was

dismissed on October 11, 2007 without discharging any debts that were

outstanding at that time.

On September 24, 2007, appellant sued appellees in the 17th District

Court of Tarrant County for DTPA violations and fraud, seeking an injunction 2 Appellant does not contest that William died intestate. Under the probate code, his interest in the property immediately vested in his heirs at law subject, however, to the outstanding debt. See Tex. Prob. Code Ann. §§ 37, 38 (Vernon 2003).

3 against them foreclosing on the residence. She accused appellees of wrongful

acceleration of the note, wrongful debt collection practices, and wrongful refusal

to give her an accurate amount required to cure the default. Appellant did not

ask for a hearing, and the trial court never issued an injunction.

On December 5, 2007, Countrywide sent appellant a second letter stating

its intention to accelerate the note if appellant failed to cure a default of now

$35,839.393 by December 25, 2007. Instead of attempting to foreclose, however,

Countrywide, for the benefit of Massachusetts Mutual as lender, filed suit in the

48th District Court of Tarrant County, seeking judicial foreclosure of the lien

secured by appellant’s residence. Appellant answered and counterclaimed with

the same matters raised in her prior petition. Both appellant’s and appellees’

suits were transferred to the 153rd District Court and consolidated into one cause

number.

Appellees filed a traditional motion for summary judgment on their claim for

judicial foreclosure and both traditional and no-evidence motions on appellant’s

claims against them. Appellant responded, but the trial court granted a final and

appealable summary judgment for appellees on both their foreclosure claim and

appellant’s counterclaims. Appellant then perfected this appeal.

3 The $35,839.39 represents approximately eighteen months of nonpayment and includes $2174.36 in late charges and $2824.80 in other charges.

4 Standards of Review

We review a summary judgment de novo. Travelers Ins. Co. v. Joachim,

315 S.W.3d 860, 862 (Tex. 2010). We consider the evidence presented in the

light most favorable to the nonmovant, crediting evidence favorable to the

nonmovant if reasonable jurors could, and disregarding evidence contrary to the

nonmovant unless reasonable jurors could not. Mann Frankfort Stein & Lipp

Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). We indulge every

reasonable inference and resolve any doubts in the nonmovant’s favor. 20801,

Inc. v. Parker, 249 S.W.3d 392, 399 (Tex. 2008). A plaintiff is entitled to

summary judgment on a cause of action if it conclusively proves all essential

elements of the claim. See Tex. R. Civ. P. 166a(a), (c); MMP, Ltd. v. Jones, 710

S.W.2d 59, 60 (Tex. 1986). A defendant who conclusively negates at least one

essential element of a cause of action is entitled to summary judgment on that

claim. Frost Nat’l Bank v. Fernandez, 315 S.W.3d 494, 508 (Tex. 2010); see

Tex. R. Civ. P. 166a(b), (c).

When reviewing a no-evidence summary judgment, we examine the entire

record in the light most favorable to the nonmovant, indulging every reasonable

inference and resolving any doubts against the motion. Sudan v. Sudan, 199

S.W.3d 291, 292 (Tex. 2006). We review a no-evidence summary judgment for

evidence that would enable reasonable and fair-minded jurors to differ in their

conclusions. Hamilton v. Wilson, 249 S.W.3d 425, 426 (Tex. 2008) (citing City of

5 Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005)). We credit evidence

favorable to the nonmovant if reasonable jurors could, and we disregard

evidence contrary to the nonmovant unless reasonable jurors could not. Timpte

Indus., Inc. v. Gish, 286 S.W.3d 306, 310 (Tex. 2009) (quoting Mack Trucks, Inc.

v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006)). If the nonmovant brings forward

more than a scintilla of probative evidence that raises a genuine issue of material

fact, then a no-evidence summary judgment is not proper. Smith v. O’Donnell,

288 S.W.3d 417, 424 (Tex. 2009); King Ranch, Inc. v. Chapman, 118 S.W.3d

742, 751 (Tex. 2003), cert. denied, 541 U.S. 1030 (2004).

Analysis

To obtain judicial foreclosure, appellees had to show that the note sued on

is a purchase money note, that a part of the purchase money is due and unpaid,

and that the property on which the lien is to be enforced is the same property

subject to the lien. Kyle v. Countrywide Home Loans, Inc., 232 S.W.3d 355, 362

(Tex. App.––Dallas 2007, pet. denied); 63 Tex. Jur. 3d Real Estate Sales §§ 436,

441 (2002). This they did through their summary judgment evidence, which

included a copy of the note endorsed to Countrywide; the deed of trust; an

assignment of the note and deed of trust to “Countrywide Home Loans, Inc. for

the benefit of the purchaser, Massachusetts Mutual Life Insurance Company”; a

statement showing payments and debits related to appellant’s loan number from

2/12/04 to 1/16/09; and an affidavit from a Countrywide senior paralegal averring

6 that appellant was in arrearage $64,351.92 as of June 2009. Accordingly, it was

appellant’s burden to raise a fact issue as to any defenses to foreclosure that she

had alleged. See Dashiel v. Lott, 243 S.W. 1072, 1072–74 (Tex. Comm’n App.

1922); Leone v. Valiant Ins. Co., 461 S.W.2d 426, 427–28 (Tex. App.––El Paso

1970, no writ).

In her brief, appellant has alleged that she raised a fact issue as to the

following defenses and counterclaims: lack of evidence of ownership of the note

and deed of trust, wrongful foreclosure, forgery of documents, misconduct by

appellees’ counsel, and breach of the deed of trust by appellees.4 Appellant’s

issues present argument as to whether she raised a fact issue on any of these

defenses and counterclaims.

In her first and second issues, appellant contends that foreclosure is

improper, and that appellees committed fraud by attempting to institute

foreclosure proceedings,5 because appellees have not shown sufficient

4 Appellant alleged in the trial court that appellees violated the Fair Debt Collection Practices Act. Although she mentions the phrase, “fair debt collection practices,” in her brief, she provides no argument or authority to show she raised a fact issue on that ground. See Tex. R. App. P. 38.1(i); Clifton v. Walters, 308 S.W.3d 94, 99 (Tex. App.––Fort Worth 2010, pet. denied). 5 Appellant contended in the trial court that appellees did not provide the proper information in a foreclosure notice under section 51.0025 of the property code. But because appellees did not move forward with a foreclosure under the power of sale provision in the deed of trust and sought a judicial foreclosure instead, appellant’s argument is premature. See Tex. Prop. Code Ann. § 51.0025 (Vernon 2007). Appellant also contends that because the deed of trust provides for a nonjudicial foreclosure, appellees cannot seek a judicial

7 ownership in the note and deed of trust and because appellees have attempted

to conceal the identity of the owner of the note and deed of trust. Appellant

claims that appellees are required to produce the original, unaltered note as

proof.

As a federal court of appeals has explained,

In 2009, a foreclosure defense colloquially termed “show me the note” began circulating through courts across the country. Advocates of this theory believe “that only the holder of an original wet-ink signature note has the lawful power to initiate a non judicial foreclosure.” Courts have routinely rejected the defense on the ground that foreclosure statutes simply do not require production of the original note at any point during the proceedings.

Stein v. Chase Home Fin., LLC, No. 09-1995 (MJD/JJG), 2010 WL 4736828, at

*3 (D. Minn. Aug. 13, 2010), adopted, 2010 WL 4736233 (D. Minn. Nov. 16,

2010) (citations omitted). Appellees were not required to produce the original

note; they provided a copy of the note containing an endorsement to

Countrywide as payee as well as the assignment of the note and deed of trust to

Countrywide for the benefit of Massachusetts Mutual, with recording information

attached. See Alexander v. Wells Fargo Bank, N.A., No. 02-10-00005-CV, 2011

WL 1331519, at *3 (Tex. App.––Fort Worth Apr. 7, 2011, no pet. h.) (mem. op.).

Accordingly, they provided sufficient summary judgment proof of the loan

servicing arrangement authorizing Countrywide to service the loan for

foreclosure of the deed of trust. But the deed of trust authorizes the lender to invoke the power of sale or “any other remedies permitted by applicable law.”

8 Massachusetts Mutual as the owner. See Tex. Bus. & Com. Code Ann.

§§ 3.205, 3.301 (Vernon 2002). We overrule appellant’s first and second issues.

In her third issue, appellant claims that appellees committed fraud by

fabricating the assignment of the note and deed of trust because the assignment

was not recorded until 2006 and because it is not signed by the lender.

Appellant also claims the copies of the note and deed of trust attached to

appellees’ summary judgment motion as evidence were altered, forged, or both.

Appellant complains about barcodes and “squiggles” on the assignment;

however, these appear to be identifications generated by either electronic

recording of the documents or an electronic identification system. She provides

no authority indicating that the additions of such indentifying barcodes voids the

documents. See Tex. Bus. & Com. Code Ann. § 3.407 (Vernon 2002) (providing

that alteration must be material and fraudulent to void instrument). The

assignment of the deed of trust was signed on behalf of MERS, the beneficiary in

the deed of trust. See Athey v. Mortg. Elec. Registration Sys., Inc., 314 S.W.3d

161, 166 (Tex. App.––Eastland 2010, pet. denied). As a Texas federal court has

explained,

The MERS system is merely an electronic mortgage registration system and clearinghouse that tracks beneficial ownerships in, and servicing rights to, mortgage loans. The system is designed to track transfers and avoid recording and other transfer fees that are otherwise associated with the sale. MERS is defined in Texas Property Code § 51.0001(1) as a “book entry system.”

9 Richardson v. CitiMortgage, Inc., No. 6:10cv119, 2010 WL 4818556, at *5 (E.D.

Tex. Nov. 22, 2010) (mem. op. and order) (citations omitted). “Book entry

system” is defined as “a national book entry system for registering a beneficial

interest in a security instrument that acts as a nominee for the grantee,

beneficiary, owner, or holder of the security instrument and its successors and

assigns.” Tex. Prop. Code Ann. § 51.0001(1) (Vernon Supp. 2010). A book

entry system such as MERS is included within the definition of “mortgagee”

under Texas law. Id. § 51.0001(4). Thus, although the transfer to appellees

through MERS took place in 2004, the actual assignment was not recorded until

2006, in anticipation of foreclosure proceedings. Appellant has not provided any

authority showing how this later recording affected the validity of the assignment.

Moreover, contrary to appellant’s contentions, the lender to whom a note and

deed of trust are assigned is not required to sign the assignment. See id. §

5.021 (Vernon 2004).

Appellant likewise failed to bring forward any evidence raising a fact issue

as to her claims of forgery. The signatures of appellant on the note and deed of

trust are consistent with the signatures on the copies of the other loan closing

documents provided by appellant. And appellant brought forward no evidence

that the endorsements on the note and the signature on the assignment of the

deed of trust were not authorized. See Tex. Bus. & Com. Code Ann. § 3.308

(Vernon 2002); Pool v. Diana, No. 03-08-00363-CV, 2010 WL 1170234, at *9

10 (Tex. App.––Austin Mar. 24, 2010, pet. denied) (mem. op.). Accordingly, we

overrule appellant’s third issue.

In her fourth and sixth issues, appellant alleges that appellees’ counsel

committed misconduct by concealing the identity of the lender during discovery

and by withholding discovery, in particular the original of the note. She also

contends that appellees’ continued pursuit of foreclosure with knowledge that

they lack such ownership is a breach of the deed of trust. Appellant never

established in the trial court that she was entitled to any additional discovery, nor

did she provide evidence that appellees refused to answer discovery. See In re

Lesikar, 285 S.W.3d 577, 587–88 (Tex. App.––Houston [14th Dist.] 2009, orig.

proceeding). Appellant’s original petition names both Countrywide and

Massachusetts Mutual as defendants and identifies Countrywide as the servicer.

Massachusetts Mutual attached a copy of the assignment of the note and deed

of trust, with recording information attached, to its motion for summary judgment.

Moreover, appellees were not required to produce the original note as proof that

Massachusetts Mutual was the current owner. See Alexander, 2011 WL

1331519, at *3. Accordingly, we conclude and hold that appellees were entitled

to summary judgment on appellant’s claims regarding actions by their counsel.

We overrule appellant’s fourth and sixth issues.

In her fifth issue, appellant claims that appellees breached the deed of

trust by interfering with her performance under it (in the trial court she alleged

11 that appellees did not credit payments she had made, and even returned some

payments) and by failing to obtain HUD approval before attempting to foreclose.

Although appellant presented evidence that Countrywide did return a payment to

her, the letter evidencing that return shows that appellant was already in default

at the time and that the payment was not enough to bring the account current.

Moreover, appellant failed to present any evidence disputing appellees’ affidavit

evidence that she has failed to make any payments since June 14, 2007, yet she

has still been living in the house secured by appellees’ lien while appellees have

continued to pay the property taxes and insurance. See id. Additionally,

appellant has no private right of action regarding any alleged failure by appellees

to follow HUD regulations, even those incorporated in the deed of trust. See,

e.g., Mitchell v. Chase Home Fin. LLC, No. 3:06-CV-2099-K, 2008 WL 623395,

at *4 (N.D. Tex. Mar. 4, 2008) (mem. op. and order). Accordingly, we conclude

and hold that appellees were entitled to summary judgment on appellant’s breach

of contract claims. We overrule her fifth issue.

In her seventh issue, appellant contends generally that she raised a fact

issue or issues sufficient to defeat appellees’ motions for summary judgment.

After a thorough review of the entire record, we conclude and hold that the trial

court did not err by granting summary judgment to appellees; appellant failed to

raise a fact issue on appellees’ claim for judicial foreclosure and on her

counterclaims. We overrule appellant’s seventh issue.

12 Conclusion

Having overruled appellant’s seven issues, we affirm the trial court’s

judgment.

PER CURIAM

PANEL: LIVINGSTON, C.J.; DAUPHINOT and WALKER, JJ.

DELIVERED: May 19, 2011