Morlock, L.L.C., a Texas Limited Liability Company v. Citimortgage, Inc.

Filing 19

OPINION AND ORDER granting 7 Motion to Dismiss; denying 15 Motion for Leave to Amend; overruling 16 Objections to Memorandum and Recommendation.(Signed by Judge Melinda Harmon) Parties notified.(rhawkins, 4)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
MORLOCK, L.L.C.,

§
§
§
§
§
§
§
§
§

Plaintiff,
VS.
BANK OF AMERICA, N.A.,
Defendant.

CIVIL ACTION H-14-1678

OPINION AND ORDER
The above referenced action, removed from state court on
diversity jurisdiction, seeks a judicial determination regarding
the propriety of the assignment of a Deed of Trust and Note to
Defendant Bank of America, N.A. (“BANA”) and BANA’s right to
receive

payment

under

them,

and

asks

the

Court

to

enjoin

foreclosure proceedings and to quiet title on the property located
at

14015

Property”),

Albany
owned

Springs
by

Lane,

Plaintiff

Houston,
Morlock,

Texas

L.L.C.

77044

(“the

(“Morlock”).

Pending before the Court are (1) BANA’s motion to dismiss pursuant
to Federal Rule of Civil Procedure 12(b)(6)(instrument #7); (2)
Morlock’s motion for leave to amend (#9); (3) United States
Magistrate Judge Frances Stacy’s memorandum and recommendation
(#15) that BANA’s motion to dismiss be granted with prejudice and
Morlock’s motion for leave to amend be denied; and (4) Morlock’s
objections

(#16)

to

the

Magistrate

recommendation.

-1-

Judge’s

memorandum

and

After reviewing the record and the applicable law, the Court
agrees with the Magistrate Judge’s legal conclusions and, for the
reasons

stated

below,

overrules

Morlock’s

objections

to

her

memorandum and recommendation, denies the motion for leave to
amend, and grants the motion to dismiss with prejudice.
Standards of Review
Objections timely filed within fourteen days of entry of the
Magistrate Judge’s memorandum and recommendation must specifically
identify the findings or recommendations for which the party seeks
reconsideration.

Byars v. Stephens, No. 5:13-CV-189-DAE, 2014 WL

1668488, at *2 (Apr. 14, 2014), citing Thomas v. Arn, 474 U.S. 140,
151 (1985).

The court does not have to consider “‘[frivolous,

conclusive, or general objections.’”

Id., citing Battle v. U.S.

Parole Comm’n, 834 F.2d 419, 421 (5th Cir. 1987).

Findings by the

Magistrate Judge to which the party specifically objects must be
reviewed de novo under 28 U.S.C. § 636(b)(1)(C).

Findings of the

United States Magistrate Judge to which no specific objections are
made require the Court only to decide whether the memorandum and
recommendation is clearly erroneous or contrary to law.

Id.,

citing U.S. v. Wilson, 864 F.2d 1219, 1221 (5th Cir. 1989).

The

district court “may accept, reject, or modify, in whole or in part,
the findings or recommendations made by the magistrate judge.”

28

U.S.C. § 636(b)(1)(C).
Federal Rule of Civil Procedure 8(a)(2) provides, “A pleading
-2-

that states a claim for relief must contain . . . a short and plain
statement of the claim showing that the pleader is entitled to
relief.”
pursuant

When a district court reviews a motion to dismiss
to

Fed.

R.

Civ.

P.

12(b)(6),

it

must

construe

the

complaint in favor of the plaintiff and take all well-pleaded facts
as true. Randall D. Wolcott, MD, PA v. Sebelius, 635 F.3d 757, 763
(5th Cir. 2011), citing Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir.
2009).

The plaintiff’s legal conclusions are not entitled to the

same assumption.

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)(“The

tenet that a court must accept as true all of the allegations
contained in a complaint is inapplicable to legal conclusions.”),
citing Bell Atlantic Corp. v. Twombly, 556 U.S. 662, 678 (2007);
Hinojosa v. U.S. Bureau of Prisons, 506 Fed. Appx. 280, 283 (5th
Cir. Jan. 7, 2012).
“While a complaint attacked by a Rule 12(b)(6) motion to
dismiss does not need detailed factual allegations, . . . a
plaintiff’s

obligation

‘entitle[ment]

to

to

relief’

provide

the

‘grounds’

requires

more

than

of

his

labels

and

conclusions, and a formulaic recitation of the elements of a cause
of action will not do . . . .”
S.

Ct.

1955,

1964-65

Bell Atlantic Corp. v. Twombly, 127

(2007)(citations

omitted).

“Factual

allegations must be enough to raise a right to relief above the
speculative level.”
Federal

Practice

Id. at 1965, citing 5 C. Wright & A. Miller,

and

Procedure

-3-

§

1216,

pp.

235-236

(3d

ed.

2004)(“[T]he pleading must contain something more . . . than . . .
a statement of facts that merely creates a suspicion [of] a legally
cognizable right of action”). “Twombly jettisoned the minimum
notice pleading requirement of Conley v. Gibson, 355 U.S. 41 . . .
(1957)[“a complaint should not be dismissed for failure to state a
claim unless it appears beyond doubt that the plaintiff can prove
no set of facts in support of his claim which would entitle him to
relief”], and instead required that a complaint allege enough facts
to state a claim that is plausible on its face.”

St. Germain v.

Howard,556 F.3d 261, 263 n.2 (5th Cir. 2009), citing In re Katrina
Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007)(“To survive
a Rule 12(b)(6) motion to dismiss, the plaintiff must plead ‘enough
facts to state a claim to relief that is plausible on its face.’”),
citing Twombly, 127 S. Ct. at 1974).

“‘A claim has facial

plausibility when the pleaded factual content allows the court to
draw the reasonable inference that the defendant is liable for the
misconduct alleged.’”

Montoya v. FedEx Ground Package System,

Inc., 614 F.3d 145, 148 (5th Cir. 2010), quoting Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009).
to

a

“probability

The plausibility standard is not akin

requirement,”

but

asks

for

“possibility that a defendant has acted unlawfully.”
U.S. at 556.

more

than

a

Twombly, 550

Dismissal is appropriate when the plaintiff fails to

allege “‘enough facts to state a claim to relief that is plausible
on its face’” and therefore fails to “‘raise a right to relief

-4-

above the speculative level.’”

Montoya, 614 F.3d at 148, quoting

Twombly, 550 U.S. at 555, 570.
Where a plaintiff fails to state a legal claim upon which
relief may be granted, i.e., the complaint lacks a cognizable legal
theory or there is a bar on the face of the complaint, such as
expiration of the statute of limitations, the suit may be dismissed
as a matter of law,

See, e.g, Clark v. Amoco Prod. Co., 794 F.2d

967, 970 (5th Cir. 1986)l Frith v. Guardian Life Ins., 9 F. Supp.
2d 734, 737-38 (S.D. Tex. 1998); ASARCO LLC v, Americas Min. Corp.,
382 B.R. 49, 56 (S.D. Tex. 2007).
On a Rule 12(b)(6) review, although generally the court may
not

look

beyond

the

pleadings,

the

Court

may

examine

the

complaint, documents attached to the complaint, and documents
attached to the motion to dismiss to which the complaint refers and
which are central to the plaintiff’s claim(s), as well as matters
of public record.

Lone Star Fund V (U.S.), L.P. v. Barclays Bank

PLC, 594 F.3d 383, 387 (5th Cir. 2010), citing Collins, 224 F.3d at
498-99; Cinel v. Connick, 15 F.3d 1338, 1341, 1343 n.6 (5th Cir.
1994).

See also United States ex rel. Willard v. Humana Health

Plan of Tex., Inc., 336 F.3d 375, 379 (5th Cir. 2003)(“the court may
consider . . . matters of which judicial notice may be taken”).
Taking judicial notice of public records directly relevant to the
issue in dispute is proper on a Rule 12(b)(6) review and does not
transform the motion into one for summary judgment.
-5-

Funk v.

Stryker Corp., 631 F.3d 777, 780 (5th Cir. 2011).

“A judicially

noticed fact must be one 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
reasonably be questioned.”

Fed. R. Evid. 201(b).

When a plaintiff’s complaint fails to state a claim, the court
should generally give the plaintiff at least one chance to amend
the complaint under Rule 15(a) before dismissing the action with
prejudice.

Great Plains Trust Co v. Morgan Stanley Dean Witter &

Co., 313 F.3d 305, 329 (5th Cir. 2002)(“District courts often afford
plaintiffs at least one opportunity to cure pleading deficiencies
before dismissing a case, unless it is clear that the defects are
incurable

or

the

plaintiffs

unwilling

or

unable

to

advise

amend

in

the
a

court

manner

that

that

they

will

are

avoid

dismissal.”); United States ex rel. Adrian v. Regents of the Univ.
of Cal., 363 F.3d 398, 403 (5th Cir. 2004)(“Leave to amend should
be freely given, and outright refusal to grant leave to amend
without a justification . . . is considered an abuse of discretion.
[citations omitted]”).

The court should deny leave to amend if it

determines that “the proposed change clearly is frivolous or
advances a claim or defense that is legally insufficient on its
face . . . .”

6 Charles A. Wright, Arthur R. Miller & Mary Kay

Kane, Federal Practice and Proc. § 1487 (2d ed. 1990).

-6-

Factual Background
The issues in contention here are legal, while the basic facts
are not in dispute and are supported by the evidence in the record.
Magistrate Judge Stacy properly relied on copies of four
documents attached to BANA’s motion to dismiss. First, the Deed of
Trust, dated January 30, 2007, naming Eduardo Ramirez and Erica
Ramirez as borrowers, Texas Western Mortgage, L.L.C. as the Lender,
and the Mortgage Electronic Registration Systems, Inc. (“MERS”) as
both the beneficiary and “nominee for Lender, as hereinafter
defined, and Lender’s successors and assigns” (#7-1, Ex. A, p.1).
MERS recorded the Deed of Trust on January 30, 2007.

The Deed of

Trust continues, id. on p. 2,
Borrower understands and agrees that MERS holds only
legal title to the interests granted by Borrower in this
Security Instrument; but, if necessary to comply with law
or custom, MERS (as nominee for Lender and Lender’s
successors and assigns), has the right: to foreclose and
sell the Property; and to take any action required of
Lender, including, but not limited to, releasing or
canceling this Security Instrument.
In support of her recommendation Magistrate Judge Stacy

also

considered the Note (#7-2, Ex. B), the “Corporation Assignment of
Deed of Trust/Mortgage” (“Assignment”),1 dated January 4, 2011 and
signed by Tanyia Hill as Vice President of MERS, from MERS to BAC

1

The Assignment was recorded in the Real Property Records of
Harris County, Texas on January 11, 2011 at Document No.
20110016005. #7, Ex. C.
-7-

Home Loans Servicing, JP, f/k/a Countrywide Home Loans Servicing,
which later merged into BANA (#7-3, Ex. C), and the Amendments to
Various Declarations of Covenants, Conditions, and Restrictions
Relating to Summerwood [Homeowner Association]” (#7-4, Ex. D),2
which created a Summerwood Homeowner Association’s lien.

The last

document (Ex. D, Part 2, § 8.6, “Lien for Assessments”), in
pertinent part reflects that the Homeowner Association’s assessment
lien was subordinate to BANA’s lien,
The Association shall have a lien against each Unit to
secure payment of assessments . . . . Such lien shall be
superior to all other liens, except (a) the liens of all
taxes, bonds, assessments, and other levies which by law
would be superior, and (b) the lien or charge of any
Recorded first Mortgage (meaning any Recorded Mortgage
with first priority over other Mortgages) made in good
faith and for value.
Morlock, a real estate investment company, purchased the
Property at a Trustee’s foreclosure sale conducted by Summerwood
Homeowner Association on August 3, 2011. At the time, the Property
was subject to the Deed of Trust lien dated January 3, 2007,
executed by the Ramirezes, which secured the Note also executed by
the husband and wife.3 The Deed of Trust was subsequently assigned
to BANA.

Morlock learned that under the Deed of Trust, on June 3,

2014 BANA had posted the Property for a Substitute Trustee’s Sale.

2

Ex. D was recorded in the Harris County, Texas Property
Records under Instrument No. V677818.
3

Filed of record under Clerk’s File Number 20007006526 in
the Real Property Records of Harris County, Texas.
-8-

On June 13, 2014 Morlock filed the instant suit in Texas state
court, from which it was timely removed.
In its Original Petition (#1-1), Morlock contends that while
the Assignment appears valid on its face, it is of no force or
effect because the person who signed the assignment on behalf of
MERS was not employed by MERS and had no authority to endorse the
Note or to execute the assignment.

Because the Assignment is not

valid, insists Morlock, BANA was not and is not the owner and
holder of the Note and Deed of Trust and therefore has no right to
post the Property for a Trustee’s foreclosure sale.
Morlock states that it has tried to contact the owner of the
Note and Deed of Trust to either pay the Note or at least discuss
paying off the Note, but BANA has refused to provide Morlock with
any proof that it is the owner or who the owner is.

Morlock fears

that if it pays BANA, it might become subject to double exposure if
BANA is not entitled to payment.

Conceding that there is a lien on

the property, Morlock seeks a determination from the Court as to
whether BANA is the holder of the Note that is secured by the Deed
of Trust and thus has a right to receive payment.

Morlock also

prays for a temporary restraining order to enjoin BANA from taking
any action to sell the Property or disturb Morlock’s possession of
it.
The Magistrate Judge’s Memorandum and Recommendation (#15)
The

Magistrate

Judge

found

-9-

that

the

Deed

of

Trust

and

Assignment documents (#7, Exs. A-D) evidence an unbroken, facially
valid chain of assignments, as described above, demonstrate that
MERS had the authority to make the assignment, and show that any
interest Morlock obtained when it purchased the Property was
subordinate

to

the

mortgage

lien

that

BANA

now

has

through

assignment.

Furthermore it is well established that “a plaintiff

who is not a party to an assignment lacks standing to challenge the
assignment on grounds which render it merely voidable at the
election of one of the parties.”
S.W. 3d

Morlock, LLC v. Bank of New York,

, No. 01-13-00949-CV, 2014 WL 4085771, at *2

(Tex. App.--Houston [1st Dist.] Aug. 19, 2014, no pet.), citing
Vazquez v. Deutsche Bank Nat’l Trust Co., N.A., 441 S.W. 3d 783,
786 (Tex. App.--Houston [1st Dist.] July 24, 2014, no pet. h.), and
Reinagel v. Deutsche Bank Nat. Trust Co., 735 F.3d 220, 225 (5th
Cir. 2013)(applying Texas law)(holding that an “obligor cannot
defend against an assignee’s efforts to enforce the obligation on
a ground that merely renders the assignment voidable.).

The

Magistrate Judge concluded that “Morlock’s conclusory allegations
would render the assignment voidable, not void” and that Morlock
“lacks standing to contest an assignment made by an unauthorized
individual or entity.”

#15 at pp. 6-7, citing Morlock, L.L.C. v.

Bank of Am., N.A., 573 Fed. Appx 364, 366 n.5 (5th Cir. June 18,
2014)(citing Reinagel, 735 F.3d at 225-26).

Moreover it is well

established that “the weight of Texas authority” supports the

-10-

proposition that the party owning the deed of trust does not have
to show that it is also the owner or holder of the note to
foreclose.

Martins v. BAC Home Loans Servicing, L.P., 722 F.3d

249, 255 (5th Cir. 2013); see also Kramer v. Fed. Nat. Mortg. Ass’n,
540 Fed. Appx. 319, (5th Cir. Sept. 19, 2013)(“The panel in Martins
clearly held that the Texas Property Code allows a party who has
been assigned the deed of trust by MERS to foreclose, regardless of
whether that party also holds the underlying note.”), cert. denied,
134 S. Ct. 1310 (2014); Wiley v. Deutsche Bank Nat. Trust Co., 539
Fed. Appx. 533, 537 (5th Cir. Sept. 6, 2013)(“In this case, the deed
of

trust

unquestionably

names

MERS

as

its

beneficiary;

MERS

transferred the deed of trust to Deutsche Bank and recorded that
transfer.

The Wileys’ claim that a transferee in Deutsche Bank’s

position does not have the power to foreclose is incorrect as a
matter of Texas law.

They therefore did not state a claim upon

which relief can be granted, and the district court rightly
dismissed the action under Rule 12(b)(6).”).
Magistrate Judge Stacy concurred with BANA that BANA had no
obligation to provide information about the lien and the amount due
to Morlock because Morlock was not a borrower under the mortgage
secured by the Deed of Trust.
N.A.,
4, 2013).

Fed. Appx.

Morlock v. JPMorgan Chase Bank,

, 2013 WL 2422778, at *2 n.4 (5th Cir. June

See also 402 Lone Star Prop., L.L.C. v. Bank of Am.,

N.A., No. 03-13-00322-CV, 2014 WL 4058715, at *3 (Tex. App.--

-11-

Austin, Aug. 12, 2014)(“To become a party to a deed of trust and
obtain the rights of a borrower under a deed of trust, such as the
right to notice and reinstatement, a purchaser of real property
must take the affirmative steps of requesting and receiving written
approval from the lender to assume the borrower’s obligations under
the deed of trust.”), citing Montenegro v. Ocwen Loan Servicing,
LLC, 419 S.W. 3d 561, 564, 571 (Tex, App.--Amarillo 2013, pet.
denied)(“even though plaintiff had been making monthly payments on
property and made one lump-sum payment to cure default of debtor,
plaintiff was not entitled to notice of foreclosure because he had
not assumed debtor’s obligations in writing and assumption had not
been approved by lender, as required in deed of trust”); Schlotte
v. Option One Mortg. Corp., No. 09-11-00208-CV, Tex. App.--Beaumont
May

31,

2012,

pet.

denied)(“even

though

plaintiff

allegedly

purchase property and had attempted to negotiate an assumption of
the mortgage, lender did not ratify transfer of duties to plaintiff
under deed of trust, and, thus, no evidence of privity between
plaintiff and lender existed and lender was not required to provide
plaintiff with notice of foreclosure”).4

The Court agrees that

BANA was under no obligation to provide the requested information
about the Note to Morlock.
As for Morlock’s claim to quiet title, Magistrate Judge Stacy
4

Morlock in the instant case has not alleged that it took
any of the affirmative steps to assume the Ramirezes’ obligations
under the Deed of Trust.
-12-

ruled that since as a matter of law Morlock’s claim that the
assignment to BANA was invalid lacked merit and since any interest
Morlock obtained by purchasing the Property is subordinate to
BANA’s mortgage lien, Morlock cannot assert a superior title and
the quiet-title claim also fails. Morlock, 2013 WL 2422778, at *2.
Magistrate Judge Stacy further and correctly concluded as a
matter of law that because all the underlying substantive claims
should be dismissed under Rule 12(b)(6), the claims for declaratory
judgment and injunctive relief cannot survive. See, e.g., Ayers v.
Aurora Loan Serv., LLC, 787 F. Supp. 2d 451, 457 (E.D. Tex. 2011);
Valdez v. Fed. Home Loan Mortg. Corp., No. 3:11-CV-1363, 2011 WL
7068386, at *3 (N.D. Tex. Nov. 28, 2011).
Finally the Magistrate Judge recommended denial of leave to
amend under Fed. R. Civ. P. 15(a) on the grounds that Morlock
cannot

overcome

the

legal

effect

of

the

Deed

of

Trust,

its

assignment, and the Amendment to Various Declarations of Covenants,
Conditions, and Restrictions to Summerwood.
Morlock’s Objections (#16)
Morlock objects that two recent opinions, Vazquez, 441 S.W. 3d
783,5 and Morlock, L.L.C. v. Nationstar Mortg., L.L.C.,

S.W. 3d

5

Morlock points to the Houston First Court of Appeals’
statement in Vazquez, id. at p. 786,
As a matter of precedent and policy, a Texas mortgagor
has standing to challenge an assignment of a deed of
trust in the chain of title of a rival claimant to land
that she owns. See Tri-Cities [Const., Inc. v.
-13-

, No. 14-12-01117-CV, 2014 WL 3866478 (Tex. App.--Houston [14th
Dist.] Aug. 7, 2014, pet. for rev. filed Nov. 14, 2014),6 hold that
a property owner has standing to question a lienholder’s right to
foreclose, including the right to attack an assignment on which the
lender bases its claim.

In particular relying on Vazquez, Morlock

quotes the following, 441 S.W. 3d at 789-90:
In addition to her allegations about the authenticity of
the signature on the assignment, Vazquez has also alleged
that the assignment was outside the authority of Bly [the
signer] and Citi [his employer] to make on behalf of
Argent [the original note holder]. Thus, we conclude
that Vazquez’s allegations in her petition and the
deposition testimony, read as a whole, gave Deutsche Bank
fair and adequate notice that she was challenging the
provenance of the signature appearing on the assignment.
According to Morlock, its Original Petition alleged in a “statement
almost identical to the language used in the pleadings in the
Vazquez case,” “The assignment, although appearing valid on its

American Nat. Ins. Co., 523 S.W. 2d 426, 430 (Tex. Civ.
App.--Houston [1st Dist.] 1975)]; Glass [v. Carpenter,
330 S.W. 530, 537 (Tex. Civ. App.--Waco 1950)]. If
foreclosure on a home is initiated by a person or
entity whose right to foreclose is contingent upon the
validity of an assignment, the homeowner has standing
to attack the assignment and thereby seek to stop or
reverse the foreclosure. Such a homeowner is
“personally aggrieved” because she is at risk of losing
her house, and the allegation of such injury is
sufficiently “concrete and particularized” to confer
standing to sue.
6

In Nationstar Morlock cites the Houston Fourteenth Court of
Appeals’ reversal of the district court’s conclusion that Morlock
lacked standing to challenge whether the defendant is the owner
and holder of the promissory note and deed of trust. 2014 WL
3866478, at *3.
-14-

face, is invalid and of no force or effect because, on information
and belief, the person who signed the assignment on behalf of MERS
was not employed by MERS and that person had no authority to
endorse the Note and no authority to execute the assignment.”

#16

at p. 3; #1-1, Orig. Pet., ¶ 7.
BANA’s Response to the Objections (#17)
BANA

insists

the

objections

are

meritless,

while

the

Magistrate Judge’s memorandum and recommendation is well reasoned
and represents controlling law.

Distinguishing Vazquez, BANA

points out that in that case the appellate court ruled that the
mortgagor

had

standing

to

challenge

the

allegations would render the assignment void.

assignment

if

the

441 S.. 3d at 787.

In the instant case the plaintiff is not the mortgagor and the
allegations, even taken as true, would render the assignment merely
voidable, not void.

The holding in Nationstar, which is not a

published opinion, reconfirms that a nonparty to an assignment
lacks standing to challenge it.

2014 WL 4085771, at *2 (“as a

nonparty to the transaction, Morlock lacks standing”), citing
Vazquez and Reinagel, 735 F.2d at 225).
Court’s Decision
Morlock’s objections lack merit, as clearly demonstrated by an
on-point case and opinion in Morlock v. The Bank of New York,
S.W. 3d

, No. 01-13-00949-CV, 2014 WL 4085771 (Tex. App.--

Houston [1st Dist.] Aug. 19, 2014, no pet.), authored by the same
-15-

judge as Vazquez, the Honorable Michael Massengale. In Bank of New
York the plaintiffs borrowed money to buy a house in Harris County,
Texas (“the Property”), made a promissory note, and gave a recorded
deed of trust to Mortgage Investment Lending Associates, Inc.
(“MILA”).

MILA

subsequently

assigned

the

deed

of

trust

to

Countrywide Document Custody Services (“Countrywide”), a Division
of Treasure Bank, N.A., which recorded it in Harris County’s public
records.

In turn, Countrywide assigned the deed of trust to the

Bank of New York (“BONY”), an assignment which was also recorded in
the public records.

The Property was in a neighborhood with a

homeowner association, which, like Summerwood in the instant case,
held a lien on the home to secure payment of assessments owed
pursuant to neighborhood covenants.

When the plaintiffs fell into

arrears on their assessments, the association foreclosed on its
lien, sold the Property to Morlock, and gave Morlock a trustee’s
deed that clearly stated that the homeowner association’s lien was
inferior to a purchase money mortgage.
property

for

foreclosure,

Morlock

When BONY later posted the
filed

suit

to

stop

the

foreclosure, asserting that (1) BONY did not have a stake in the
property because it was not the owner or holder of the note and (2)
the person who executed the assignment from MILA to Countrywide was
not

authorized

to

do

so.

BONY

counterclaimed,

seeking

a

declaratory judgment that the deed of trust was a valid lien on the
Property and that BONY had a valid right to foreclose.

-16-

BONY also

filed a motion for summary judgment contending that Morlock lacked
standing to challenge the assignment from MILA to Countrywide as
unauthorized by MILA.

BONY further argued that it did not have to

show that it owned or held the promissory note in order to
foreclose. The district court granted the summary judgment and the
First Court of Appeals affirmed.
Focusing on Morlock’s allegation that “the person who executed
the assignment [of the deed of trust] was not authorized to execute
the assignment” on behalf of MILA, 2014 WL 4085771 at *2, the panel
pointed out that Morlock did not allege that the signature on the
assignment was forged (i.e., “that the person who signed the
document purported to act as someone else,”7), but simply that the
person who signed it was not authorized to do so.8

Reiterating the

black letter law that a plaintiff who is not a party to the
assignment lacks standing to challenge on grounds which renders it
merely voidable at the election of one of the parties,9 the panel
opined,
“Deeds procured by fraud are voidable only, not void, at

7

Citing Nobles v. Marcus, 533 S.W. 2d 923, 925-26 (Tex.
1967)(“[T]o be a forgery the signing must be by one who purports
to act as another.”)).
8

So, too, in the instant case, Morlock does not allege that
the person who signed the Assignment “Tanyia Hill” was not Tanyia
Hill.
9

Citing Valdez, 2014 WL 3672892, at *2; Reinagel, 735 F.3d
at 225; Tri-Cities, 523 S.W. 2d at 430; and Glass, 330 S.W. 2d at
537.
-17-

the election of the grantor.” [Nobles, 533 S.W. 2d at
926 “one who signs his true name and does not represent
himself to be someone else of the same name, does not
commit a forgery because his act does not purport to be
that of another”)](distinguishing between challenges
based upon fraud and forgery).
When someone without
authorization signs a conveyance on behalf of a grantor
corporation, the cause of action for fraud to set aside
the assignment belongs to the grantor. See id. at 92627.
A third party lacks standing to challenge this
voidable defect in the assignment. See id. at 927.
Id.

The appellate court concluded that Morlock lacked standing to

challenge the claim that MILA’s assignment of the deed of trust to
Countrywide was executed without authorization.

Id.

As for BONY’s right to foreclose under the deed of trust, the
First Court of Appeals cited black letter law that “the right to
recover a personal judgment for a deed secured by a lien on land
and the right to have a foreclosure of lien are severable,” and “a
deed

of

trust

may

therefore

be

enforced

by

the

mortgagee,

regardless of whether the mortgagee also holds the note.”

Id. at

*3 (and case cited therein). This legal principle explains why the
provisions

of

the

Texas

Property

Code

addressing

nonjudicial

foreclosure do not require possession or production of the original
note.

Id. at *3-4, citing inter alia Martins, 722 F.3d at 254-55

(the majority of Texas courts hold that the party owning the deed
of trust need not also show that it is the owner or holder of the
note in order to foreclose); Texas Property Code Ann. § 51.002 and
§ 51.001(4).
This Court also concludes that the Magistrate Judge correctly

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interpreted and applied the law which she discussed to the facts of
this case.
Accordingly, the Court
ORDERS that Morlock’s objections (#16) to the memorandum and
recommendation are OVERRULED.

The Court further

ORDERS that Morlock’s motion for leave to amend (#9) is DENIED
as futile and BANA’s motion to dismiss (#7) is GRANTED with
prejudice.

A final judgment will issue by separate instrument.

SIGNED at Houston, Texas, this

9th

day of

January , 2015.

___________________________
MELINDA HARMON
UNITED STATES DISTRICT JUDGE

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