Deutsche Bank Natl Trust Co. v. Joanna Burke, et a ( 2018 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
September 5, 2018
No. 18-20026
Summary Calendar Lyle W. Cayce
Clerk
DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee of the
Residential Asset Securitization Trust 2007-A8, Mortgage Pass-Through
Certificates, Series 2007-H under the Pooling and Servicing Agreement dated
June 1, 2007,
Plaintiff - Appellant
v.
JOANNA BURKE; JOHN BURKE,
Defendants - Appellees
Appeal from the United States District Court
for the Southern District of Texas
Before DAVIS, HAYNES, and GRAVES, Circuit Judges.
PER CURIAM:
In this mortgage foreclosure suit filed by Deutsche Bank National Trust
Company, a prior panel opinion of this court reversed the magistrate judge and
held that Deutsche Bank possessed a right to foreclose under a valid
assignment of the deed of trust. We vacated the final judgment in favor of
mortgagors, Joanna and John Burke, and remanded with instructions to
determine whether Deutsche Bank met the remaining requirements to
foreclose under Texas law. Pursuant to our mandate, the magistrate judge
concluded that the Burkes’ remaining challenges to the foreclosure suit lacked
No. 18-20026
merit. Nevertheless, the magistrate judge proceeded to defy the mandate and
contravene the law of the case doctrine by concluding that our prior opinion
was clearly erroneous and that failure to correct the error would result in
manifest injustice. He therefore rendered final judgment in favor of the Burkes
for a second time. We REVERSE and RENDER judgment in favor of Deutsche
Bank.
I. Background
The relevant facts leading up to this foreclosure suit, as described in our
prior opinion, are as follows:
Joanna Burke signed a Texas Home Equity Note in
May 2007 promising to pay $615,000 plus interest to
secure a loan from IndyMac Bank. The note was
secured by a Texas Home Equity Security Instrument
(deed of trust), signed by both Joanna and John,
placing a lien on their property. Mortgage Electronic
Registration Systems, Inc. (MERS) is the beneficiary
named in the deed of trust.
In the summer of 2008, the Office of Thrift Supervision
closed IndyMac Bank and transferred substantially all
of IndyMac Bank’s assets to IndyMac Federal Bank,
FSB. In the spring of 2009, the Federal Deposit
Insurance Corporation [(“FDIC”)] placed IndyMac
Federal in receivership, selling substantially all of its
assets to OneWest Bank, FSB. . . . The Burkes made
their loan payments until December 2009—their last
attempted payment was returned by the bank.
. . . . In January 2011, MERS assigned the Burkes’
deed of trust to Deutsche Bank. . . . In February 2011,
OneWest Bank, the mortgage servicer for Deutsche
Bank, notified the Burkes that because they had failed
to cure the default on their loan, their mortgage was
accelerated. The Burkes still did not make any
payments.
In April 2011, Deutsche Bank sought a declaratory
judgment in federal district court authorizing a non-
judicial foreclosure sale pursuant to Texas law.
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No. 18-20026
Deutsche Bank Nat’l Tr. Co. v. Burke, 655 F. App’x 251, 252 (5th Cir. 2016).
Following a bench trial, the magistrate judge determined that Deutsche Bank
did not possess the right to foreclose under the Burkes’ deed of trust because
the assignment was void and invalid. Id. at 253.
On appeal, we held that the magistrate judge’s ruling was “based on the
incorrect premise that when MERS assigned the deed of trust to Deutsche
Bank, acting per the assignment as ‘nominee for IndyMac Bank,’ it as
beneficiary did not have authority to assign the deed of trust.” Id. at 254. Both
Texas law and our precedent make clear that, because the original deed of trust
names MERS as a beneficiary, “MERS, acting on its own behalf as a book entry
system and beneficiary of the Burkes’ deed of trust, can transfer its right to
bring a foreclosure action to a new mortgagee by a valid assignment of the deed
of trust.” Id. Most importantly for purposes of this appeal, we explained that
merely because “the assignment did not state that MERS was acting in its
capacity as beneficiary does not change our analysis.” Id. We had “not found
a single case from any Texas state court that has made this distinction.” Id. at
254 n.1.
According to the magistrate judge, we clearly erred in concluding that
MERS assigned its foreclosure rights as beneficiary under the deed of trust
because MERS executed the assignment as “nominee,” suggesting that MERS
was acting only in an agency capacity for a principal rather than also in its
capacity as beneficiary. Because IndyMac Bank’s only known successor,
IndyMac Federal Bank, had been placed in receivership prior to the
assignment and Deutsche Bank had failed to show that the FDIC, as receiver,
had sold the Burkes’ note to another bank, the magistrate judge also concluded
that there was no existing successor to IndyMac Bank. Thus, despite the fact
that we had already examined the arguments on this point, the magistrate
judge, perceiving no existing principal capable of assigning a right to foreclose,
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No. 18-20026
determined that MERS’s purported assignment of such rights as “nominee”
was “void and absolutely invalid.” Deutsche Bank timely appealed.
II. Standard of Review
“We review de novo a district court’s interpretation of our remand order,
including whether the law-of-the-case doctrine or mandate rule forecloses any
of the district court’s actions on remand.” Gen. Universal Sys., Inc. v. HAL,
Inc., 500 F.3d 444, 453 (5th Cir. 2007) (quoting United States v. Elizondo, 475
F.3d 692, 695 (5th Cir. 2007)). “The mandate rule requires a district court on
remand to effect our mandate and to do nothing else.” Id. (quoting United
States v. Castillo, 179 F.3d 321, 329 (5th Cir. 1999), rev’d on other grounds, 530
U.S. 120 (2000)). “Because the mandate rule is a corollary of the law of the
case doctrine, it ‘compels compliance on remand with the dictates of a superior
court and forecloses relitigation of issues expressly or impliedly decided by the
appellate court.’” Id. (quoting Castillo, 179 F.3d at 329). As a second panel
reviewing an appeal after a remand following a prior panel’s decision in the
same case, we have explained that we will only “reexamine issues of law
addressed by a prior panel opinion in a subsequent appeal of the same case” if
“(i) the evidence on a subsequent trial was substantially different, (ii)
controlling authority has since made a contrary decision on the law applicable
to such issues, or (iii) the decision was clearly erroneous and would work a
manifest injustice.” Hopwood v. Texas, 236 F.3d 256, 272 (5th Cir. 2000). In
practice, we have rarely used the last exception.
III. Discussion
The magistrate judge construed the third exception to the law of the case
doctrine as a license to disagree with our legal analysis if, in his opinion, it was
“clearly erroneous” and would “work a manifest injustice” if not overruled. The
conduct here is extraordinary conduct that would lead to chaos if routinely
done. Even assuming arguendo that a trial court can overrule an appellate
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No. 18-20026
court on the very legal point previously decided in the absence of intervening
law or new facts, this case does not represent the sort of extraordinary
circumstances required to disregard the prior panel’s opinion. See id. at 272–
73 (“Mere doubts or disagreement about the wisdom of a prior decision of this
or a lower court will not suffice for this exception. To be clearly erroneous, a
decision must strike us as more than just maybe or probably wrong; it must be
dead wrong.” (quoting City Pub. Serv. Bd. v. Gen. Elec. Co., 935 F.2d 78, 82
(5th Cir. 1991))).
No one disputes that MERS had the authority to assign its beneficiary
rights to Deutsche Bank, and that its dual role as beneficiary and nominee
under the deed of trust is permissible. Harris Cty. v. MERSCORP Inc., 791
F.3d 545, 558–59 (5th Cir. 2015). The prior panel opinion’s conclusion that
MERS transferred its beneficiary rights to Deutsche Bank through a valid
assignment of the deed of trust despite being described as “nominee” was not
dead wrong. Neither the magistrate judge nor the Burkes cite any binding
authority stating that MERS cannot simultaneously act as both beneficiary
and nominee under the deed of trust. 1 Even if MERS were acting only as a
nominee, as the magistrate judge purports, it still would not be clearly
erroneous to conclude that MERS validly assigned the deed of trust on behalf
of an existing successor of IndyMac Bank. 2 Because the FDIC could sell “all
the real and personal property” of IndyMac Federal Bank, see 12 U.S.C. § 192,
it necessarily had power to assign the rights under the note, including the
Notably, the only federal district court to have addressed this issue concluded that
1
“MERS always acts simultaneously as both beneficiary and nominee under the deed of trust.”
DHI Holdings, LP v. Sebring Capital Partners, Ltd. P’ship, No. 14:17-CV-2930, 2018 WL
2688474, at *2 (S.D. Tex. June 5, 2018).
2 It is undisputed that a lender’s failure does not preclude MERS’s right to assign, as
nominee, the deed of trust when there exists a successor or assign to the failed lender’s right
to foreclose under the deed of trust. See L’Amoreaux v. Wells Fargo Bank, N.A., 755 F.3d 748,
750 (5th Cir. 2014).
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No. 18-20026
foreclosure rights, 3 see Concierge Nursing Ctrs., Inc. v. Antex Roofing, Inc., 433
S.W.3d 37, 45 (Tex. App.—Houston [1st Dist.] 2013, pet. denied) (“The word
‘assign’ or ‘assignment’ in its most general sense means the transfer of property
or some right or interest from one person to another.”).
We also hold that even if the prior opinion was “dead wrong” and even if
(assuming arguendo) the magistrate judge could then reexamine our ruling, no
manifest injustice would result from following our mandate. To the contrary,
the manifest injustice is that the Burkes have not made a payment on their
mortgage since December 2009 despite continuing to live in the home. No one
disputes that MERS, as beneficiary under the deed of trust, had the right to
initiate foreclosure proceedings and to transfer that right by a valid
assignment of the deed of trust. MERS attempted to assign that right to
Deutsche Bank. The magistrate judge found no impediment to foreclosure
other than a supposed defect in the assignment. Any such imperfection does
not change the fact that MERS and its successors and assigns are entitled to
foreclose on the Burkes’ property. Given nearly a decade of free living by the
Burkes, there is no injustice in allowing that foreclosure to proceed.
REVERSED and RENDERED.
3 The case relied on by the magistrate judge to conclude that a failed bank in
receivership could not be a valid assignor involved the death of a person. Pool v. Sneed, 173
S.W.2d 768, 775 (Tex. Civ. App.—Amarillo 1943, writ ref’d w.o.m.). The Burkes similarly
rely on the Restatement (Third) of Agency § 3.07(4) for the proposition that an agency
relationship generally “terminates” when the principal “ceases to exist or commence a process
that will lead to cessation of existence.” However, neither the magistrate judge nor the
Burkes cited any case law suggesting that the FDIC as receiver of a failed bank could not be
a valid assignor as the bank’s successor. We likewise found no case reaching that result.
Rather, courts that have addressed this issue have rejected the magistrate judge’s conclusion
and found that the FDIC, as receiver, was a successor to IndyMac Bank. See Powe v. Deutsche
Bank National Trust Co., No. 4:15-CV-661, 2016 WL 4054913, at *3 (E.D. Tex. July 29, 2016).
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