PNC Bank v. Ruiz ( 2023 )

Case: 22-50584 Document: 00516745516 Page: 1 Date Filed: 05/10/2023
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
____________ FILED
May 10, 2023
No. 22-50584 Lyle W. Cayce
____________ Clerk
PNC Bank, National Association,
Plaintiff—Appellee,
versus
Sylvia Ruiz,
Defendant—Appellant.
______________________________
Appeal from the United States District Court
for the Western District of Texas
USDC No. 1:15-CV-770
______________________________
Before Higginbotham, Southwick, and Willett, Circuit Judges.
Per Curiam: *
PNC Bank’s predecessor in interest extended a loan to Sylvia Ruiz,
secured by a deed of trust on her homestead, as permitted under the Texas
Constitution Article XVI, Section 50. Ruiz fell into default and PNC initiated
foreclosure. The district court rejected her challenge, and granted summary
judgment to PNC, concluding that it was entitled to foreclose against
defendant Ruiz. We AFFIRM.
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*
This opinion is not designated for publication. See 5th Cir. R. 47.5.
Case: 22-50584 Document: 00516745516 Page: 2 Date Filed: 05/10/2023
No. 22-50584
I.
On May 24, 2002, Sylvia Ruiz and her then-husband, Mark Rude,
obtained a home equity loan from National City Mortgage Co. for
$187,000.00. The loan was secured by a lien on the property. Both Ruiz and
Rude signed a Texas Home Equity Note and Texas Home Equity Security
Instrument granting a secured interest in the home to National City. Later
that year when the couple divorced, the property that secured the loan went
to Ruiz by way of special warranty deed, and in 2006 she asked National City
to remove Rude from the loan.
But Ruiz failed to satisfy her payment obligations, and in July 2009,
National City sent Ruiz a notice of default, stating that, to avoid acceleration
of the maturity date, she could cure the default by paying a certain amount by
a specified date. Ruiz failed to cure the default. On December 24, 2013,
National City transferred the loan to PNC. On April 28, 2014, and June 25,
2014, PNC notified Ruiz that because of her failure to cure the default, it had
elected to accelerate the loan. Ruiz remains in default, owing $167,765.91.
In September 2015, PNC sued Ruiz in federal court seeking judicial
foreclosure and declaratory judgment. A magistrate judge granted PNC’s
motion for summary judgment, denied Ruiz’s motion for summary
judgment, and entered final judgment. 1 Ruiz timely appealed. Because PNC
had declined to proceed before a magistrate judge, this Court vacated the
judgment and remanded. 2
On remand, PNC asked the district court to treat the magistrate
judge’s opinion as a report and recommendation. The district court granted
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1
See PNC Bank, Nat’l. Ass’n. v. Ruiz, No. 1:15-CV-770, 2020 WL 836517, at *1
(W.D. Tex. Feb. 20, 2020).
2
PNC Bank, Nat’l. Ass’n. v. Ruiz, 989 F.3d 397, 398 (5th Cir. 2021).
2
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No. 22-50584
the request, overruled Ruiz’s objections, and adopted the report and
recommendation as its own order. 3 Ruiz then timely appealed.
II.
We review applications of state substantive law and grants of summary
judgment de novo. 4 Summary judgment is proper “if the movant shows that
there is no genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law.” 5 “The moving party is entitled to a judgment
as a matter of law because the nonmoving party has failed to make a sufficient
showing on an essential element of her case with respect to which she has the
burden of proof.” 6
III.
In Texas, to foreclose pursuant to a secured instrument,
the lender must demonstrate that: (1) a debt exists; (2) the debt is
secured by a lien created under Art. 16, § 50(a)(6) of the Texas
Constitution; (3) plaintiffs are in default under the note and security
instrument; and (4) plaintiffs received notice of default and
acceleration. 7
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3
See PNC Bank, Nat’l Ass’n. v. Ruiz, No. 1:15-CV-770, 2022 WL 2542371, at *1
(W.D. Tex. June 3, 2022).
4
Renfroe v. Parker, 974 F.3d 594, 599 (5th Cir. 2020) (citations omitted).
5
Fed. R. Civ. Pro. 56(a).
6
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (internal quotation marks
omitted).
7 Bracken v. Wells Fargo Bank, N.A., No. 05-16-01334-CV, 2018 WL 1026268, at *5
(Tex. App.—Dallas Feb. 23, 2018, pet. Denied); see also Bowman v. CitiMortgage, Inc., 768
F. App’x 220, 223 (5th Cir. 2019) (unpublished) (per curiam) (same); Kyle v. Countrywide
Home Loans, Inc., 232 S.W.3d 355, 362 (Tex. App.—Dallas 2007, pet. denied) (holding that
3
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Appellant conceded below that: (1) she executed a home equity note and
home equity security instrument granting a security interest in her home; (2)
she has not made required payments under the terms of the Note and
Security instrument; (3) because she has failed to make such payments, she
is in default; and (4) she was provided with a notice of default, acceleration,
and foreclosure by PNC. Therefore, the district court concluded PNC met
its burden.
On appeal, Appellant argues that there is an issue as to whether PNC
has the authority to foreclose. Specifically, Appellant contends that PNC
cannot foreclose because: (1) PNC did not plead or prove that the home
equity loan was valid or foreclosure-eligible; and (2) the home equity loan
failed to provide the constitutionally required language that permits
forfeiture. We review each argument in turn.
The Texas Property Code specifies that “if the security interest has
been assigned of record, the last person to whom the security interest has
been assigned of record” qualifies as a “mortgagee” with the right to
foreclose. 8 And under Texas law, a party need not possess the note in order
to foreclose on a property, as the power to foreclose may be assigned under
the deed of trust to another party. 9 The record shows that the Security
Instrument signed by Appellant was not only assigned to PNC but also
publicly filed. Appellant, however, contends that the document is
nevertheless invalid.
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a copy of the security instrument and a sworn affidavit stating that the borrowers stopped
making payments on their mortgage were sufficient to support a judgment for judicial
foreclosure).
8
Tex. Prop. Code § 51.0001(4).
9
See Martins v. BAC Home Loans Servicing, L.P., 722 F.3d 249, 255 (5th Cir. 2013).
4
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“The general rule is that separate instruments or contracts executed
at the same time, for the same purpose, and in the course of the same
transaction are to be considered as one instrument, and are to be read and
construed together.” 10 Here, when read together, it is plain that Appellant
executed a single Note secured by the Security Instrument submitted by
PNC. The documents admitted by Appellant and proffered by PNC match
in all material respects. Texas law requires nothing more.
Next Appellant contends that the lien is invalid because it failed to
provide the constitutionally required language. Appellant parses the language
of a Supreme Court of Texas case that the remedy of forfeiture must be
included in a “home-equity loan . . . to be foreclosure-eligible.” 11 From this
passage, Appellant gleans a broad-based rule that, to be valid, the loan itself
must reference all the terms of Section 50(a)(6)(A)-(Q) of the Texas
Constitution. But this brings no aid, for the Supreme Court of Texas later
explained that references to forfeiture as a potential remedy need only be
included in the “loan documents” at large, not in a specific or particular loan
document. 12 PNC incorporated all terms of the section in the “loan
documents,” including those claimed to have been omitted. In sum, the
home equity loan suffered no constitutional defect and therefore the lien
remains valid.
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10
Jones v. Kelley, 614 S.W.2d 95, 98 (Tex. 1981).
11
Garofolo v. Ocwen Loan Servicing, L.L.C., 497 S.W.3d 474, 479 (Tex. 2016).
12
Wood v. HSBC Bank USA, N.A., 505 S.W.3d 542, 546 (Tex. 2016) (explaining
that, in its Garofolo decision, it “explain[ed] that borrowers may access the forfeiture
remedy through a breach-of-contract action based on the inclusion of those terms in their
loan documents, as the Constitution requires to make the home-equity lien foreclosure-
eligible”); see also Alexander v. Wells Fargo Bank, N.A., 867 F.3d 593, 599 (5th Cir. 2017)
(noting that the Garofolo case “describes what a home-equity loan must look like if a lender
wants the option to foreclose on a homestead upon borrower default”).
5
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IV.
Appellant also brings two evidentiary challenges to the district court’s
consideration of an affidavit as well as Appellant’s bankruptcy records. We
review the district court’s evidentiary rulings and use of judicial notice for
abuse of discretion. 13 We address each in turn.
1. Affidavit of William Hardwick
Federal Rule of Civil Procedure 56(c)(4) states that “[a]n affidavit or
declaration used to support or oppose a motion must be made on personal
knowledge.” Yet under Fed. R. Evid. 803(6), evidence that would otherwise
be inadmissible as hearsay is admissible under the business records exception
if the requirements for admitting the evidence “are shown by the testimony
of the custodian or another qualified witness.” 14 A witness may testify to a
matter only if evidence is introduced sufficient to support a finding that the
witness has personal knowledge of the matter. 15 Personal knowledge can be
“demonstrated by showing that the facts stated reasonably fall within the
sphere of responsibility of the affiant as a corporate employee.” 16 Personal
knowledge may even be “reasonably inferred” from the affiant’s position
with the company. 17 To qualify as a witness, the affiant must be able to
“explain the record keeping system of the organization and vouch that the
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13
See Smith v. Chrysler Grp., L.L.C., 909 F.3d 744, 748 (5th Cir. 2018); Taylor v.
Charter Med. Corp., 162 F.3d 827, 829 (5th Cir. 1998).
14
Fed. R. Evid. 803(6)(D); see also United States v. Box, 50 F.3d 345, 356 (5th Cir.
1995) (noting authentication requirement under Rule 803(6)).
15
Fed. R. Evid. 602.
16
DIRECTV, Inc. v. Budden, 420 F.3d 521, 530 (5th Cir. 2005).
17
Id.6
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requirements of Rule 803(6) are met.” 18 And business records produced by
another entity, but subsequently integrated into the records of the party
offering them, are admissible. 19
Appellant contends that the Hardwick’s affidavit was insufficient
because Hardwick lacks personal knowledge of the loan documents and
provides no foundation for his assertions concerning them outside of the fact
that he has read them.
Hardwick’s testimony sufficiently established that the records were
made as part of PNC’s business practices. Specifically, Hardwick testified
that the records were “kept in the course of PNC’ s regularly conducted
business activities and . . . within the regular practice of PNC to make such
records,” were made “by persons with personal knowledge of the
information in the business record, or from information transmitted by
persons with personal knowledge,” and were “made at or near the time of
the occurrence of the matters recorded.” That is sufficient. 20
Hardwick’s testimony sufficiently established his connection to the
documents. Specifically, Hardwick testified that his statements are based on
his review of the records and as “part of my job responsibilities for PNC, I
am familiar with the type of records maintained by PNC in connection with
the loan.” As there “is no requirement that the witness who lays the
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18
United States v. Iredia, 866 F.2d 114, 120 (5th Cir. 1989). Moreover, a custodian
of records is competent to testify as to business records simply just as a corporate
representative. See Love v. Nat’l Med. Enters., 230 F.3d 765, 776 (5th Cir. 2000).
19
United States v. Duncan, 919 F.2d 981, 986 (5th Cir. 1990).
20
See also Fed. R. Evid. 803(6)(C); Iredia, 866 F.2d at 120 (finding no error where
bank employees “testified that to [their] own knowledge the records were received and
kept in the ordinary course of business activity, and it was each employee’s regular business
practice to receive the business records”).
7
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foundation be the author of the record or be able to personally attest to its
accuracy,” 21 and to qualify as a witness, the affiant must simply “explain the
record keeping system of the organization and vouch that the requirements
of Rule 803(6) are met,” 22 the district court did not err in considering this
affidavit.
2. Ruiz’s Bankruptcy Records
Ruiz challenges the district court’s consideration of her bankruptcy
records. The Bankruptcy Code provides that all papers filed in a bankruptcy
case and the dockets of a bankruptcy court are public records except for
certain limited, unrelated exceptions. 23 More succinctly, all bankruptcy
records are a matter of public record. Judicial notice may be taken of a fact
“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 be
questioned.” 24 We think the records are relevant for the reasons PNC states,
as they show that Ruiz was liable to PNC for the lien on her home. Since the
bankruptcy records are matters of public record, and given that no exception
applies, the district court did not err in taking judicial notice of them. 25
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21
See United States v. Brown, 553 F.3d 768, 792 (5th Cir. 2008) (quoting Duncan,
919 F.2d at 986).
22
Iredia, 866 F.2d at 120.
23
See 11 U.S.C. § 107(a) (“Except as provided in subsections (b) and (c) and
subject to section 112, a paper filed in a case under this title and the dockets of a bankruptcy
court are public records and open to examination by an entity at reasonable times without
charge.”).
24
Taylor v. Charter Medical Corp., 162 F.3d 827, 829 (5th Cir. 1998); see also Gov’t
of Canal Zone v. Burjan, 596 F.2d 690, 694 (5th Cir. 1979).
25
See Fed. R. Evid. 201(b)(2); Tu Nguyen v. Bank of Am., N.A., 728 F. App’x 387,
388 (5th Cir. 2018) (unpublished) (per curiam) (“Because the proposed documents are
8
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V.
Appellant challenges PNC’s right to enforce the deed of trust as
barred by the statute of limitations because PNC accelerated the note in 2014
but has yet to sell the property. This challenge also fails, for PNC seeks the
remedy of a judicial foreclosure, not a non-judicial foreclosure. 26 To obtain
the remedy of a judicial foreclosure, Texas law requires that a party, “must
bring suit for . . . the foreclosure of a real property lien not later than four
years after the day the cause of action accrues.” 27 “On the expiration of the
four-year limitations period, the real property lien and a power of sale to
enforce the real property lien become void.” 28 Where, as here, there is an
option to accelerate, “the action accrues ‘when the holder actually exercises
its option to accelerate.’” 29 To exercise this option, the holder must send
“both a notice of intent to accelerate and a notice of acceleration.” 30 The
record reflects a notice of intent to accelerate and a notice of acceleration was
sent to Appellant, and PNC sued for declaratory judgment and judicial
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highly indisputable public records, we take judicial notice of them.”); Matter of Manges, 29
F.3d 1034, 1042 (5th Cir. 1994) (taking judicial notice of certified copies of a deed in the
public record).
26
See In re Erickson, 566 F. App’x 281, 284 (5th Cir. 2014) (unpublished) (“Both
this court and the Texas Courts of Appeals have held that judicial foreclosure and [non-
judicial foreclosure] under the power of sale in a deed of trust are separate and distinct
remedies.”).
27
Boren v. U.S. Nat. Bank Ass’n., 807 F.3d 99, 104 (5th Cir. 2015) (quoting Tex.
Civ. Prac. & Rem. Code § 16.035(a)).
28
Tex. Civ. Prac. & Rem. Code § 16.035(d).
29
Boren, 807 F.3d at 104 (quoting Holy Cross Church of God in Christ v. Wolf, 44
S.W.3d 562, 566 (Tex. 2001)).
30
EMC Mortg. Corp. v. Window Box Ass’n., Inc., 264 S.W.3d 331, 336 (Tex. App.—
Waco 2008, no pet.).
9
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foreclosure on September 2, 2015, well within the 4-year statute of
limitations prescribed by Texas law. 31
VI.
Appellant forfeited her remaining claims. Appellant argues that the
district court erred in assessing costs against her individually and issuing a
final judgment for foreclosure without listing a final judgement amount. But
we are “a court of review, not of first view.” 32 As Appellant did not press the
issue before the district court, the claims have been forfeited.
*****
We AFFIRM.
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31
See Tex. Civ. Prac. & Rem. Code § 16.035(a)).
32
Cutter v. Wilkinson, 544 U.S. 709, 718 n.7 (2005); see also Lackey v. Johnson, 116
F.3d 149, 152 (5th Cir. 1997) (“[W]e decline to address those claims that Lackey has raised
for the first time on appeal because those issues are deemed waived.”); United States v.
Salerno, 77 F.3d 476 (5th Cir. 1995) (holding that claims “not presented to the district court
. . . are not preserved for appeal”).
10