Ermisch v. HSBC Bank, National Ass'n

Case: 15-50276 Document: 00513280152 Page: 1 Date Filed: 11/20/2015
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 15-50276 November 20, 2015
Summary Calendar
Lyle W. Cayce
Clerk
RYAN ERMISCH; JULIE ERMISCH,
Plaintiffs - Appellants
v.
HSBC BANK, NATIONAL ASSOCIATION, as Trustee for Deutsche Alt-A
Securities Mortgage Loan Trust, Series 2007-1; BDF TITLE SERVICES,
L.L.C.; WENDY ALEXANDER; PNC BANK, NATIONAL ASSOCIATION,
Defendants - Appellees
Appeal from the United States District Court
for the Western District of Texas
USDC No. 1:13-CV-851
Before KING, CLEMENT, and OWEN, Circuit Judges.
PER CURIAM:*
In 2007, Ryan and Julie Ermisch (the “Ermisches”) purchased a home in
Austin, Texas, financed by a 30-year note. To secure the note, the Ermisches
executed a deed of trust in favor of the lender, National City Bank. 1 The
Ermisches defaulted on the note in the summer of 2011. In September 2011,
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
1National City Bank merged into PNC Bank in 2009, and so PNC Bank became the
lender and acquired the corresponding security interests at that time. See 12 U.S.C. § 215a(e).
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No. 15-50276
the lender assigned the note and deed of trust to HSBC Bank as trustee of a
real estate mortgage investment conduit trust. HSBC appointed a substitute
trustee to conduct a sale of the property under the deed of trust, and the
substitute trustee sold the property to HSBC at a foreclosure sale. The
Ermisches filed suit against HSBC and the other defendants, challenging the
foreclosure on several different bases. The district court—adopting the
magistrate’s report and recommendation in full—granted summary judgment
in favor of the defendants. The Ermisches raise four issues on appeal: (1) that
the district court abused its discretion when the magistrate ordered HSBC to
supplement its motion for summary judgment with authenticated evidence; (2)
that the substitute trustee lacked authority to foreclose; (3) that the transfer
of the note and deed of trust from the lender to the HSBC trust was void; (4)
and that the district court erred in holding that the Ermisches lacked standing
to challenge the transfer from the lender to the HSBC trust. The Ermisches
also filed a motion to certify a question of law to the New York Court of Appeals
to determine whether a transfer in violation of the New York Trust Code is
void or merely voidable.
DISCUSSION
The Ermisches first argue that the magistrate erred when he ordered
HSBC to supplement its motion for summary judgment with authenticated
evidence. After HSBC filed its initial motion for summary judgment with
supporting business records, the magistrate determined that the business
records were not properly authenticated under Federal Rule of Evidence
901(a). The magistrate then ordered HSBC to supplement its motion with
authenticating records, which HSBC did.
Because the Ermisches did not object to this order below, we review for
plain error. Robertson v. Plano City, 70 F.3d 21, 23 (5th Cir. 1995). Even
without such an order from the magistrate, HSBC could have sought leave to
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supplement its motion because “[c]ourts have consistently allowed parties to
refile or amend motions and supporting documents as a valid exercise of their
discretion in case management.” United States v. Filson, 347 F. App’x 987, 991
(5th Cir. 2009). The district court’s order simply promoted “economy of time
and effort for itself, for counsel, and for litigants,” and we find no error. United
States v. Colomb, 419 F.3d 292, 299 (5th Cir. 2005) (quoting Landis v. N. Am.
Co., 299 U.S. 248, 254 (1936)).
The Ermisches next argue that Wendy Alexander, one of the substitute
trustees, lacked authority to participate in the foreclosure proceedings because
another one of the named substitute trustees had previously participated in
the proceedings. This argument is without merit, as it ignores the plain
language of the deed of trust, which states that the “duties of Trustee . . . may
be exercised or performed by one or more trustees acting alone or together.”
Because Alexander was a named substitute trustee, she had authority to
perform foreclosure duties.
Finally, the Ermisches argue that the district court erred when it
determined that the lender’s transfer of the deed to HSBC was voidable, rather
than void, and that they lacked standing to challenge the transfer. Because the
district court granted summary judgment, we review de novo. Kariuki v.
Tarango, 709 F.3d 495, 501 (5th Cir. 2013).
The Ermisches contend that because the transfer from the lender to
HSBC violated the pooling and servicing agreement (“PSA”) governing the
trust, it is void under New York law. 2 By separate motion, the Ermisches argue
that New York law is unclear in this area and request that this court certify
2“[E]very sale, conveyance or other act of the trustee in contravention of the trust,
except as authorized by this article and by any other provision of law, is void.” N.Y. EST.
POWERS & TRUSTS LAW § 7-2.4 (McKinney 2015).
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the question to the New York Court of Appeals. This court has held that
“assignments [from a lender to a mortgage pool that] violated the PSA—a
separate contract—would not render the assignments void.” Reinagel v.
Deutsche Bank Nat’l Trust Co., 735 F.3d 220, 228 (5th Cir. 2013). Although
Reinagel did not specifically address New York trust law, we have previously
rejected the Ermisches’ argument, stating that “[t]he [borrowers] attempt to
evade Reinagel’s holding by invoking New York law,” but “even under New
York law, the alleged violations of the PSA would make the assignment
voidable, not void, and the [borrowers] may not challenge the assignment.”
Shaver v. Barrett Daffin Frappier Turner & Engel, L.L.P., 593 Fed. App’x 265,
273 (5th Cir. 2014). Persuasive authority also comes from the Second Circuit,
which—in a factually similar case—rejected a borrower’s contention that the
transfer was void under New York law, and stated that “we are not aware of
any New York appellate decision that has endorsed this interpretation of § 7–
2.4,” and “most courts in other jurisdictions discussing that section have
interpreted New York law to mean that ‘a transfer into a trust that violates
the terms of a PSA is voidable rather than void.’” Rajamin v. Deutsche Bank
Nat’l Trust Co., 757 F.3d 79, 90 (2d Cir. 2014) (citations omitted).
The Ermisches rely on a New York trial court opinion in Wells Fargo
Bank, N.A. v. Erobobo, 972 N.Y.S.2d 147, 2013 WL 1831799, at *8 (N.Y. Sup.
Ct. Apr. 29, 2013), where the trial court stated that “[u]nder New York Trust
Law . . . the acceptance of the note and mortgage by the trustee [in violation of
the PSA] would be void.” Erobobo was reversed on appeal. 9 N.Y.S.3d 312 (N.Y.
App. Div. 2015). The appellate court stated that “[i]n any event, Erobobo, as a
mortgagor whose loan is owned by a trust, does not have standing to challenge
the plaintiff's possession or status as assignee of the note and mortgage based
on purported noncompliance with certain provisions of the PSA” and cited
Rajamin in support. Id. at 314.
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As noted by the First Circuit, “the vast majority of courts to consider the
issue have rejected Erobobo’s reasoning, determining that despite the express
terms of N.Y. Est. Powers & Trusts Law § 7–2.4, the acts of a trustee in
contravention of a trust may be ratified, and are thus voidable.” Butler v.
Deutsche Bank Trust Co. Americas, 748 F.3d 28, 37 n.8 (1st Cir. 2014). The
Ermisches have not cited any “New York appellate decision that has endorsed
[their] interpretation.” Rajamin, 757 F.3d at 79. Therefore, the district court
properly held that the assignment was merely voidable and that the Ermisches
lacked standing to challenge it. Nor is this issue appropriate for certification.
“[A]bsent genuinely unsettled matters of state law,” this court will not certify.
Jefferson v. Lead Indus. Ass’n, 106 F.3d 1245, 1247 (5th Cir. 1997). The motion
to certify is DENIED. The district court’s judgment is AFFIRMED.
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