Horvath v. Bank of New York, N.A.

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

JOHN A. HORVATH, 

Plaintiff-Appellant,

v.

BANK OF NEW YORK, N.A.;

CWALT, INCORPORATED,

Alternative Loan Trust 2006-45TI;

COUNTRYWIDE HOME LOANS

SERVICING, LP; MORTGAGE



ELECTRONIC REGISTRATION SYSTEMS,

INCORPORATED; EQUITY TRUSTEES, No. 10-1528

LLC; AMERICA’S WHOLESALE

LENDER,

Defendants-Appellees,

and

JOHN DOE; JANE DOE; JACK DOE;

JILL DOE; QUI DOE; CHI DOE;

SAMUEL I. WHITE, PC,

Defendants.



Appeal from the United States District Court

for the Eastern District of Virginia, at Alexandria.

Anthony J. Trenga, District Judge.

(1:09-cv-01129-AJT-TCB)

Argued: March 22, 2011

Decided: May 19, 2011

Before WILKINSON, KEENAN, and DIAZ, Circuit Judges.

2 HORVATH v. BANK OF NEW YORK

Affirmed by published opinion. Judge Wilkinson wrote the

opinion, in which Judge Keenan and Judge Diaz joined.

COUNSEL

ARGUED: Christopher Edwin Brown, BROWN, BROWN &

BROWN, PC, Alexandria, Virginia, for Appellant. George

Peter Sibley, III, HUNTON & WILLIAMS, LLP, Richmond,

Virginia, for Appellees. ON BRIEF: R. Michael Smith,

BROWN, BROWN & BROWN, PC, Alexandria, Virginia,

for Appellant. Mark B. Bierbower, HUNTON & WILLIAMS,

LLP, Washington, D.C., for Appellees Bank of New York,

N.A., CWALT, Incorporated, Alternative Loan Trust 2006-

45TI, Countrywide Home Loans Servicing, LP, Mortgage

Electronic Registration Systems, Incorporated, and America’s

Wholesale Lender; Allison Melton, BIERMAN, GEESING,

WARD & WOOD, LLC, Arlington, Virginia, Robert Ryan

Michael, BIERMAN, GEESING, WARD & WOOD, LLC,

Richmond, Virginia, for Appellee Equity Trustees, LLC.

OPINION

WILKINSON, Circuit Judge:

In October 2006, America’s Wholesale Lender ("AWL")

agreed to loan John Horvath $650,000. The loan was reflected

in an interest-only fixed-rate note and was secured by a deed

of trust on Horvath’s home. In exchange for the $650,000,

Horvath agreed to repay AWL in monthly installments rang-

ing from $3,791.67 to $5,039.44.

The note allowed AWL (and any subsequent holder) to

freely transfer the note. In fact, the note provided for "anyone

who takes this Note by transfer" to inherit the powers of the

"Note Holder," including the right to accelerate payment in

HORVATH v. BANK OF NEW YORK 3

the event Horvath defaulted. Moreover, AWL endorsed the

note in blank, meaning that, under Virginia law, any party

who took possession of the note would have the authority to

enforce it.

In 2009, the note ended up in the hands of the Bank of New

York ("BNY"). After Horvath failed to make payments for

over half a year, BNY foreclosed on the property. In response,

Horvath filed suit, alleging that BNY lacked authority to carry

out that sale. On Horvath’s theory, only AWL — the original

lender — had authority to foreclose on the property. This the-

ory, however, runs counter to centuries of Virginia law. We

therefore affirm the district court’s dismissal of Horvath’s

lawsuit.

I.

The facts of the case are largely undisputed; the parties pri-

marily disagree on their meaning. On October 23, 2006,

America’s Wholesale Lender ("AWL") and John Horvath

agreed to terms on a loan secured by a deed of trust on Hor-

vath’s property at 11599 Water Oak Court in Woodbridge,

VA. Under the loan, Horvath received $650,000 and agreed

to pay it back in monthly installments starting on December

1, 2006. Samuel I. White agreed to serve as the trustee for the

loan and Mortgage Electronic Registration Systems, Inc.

("MERS") became the beneficiary.

The terms of the note and the deed of trust clarified that

AWL could freely transfer the note at any time, stating, "the

Lender may transfer this note." To drive that point home, the

note clarified that "The Lender or anyone who takes this Note

by transfer and who is entitled to receive payments under this

Note is called the ‘Note Holder.’" (emphasis added). Nor was

the term "Note Holder" merely a meaningless title; whoever

filled that role had the right to decide whether excess pay-

ments would be counted towards interest or principal, to

4 HORVATH v. BANK OF NEW YORK

receive late charges, and to accelerate the payment of the loan

in the event of default.

The deed of trust contained similarly straightforward lan-

guage regarding transferability. As Section 20 explained,

"The Note or a partial interest in the Note (together with this

Security Instrument) can be sold one or more times without

prior notice to Borrower." In the event of such a sale, the deed

of trust clarified that "[t]he covenants and agreements of this

Security Instrument shall bind . . . and benefit the successors

and assigns of Lender." Finally, the deed of trust named

MERS as the beneficiary "for Lender and Lender’s successors

and assigns," establishing a consistent beneficiary and thereby

further enhancing the ease with which the deed of trust could

be transferred.

After making the loan, AWL included it in a real estate

mortgage investment conduit known as the CWALT Trust. In

other words, AWL pooled Horvath’s loan with others and

then sold shares in the pool to investors. Countrywide Servic-

ing subsequently agreed to service Horvath’s loan. Insofar as

Countrywide agreed to accept all of Horvath’s payments, send

him any notices, and answer all of his questions about the

loan, it became Horvath’s single point of contact.

As a natural consequence of the securitization process,

Horvath’s note changed hands. As of 2009, the Bank of New

York ("BNY") possessed Horvath’s loan note. The deed of

trust, however, remained unchanged in Virginia’s real estate

records. By that point, Horvath had failed to make payments

on the loan for several months. The changing ownership of

the note provided him no excuse: despite the transfers, Coun-

trywide had remained as the servicer and Horvath had dealt

exclusively with that company. Accordingly, a lawyer at the

law firm of Bierman Geesing & Ward (acting on BNY’s

behalf) appointed Equity Trustees as a substitute trustee for

Samuel I. White. Equity Trustees then conducted a foreclo-

sure sale on the property on August 14, 2009.

HORVATH v. BANK OF NEW YORK 5

That same month, Horvath filed his complaint in Virginia

state court. The complaint alleged violations of the federal

Fair Debt Collection Practices Act ("FDCPA"), the Due Pro-

cess Clause, and various Virginia laws, and it named as defen-

dants BNY, Countrywide, MERS, AWL, Equity Trustees,

Samuel I. White, the CWALT Trust, and all holders of certifi-

cates in that trust. The defendants removed the case to federal

court based on the FDCPA and constitutional claims, and

Equity Trustees moved to dismiss the complaint in October

2009.

That motion was granted in part and denied in part on

November 13, 2009, which led Horvath to file an amended

complaint later that month. That complaint alleged several

claims, the most salient of which was Horvath’s claim to quiet

title under Virginia law on the theory that the "splitting, sell-

ing, trading, and insuring of the pieces of" his mortgage had

caused "the Deeds of Trust [to] split from the Notes and

[become] unenforceable." On Horvath’s view, the securitiza-

tion of his mortgage note had voided anyone else’s claim to

title over the property, meaning that he now owned the prop-

erty free and clear despite having defaulted on the loan.

All of the defendants except Samuel I. White moved to dis-

miss that complaint, and their motion was granted on January

29, 2010. The court concluded that Horvath’s quiet title claim

must fail because AWL’s decision to transfer Horvath’s note

to the CWALT Trust and ultimately to BNY was proper under

both the note and Virginia law. The district court further rea-

soned that these transfers had not changed Horvath’s repay-

ment obligations in any way. After Horvath filed several

unsuccessful motions to reconsider, the parties agreed to vol-

untarily dismiss the remaining claims against Samuel I. White

in an order the court labeled "final."1 This appeal followed.

1

Throughout the litigation, there has been some confusion as to whether

the order being appealed is a final order within the meaning of 28 U.S.C.

§ 1291. After hearing argument and reviewing the district court’s designa-

tion of its order as final, we think it appropriate to construe that order as

final and appealable. See JA 469.

6 HORVATH v. BANK OF NEW YORK

II.

For several centuries, Virginia has attempted to enhance

commerce within the state by ensuring that negotiable instru-

ments — broadly defined under Virginia law as "uncondi-

tional promise[s] or order[s] to pay a fixed amount of money,"

see Va. Code Ann. § 8.3A-104(a) — are freely transferable.

Indeed, the state’s policy dating back to at least 1827 has been

to allow the bearer of a negotiable instrument (that is, the per-

son to whom funds are owed) to endorse the instrument "in

blank." Whitworth v. Adams, 26 Va. (5 Rand.) 333, 1827 WL

1200, at *45 (1827) (Cabell, J.). Such an endorsement allows

the bearer to transfer the instrument freely, insofar as it makes

possession the sole precondition to enforcement of the instru-

ment. Id. ("[H]aving been endorsed in blank, every bearer or

holder, be he agent, trustee, finder or thief, has a right to sell

[the instrument], and to transfer it, by delivery."). This

approach allows the parties to avoid thorny disputes about

who has to pay whom, and when, in favor of a simple rule:

possession permits enforcement. After all, as the Whitworth

court observed, "[t]o compel the purchaser to go into

enquiries as to the consideration, or to permit the parties to the

bill to object to its payment, on any of the grounds stated,

would greatly impair the negotiability of bills and notes; their

most distinguishing, most useful, and most valued feature."

Id.

Since then, Virginia law has hewed to this basic approach

in a variety of ways. Principally, the state has ensured that

notes remain easy to transfer by adopting the provisions of the

Uniform Commercial Code governing negotiable instruments.

Those provisions set forth a relatively simple set of rules.

Instruments may still be endorsed in blank, see Va. Code

Ann. § 8.3A-201(b), and once they are so endorsed, they may

be negotiated (that is, transferred) "by transfer of possession

alone," see id.; see also id. § 8.3A-205(b) ("If an

[e]ndorsement is made by the holder of an instrument and it

is not a special [e]ndorsement, it is a ‘blank [e]ndorsement.’

HORVATH v. BANK OF NEW YORK 7

When [e]ndorsed in blank, an instrument becomes payable to

bearer and may be negotiated by transfer of possession alone

until specially [e]ndorsed."). After a transfer, the recipient of

an instrument obtains whatever rights the transferor had,

which in the case of an instrument endorsed in blank amounts

to plenary power to enforce the instrument. See id. § 8.3A-

203(b) ("Transfer of an instrument, whether or not the transfer

is a negotiation, vests in the transferee any right of the trans-

feror to enforce the instrument."). In other words, just as

before, possession of a negotiable instrument endorsed in

blank permits the holder to enforce it. Id.; see id. § 8.3A-

205(b) (establishing that the holder of an instrument endorsed

in blank has the right to demand payment).

The upshot of these provisions is clear. Negotiable instru-

ments like mortgage notes that are endorsed in blank may be

freely transferred. And once transferred, the old adage about

possession being nine-tenths of the law is, if anything, an

understatement. Whoever possesses an instrument endorsed in

blank has full power to enforce it. With these principles in

mind, we turn to evaluating Horvath’s claims.

III.

Horvath’s principal argument on appeal stems from his

quiet title claim.2 "[A]n action to quiet title is based on the

2

Horvath also appeals the district court’s decision to dismiss Count 2 of

his complaint. That count involved a second loan in the amount of

$111,000 that Horvath secured from the First Magnus Financial Corpora-

tion ("FMFC") in February 2006. Count 2 sought a declaratory judgment

stating that FMFC cannot foreclose on the note, even though Horvath is

in default and even though the current noteholder has made no attempt to

foreclose. Having reviewed the parties’ submissions, we conclude that this

claim is unripe for adjudication. Insofar as no foreclosure has even been

threatened, Horvath cannot yet show a "controversy . . . presented in [a]

clean-cut and concrete form." Ostergren v. Cuccinelli, 615 F.3d 263, 288

(4th Cir. 2010) (quoting Miller v. Brown, 462 F.3d 312, 316 (4th Cir.

2006)).

8 HORVATH v. BANK OF NEW YORK

premise that a person with good title to certain real or per-

sonal property should not be subjected to various future

claims against that title." Maine v. Adams, 672 S.E.2d 862,

866 (Va. 2009). In Horvath’s view, under the note, the deed

of trust, and Virginia law, only AWL (as the originating

lender) had the authority to foreclose on his home. Thus, the

foreclosure was illegitimate, because BNY (and its substitute

trustee, Equity Trustees) had no authority to carry it out.

It is difficult to see how Horvath’s arguments could possi-

bly be correct. Horvath’s note plainly constitutes a negotiable

instrument under Va. Code Ann. § 8.3A-104. That note was

endorsed in blank, meaning it was bearer paper and enforce-

able by whoever possessed it. See Va. Code Ann. § 8.3A-

205(b). And BNY possessed the note at the time it attempted

to foreclose on the property. Therefore, once Horvath

defaulted on the property, Virginia law straightforwardly

allowed BNY to take the actions that it did.

There is no evidence that the note or deed of trust sought

to curb these generally applicable provisions of Virginia law.

While parties may contract around the baseline rules applica-

ble to negotiable instruments, see id. § 8.1A-302(a), both the

note and the deed of trust demonstrate that the parties

intended to allow the documents to be freely transferred. The

note, for example, established that "the Lender may transfer

this Note," declared that "[t]he Lender or anyone who takes

this Note by transfer and who is entitled to receive payments

under this Note is . . . the ‘Note Holder,’" and granted the note

holder the right to make various decisions about the adminis-

tration of Horvath’s obligations and about how to deal with

default. The deed of trust took similar steps, asserting that

"[t]he Note or a partial interest in the Note (together with this

Security Instrument) can be sold one or more times without

prior notice to Borrower," and clarifying that "[t]he covenants

and agreements of this Security Instrument shall bind . . . and

benefit the successors and assigns of Lender." Taken together,

these provisions do little to suggest that the parties intended

HORVATH v. BANK OF NEW YORK 9

to depart from the Virginia code’s permissive approach to

transfers. In fact, they suggest precisely the opposite.

In short, it is undisputed that there was no alteration to the

note or deed of trust at any time, that there was no change in

its terms of payment, that Horvath was in default on his obli-

gations, and that the note was endorsed in blank and in BNY’s

hands when the foreclosure sale took place. Based on these

facts, it seems difficult to debate that BNY had the authority

to enforce the note by appointing a substitute trustee and fore-

closing on the property.

IV.

Horvath, however, makes a number of arguments in

response to this straightforward reasoning.3

A.

We first address the argument Horvath presses most force-

fully: that the note and deed of trust are "separate agreements"

that are "governed by separate rules of enforcement." Appel-

lant’s Br. at 18. Sometimes Horvath argues that this differen-

tial treatment is a feature of Virginia law; other times he

suggests that it is a product of "the securitization of the Note."

Reply Br. at 11. Either way, his contention boils down to a

basic principle: while BNY "potentially could sue on the Note

pursuant to the UCC," id. at 8, it has no claim under the deed

of trust. According to Horvath, the deed of trust is governed

3

In addition to the arguments discussed below, Horvath hints that BNY

should have had to prove that it had standing to enforce the note before

appointing Equity Trustees to conduct a foreclosure. See Appellant’s Br.

at 16. We reject this argument. Virginia is a non-judicial foreclosure state.

As Virginia law provides, in the event of default on a deed of trust, the

trustee "shall forthwith declare all the debts and obligations secured by the

deed of trust at once due and payable and may take possession of the prop-

erty and proceed to sell the same at auction" without any need to first seek

a court decree. See Va. Code Ann. § 55-59(7).

10 HORVATH v. BANK OF NEW YORK

by the law of real property and by equitable principles, and

those sources suggest that AWL is the only party that can

foreclose on the property. See Appellant’s Br. at 19-23.

But this argument is seriously flawed. For starters, both the

deed of trust and the case law suggest that there is no reason

to treat the note and deed of trust as governed by separate

forms of law. The text of the deed of trust envisions that it

will be conjoined with the note, clarifying that "[t]he Note or

a partial interest in the Note (together with this Security

Instrument) can be sold one or more times without prior

notice to Borrower." (emphasis added). This provision belies

any contention that the note is somehow walled off from the

deed of trust.

The cases reinforce this perspective. For over a century, it

has been settled that under Virginia law, interests in deeds of

trust accompany the promissory notes that they secure. In

other words, "deeds of trust and mortgages are regarded in

equity as mere securities for the debt, and whenever the debt

is assigned the deed of trust or mortgage is assigned or trans-

ferred with it." Williams v. Gifford, 124 S.E. 403, 404 (Va.

Special Ct. App. 1924) (citing McClintic v. Wise’s Adm’rs, 66

Va. (25 Gratt.) 448, 1874 WL 5664 (1874)); see Stimpson v.

Bishop, 82 Va. 190, 1886 WL 2987, at *7 (Va. 1886) ("It is

undoubtedly true that a transfer of a secured debt carries with

it the security without formal assignment or delivery."). The

transfer of Horvath’s note thus necessarily involved a transfer

of the underlying security.

The cases Horvath cites in response do not undermine this

longstanding principle or suggest that the note and deed of

trust should receive different legal treatment. Horvath relies

on Empire Management & Development Co., Inc. v. Green-

ville Associates, 496 S.E.2d 440 (Va. 1998) and Beck v.

Smith, 538 S.E.2d 312 (Va. 2000), for the proposition that the

"Deed of Trust is ‘of higher dignity’ and better evidence of

the understanding of the parties" than the note. Appellant’s

HORVATH v. BANK OF NEW YORK 11

Br. at 18 (quoting Empire Mgmt., 496 S.E.2d at 443). But

these cases involve the "merger doctrine," which "deals with

extinguishing a previous contract by an instrument of higher

dignity." Empire Mgmt., 496 S.E.2d at 442. In other words,

these cases focus on situations where a later-executed deed of

trust contradicts an earlier agreement. But that doctrine has

little applicability where, as here, the note and the deed of

trust are contemporaneous documents that reflect a singular

understanding between the parties. And even if the doctrine

did apply, the deed of trust does not contradict the note in any

meaningful way. To the contrary, it, like the note, suggests

that it may be freely transferred.

Of course Horvath is right that "deeds of trust and their

underlying notes are ‘separate and distinct’ documents." Va.

Hous. Dev. Auth. v. Fox Run Ltd. P’ship, 497 S.E.2d 747, 752

(Va. 1998) (quoting Jim Carpenter Co. v. Potts, 495 S.E.2d

828, 833 n.5 (Va. 1998)). But it is equally clear that "notes

and contemporaneous written agreements executed as part of

the same transaction will be construed together as forming

one contract." Id. (quoting Richmond Postal Credit Union v.

Booker, 195 S.E. 663, 665 (Va. 1938)) (emphasis added).

Where "neither document varies or contradicts the terms of

the other, [the] terms of one document which clearly contem-

plate the application of terms in the other may be viewed

together as representing the complete agreement of the par-

ties." Id. at 752-53. Here, that "agreement" is that the note and

deed of trust form part of one transaction, that the note may

be transferred freely with the purchaser or recipient inheriting

full rights to enforce, and that the deed of trust follows the

note.

Indeed, common sense suggests that things could not be

any other way. If Horvath were correct in asserting that the

transfer of a note splits it from the deed of trust, see Reply Br.

at 11, there would be little reason for notes to exist in the first

place. One of the defining features of notes is their transfera-

bility, see Whitworth, 1827 WL 1200, at *45, but on Hor-

12 HORVATH v. BANK OF NEW YORK

vath’s view, transferring a note would strip it from the

security that gives it value and render the note largely worth-

less. This cannot be — and is not — the law.

Finally, even were we to assume that deeds of trust are gov-

erned by different law than notes, the Virginia code confirms

that BNY had the authority to take the steps it took. Section

55-59 of the code discusses the construction of deeds of trust

and quite plainly states that "[t]he party secured by the deed

of trust, or the holders of greater than fifty percent of the

monetary obligations secured thereby, shall have the right and

power to appoint a substitute trustee or trustees for any rea-

son." Va. Code Ann. § 55-59(9). At the very least, at the time

it appointed Equity Trustees to carry out the foreclosure, BNY

held 100 percent of the monetary obligations due from Hor-

vath by virtue of being the holder of the note Horvath signed,

bringing its actions squarely within the scope of § 55-59(9).

B.

Horvath mounts one other argument for why the deed of

trust trumps the note: according to him, the deed of trust’s

plain text forbids anyone but AWL from appointing a substi-

tute trustee and foreclosing on the property. Horvath’s argu-

ment here is a bit complicated, and rests on the interpretive

canon that "expressing one item of a commonly associated

group or series excludes another left unmentioned." United

States v. Vonn, 535 U.S. 55, 65 (2002).

As Horvath points out, the deed of trust defines the term

"Lender" as AWL and quite clearly specifies when actors

besides the Lender may take actions to administer the deed of

trust. For example, Section 7 allows the "Lender or its agent"

to make "reasonable entries upon and inspections of the Prop-

erty," and Section 22 requires the "Lender or Trustee" to give

notice to the borrower if the Lender decides to sell the prop-

erty. But the deed of trust allows only the "Lender" to "in-

voke[ ] the power of sale" (in Section 22) and "appoint a

HORVATH v. BANK OF NEW YORK 13

successor trustee" (in Section 24). Thus, argues Horvath,

while the parties allowed the Lender’s agents and trustees to

stand in the Lender’s shoes for some purposes, "the parties

. . . did not see fit to extend" the powers of sale and appoint-

ment "beyond the Lender." Appellant’s Br. at 14. Therefore,

only AWL can enforce the deed of trust.

This argument runs aground on other provisions of the deed

of trust. Section 20 allows for the "Note or a partial interest

in the Note (together with this Security Instrument) [to] be

sold one or more times without prior notice to" Horvath. This

provision establishes that AWL — the Lender — may sell its

entire interest in the deed of trust to another party. But if Hor-

vath’s reading of the deed of trust is correct, the purchaser

would be paying for a worthless document, as the purchaser

would have absolutely no power to administer or enforce the

deed of trust. After all, to the extent Horvath argues that AWL

is the only party who can fulfill the role of the "Lender" under

the deed of trust, the purchaser would be entirely beholden to

AWL — a party who, post sale, has no remaining financial

stake in the deed of trust — to manage the deed of trust after

the sale.

The better reading — and the one that avoids bringing

about such an absurd result — is to read the term "Lender" as

applying not only to AWL but to any subsequent purchaser of

the deed of trust. See Chi. Ry. Equip. Co. v. Merchants’ Bank,

136 U.S. 268, 281 (1890) (provisions of a contract should "be

construed in connection with the other provisions, so that if

possible, or so far as is possible, they may all harmonize");

Ward’s Equip., Inc. v. New Holland N. Am., Inc., 493 S.E.2d

516, 519 (Va. 1997) ("A contract must be construed as written

and as a whole with all parts being harmonized whenever pos-

sible."); Paramount Termite Control Co., Inc. v. Rector, 380

S.E.2d 922, 925 (Va. 1989) (same). This approach comports

as well with the text of the deed of trust, for Section 13 pro-

vides that "[t]he covenants and agreements of this Security

14 HORVATH v. BANK OF NEW YORK

Instrument shall bind . . . and benefit the successors and

assigns of Lender." (emphasis added).

It is worth noting in closing that this reading has the addi-

tional benefit of making good sense. If AWL were to sell its

interest in the deed of trust, it would no longer be the

"Lender" in any meaningful sense: at that point, Horvath’s

financial obligations would run to the purchaser, not to AWL,

and AWL would not be entitled to recover any funds from

Horvath. On Horvath’s view, by contrast, even after the point

of sale, AWL — not the purchaser — would be the "Lender"

and would have the right to receive monthly payments and

foreclose on the property. Stating this proposition is sufficient

to refute it.

C.

Perhaps recognizing the flaws with his textual argument,

Horvath comes close to conceding that any "successor in

interest to AWL" can enforce the deed of trust. Reply Br. at

13. Nevertheless, Horvath mounts one final argument for why

BNY is not truly the "Lender." On Horvath’s view, the trans-

fer of the note and deed of trust was invalid because it was

never recorded in the land records relating to Horvath’s prop-

erty. According to Horvath, the land records do not reflect any

"assignment . . . evidencing a transfer of interest in the Deed

of Trust from AWL to any other entity," meaning there is a

"break in the chain of title" on the property. Appellant’s Br.

at 21. Thus, "BNY’s possession of the physical note is mean-

ingless"; as the transfer was not recorded, "equitable princi-

ples" suggest that BNY had no right to enforce the deed of

trust. Reply Br. at 16.

The principal problem with this argument is that it is incon-

sistent with Virginia law. While Virginia allows parties to

transfer securities like the deed of trust, it does not require

them to record such transfers in the land records. Indeed, Va.

Code Ann. § 55-66.01 suggests that the assignor of a deed of

HORVATH v. BANK OF NEW YORK 15

trust "at its option, may cause the instrument of assignment to

be recorded," but goes on to make clear that "[n]othing in this

statute shall imply that recordation of the instrument of

assignment or a certificate of transfer is necessary in order to

transfer to an assignee the benefit of the security provided by

the deed of trust." Va. Code Ann. § 55-66.01 (emphasis

added). In other words, parties may elect to record the transfer

in the land records, but their failure to do so does not under-

mine the transaction in any way.

At bottom, Horvath’s arguments on this score stem more

from his views of what the law ought to be than from what

it actually is. But even if Horvath were correct in arguing that

recordation would help avoid the "fraud" that has allegedly

beset the mortgage industry "at all levels," Appellant’s Br. at

22, and would preserve the "sanctity of the land records," id.

at 20, we would nevertheless still decline to accept his invita-

tion to rewrite Virginia law. The Virginia legislature has

decided to allow parties free rein to assign and transfer notes

and the deeds of trust accompanying them, and if Horvath

thinks the legislature struck that balance wrong, it is for the

legislature to correct it.4

V.

Horvath’s briefs are filled with allegations of fraud in the

mortgage industry and discussions of the financial crisis that

has plagued the country of late. But these seem interposed

4

As a last resort, Horvath argues that the appellees should not have been

able to foreclose on his property because they did not suffer any losses

from his default. In his view, the profits from the securitization of his

mortgage must have offset any losses the appellees incurred from his

default. We reject this claim as well. While Virginia law does recognize

a limited "double recovery" defense to foreclosure proceedings, see Nizan

v. Wells Fargo Bank Minn. Nat’l Ass’n, 650 S.E.2d 497 (Va. 2007), that

defense does not allow individuals in default on a mortgage to offset their

outstanding obligations by pointing to the mortgagee’s unrelated invest-

ment income.

16 HORVATH v. BANK OF NEW YORK

mainly to distract attention from what in reality is a straight-

forward commercial case. The court cannot ignore the myriad

sources that confirm BNY’s authority to take the steps that it

did — from the text of the note and deed of trust, to the provi-

sions of the Virginia code, to the centuries of Virginia case

law protecting the negotiability of commercial instruments.

None of these permits us to grant Horvath undisputed title

over his property in return for his default. We thus affirm the

judgment of the district court.

AFFIRMED