Opinion

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-11-00429-CV

Alvie Campbell and Julie Campbell, Appellants

v.

Mortgage Electronic Registration Systems, Inc., as Nominee for Lender and Lender's

Successors and Assigns; Wells Fargo Bank, N.A.; Stephen C. Porter; David Seybold;

Ryan Bourgeois; Matthew Cunningham, and John Doe 1-100, Appellees

FROM THE DISTRICT COURT OF WILLIAMSON COUNTY, 368TH JUDICIAL DISTRICT

NO. 10-1093-C368, HONORABLE BURT CARNES, JUDGE PRESIDING

M E M O R A N D U M O P I N I O N

Alvie Campbell and Julie Campbell appeal from the trial court's orders granting a

no-evidence motion for summary judgment filed by Mortgage Electronic Registration Systems, Inc.

("MERS") and Wells Fargo Bank, N.A. and a motion to dismiss filed by Wells Fargo attorneys

Stephen C. Porter, David Seybold, Ryan Bourgeois, and Matthew Cunningham (collectively "the

Attorney Defendants"). We will affirm the trial court's orders.

FACTUAL AND PROCEDURAL BACKGROUND

In order to purchase property located at 250 Private Road 947 in Williamson County,

the Campbells borrowed $137,837 from American Mortgage Network, Inc. d/b/a AMNET Mortgage

("AMNET"). The loan is evidenced by a promissory note dated October 29, 2004 in the original

principal amount of $137,837 payable to "Lender," which is defined as AMNET and its successors

and assigns. The note is secured by a deed of trust dated October 29, 2004, and recorded in the

Official Public Records of Williamson County. The deed of trust secures repayment of the debt

evidenced in the note, and for that purpose the Campbells granted and conveyed to the trustee, to

hold in trust with power of sale, the property located at 250 Private Road 947. The beneficiary under

the deed of trust is MERS, acting solely as a nominee for AMNET and its successors and assigns.

The deed of trust states:

[The Campbells] understand and agree that MERS holds only legal title to the

interests granted by [the Campbells] in this Security Interest, but, if necessary to

comply with law or custom, MERS (as nominee for Lender and Lender's successors

and assigns) has the right: to exercise any or all of those interests including, but not

limited to, the right to foreclose and sell the Property; and to take any action required

of Lender including, but not limited to, releasing and canceling this Security

Instrument.

The reverse side of the note's signature page includes an endorsement signed by AMNET stating:

"pay to the order of Wells Fargo Bank, N.A. without recourse." The summary-judgment evidence

included the affidavit of Kyle N. Campbell, Vice President of Loan Documentation for Wells Fargo

Bank, who averred that

Wells Fargo became the holder and servicer of the Note on December 9, 2004. Since

that time, Wells Fargo has remained the holder and servicer of the Note. Wells Fargo

is in physical possession of the original Note, which is endorsed to Wells Fargo. The

endorsement appears on the back side of the Original Note's signature page.

In August 2008, MERS assigned its interest in the deed of trust to Wells Fargo. This assignment was

recorded in the Official Public Records of Williamson County on September 30, 2008.

In July 2010, counsel for Wells Fargo gave the Campbells notice of its intent to

foreclose on the property securing the note, and in September 2010 the substitute trustee sold the

property at a non-judicial foreclosure sale. The Campbells then sued MERS, Wells Fargo, and the

Attorney Defendants, asserting a cause of action for wrongful foreclosure. The Campbells alleged

that Wells Fargo lacked authority to foreclose under the deed of trust because it was not the holder

of the note and because the note and deed of trust had been "bifurcated." They contended this

bifurcation "rendered the secured debt unsecured," causing it to be unenforceable and, as a

consequence, "the power of sale clause contained within the nullified security interest" was also

unenforceable. The Campbells sought monetary damages and requested that the court set aside the

sale and enter an injunction prohibiting any action that would interfere with their possession and

enjoyment of the property.

Wells Fargo and MERS filed traditional and no-evidence motions for summary

judgment, and the Attorney Defendants filed a motion to dismiss. The trial court granted the

no-evidence motion for summary judgment and the motion to dismiss, and this appeal followed. In

two issues, the Campbells contend that the trial court erred in granting those motions.

DISCUSSION

Did the trial court err in granting the no-evidence motion for summary judgment?

We review the trial court's summary-judgment rulings de novo. Valence Operating

Co. v. Dorsett , 164 S.W.3d 656, 661 (Tex. 2005); Provident Life & Accident Ins. Co. v. Knott ,

128 S.W.3d 211, 215 (Tex. 2003). A party moving for summary judgment under rule 166a(i) must

assert that, after adequate time for discovery, there is no evidence of one or more essential elements

of a claim or defense on which the adverse party would have the burden of proof at trial. Tex. R.

Civ. P. 166a(i); see Fort Worth Osteopathic Hosp. Inc. v. Reese , 148 S.W.3d 94, 99 (Tex. 2004).

To defeat a rule 166a(i) summary-judgment motion, the nonmovant must produce summary-judgment evidence raising a genuine issue of material fact. Tex. R. Civ. P. 166a(i); Ford Motor Co.

v. Ridgway , 135 S.W.2d 598 , 600 (Tex. 2004). A genuine issue of material fact exists if the

nonmovant produces more than a scintilla of evidence establishing the existence of the challenged

element. Ford Motor Co. , 135 S.W.3d at 600. More than a scintilla of evidence exists if the

evidence would allow reasonable and fair-minded people to differ in their conclusions. City of

Keller v. Wilson , 168 S.W.3d 802, 827 (Tex. 2005); see also Goodyear Tire & Rubber Co. v. Mayes ,

236 S.W.2d 754 , 755 (Tex. 2007). "Less than a scintilla of evidence exists when the evidence is

'so weak as to do no more than create a mere surmise or suspicion' of a fact." King Ranch,

Inc. v. Chapman , 118 S.W.3d 742, 750-51 (Tex. 2003) (quoting Kindred v. Con/Chem. Inc. ,

650 S.W.2d 61, 63 (Tex. 1983)). Evidence that is so slight as to make any inference a guess is in

legal effect no evidence. Ford Motor Co. , 135 S.W.3d at 601. If the nonmovant fails to produce

more than a scintilla of evidence under that burden, there is no need to analyze whether the movant's

proof satisfied the "traditional" summary-judgment burden under rule 166a(c). Id. at 600.

In their second issue, the Campbells contend that the trial court erred in granting the

no-evidence motion for summary judgment because there were genuine issues of material fact as to

whether Wells Fargo was the owner of a valid lien securing the property sold, as well as to whether

the lien actually created a security interest in the property. They argue that their cause of action

below was not one for wrongful foreclosure but instead was a complaint that Wells Fargo did not

have "the legal right to invoke the power of sale contained in an expired deed of trust much less not

having been a proper agent for a note holder with rights to enforce" the note. In their petition,

however, the Campbells alleged, under the caption "Count 1: Wrongful Foreclosure," that

[the] foreclosure action was wrongful. The Deed of Trust is not enforceable due to

that lack of ownership in the note by the Defendants and if such lawful owner of the

indebtedness was to prove up a proper Note, bifurcation of the note and the security

instrument has been proved by an assignment of the mortgage by an intrusive non-party that was not [a] "Holder in Due Course."

We understand the Campbells' claim in the court below to be that Wells Fargo and MERS lacked

authority to foreclose on the property because (1) neither was the holder of the note, and (2) the deed

of trust, by virtue of events transpiring after the note and deed of trust were executed, did not

continue to create a security interest in the property. Therefore, in order to defeat the no-evidence

motion for summary judgment, the Campbells were required to produce summary-judgment

evidence creating a fact issue as to one of these stated bases for their allegation that the foreclosure

was improper.

In their response to the no-evidence motion for summary judgment, the Campbells

argued that Wells Fargo has not proven that it is the holder of the note. As an initial matter, we note

that the Campbells, as plaintiffs alleging wrongful foreclosure, would have the burden of proof

at trial to show that Wells Fargo was not the note's holder. See Sauceda v. GMAC Mortg. Corp. ,

268 S.W.3d 135, 139 (Tex. App.--Corpus Christi 2008, no pet.) ("To prevail in a wrongful

foreclosure suit, a party must establish (1) a defect in the foreclosure sale proceedings; (2) a grossly

inadequate selling price; and (3) a causal connection between the defect and the grossly inadequate

selling price."). In the context of a no-evidence motion for summary judgment, Wells Fargo was not

required to present proof that it was the holder. Rather, the Campbells had the burden of proving

this alleged defect in the foreclosure sale proceedings, i.e., that Wells Fargo was not the holder. To

survive the no-evidence summary judgment motion, therefore, they were required to create a fact

issue as to whether Wells Fargo was in fact the note's holder. They did not do so. The "evidence"

attached to their response to the no-evidence motion consisted of (1) an order from a New Jersey

proceeding involving unrelated parties; (2) an "exhibit" that consists of a composite of photocopies

of portions of instruments purportedly related to this transaction, unsupported by any affidavit or

attestation that would make it competent summary-judgment evidence; and (3) the affidavit of James

McGuire, who averred that he overheard Mark Hopkins, counsel for the Attorney Defendants, tell

a different trial judge in a different proceeding that a ruling in that proceeding could impact the

outcome of the present case. None of this "evidence" created a fact issue as to whether Wells Fargo

was the holder of the note. (1) The Campbells thus failed to produce any evidence creating a fact issue

as to Wells Fargo's status as the note's holder.

We next consider whether the Campbells created a fact issue as to whether the deed

of trust continued to create a valid security interest in the property. Again, it was the Campbells'

burden to create a fact issue as to the invalidity of the security interest created by the deed of trust.

While the Campbells did not produce any competent summary-judgment evidence in this regard,

they did point to evidence attached to Wells Fargo and MERS's traditional summary-judgment

motion and argue that such evidence created a fact issue as to the validity of the deed of trust and

Wells Fargo's right to foreclose on the property. Because the Campbells referenced this summary-judgment evidence in their response, the trial court could have considered it when ruling on the

no-evidence motion for summary judgment. See, e.g. , Dyer v. Accredited Home Lenders, Inc. ,

No. 02-11-00046-CV, 2012 WL 335858 , at *3 (Tex. App.--Fort Worth Feb. 2, 2012, no pet. h.)

(mem. op.) (court required to ignore traditional summary-judgment evidence attached to combined

summary judgment motion unless nonmovant directed trial court to that evidence in its response to

no-evidence motion). In their response to Wells Fargo's no-evidence motion for summary judgment,

the Campbells referred to the note, the deed of trust, and evidence of their assignments attached as

evidence to Wells Fargo's traditional summary-judgment motion and asserted that, because the

"transfer of the lien was not recorded into land records in Williamson County until almost four years

after the alleged negotiation of the note . . . perfection was lost in the chain of title by not conforming

to recordation laws of Texas." Presumably, the Campbells were referring to the fact that the note

was transferred to Wells Fargo in December 2004, but the assignment of the deed of trust from

MERS to Wells Fargo was not recorded in the Official Public Records of Williamson County until

September 30, 2008. According to the Campbells, during the intervening time period the note and

the deed of trust securing its payment became "bifurcated," and perfection of the security interest

was lost, rendering its foreclosure provisions unenforceable. The Campbells' arguments do not

create a fact issue as to whether there was a defect in the foreclosure proceedings. First, no

"bifurcation" of the note and the deed of trust resulted from AMNET's assignment of the note to

Wells Fargo. When a mortgage note is transferred, the mortgage or deed of trust is also

automatically transferred to the note holder by virtue of the common-law rule that "the mortgage

follows the note." J.W.D., Inc. v. Federal Ins. Co. , 806 S.W.2d 327, 329-30 (Tex. App.--Austin

1991, no writ) (mortgage on real estate is said to "follow" promissory note it secures). (2) Therefore,

when AMNET transferred the note to Wells Fargo, that transfer also served to transfer the deed of

trust to Wells Fargo.

Second, perfection of the security interest was not lost due to the claimed "late" filing

and recordation, as the Campbells appear to contend. The summary-judgment evidence shows that

the deed of trust was filed and recorded in the Official Public Records of Williamson County on

November 5, 2004, approximately one week after it was executed by the Campbells. Re-recordation

was not required when the note was transferred to Wells Fargo in December of that year. MERS is

a recognized "book entry system." See Tex. Prop. Code Ann. § 51.0001 (1) (West 2007) ("book

entry system" means national book entry system for registering beneficial interest in security interest

that acts as nominee for grantee, beneficiary, owner, or holder of security instrument and its

successors and assigns). The MERS system is an electronic mortgage registration and clearinghouse

that tracks beneficial ownerships in, and servicing rights to, mortgage loans. See In re Mortg. Elec.

Registration Sys. (MERS) Litig. , 659 F. Supp. 2d 1368, 1370 (J. P. M. L. 2009). When, as here, the

deed of trust names MERS as the nominee for the lender and its successor and assigns and the deed

of trust is recorded in the local real-property records with MERS as the named beneficiary, MERS

remains the mortgagee of record if the note is transferred between MERS members, and there is no

requirement that the deed of trust be re-recorded each time it is transferred. See Knighton

v. Merscorp, Inc. , 300 F. App'x 285, 286 (5th Cir. 2008) ("MERS members pay a one-time and

nominal fee for each registered mortgage. With MERS as the permanent record mortgagee, rights

to the mortgage loan can be bought and sold without any changes to the public land records.").

When the note was transferred from AMNET to Wells Fargo in December 2004, MERS became the

nominee for Wells Fargo and, consequently, there was no requirement that the deed of trust be

re-recorded.

To the extent the Campbells argue that the assignment of the deed of trust from

MERS to Wells Fargo in August 2008 was invalid, or that the involvement of MERS in the

transaction somehow rendered it ineffective to preserve Wells Fargo's right to foreclose on the

property, these arguments also fail. The role of MERS was clearly established in the deed of trust:

Borrower understands and agrees that MERS holds any legal title to the interests

granted by Borrower in this Security Interest, but, if necessary to comply with the law

or custom, MERS (as nominee for Lender and Lender's successors and assigns) has

the right: to exercise any or all of those interests, including, but not limited to, the

right to foreclose and sell the Property; and to take any action required of Lender,

including but not limited to, releasing and canceling this Security Interest.

Under Texas law, where, as here, a deed of trust expressly grants MERS the power of sale, then

MERS has that power. Athey v. MERS , 314 S.W.3d 161, 166 (Tex. App.--Eastland 2010, pet.

denied). MERS was the nominee for AMNET and its successors and assigns, which includes Wells

Fargo. MERS had the authority to transfer the rights and interests in the deed of trust to Wells

Fargo. When MERS transferred the deed of trust to Wells Fargo, Wells Fargo obtained all MERS's

rights and interests in the deed of trust, including the power to foreclose on the property. As in

Athey , the mortgage documents provide for the use of MERS, and those provisions are enforceable

to the extent provided by the terms of the documents. MERS's actions in this transaction were

consistent with both the note and the deed of trust. MERS's involvement in these foreclosure

proceedings does not render them defective. The Campbells have failed to raise a genuine issue of

material fact regarding Wells Fargo's non-judicial foreclosure on the property.

With regard to MERS, the no-evidence summary judgment was proper because there

was no evidence that MERS participated in the foreclosure sale. Rather, it had already assigned the

deed of trust to Wells Fargo, and the foreclosure sale was conducted by Wells Fargo. We overrule

the Campbells' second issue.

Did the trial court err in granting the Attorney Defendants' motion to dismiss?

In their petition, the Campbells did not allege a separate cause of action against the

Attorney Defendants, but instead appeared to base their claim for damages on the Attorney

Defendants' participation in what the Campbells asserted was a wrongful foreclosure. The Attorney

Defendants filed a motion to dismiss based on attorney immunity from suit with regard to claims

against them. The trial court granted the Attorney Defendants' motion to dismiss.

An attorney enjoys "qualified immunity," with respect to non-clients, for actions

taken in connection with representing a client in litigation. See, e.g. , Butler v. Lilly , 533 S.W.2d 130,

131-34 (Tex. Civ. App.--Houston [1st Dist.] 1976, writ dism'd). This qualified immunity generally

applies even if conduct is improper in the context of the underlying lawsuit. Renfroe v. Jones

& Assocs. , 947 S.W.2d 285, 288 (Tex. App.--Fort Worth 1997, writ denied) ("Under Texas law,

attorneys cannot be held liable for wrongful litigation conduct."). An attorney's conduct, even if

frivolous or without merit, while potentially sanctionable by the court, is not independently

actionable if the conduct is part of the discharge of the lawyer's duties in representing his client.

Chapman Children's Trust v. Porter & Hedges, L.L.P ., 32 S.W.3d 429, 441 (Tex. App.--Houston

[14th Dist.] 2000, pet. denied); Bradt v. West , 892 S.W.2d 56, 71-74 (Tex. App.--Houston [1st

Dist.] 1994, writ denied). A lawyer's protection from liability arising out of his representation of

a client is not, however, without limits. See McCamish, Martin, Brown & Loeffler v. Appling

Interests , 991 S.W.2d 787, 792 (Tex. 1999). For example, a cause of action could exist against an

attorney who knowingly commits a fraudulent act outside the scope of his legal representation of his

client. See Likover v. Sunflower Terrace II, Ltd. , 696 S.W.2d 468, 472 (Tex. App.--Houston [1st

Dist.] 1985, no writ). If a lawyer participates in independently fraudulent activities, his action is

"foreign to the duties of an attorney." Id. Thus, a lawyer cannot shield his own fraudulent actions

from liability simply on the ground that he is an agent of his client. Id.

In their motion to dismiss, the Attorney Defendants asserted that they were immune

from suit because they could not be sued by the Campbells for actions taken within the scope of their

representation of Wells Fargo. The Attorney Defendants were retained by Wells Fargo to assist in

the foreclosure of the property located at 250 Private Road 947. Attached to the motion to dismiss

was the affidavit of Stephen Porter, who averred that the Attorney Defendants had no contact with

the Campbells that was not in their capacity as "legal counsel for Wells Fargo in an adverse

relationship with Alvie Campbell and Julie Campbell." The Campbells did not controvert the Porter

affidavit, nor did they produce evidence or allege that the Attorney Defendants had any contact or

communication with them that was not in their capacity as counsel for Wells Fargo assisting with

the foreclosure proceedings. Neither the Campbells' petition nor their response to the motion to

dismiss alleged that the Attorney Defendants committed any wrongful acts outside of the foreclosure

proceedings. Moreover, we have already concluded above that the foreclosure proceedings were not

defective in any discernable way. We hold, therefore, that the trial court did not err in dismissing

the Campbells' claims against the Attorney Defendants. See Alpert v. Crain, Caton & James, P.C. ,

178 S.W.3d 398, 408 (Tex. App.--Houston [1st Dist.] 2005, pet. denied) (affirming trial court's

dismissal of claims against attorney on ground that because of attorney's immunity from suit,

plaintiff failed to allege claim or plead cause of action for which relief could be granted). We

overrule the Campbells' first appellate issue.

CONCLUSION

Having overruled the Campbells' two appellate issues, we affirm the trial court's

order granting Wells Fargo and MERS's no-evidence motion for summary judgment and its order

dismissing the Campbells' claim against the Attorney Defendants.

_____________________________________________

J. Woodfin Jones, Chief Justice

Before Chief Justice Jones, Justices Pemberton and Rose

Affirmed

Filed: May 18, 2012

1. We observe that the uncontroverted summary-judgment evidence that Wells Fargo

produced in connection with its traditional motion for summary judgment does establish conclusively

that it was the holder of the note. This evidence included a copy of the note endorsed by AMNET

to Wells Fargo proved up by the affidavit of Kyle N. Campbell, who averred that Wells Fargo

became the note's holder in December 2004 and has since remained its holder and servicer.

2. In the context of personal property, this rule has been codified in section 9.203(g) of the

business and commerce code. See Tex. Bus. & Com. Code Ann. § 9.203 cmt. 9 (West 2011)

("Subsection (g) codifies the common-law rule that a transfer of an obligation secured by a security

interest or other lien on personal or real property also transfers the security or lien."). The fact that

the rule has not been similarly codified as to real property does not diminish the force of the

common-law real-property rule.