FILED

United States Court of Appeals

Tenth Circuit

UNITED STATES COURT OF APPEALS February 1, 2012

TENTH CIRCUIT

Elisabeth A. Shumaker
Clerk of Court

CHAD D. SCARBOROUGH,
Plaintiff-Appellant,
v.
LASALLE BANK NATIONAL
ASSOCIATION, as Trustee for First
Franklin Mortgage Loan Trust, Mortgage
Loan Asset-Backed Certificates Series
2007 FF2; MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS; FIRST
FRANKLIN FINANCIAL,

No. 11-4092
(D.C. No. 2:10-CV-00624-CW)
(D. Utah)

Defendants-Appellees.

ORDER AND JUDGMENT*

Before BRISCOE, Chief Judge, EBEL and LUCERO, Circuit Judges.

Plaintiff Chad Scarborough defaulted on his mortgage, resulting in foreclosure

proceedings and the sale of his home. Scarborough then filed this action against the
mortgagee, as well as several other entities, claiming that the pre-default sale of his
mortgage and its securitization effectively prevented defendants from instituting

This order and judgment is not binding precedent, except under the doctrines of
law of the case, res judicata, and collateral estoppel. It may be cited, however, for its
persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.

foreclosure proceedings against him. The district court granted summary judgment in
favor of defendants. Scarborough now appeals. Exercising jurisdiction pursuant to 28
U.S.C. 1291, we affirm.
I
Scarboroughs mortgage loan
On December 20, 2006, Scarborough purchased a home in South Jordan, Utah. To
fund the purchase, Scarborough entered into a residential mortgage loan, in the amount of
$237,000, with First Franklin Financial Corporation (First Franklin). First Franklins
security interest in the property was memorialized by a promissory note and a deed of
trust naming Utah Mountain Title as trustee and Mortgage Electronic Registration
Systems, Inc. (MERS) as beneficiary. The trust deed was recorded on December 22,
2006, in the office of the Salt Lake County Recorder.
The sale and securitization of Scarboroughs loan
Scarboroughs mortgage loan was subsequently sold and securitized. More
specifically, on February 1, 2007, First Franklin entered into a mortgage loan purchase
agreement with Merrill Lynch Mortgage Investors, Inc. (MLM Investors). Under the
terms of that agreement, First Franklin agreed to sell to MLM Investors a group of
mortgage loans, apparently including Scarboroughs,1 with an aggregate balance of
$205,9889,567. The agreement provided that MLM Investors would in turn create the
1

The record on appeal does not appear to precisely identify whether Scarboroughs
mortgage was included in this group of loans. But the clear implication of the record is
that it was.
2

First Franklin Mortgage Loan Trust, Mortgage Loan Asset-Backed Certificates, Series
2007-FF2 . . . under a pooling and servicing agreement . . . by and among [MLM
Investors], as depositor, LaSalle Bank, National Association [(LaSalle)], as trustee . . .
and Home Loan Services, Inc. [(Home Loan Services)], as servicer. Aplt. App. at 11.
The agreement further provided that, [p]ursuant to the Pooling and Servicing
Agreement, [MLM Investors] w[ould] assign . . . all of its right, title and interest in and to
the Mortgage Loans to the Trustee [LaSalle] for the benefit of the Certificateholders.2
Id. at 16.
On that same date (February 1, 2007), MLM Investors, Home Loan Services, and
LaSalle entered into a Pooling and Servicing Agreement for the First Franklin Mortgage
Loan Trust, Mortgage Loan Asset-Backed Certificates, Series 2007-FF2. Id. at 56. The
Pooling and Servicing Agreement provided that [t]he ownership of each Mortgage Note,
the Mortgage and the contents of the related Mortgage File [were to be] vested in the
Trustee [LaSalle] on behalf of the Certificateholders. Id. at 138.
The foreclosure
On September 2, 2008, MERS, as nominee of First Franklin and beneficiary under
the trust deed, assigned its beneficial interest in the trust deed to LaSalle. On December
2, 2008, eTitle Insurance Agency (eTitle) recorded a Substitution of Trustee. In that
2

On that same date (February 1, 2007), MLM Investors purchased an even larger
group of mortgage loans (totaling $2,394,022,629) from Merrill Lynch Mortgage
Lending, Inc. (MLM Lending). All of those loans had apparently originated from First
Franklin. It appears that this group of loans was securitized with the group of loans
purchased directly from First Franklin, and held in trust for MLM Investors by LaSalle.
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document, LaSalle explicitly ratified and confirmed all actions taken on its behalf by
eTitle prior to the recording of the Substitution of Trustee.
On October 9, 2008, eTitle, acting as successor trustee, issued to Scarborough a
notice of default and election to sell. That document indicated that Scarborough was in
default on his monthly payment obligations under the promissory note. The default was
not cured within three months after the filing of the notice of default. On May 19, 2010,
eTitle, as successor trustee, held a trustees sale of the property. The property was sold to
U.S. Bank, National Association, as successor trustee to Bank of America, N.A., as
successor by merger to LaSalle.
The instant proceedings
On June 7, 2010, Scarborough filed a complaint in the Third District Court of Salt
Lake County, Utah, against LaSalle, MERS, First Franklin, and John Does of Unknown
Number, id. at 478, which Scarborough later identified as the unknown investors
(presumably referring to the purchasers of the mortgage loan asset-backed certificates),
Aplee. Supp. App. at 138. The complaint began by recounting the history of
Scarboroughs mortgage loan and the subsequent sale and securitization of that loan. The
complaint in turn alleged that, [a]s a result of the transfer of the debt as part of a
securities transaction, and of the lack of [any] recordings [of any security interest by any
transferee], First Franklin and the other defendants [we]re not the present owners of the
debt or the obligee(s) thereon. Aplt. App. at 482. Relatedly, the complaint alleged that
[t]he Trust Deed ha[d] not been assigned or transferred of record, in whole or in part,
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and that the [n]amed defendants, or one of them, [wa]s a mere custodian of the Note for
others. Id.
Based upon these allegations, the complaint asserted five causes of action. The
first cause of action, entitled Injunctive Relief, sought an order enjoining disposition
of the subject realty by the defendants. Id. at 485. The second cause of action, for
estoppel/declaratory judgment, sought the entry of an Order declaring that defendants,
including unnamed defendants who have asserted no assignment of the Trust Deed, lack
any interest under the Trust Deed which may be enforced by lien upon or sale of the
subject property. Id. at 486. The third cause of action, entitled Declaratory Judgment,
similarly sought entry of an Order declaring that defendants . . . lack any interest under
the Trust Deed which may be enforced by lien upon or sale of the subject property. Id.
at 488. The fourth cause of action, entitled Quiet Title, sought entry of an Order . . .
quieting title to the subject property in plaintiff and against defendants, . . . freeing title to
the subject property of the lien of the Trust Deed and leaving the debt unsecured by any
interest in the subject property. Id. at 489. The fifth cause of action, entitled Refund,
Fees and Costs, alleged that Defendant Bank and Trustees pretenses of authority to
foreclose, or attempt to foreclose, under the Trust Deed were fraudulent, and in turn
sought an order directing defendants to pay to plaintiff its fees and costs, together with a
reasonable attorneys fee . . . and to reimburse to plaintiff unnecessary fees and charges
under the Note and Trust Deed. Id.
On July 7, 2010, LaSalle, MERS and First Franklin removed the case to federal
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court on the basis of diversity jurisdiction. Nine days later, on July 16, 2010, these three
defendants filed a motion to dismiss Scarboroughs complaint pursuant to Fed. R. Civ. P.
12(b)(6). In support, defendants argued that the Trust Deed was a valid and enforceable
encumbrance on the Property and secured a valid and enforceable Note, which Note was
indisputably in default at the time of the Trustees Sale and [that] the actions taken by
Defendants leading up to and including the Trustees Sale were valid and authorized by
Utah law. Aplee. Supp. App. at 2. In turn, defendants argued that [t]he alleged sale
and securitization of the Note d[id] not relieve [Scarborough] of his obligations under it,
nor d[id] it affect Defendants rights under the Trust Deed. Id.
In their supporting memorandum, defendants also asserted as follows:
This case is but one of a series of nearly identical cases filed by
Plaintiffs attorney on behalf of his clients as part of a mortgage relief
scheme. The concept underpinning this scheme is that a defaulting
borrower, whose home is noticed for sale or has been sold at a trustees
sale, may gain fee simple title to the subject property merely by asserting
that the promissory note executed by the borrower has become unsecured
because it has been securitized or made part of a trust pool. Plaintiffs
claims in this case, like the cases it mirrors, are without merit and should be
dismissed.
Id. at 8 (internal footnote, listing various cases filed by plaintiffs counsel, omitted).
Scarborough filed a response in opposition to the motion to dismiss. He argued, in
pertinent part, that the purchasers of the certificates were the effective owners of the
[underlying] debt, and, as such, were the only ones who had the right to foreclose. Id. at
139. Relatedly, Scarborough argued that where a loan has been securitized, the
possessor of the Note is presumptively a custodian . . . for investors, and may not
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foreclose without demonstrating an express agency to do so on behalf of the investors.

Id. at 141.
Defendants, in reply, asserted that Scarboroughs entire argument hinge[d] on his
erroneous characterization of the home loan securitization process. Id. at 375. In
particular, defendants argued that, contrary to Scarboroughs assertions, MBS
[mortgage-backed securities] certificate holders do not have the authority to enforce a
deed of trust, id., nor do they own the underlying promissory notes of an MBS, id. at
376. Instead, defendants argued, MBS certificate holders own an interest in the proceeds
of the pool [i.e., the trust fund created pursuant to the pooling and servicing agreement],
and nothing more. Id. at 377.
On February 4, 2011, the district court held oral argument on the defendants
motion to dismiss and, at the conclusion thereof, took the matter under advisement. Four
days later, on February 8, 2011, Scarboroughs attorney sent a one-page letter to the
district court, along with a copy of the Pooling and Servicing Agreement that he
referenced during the hearing on the motion to dismiss.
On February 15, 2011, the district court entered a docket text order stating as
follows:
The court has recently received Plaintiff[]s document entitled Pooling and
Servicing Agreement, between Merrill Lynch Mortgage Investors, Inc.
(Depositor), Home Loan Services, Inc. (Servicer), and LaSalle Bank
National Association (Trustee), dated February 1, 2007. Noting that the
document is over 420 pages, Plaintiff is ordered to provide Defendants and
the court with all citations upon which he relies in supporting his arguments
as raised in his pleadings and at the hearing on February 4, 2011, including
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specific references to the provisions in the agreement Plaintiff contends

supports his arguments. Plaintiff is to do so no later than February 20,
2011. The court also gives notice of its intent to rely on documents outside
of the pleadings and convert the outstanding motion to dismiss to a motion
for summary judgment, pursuant to Fed. R. Civ. P. 12(d). If any party
believes additional supplemental evidence is needed as to whether there are
additional issues of material fact, such evidence should be submitted to the
court. Defendants are hereby given leave to provide supplemental briefing
on the issue raised by Plaintiff regarding the nature of the interest conveyed
or transferred, if any, as referenced in the document cited above [i.e., the
letter from plaintiffs counsel]. Defendants are to file such briefing with the
court no later than March 2, 2011. Plaintiff will likewise have until March
13, 2011 to respond, if he so chooses. Defendants may thereafter submit a
reply, to be received no later than March 18, 2011. In crafting their briefs,
the parties are admonished to take particular note of Fed. R. Civ. P. 56(c)(3)
and cite to the materials they will provided [sic].
Aplt. App., Docket Sheet at 5, Entry #27.
On March 1, 2011, having requested and received an extension of time from the
district court, Scarboroughs counsel filed a written response to the docket text order. In
that response, Scarboroughs counsel stated that he was including copies of the pertinent
documents, with portions thereof presently believed by plaintiff to be pertinent
highlighted in yellow. Aplee. Supp. App. at 831. But, he argued, [t]he [district] court
[could] not, upon receipt of the apparently pertinent documents from plaintiff, convert
defendants [sic] motion to dismiss to one for summary judgment, and cast the burden of
proof upon plaintiff to disprove claims not yet made by defendants. Id. at 832.
On March 15, 2011, defendants filed a response to plaintiffs March 1, 2011
submission. Defendants first asserted that [p]laintiff ha[d] failed to comply with the
[district] [c]ourts Order. Id. at 1313. Instead of citing to specific portions of the

Documents he claim[ed] support[ed] his arguments, defendants asserted, [p]laintiff

merely highlight[ed] (literally, in yellow) portions of the Documents presently believed
by plaintiff to be pertinent. Id. Defendants noted that Scarborough d[id] not explain
why he believe[d] those highlighted portions [we]re pertinent, let alone how they
support[ed] his arguments. Id. Plaintiffs Response to the Order, they argued, d[id]
not provide even a modicum of clarity as to [his] interpretation of the Documents. Id.
In short, defendants argued, plaintiff ha[d] failed to demonstrate how the Documents
support[ed] his arguments. Id.
Defendants in turn argued that, contrary to plaintiffs assertions, it was entirely
appropriate for the district court to convert defendants motion to dismiss to a motion for
summary judgment. Id. at 1315. And, they argued, summary judgment in their favor was
warranted:
Plaintiffs case relies entirely on his assertion that Defendants have ceased
to have any interest in the Trust Deed securing Plaintiffs debt, and thus
Defendants should not have taken action to foreclose such security absent
proof of agency to do so on behalf of the present owner of such debts, the
investors in the mortgage backed securities. (Complaint, 34.) Plaintiff
has argued that the Documents support the assertion that investors in the
mortgage backed securities presently own Plaintiffs debt, but has failed to
point to any portion of the Documents that do so. This failure is fatal to
Plaintiffs claims, and Defendants are entitled to summary judgment as a
result.
Id. (internal footnote omitted).
On April 21, 2011, the district court issued a memorandum decision and order
converting defendants motion to dismiss to a motion for summary judgment and granting

summary judgment in favor of defendants. At the outset of its order, the district court
took Scarboroughs counsel to task for submitting lengthy documents without providing
the court with any explanation of their relevance:
The court has previously admonished counsel for advancing
frivolous arguments, and for failing to be more discriminating in his
argumentation and responsible in his use of caselaw. Commonwealth
Prop. Advocates v. Citimortgage, Inc., No. 2:10-CV-885, 2011 U.S. Dist
LEXIS 16159, at *5 (D. Utah Feb. 16, 2011). Despite the courts
admonitions regarding his poor briefing, counsel has taken new steps to
further confuse the issues, delay litigation, and waste Defendants resources
and those of the court. As previously stated, Plaintiffs counsel proffered
hundreds of pages of documents to the court during the hearing on February
4, 2011, which he admitted to have not fully read. In response to the courts
order to produce all citations and specific references to the provisions in
the agreement Plaintiff contends supports his arguments, counsel
submitted the same stack of documents, only now highlighted, with little
explanation of how the highlighted portions were relevant to his argument.
Such a submission is unhelpful. The court must conclude that counsels use
and submission of the documents were not for the purpose of advancing
Plaintiffs case, but simply to delay. As such, it is obvious that this courts
admonitions, threats of sanctions, and use of sanctions have not persuaded
counsel to take the court seriously or raise his practice to a higher, more
responsible standard. See Commonwealth, 2011 U.S. Dist LEXIS 16159 at
*6. Counsel is hereby warned that further contempt will not only result in
additional sanctions, but a referral to the courts disciplinary committee.
Aplt. App. at 694-95.
The district court then proceeded to address the documents submitted by
Scarborough and concluded that Scarboroughs anemic use of the evidence fail[ed] to
provide support for the most basic assumptions necessary to succeed on his complaint.
Id. In particular, the district court noted that Scarborough fail[ed] to show . . . that the
securitization of the[] certificates also constitute[d] a securitization of the note or

10

underlying debt. Id. at 696. In fact, the district court noted, the Servicing and Pooling
agreement . . . stated that the certificates simply evidenc[ed] ownership of the entire
Trust Fund. Id. (quoting Pooling and Servicing Agreement 2.06, 76). Consequently,
the district court concluded that there was no evidence that the debt was ever
securitized. Id. [I]n the end, the district court concluded that nothing ha[d] been
presented to [it] that demonstrate[d] that the certificates represent[ed] anything more than
an interest in all proceeds or cash-flows paid corresponding to the note, independent and
separate from any right to collect the debt as asserted by Plaintiff. Id. at 697. Because
Plaintiff . . . failed to show that the debt as a right to collect the loans was securitized,
the district court concluded, there [wa]s nothing by which [it] c[ould] conclude that
LaSalle [wa]s not the owner of both the trust holding the debt as evidenced by the note,
and the beneficial interest under the trust deed. Id. Lastly, the district court concluded
that Scarborough ha[d] likewise failed to demonstrate that the foreclosure proceeding
against him by eTitle Insurance Agency, acting for LaSalle, was improper. Id.
Final judgment was entered in favor of defendants and against Scarborough on
April 22, 2011. Scarborough filed a notice of appeal on May 2, 2011.
II
On appeal, Scarborough challenges the district courts grant of summary judgment
in favor of defendants. We review the grant of summary judgment de novo, applying
the same standard as the district court. Klen v. City of Loveland, 661 F.3d 498, 507
(10th Cir. 2011) (internal quotation marks omitted). Summary judgment is appropriate
11

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. Fed. R. Civ. P. 56(a). We view the
record on summary judgment in the light most favorable to the nonmoving party. Klen,
661 F.3d at 508.
Scarboroughs failure to file proper summary judgment pleadings and evidence
Like the district court, we conclude that Scarboroughs procedural failings were
fatal to the claims asserted in his complaint. After the district court expressly notified the
parties that it would be converting defendants motion to dismiss into a motion for
summary judgment, Scarboroughs counsel responded by simply submitting to the district
court a one-page letter accompanied by a copy of the Pooling and Servicing Agreement
highlighted in certain places with a yellow marker. At no point did Scarboroughs
counsel submit any type of pleading to the district court explaining the purported
significance of the highlighted passages. Nor did Scarboroughs counsel submit to the
district court a brief in opposition to summary judgment, or any other pleading that
recounted the relevant facts and supported those facts with citations to any evidence. In
light of these failings, the district court had no choice but to conclude that defendants
were entitled to judgment as a matter of law with respect to all of the claims asserted in
Scarboroughs complaint. More specifically, the district court concluded, and we agree,
that Scarboroughs counsel failed to provide any evidence to support the allegations in the
complaint (e.g., that the certificateholders were actually the owners of the promissory
note that Scarborough signed, or that LaSalle, as trustee, lacked any interest in that note).
12

Scarborough now offers three excuses for his procedural failings, but we find no
merit to any of them. First, Scarborough argues that the district court afforded him only
three days after the hearing on defendants motion to dismiss in which to submit
documentation to support his claims, thus forcing his counsel to resort[] to highlighting
the documents to show the language thought pertinent. Aplt. Br. at 11. But
Scarborough confuses the facts. Approximately three days after the hearing on
defendants motion to dismiss, Scarborough provided the district court with a plain copy
of the Pooling and Servicing Agreement. After receiving and reviewing this submission,
the district court issued an order affording Scarborough five days in which to submit
relevant documentation. Scarborough immediately sought and was granted an additional
nine days to respond to the courts order. Ultimately, at the end of the fourteen-day time
period, Scarborough submitted a highlighted copy of the Pooling and Servicing
Agreement. Thus, in sum, Scarborough had approximately two weeks to prepare and file
a proper response to the district courts docket text order, and was by no means forced to
submit the highlighted copy of the Pooling and Servicing Agreement.
Second, Scarborough asserts that the district court disallow[ed] him from filing a
supporting memorandum except in response to one from the defendants, and
[d]efendants filed no such memorandum, except one complaining that the graphic form
of citation adopted by [him] was somehow disallowed by the courts order. Id. As we
read the district courts February 15, 2011 docket text order, however, Scarborough was
clearly, albeit implicitly, afforded the opportunity to file a supporting brief along with the
13

documents he provided to the district court, i.e., a brief explaining the relevance of the
key provisions of the documents. Further, in that same order, the district court expressly
afforded Scarborough the opportunity to respond to any briefing filed by defendants.
Because defendants filed a brief challenging the propriety of Scarboroughs submission
(i.e., the highlighted documents), Scarborough could and should have filed a brief
explaining, in detail, how the submitted documents supported his claims.
Finally, Scarborough argues that, because the district court avoid[ed] the pertinent
documents he submitted, the defendants motion remain[ed] one to dismiss, and was
not properly converted into a motion for summary judgment. Id. at 12. It is apparent
from the record, however, that the district court considered the Pooling and Servicing
Agreement submitted by Scarborough. Thus, there was no abuse of discretion on the part
of the district court in converting the defendants motion to dismiss into a motion for
summary judgment. See Geras v. Intl Bus. Mach. Corp., 638 F.3d 1311, 1314 (10th Cir.
2011) (applying abuse of discretion standard to district courts decision to convert motion
and then exclude proffered evidence).
Tenth Circuit and Utah case law precludes Scarboroughs claims
Even if we could somehow overlook Scarboroughs procedural failings, we would
reject his claims on the basis of existing Tenth Circuit and Utah case law. As defendants
correctly noted in their memorandum in support of their motion to dismiss, the instant
case is but the latest in a series of nearly identical cases filed by Scarboroughs attorney
on behalf of various clients in Utah seeking mortgage relief on the theory that the
14

securitization of a mortgage renders the holder of the underlying trust deed and its
nominees unable to foreclose absent authorization from every investor holding an interest
in the securitized mortgage. This court recently affirmed the dismissal of three of those
prior cases, and in doing so rejected not only their central theory, but also their
accompanying causes of action, all of which were identical to those asserted by
Scarborough in his complaint. See Commonwealth Prop. Advocates, LLC v. Mortg.
Elec. Registration Sys., Inc., F.3d , 2012 WL (10th Cir. 2012). Likewise, the
Utah Court of Appeals has rejected as an incorrect legal assertion the underlying theory
of these cases, i.e., that securitization [of a mortgage] nullifie[s] [the] rights of the
holder of the underlying trust deed and its nominees. Commonwealth Prop. Advocates,
LLC v. Mortg. Elec. Registration Sys., Inc., 263 P.3d 397, 405 (Utah. Ct. App. 2011)
(MERS), cert. denied, P.3d (Utah Dec. 14, 2011); see Howard v. PNC Mortg.,
P.3d , 2012 WL 163830 at *2 (Utah Ct. App. 2012) (affirming the holding in MERS).
These cases clearly require our affirmance of the district courts dismissal of
Scarboroughs claims. See Kokins v. Teleflex, Inc., 621 F.3d 1290, 1295 (10th Cir.
2010) (noting that, in diversity cases, a decision by a panel of this Court . . . interpreting
state law . . . is binding on . . . subsequent panels of this Court, unless an intervening
decision of the states highest court has resolved the issue); see also United Fire & Cas.
Co. v. Boulder Plaza Residential, LLC, 633 F.3d 951, 957 (10th Cir. 2011) (holding that
where jurisdiction rests solely on diversity of citizenship and there is no controlling
decision by the highest court of a state, a decision by an intermediate court should be
15

followed by the Federal court, absent convincing evidence that the highest court would
decide otherwise) (internal quotation marks omitted).
III
The judgment of the district court is AFFIRMED.

Entered for the Court

Mary Beck Briscoe

Chief Judge

16