Ashley Martins v. BAC Home Loans Servicing, L.P.
2013 U.S. App. LEXIS 13108
| 5th Cir. | 2013Background
- In 2003 Martins refinanced his homestead; Mortgage Electronic Registration Systems (MERS) was named beneficiary/nominee. Martins defaulted in 2009–2010.
- In November 2010 MERS assigned the mortgage to BAC; the assignment was recorded. Foreclosure notices were sent and the property was sold at a nonjudicial sale in April 2011 to Fannie Mae.
- Martins sued in state court for wrongful foreclosure, promissory estoppel, and negligent misrepresentation; BAC removed and moved for summary judgment. Martins missed the response deadline, moved for a continuance, filed an untimely reply; the district court considered the late reply and granted summary judgment for BAC.
- Martins argued BAC lacked standing/authority to foreclose because the note was not properly transferred (alleging robosigning/forgery) and that BAC held only the mortgage, not the note ("show-me-the-note" / "split-the-note" theories).
- Martins also claimed lack of required notice, grossly inadequate sale price, and an oral promise (HAMP application) that estopped BAC from foreclosing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to foreclose | Assignment was forged/robosigned; BAC not holder of note or mortgage | MERS executed and recorded a signed assignment to BAC establishing authority | BAC had valid recorded assignment; Martins produced no evidence of forgery; BAC had authority to foreclose |
| Requirement to produce original note ("show-me-the-note") | Foreclosure requires production/possession of original wet-ink note | Texas law does not require production of original note for nonjudicial foreclosure; photocopy + affidavit can suffice | Rejected plaintiff: Texas law and precedent do not require production of the original signed note |
| "Split-the-note" theory (must hold note+deed) | Assignment of deed alone split note from security, rendering foreclosure invalid | Texas Property Code and authorities allow mortgagee/servicer (including MERS/book-entry) to foreclose without possessing the note | Rejected plaintiff: a mortgage servicer with proper assignment may foreclose without holding the note |
| Promissory estoppel/statute of frauds | BAC orally promised not to foreclose if Martins applied for HAMP; he relied and applied | Any modification or promise affecting real estate/loan >$50,000 must be in writing; estoppel cannot substitute absent promise to sign a prepared written contract | Rejected plaintiff: statute of frauds bars oral modification; promissory estoppel cannot overcome it absent a promise to sign a written contract |
| Notice and wrongful foreclosure elements | Martins claims he did not receive statutorily-required notice; sale price was inadequate | BAC produced affidavit and evidence of certified mailing; sale price about 92% of last appraisal | Rejected plaintiff: mailing affidavit is prima facie proof of notice; price not grossly inadequate; no wrongful foreclosure |
| Continuance under Rule 56(d) | District court abused discretion denying untimely continuance and relief to gather facts | Martins failed to specify facts needed or request before deadline; court nevertheless considered late filing | No abuse of discretion: Martins did not make specific Rule 56(d) showing and received more consideration than required |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard)
- Moussazadeh v. Texas Dep’t of Criminal Justice, 703 F.3d 781 (5th Cir. 2012) (de novo review of summary judgment)
- Carpenter v. Longan, 83 U.S. 271 (discussed for historical rule that note and mortgage are inseparable)
- Fed. Deposit Ins. Corp. v. Blanton, 918 F.2d 524 (5th Cir.) ("grossly inadequate" sale price standard)
- Shepard v. Boone, 99 S.W.3d 263 (Tex. App.) (authority holding foreclosure party must prove it owns/holds the note)
- Leavings v. Mills, 175 S.W.3d 301 (Tex. App.) (similar holding on necessity of holding note)
- Moore Burger, Inc. v. Phillips Petroleum Co., 492 S.W.2d 934 (Tex.) (promissory estoppel elements and relation to statute of frauds)