Morlock, L.L.C. v. the Bank of New York, as Trustee on Behalf of the Certificate Holders of CWABS, Inc., Asset- Backed Certificates, Series 2004-13
448 S.W.3d 514
Tex. App.2014Background
- Harshidaben and Jigar Sandesara executed a note and deed of trust to Mortgage Investment Lending Associates, Inc. (MILA) to buy a Harris County home; the deed of trust and subsequent recorded assignments eventually named The Bank of New York (BONY) as assignee.
- A homeowner’s association foreclosed on an assessment lien and conveyed the property to Morlock, L.L.C. by trustee’s deed; the association’s lien was junior to the purchase-money mortgage.
- BONY posted nonjudicial foreclosure notices; Morlock sued to enjoin foreclosure, alleging BONY had no interest because (1) BONY was not owner/holder of the note, and (2) the MILA→Countrywide assignment was executed by an unauthorized person.
- BONY counterclaimed for declaratory relief that it validly holds the deed of trust and may foreclose, and moved for traditional summary judgment attaching recorded deed and two recorded assignments establishing a chain to BONY.
- The trial court granted BONY’s motion; Morlock appealed challenging standing to attack the assignment and arguing the summary-judgment proof did not establish BONY’s right to foreclose.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to challenge assignment | Morlock: as current title holder, may challenge assignment as unauthorized and cloud on title | BONY: third parties lack standing to attack an assignment that is voidable, not void; only the grantor may rescind | Court: Morlock lacks standing; an unauthorized signature makes the assignment voidable at grantor’s election (Nobles rule) |
| Necessity of proving ownership/possession of note to foreclose | Morlock: BONY must be owner/holder of the note and deed to foreclose | BONY: ownership of the deed of trust alone (recorded chain) suffices to establish right to foreclose under Texas law | Court: BONY established ownership of the deed of trust by recorded assignments; ownership/possession of the note is not required to enforce the deed of trust in a nonjudicial foreclosure |
| Effect of chain of assignments evidence | Morlock: summary evidence does not conclusively show BONY owns note/deed | BONY: recorded deed and assignments create unbroken chain establishing ownership of the deed of trust | Court: recorded deed and assignments suffice to show BONY is owner of the deed of trust and thus entitled to foreclose |
| Conflict with other appellate decisions | Morlock: other court (14th Dist.) allowed standing to attack fraudulent assignment | BONY: Nobles and related Texas precedent control; moral and procedural differences between cases | Court: no controlling conflict; Nobles bars third-party suits to set aside fraudulent conveyances because such deeds are voidable only by the defrauded grantor |
Key Cases Cited
- Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211 (Tex. 2003) (standard for de novo review of summary judgment)
- Nobles v. Marcus, 533 S.W.2d 923 (Tex. 1976) (deed obtained by fraud is voidable only; only the defrauded party may sue to set it aside)
- Reinagel v. Deutsche Bank Nat’l Trust Co., 735 F.3d 220 (5th Cir. 2013) (lack of authority to assign is voidable; mortgagor lacked standing to challenge)
- Leavings v. Mills, 175 S.W.3d 301 (Tex. App.—Houston [1st Dist.] 2004) (party seeking foreclosure must prove entitlement; failure to show chain of assignments defeats relief)
- Martins v. BAC Home Loans Servicing, L.P., 722 F.3d 249 (5th Cir. 2013) (recognizes weight of Texas authority that deed of trust holder need not also hold note to foreclose)
- Carter v. Gray, 81 S.W.2d 647 (Tex. 1935) (note and lien rights are severable; right to foreclose distinct from right to obtain personal judgment)