    Case: 12-20559   Document: 00512287401     Page: 1   Date Filed: 06/26/2013




         IN THE UNITED STATES COURT OF APPEALS
                  FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                  Fifth Circuit

                                                                  FILED
                                                                 June 26, 2013
                               No. 12-20559
                             Summary Calendar                    Lyle W. Cayce
                                                                      Clerk




ASHLEY MARTINS,

                                          Plaintiff-Appellant,

versus

BAC HOME LOANS SERVICING, L.P.;
FEDERAL NATIONAL MORTGAGE ASSOCIATION,

                                          Defendants-Appellees.




                Appeal from the United States District Court
                     for the Southern District of Texas




Before SMITH, PRADO, and OWEN, Circuit Judges.
JERRY E. SMITH, Circuit Judge:


      BAC Home Loans Servicing, L.P. (“BAC”), foreclosed on Ashley Martins’s
house, whereupon he challenged the foreclosure. Finding no genuine issue of
material fact, the district court granted summary judgment for BAC. We affirm.
    Case: 12-20559    Document: 00512287401     Page: 2    Date Filed: 06/26/2013



                                 No. 12-20559

                                       I.
      In 2003, Martins refinanced a mortgage on his homestead through BSM
Financial (“BSM”), executing a security instrument naming the Mortgage Elec-
tronic Registration System (“MERS”) as the beneficiary and nominee for BSM
and its assigns. Martins paid the mortgage until December 2009, when he
became delinquent and then ceased payment in June 2010.
      In November 2010, MERS assigned the mortgage to BAC; the transfer was
recorded on November 22. In February 2011, Martins was notified that he was
in default and that the property would be foreclosed on if he failed to cure the
default. Martins did not respond, and on March 14 the note’s trustee provided
notice to Martins and the clerk’s office that the property would be sold. The
house was sold on April 5, 2011, to the Federal National Mortgage Association
(“Fannie Mae”); Martins did not participate in the sale.
      Martins sued in state court claiming wrongful foreclosure, promissory
estoppel, and negligent misrepresentations. BAC removed to federal court and
moved for summary judgment. Following Martins’s failure to file a response,
BAC filed a Notice of No Response, to which Martins replied with a motion for
continuance, which was denied, and an untimely reply to the summary judgment
motion. Having considered the untimely reply, the court granted summary judg-
ment for BAC.


                                       II.
      “Summary judgments are reviewed de novo.” Moussazadeh v. Tex. Dep’t
of Criminal Justice, 703 F.3d 781, 787 (5th Cir. 2012). Summary judgment may
be granted where, taking the evidence in the light most favorable to the non-
movant, there is no genuine dispute of material fact and the moving party is
entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317,
322 (1986). See also FED. R. CIV. P. 56(a).

                                       2
     Case: 12-20559       Document: 00512287401         Page: 3    Date Filed: 06/26/2013



                                      No. 12-20559

                                            III.
                                             A.
       Martins questions BAC’s “standing” to foreclose. Martins presents an
incoherent and rambling argument conflating ownership of a note with constitu-
tional standing. Interpreting those arguments most charitably, we conclude that
Martins contends that the note was not properly transferred to BAC and that
the assignment was “robosigned” and therefore “forged.” Because of that, Mar-
tins’s logic goes, BAC was not the holder of the note, did not own the mortgage,
and could not foreclose.
       This argument fails. There is no doubt that the mortgage was transferred
by MERS to BAC, which presented a signed, notarized assignment document
that had also been recorded by the county clerk. Martins’s allegations of forgery
rest on the fact (based on counsel’s research) that MERS does not have a Texas
office and that the assignment was “robosigned.” That alone is hardly sufficient
to maintain a claim for fraud, much less to avoid summary judgment.1 BAC has
offered sufficient evidence, through its recorded assignment, that it was the
rightful holder of the mortgage, and Martins failed to present evidence creating
a genuine issue of fact.


                                             B.
       Martins contends that BAC cannot foreclose because it was assigned only
the mortgage, and not the note itself, by MERS. Martins suggests that the
assignment split the note from the deed of trust and that BAC therefore had a
meaningless piece of paper rather than a debt on which it could foreclose.


       1
          See Kan v. OneWest Bank, FSB, 823 F. Supp. 2d 464, 470 (W.D. Tex. 2011) (dismissing
suit for failure to state a claim where one of the arguments was that the mortgage documents
were robosigned and therefore somehow invalid); Christensen v. Bank of Am., N.A., 2011 WL
7070568 (N.D. Tex. Nov. 4, 2011) (granting summary judgment where the plaintiff had no
grounds for alleging that a document was robosigned).

                                             3
     Case: 12-20559       Document: 00512287401          Page: 4     Date Filed: 06/26/2013



                                       No. 12-20559

       Martins’s argument merges, in part, two common theories on which mort-
gagees in wrongful-foreclosure cases in Texas and elsewhere often attempt to
rely: what is commonly called the “show-me-the-note” theory and what may be
called the “split-the-note” theory. There is some disagreement among the federal
district courts,2 and we have not spoken plainly enough on this issue in a pub-
lished opinion, so we now clarify what is required regarding production of a note
under Texas law.
       The first theory posits that to foreclose, a party must produce the original
note bearing a “wet ink signature.”3 Numerous federal district courts have
addressed this question, and each has concluded that Texas recognizes assign-
ment of mortgages through MERS and its equivalents as valid and enforceable
without production of the original, signed note. The court summarized Martins’s
strategy accurately in Wells v. BAC Home Loans Servicing, L.P., No. W-10-CA-
350, 2011 WL 2163987, at *2 (W.D. Tex. Apr. 26, 2011) (internal citations and
quotation marks omitted):

           This claim—colloquially called the “show-me-the-note” theory—
       began circulating in courts across the country in 2009. Advocates
       of this theory believe that only the holder of the original wet-ink sig-

       2
        The issue is made all the more difficult by the fact that few Texas courts have properly
articulated Texas law in this area—most foreclosure cases are decided by the federal courts
under diversity jurisdiction. Moreover, Texas courts routinely rely on federal interpretations
of Texas law. See Bierwirth v. BAC Home Loans Servicing, L.P., No. 03-11-644-CV, 2012 WL
3793190, at *1 n.3 (Tex. App.—Austin Aug. 30, 2012, no pet.) (“Federal authority is persuasive
here because a great amount of home-mortgage litigation in Texas is tried in its federal courts,
applying Texas foreclosure law.”); Robeson v. MERS, No. 02-10-227-CV, 2012 WL 42965, at *4
n.4 (Tex. App.—Fort Worth Jan. 5, 2012, pet. denied) (explaining that federal authority,
though not controlling, is “particularly persuasive” in this area).
       3
         See, e.g., Carrie v. Chase Home Fin., No. 3:12-CV-852, 2013 WL 704943 (N.D. Tex.
Feb. 1, 2013) (recommendation of magistrate judge), adopted sub nom. Carrie v. JPMorgan
Chase Bank, N.A., 2013 WL 705865, at *3 (N.D. Tex. Feb. 27, 2013) (describing plaintiffs’
demand for “The ORIGINAL UNALTERED WET INK SIGNATURE PROMISSORY NOTE”);
Islamic Ass’n of DeSoto, Tex., Inc. v. MERS, No. 3:12-CV-613, 2012 WL 2196040, at *1 (N.D.
Tex. June 15, 2012).

                                               4
     Case: 12-20559        Document: 00512287401           Page: 5      Date Filed: 06/26/2013



                                         No. 12-20559

       nature note has the lawful power to initiate a non-judicial foreclos-
       ure. The courts, however, have roundly rejected this theory and dis-
       missed the claims, because foreclosure statutes simply do not
       require possession or production of the original note. The “show me
       the note” theory fares no better under Texas law.[4]

In Texas, existence of a note may be established by “[a] photocopy of the promis-
sory note, attached to an affidavit in which the affiant swears that the photocopy
is a true and correct copy of the original note.” Blankenship v. Robins, 899
S.W.2d 236, 238 (Tex. App.—Houston [14th Dist.] 1994, no writ). We find no
contrary Texas authority requiring production of the “original” note. The orig-
inal, signed note need not be produced in order to foreclose.
       The second theorySSdistinct but relatedSSis that a transfer of a deed of
trust by way of MERS “splits” the note from the deed of trust, thus rendering
both null. In order to foreclose, the theory goes, a party must hold both the note
and the deed of trust. The federal district courts have reached conflicting results
on precisely what is required.5 The minority of district courts have held that the
note and deed of trust must both be held by the foreclosing entity.6 Others have
held that, under Texas law, foreclosure does not require possession of the note.7

       4
         See also Clark v. Bank of Am. NA, No. 3:12-CV-1277, 2012 WL 4793465 (N.D. Tex.
Aug. 1, 2012) (recommendation of magistrate judge), adopted, 2012 WL 4793439 (N.D. Tex.
Oct. 9, 2012).
       5
         See Routh v. Bank of Am., N.A., No. SA-12-CV-244, 2013 WL 427393, at *6 (W.D. Tex.
Feb. 4, 2013) (discussing the varying positions). Moreover, courts have often conflated or at
least intertwined the “show-me-the-note” and “split-the-note” theories such that the analysis
is not always completely clear.
       6
         See, e.g., McCarthy v. Bank of Am., NA, No. 4:11-CV-356, 2011 WL 6754064, at *3
(N.D. Tex. Dec. 22, 2011) (“If the holder of the deed of trust does not own or hold the note, the
deed of trust serves no purpose, is impotent, and cannot be a vehicle for depriving the grantor
of the deed of trust of ownership of the property described in the deed of trust.”).
       7
        See, e.g., Wells, 2011 WL 2163987, at *3 (“[W]hile suits on a promissory note typically
require possession, foreclosures do not. Under Texas law, a mortgage servicer can foreclose
under a deed of trust, regardless of whether it is a holder.”) (internal citation omitted); Kramer
                                                                                     (continued...)

                                                5
     Case: 12-20559       Document: 00512287401          Page: 6     Date Filed: 06/26/2013



                                       No. 12-20559

       The first position, declaring the “split-the-note” theory valid, is supported
primarily by Carpenter v. Longan, 83 U.S. 271, 274 (1872), holding that “[t]he
note and mortgage are inseparable; the former as essential, the latter as an inci-
dent. An assignment of the note carries the mortgage with it, while an assign-
ment of the latter alone is a nullity.” See McCarthy, 2011 WL 6754064, at *3.
That language, however, is inapposite, because the Court was addressing Colo-
rado Territorial law and federal common law. Neither controls our interpreta-
tion of Texas law.
       There are few sources in Texas law that support the “split-the-note”
theory. Two courts have held that a party must hold the note in order to execute
on a lien. In Shepard v. Boone, 99 S.W.3d 263, 266 (Tex. App.—Eastland 2003,
no pet.), the court held that summary judgment was properly granted against
the creditor where the foreclosing party had adduced no evidence that it was the
owner and holder of the underlying note. The court in Leavings v. Mills, 175
S.W.3d 301, 309 (Tex. App.—Houston [1st Dist.] 2004, no pet.), reached the same
conclusion and held that to foreclose through a deed of trust or sue on a note, a
party must prove that it owns and holds the note.8
       The weight of Texas authority, however, suggests just the opposite. The
Texas Property Code provides that a “mortgage servicer” may administer a fore-
closure on behalf of a mortgagee if “the mortgage servicer and the mortgagee
have entered into an agreement granting the current mortgage servicer author-
ity to service the mortgage,” proper notice is given, and notice discloses that the

       7
         (...continued)
v. Fed. Nat’l Mortgage Ass’n, No. A-12-CA-276, 2012 WL 3027990, at*6–*7 (W.D. Tex. May 15,
2012) (explicitly rejecting the reasoning and conclusion in McCarthy); Stevens v. Wells Fargo
Bank, N.A., No. 4:12-CV-594, 2012 WL 5951087 (N.D. Tex. Nov. 27, 2012).
       8
           Accord 30 TEX. JUR. 3d DEEDS OF TRUST AND MORTGAGES § 119, at 524 (stating that
because “a mortgage can have no legal effect apart from the debt or obligation of which it is
designed to secure payment, any attempt to assign or transfer it apart from the debt is a nul-
lity”) (citing Nutt v. Anderson, 87 S.W.2d 760 (Tex. Civ. App.SSFort Worth 1935, writ dism’d)).

                                              6
     Case: 12-20559       Document: 00512287401         Page: 7    Date Filed: 06/26/2013



                                      No. 12-20559

mortgage servicer represents the mortgagee. TEX. PROP. CODE § 51.0025. A
mortgagee includes both “the grantee, beneficiary, owner, or holder of a security
instrument” and “a book entry system.” Id. § 51.0001(4). The Code defines a
“book entry system” as “a national book entry system for registering a beneficial
interest in a security instrument that acts as a nominee for the grantee, benefi-
ciary, owner, or holder of the security instrument and its successors and
assigns.” Id. § 51.0001(1). The “mortgage servicer” is the “last person to whom
a mortgagor has been instructed by the current mortgagee to send payments for
the debt secured by a security instrument.” Id. § 51.0001(3). A mortgagee may
be its own mortgage servicer. Id.
       Because MERS is a book-entry system, it qualifies as a mortgagee. Thus,
the Texas Property Code contemplates and permits MERS either (1) to grant the
mortgage servicer the authority to foreclose or, if MERS is its own mortgage ser-
vicer, (2) to bring the foreclosure action itself. In either event, the mortgage ser-
vicer need not hold or own the note and yet would be authorized to administer
a foreclosure.9
       The Texas courts have repeatedly discussed the dual nature of a note and
deed of trust. “It is so well settled as not to be controverted that the right to
recover a personal judgment for a debt secured by a lien on land and the right
to have a foreclosure of lien are severable, and a plaintiff may elect to seek a per-
sonal judgment without foreclosing the lien, and even without a waiver of the
lien.” Carter v. Gray 81 S.W.2d 647, 648 (Comm’n App. 1935, writ dism’d).
Where a debt is “secured by a note, which is, in turn, secured by a lien, the lien
and the note constitute separate obligations.” Aguero v. Ramirez, 70 S.W.3d 372,


       9
         See Van Hauen v. Wells Fargo Bank, N.A., No. 4:12-CV-344, 2012 WL 4162138, at *5
(E.D. Tex. Aug. 24, 2012) (recommendation of magistrate judge), adopted, 2012 WL 4322518
(E.D. Tex. Sept. 20, 2012) (“Courts in Texas have repeatedly recognized that Texas law allows
either a mortgagee or a mortgage servicer to administer a deed of trust foreclosure without
production of the original note.”).

                                             7
     Case: 12-20559         Document: 00512287401        Page: 8    Date Filed: 06/26/2013



                                        No. 12-20559

374 (Tex. App.—Corpus Christi 2002, pet. denied). The Texas courts have
“rejected the argument that a note and its security are inseparable by recogniz-
ing that the note and the deed-of-trust lien afford distinct remedies on separate
obligations.” Bierwirth, 2012 WL 3793190, at *3.10 A deed of trust “gives the
lender as well as the beneficiary the right to invoke the power of sale,” even
though it would not be possible for both to hold the note. Robeson, 2012 WL
42965, at *6.
       The “split-the-note” theory is therefore inapplicable under Texas law
where the foreclosing party is a mortgage servicer and the mortgage has been
properly assigned. The party to foreclose need not possess the note itself. Here,
the mortgage was assigned to MERS, and then by MERS to BAC—the assign-
ment explicitly included the power to foreclose by the deed of trust. MERS and
BAC did not need to possess the note to foreclose.
       Martins’s theories regarding improper foreclosure relating to possession
of the note are consequently unavailing. Given the transfer in this case, neither
the “show-me-the-note” theory nor the “split-the-note” notion applies under
Texas law.


                                              C.
       Martins claims he did not receive notice of the sale as required by Section
51.002 of the Texas Property Code. Service of notice is complete when the notice
is sent via certified mail. TEX. PROP. CODE § 51.002(e). “The affidavit of a person
knowledgeable of the facts to the effect that service was completed is prima facie
evidence of service.” Id. BAC satisfied its burden of proof by presenting evi-
dence of mailing the notice and an affidavit to that effect. There is no require-
ment that Martins receive the notice.

       10
            See also Stephens v. LPP Mortg., 316 S.W.3d 742, 747 (Tex. App.—Austin 2010, pet.
denied).

                                               8
     Case: 12-20559       Document: 00512287401         Page: 9    Date Filed: 06/26/2013



                                      No. 12-20559

                                             D.
       Martins maintains that there was a sufficient dispute of material fact to
send his claim of wrongful foreclosure to the jury. The three elements of wrong-
ful foreclosure discussed by Martins are (1) a defect in the foreclosure sale pro-
ceedings; (2) a grossly inadequate selling price; and (3) a causal connection
between the two.11 Martins urges that the failure to receive notice was a defect.
That contention fails for the reasons set forth above: BAC provided the proper
notice to Martins directly through the mails and to the county clerk. There was
no defect.
       Additionally, the selling price was not grossly inadequate: The house was
sold for $133,897.86. The last appraisal had been $145,716. Fannie Mae paid
almost 92% of the most recent appraisal value. A “grossly inadequate price
would have to be so little as ‘to shock a correct mind.’”12 The sale price is not
shocking and is therefore not “grossly inadequate.” Because there was no defect,
and the sale price was not grossly inadequate, there was no wrongful foreclosure.


                                             E.
       Martins avers that promissory estoppel bars BAC from foreclosing. He
claims that BAC orally promised that his house would not be foreclosed on if he
submitted an application through the Home Affordable Modification Program
(known as “HAMP”), which he did. Under the doctrine of promissory estoppel,
if justice requires, a person may be bound by a promise that he reasonably
believed would induce action or inaction and that did induce the action or for-
bearance. Moore Burger, Inc. v. Phillips Petroleum Co., 492 S.W.2d 934, 937


       11
         See Charter Nat’l Bank–Hous. v. Stevens, 781 S.W.2d 368, 371 (Tex. App.—Houston
[14th Dist.] 1989, writ denied).
       12
         Fed. Deposit Ins. Corp. v. Blanton, 918 F.2d 524, 531 (5th Cir. 1990) (quoting Rich-
ardson v. Kent, 47 S.W.2d 420, 425 (Tex. Civ. App.—Dallas 1932, no writ)).

                                             9
    Case: 12-20559        Document: 00512287401          Page: 10      Date Filed: 06/26/2013



                                        No. 12-20559

(Tex. 1972).
       Martins’s argument fails on several grounds, chief among them the statute
of frauds. A loan agreement for more than $50,000 is not enforceable unless it
is in writing. TEX. BUS. & COM. CODE § 26.02(b). Similarly, a promise relating
to the sale of real estate must be in writing. Id. § 26.01(b)(4). An agreement
regarding the transfer of the property or modification of a loan must therefore
be in writing to be valid.
       Promissory estoppel may overcome the statute-of-frauds requirement in
Texas, but “there must have been a promise to sign a written contract which had
been prepared and which would satisfy the requirements of the statute of
frauds.”13 The purported agreement to modify the loan agreement is within the
statute of frauds. Martins alleges only an oral agreement, not a promise on the
part of BAC or its agents to sign an agreement validating the oral agreement
that would satisfy the statute of frauds. Thus, promissory estoppel does not
overcome the statute of frauds, and Martins’s argument fails.


                                               F.
       Martins contends that the district court abused its discretion by denying
his motion for a continuance, which was filed after the deadline to respond to
BAC’s motion for summary judgment. Under Federal Rule of Civil Procedure
56(d), the court may defer judgment if the nonmovant shows that, for “specific
reasons,” it cannot present facts to justify its position and needs further discov-


       13
          Beta Drilling, Inc. v. Durkee, 821 S.W.2d 739, 741 (Tex. App.—Houston 1992, writ
denied). See also Carpenter v. Phelps, 391 S.W.3d 143 (Tex. App.—Houston [1st Dist.] 2011,
no pet.) (“For promissory estoppel to create an exception to the statute of frauds requires a
promise to sign a prepared written contract which would satisfy the requirements of the stat-
ute of frauds.”); Ford v. City State Bank of Palacios, 44 S.W.3d 121, 139 (Tex. App.—Corpus
Christi 2001, no pet.) (“When promissory estoppel is raised to bar the application of the statute
of frauds, there is an additional requirement that the promisor promised to sign a written doc-
ument complying with the statute of frauds.”).

                                               10
   Case: 12-20559    Document: 00512287401     Page: 11   Date Filed: 06/26/2013



                                No. 12-20559

ery. Martins did not ask for more time until after the deadline had passed and
did not articulate specifically what facts he needed to respond to the motion.
Nevertheless, the court considered his response, giving him more consideration
than was required. The court did not abuse its discretion by denying the
untimely motion for continuance.
      The summary judgment is AFFIRMED.




                                     11
