Editor: David Reiss
Brooklyn Law School

July 22, 2013

Texas Appellate Court Rules that Foreclosure can be Initiated Without Specific Endorsement in the Note and Before the Formal Transfer of the Deed

By Shannon Daugherty

In Robeson v. MERS (Tex. App. 2012) WL 42965, No. 02-10-00227-CV the court affirmed the lower court’s ruling finding that Robeson was given adequate time for discovery, MidFirst had authority to send default notices prior to the assignment date of the deed of trust, and MidFirst gave sufficient foreclosure notice.  The court held that Robeson did not produce even a “scintilla of probative evidence that raises[d] a genuine issue of material fact” and therefore the lower court’s ruling in favor or MERS was proper.

In late 2007, Robeson executed a loan with Alethes.  The note bore endorsements from Alethes to GMAC Bank, from GMAC bank to GMAC Mortgage, as well as a blank endorsement from GMAC Mortgage.  The debt to Alethes was secured in a deed of trust with MERS as the nominee for Alethes.  In 2008 and 2009, GMAC Mortgage and MidFirst provided Robeson with notice of the default on his loan.  In February 2009, MERS assigned its interest as nominee to MidFirst.

The court held that in accordance with the Texas Business and Commercial Code and case law, MidFirst was the owner of the note by possession alone and did not need to show that the original note contained a special endorsement to it from GMAC.   As MERS members, GMAC and MidFirst may freely transfer interests between themselves without property deeds.  The court noted that mortgages generally follow the note they secure and prior cases have recognized effective transfers when the assignment was executed up to two years after effective ownership changed.  Two vice presidents of MidFirst swore in their affidavits that the note and deed of trust came under MidFirst’s ownership in 2008.  Since the February 2009 assignment gave both the lender and the beneficiary the right to invoke the power of sale, there was no factual inconsistency between MidFirst’s claim that it began to exercise power over the note in 2008 and the February 2009 assignment.

As to whether notice was proper, the court found that Midfirst and MERS provided ample evidence that Robeson was given notice pursuant to § 51.002(b) and (d) and § 51.0025(2).

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