June 27, 2014
Texas Court Rejects Claims Brought on the Grounds of “Show-me-the-Note” and “Split-the-Note” Theories
The court in deciding Hunt v. Worldwide Mortg. Co., 2013 U.S. Dist. (N.D. Tex., 2013) dismissed the plaintiff’s action in its entirety and specifically granted the defendant’s motion to dismiss.
Plaintiffs asserted claims for fraud (only against MidFirst and its mortgage servicer), wrongful foreclosure, and violations of the Texas Business and Commerce Code and Finance Code. The plaintiffs also sought to quiet title and declaratory relief.
Specifically, the plaintiffs argued variations of the roundly discounted “show me the note” and “split the note” theories, alleging that the defendants did not have the authority to foreclose on the Property because MERS was not holder of the note and thus was not entitled to enforce the deed of trust.
The plaintiffs also contended MidFirst perpetrated a fraud by misrepresenting that it was the holder or beneficiary of the deed of trust entitled to receive mortgage payments on the note, thus collecting on a debt that it had “no legal, equitable or pecuniary interest in.”
Plaintiffs also alleged violations of the Texas Business and Commerce Code, arguing that the defendant had failed to produce the note and that it is very likely that the defendant was not the holder of the note.
Defendants’ moved to dismiss the plaintiffs’ complaint under Federal Rule of Civil Procedure 12(b)(1) for lack of subject-matter jurisdiction, Rule 12(b)(6) for failure to state a claim, this was granted by the court.
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