Karl B. Bailey v. MidFirst Bank

ACCEPTED
03-14-00632-CV
4153377
THIRD COURT OF APPEALS
AUSTIN, TEXAS
2/13/2015 4:57:07 PM
JEFFREY D. KYLE
CLERK
NO. 03-14-00632-CV

FILED IN
3rd COURT OF APPEALS
IN THE COURT OF APPEALS FOR AUSTIN, TEXAS
THE THIRD DISTRICT OF TEXAS 2/13/2015 4:57:07 PM
AT AUSTIN JEFFREY D. KYLE
Clerk

KARL B. BAILEY,
Appellant,

v.

MIDFIRST BANK,
Appellee.

ON APPEAL FROM THE 250TH JUDICIAL DISTRICT COURT, TRAVIS COUNTY, TEXAS
TRIAL COURT CAUSE NO. D-1-GN-14-002430
HON. GUS J. STRAUSS, PRESIDING

BRIEF FOR THE APPELLEE

Mark D. Hopkins
Texas State Bar No. 00793975
Hopkins & Williams, PLLC
12117 Bee Caves Rd., Suite 260
Austin, Texas 78738
(512) 600-4320 – Telephone
(512) 600-4326 – Facsimile
mark@hopkinswilliams.com

ATTORNEY FOR APPELLEE

February13, 2015
 IDENTITY OF PARTIES AND COUNSEL

Pursuant to Texas Rule of Appellate Procedure 38.2(a)(1), Appellee certifies
that the following is a complete list of all parties and counsel:

1. Appellee: MidFirst Bank, N.A.

Represented at trial Chris H. Pochyla
Texas State Bar No. 24032842
Barrett Daffin Frappier Turner & Engel, LLP
15000 Surveyor, Blvd., Suite 100
Addison, Texas 75001
(972) 340-7955 – Telephone
(972) 341-0734 - Facsimile

Represented on appeal by: Mark D. Hopkins
Texas State Bar No. 00793975
Hopkins & Williams, PLLC
12117 Bee Caves Rd., Suite 260
Austin, Texas 78738
(512) 600-4320 – Telephone
(512) 600-4326 – Facsimile

2. Appellant: Karl B. Bailey

Represented at trial
and on appeal by: William B. Gammon
Texas State Bar No. 07611280
Anthony G. Read
Texas State Bar No. 24056184
Gammon Law Office, PLLC
1201 Spyglass Drive, Suite 100
Austin Texas 78746
(512) 444-4529 – Telephone
(512) 545-4279 - Facsimile

3. Trial Judge: Hon. Gus J. Strauss
250th Judicial District Court of Travis
County, Texas

ii
 TABLE OF CONTENTS

BRIEF FOR THE APPELLEE .................................................................................. i
IDENTITY OF PARTIES AND COUNSEL ........................................................... ii
TABLE OF CONTENTS ........................................................................................ iii
INDEX OF AUTHORITIES ................................................................................... iv
STATEMENT OF THE CASE ................................................................................ 1
ISSUES PRESENTED ............................................................................................. 2
STATEMENT OF FACTS ....................................................................................... 3
SUMMARY OF THE ARGUMENT ....................................................................... 5
ARGUMENTS & AUTHORITIES .......................................................................... 7

1. Did the trial court commit error in granting Appellee’s request for
declaratory relief regarding the validity of the foreclosure sale of
the Property? ................................................................................................... 8

2. Did the trial court error in determining that Appellant’s breach of
contract claim fails as a matter of law? ......................................................... 15

3. Did the undisputed summary judgment evidence negate
Appellant’s wrongful foreclosure claim as a matter of law?......................... 16

4. Does the undipsuted summary judgment evidence negate
Appellant’s quiet title claim as a matter of law? ........................................... 18

5. Did the trial court error in determining that Appellant’s affirmative
claim for equitable estoppel fails as a matter of law given that it is
only a defensive claim and not an affirmative cause of action? .................... 20
PRAYER................................................................................................................. 22
CERTIFICATE OF SERVICE ............................................................................... 23
CERTIFICATE OF COMPLIANCE ...................................................................... 24
APPENDIX............................................................................................................. 25

iii
 INDEX OF AUTHORITIES
CASES PAGE(S)

Athey v. MERS,
314 S.W.3d 161 (Tex. App.—Eastland 2010, pet. denied). ................................. 9

BHP Petroleum Co. v. Millard,
800 S.W.2d (Tex. 1990) ...................................................................................... 14

Bierwirth v. BAC Home Loan Servicing, L.P.,
2012 WL 3793190 (Tex. App. – Austin 2012) ........................................ 3, 10, 11

Biswell v. Gladney,
213 S.W. 256 (Tex.Comm'n App.1919)............................................................. 21

Boucher v. Wallis,
236 S.W.2d 519 Tex.Civ.App.—Eastland 1951, writ ref'd n.r.e.) ..................... 21

Campbell v. Mort. Elect. Reg. Systems, Inc.,
2012 WL 1839357 (Tex. App. – Austin, pet. denied) .......................................... 9

Charter Nat’l Bank – Houston v. Stevens,
781 S.W.2d 368 (Tex. App. – Houston [14th Dist.] 1989, writ denied) .............. 17

Cox v. Clay,
237 S.W.2d 798 (Tex. App. -Amarillo 1951) .................................................... 21

Cuauhtli v. Chase Home Fin. LLC,
252 F. App'x 690 (5th Cir.2007) ........................................................................ 12

EMC Mortgage Corp. v. Window Box Ass'n, Inc.,
264 S.W.3d 331 (Tex.App. 2008). ..................................................................... 16

Fillion v. David Silvers Co.,
709 S.W.2d 240 (Tex. App. – Houston [14th Dist.] 1986, writ ref’d n.r.e) ........ 18

Ford Motor Co. V. Ridgway,
135 S.W. 3d 598, 600 (Tex. 2004) ........................................................................ 8

iv
Fricks v. Hancock,
45 S.W. 3d 322 (Tex. App. – Corpus Christ 2001, no pet.). ............................... 19

Harris v. Ebby Halliday Real Estate, Inc.
345 S.W. 3d 756 (Tex.App.---El Paso 2011, no pet.) ........................................... 8

Howell v. Mauzy,
899 S.W.2d 690 (Tex. App. – Austin 1994, writ denied) .................................. 13

Johnson v. Hewitt,
539 S.W.2d 239 (Tex. Civ. App. – Houston [1st Dist.] 1976, no writ) ............... 13

Kelly v. Rio Grande Computerland Group,
128 S.W.3d 759 (Tex. App. – El Paso 2004, no pet.) ........................................ 21

Kramer v. Fannie Mae,
2012 WL 3027990 (W.D.Tex. May 15, 2012) .................................................... 10

Lambert v. First Nat. Bank of Bowie,
993 S.W.2d 833 (Tex. App. – Ft. Worth 1999, no pet.) ...................................... 18

Pena Wells Fargo Bank, N.A.,
2014 WL 2090859 (W.D. Tex. 2014) ............................................................... 16

Reinagel v. Deutsche Bank Nat. Trust Co.,
735 F.3d 220 (5th Cir. 2013) .............................................................................. 11

Rodriguez v. Ocwen Loans Servicing, LLC,
306 F. App'x 854 (5th Cir.2009) ........................................................................ 12

Sefzik v. City of McKinney,
198 S.W.3d 884 (Tex. App. – Dallas 2006, no pet) ............................................ 21

Stanley v. CitiFinancial Mortg. Co.,
121 S.W.3d 811 (Tex.App.- Beaumont 2003, pet. denied) ................................ 12

Star-Telegram, Inc. v. Doe,
915 S.W.2d 471, 473 (Tex. 1995). ........................................................................ 8

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

Valence Operating Co. v. Dorsett,
164 S. W. 3d 656 (Tex. 2005) ............................................................................... 7

Vernon v. Perrien,
390 S.W.3d 47 (Tex. App. – El Paso 2012, pet. denied) .................................... 19

Wright v. Matthews,
26 S.W. 3d 575 (Tex. App. – Beamount 2000, pet. denied).................................. 19

Ysasaga v. Nationwide Mut. Ins.,
279 S.W.3d 858 (Tex. App. – Dallas 2009, pet. denied) .................................... 13

STATUTES PAGE(S)

C.P.R.C. §37.004 .................................................................................................... 14

Tex. Prop. Code Chapter 51 ............................................................................... 5, 14

Tex. Prop. Code §51.002 .................................................................................. 10, 12

Tex. Prop. Code Ann. §§ 51.0001(4) ...................................................................... 10

Tex. R. Civ. P. 310 ................................................................................... 1, 6, 14, 15

vi
 I.
STATEMENT OF THE CASE

Appellant Karl B. Bailey (“Appellant” or “Bailey”) appeals summary

judgment in favor of MidFirst Bank (“Appellee” or “MidFirst”), entered by the

250th Judicial District Court in Travis County, Texas, on July 2, 2014. (CR at 26-

27). The trial court dismissed all of Appellant’s claims against MidFirst, and

granted MidFirst’s counterclaim for a declaration that MidFirst’s non-judicial

foreclosure sale 1 of 1234 Acanthus Street, Pflugerville, Texas 78660 (the

“Property”) was proper. The trial court also granted MidFirst relief pursuant to

Texas Rule of Civil Procedure 310, whereby providing MidFirst possession of the

Property. Appellant severed his claims against MidFirst from the remaining

defendants in the lawsuit on July 22, 2014 so that the summary judgment in favor

of MidFirst could become final (CR 28). Appellant then filed a Motion for New

Trial on July 28, 2014 (CR 29-31). Appellant’s Motion for New Trial was

overruled by operation of law and he subsequently filed a Notice of Appeal on

September 30, 2014 (CR 57-58).

1
The Property was sold at a non-judicial foreclosure sale on January 4, 2011 due to the
mortgagor’s failure to pay his mortgage. (Supp. CR 75)

1
 II.
ISSUES PRESENTED

1. Did the trial court commit error in granting Appellee’s request for
declaratory relief regarding the validity of the foreclosure sale of the
Property?

2. Did the undisputed summary judgment evidence negate Appellant’s
breach of contract claim as a matter of law?

3. Did the undisputed summary judgment evidence negate Appellant’s
wrongful foreclosure claim as a matter of law?

4. Did the undisputed summary judgment evidence negate Appellant’s
quiet title claim as a matter of law as the deed records establish
MidFirst’s superior legal title to the property?

5. Did the trial court error in determining that Appellant’s affirmative
claim for equitable estoppel fails as a matter of law given that equitable
estoppel is only a defensive claim and not an affirmative cause of
action?

2
 III.
STATEMENT OF FACTS

This is a home foreclosure matter and involves real estate located in Travis

County, Texas. On July 15, 2004, Travis Chestnut and Amy Chestnut borrowed

$116,578.00 to purchase the real property and improvements at 1234 Acanthus

Street, Pflugerville, Texas 78660 (hereafter, “Property”). The Chestnuts agreed to

repay their loan by executing a promissory note (“Note”) (Supp. CR 51-53), and

they secured the Note by executing a deed of trust (“Deed of Trust”) (Supp. CR

39-50).

The Deed of Trust identified Mortgage Electronic Registration Systems

(MERS) as “Beneficiary” and stated that MERS was the nominee for Lender

(Alethes, LLC) and its successors and assigns. (Supp. CR 49). The Deed of Trust

further specified that MERS had the right to exercise any or all of the interests that

the Chestnuts granted in the Deed of Trust, including the right to foreclose and sell

the Property and to take any of the Lender’s required actions (Supp. CR 50).

MERS (“as nominee for Lender and Lender’s successors and assigns”)

subsequently assigned the Chestnuts’ Note and Deed of Trust to MidFirst and

recorded the assignment in the Travis County real property records. (Supp. CR

51).2 See Bierwirth v. BAC Home Loans Servicing, L.P., 2012 Tex. App. LEXIS

2
The Note was also subsequently endorsed to MidFirst. (Supp. CR 51).

3
7506, at *2-3 (Tex. App. – Austin 2012, no pet.)(mem. op.)(addressing analogous

facts).

Unbeknownst to MidFirst and without MidFirst’s approval, the Chestnuts

sold the Property to Appellant Bailey in 2009, without the Chestnuts paying off

their Note nor obtaining a release of MidFirst’s Deed of Trust. The Chestnuts and

Appellant supposedly entered into a “Wally Wrap”3 through which Appellant was

to pay his monthly installment (under the Wally Wrap) to the Chestnut’s designee,

and the Chestnuts’ designee would, in turn, continue to pay the MidFirst Note. The

special warranty deed from the Chestnuts 4 into Appellant specifies that the

conveyance of title to the Property into Appellant is subordinate to MidFirst’s

interest(s) in the Property.5

As any bad television movie would go, the Chestnuts (through their

designee) ceased making payments on the MidFirst Note while still collecting

Appellant’s monthly installment payments. After the Chestnuts defaulted on their

Note, MidFirst initiated the foreclosure process that culminated in the foreclosure

3
See, Appellant’s Brief at. n.1 describing Wally Wraps in general.
4
The Chestnuts actually transferred title to the property to their designee who then, in turn,
conveyed the property to Appellant.
5
The Special Warranty Deed reads in part,
This conveyance, however, is made and accepted subject to the Vender’s Lien retained in
Deed recorded as Document No. 2004136581 in the Official Public Records of Travis
County, Texas the Deed of Trust recorded as Document No. 2004136582 in the Official
Public Records of Travis County, Texas, and assigned by instrument recorded as
Document No. 2009079539…(Supp. CR 39).

4
sale of the Property on January 4, 2011. (Supp. CR 135). During the foreclosure

process, MidFirst sent the Chestnuts a notice of default (Supp. CR 61), a notice of

acceleration (Supp. CR 70), and a notice of foreclosure sale (Supp. CR 72).

The foreclosure sale occurred as scheduled on January 4, 2011. Appellant

asserts that the foreclosure sale is invalid because MidFirst did not send Appellant

notice of the foreclosure sale. See, Appellant’s Brief at 21. Appellant also seeks to

challenge the assignment into MidFirst from MERS, whereby indirectly attacking

the validity of the foreclosure sale. See, Appellant’s Brief at 20.

IV.
SUMMARY OF THE ARGUMENT

1. Foreclosure was in compliance with contractual terms. MidFirst’s

foreclosure of the Property, after the default by the Chestnuts, occurred in strict

compliance with the terms of the Deed of Trust and Chapter 51 of the Texas

Property Code. Notices of foreclosure are to be sent to “debtors” obligated on the

Note. Appellant was not an obligor on the Note and therefore was not entitled to

notice.

2. Appellant lacks standing to challenge the Deed of Trust. Appellant

seeks to attack the assignment of the Deed of Trust from MERS into MidFirst. As

provided by black letter law, a nonparty to an assignment does not have standing to

challenge an assignment on grounds that would only render the assignment

voidable and not void. Additionally, even if the assignment were to have failed

5
(which it did not) the summary judgment evidence also provided that MidFirst

holds the Note. Either as the note holder or beneficiary under the Deed of Trust,

MidFirst qualified as a mortgagee as that term is defined by the Texas Property

Code. As a mortgagee of the Property, MidFirst was authorized to conduct the

foreclosure sale of the Property.

3. Effect of MidFirst’s superior title in the Property. MidFirst purchased

the Property at the foreclosure sale. The special warranty deed through which

Appellant claims his interest in the Property specifically recognizes that the title

interest conveyed to Appellant (by the Chestnuts) was subordinate to MidFirst’s

vendor’s lien and Deed of Trust lien. When the Deed of Trust lien was foreclosed,

Appellant lost his title interest in the Property. As such, Appellant’s quiet title

claim against MidFirst fails as a matter of law.

4. Declaratory Relief and Right to Possession. The trial court properly

granted the affirmative relief of MidFirst in validating the foreclosure sale. As no

contract existed between Appellant and MidFirst, MidFirst properly obtained the

trial court’s judgment with respect to the contested right to the Property as between

the parties. Further, the trial court was empowered to provide Tex. R. Civ. P. 310

relief to MidFirst in awarding MidFirst possession of the Property given its

superior interest in the Property vis-à-vis Appellant.

6
 V.
ARGUMENTS & AUTHORITIES

As a common problem running through Appellant’s Brief, Appellant

attempts to articulate that his various causes of action were denied for very specific

reasons. Appellant then attempts to set up straw man arguments attacking the

imagined reasons for the trial court’s ruling (eg. “Summary Judgment is in Error

because Bailey has standing to bring his claims…” see, Appellant’s Brief at 18).

However, the trial court did not specify the reasons why it granted MidFirst’s

summary judgment motion. Appellant’s limited arguments in attacking the

summary judgment order misses the mark in the sense that Appellant needs to

attack all grounds upon which the judgment could have been rendered, and not just

selected issues.

MidFirst filed both a traditional and no-evidence motion for summary

judgment. In granting MidFirst’s Motion for Summary Judgment, the court did not

address in its order the grounds upon which the motion was granted, nor whether it

was granting MidFirst’s traditional motion or no-evidence motion with respect to

each cause of action. (CR 27).

Both traditional and no-evidence summary judgment motions are subject to

a de novo review upon appeal. See Valence Operating Co. v. Dorsett, 164 S. W. 3d

656, 661 (Tex. 2005). When a party moves for summary judgment under both

standards, the reviewing court will generally address the no-evidence grounds first.

7
Ford Motor Co. V. Ridgway, 135 S.W. 3d 598, 600 (Tex. 2004). When, as in this

case, the trial court does not specify the basis for the judgment, the appealing party

must demonstrate none of the grounds proposed in either motion support the

judgment. Harris v. Ebby Halliday Real Estate, Inc. 345 S.W. 3d 756, 759

(Tex.App.---El Paso 2011, no pet.) Star-Telegram, Inc. v. Doe, 915 S.W.2d 471,

473 (Tex. 1995). The appellate court may review and affirm on any ground the

movant presented in a motion for summary judgment, regardless of whether the

trial court identified the ground relied on to grant the summary judgment.

Cincinnati Life Ins. v. Cates, 927 S.W.2d 623, 625 (Tex. 1996).

1. Did the trial court commit error in granting Appellee’s request for
declaratory relief regarding the validity of the foreclosure sale of the
Property?

The trial court did not commit error in granting MidFirst declaratory relief

that its foreclosure sale was valid, and that the foreclosure of MidFirst’s purchase

money lien interest in the Property extinguished all subordinate liens. Appellant

attacks the grant of declaratory relief on three grounds, those being:

a. The Assignment into MidFirst is invalid and therefore MidFirst
had no authority to conduct the sale;

b. MidFirst did not comply with the necessary pre-sale requirements
set out within the Deed of Trust and Texas Property Code; and

c. The trial court should not have even considered MidFirst’s request
for declaratory relief as the relief was duplicative of the claims
already asserted by Appellant before the trial court.

8
a. MidFirst’s legal standing to foreclose is beyond dispute. MidFirst’s legal

right to have conducted the foreclosure sale of the Property is crystal clear. The

recorded assignment of the Deed of Trust into MidFirst, from MERS, leaves no

room for doubt that MidFirst was empowered to act pursuant to the terms of the

Deed of Trust (including the power to foreclose). This Court has repeatedly held in

recent years that,

Under Texas law, where, as here, a deed of trust expressly grants
MERS the power of sale, then MERS has that power. Athey v. MERS,
314 S.W.3d 161, 166 (Tex. App.—Eastland 2010, pet. denied). MERS
was the nominee for [lender] and its successors and assigns… MERS
had the authority to transfer the rights and interests in the deed of
trust… When MERS transferred the deed of trust to [assignee],
[assignee] obtained all MERS’s rights and interests in the deed of
trust, including the power to foreclose on the property. As in Athey,
the mortgage documents provide for the use of MERS, and those
provisions are enforceable to the extent provided by the terms of the
documents.

Campbell v. Mort. Elect. Reg. Systems, Inc., 2012 WL 1839357 (Tex. App. –

Austin, pet. denied). Appellant attempts to misdirect the Court away from the

express powers granted MidFirst under the Deed of Trust by pointing to a

supposed discrepancy with the endorsements on the Note.6 Appellant argues that if

the endorsements on the Note are unclear ‘there must be doubt about who can

6
The Note was originally endorsed from Atheles LLC into GMAC, and then from GMAC into
MidFirst.

9
foreclose as the beneficiary under the Deed of Trust.’ See generally, Appellant’s

Brief at 24.

Appellant’s argument misses the mark in the sense that the right to foreclose

under a security instrument is fundamentally different than a note holder’s right to

seek collection on a note. It does not matter if MidFirst held the Note or not at the

time of foreclosure. As the Austin Court of Appeals set out in Bierwirth v. BAC

Home Loan Servicing, L.P., “Bierwirth’s assertion that an entity must own or hold

a promissory note to conduct a foreclosure under the associated deed of trust runs

afoul of the property code provisions governing foreclosure under a deed of trust.”

Bierwirth v. BAC Home Loan Servicing, L.P., 2012 WL 3793190 (Tex. App. –

Austin 2012); See also, Tex. Prop. Code Ann. §§ 51.0001(4)(defining

“mortgagee”), and 51.002 (providing procedure for foreclosure “under power of

sale conferred by deed of trust”) (West Supp.2012); Kramer, 2012 U.S. Dist.

LEXIS 105878, at *17–18, 2012 WL 3027990. Continuing, the Austin Court of

Appeals went on to state,

Similarly, this Court rejected the argument that a note and its security
are inseparable by recognizing that the note and the deed-of-trust lien
afford distinct remedies on separate obligations—the note against the
borrower and the lien against the real property. See Stephens v. LPP
Mortg., 316 S.W.3d 742, 747 (Tex.App.-Austin 2010, pet. denied).
For this reason, a lien creditor may pursue foreclosure of a lien against
real property under the deed of trust independent of any personal
action against the borrower for collection on the note. See id.; see also
Kramer v. Fannie Mae, No. A–12–CA–276–SS, 2012 U.S. Dist.
LEXIS 105878, at *16–19, 2012 WL 3027990 (W.D.Tex. May 15,

10
 2012).
Bierwirth v. BAC Home Loan Servicing, L.P., 2012 WL 3793190 at *4 (Tex. App.

– Austin 2012). Simply put, Texas courts refuse to conflate foreclosure under a

security instrument with enforcement of a note.

Appellant also attempts to argue that the trial court improperly determined

that Appellant lacked standing to challenge the Assignment to the Deed of Trust;

the trial court never made such a ruling (instead the summary judgment order

simply reads that Appellant’s claims are denied). The summary judgment record

factually supports that MidFirst is the holder of the Note (by way of

endorsement)(Supp. CR 51), and is also the beneficiary of the Deed of Trust (by

way of assignment)(Supp. CR 39). Whether the Assignment from MERS

attempted to transfer the Note to MidFirst (by assignment) despite MidFirst already

being the holder of the Note (by endorsement) is immaterial. At a minimum the

summary judgment evidence depicts that MidFirst was assigned the Note twice,

and was assigned the Deed of Trust once.7 The assignment of the Deed of Trust

alone was sufficient to empower MidFirst to act as it did.

b. MidFirst Complied with all Pre-sale requirements. MidFirst’s

7
Even if the trial court based its decision on issues of standing as opposed to the factual issue of
MidFirst holding the Note and being the beneficiary under the Deed of Trust, Appellant can’t
escape that he does not possess standing to challenge the assignment in the manner addressed in
his brief. See, Reinagel v. Deutsche Bank Nat. Trust Co., 735 F.3d 220 (borrower did not have
standing to challenge assignment on grounds that would only make the assignment “voidable” as
opposed to being “void.” Nothing Appellant has articulated suggests that the Assignment of the
Deed of Trust was void from inception.

11
declaratory relief, affirming the foreclosure sale, is supported by the undisputed

summary judgment evidence. Specifically, the Chestnut’s Note was in default.

MidFirst sent the Chestnuts a notice of default as required by the Deed of Trust

(Supp. CR 61). After the default was not cured, MidFirst sent the Chestnut’s a

notice of acceleration of the debt. (Supp. CR 72). Notice of foreclosure was also

provided to the Chestnuts as required by law (Supp. CR 74). Contrary to

Appellants un-cited legal proposition that Appellant was also entitled to notice of

sale, Texas law is clear that the entity conducting foreclosure must provide notice

only to the obligors under the loan agreement. See, Tex. Prop. Code §51.002

(“serving written notice of the sale by certified mail on each debtor who,

according to the records of the mortgage servicer of the debt, is obligated to pay

the debt.”)(emp. added). “There is no legal requirement that personal notice of

foreclosure be sent to persons not parties to the deed of trust.” Rodriguez v. Ocwen

Loans Servicing, LLC, 306 F. App'x 854, 856 (5th Cir.2009) (quoting Stanley v.

CitiFinancial Mortg. Co., 121 S.W.3d 811, 817 (Tex.App.- Beaumont 2003, pet.

denied)); Cuauhtli v. Chase Home Fin. LLC, 252 F. App'x 690, 692 (5th Cir.2007)

(“The personal notice that must be given to debtors is not owed to residents of the

property who are not personally liable for the debt.”).

The undisputed summary judgment evidence established that the Chestnuts

were in default on their Note. The evidence also established that the required

12
notices of default, acceleration and sale were sent to the Chestnuts. The substitute

trustee’s deed additionally reflects that the sale occurred within the time required

and at the location specified.

c. MidFirst’s Counterclaim for Declaratory Relief was Proper.

Appellant seeks to challenge the propriety of the trial court even entertaining

MidFirst’s request for declaratory relief. Appellant asserts that his filing of a quiet

title cause of action works to bar MidFirst from bringing a claim for declaratory

relief. See, Appellant’s Brief at 30 (relying on the proposition that, “The

Declaratory Judgments Act is not available to settle disputes already pending

before the court. Johnson v. Hewitt, 539 S.W.2d 239, 240-241 (Tex. Civ. App. –

Houston [1st Dist.] 1976, no writ)).” Appellant is incorrect in his analysis of the

law.

A court may allow a declaratory judgment counterclaim if it is something

more than a mere denial of the plaintiff’s claim and has greater ramifications than

the original suit. See, Howell v. Mauzy, 899 S.W.2d 690 (Tex. App. – Austin

1994, writ denied); Ysasaga v. Nationwide Mut. Ins., 279 S.W.3d 858, 863 (Tex.

App. – Dallas 2009, pet. denied). A counterclaim states a claim for affirmative

relief if it alleges that the defendant has a cause of action independent of the

plaintiff’s claim, on which the defendant could recover benefits, compensation, or

relief, even if the plaintiff were to abandon or fail to establish his cause of action.

13
BHP Petroleum Co. v. Millard, 800 S.W.2d 838 (Tex. 1990).

MidFirst’s request for declaratory relief has larger implications than simply

determining the rights of Appellant vis-à-vis MidFirst. MidFirst’s relief was not

only whether the sale was valid, but also whether the sale extinguished all inferior

lien interests (not just Appellant’s interest). As such, MidFirst’s claim was

independent of Appellant’s action and sought relief beyond Appellant’s limited

interest in the Property.

MidFirst properly brought a claim for declaratory relief pursuant to Civil

Practice and Remedies Code §37.004 seeking to ascertain the status of its rights in

the Property. The summary judgment evidence undisputedly establishes that

MidFirst possessed the right to foreclose as the beneficiary under the Deed of

Trust, and that the foreclosure sale was performed in accordance with the terms of

the Deed of Trust and Chapter 51 of the Texas Property Code. The trial court’s

grant of declaratory relief to MidFirst should be in all things affirmed.8

8
By way of ancillary relief the trial court granted MiFirst a writ of possession. The trial court’s
declaratory relief specifically provided that, “any interests of any secondary or junior lienholder
were extinguished as a result of the foreclosure sale.” MidFirst asked for Rule 310 relief within
the body of its motion for summary judgment and in its prayer for relief generally asked for a
writ of possession ancillary to its request for declaratory relief. In response, the trial court ruled,
“MidFirst, is entitled to possession of the premises in accordance with Tex. R. Civ. P. 310 and
that Defendant Midfirst have restitution, for which let writ issue…” (CR 24-25)(emp. added).
Even if the trial court assigned an incorrect reason for the issuance of the writ (which it did not),
“we will affirm if we find that one of the grounds asserted by the movant is valid.” Torres v.
Chrysler Credit Corp., 655 S.W.2d 249 (Tex. App. – Corpus Christi 1983); Hotchkiss v. Texas
Employers’ Insurance Ass’n, 479 S.W.2d 336, 339 (Tex. Civ. App. – Amarillo 1972, no writ).
MidFirst’s right to possession of the Property flows from its superior legal interest in the

14
 2. Did the trial court error in determining that Appellant’s breach of
contract claim fails as a matter of law?

Appellant brought a claim against MidFirst for breach of contract (breach of

the terms of the Deed of Trust). Appellant asserts MidFirst should have provided

Appellant with notice of the foreclosure sale of the Property. In defense, MidFirst

moved for summary judgment seeking to negate Appellant’s breach of contract

claim on the grounds that: (1) Appellant does not have standing to assert his claim

as he was not a party to the Deed of Trust, and (2) that Appellant was not entitled

to notice.9

In a strikingly similar case to this matter, the United States District Court for

the Western District of Texas was confronted in Pena v. Wells Fargo Bank, N.A.

with whether a person holding an equitable interest in property (under a wrap

around deed of trust), but who was not a party to the Deed of Trust, possessed

standing to sue for breach of contract for lack of notice of sale. The court

concluded,

“[A] s a general rule, only the mortgagor or a party who is in privity
with the mortgagor has standing to contest the validity of a
foreclosure sale pursuant to the mortgagor's deed of trust.” …
However, Texas courts recognize a third-party exception to this rule:
“when [a] third party has a property interest, whether legal or
equitable, that will be affected by [a foreclosure] sale, the third party

Property. Whether via Rule 310 relief or as ancillary relief to MidFirst’s declaratory relief, it
was proper for the trial court to see to the enforcement of its order.
9
In Section 1b above, MidFirst addressed the issue that notice of sale is to be sent to debtors
obligated for repayment of the Note, which did not include Appellant.

15
 has standing to challenge such a sale to the extent that its rights will
be affected by the sale.” EMC Mortgage Corp. v. Window Box Ass'n,
Inc., 264 S.W.3d 331, 335 (Tex.App.2008).

Pena v. Wells Fargo, N.A., 2014 WL 2090859 (W.D. Tex. 2014).

However, despite having standing to sue, the Pena court held that the

plaintiff’s claim failed as a matter of law because,

“Plaintiff's Complaint does not allege that she is a party to the deed of
trust or otherwise a debtor on the loan taken out by the Apostols to
secure the Property. See Pl.'s Compl. Moreover, Plaintiff does not cite
to any statute or regulation that would require Defendants to provide
foreclosure notices to Plaintiff. Therefore, dismissal is appropriate as
to Plaintiff’s claims that Defendants failed to provide her with
foreclosure notices pursuant to the Deed of Trust and the Texas
Property Code.

Pena Wells Fargo Bank, N.A., 2014 WL 2090859 *3. Appellant sets out in his

brief that the trial court determined that he did not have standing to assert his

breach of contract claim; the trial court made no such determination. Rather, the

trial court granted MidFirst’s summary judgment without specifying the reasons.

The record clearly reflects that while Appellant had standing to pursue his claim,

his claim failed as a matter of law because Texas law does not require notice of

sale be provided to individuals who are not parties to the deed of trust nor debtors

obligated on the note. This Court should in all things affirm the trial court’s

dismissal of Appellant’s breach of contract claim.

3. Did the undisputed summary judgment evidence negate Appellant’s
wrongful foreclosure claim as a matter of law?

16
 In trying to appreciate what cause of action Appellant is attempting to assert

via his “void foreclosure” allegation (See Appellant’s Brief at 24), MidFirst

assumes Appellant is attempting to articulate a cause of action for wrongful

foreclosure. In defense against Appellant’s claim, MidFirst filed a no-evidence

motion for summary judgment. Appellant failed to produce any evidence in

support of the various elements of his wrongful foreclosure claim.

The elements of a wrongful foreclosure claim are: (1) a defect in the

foreclosure sale proceedings; (2) a grossly inadequate selling price; and (3) a

casual connection between the defect and the grossly inadequate selling price.

Charter Nat’l Bank – Houston v. Stevens, 781 S.W.2d 368, 371 (Tex. App. –

Houston [14th Dist.] 1989, writ denied). The only aspects of the foreclosure that

Appellant challenges are that MidFirst did not have standing to conduct the sale,

and that Appellant was entitled to notice of sale. MidFirst has already addressed

each of these issues at length above.

Appellant failed to produce any evidence in response to MidFirst’s no

evidence motion depicting a defect with the foreclosure process. Additionally,

nowhere within Appellant’s summary judgment response, nor his Appellant’s

Brief, is there any discussion or commentary regarding a grossly inadequate selling

price for the Property at the foreclosure sale. As Appellant failed to produce more

17
than a scintilla of evidence regarding essential elements of his cause of action for

wrongful foreclosure, his claim fails as a matter of law.

Additionally, Appellant’s wrongful foreclosure claim also fails because, in

order to be entitled to have a foreclosure sale set aside in Texas, a plaintiff must

actually tender – not just offer to tender – the full amount owed on the note.

Lambert v. First Nat. Bank of Bowie, 993 S.W.2d 833, 835 (Tex. App. – Ft. Worth

1999, no pet.); Fillion v. David Silvers Co., 709 S.W.2d 240, 246 (Tex. App. –

Houston [14th Dist.] 1986, writ ref’d n.r.e)(“Tender of whatever sum is owed on

the mortgage debt is a condition precedent to the mortgagor’s recovery of title

from a mortgagee who is in possession and claims title under a void foreclosure

sale”).

In short, Appellant failed to introduce summary judgment evidence to carry

his burden of proof regarding the essential elements of his wrongful foreclosure

claim. The record before the Court also fails to establish that Appellant has

tendered the amount due and owing to pay off the MidFirst Note. Given the

foregoing, the trial court’s summary judgment order denying Appellant relief under

his wrongful foreclosure claim should be in all things affirmed.

4. Does the undipsuted summary judgment evidence negate Appellant’s
quiet title claim as a matter of law?

From the very outset of Appellant acquiring an interest in the Property in

2009, his interest was subordinate to the interest(s) held by MidFirst. MidFirst

18
possessed two lien interests in the Property dating back to 2004. First, MidFirst

was the beneficiary of the Chestnut’s purchase money deed of trust lien (Supp. CR

39). Second, MidFirst possessed the vendor’s lien that was reserved within the

Chestnut’s Warranty Deed in favor of their lender. (Supp. CR 59). Additionally,

the Special Warranty Deed into Appellant specifically provides that Appellant’s

interest in the Property is subject to MidFirst’s Deed of Trust lien (Supp. CR 39).

Despite the title documents unmistakably confirming the superior nature of

MidFirst’s title, Appellant nonetheless filed suit against MidFirst asserting a quiet

title claim. The elements of the cause of action to quiet title are that the plaintiff

must show: (1) an interest in specific property, (2) title to the property is affected

by a claim by the defendant, and (3) the claim, although facially valid, is invalid or

unenforceable. Vernon v. Perrien, 390 S.W.3d 47 (Tex. App. – El Paso 2012, pet.

denied). The plaintiff in a suit to quiet title must allege right, title, or ownership

in himself or herself with sufficient certainty to enable the court to see he or she

has a right of ownership that will warrant judicial interference. Wright v.

Matthews, 26 S.W. 3d 575, 578 (Tex. App. – Beamount 2000, pet. denied). A

plaintiff cannot succeed in a suit to quiet title by simply basing his claim on the

weakness of his opponent’s title but rather he must succeed on the strength of his

own title. See generally, Fricks v. Hancock, 45 S.W. 3d 322, 327 (Tex. App. –

Corpus Christ 2001, no pet.).

19
 While not altogether clear from Appellant’s Brief, MidFirst construes

Appellant’s argument to be that MidFirst’s foreclosure action, while facially valid,

is actually defective due to the issues raised by Appellant surrounding the

Assignment and the Note. MidFirst has already addressed these issues within

Issues No. 1, 2 and 3 above and incorporates those prior arguments within this

Section of its brief to the extent necessary. As MidFirst’s lien interest in the

Property was superior to that of Appellant’s, and as no defect exists with the

foreclosure sale, Appellant’s quiet title claim fails as a matter of law. The trial

court’s judgment dismissing Appellant’s quiet title claim should be affirmed.

5. Did the trial court error in determining that Appellant’s affirmative
claim for equitable estoppel fails as a matter of law given that it is only a
defensive claim and not an affirmative cause of action?

Appellant asserts equitable estoppel as an affirmative claim against Midfirst.

See, Appellant’s Brief at 27. Appellant’s argument is that MidFirst should have

seen the Wally Wrap within the deed records, and once aware of the Wally Wrap,

MidFirst should have known Appellant was making payments on the Property (and

that it would be inequitable to foreclose on someone making payments). There are

multiple problems with Appellant’s argument.

First, a party is not required to constantly monitor the real property records

to guard against a future filing by another party. The law does not impart any

requirement on MidFirst to examine title records periodically to confirm no one

20
has attempted to destroy its lien interest in a specific piece of real property. See

generally, Biswell v. Gladney, 213 S.W. 256, 258 (Tex.Comm'n App.1919) (A

mortgagee is not charged with constructive notice of a subsequently recorded deed

conveying part of the land involved.). The object of all registration acts is to affect

with notice only such persons as have reason to apprehend some transfer or

incumbrance prior to their own, because none arising afterwards can affect them or

their estate in the land. Cox v. Clay, 237 S.W.2d at 804; also see, Boucher v.

Wallis, 236 S.W.2d 519, 526 (Tex.Civ.App.—Eastland 1951, writ ref'd n.r.e.)

(observing that the “purpose of [the Texas] recording laws is to notify subsequent

purchasers ... and not to give protection to the alleged perpetrators of fraud.”)

(emphasis added). Appellant has cited to no authority, and no authority exists to

impart a duty on MidFirst to examine deed records for an “after the fact” wally

wrap.

Second, and equally damaging to Appellant’s claim is that that equitable

estoppel is only a defense and cannot be used as an affirmative claim. See, Kelly v.

Rio Grande Computerland Group, 128 S.W.3d 759, 769 (Tex. App. – El Paso

2004, no pet.)(setting out that promissory estoppel can be used as an affirmative

claim but equitable estoppel cannot). Equitable estoppel prevents a party from

changing its position when it has misrepresented facts to another, knowing the

other party would rely on the representation to their detriment. See, Sefzik v. City

21
of McKinney, 198 S.W.3d 884, 895 (Tex. App. – Dallas 2006, no pet). Nothing

within the record suggests that MidFirst every misrepresented anything to

Appellant, much less even knew of Appellant’s existence. Further, nothing in the

record suggests that MidFirst changed its position after making a representation.

There is no merit in either fact or law to Appellant’s affirmative claim of

equitable estoppel against MidFirst. The trial court was correct in determining that

based upon the summary judgment evidence; Appellant’s claim for equitable

estoppel fails as a matter of law.

V.
PRAYER

For these reasons, Appellee MidFirst Bank respectfully requests that this

Honorable Court affirm the judgment of the trial court. Appellee also requests any

other relief, at law or in equity, to which it may be entitled.

Respectfully submitted,

Hopkins & Williams, PLLC
12117 Bee Caves Rd. Suite 260
Austin, Texas 78738
(512) 600-4320 – Telephone
(512) 600-4326 – Facsimile
mark@hopkinswilliams.com

By: _/s/ Mark D. Hopkins________
Mark D. Hopkins
Texas State Bar No. 00793975

ATTORNEY FOR APPELLEE MIDFIRST BANK

22
 CERTIFICATE OF SERVICE

I hereby certify that Appellee's Brief for No. 03-14-00632-CV has been
forwarded to the following via certified mail, return receipt requested and regular
U.S. mail on this 13th day of February 2015:

Via Regular U.S. Mail
And CMRRR #70121640000171145954
William B. Gammon
Anthony G. Read
Gammon Law Office, PLLC
1201 Spyglass Drive, Suite 100
Austin Texas 78746

/s/ Mark D. Hopkins
Mark D. Hopkins

23
 CERTIFICATE OF COMPLIANCE

Pursuant to Texas Rule of Appellate Procedure 9.4(i)(3), the undersigned
certifies this brief complies with the type-volume limitations of Texas Rule of
Appellate Procedure 9.4.

1. Exclusive of the exemption portions in Texas Rule of Appellate Procedure
9.4(i)(1), the brief contains: 5,035 words

2. THE BRIEF HAS BEEN PREPARED in proportionally spaced typeface
using Microsoft Word 2011 in Times New Roman font, with 14 pitch font
for text and 12 pitch font for footnotes.

3. IF THE COURT SO REQUESTS, THE UNDERSIGNED WILL PROVIDE
AN ELECTRONIC VERSION OF THE BRIEF AND/OR A COPY OF
THE WORD OR LINE PRINTOUT.

4. THE UNDERSIGNED UNDERSTANDS A MATERIAL MISREPRESEN-
TATION IN COMPLETING THIS CERTIFICATE, OR CIRCUMVEN-
TION OF THE TYPE-VOLUME LIMITS IN TEXAS RULE OF
APPELLATE PROCEDURE 9.4, MAY RESULT IN THE COURT’S
STRIKING THE BRIEF AND IMPOSING SANCTIONS AGAINST THE
PERSON SIGNING THE BRIEF.

/s/ Mark D. Hopkins
Mark D. Hopkins

24
 APPENDIX

Exhibit “A”: Summary Judgment Order

Exhibit “B”: Deed of Trust

Exhibit “C” Assignment

Exhibit “D” Special Warranty Deed

25
Notice stJnt: Finc-ll fntcrlocutory
DC BK14203 PG589
Dlsp Parties:. _ _ _ ---r+t-=7.~

Dlsp code: CVD / CLS ---'+.:.....o.-=--

~::::~~=: __ __.~..e-tt---
clcrk _ CAUSE NO. D-1-GN-11-000558

KARL B. BAILEY, JR. § 1N THE DISTRICT COURT
§
§
Plaintiff, §
vs. §
§
MIDFIRST BANK; SMOKE SIGNAL § 250TH JUDICIAL DISTRICT
PASS, LLC; ERIC J. LEE; KW §
MANAGEMENT, LLC, dfb/a Keller §
Williams §
§
§
Defendants. § TRAVIS COUNTY, TEXAS

ORDER ON DEFENDANT MIDFIRST BANK'S FIRST
AMENDED MOTION FOR SUMMARY JUDGMENT

On this day, the Court determined it had jurisdiction over the subject matter and the

parties to this proceeding. After considering Defendant MidFirst Bank's ("MidFirst") First

Amended Motion for Summary Judgment, the pleadings, the affidavits, and other evidence on

file, the Court GRANTS Defendant MidFirst's first amended motion for summary judgment.

IT IS THEREFORE ORDERED ADJUDGED AND DECREED that Defendant's

First Amended Motion for Summary Judgment is hereby GRANTED.

IT IS FURTHER ORDERED that all of Plaintiffs cause of actions against Defendant

MidFirst are dismissed with prejudice to there-filing of same.

IT IS FURTHER ORDERED that Defendant MidFirst's foreclosure sale conducted on

January 4, 2011 was valid, that it has a priority first lien on the Property in question, and that any

interests of any secondary or junior lienholder were extinguished as a result of the foreclosure

sale.

IT IS FURTHER ORDERED that Defendant, MidFirst, is entitled to possession of the

premises in accordance with TEX. R. CN. P. 310 and that Defendant Mid.First have restitution, for

ORDER ON DEFENDANT'S AMENDED MOTION FOR SUMMARY J'UDGMEJ','T
BDFrENO. 20100010601513
 DC BK14203 PG590

which let writ issue, of the premises commonly known as 1234 Acanthus Street, Pflugerville,

Texas 78660, and legally described, to-wit:

LOT 18 BLOCK B, OF HEA THERWILDE, SECTION THREE, AN ADDITION
IN TRAVIS COUNTY, TEXAS, ACCORDING TO THE MAP OR PLAT THEREOF;
RECORDED IN BOOK 87, PAGES 57C-58A, OF THE PLAT RECORDS OF TRAVIS
COUNTY, TEXAS; AS CORRECTED IN DOCUMENT NUMBER 2000188927 OF THE
OFFICIAL PUBLIC RECORDS OF THE REAL PROPERTY RECORDS OF TRAVIS
COUNTY, TEXAS.

SIGNED on Q\11. l ~ ~II '2014.

~-~
pRESJI)INJ GE

SUBMITTED BY:

BARRETT DAFFIN FRAPPIER
TURNER & ENGEL, LLP

Is/Chris Pochyla
Chris Pochyla
State Bar No. 24032842
15000 Surveyor Boulevard, Suite 100
Addison, TX 75001
ChrisPO@bdfgroup.com
972-386-5040
972-341-0734 (Fax)

ATTORNEY FOR DEFENDANT
MIDFIRST BANK

ORDER ON DEFENDANT'S AMENDED MOTION FOR SUMMARY .TUDGl\IENT PAGE2
BDFTE NO. 20100010601513
27
.--2.5.12002146
SLG/04

1111111111111 DT
t2 PGS
2004136582

When Recorded Return and Mail To:
ALI'riiES, LLC
12885 RESEARCH BLVD STE 202
AV8TtN, TX 78750
ATTN:

[elephone: ------- --··----
rrepared By:
GINNY MXLU~
lU.&'rllm8, t..X.C

t2885 RBRMtC:H BLVD ftE 202,
AU8'rtN, 'rX 18750
- - - - ------IS_p_a_e_e_A_bo-ve-T"'"h-ls_L_Ine For Recordtna Dat;y-------·--·-
DEED OF TRUST
CIICS'INIM'
t.cWf mDIBD: . . . . . .
~ ~: t~S-?012.71-703 -
NZ•:
1002.71000020~3683

NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL
PERSON, YOU MAV REMOVE OR STIUKE ANY OF TltE FOLLOWlNG
INFORMATION FROM THIS .INSTRUMENT BEFORE lT IS FILED FOR
RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER
OR YOUR DRIVER•s LICENSE NUMBER.
TillS DEED OF TRUST("Sec:urity ln•1rumcnt"J i~ made on JULY 15, 2004 . The
grantor is TAAVIS CliES'.rlVI' AND AMY CHIS MIT, WSBAND AND WIJi't

("Bt)tlOwcr"). The trustue is MBIR'r J. WlLSON

whose ilddre~~S is 9951 ANDIRSON MILL RD. 1200 .AOSUN, 'l'X 79750

('"trustee"). 'f'he bi:neficiary is Mortgage E~tronic Registration Systemli,lnc. ("MERS") (solely as nominee
tor tender, as hereinafter defined, and Lender'~ succ."Cuors and assisns). MHRS is organit.cd and existing
under the lawa of Delaware, and has an address and telephone number or Post Office Box 2026, Flint,
Michigan 48501-2026, telephone (888)679·Mf.RS. ALITHES, LLC

("Lender") Is organized and existing under the laws of 'l'EXAS
and has an address of 12685 USI:ARCR BLVD STI: 202 AUSTIN, TX 76750

I'll"! I or Ill lo1J.A T1111l Otd ofl'rllff • 2.91
Borrower owe..-. Lender the principal sum of
20S368
0
ONE HUNDRED SIXD&N !'HOUSAND FIVE HUNDRED SllVZN'rY-EIGKT AND 00/100 c
Dollars (U.S. S 116, S78. 00 ). This debt is evidenced by Borrower's note dated the same
date as this Security Instrument ("Note"). which provides for monthly paymenls. with the futl debt. if not
<
:I:
paid earlier, due and payable on AUGUST 1, 2034 . This Security Instrument secures to Lender: 0
(a) the repayment of the debt evidenced by the Note. with interest, and all renewals, extensions nnd
mroperty againllt all
claims tmd ther hazard insurance premiums, as required:
Third. to intere.9tdue under the Note;
Fcnmh,.lo amoniz.tion of the principal of the Nate; and
Fifth, to late charges due under the Not~:.
4. Fire. Flood and Otber Haurd lllluraru:". Borrower shall insure all improvcmel1ts on the
Property, whether now in exisrence or subseqoontly erected, aaainst any hazards, casualties, and
c:ootinacnei~. including fire. for which Lender requires lnsu~. This Insurance shall be maintained ln the
amounts and far the periods that Lender ~ulres. Borrower shall also irisure $11 improvements on the
Property, wht:ther now in txistencct .or $Ubsequently erected, against loss by floods \O the extent roquircd by
the Se~!ll')'. All insurance shall be carried with C(lmpanies approve.d by Lender. The insurance policies
and any renewals shall be 1\eld by Lender 1\nd shall include loss payable clauses in favor ot: and in a form
acceptable to, Lender.
In the event of lois, Borrower shall give Lender immediate notice by mail. l.ender may make proof
of loss If not made promptly by Borrower. Each insul'3RCe eompany conc:erMd is hereby authorized and
directed to make payment for such ross directly ta Lender, instead of to Borrower and ro Ltnder.jointly. All
or any pan of the insurance proceods may be applied by Lender, at its option, either (a) to the reduction of the
indebtedness under the Note and this Security lnstrumenl. first to any delinquent amounts applied In the order
in Paragraph ), and then to prepayment of princi~Jltl, or (b) to. the restoration or repair of the damaged
Property. Any applicatiOn oftlle proceeds to the principal shall not extend or pu~pone the due date o( the
monthly J)ayments which are referred to in JJaragraph ~. or chortge the amount of such payments. Any e:ot~ess
ins11rancc proceeds OV!R' an amount required to pay all outstanding indebtedneMo: under the Note and this
Soc:urlty ln$trumcnt shall be paid to the entity legally entitled thereto.
In the event of foreclosure o( this Security Instrument or other transfer of title to the Propeny that
ulinguish1.'S the indebtedness, olf right, title and intiJI"CSt of Horrower in and to insurance policies in force
shall pass to the purchaser.
~lofiU
.,.,
 •

20536$
5. Occupaacy, Prelel'\lation. Maintenance and ProttctloD or tbe Property; Borrower's Loan
Appllcatto_.; Leaseholds. Borrower shall occupy, establish, and use the Property as Borrower's princip~~l
residence within sixty days after the execution of this Security Instrument (or within sixty days .of ~!later sale
or transfer c>f the Property) and shall continuo to occupy the Property as Borrower's principal residence for at
least one year after the date of occupancy. unloss Lender determines that requirement will cause undue
hardship for Borrower, ur Wlloss exteflll!Uing circumstances exist which are beyond Borrower's control.
Borrower shall notify l.ender of any extenuating circ11mstances. Borrower shall not commit waste or destroy.
damage pr sub5tantially change the Property or allow the Property to deteriorate. reasonable wear and tear
excepted. Lender may inspect the Property if the Property is vacant or abandoned or the loan is in dcfaull.
Lender may take teaSOnable action to protect and preserve such -1acant or abandoned Property. Borrower
shall ab;o be in default if Borrower. dll'ing the loan application process, gave matt"rially false or inaccurate
information or statements to Lender (or failed to provide Lcndc:r with any material information) in
connection with the loan evidenced by the Note, including, but not limited to, representations concerning
Borrower's occupancy of the Property as a principal residence. If this Security Instrument is on alensehold,
Borrower shall comply with the provisions of the lease. If Borrower acquires fee title to the Property, the
leasebold and fee title shall not~ mergod unless Lender agrees to me merger in writing.
6. Condemnation. The pruceeda of any aw;~rd ot claim for damages, direct or consequential, in
connection with any condemnation or other taking of any part. of the Property. or tbr conveyance in pln~ of
condemnation, are hereby assigned and shall be piid to Lender to the extent or the full amount of the
indebtedness that ffinalns unpaid under the Note 111nd this Security lnatrument. Lender ahall apply t;Uch
proceeds to the reduction of the indebtedness under the Note and this .Security Instrument, tirst to any
delinq1.1ent amounts applied in the order provided in Paragrap]l 3, and then to prepayment of principal. Any
application of the proceeds to the principal l!hall not extend or postpone the due date of the monthly
payments, which arc referred to in Paragraph 2, or change the amount of such payrnents. Any excess
proceeds over 1111 amooot required to pay all oul511lndinJ indebtedness under the Note and this S~riry
Instrument shall be paid to the entity legally llnlitled thereto .
7. Charaes to 8orrower and Protettion or lender's R.lgbts Jn tbe Proptrty. Borrower shall pay all
govemmenllll or municipal charges. Ones and impositions that are not included in Paragraph 2. Borrower
shall pay these obligations on time directly to ihe entity which is owed the payment. If failure to pay would
advonety affect Lender's intmost in the Property, upon t.ender's request Borrower shall promptly furnish to
Lender receipts evidenciltg these p~~ymr.mts.
If Btttrowcr tails to mak~ these payments or the payments required .by Paragraph 2. or fails to
perfonn 11ny other covenants and agreements contained in this Security Instrument, or there is a legal
proceeding that may Sijpllficantly atTect Lendc(il righ!S in the Property (such 4ll a proceeding in bankruptcy.
for. condonmatiun (,lt to enforce laws or regulations), then Lender may do and pay whatever is necessary to
protecr the value of the Property and lender·~ righu in the Property, Including payment of uuuls. hazard
insurance und other itoma mentioned in Paragraph 2.
, Any IUllOUn(j disj,u~d by Lender under this Paragraph shall become an additional debt of
Borrower und be seeured by this Security Instrument These amounts shall bear interest from the date or
disbnrstm&.'flt. nt the Now me and at the option of Lender shall be immediately due and payable.
Borrower shall promptly discharge any lien which has priority over this Security Instrument unless
Borrower: (a) agrees In writing to the payment of the: obligatioo aecurc4 by the lien in a maoner acceptable to
Lender; (b) contests in good faith dtc lien by, or defeflds against enforcement of !he lien in, le$al proceedings
·which in the l.ender's opinion operate to prevent tho cntOrcc.ment of the lien; or (c) secures from the holder
of the lien an 8gTeem~nt satisfactory to Lendct iubordinating tho lien to this Security Instrument. If Lel)der
det\.'t'lllines that any part or the Pr()perty is su~iect to a lien which rnny attain priority over this ~urity
Instrument. l.ondcr may giveBI>ITower Q notice identifYing the lien. Borrower shall Sltlisfy the lien or take
one or more ufdteactlorn; sec tbrth above within 10 days of the giving or notice.
8. Fen. Ll!ndcr may collect f~:Cli and charge!laulhorlzed by the Secretary.
JIUA Tnu Dftd urT111tt • 11!11

I. '
I i

- ..,....
, ,, . . -· ~ . ....
~ " ' .. . .
 ..
-------""""·""!1aco ~of to

j.
 ''·'')·~·-4fiJ{1J •
...,~--··~-~-·1-l•·• ,"''" .-•-v" •" . . . . '"" "'" .

i/
I!
,..
•';

205368
successor in .Interest or refuse to ()(tend rime for payment or otherwise modifY amorti:r.atlon of the sums
secured by this Security Instrument by msson of 1111}' demand made by the original Borrower or Borrower's
successors in interest. Any forbeal'lll<:e by Lender in exer<:ising any right or remedy shall not be a waiver of
or preclude the exercise of any right or remedy.
•2. Su~cuson and Aulpa Bound; Jolat aad Stveral Liability; Co-SI&nen. Th~ covenants lmd
aa""ments of this SeC\Irity Instrument shall bind ood benefit the suceeS$01'5 anll asslgnN of Lender and
Borrower, subject .lo the provisions of Paragraph 9(b~ Borrower's Govenants and agrccments shall be joint
and soveral. Any Borrower who co-sigt~s this Security lnstrumenl but does not execure the Note: (a) is co-
signing this S'lcurity Instrument only to mortgage, gr411t and convey that Borrower's interest in the Property
under the term~ of this Security Instrument; (b) Is not personally obligated to pay the sums s~cured by this
Seoority Instrument; and (e) agrees that Lender and any other Borrower may agree to eKtend, modify, forbear
or make any accommodations with regard to the tenns uf this Security Instrument ur the Note without that
Borrower's consent.
J 3. Notices. Any notice to Borrow'r provid-=d for in this Security Instrument shall bt given by
~llvcring it or by mailing it by first clau mail unless applicable law requires use or another m1.'1hod. The
notice ~all be direaed to the Property Addre$$ or any other address Borrower designates by notice to
Lender. Any notice. to Lender shall be given by first class mail w Lender's address 11tated h~rein or any
address leftder designates by notice to Borrow~. Any notice provided ror in this Security Instrument shnll
~deemed to have been &iven to Borrower or Lender when given as provided in this paragraph.
14. Governlila Law; Severablll1y. This Security Instrument shall be governed by Federal law and tht
law of the: jul'i!ldiction in wbich the PropertY is located. In the ~vent that any provision or clause of this
Security Instrument or the Nate connicts with applicable law, such ~onflict shall not affect other provisions
of this ~urity Instrument or the: Note which can be givtm effect without the contlicting pmvision. To this
end the provisions of this Security Instrument and the Nore are dedared to be !ii:Verable.
IS, Borrower's Copy. Borrower shall be given one conformed copy of the. Note and of this Security
Instrument.
16. Hazardous Subltltncts. Borrower shall not cause or permit the presence, use, disposal, storage. or
release of any lluardous. Substances on or in the Property. Borrower shall not da, nor allow anyorw els~ to
!.'f.'foii~•>"•Oo"· ."Wtf'I"S
~2l.~
(Signature of Office
cr~tle of Officer)
My cvmmisslon e~pires:

~IOoflevclopmcnfl

. PUD COVENANTS. In addition to the eovtnanta and agreements made in the ~rity InstrUment,
Borrower and Lender further covenant and ag~ as follows:

A. So long as the OWners Assoc:llitlon (or equivalent enlity holding title to common areas and facllitles),
acting as trustee for .the homeowners, n1aintalns. with a generally accepted insurance carrier, a
"master" of "blanket• policy insuring lhe property tocated In the PUD, including all improvements
now cKisting or heteafier erected on the mmtgagetl premise~. and such policy is satisfactory to Lender
and provides insurance coverage in the amounts. for the periods, and against the hazards Lender
requires, including fire and other hat.ards induded within Uu: term "extended coverago,• and loss by
llood, to the extent requh·ed by the Secretary, then: (i) Lender waives the provision in Paragraph 2 of
thi~. Security Instrument for the tnonthly payment to Lender of one-twelfth of !he yearly premium
in!itallments for hazard insurance on the Property, und (ii) Borrower's obligation under Paragraph 4 of
this Security Instrument to maintain hazard inwrance coverage on the Property ls deemed satidied to
the extent that the required coverage is pr•>vidcd by the Owners A$Sociation policy. Borrower shall
gi\re Lender prompt notice of any lap&e in rtquired hazard insurance c:ove1"1lge and of any loss
o,;currlng from a huard. In the event '11' a distribution of hazard insurance proceeds In lieu of
restoration or repair following a loss to the Property or to common IU'Cas and fa<:ililies oft he PUD. any
proceeds payable to Rorrower are hereby ;tSSigncd and shall be paid to Lender for applicatk)n to the
sums secured by this Security lns1rument, with any excess paid to Ule entity legally entitled thereto.

a. Uorrower promises to pay all dues and assessments lm~ punuant to the legal instntments creating
and governing the PUD.

\.

!
DOCtJIU'Ill 1'1111< I of2 FUA Mutllstatt PUP Rklrr- 6196 '~··
oac:uitl'llt.Ynl Ol/01/2000 .. ,'

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205368
C. If 'Borrower ctoes not pay PUD dues and assessments when due, then Lender may pay thj:m. Any
amounts disbursed by Lender under this paragraph C shall become additioMI debt of Borrower
secured by the Sec:urtty Instrument. Unltss Borrower and l.ender agree to other tenns or payment.
these amounts shall bear interest from the date of disbursemt:nt at the Note rare and shall be payable,
with Interest. upcn notice trom Lender to Borrower requesting payment.

to the terms and provisions contained fn this PUD

FILED AND RECORDED
OFFIClAI. lltaJC ltiCOAD$

'

IJ(JCIJKPI12 f'nao: 2 url ffiA Mullitttk P()O ltldtr- 6196
-.Vft ~/l7120M
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Pf11)8red by Sarah Fomeca
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MidFII'a\ Bank
reiUm to:
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2.730 N POI'IItnd
OKC. OK 73107
MFBflti346G074
. . . . . . . :-_ 219879539

AMIGltMafJ Of' DECJ) OF mlm
f'OR VAlUE RECEIVED. MOitgtGe Eltctronlc Registration Syltllmt, ~. aa nominee for AlllhM,
U.C. Po Box 2028, Flint, MI. <48501·3)26 (h«.maftw c:an.cllha •Asslgno!"), does hereby QrWit. ri«MittIn Ina~ wu 11Qni1:1 ~ blltlalf d Hid COI'pOI alioh by aut11or1ty of Its Bolwd Of or.dora, and that
they ~gad the oxecuton of lllid loatumeol to be tne volUntary act and 4elt