Karl B. Bailey v. MidFirst Bank

• Court: Court of Appeals of Texas
• Decided: January 14, 2015
• Docket: 03-14-00632-CV
• Status: Published

Opinion

ACCEPTED 03-14-00632-CV 3771129 THIRD COURT OF APPEALS AUSTIN, TEXAS 1/14/2015 3:40:26 PM JEFFREY D. KYLE CLERK No. 03-14-00632-CV

FILED IN 3rd COURT OF APPEALS In The Court of Appeals AUSTIN, TEXAS For the Third District Court of Appeals 1/14/2015 3:40:26 PM Austin, Texas JEFFREY D. KYLE Clerk

KARL B. BAILEY Appellant,

v.

MIDFIRST BANK Appellees.

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

APPELLANT’S BRIEF

WILLIAM B. GAMMON, SBN: 07611280 ANTHONY G. READ, SBN: 24056184 GAMMON LAW OFFICE, PLLC. 1201 Spyglass Drive, Suite 100 Austin, Texas 78746 Phone: 512-444-4529 Fax: 512-545-4279 Firm@GammonLawOffice.com COUNSEL FOR APPELLANT

ORAL ARGUMENT REQUESTED No. 03-14-00632-CV

In The Court of Appeals For the Third District Court of Appeals Austin, Texas

MIDFIRST BANK Appellee.

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

WILLIAM B. GAMMON, SBN: 07611280 ANTHONY G. READ, SBN: 24056184 GAMMON LAW OFFICE, PLLC. 1201 Spyglass Drive, Suite 100 Austin, Texas 78746 Phone: 512-444-4529 Fax: 512-545-4279 Firm@GammonLawOffice.com COUNSEL FOR APPELLANT

ORAL ARGUMENT REQUESTED

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 2 OF 34 IDENTITY OF PARTIES AND COUNSEL

Appellant: Appellant’s Counsel: Karl B. Bailey WILLIAM B. GAMMON, SBN: 07611280 ANTHONY G. READ GAMMON LAW OFFICE, PLLC. 1201 Spyglass Drive, Suite 100 Austin, Texas 78746 Phone: 512-444-4529 Fax: 512-545-4279 Firm@GammonLawOffice.com

Appellee: Appellee’s Counsel: MidFirst Bank CHRIS H. POCHYLA, SBN: 24032842 BARRETT DAFFIN FRAPPIER TURNER & ENGEL, LLP 15000 Surveyor Boulevard, Suite 100 Addison, Texas 75001 Telephone: 972-340-7955 Facsimile: 972-341-0734

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 3 OF 34 TABLE OF CONTENTS

IDENTITY OF PARTIES AND COUNSEL ............................................3 TABLE OF CONTENTS............... ……………………………................4 TABLE OF AUTHORITIES .....................................................................6 STATEMENT OF THE CASE ..................................................................9 RECOMMENDATION ON ORAL ARGUMENT ...............................10 ISSUES PRESENTED ..............................................................................11 STATEMENT OF THE FACTS .............................................................12 SUMMARY OF THE ARGUMENT .....................................................15 ARGUMENT AND AUTHORITIES ......................................................17

I. Midfirst's Traditional Motion for Summary Judgment……….17

A. Standard of Review- Tex. R. Civ. P. 166a…………..…..17

B. The Trial Court’s Summary Judgment is in Error Because Bailey has Standing to Bring his Claims as Successor, Assignee Bound and Benefitted by the Deed of Trust or a Person with an Interest in the Property……….18

C. Bailey has Standing to Challenge The Assignment to MidFirst Bank ……………....…….……….………..……....20

D. The Trial Court's Judgment is in Error Because Bailey was Entitled to Notice of the Foreclosure Sale by Statute……………………….……………………………….21

E. The Trial Court's Judment is in error Because There are Genuine Issues of Material Fact as to When MidFirst Bank Knew of the SPP Deed and the Bailey Deed………………………………………………………….22

F. Bailey has a Cause of Action for Breach of Contract….24

G. Bailey's Claim for Void Foreclosure is Supported by Evidence……………………………………………………24

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 4 OF 34 H. Bailey's Quite Title Claim Raises Material Fact Issues…………………………………………………………25

II. Midfirst Bank's No-Evidence Motion for Summary Judgment…………………………………………………….26

A. Standard of Review- Tex. R. Civ. P. 166a……………….26

B. Bailey is Entitled to Equitable Estoppel/Unjust Enrichment…………………………………………………..27

C. Bailey Provided More Than a Scintilla of Proof to Support Breach of Contract, Void Foreclosure and Quiet Title Claims………………………………………………………..28

III. Midfirst Bank's Motion for Summary Judgment on its Counterclaims……………………………………………….29

A. Standard of Review- Tex. R. Civ. P. 166a……………29

B. MidFirst Bank's Request for Declaratory Judgment is Improper…………………………………………………….30

C. This Suit Does Not Support a Writ of Possession Counterclaim……………………………………………….31

IV. Bailey's Motion for Summary Judgment MidFirst Bank's Counterclaims……………………………………………….32

PRAYER ....................................................................................................33 CERTIFICATE OF COMPLIANCE .....................................................33 CERTIFICATE OF SERVICE………………………………………...34 APPENDIX ...............................................................................................35

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 5 OF 34 TABLE OF AUTHORITIES Cases

Acevedo v. Stiles, 2003 Tex. App. LEXIS 3854 (Tex. App.— San Antonio 2003, pet. denied)…………………………………………………………………………..32

American Savings & Loan Assoc. v. Musick, 531 S.W.2d 581, 586 (Tex. 1976)...19

Aurora Petroleum, Inc. v. Cholla Petroleum, Inc., 2011 Tex. App. LEXIS 1382, 8- 9 (Tex. App. – Amarillo 2011, no pet.)…………………………………………27

Austin v. Countrywide Home Loans, 261 S.W.3d 68 (Tex. App.—Houston [1st Dist.] 2008, pet. denied)………………………………………………………...21

Boudreau v. Fed. Trust Bank, 115 S.W.3d 740, 743 (Tex. App.—Dallas 2003, pet. denied)……………………………………………………………………….……30

City of Keller v. Wilson, 168 S.W.3d 802, 816 (Tex. 2005)………………..….….29

Estelle v. Hart, 55 S.W.2d 510, 513 (Tex. Comm'n App. 1932, no writ)………...19

Ford v. Exxon Mobil Chem. Co., 235 S.W.3d 615, 617 (Tex. 2007)…………..…23

Glass v. Carpenter, 330 S.W.2d 530, 537 (Tex. Civ. App.—San Antonio 1959, writ ref’d n.r.e.)……………………………………………………………….…..20

Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 756 (Tex. 2007)…….. 26

Goswami v. Metropolitan Sav. & Loan Asso., 751 S.W.2d 487, 489 (Tex. 1988)..19

Heldenfels Bros. v. City of Corpus Christi, 832 S.W. 2d 39, 41 (Tex. 1992)…….27

Howell v. Murray Mortgage Co., 890 S.W.2d 78, 84 (Tex. App. Amarillo 1994, rehearing overruled)……………………………………………………………....18

John Chezik Buick Co. v. Friendly Chevrolet Co., 749 S.W.2d 591, 594 (Tex. App. — Dallas 1988, writ denied)………………………………………………………30

Johnson v. Hewitt, 539 S.W.2d 239, 240-241 (Tex. Civ. App. — Houston [1st Dist.] 1976, no writ)…………………………………………………………………….30

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 6 OF 34 Joseph v. City of Ranger, 188 S.W.2d 1013, 1014 (Tex. Civ. App. — Eastland 1945, writ ref'd w.o.m.)………………………………………………………………….30

Kansas Reinsurance Co. v. Congressional Mortgage Corp., 20 F.3d 1362, 1370 (5th Cir. Tex. 1994)…………………………………………………………….23

King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 750 (Tex. 2003)………………..26

Leavings v. Mills, 175 S.W.3d 301 (Tex. App.— Houston [1st Dist.] 2004, no pet.)………………………………………………………………………………..21

Limestone Prods. Distrib., Inc. v. McNamara, 71 S.W.3d 308, 311 (Tex. 2002)...30

Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009)……………………………………………………..……………17,29

Martin v. New Century Mortgage Co., 2012 Tex. App. LEXIS 4705 (Tex. App.— Houston [1st Dist.] 2012, no pet.)………………………………….…………20, 21

MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex. 1986)…………………..……..18, 29

Mooney v. Harlin, 622 S.W.2d 83, 85 (Tex. 1981)……………………………….23

Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548 (Tex. 1985)………17, 29, 30

Priesmeyer v. Pacific Southwest Bank, F.S.B., 917 S.W.2d 937 (Tex.App.—Austin 1996, no pet.)……………………………………………………………………20

Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215-216 (Tex. 2003)………………………………………………………………………..17

Reinagel, et al. v. Deutsche Bank Nat’l Trust Co., No. 12-50569, 2013 U.S. App. LEXIS 14089 (5th Cir. (Tex.) July 11, 2013)………………………………….20

Rhône-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 223 (Tex. 1999)………………...30

Shepard v. Boone, 99 S.W.3d 263 (Tex. App.—Eastland 2003, no pet.)…………21

Stanley v. Citifinancial Mortg. Co., 121 S.W.3d 811, 817 (Tex. App. — Beaumont 2003)……………………………………………………………………………..25 BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 7 OF 34 Tipps v. Chinn Exploration Co., 2014 Tex. App. LEXIS 10061 (Tex. App.— Texarkana Sept. 5, 2014, pet. filed)……………………………………………...26

Tri-Cities Const., Inc. v. American Nat. Ins. Co., 523 S.W.2d 426, 430 (Tex. Civ. App.—Houston [1st Dist.] 1975, no writ)……………………………………..20

Vazquez v. Deutsche Bank Nat'l Trust Co., N.A., 441 S.W.3d 783, 790 (Tex. App.— Houston [1st Dist.] 2014, no pet. hist.)………………………………..21

Westland Oil Dev. Corp. v. Gulf Oil Corp., 637 S.W.2d 903, 908 (Tex. 1982)…22

Wolf v. Highland Haven Prop. Owners Ass'n, 2013 Tex. App. LEXIS 10912 (Tex. App.— Austin Aug. 29, 2013, pet. denied)…………………………………….23

Statutes and Rules

7 Tex. Admin Code § 65.3 (21) .............................................................................. 13 Tex. Prop. Code § 51.002 ........................................................................................25 Tex. Prop. Code § 51.002(b) ....................................................................................21 Tex. R. Civ. P. 166a .......................................................................................... 17, 26 Tex. R. Civ. P. 166a(c)……………………………………….…………...17, 29, 32 Tex R. Civ. P. 310 ....................... …………………………………………12, 17, 31

Other

Black's Law Dictionary 1444 (West 1979)……………..………………………...32

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 8 OF 34 STATEMENT OF THE CASE

1.01 Karl B. Bailey made ALL of his mortgage payments, but was nonetheless

foreclosed upon. This is a void foreclosure case. Karl B. Bailey’s causes of

action are breach of contract, void foreclosure, violation of the DTPA and

quiet title. (CR 13-18). Plaintiff also seeks equitable estoppel and claims

against unjust enrichment. Defendant MidFirst Bank’s counterclaims are for

declaratory judgment and a writ of possession. (CR 19-23.)

1.02 Trial court is the 250th District Court of Travis County, the Honorable John

K. Dietz then presiding. The ruling in the case was made by visiting judge

the Honorable Gus Strauss.

1.03 The claims and counterclaims between Karl B. Bailey and Defendant MidFirst

Bank were resolved on dueling summary judgment motions. (Appendix C, D.)

1.03 The trial court denied Plaintiff’s summary judgment motion and granted

Defendant MidFirst Bank’s summary judgment motion. (Appendix A, CR 24-

25.)

1.04 On Plaintiff’s motion, the claims and counterclaims between Plaintiff and

Defendant MidFirst Bank were severed to render the ruling on the motions for

summary judgment appealable. (Appendix B, CR 28).

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 9 OF 34 RECOMMENDATION ON ORAL ARGUMENT

Bailey suggests that the issues presented should not be determined on the

record alone and that oral argument is necessary. The issues presented have become

sufficiently muddled by misinterpretation and the law sufficiently misapplied that

oral argument would benefit the panel.

/s/ Anthony G. Read Anthony G. Read

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 10 OF 34 TO THE HONORABLE THIRD DISTRICT COURT OF APPEALS:

Appellant, Karl B. Bailey, pleads that this honorable Court of Appeals reverse

the judgment of the visiting judge in the 250th Judicial District Court and remand

this case for further proceedings.

ISSUES PRESENTED

2.01 Is Bailey bound and benefited by the covenants and agreements of the Deed

of Trust signed by Amy and Travis Chestnut by virtue of succession, assignment or

interest in the property? Does Bailey therefore have standing to bring claims against

MidFirst Bank?

2.02 Did the trial court err in determining Bailey did not have standing to

specifically challenge the Assignment to MidFirst Bank?

2.03 Did the trial court err in determining Karl B. Bailey was not entitled to

receive notice of the foreclosure sale under either the statutory provisions, the

Chestnut Deed of Trust, public policy or equity?

2.04 Did the trial court err in determining no genuine issue of material fact existed

regarding MidFirst Bank’s knowledge of subsequent deeds and when it occurred?

2.05 Did the trial court err in denying Karl B. Bailey’s Breach of Contract claim

by finding he did not have standing?

2.06 Did the trial court err in denying Karl B. Bailey’s Void Foreclosure Claim

when he did not receive statutory notice?

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 11 OF 34 2.07 Did the trial court err in denying Karl B. Bailey’s Quiet Title claim when there

were issues of material fact?

2.08 Did the trial court err in granting no-evidence summary judgment on Karl B.

Bailey’s Equitable Estoppel/Unjust Enrichment Claim?

2.09 Did the trial court err in granting no-evidence summary judgment on Karl B.

Bailey’s Breach of Contract, Void Foreclosure and Quiet Title claims?

2.10 Did the trial court err in granting MidFirst Bank declaratory judgment? Was

the declaratory judgment in violation of the applicable statute as it raised an issue

already before the trial court?

2.11 Did the trial court err in granting a writ of possession under TEX. R. CIV. P.

310 when the plain language of the Rule states TRCP 310 applies to suits seeking

foreclosure when this was not a suit seeking foreclosure?

STATEMENT OF THE FACTS

3.01 Karl B. Bailey (“Bailey”) purchased a homestead using creative financing

foisted upon him by Eric Lee (“Lee”) and Smoke Signal Pass, LLC (“SSP”). This

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 12 OF 34 transaction is known as a “Wally Wrap” 1 or Wrap-around real estate loan.2 From

the time he purchased the Property until he received a surprise Demand to Vacate,

Mr. Bailey dutifully made ALL of his payments. (Appendix D)

3.02 The property in question is commonly known as 1234 Acanthus Street,

Pflugerville, Travis County, Texas 78660 (the Property) and is more particularly

described in Appendix C, Exhibit 2-A-1.

3.03 On July 15, 2004, the Property was purchased by Travis Chestnut and Amy

Chestnut (the Chestnuts), using funding from lender Alethes, LLC. The Chestnuts

executed a Deed of Trust which was recorded in the Travis County Property Records

as document 2004136582 (Chestnut Deed). (Appendix C, Exhibit 2-A-1.)

3.04 On April 22, 2009, a purported assignment of the Chestnut Deed to MidFirst

Bank (MFB) was recorded in the Travis County Property Records as document

2009079593 (MFB Assignment). (Appendix C, Exhibit 2-A-3.) The MFB

assignment was executed by Mortgage Electronic Registration Systems, Inc.

1 A “Wally Wrap” system was designed roughly twenty (20) years ago as a secondary financing tool for the purchase of real property. According to WALLY TINGLEY & ASSOCIATES., P.C., “a seller provides buyer non-qualifying interim purchase wrap financing for 1 – 5 years (balloon period), stacking the wrap financing on seller’s prior mortgage.” http://wallytingley.com/wallywrap/. Essentially, the seller is providing the buyer a “junior” mortgage which “wraps” around and exists in addition to any “senior” mortgages securing the property in question. This “junior” mortgage provides financing for a minimum of five years. The buyer usually makes a down payment and pays off both the agreed upon financing and seller’s existing mortgage within that five year period. This “interim” financing: is used by a buyer to own the property in question and sell, or refinance into a mortgage loan. 2 “Wrap-around real estate loan--A financing device whereby a junior mortgage lien secures a liability consisting of the amount of senior debt, plus any additional funds advanced to the borrower.” 7 TEX. ADMIN CODE § 65.3(21). BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 13 OF 34 (MERS) as “nominee” for the original lender, Alethes, LLC. The MERS assignment

claimed to assign to MFB the negotiable Promissory Note and the lien interest.

3.05 At some point, the Promissory Note was endorsed by Alethes, LLC (not

MERS) to GMAC Bank. (Appendix B, Exhibit A-2.) GMAC Bank endorsed the

Note to GMAC Mortgage Corporation which endorsed the Note to MFB.

3.06 On July 30, 2009, the Chestnuts executed a General Warranty Deed to SSP

which was recorded in the Travis County Property Records as document 200913692

(SPP Deed). (Appendix C, Exhibit A-4.)

3.07 On July 31, 2009, SPP executed a Special Warranty Deed with Vendor’s Lien

to Bailey (and his wife Rebecca) which was recorded in the Travis County Property

Records as document 2009135933 (Bailey Deed). (Appendix C, Exhibit A-4.) The

wraparound transaction meant Bailey made his payments to SPP and SPP would

ensure MFB was paid. SPP charged an amount greater than the payment to MFB

which it kept as profit.

3.08 Bailey began making the required payments to SSP and continued to do so

until he received a Demand to Vacate from MFB on February 14, 2011.

(Appendix D, Exhibit 6.)

3.09 It is uncontested MFB did not provide contractual or statutory notice to Bailey

prior to the foreclosure. (Appendix C, ¶8.) MFB sent notices to the Chestnuts.

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 14 OF 34 3.10 On May 8, 2009, MFB filed an Appointment of Substitute Trustee in the

Travis County Property Records, dated November 5, 2010 which was recorded as

document 20101892473. (Appendix C, Exhibit 5.) This document was filed after the

SPP Deed and the Bailey Deed.

3.11 On November 15, 2010, MFB, through its purported servicer Midland

Mortgage Co. (MMC), filed a Notice of Substitute Trustee Sale as document

2010001061513 in the Travis County Property Records. (Appendix C, Exhibit B-

1.)

3.12 On January 4, 2011, MMC conducted a foreclosure sale. (Appendix C, Exhibit

B-2.)

SUMMARY OF THE ARGUMENT

4.01 Bailey was an innocent victim in this transaction. SPP sold him the Property

and took his payments. Bailey made each and every payment he was required to

make until he received a Demand to Vacate indicating MFB had foreclosed on the

Property. Bailey had no way of knowing SPP was keeping his payments and not

forwarding them to MFB as required. MFB, on the other hand, was charged with

knowledge of recordings in the property records and therefore knew of the SPP and

Bailey’s Deed and would have known Bailey was the entity making payments.

4.02 Bailey attempted to work with MFB to take over the Chester Deed of Trust

and resume payments. MFB would not agree to such an arrangement which would

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 15 OF 34 have ended this controversy and ensured MFB was paid all it was due.

4.03 The foreclosure was void because MFB did not have requisite authority to

conduct or to order the sale conducted. Further, MFB did not give Bailey the

statutory notice of foreclosure.

4.04 The trial court erred in granting summary judgment when genuine issues of

material fact existed as to when MFB knew of the SPP Deed and Bailey Deed. This

genuine issue of material fact is determinative of Bailey’s rights under all three

deeds. Specifically, Bailey’s rights a successor or assignee, privity with MFB or an

interest in the property and whether he was entitled to notice of default, notice of

acceleration and notice of sale.

4.05 The trial court erred in determining Bailey did not have standing to challenge

the void foreclosure and the void assignment.

4.06 The trial court erred in denying Bailey’s Void Foreclosure Claim as there exist

genuine issues of material fact as to who holds superior title to the subject property

and the impact of the execution of the wraparound.

4.07 The trial court erred in finding no evidence for Bailey’s quiet title and void

foreclosure claims.

4.07 The trial court erred in not finding equitable estoppel/unjust enrichment since

Bailey made all payments and MFB was the beneficiary of a number of those

payments.

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 16 OF 34 4.08 The trial court erred in granting declaratory judgment for MFB since the issues

were already before the trial court in Bailey’s claims. Declaratory judgment is not

available on claims that have already been raised in the suit.

4.09 The trial court erred in granting a writ of possession under TEX. R. CIV. P.

310 in violation of the plain language of the Rule.

ARGUMENT AND AUTHORITIES

I. MIDFIRST’S TRADITIONAL MOTION FOR SUMMARY JUDGMENT

A. STANDARD OF REVIEW- TEX. R. CIV. P. 166A.

5.01 A trial court’s decision to grant summary judgment is reviewed de novo using

the standards for summary judgment set forth in Tex. R. Civ. P. 166a. Provident

Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215-216 (Tex. 2003). In

reviewing a grant of summary judgment, a court of appeals must determine whether

the successful movant carried its burden of demonstrating that there is no genuine

issue of material fact and that it is entitled to judgment as a matter of law. TEX. R.

CIV. P. 166a(c); Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d

844, 848 (Tex. 2009); Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548 (Tex.

1985). In making this decision, a court of appeals takes all evidence favorable to the

non-movant as true, and make every reasonable inference in favor of the non-

movant, resolving all doubts in his or her favor. Provident Life & Accident Ins. Co.,

128 S.W.3d at 215. Where defendant-movant seeks summary judgment on an

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 17 OF 34 affirmative defense, it must prove conclusively all elements of that defense. MMP,

Ltd. v. Hones, 710 S.W.2d 59, 60 (Tex. 1986).

B. THE TRIAL COURT’S JUDGMENT IS IN ERROR BECAUSE BAILEY HAS STANDING TO BRING HIS CLAIMS AS SUCCESSOR, ASSIGNEE BOUND AND BENEFITED BY THE DEED OF TRUST OR A PERSON WITH AN INTEREST IN THE PROPERTY.

6.01 Section 12 of the Chestnut Deed states: “The covenants and agreements of

this Security Agreement shall bind and benefit the successors and assigns of Lender

and Borrower, subject to the provisions of Paragraph 9(b).” 3 (Appendix C, Exhibit

A.)

6.02 This is analogous to Bank A loaning money for a house to Homeowner B

under a Deed of Trust. Homeowner B then sells the house to Homeowner C. When

B or C defaults, C is bound and benefited as a successor or assign under Section 12

of the Deed of Trust in that Bank A has the right to foreclose and take the Property

from Homeowner C despite no direct contract. This is so because Homeowner C is

bound and benefited by the Deed of Trust as a successor or assign. See, Howell v.

Murray Mortgage Co., 890 S.W.2d 78, 84 (Tex. App. Amarillo 1994, rehearing

overruled) (stating “when the term successor is used in common parlance it means

anyone who follows. However, when used as a legal term applying to . . . natural

persons, [it] is [an] apt and appropriate term to designate one to whom property

3 Paragraph 9(b) is the “due on sale clause” which was not invoked. BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 18 OF 34 descends or [the] estate of decedent.” and finding the person to whom the property

descended was a successor bound by the terms of the Deed of Trust).

6.03 Bailey is also a successor or assign to the Chestnut Deed because it gives MFB

the right to foreclose on property owned by Bailey.

6.04 Alternatively, Bailey has standing to challenge the foreclosure as an interested

party.

6.05 Appellee cites Goswami v. Metropolitan Sav. & Loan Asso., 751 S.W.2d 487,

489 (Tex. 1988) for the proposition that “as 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.”

6.06 Even if Bailey is not a successor or assignee of the Chestnut Deed, Goswami,

in the same paragraph cited above, points out that “when the third party has a

property interest, whether legal or equitable, that will be affected by such a sale, the

third party has standing to challenge such a sale to the extent that its rights will be

affected by the sale.” citing American Savings & Loan Assoc. v. Musick, 531 S.W.2d

581, 586 (Tex. 1976); Estelle v. Hart, 55 S.W.2d 510, 513 (Tex. Comm'n App. 1932,

no writ). Goswami 751 S.W.2d at 489.

6.07 Bailey had both legal and equitable interest in the Property. He had a Deed

and was faithfully making monthly payments. The void sale of the Property by MFB

affected Bailey’s rights. Therefore, alternatively, Bailey has standing to challenge

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 19 OF 34 the foreclosure since he has a property interest.

6.08 Bailey had no opportunity to challenge the foreclosure sale because he was

not aware of any default. He was an innocent party and was making his payments

as required by his agreement with SPP. SPP was charged with getting the payments

to MFB.

C. BAILEY HAS STANDING TO CHALLENGE THE ASSIGNMENT TO MIDFIRST BANK.

7.01 As discussed supra, Bailey has standing with regard to the Chester Deed as

a successor or assign or, alternatively, as a party with an interest in the property.

7.02 Texas law follows the common law rule where a debtor may bring any

ground against an assignee to challenge an assignment as void or invalid. See Tri-

Cities Const., Inc. v. American Nat. Ins. Co., 523 S.W.2d 426, 430 (Tex. Civ. App.—

Houston [1st Dist.] 1975, no writ); Glass v. Carpenter, 330 S.W.2d 530, 537 (Tex.

Civ. App.—San Antonio 1959, writ ref’d n.r.e.). This was recently acknowledged

by the Federal 5th Circuit, and is the majority rule followed in Texas. See, Reinagel,

et al. v. Deutsche Bank Nat’l Trust Co., No. 12-50569, 2013 U.S. App. LEXIS 14089

(5th Cir. (Tex.) July 11, 2013) (reversing district court, Hon. Sam Sparks, on this

point of law).

7.03 Texas Courts also permit challenging the chain of assignments regarding the

right of a party to foreclose. See, Priesmeyer v. Pacific Southwest Bank, F.S.B., 917

S.W.2d 937 (Tex.App.—Austin 1996, no pet.); see, also, Martin v. New Century BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 20 OF 34 Mortgage Co., 2012 Tex. App. LEXIS 4705 (Tex. App.—Houston [1st Dist.] 2012,

no pet.); Austin v. Countrywide Home Loans, 261 S.W.3d 68 (Tex. App.—Houston

[1st Dist.] 2008, pet. denied); Leavings v. Mills, 175 S.W.3d 301 (Tex. App.—

Houston [1st Dist.] 2004, no pet.); Shepard v. Boone, 99 S.W.3d 263 (Tex. App.—

Eastland 2003, no pet.).

7.04 The right to challenge an assignment was very recently upheld in Vazquez v.

Deutsche Bank Nat'l Trust Co., N.A., 441 S.W.3d 783, 790 (Tex. App.— Houston

[1st Dist.] 2014, no pet. hist.). Bailey, like Vasquez, alleges the assignment to MFB

was void and therefore the trial court should not have granted summary judgment

that he lacked standing.

D. THE TRIAL COURT’S JUDGMENT IS IN ERROR BECAUSE BAILEY WAS ENTITLED TO NOTICE OF THE FORECLOSURE SALE BY STATUTE

8.01 As discussed supra, Bailey is bound and benefited by the Chestnut Deed as

a successor or assign. Consequently, Bailey was entitled to the benefit of the

Chestnut Deed, section 18.

8.02 The Chestnut Deed, section 18, requires Lender to “mail a copy of the notice

of sale to Borrower in the manner prescribed by applicable law.” Applicable law,

TEX. PROP. CODE 51.002(b) requires the notice be sent by certified mail.

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 21 OF 34 8.03 It is undisputed no such notice was sent to Bailey. (Appendix C, Exhibit ¶8.)

8.04 Bailey was also entitled to notice of the sale as a matter of public policy and

equity. MFB was either aware or charged with awareness of the Bailey Deed and

knew Bailey had an interest in the property. The public policy reason for notice

under the statutes and case law (and Deed of Trust) is to allow property owners to

cure defaults and prevent foreclosure. Allowing Mortagees to deny property owners

notification prevents property owners from taking any action to prevent foreclosure.

This contravenes the public policy of reducing foreclosures and ensuring that

contracts are voluntarily and knowingly complied with, rather than breached and not

cured.

8.05 Equity also dictates Bailey receive advance notice of the foreclosure. MFB

benefited from Bailey’s payments. Bailey has an interest in the property. Allowing

MFB to retain Bailey’s payments and gain any equity in the property unjustly

enriches MFB and the expense of an innocent party – Bailey.

E. THE TRIAL COURT’S JUDGMENT IS IN ERROR BECAUSE THERE ARE GENUINE ISSUES OF MATERIAL FACT AS TO WHEN MIDFIRST BANK KNEW OF THE SPP DEED AND THE BAILEY DEED.

9.03 MFB is charged by Texas Law with knowledge of the contents of the property

records regarding its property. Westland Oil Dev. Corp. v. Gulf Oil Corp., 637

S.W.2d 903, 908 (Tex. 1982) (“it is well settled that ‘a purchaser is bound by every

recital, reference and reservation contained in or fairly disclosed by any instrument

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 22 OF 34 which forms an essential link in the chain of title under which he claims.’") (internal

cites omitted).4 Mooney v. Harlin, 622 S.W.2d 83, 85 (Tex. 1981) (“Constructive

notice in law creates an irrebuttable presumption of actual notice.).

9.04 It can be argued property owners are not bound to periodically search the

property records to ensure nothing unexpected is filed.5 However, since MFB filed

an appointment of substitute trustee on December 7, 2010, they would be charged

with knowledge of the SPP Deed and Bailey Deed since both were on file since 2009

which was prior to the December 7, 2010 filing date of the appointment of substitute

trustee. Further, MFB had a duty to determine whether other liens existed on the

property including tax and mechanics liens.

9.05 MFB is charged with knowledge of the SPP Deed and Bailey Deed from

December 7, 2010. This means MFB was aware Bailey had an interest in the

property and was required to be notified of default, acceleration and sale. The

affidavit of MFB’s First Vice President, Thad Burr, indicated the SPP Deed and

Bailey Deed were unknown to MFB when filed. He did not address the genuine

4 See also: Wolf v. Highland Haven Prop. Owners Ass'n, 2013 Tex. App. LEXIS 10912 (Tex. App.— Austin Aug. 29, 2013, pet. denied) “…we note that appellants are charged with constructive notice of the actual knowledge of the Subject Property's ownership they could have acquired by examining the Burnet County public records.” See Ford v. Exxon Mobil Chem. Co., 235 S.W.3d 615, 617 (Tex. 2007) (per curiam) (‘While not all public records establish an irrebuttable presumption of notice, the recorded instruments in a grantee's chain of title generally do.’).have been acquired by examining public records.’)”. 5 Kansas Reinsurance Co. v. Congressional Mortgage Corp., 20 F.3d 1362, 1370 (5th Cir. Tex. 1994) BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 23 OF 34 material issue of fact as to when MFB found out about the deeds.

F. BAILEY HAS A CAUSE OF ACTION FOR BREACH OF CONTRACT.

10.01 As discussed supra, Bailey is a successor to the Chestnut Deed of Trust.

10.02 The Chestnut deed is a valid contract, Bailey tendered every payment

required of him until after foreclosure. (Appendix D, Exhibits 6 and 7, Affidavit

and Proof of Payments.) MidFirst breached the contract by not providing notice to

Bailey as admitted in paragraph 23 of MFB’s Amended MSJ. Bailey pled damages

of having a void foreclosure executed on his home. The lack of notice was a

violation of Section 18 of the Chester Deed.

G. BAILEY’S CLAIM FOR VOID FORECLOSURE IS SUPPORTED BY EVIDENCE.

11.01 The MFB assignment of the Note and Deed of Trust was void. (Appendix C,

Exhibit A-3.) The document purports to transfer both the Note and Deed of Trust

from Alethes, LLC via MERS as nominee to MFB. The assignment was executed

April 22, 2009. A conflict exists with the MFB assignment and the endorsements

on the Note.

11.02 The Note is endorsed by Alethes, LLC to GMAC Bank. (Appendix C, Exhibit

A-2.) One of two possible sequences of events render the MFB assignment and/or

Note endorsements invalid. If Alethes, LLC endorsed the Note to GMAC Bank

before the MFB assignment, MFB did not receive the Note as stated in the MFB

assignment as Alethes, LLC had endorsed it and no longer held it. Alternatively, if

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 24 OF 34 the MFB assignment occurred before the endorsement, the Alethes, LLC

endorsement to GMAC Bank was void because Alethes, LLC no longer held the

note.

11.03 Regardless, a material issue of fact exists as to whether the MFB assignment

is valid. This creates a material issue of fact as to whether MFB had authority to

direct the foreclosure as it did not own the Note.

11.04 Even if the MFB sale was not void for the reasons above, genuine issues of

material fact exist as to whether Bailey was entitled to notice under TEX. PROP. CODE

51.002. Bailey was a party to the Chestnut Deed through the Bailey and SSP Deeds.

Bailey was a person MFB knew or should have known was obligated to pay the debt.

This would have been in MFB’s records based on their knowledge of the property

records. Some cases indicate someone not a party to the Deed of Trust are not

entitled to notice.6 In the instant case, a genuine issue of material fact exists as to

whether Bailey was a successor or assign to the Chester Deed.

H. BAILEY’S QUIET TITLE CLAIM RAISES MATERIAL FACT ISSUES.

11.04 MFB first states Bailey’s Quiet Title claim fails and then discusses the

elements of a Trespass to Try Title Claim. (Appendix C, Exhibit ¶¶ 52-53.)

11.05 The elements of a Quiet Title Claim are: (1) an interest in a specific property,

(2) title to the property is affected by a claim by the defendant, and (3) the claim,

6 Stanley v. Citifinancial Mortg. Co., 121 S.W.3d 811, 817 (Tex. App. — Beaumont 2003). BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 25 OF 34 although facially valid, is invalid or unenforceable. Tipps v. Chinn Exploration Co.,

2014 Tex. App. LEXIS 10061 (Tex. App.— Texarkana Sept. 5, 2014, pet. filed).

11.06 Issues of material fact have been raised by Bailey on this claim. The Bailey

Deed shows an interest in a specific property, the Substitute Trustee’s Deed shows

a claim by MFB. (Appendix C, Exhibit B-2.)The void foreclosure, discussed supra,

demonstrates the claim, although facially valid, is invalid or unenforceable.

II. MidFirst Bank’s No-Evidence Motion for Summary Judgment

12.01 When a party moves for summary judgment on a no-evidence ground, the

court reviews the claim under the same legal sufficiency standard as directed

verdicts. King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 750 (Tex. 2003). Under

that standard, evidence is considered in the light most favorable to the non-movant.

Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 756 (Tex. 2007). The non-

movant is “not required to marshal [his] proof; [his] response need only point out

evidence that raises a fact issue on the challenged elements.” TEX. R. CIV. P. 166a.

A no-evidence summary judgment is improperly granted if the party responding

brings forth more than a scintilla of probative evidence to raise a genuine issue of

material fact. King Ranch, Inc. v. Chapman, 118 S.W.3d at 751.

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 26 OF 34 B. Bailey is Entitled to Equitable Estoppel/Unjust Enrichment

13.01 It must be remembered in the instant case Bailey was an innocent party in this

transaction. He paid each and every payment he was required to pay to SPP per the

Bailey Deed. The void foreclosure occurred without his knowledge. Once it did

occur, he attempted to resume payments with MFB. MFB declined to accept the

money.

13.02 When MFB became aware of the wraparound through the property records, it

also became aware it had been taking payments which originated from Bailey.

13.03 MFB cites Heldenfels Bros. v. City of Corpus Christi, 832 S.W. 2d 39, 41

(Tex. 1992) for the proposition that unjust enrichment must entail a benefit obtained

by fraud, duress or taking of undue advantage. Actually, the case says a party may

recover under these circumstances.7 Heldenfels Bros. does not say these conditions

must occur. Other case law provides unjust enrichment in other circumstances. See,

e.g., Aurora Petroleum, Inc. v. Cholla Petroleum, Inc., 2011 Tex. App. LEXIS 1382,

8-9 (Tex. App. – Amarillo 2011, no pet.). 8

7 “A party may recover under the unjust enrichment theory when one person has obtained a benefit from another by fraud, duress, or the taking of an undue advantage.” Heldenfels Bros., Inc. v. Corpus Christi, 832 S.W.2d 39, 41 (Tex. 1992) (emphasis added). 8 “Unjust enrichment is an equitable principle that is the result of a failure to make restitution of benefits wrongfully or passively received under circumstances that give rise to an implied or quasi-contractual obligation to repay… While it often applies when one person has obtained a benefit from another by fraud, duress, or by taking an undue advantage… it is also available if a contract is unenforceable, impossible, not fully performed, or void for other legal reasons … Indeed, fraud is not a requisite component for a finding of unjust enrichment.” (internal cites omitted). BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 27 OF 34 13.04 Bailey was current on his payments up until MFB’s void foreclosure.

(Appendix C, Exhibit 6 and 7.) MFB was aware at some point before the foreclosure

that Bailey was making the payments. Either when the source of the checks changed

from the Chestnuts to SPP or when MFB checked the property records in preparation

for foreclosure or when filing the assignment of substitute trustee. MFB continued

to foreclose knowing Bailey had made all payments. MFB was unjustly enriched by

the payments made by Bailey.

13.05 MFB is further estopped from asserting the foreclosure is valid in that MFB

knowingly received payments from Bailey, yet continued to foreclose on his

property.

C. Bailey Provided More Than a Scintilla of Proof to Support Breach of Contract, Void Foreclosure and Quiet Title Claims.

14.01 As discussed supra, Bailey is a successor, assign or, alternatively, a party with

an interest to the Chestnut Deed of Trust. This demonstrates a valid, enforceable

contract exists with MFB. Consequently, more than a scintilla of evidence has been

provided establishing the contested element: existence of a valid, enforceable

contract.

14.02 Bailey has not pled wrongful foreclosure. Instead, Bailey pled the foreclosure

was void, ab initio and has provided more than a scintilla of evidence the Note and

Deed of Trust were not properly transferred to MFB and Bailey did not receive

notice of the sale to which he was entitled. BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 28 OF 34 14.03 MFB did not have standing to initiate or direct its servicer to initiate

foreclosure proceedings against Bailey as it was neither the owner nor holder of any

indebtedness secured by Bailey’s homestead.

14.04 MFB continues to address Bailey’s quiet title claim with the elements of a

trespass to try title claim. As discussed supra, Bailey has more than a scintilla of

evidence to support his quiet title claim.

III. MIDFIRST BANK’S MOTION FOR SUMMARY JUDGMENT ON ITS COUNTERCLAIMS

15.01 To succeed on a traditional motion for summary judgment on its

counterclaim, the defendant must show that there is no genuine issue of material fact

and that it is entitled to summary judgment as a matter of law. Tex. R. Civ. P.

166a(c); Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844,

848 (Tex. 2009); Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548 (Tex. 1985).

To meet this burden, the defendant must conclusively prove all essential elements of

its claim. MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex. 1986). A matter is

conclusively established if reasonable people could not differ on the conclusion to

be drawn from the evidence. City of Keller v. Wilson, 168 S.W.3d 802, 816 (Tex.

2005). If the defendant establishes its right to summary judgment as a matter of law,

the burden shifts to the plaintiff to present evidence that raises a genuine issue of

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 29 OF 34 material fact. Boudreau v. Fed. Trust Bank, 115 S.W.3d 740, 743 (Tex. App.—

Dallas 2003, pet. denied). In deciding whether to grant defendant’s motion, the court

must take as true all competent evidence favorable to the plaintiff and indulge every

reasonable inference and resolve any doubts in the plaintiff’s favor. Limestone

Prods. Distrib., Inc. v. McNamara, 71 S.W.3d 308, 311 (Tex. 2002); Rhône-

Poulenc, Inc. v. Steel, 997 S.W.2d 217, 223 (Tex. 1999); Nixon, 690 S.W.2d at 548-

49.

B. MidFirst Bank’s Request for Declaratory Judgment is Improper

16.01 MFB moved for summary judgment on its counterclaim for Declaratory

Judgment, arguing that its motion had proven it had standing to foreclose. Because

Bailey has not brought an action under the Act, Movant is not permitted to bring

counterclaims under the Act. The Declaratory Judgment Act is not available to settle

disputes already pending before a court. Johnson v. Hewitt, 539 S.W.2d 239, 240-

241 (Tex. Civ. App. — Houston [1st Dist.] 1976, no writ); Joseph v. City of Ranger,

188 S.W.2d 1013, 1014 (Tex. Civ. App. — Eastland 1945, writ ref'd w.o.m.). John

Chezik Buick Co. v. Friendly Chevrolet Co., 749 S.W.2d 591, 594 (Tex. App. —

Dallas 1988, writ denied).

16.02 MFB’s Declaratory Judgment counterclaim is duplicative of Bailey’s Quiet

Title claim and therefore a dispute already before the Court and should be denied.

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 30 OF 34 16.03 Further, MFB has not proven that its foreclosure was valid as discussed

supra. The SPP Deed and Bailey Deed negated MFB’s right to foreclose or at least

its right to foreclose without notifying Bailey.

C. This Suit Does Not Support a Writ of Possession Counterclaim

16.04 The trial court, ignoring the plain language of TEX. R. CIV. P. 310, granted

MFB a writ of possession. The rule’s plain language specifies an order foreclosing

in a suit having for its object foreclosure:

When an order foreclosing a lien upon real estate is made in a suit having for its object the foreclosure of such lien, such order shall have all the force and effect of a writ of possession as between the parties to the foreclosure suit and any person claiming under the defendant to such suit by any right acquired pending such suit; and the court shall so direct in the judgment providing for the issuance of such order. The sheriff or other officer executing such order of sale shall proceed by virtue of such order of sale to place the purchaser of the property sold thereunder in possession thereof within thirty days after the day of sale. 16.05 This suit concerned a lien already foreclosed (precluding an order

foreclosing a lien). The suit did not have as its object the foreclosure of the lien

(which had already been done). No one could execute an order of sale because the

property had been sold. Finally, the property could not have been sold under the trial

court’s order as it had already been sold.

16.06 Shepardizing Rule 310 reveals the majority of citing cases were decided pre-

1939. Of the more recent cases (2003 and 1982), one is not applicable. The 2003

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 31 OF 34 case, from the San Antonio Fourth Court of Appeals ignores the plain language of

the Rule and finds a writ proper even though the purpose of the suit was not

foreclosure (which had occurred previously or the party was not informed). 9

16.07 It appears only one case since 1939 has interpreted this Rule and has ignored

its plain language. No Texas court has cited the San Antonio decision for this

proposition. Since it is a single opinion not binding on this Court, Bailey requests

this Court apply the plain language of the Rule and find the issuance of a writ not

appropriate when the foreclosure has already taken place and was not part of the

instant suit.

IV. BAILEY’S MOTION FOR SUMMARY JUDGMENT MIDFIRST BANK’S COUNTERCLAIMS

17.01 Section III above discusses MFB’s counterclaims.

17.02 MFB did not satisfy its burden under Tex. R. Civ. P. 166a(c).

17.03 MFB’s counterclaim for Declaratory Judgment is not permitted as the issue

is already before the court.

17.04 This suit does not support a writ of possession counterclaim.

9 “We again disagree. A writ of possession is nothing more than a ‘writ of execution employed to enforce a judgment to recover the possession of land. It commands the sheriff to enter the land and give possession of it to the person entitled under the judgment.’ BLACK'S LAW DICTIONARY 1444 (West 1979). The writ was appropriate in this case because the Acevedos failed to supersede the trial court's judgment awarding Stiles' home to her.” Acevedo v. Stiles, 2003 Tex. App. LEXIS 3854 (Tex. App.— San Antonio 2003, pet. denied)

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 32 OF 34 PRAYER

Karl B. Bailey respectfully requests that the Court reverse the judgment of

the District Court in all things for further action consistent with its opinion.

Respectfully submitted,

By:_________________________________ /s/ Anthony G. Read ANTHONY G. READ, SBN: 24056184 WILLIAM B. GAMMON, SBN: 07611280 GAMMON LAW OFFICE, PLLC. 1201 Spyglass Drive, Suite 100 Austin, Texas 78746 Phone: 512-444-4529 Fax: 512-545-4279 Firm@GammonLawOffice.com COUNSEL FOR APPELLANT

CERTIFICATE OF COMPLIANCE Pursuant to Texas Rule of Appellate Procedure 9.4(i)(3), as amended effective January 1, 2015, the undersigned certifies that this Brief complies with the length limitations of Rule 9.4(i) and the typeface requirements of Rule 9.4(e).

1. Exclusive of the contents excluded by Rule 9.4(i)(1), this Brief contains 5120 words as counted by the Word Count function (including textboxes, footnotes, and endnotes) of Microsoft Office Word 2013.

2. This Brief has been prepared in proportionally spaced typeface using:

Software name and Version: Microsoft Office Word 2013 Typeface Name; Times New Roman Font Size: 14 point

/s/ Anthony G. Read _____________________________ Anthony G. Read

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 33 OF 34 CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of Appellant’s Brief, with Appendix, was served by ProDoc e-service or facsimile on this the 12th day of January, 2015, to:

Chris Pochyla, SBN: 24032842 Counsel for MidFirst Bank Barrett Daffin Frappier Turner & Engel, LLP 15000 Surveyor Blvd., Ste. 100 Addison TX 75001 Tel: (972) 340-7935 Fax: (972) 341-0734

/s/ Anthony G. Read _____________________________ Anthony G. Read

BAILEY V. MIDFIRST BANK APPELLANT’S BRIEF CAUSE NO.: NO. 03-14-00632-CV PAGE 34 OF 34 No. 03-14-00632-CV

In The Court of Appeals For the Third District Court of Appeals Austin, Texas

APPENDIX TO APPELLANT’S BRIEF

A. Order on Defendant Midfirst Bank’s First Amended Motion for Summary Judgment

B. Order on Plaintiff’s Motion to Sever

C. Defendant MidFirst Bank’s First Amended Motion for Summary Judgment

D. Plaintiff’s Response to Defendant’s Traditional and No-Evidence Motion for Summary Judgment and Plaintiff’s Motion for Summary Judgment

E. 7 TEX. ADMIN CODE § 65.3 (21)

F. TEX. R. CIV. P. 310

G. TEX. PROP. CODE 51.002(b)

H. TEX. R. CIV. P. 166a APPENDIX TAB A APPENDIX TAB B APPENDIX TAB C APPENDIX TAB D 6/25/2014 5:46:30 PM Amalia Rodriguez-Mendoza District Clerk Travis County D-1-GN-11-000558 CAUSE NO. D-1-GN-11-000558

KARL B. BAILEY, JR. § IN THE DISTRICT COURT § Plaintiff § v § § 250th JUDICIAL DISTRICT § MIDFIRST BANK; SMOKE SIGNAL § PASS, LLC; ERIC J. LEE; KW § MANAGEMENT, LLC, d/b/a Keller § Williams § § Defendants § TRAVIS COUNTY, TEXAS

PLAINTIFF’S RESPONSE TO DEFENDANT’S TRADITIONAL & NO-EVIDENCE MOTION FOR SUMMARY JUDGMENT AND PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT

Plaintiff, Karl B. Bailey, Jr., asks the Court to deny defendant MidFirst Bank’s motions

for summary judgment and to grant Plaintiff’s motion for summary judgment

against defendant MidFirst Bank.

INTRODUCTION

1. Plaintiff, Karl B. Bailey (Bailey), sued defendant, MidFirst Bank (MidFirst), for

breach of contract, violations of the Texas DTPA, void foreclosure, equitable

estoppel/unjust enrichment and quiet title.

2. MidFirst answered asserting counter claims for declaratory judgment and a writ

of possession. MidFirst’s chief claim is that Bailey was not a party to the Deed of

Trust, MidFirst was not aware the property in question had been deeded to Bailey

and therefore Bailey has no standing to bring these claims and was not entitled to

notice prior to foreclosure and MidFirst was entitled to keep payments Bailey

made on the note.

KARL B. BAILEY, JR. V. MIDFIRST BANK ET AL ANSWER AMENDED MOTION FOR SUMMARY JUDGMENT PAGE 1 OF 14 BACKGROUND

3. The property in question is described in Exhibit 1 and is more commonly known

as 1234 Acanthus Street, Pflugerville, Texas 78660 (“the property”).

4. The property was initially purchased by Travis and Amy Chestnut through a Note

and Deed of Trust on or about July 15, 2004. The lender was Alethes, LLC. On

or about April 17, 2009, MidFirst allegedly obtained, by assignment and

endorsement, the Note and Deed of Trust on the property.

5. On or about July 30, 2009, the Chestnut’s transferred the property to Smoke

Signal Pass, LLC (SPP) under a General Warranty Deed.

6. SPP then transferred the property to Bailey on or about July 31, 2009 under a

Special Warranty Deed with Vendor’s Lien. Bailey began making payments in

September, 2009 and continued to make all payments until he was informed

MidFirst had foreclosed on the property by receipt of a three day notice to vacate.

SUMMARY-JUDGMENT EVIDENCE

7. To support the facts in this response, plaintiff offers the following summary-

judgment evidence attached to this response and incorporates the evidence into

this response by reference.

Exhibit 1: Deed of Trust dated July 15, 2004 and recorded in the Travis County Property Records as Document 2004136582. (Chestnut Deed).

Exhibit 2: Assignment of Deed of Trust, dated April 22, 2009 and recorded in the Travis County Property Records as Document 2009079539. (MidFirst Assignment)

Exhibit 3: General Warranty Deed, dated July 30, 2009 and recorded in the Travis County Property Records as Document 200913692. (SPP Deed).

KARL B. BAILEY, JR. V. MIDFIRST BANK ET AL ANSWER AMENDED MOTION FOR SUMMARY JUDGMENT PAGE 2 OF 14 Exhibit 4: Special Warranty Deed with Vendor’s Lien dated July 31, 2009 and recorded in the Travis County Property Records as Document 2009135933. (Bailey Deed)

Exhibit 5: Appointment of Substitute Trustee dated November 5, 2010 and recorded in the Travis County Property Records as Document 2010182473.

Exhibit 6: Affidavit of Karl Bailey

Exhibit 7: Checks and bank statement showing Bailey payments to SPP.

Exhibit 8: Substitute Trustee’s Deed dated January 4, 2011 and recorded in the Travis County Property Records as Document 2011006182.

RESPONSE TO TRADITIONAL SUMMARY JUDGMENT ON PLAINTIFF’S CAUSES OF ACTION DUE TO LACK OF STANDING

A. Defendant did not disprove plaintiff’s causes of action as a matter of law.

8. A defendant is entitled to summary judgment on a plaintiff’s cause of action if the defendant can disprove at least one element of the cause of action as a matter of law. Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 2002); see Tello v. Bank One, N.A., 218 S.W.3d 109, 113 (Tex. App.—Houston [14th Dist.] 2007, no pet.).

9. The Court should deny defendant’s motion for summary judgment on plaintiff’s cause of action because defendant did not disprove Bailey’s claims as a matter of law.

10. The Court should deny defendant’s motion for summary judgment on plaintiff’s cause of action because the Affidavits and property records attached to defendant’s motion are defective and do not present competent summary- judgment evidence. Specifically, see Bailey’s Motion to Strike MidFirst Bank’s Summary Judgment Evidence.

A. MidFirst did not prove Bailey lacks standing as a matter of law

11. MidFirst’s chief argument is that Bailey does not have standing to sue on breach

of the Deed of Trust because he is not a party to the Deed of Trust. Further,

KARL B. BAILEY, JR. V. MIDFIRST BANK ET AL ANSWER AMENDED MOTION FOR SUMMARY JUDGMENT PAGE 3 OF 14 MidFirst asserts Bailey is not entitled to the notices required by law and by the

Deed of Trust because he was not a party to the contract and not obligated to pay

the debt.

12. The Court should deny MidFirst’s motion for summary judgment on the issue of

Bailey’s standing because MidFirst did not prove lack of standing as a matter of

law. Bailey does have standing as a matter of law based on the Chain of Title

proven by Exhibits 1 through 4.

13. Bailey’s standing is further evidenced by the Chestnut deed, Section 12, which

states: “[t]he covenants and agreements of this Security Instrument shall bind and

benefit the successors and assigns of Lender and Borrower, subject to the

provisions of Paragraph 9(b).” 1

14. Since Bailey was an assignee and/or successor of Borrower (the Chestnuts), the

covenants and agreements of the Security Instrument benefit him. MidFirst was

required to provide the contractual notices in the Deed of Trust to Bailey. This

clause also makes Bailey a party to the contract. A party to a contract can always

sue under the contract.

15. Both the SPP Deed and the Bailey Deed were properly recorded in the Travis

County Property Records. This gives rise to an irrebutable presumption MidFirst

had notice of these instruments. 2

1 Paragraph 9(b) is the “due on sale” clause that gives the Lender the right to accelerate the debt if the original borrower sells their interest without the Lender’s permission. 2 Noble Mortg. & Invs. LLC v. D&M Vision Invs., LLC, 340 S.W.3d 65 (Tex. App. Houston [1st Dist.] 2011, no pet.) “The Texas Property Code provides that an "instrument that is properly recorded in the proper county is . . . notice to all persons of the existence of the instrument." Tex. Prop. Code Ann. § 13.002. Recorded instruments in a grantee's

KARL B. BAILEY, JR. V. MIDFIRST BANK ET AL ANSWER AMENDED MOTION FOR SUMMARY JUDGMENT PAGE 4 OF 14 16. Some courts have said instruments recorded after the property was purchased do

not automatically provide notice to the purchaser. See Andretta v. West, 415

S.W.2d 638, 642 (Tex. 1967). However, in the instant case, MidFirst had reason

to investigate when payment origination changed from the Chestnuts to SPP.

This should have led them to inquire regarding what had been filed to lead SPP to

make payments. 3 Additionally, MidFirst recorded documents in the Travis

County Property Records after the SPP Deed and the Bailey Deed were recorded.

For example, Exhibit 5 was recorded in November 2010 showing MidFirst or one

of its agents was actively accessing the property records. At that point, MidFirst

would have had notice of the SPP Deed and the Bailey Deed.

17. MidFirst has produced no admissible evidence to prove they were not aware of

these deeds. At best, an incompetent interested witness affidavit claims only that

MidFirst was not aware of the Deeds on or about the time they were executed.

The Thad Burr affidavit (Exhibit A to MidFirst’s motion) did not address the

question of when MidFirst learned of the deeds.

18. MidFirst and their agents were either not diligent in execution of the foreclosure

or ignored the SPP Deed and the Bailey Deed. Before foreclosing on a

homeowner, it should be expected the appropriate property records would be

chain of title generally establish an irrebuttable presumption of notice. Ford v. Exxon Mobil Chem. Co., 235 S.W.3d 615, 617 (Tex. 2007).” 3 “Reasonable diligence requires that owners of property interests make themselves aware of relevant information available in the public record.” …’However, reliance is not reasonable when information revealing the truth could have been discovered within the limitations period.’ Diligence is required when claimants have been ‘put on notice of the alleged harm of injury-causing actions.’”

Shell Oil Co. v. Ross, 356 S.W.3d 924, 928 (Tex. 2011)

KARL B. BAILEY, JR. V. MIDFIRST BANK ET AL ANSWER AMENDED MOTION FOR SUMMARY JUDGMENT PAGE 5 OF 14 checked to determine if there were any tax or judgment liens or second liens.

These could affect the foreclosure and certainly would affect the allocation of

sales proceeds.

19. Additionally, several of the documents filed with MidFirst’s Motion have check

marks not on the recorded copies. These check marks seem to be noting

particular data in the document. For example, MidFirst’s Exhibit A-1, Bailey’s

Exhibit 1 (Chester Deed) has checks on the names of the borrowers and the

amount borrowed. MidFirst’s Exhibit A-4, Bailey’s Exhibit 4 (Bailey Deed) has

these same check marks. It is a key fact issue as to when the marks were made

and by whom. If made by MidFirst or its agent prior to the sale, it is evidence of

knowledge of the Bailey Deed and, by extension, the SPP Deed.

20. Finally, several of the exhibits in MidFirst’s Motion were clearly downloaded

from the Travis County Clerk’s website (they have “Unofficial Document”

emblazoned across the pages). This shows MidFirst or its agent was accessing the

property records for the property and should have noticed the Bailey and SPP

deeds.

21. At a minimum, a fact issue exists regarding what MidFirst knew and when they

knew it.

B. MidFirst did not prove Bailey lacks standing to challenge any assignment.

22. As discussed supra, Bailey has standing with regard to the Chester Deed and, as

a successor and/or assign is entitled to the benefits thereof.

23. Texas law follows the common law rule where a debtor may bring any ground

against an assignee to challenge an assignment as void or invalid. See Tri-Cities

KARL B. BAILEY, JR. V. MIDFIRST BANK ET AL ANSWER AMENDED MOTION FOR SUMMARY JUDGMENT PAGE 6 OF 14 Const., Inc. v. American Nat. Ins. Co., 523 S.W.2d 426, 430 (Tex. Civ. App.—

Houston [1st Dist.] 1975, no writ); Glass v. Carpenter, 330 S.W.2d 530, 537

(Tex. Civ. App.—San Antonio 1959, writ ref’d n.r.e.). This was recently

acknowledged by the Federal 5th Circuit, and is the majority rule followed in

Texas. See Reinagel, et al. v. Deutsche Bank Nat’l Trust Co., No. 12-50569, 2013

U.S. App. LEXIS 14089 (5th Cir. (Tex.) July 11, 2013) (reversing district court,

Hon. Sam Sparks, on this point of law);

24. Texas Courts also permit challenging the chain of assignments regarding the right

of a party to foreclose. See Priesmeyer v. Pacific Southwest Bank, F.S.B., 917

S.W.2d 937 (Tex.App.—Austin 1996); see also Martin v. New Century Mortgage

Co., 2012 Tex. App. LEXIS 4705 (Tex. App.—Houston [1st Dist.] 2012); Austin

v. Countrywide Home Loans, 261 S.W.3d 68 (Tex. App.—Houston [1st Dist.]

2008); Leavings v. Mills, 175 S.W.3d 301 (Tex. App.— Houston [1st Dist.] 2004,

no pet.); Shepard v. Boone, 99 S.W.3d 263 (Tex. App.—Eastland 2003).

C. Plaintiff has a viable cause of action for breach of contract.

25. MidFirst claimed that it is entitled to summary judgment on Bailey’s breach of

contract claim because Bailey did not have a contract with MidFirst. As

discussed supra, Bailey is a successor and/or assignee of the Chestnut Deed and is

bound and benefited by the Deed of Trust. Therefore, he is a party to the contract.

If MidFirst is a party to the contract, Bailey has a contract with MidFirst.

26. The Chestnut deed is a valid contract, Bailey tendered every payment required

of him until after foreclosure. See Exhibits 6 and 7 Affidavit and Proof of

payments. MidFirst breached the contract by not providing notice to Bailey as

KARL B. BAILEY, JR. V. MIDFIRST BANK ET AL ANSWER AMENDED MOTION FOR SUMMARY JUDGMENT PAGE 7 OF 14 admitted in paragraph 23 of MidFirst’s Motion. Bailey pled damages of having a

void foreclosure executed on his home. This was a violation of Section 18 of the

Chester Deed.

D. Bailey’s pleading supports his assertion the foreclosure is void ab initio and should be set aside

27. The intervening actions of the Chestnuts and SPP to deed the property to Bailey

negated MidFirst’s authority to conduct a foreclosure. An action taken without

authority is void. Bailey is entitled to have the foreclosure sale set aside because

MidFirst did not own any of the debt.

E. Bailey’s Quiet Title Claim is Supported by Proper Assignments

28. MidFirst states Plaintiff’s Quiet Title action fails but then discusses the elements

of a trespass to title action. Bailey has pled Quiet Title but not trespass to quiet

title.

29. The elements of a suit to Quiet Title are:

(a) Petitioner's legal or equitable interest in specific property

(b) Existence of claim by defendant that appears valid on its face and

interferes with or hinders petitioner's title.

(c) Invalidity or unenforceability of defendant's claim

30. Petitioner seeks judicial decree quieting title to property by removing cloud cast

by defendant's claim or contention.

31. The Bailey Title shows his interest in the specific property. The Substitute

Trustee’s Deed (Exhibit 8) appears valid on its face and interferes with Bailey’s

KARL B. BAILEY, JR. V. MIDFIRST BANK ET AL ANSWER AMENDED MOTION FOR SUMMARY JUDGMENT PAGE 8 OF 14 32. MidFirst’s claim is invalid because of the void foreclosure discussed supra.

33. Bailey has sought judicial decree quieting title to the property by removing the

cloud cast by MidFirst’s claim or contention.

RESPONSE TO NO-EVIDENCE SUMMARY JUDGMENT

A. Bailey has sufficient evidence to raise fact issues on his breach of contract claim. 34. In a no-evidence motion for summary judgment, a defendant can challenge a

plaintiff to produce evidence to support one or more elements of the plaintiff’s

cause of action on which the plaintiff would have the burden of proof at trial after

an adequate time for discovery has passed. TEX. R. CIV. P. 166a(i). To avoid a no-

evidence summary judgment, the plaintiff is not required to marshal its proof; the

plaintiff only needs to point out evidence that raises a fact issue on the elements

challenged in the defendant’s motion. Hamilton v. Wilson, 249 S.W.3d 425, 426

(Tex. 2008). To raise a genuine issue of material fact, the plaintiff must produce

more than a scintilla of evidence in support of the challenged elements. Smith v.

O’Donnell, 288 S.W.3d 417, 424 (Tex. 2009); Ford Motor Co. v. Ridgway, 135

S.W.3d 598, 600 (Tex. 2004). More than a scintilla of evidence is produced if the

evidence is sufficient to allow reasonable and fair-minded people to differ in their

conclusions on whether the challenged fact exists. Forbes, Inc. v. Granada

Biosciences, Inc., 124 S.W.3d 167, 172 (Tex. 2003). In evaluating whether more

than a scintilla of evidence exists, the court must view the evidence in the light

most favorable to the plaintiff, crediting evidence favorable to the plaintiff if

reasonable jurors could, and disregarding contrary evidence unless reasonable

jurors could not. Timpte Indus., Inc. v. Gish, 286 S.W.3d 306, 310 (Tex. 2009).

KARL B. BAILEY, JR. V. MIDFIRST BANK ET AL ANSWER AMENDED MOTION FOR SUMMARY JUDGMENT PAGE 9 OF 14 35. Defendant alleged that there is no evidence supporting essential elements of

plaintiff’s cause of action for breach of contract. MidFirst only challenges the

element requiring the existence of a contract. Bailey has shown there is more

than a scintilla of evidence he is a successor and/or assignee of the Chester Deed

which is the contract that MidFirst contends gives them contractual rights in the

lien and the ability to foreclose. MidFirst is purportedly a successor and/or

assignee of the Deed of Trust

36. The Court should deny defendant’s no-evidence motion for summary judgment

because plaintiff has produced sufficient evidence to raise a fact issue on the

element challenged by MidFirst.

37. MidFirst also seeks no-evidence summary judgment on a wrongful foreclosure

claim that was not pled. Instead, Bailey stated the foreclosure was void.

B. Bailey has sufficient evidence to support his Quiet Title Claim

38. Bailey’s Quiet Tile claim evidence is discussed supra. Bailey has provided more

than a scintilla of evidence to support the elements of Quiet Title.

REQUEST FOR TRADITIONAL SUMMARY JUDGMENT ON DEFENDANT’S COUNTERCLAIMS

A. MidFirst did not satisfy its burden under Texas Rule of Civil Procedure 166a(c)

39. To succeed on a traditional motion for summary judgment on its counterclaim,

the defendant must show that there is no genuine issue of material fact and that it

is entitled to summary judgment as a matter of law. Tex. R. Civ. P. 166a(c); Mann

Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex.

KARL B. BAILEY, JR. V. MIDFIRST BANK ET AL ANSWER AMENDED MOTION FOR SUMMARY JUDGMENT PAGE 10 OF 14 2009); Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548 (Tex. 1985). To meet

this burden, the defendant must conclusively prove all essential elements of its

claim. MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex. 1986). A matter is

conclusively established if reasonable people could not differ on the conclusion to

be drawn from the evidence. City of Keller v. Wilson, 168 S.W.3d 802, 816 (Tex.

2005). If the defendant establishes its right to summary judgment as a matter of

law, the burden shifts to the plaintiff to present evidence that raises a genuine

issue of material fact. Boudreau v. Fed. Trust Bank, 115 S.W.3d 740, 743 (Tex.

App.—Dallas 2003, pet. denied). In deciding whether to grant defendant’s

motion, the court must take as true all competent evidence favorable to the

plaintiff and indulge every reasonable inference and resolve any doubts in the

plaintiff’s favor. Limestone Prods. Distrib., Inc. v. McNamara, 71 S.W.3d 308,

311 (Tex. 2002); Rhône-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 223 (Tex. 1999);

Nixon, 690 S.W.2d at 548-49.

40. MidFirst moved for summary judgment on its counterclaim for Declaratory

Judgment, arguing that its motion had proven it had standing to foreclose.

Because Plaintiff has not brought an action under the Act, Movant is not

permitted to bring counterclaims under the Act. The Declaratory Judgment Act is

not available to settle disputes already pending before a court. Johnson v. Hewitt,

539 S.W.2d 239, 240-241 (Tex. Civ. App. -- Houston [1st Dist.] 1976, no writ);

Joseph v. City of Ranger, 188 S.W.2d 1013, 1014 (Tex. Civ. App. -- Eastland

1945, writ ref'd w.o.m.). John Chezik Buick Co. v. Friendly Chevrolet Co., 749

S.W.2d 591, 594 (Tex. App. Dallas 1988).

KARL B. BAILEY, JR. V. MIDFIRST BANK ET AL ANSWER AMENDED MOTION FOR SUMMARY JUDGMENT PAGE 11 OF 14 41. MidFirst’s Declaratory Judgment counterclaim is duplicative of Bailey’s Quiet

Title claim and therefore a dispute already before the Court and should be denied.

42. Further, MidFirst has not proven that its foreclosure was valid as discussed

supra. The SPP Deed and Bailey Deed negated MidFirst’s right to foreclose or at

least its right to foreclose without notifying Bailey.

B. This suit does not support a writ of possession counterclaim.

43. Tex. R. Civ. Pro. 310 provides a writ of possession “when an order foreclosing a

lien upon real estate is made in a suit having for its object the foreclosure of such

lien…” This suit does not have for its object the foreclosure of the lien. Instead,

it is a suit claiming the foreclosure of the lien was improper due, among other

things, to a lack of standing and proper foreclosure procedure.

44. Additionally, MidFirst, as discussed supra, has not established its right to

foreclose.

CONCLUSION

45. Plaintiff Karl B. Bailey has provided admissible evidence to support his claims

and defeat defendant MidFirst Bank’s amended traditional and no evidence

motions for summary judgment. Further, admissible evidence has been provided

to disprove defendant MidFirst Bank’s, counterclaims.

PRAYER

WHEREFORE, PREMISES CONSIDERED, Karl B. Bailey requests that the

Amended Motion for Summary Judgment of MidFirst Bank, Defendant, be denied

in its entirety and further that summary judgment be entered in his favor on the

counterclaims of MidFirst Bank. If the Court grants defendant’s motion for

KARL B. BAILEY, JR. V. MIDFIRST BANK ET AL ANSWER AMENDED MOTION FOR SUMMARY JUDGMENT PAGE 12 OF 14 summary judgment, plaintiff asks the Court to overrule plaintiff’s objections so they

will be preserved for appeal.

/s/ Anthony G. Read --------------------------------- William B. Gammon SBN: 07611280 Anthony G. Read SBN: 24056184 1201 Spyglass Dr., Suite 100 Austin, Texas 78746 (512) 472-8909 (888) 545-4279 (fax) firm@gammonlawoffice.com Attorneys for Karl B. Bailey

KARL B. BAILEY, JR. V. MIDFIRST BANK ET AL ANSWER AMENDED MOTION FOR SUMMARY JUDGMENT PAGE 13 OF 14 CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing instrument has been served via ProDoc E-Service or fax on June 25, 2014, in accordance with Rule 21a, Texas Rules of Civil Procedure, on all counsel of record.

CHRIS H. POCHYLA BARRETT DAFFIN FRAPPIER TURNER & ENGEL, LLP 15000 Surveyor Boulevard, Suite 100 Addison, TX 75001 Phone: 972-340-7955 Fax: 972-341-0734

KARL B. BAILEY, JR. V. MIDFIRST BANK ET AL ANSWER AMENDED MOTION FOR SUMMARY JUDGMENT PAGE 14 OF 14 APPENDIX TAB E TEX. R. CIV. P. 310 Writ of Possession

When an order foreclosing a lien upon real estate is made in a suit having for its object the foreclosure of such lien, such order shall have all the force and effect of a writ of possession as between the parties to the foreclosure suit and any person claiming under the defendant to such suit by any right acquired pending such suit; and the court shall so direct in the judgment providing for the issuance of such order. The sheriff or other officer executing such order of sale shall proceed by virtue of such order of sale to place the purchaser of the property sold thereunder in possession thereof within thirty days after the day of sale. APPENDIX TAB F 7 Tex. Admin. Code § 65.3. Definitions

The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise. … (21) Wrap-around real estate loan--A financing device whereby a junior mortgage lien secures a liability consisting of the amount of senior debt, plus any additional funds advanced to the borrower. APPENDIX TAB G TEX. PROP. CODE § 51.002. Sale of Real Property Under Contract Lien

(a) A sale of real property under a power of sale conferred by a deed of trust or other contract lien must be a public sale at auction held between 10 a.m. and 4 p.m. of the first Tuesday of a month. Except as provided by Subsection (h), the sale must take place at the county courthouse in the county in which the land is located, or if the property is located in more than one county, the sale may be made at the courthouse in any county in which the property is located. The commissioners court shall designate the area at the courthouse where the sales are to take place and shall record the designation in the real property records of the county. The sale must occur in the designated area. If no area is designated by the commissioners court, the notice of sale must designate the area where the sale covered by that notice is to take place, and the sale must occur in that area.

(b) Except as provided by Subsection (b-1), notice of the sale, which must include a statement of the earliest time at which the sale will begin, must be given at least 21 days before the date of the sale by:

(1) posting at the courthouse door of each county in which the property is located a written notice designating the county in which the property will be sold;

(2) filing in the office of the county clerk of each county in which the property is located a copy of the notice posted under Subdivision (1); and

(3) 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.

(b-1) If the courthouse or county clerk's office is closed because of inclement weather, natural disaster, or other act of God, a notice required to be posted at the courthouse under Subsection (b)(1) or filed with the county clerk under Subsection (b)(2) may be posted or filed, as appropriate, up to 48 hours after the courthouse or county clerk's office reopens for business, as applicable.

(c) The sale must begin at the time stated in the notice of sale or not later than three hours after that time. (d) Notwithstanding any agreement to the contrary, the mortgage servicer of the debt shall serve a debtor in default under a deed of trust or other contract lien on real property used as the debtor's residence with written notice by certified mail stating that the debtor is in default under the deed of trust or other contract lien and giving the debtor at least 20 days to cure the default before notice of sale can be given under Subsection (b). The entire calendar day on which the notice required by this subsection is given, regardless of the time of day at which the notice is given, is included in computing the 20-day notice period required by this subsection, and the entire calendar day on which notice of sale is given under Subsection (b) is excluded in computing the 20-day notice period.

(e) Service of a notice under this section by certified mail is complete when the notice is deposited in the United States mail, postage prepaid and addressed to the debtor at the debtor's last known address. The affidavit of a person knowledgeable of the facts to the effect that service was completed is prima facie evidence of service.

(f) Each county clerk shall keep all notices filed under Subdivision (2) of Subsection (b) in a convenient file that is available to the public for examination during normal business hours. The clerk may dispose of the notices after the date of sale specified in the notice has passed. The clerk shall receive a fee of $ 2 for each notice filed.

(f-1) If a county maintains an Internet website, the county must post a notice of sale filed with the county clerk under Subsection (b)(2) on the website on a page that is publicly available for viewing without charge or registration.

(g) The entire calendar day on which the notice of sale is given, regardless of the time of day at which the notice is given, is included in computing the 21-day notice period required by Subsection (b), and the entire calendar day of the foreclosure sale is excluded.

(h) For the purposes of Subsection (a), the commissioners court of a county may designate an area other than an area at the county courthouse where public sales of real property under this section will take place that is in a public place within a reasonable proximity of the county courthouse as determined by the commissioners court and in a location as accessible to the public as the courthouse door. The commissioners court shall record that designation in the real property records of the county. A designation by a commissioners court under this section is not a ground for challenging or invalidating any sale. A sale must be held at an area designated under this subsection if the sale is held on or after the 90th day after the date the designation is recorded. The posting of the notice required by Subsection (b)(1) of a sale designated under this subsection to take place at an area other than an area of the courthouse remains at the courthouse door of the appropriate county.

(i) Notice served on a debtor under this section must state the name and address of the sender of the notice and contain, in addition to any other statements required under this section, a statement that is conspicuous, printed in boldface or underlined type, and substantially similar to the following: "Assert and protect your rights as a member of the armed forces of the United States. If you are or your spouse is serving on active military duty, including active military duty as a member of the Texas National Guard or the National Guard of another state or as a member of a reserve component of the armed forces of the United States, please send written notice of the active duty military service to the sender of this notice immediately." APPENDIX TAB H TEX. R. CIV. P. 166a Summary Judgment

(a) For Claimant. --A party seeking to recover upon a claim, counterclaim, or cross-claim or to obtain a declaratory judgment may, at any time after the adverse party has appeared or answered, move with or without supporting affidavits for a summary judgment in his favor upon all or any part thereof. A summary judgment, interlocutory in character, may be rendered on the issue of liability alone although there is a genuine issue as to amount of damages.

(b) For Defending Party. --A party against whom a claim, counterclaim, or cross- claim is asserted or a declaratory judgment is sought may, at any time, move with or without supporting affidavits for a summary judgment in his favor as to all or any part thereof.

(c) Motion and Proceedings Thereon. --The motion for summary judgment shall state the specific grounds therefor. Except on leave of court, with notice to opposing counsel, the motion and any supporting affidavits shall be filed and served at least twenty-one days before the time specified for hearing. Except on leave of court, the adverse party, not later than seven days prior to the day of hearing may file and serve opposing affidavits or other written response. No oral testimony shall be received at the hearing. The judgment sought shall be rendered forthwith if (i) the deposition transcripts, interrogatory answers, and other discovery responses referenced or set forth in the motion or response, and (ii) the pleadings, admissions, affidavits, stipulations of the parties, and authenticated or certified public records, if any, on file at the time of the hearing, or filed thereafter and before judgment with permission of the court, show that, except as to the amount of damages, there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law on the issues expressly set out in the motion or in an answer or any other response. Issues not expressly presented to the trial court by written motion, answer or other response shall not be considered on appeal as grounds for reversal. A summary judgment may be based on uncontroverted testimonial evidence of an interested witness, or of an expert witness as to subject matter concerning which the trier of fact must be guided solely by the opinion testimony of experts, if the evidence is clear, positive and direct, otherwise credible and free from contradictions and inconsistencies, and could have been readily controverted. (d) Appendices, References and Other Use of Discovery Not Otherwise on File. -- Discovery products not on file with the clerk may be used as summary judgment evidence if copies of the material, appendices containing the evidence, or a notice containing specific references to the discovery or specific references to other instruments, are filed and served on all parties together with a statement of intent to use the specified discovery as summary judgment proofs: (i) at least twenty-one days before the hearing if such proofs are to be used to support the summary judgment; or (ii) at least seven days before the hearing if such proofs are to be used to oppose the summary judgment.

(e) Case Not Fully Adjudicated on Motion. --If summary judgment is not rendered upon the whole case or for all the relief asked and a trial is necessary, the judge may at the hearing examine the pleadings and the evidence on file, interrogate counsel, ascertain what material fact issues exist and make an order specifying the facts that are established as a matter of law, and directing such further proceedings in the action as are just.

(f) Form of Affidavits; Further Testimony. --Supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein. Sworn or certified copies of all papers or parts thereof referred to in an affidavit shall be attached thereto or served therewith. The court may permit affidavits to be supplemented or opposed by depositions or by further affidavits. Defects in the form of affidavits or attachments will not be grounds for reversal unless specifically pointed out by objection by an opposing party with opportunity, but refusal, to amend.

(g) When Affidavits Are Unavailable. --Should it appear from the affidavits of a party opposing the motion that he cannot for reasons stated present by affidavit facts essential to justify his opposition, the court may refuse the application for judgment or may order a continuance to permit affidavits to be obtained or depositions to be taken or discovery to be had or may make such other order as is just.

(h) Affidavits Made in Bad Faith. --Should it appear to the satisfaction of the court at any time that any of the affidavits presented pursuant to this rule are presented in bad faith or solely for the purpose of delay, the court shall forthwith order the party employing them to pay to the other party the amount of the reasonable expenses which the filing of the affidavits caused him to incur, including reasonable attorney's fees, and any offending party or attorney may be adjudged guilty of contempt.

(i) No-Evidence Motion. --After adequate time for discovery, a party without presenting summary judgment evidence may move for summary judgment on the ground that there is no evidence of one or more essential elements of a claim or defense on which an adverse party would have the burden of proof at trial. The motion must state the elements as to which there is no evidence. The court must grant the motion unless the respondent produces summary judgment evidence raising a genuine issue of material fact.