Defendants’ final (and weakest) argument is that homeowners like plaintiffs “will not
be prejudiced” if the chain of assignments from original lender to foreclosing entity were
immune to debtor challenge. After all, the argument apparently goes, the Millers owe the
money to somebody. In truth, the potential prejudice is both plain and severe – foreclosure
by the wrong entity does not discharge the homeowner’s debt, and leaves them vulnerable
to another action on the same note by the true creditor. Banks are neither private attorneys
general nor bounty hunters, armed with a roving commission to seek out defaulting
homeowners and take away their homes in satisfaction of some other bank’s deed of trust.
MasterCard has no right to sue for debts rung up on a Visa card, and that remains true even
if MasterCard has been assigned the rights of another third party like American Express.
Unless and until a complete chain of transactions back to the original lender is shown,
MasterCard remains a stranger to the original transaction with no claim against the debtor.
And that is a fair description of this case in its present posture.
A debtor may, generally, assert against an assignee all equities or defenses
existing against the assignor prior to notice of the assignment, any matters
rendering the assignment absolutely invalid or ineffective, and the lack of
plaintiffs title or right to sue; but if the assignment is effective to pass
legal title, the debtor cannot interpose defects or objections which merely
render the assignment voidable at the election of the assignor or those
standing in his or her shoes.
The obligor of an assigned claim may defend a suit brought by the assignee
on any ground that renders the assignment void or invalid, but may not defend
on any ground that renders the assignment voidable only, because the only
interest or right that an obligor of a claim has in the assignment is to ensure
that he or she will not have to pay the same claim twice.
Plaintiffs here do not assert these or any other “voidable” defenses to Mellon’s
assignment. Instead, plaintiffs assert that, standing alone, this single assignment from a third
party is ineffective to establish a right to foreclose, because it does not show a proper
assignment of the original security instrument to the third party. Texas courts routinely
allow a homeowner to challenge the chain of assignments by which a party claims the right
Under the Texas Property Code, the only party with standing to initiate a non-judicial
foreclosure sale is the m~rtgageeo,~r t he mortgage servicer acting on behalf of the current
mortgagee.’ Determining mortgagee status is easy when the party is named as grantee or
beneficiary in the original deed of trust, mortgage, or contract lien. But factual disputes may
arise when the party seeking to foreclose is not the original mortgagee, as is most often the
case these days. In such cases the foreclosing party must be able to trace its rights under the
security instrument back to the original mortgagee.