Michael Wayne Singletary, proceeding pro se, obtained a loan in 2024 secured by a mortgage on his home from SWBC Mortgage Corporation. He later alleged that SWBC transferred the loan to Freddie Mac without his knowledge or consent. Singletary claimed this transfer was wrongful because it was not recorded in county property records and allegedly violated a notification provision in his Deed of Trust. He filed suit in the United States District Court for the Southern District of Texas, asserting claims for fraud, breach of contract, and to quiet title. Defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. The district court granted the motion, finding that the 'split the note' theory was rejected by Texas courts, that Singletary failed to plead fraud with sufficient factual specificity, and that the Deed of Trust contained no provisions barring the transfer or requiring notice.
The Fifth Circuit, in a Per Curiam opinion, affirmed the district court's dismissal. The court first addressed the 'split the note' theory, which posits that ownership of promissory notes and deeds of trust cannot be separated. The appellate court noted that Singletary abandoned this argument on appeal, but even if raised, it is definitively rejected under Texas law. Regarding the claim that the transfer was void due to failure to record, the court cited existing precedent stating that failure to record a mortgage note transfer does not render the mortgage unenforceable against the original mortgagor. The court found Singletary's reliance on AI-hallucinated case law to be unsupported by actual legal authority and warned that such reliance could lead to sanctions. Furthermore, the court addressed arguments raised for the first time on appeal, such as violations of federal servicing requirements and deprivation of a Seventh Amendment right to a jury trial. These were deemed unpreserved because they were not adequately developed in the district court proceedings. Finally, the court upheld the district court's finding that amendment would be futile, as Singletary's claims relied on non-viable legal theories.
The decision reinforces that failure to record a mortgage transfer does not invalidate the debt or the lender's right to enforce it. It serves as a warning to pro se litigants that relying on fabricated or hallucinated case law can result in sanctions. The ruling confirms that the 'split the note' theory is not a viable legal defense in Texas federal courts. The case is remanded with instructions to dismiss the claims with prejudice, meaning Singletary cannot refile the same claims.
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