Santos v. Yellowfin Loan Servicing Corp.

Deysi Santos (defendant) obtained two loans from First Franklin, a division of National City Bank of Indiana (National City Bank), to purchase a residential property. The second loan was evidenced by a promissory note and secured by a deed of trust. Santos later defaulted on her payment obligations. In 2007, National City Bank foreclosed on the first loan. The foreclosure sale satisfied the first loan and extinguished all junior liens, including the lien securing the second loan, but it did not extinguish the debt evidenced by the note. In 2019, Yellowfin Loan Servicing Corp. (Yellowfin) (plaintiff) purchased the outstanding note. After Santos failed to cure her default, Yellowfin accelerated all amounts due and brought suit against Santos for breach of contract. Santos counterclaimed for fraud and violations of the Texas Debt Collection Practices Act. Yellowfin moved for summary judgment. Santos opposed the motion, arguing, among other things, that the note was not a negotiable instrument because it was governed by, and incorporated, other documents. Santos pointed to section 11 of the note, which provided that default would occur if she failed to keep any of her agreements “under this Note or under any other agreement,” and section 15, which stated that she agreed to “all provisions of this Note … and the Disclosure Statement which are incorporated herein by reference.” The note defined “Disclosure Statement” as a “separate federal truth-in-lending disclosure,” the terms of which were incorporated by reference and made part of the note. The trial court granted Yellowfin’s motion. Santos appealed.