NEW ORLEANS –A district court’s decision to dismiss a case filed by two mortgagors who claim that the note and deed of trust associated with their Texas property should be considered invalid because they were “robosigned” was upheld by the U.S. Fifth Circuit Court of Appeals.

When the plaintiffs, the Reinagels, defaulted on their note sometime in 2009 or 2010, Deutsche Bank attempted to assert its right to foreclose on the property as alleged mortgagee and owner/holder of the deed of trust, court documents state.

The plaintiffs filed suit against Deutsche Bank National Trust Company in 2011, claiming the defendant illegally attempted to foreclose on their property. A Texas state court granted a temporary injunction on the foreclosure process pursuant to the plaintiff’s allegations that the documentation transferring possession of the loan note and deed of trust to the defendant was “robosigned” and therefore void.

According to the appeals court ruling, “robosigning” is defined as “the colloquial term the media, politicians, and consumer advocates have used to describe an array of questionable practices banks deployed to perfect their right to foreclose in the wake of the subprime mortgage crisis, practices that included having bank employees or third-party contractors.”

The issues reviewed by the appeals court apply to questions of whether the Reingals successfully established that the defendant lacked authority to foreclose and whether they had standing to challenge the validity of the transactions between their original loan holder, Argent, and the current loan holder and defendant, Deutsche Bank. In addition, the Reinagels claimed that the defendant violated the Pooling and Servicing Agreement that stated no loans could be transferred into the trust after Oct. 1, 2006.

The court affirmed the district court’s decision for the plaintiffs’ failure to prove these points, however, the court emphasized that its “holding is a narrow one.”

The appeals court held that the plaintiffs lacked standing to sue as “a non-party to a contract cannot enforce the contract unless she is an intended third-party beneficiary.” And as to the claims of invalid signing, the appeals court found that “under Texas law, facially valid assignments cannot be challenged for want of authority except by the defrauded assignor” so that the Reinagels’ claim of forgery for a scanned signature notarized as original is “a red herring.”

The case was heard by Circuit Judges Patrick E. Higginbotham, Priscilla R. Owen and James E. Graves Jr.

Case no. 12-50569.

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