The Leeds and England star will sign for Everton instead after telling Blues boss Claudio Ranieri he will not uproot his family from Yorkshire.
Ranieri was confident of landing Martyn in a £500k deal after telling bankrolling owner Roman Abramovich he wanted him as No.2 to Carlo Cudicini.
Leeds were so keen to do a deal they offered to let Martyn train with them two or three days a week if it meant he'd agree to go.
But Ranieri rejected that idea.