SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF ROCKLAND —————————————————————–)( U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR MAS TR ADJUSTABLE RA TE MORTGAGES TRUST 2007-1, MORTGAGE PASSTHROUGH CERTIFICATES, SERIES 2007-1, Plaintiff,
-against-
LEONARD FRIEDMAN, KARYN FRIEDMAN, NATIONAL CITY BANK, and “JOHN DOE#l” through “JOHN DOE#lO” the last ten names being fictitious and unknown to the Plaintiff, the person or parties intended being the person or parties, if any, having or claiming an interest or lien upon the mortgaged premises described in the complaint, Defendants. ——————————————————————)
LOEHR, J. Index No.: 032128/11 In this foreclosure action, the Court, in a Decision and Order dated June 28, 2013, having granted the Plaintiff summary judgment as to the execution and delivery of the Note and Mortgage and the Defendants’ default thereunder, but have denied summary judgment on the issue of Plaintiffs standing- specifically, when the Original Note, indorsed by the original lender, had been delivered to Plaintiff1 – the matter was tried before me on February 28, 2014, and the Plaintiff called as its sole witness, Rashad Blanchard, an employee of Ocwen, which subsequently became the servicer of this loan. Mr. Blanchard testified that Plaintiff had possession of the original indorsed Note based on: 1) his having examined it approximately 30 days ago and 2) that the original indorsed Note had been delivered to Plaintiff on April 16, 2007 based on the records of the original servicer, Well Fargo Bank. As Plaintiff failed to lay a proper foundation for the admission of the Well Fargo Bank records, they are inadmissible hearsay (Unifund CCR Partners v Youngman, 89 AD3d 1377, 1377-78 [4th Dept 2011]; Palisades Collection, LLC v Kedik, 67 AD3d 1329 [4th Dept 2009]; accord JP Morgan Chase Bank, NA. v Rads Group, Inc., 88 AD3d 766 [2d Dept 2011]) and all that has been established is that Plaintiff had possession of the original indorsed Note some 30 days ago – long after this case was commenced. Thus, Plaintiff having failed to establish that it owned the Note on the date this case was commenced, it does not have standing to maintain this action and the Complaint is dismissed on that basis.
This constitutes the decision and order of the Court. Dated: New City, New York March 21, 2014
HINSHAW & CULBERTSON LLP Attorneys for Plaintiff 780 Third Avenue New York, NY 10017
LAW OFFICES OF ALLEN A. KOLBER, ESQ. Attorneys for the Borrowers 134 Rt. 59, Suite A Suffern, NY 10901
1 With respect to standing, where, as here, a defendant has put standing in issue, the plaintiff must prove its standing, that is that it had been assigned the mortgage and note prior to the commencement of the foreclosure (Deutsche Bank National Trust Company v Haller (100 AD3d 680, 682 [2d Dept 2012]). A valid assignment can be effectuated by a written assignment of the mortgage and note executed by one with authority, or by indorsement and delivery of the note – the mortgage following the note by operation of law (Bank of New York v Silverberg, 86 AD3d 274 [2d Dept 2011]; US. Bank, NA. v Collymore, 68 AD3d 752 [2d Dept 2009]). Here, the documents show that MERS purported to assign the Note and Mortgage on behalf of ABC to Plaintiff on August 1 7, 2011. As MERS had no apparent authority to assign the Note, this assignment assigned nothing (Bank of New York v Silverberg, 86 AD3d 274 [2d Dept 274 [2d Dept 2011]; Aurora Loan Services, LLC v Weisblum (85 AD3d 95 [2d Dept 2011]). Plaintiff, however, does not now rely on this written assignment but on an assignment by delivery of the Note under an undated indorsement prior to the commencement of the case. In support thereof, Plaintiff has submitted the Note, indorsed by an officer of ABC, and the Affidavit of an Assistant Vice President of American Home who avers, “based on the books and records of Plaintiff and [American Home],” that the indorsed Note had been delivered to Plaintiff “since on or before January 16, 2007.” These records have not been submitted nor an explanation why, if they did, Plaintiff felt the need to do a written assignment in 2011. Deutsche Bank National Trust Company v Haller (100 AD3d 680, 682 [2d Dept 2102]) now requires more stringent proof where a plaintiff is trying to prove standing by delivery of the note under an undated indorsement, particularly where the plaintiff’s conduct has been inconsistent with such asserted prior assignment. Thus, in Haller, where the plaintiff was asserting standing by virtue of a note delivered under an undated indorsement, the Second Department said: “Here, the evidence submitted by the Plaintiff in support of its motion did not demonstrate that the note was physically delivered to it prior to the comrnencernent of the action. The affidavit from the plaintiffs servicing agent did not give any factual details of a physical delivery of the note and, thus failed to establish that the plaintiff had physical possession of the note prior to commencing this action.”
Can’t get a mortgage? Turns out it’s my fault. As in mine, personally. Yup. That’s the claim in a Housing Wire written by right-wing banking analyst R. Christopher Whalen. Here is Whalen’s argument in a nutshell:
Servicing regulations make banks really reluctant to deal with anyone but very good credit borrowers because it takes so long to foreclose on anyone anymore. Servicing regulations are so onerous because of an article Tara Twomey and I wrote on mortgage servicing that said that servicers were doing bad things. The problem (in Whalen’s view) is that Tara and I had it totally wrong.
I’m flattered that Whalen credits the article with having inspired all of the subsequent foreclosure regulation, but it would be nice if Whalen would accurately characterize the article. (Has he even read it?) It would also be nice if Whalen would acknowledge that servicers have done an awful lot of bad things over the past several years, which might just possibily have something to do with the current regulatory enviornment for servicing. But such an admission that might get in the way of Whalen grinding his political axe (two legs good, regulation ba-a-a-d).
A New York federal judge on Monday refused to dismiss JPMorgan Chase & Co. and CEO Jamie Dimon from a shareholder class action over the bank’s $6 billion “London Whale” trading fiasco.
U.S. District Judge George B. Daniels denied a request by JPMorgan, Dimon and former bank finance chief Douglas Braunstein to be dismissed from the suit. The judge said the plaintiffs had adequately alleged that public statements by Dimon and Braunstein about the trades during an April 2012 earnings conference call “were materially false and…
The morning roll call was long: GMAC Mortgage vs. Thomas Brady. SunTrust Mortgage vs. Scott Dodat. Wells Fargo vs. Janet Winn.
On it went.
One-by-one, foreclosure cases were called out by a retired judge — many dating back to the trough of the crisis in 2008 — and dismissed by the court in just seconds.
The local judicial system, still burdened with a backlog of more than 10,000 foreclosures, cleared a 60-page docket with nearly 300 languishing cases Friday in about an hour.
DEUTSCHE BANK NATIONAL TRUST. COMPANY AS TRUSTEE Appellee
v.
GLENN E. HOLDEN, et al. Appellants
EXCERPT:
{~14} In the recent case of Fannie Mae v. Trahey, 9th Dist. Lorain No. 12CAOI0209, 2013-0hio-3071, this Court also faced a similar issue when the foreclosing lender attached a copy of the note to its complaint that contained a blank indorsement from the original lender. In that case, the foreclosing lender filed an amended complaint, which included a different copy of the note. The note attached to the amended complaint demonstrated an indorsement from the original lender to another lender and then a second indorsement from that lender in blank. We concluded that the inconsistencies between the indorsements contained on the submitted notes created a genuine issue of material fact that precluded summary judgment as we could not ascertain which lender possessed the note at the time the foreclosure was filed. Id. at ~ 12. But see Bridge v. Ocwen Fed. Bank FSB, N.D.Ohio No. 1:07 CV 2739,2013 WL 4784292 (Sept. 6, 2013) (slip opinion) (distinguishing Trahey and finding that two different copies of identical promissory note did not create genuine issue of material fact so as to preclude summary judgment from being granted to the foreclosing lender).
{~15} Due to the inconsistencies between the copies of the note and the lack of an explanation based on personal knowledge as to how Deutsche Bank came to offer two different copies of the note into the record, this Court concludes that there is a genuine issue of material fact as to whether Deutsche Bank was the holder of the note at the time the complaint was filed. Accordingly, the trial court erred in granting Deutsche Bank’s motion for summary judgment on its foreclosure complaint.
IN THE DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA FIFTH DISTRICT NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND DISPOSITION THEREOF IF FILED
Case No. 5D13-1585
PAMELA SAMAROO AND JESSIE SAMAROO, Appellants,
v.
WELLS FARGO BANK, ETC., ET AL., Appellees. ________________________________/ Opinion filed March 28, 2014
Appeal from the Circuit Court for Marion County,
Victor J. Musleh, Judge.
Henry W. Hicks and Adam J. Knight, of Henry W. Hicks, P.A., Tampa, for Appellants.
Jeffrey S. York and N. Mark New, of McGlinchey Stafford, Jacksonville, for Appellees.
GRIFFIN, J.
Pamela Samaroo and Jessie Samaroo [“the Samaroos”] appeal the entry of summary final judgment of mortgage foreclosure in favor of Wells Fargo Bank, National Association, as Trustee for the Holders of the First Franklin Mortgage Loan Trust 2006- FF15 Mortgage Pass-Through Certificates, Series 2006-FF15 [“Wells Fargo”]. The Samaroos raise three issues on appeal; we find merit in only one. We agree that Wells Fargo failed to satisfy the notice requirement of section 22 of the mortgage as a condition precedent to foreclosure.
On April 8, 2009, Wells Fargo filed its complaint to foreclose on the Samaroos’ mortgage. Wells Fargo alleged that there had been a default under the note and mortgage, and that all conditions precedent to the filing of the action had been performed or had occurred. The Samaroos filed an amended answer and affirmative defenses, asserting, among other defenses, that Wells Fargo had failed to give the Samaroos notice of default in compliance with paragraph 22 of the mortgage.
Wells Fargo filed a motion for summary final judgment, asserting that the material facts were not in dispute, that it had standing to foreclose the mortgage as it was the owner and holder of the note and mortgage, and that Pamela Samaroo was in default, had been sent a default letter, and owed amounts as identified in an attached affidavit of indebtedness. Wells Fargo asserted that “a notice of default letter was sent to Defendant Pamela Samaroo, in accordance with Paragraph 22 of the Mortgage, on December 17, 2008.” It ultimately argued: “Accordingly, because Plaintiff provided the notice of default in compliance with paragraph 22 of the Mortgage, Defendants’ Tenth, Nineteenth, and Twentieth Affirmative Defenses do not bar entry of Final Summary Judgment.”
Attached to Wells Fargo’s motion for summary final judgment are an affidavit in support of the motion and an affidavit of indebtedness. Affiant, Deborah A. Schroeder [“Schroeder”], represented that she was an officer at Select Portfolio Servicing, Inc. [“SPS”], and that SPS serviced the mortgage loan for Wells Fargo. In paragraph 13 of her affidavit, she stated:
The Loan Records reflect that on December 17, 2008, a default letter was sent to Defendant Pamela Samaroo, pursuant to Paragraph 22 of the Mortgage, informing her of the default and providing the amounts due under the Note. A copy of the acceleration/default letter is attached hereto as Exhibit “E.”
The trial court conducted a hearing on Wells Fargo’s motion for summary final judgment and entered summary final judgment in favor of Wells Fargo.
The Samaroos’ tenth affirmative defense asserted that Wells Fargo failed to give notice of default that complied with the notice requirements set forth in paragraph 22 of the mortgage. Paragraph 22 of the mortgage provides:
Acceleration; Remedies. Lender shall give notice to Borrower prior to acceleration following Borrower’s breach of any covenant or agreement in this Security Instrument (but not prior to acceleration under Section 18 unless Applicable Law provides otherwise). The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument, foreclosure by judicial proceeding and sale of the Property. The notice shall further inform Borrower of the right to reinstate after acceleration and the right to assert in the foreclosure proceeding the non-existence of a default or any other defense of Borrower to acceleration and foreclosure. If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security Instrument without further demand and may foreclose this Security Instrument by judicial proceeding. Lender shall be entitled to collect all expenses incurred in pursuing the remedies provided in this Section 22, including, but not limited to, reasonable attorneys’ fees and costs of title evidence.
To refute the Samaroos’ affirmative defense that Wells Fargo failed to give the Samaroos notice prior to acceleration that complied with the notice requirements set forth in paragraph 22 of the mortgage, Wells Fargo relied upon the default letter that is attached to the affidavit in support of its motion for summary judgment. However, it is apparent in comparing the letter to the requirements of paragraph 22 that it does not comply with the notice requirements set forth in paragraph 22 of the mortgage. Importantly, it does not inform the Samaroos of their right to reinstate after acceleration. Rather, it informs the Samaroos that the “acceptance of one or more payments for less than the amount required to cure the default shall not be deemed to reinstate [their] loan or waive any acceleration of the loan.” This in no way suggests the right to reinstate after acceleration. See Kurian v. Wells Fargo Bank, Nat’l Ass’n, 114 So. 3d 1052, 1055 (Fla. 4th DCA 2013) (“[The letter attached to the Complaint] did not advise of the default, provide an opportunity to cure, or provide thirty days in which to do so. The letter attached to the Complaint did not satisfy section 22’s requirements.”); Judy v. MSMC Venture, LLC, 100 So. 3d 1287, 1289 (Fla. 2d DCA 2012).
Wells Fargo contends that it “substantially” complied with the contractual notice requirements, an argument we cannot credit. None of the cases cited by Wells Fargo involved compliance with pre-acceleration notice requirements contained in a mortgage.
Its own mortgage specified the important information that it was bound to give its borrower in default, and it simply failed to do so.1
REVERSED and REMANDED. TORPY, C.J. and EVANDER, J., concur.
1 Wells Fargo also relies on our opinion in Godshalk v. Countrywide Home Loans Servicing, L.P., 81 So. 3d 626, 626 (Fla. 5th DCA 2012), for the proposition that the Samaroos’ denial of Wells Fargo’s claim that it had met all conditions precedent to foreclosure was not sufficiently specific or particular as required by Florida Rule of Civil Procedure 1.120(c). We reject this argument. The Samaroos specifically asserted a failure to comply with the notice provisions of paragraph 22 of the mortgage. That paragraph specifies only five components of the notice that the bank must give. The failure to include the right to reinstate the mortgage after acceleration is an obvious and crucial omission.
Daniel L. Wischof, Franklin, Tennessee, for the appellants, Steve Dickerson and Deborah Dickerson.
W. Kennerly Burger, Murfreesboro, Tennessee, for the appellees, Beta, LLC, and Sound Marketing, LLC.
FRANK G. CLEMENT, JR., J., delivered the opinion of the Court, in which ANDY D. BENNETT and RICHARD H. DINKINS, J.J., joined.
OPINION
FRANK G. CLEMENT, Jr., J.
Plaintiffs, husband and wife, filed this action on February 17, 2009, to quiet title to property they own in Williamson County, Tennessee. At issue was a Deed of Trust that secured a 1997 promissory note, with an original maturity date in 1998, executed by a South Carolina limited liability company of which the plaintiff husband was a member. Plaintiffs asserted, inter alia, that the statute of limitations for the 1997 note and deed of trust had lapsed; therefore, the deed of trust encumbering their property should be released. Defendant Beta, LLC, filed a counterclaim for judicial foreclosure asserting it was the assignee of an October 8, 1998 renewal note with a maturity date of October 1999, the maturity date of which was subsequently extended to October 2000 pursuant to a Change in Terms Agreement executed in October 1999. It is based on the Change in Terms Agreement that Beta insists the statute of limitations had not lapsed and it is entitled to enforce the deed of trust. Although Beta was unable to produce an original or photocopy of an October 1998 renewal promissory note or evidence that complied with Tenn. Code Ann. § 24-8-101 to prove it was a lost negotiable instrument, the trial court held that a copy of the 1999 Change of Terms Agreement was sufficient to established the existence of the October 1998 renewal note and the extension of the maturity date to 2000; thus the statute of limitations had not run and Beta was vested with the right to enforce the deed of trust. Therefore, the court dismissed Plaintiffs complaint to quiet title and ruled in favor of Beta on the issue of foreclosure. On appeal Plaintiffs contend that the evidence was insufficient to support the court’s rulings. Particularly, Plaintiffs contend the trial court erred in finding that the Change in Terms Agreement dated October 8, 1999, was sufficient to establish Beta’s claims under an October 1998 promissory note of which there is no copy. We have determined the trial court erred in finding that the evidence was sufficient to satisfy Beta’s burden of proof as the foreclosing party. We, therefore, reverse the judgment of the trial court and remand this matter for further proceedings consistent with this opinion, including a determination of the specific relief to which Plaintiffs may be entitled.
Plaintiff Steve Dickerson is one of five individuals who, in 1997, founded Sound Marketing, LLC (“Sound Marketing”), a South Carolina limited liability company, to engage in a multi-level marketing business selling compact discs. On October 10, 1997, Sound Marketing borrowed $500,000 from Spartanburg National Bank pursuant to a promissory note to capitalize the company. The note was executed on behalf of Sound Marketing by Wayne Plylar and Darvin Shoemaker, both founding members, who were authorized by the members of Sound Marketing to execute the note on behalf of Sound Marketing. The due date of the original note was April 8, 1998.
Each member was personally liable for a pro rata share of the debt, and some of the members executed deeds of trust as collateral for their respective obligations. Concurrent with the execution of the 1997 note, Steve Dickerson and his wife Deborah (“Plaintiffs”) executed a Deed of Trust, that encumbered a thirteen acre tract of unimproved land they owned in Williamson County; the deed of trust was duly recorded and its authenticity is not at issue. By its terms, the deed of trust secured the note executed by Sound Marketing and “all modifications or extensions thereto, all renewals thereof, and all replacement notes thereof.”
Soon after the note was executed, Spartanburg National Bank was acquired by Regions Bank. On April 8, 1998, Sound Marketing executed a renewal of the note with Regions Bank and the maturity date was extended six months to October 6, 1998.
As time passed, it became apparent that the marketing model for Sound Marketing was flawed and it ceased doing business. Over the next three years, Mr. Plylar states that he personally paid interest on the note to avoid default. In 2002, Mr. Plylar corresponded with the members advising them that he would no longer pay the note and demanded contributions from the members.
On September 18, 2006, Mark M. Wright, a Brentwood, Tennessee attorney, writing on behalf of Sound Marketing, LLC, made a written demand on Plaintiffs for payment of the note, stating they were in default and threatening foreclosure on the property secured by the deed of trust. In a letter dated September 25, 2006, J. Timothy Street, a Franklin, Tennessee attorney, responded on behalf of Plaintiffs, disputing any liability on the note. In the same letter, Mr. Street requested Mr. Wright to forward proof of the debt and, in addition, “the name, address, and phone number of the current note holder.”
By letter dated January 3, 2007, Mr. Street also sent a letter to Regions Bank demanding release of the deed of trust, citing Tenn. Code Ann. § 66-25-102, which governs liability for one’s failure to release a deed of trust that has been satisfied.
On March 6, 2007, attorney Mark Wright, corresponding on behalf of his client Sound Marketing, provided Plaintiffs with copies of the following documents:
Regions Bank Business Loan
Loan Authorization signed by Dickersons
Assignment of Note by Regions to Sound Marketing, LLC
Deed of Trust
Mr. Wright’s letter also stated: “As indicated on the documents, this note is currently held by Sound Marketing, LLC, 3501 Rutherford Road Ext., PO Box 68, Taylors, SC 29687.”
On August 9, 2007, Mr. Street, again acting on behalf of Plaintiffs, wrote attorney Wright insisting that the deed of trust had been fully extinguished and, therefore, it should be released as outlined in his January 3, 2007 letter. Mr. Street also stated:
If it is your position that the obligation secured by said Deed of Trust has not been satisfied in full, please provide documentation in support thereof to my office at the above address. In our letter of June 18, 2007, we asked for documentation which has yet to be forwarded to this office. If we do not hear from your office within the next 30 days, we will pursue our remedies under TCA 66-25-102(b).
More than one year later, on December 1, 2008, Mr. Street again wrote Mr. Wright stating, as before, Plaintiffs insist the obligation secured by the deed of trust encumbering their property has been fully extinguished and stating that his clients were “making their third demand for release of the Deed of Trust.” He also restated his position that he had not received the specific documentation requested in his June 18, 2007 letter.[1]
On February 17, 2009, Plaintiffs commenced this action to quiet title to their property by filing a Verified Petition for Declaratory Judgment in the Chancery Court for Williamson County against Regions Bank, Sound Marketing, LLC, and Beta, LLC,[2] and the trustee under the deed of trust. The only defendants relevant to this appeal are Sound Marketing and Beta.[3]
Plaintiffs asserted the following relevant facts in the complaint:
6. On or about October 10, 1997, Petitioners Steve and Deborah Dickerson executed a Deed of Trust which encumbered real estate owned by them located in Williamson County, Tennessee. The Deed of Trust is of record in Deed Book 1582, Page 294, Register’s Office for Williamson County, Tennessee. A copy of the Deed of Trust is attached hereto as Exhibit 1.
7. The Deed of Trust secured a Promissory Note executed by Sound Marketing, LLC in favor of Regions Bank. The loan date of the Note was April 8, 1998 and has a maturity date of October 6, 1998. A copy of the Promissory Note is attached hereto as Exhibit 2.
8. On September 18, 2006, Sound Marketing, LLC, through its counsel, made demand on Petitioners for payment of the Promissory Note denominated as Exhibit 2, alleging that Petitioners were in default of said Note and threatening foreclosure of the subject real estate. A copy of the collection letter is attached hereto as Exhibit 3.
9. In response to the communication received from the debt collector for Sound Marketing, LLC, Petitioners responded by letter dated September 25, 2006, in which they informed Sound Marketing, LLC that they disputed any liability on the Promissory Note. A copy of the communication is attached here to as Exhibit 4.
10. In follow up to the demand made by Sound Marketing, LLC, Plaintiffs forwarded a letter to Regions Bank pursuant to T.C.A. § 66-25-102 demanding release of the Deed of Trust. A copy of the letter and the return receipt evidencing delivery to Regions Bank is attached hereto as Exhibit 5.
11. Thereafter, on March 6, 2007, Sound Marketing, LLC forwarded to counsel for the Petitioners a letter with documents enclosed. The documents attached to the letter included a copy of the Promissory Note denominated as Exhibit 2.
12. The letter dated March 6, 2007, also stated that enclosed therein were copies of the assignment of the Note by Regions to Sound Marketing, LLC. However, no assignment of the Note was included in the package. A copy of the letter dated March 6, 2007 is attached hereto as Exhibit 6.
13. On information and belief, the Promissory Note executed by Sound Marketing, LLC dated April 8, 1998, included herein as Exhibit 2, has been paid in full and is no longer of any force and effect.
14. Thereafter, on August 9, 2007, Plaintiffs forwarded to counsel for Sound Marketing, LLC a second demand letter pursuant to T.C.A. § 66-25-102(b), demanding for the second time that the Deed of Trust encumbering their real property be released. A copy of the letter is attached hereto as Exhibit 7.
15. Because the return receipt was not returned to the Petitioners, on December 1, 2008, they had mailed a third demand for release pursuant to T.C.A. § 66-25-102(b), a copy of the letter and return receipt are attached hereto as Exhibit 8.
16. To date, the Deed of Trust encumbering Petitioner’s real property remains unreleased despite repeated requests by Plaintiffs to Respondents to remove same.
Based upon the above facts, Plaintiffs asserted that the note executed by Sound Marketing matured on October 6, 1998, and pursuant to the ten-year statute of limitations in Tenn. Code Ann. § 28-2-111(a), the deed of trust they executed to secure the note was time barred and should be discharged.
Sound Marketing and Beta filed a joint answer and a counter-claim for enforcement of the deed of trust by judicial foreclosure. Sound Marketing and Beta asserted that, when the original note matured, the loan was extended by a renewal promissory note dated April 8, 1998, with a maturity date of October 8, 1998. Defendants also asserted that following the maturity of this note on October 6, 1998, another renewal note was entered on October 8, 1998. Although no copy of the purported October 8, 1998 renewal note is in the record, Defendants asserted that the existence of such note is evidenced by the Change in Terms Agreement dated October 8, 1999, which states the maturity date was extended to January 8, 2000. Sound Marketing and Beta further asserted that the note and deed of trust were assigned by Regions Bank in 2003 to Beta (not Sound Marketing as represented in Mr. Wright’s March 6, 2007 letter).[4]
The case was tried on April 9, 2012; the testimony was limited to two witnesses, Steve Dickerson and Wayne Plylar, and several documents were admitted into evidence either by stipulation or through the witnesses. No original documents evidencing the note, or any renewal thereof, or assignment were admitted into evidence; only photocopies. The only documents entered into evidence that related to the underlying indebtedness at issue included:
(1) Photocopy of the Sound Marketing — Spartanburg National Bank “Promissory Note” dated October 10, 1997, with a maturity date of April 8, 1998, in the principal amount of $500,000;
(2) Photocopy of the Sound Marketing — Regions Bank “Promissory Note” dated April 8, 1998, with a maturity date of October 6, 1998, in the principal amount of $500,000 (this was the renewal of Sound Marketing’s original note with Spartanburg National Bank dated October 10, 1997);
(3) Photocopy of the “Change in Terms Agreement” dated October 8, 1999, between Sound Marketing and Regions Bank (no note or photocopy of a note was attached to the Change in Terms Agreement);[5] and
(4) Photocopy of the “Assignment of Note and Deed of Trust” from Regions Bank to Beta, LLC, assigning the Deed of Trust executed by Deborah and Steve Dickerson dated October 10, 1997, together with the indebtedness in the original principal sum of $500,000 and the Note evidencing the indebtedness; the assignment was dated May 15, 2003.[6]
Wayne Plylar testified that he was a founding member of Sound Marketing, he served as its president, and he executed the note on behalf of Sound Marketing. He also testified that he was the manager of Beta, LLC, which was also a South Carolina limited liability company. He explained the members of Beta were his wife and children, and while he served as the manager of Beta, he was not a member.
As for the original of the promissory note, the change in terms agreement and the assignment, Mr. Plylar testified that he did not have an original of any of the documents and he had no idea as to who, if anyone, had the originals. He also stated he did not know if he ever had the original of any note. The parties also stipulated that neither Mr. Plylar nor Beta had any original documents evidencing the note or any extensions or amendments of the notes executed by Sound Marketing.
Notwithstanding the letters from Mr. Wright in 2007 and 2008, wherein he represented that Sound Marketing owned the note, Mr. Plylar testified that Beta acquired the note from Regions Bank by written assignment dated May 15, 2003, pursuant to the Assignment of Note and Deed of Trust (“the Assignment”). The Assignment identified the original note of $500,000 and the deed of trust executed by Plaintiffs; however, no original or photocopy of a note was attached to the Assignment. Mr. Plylar testified that he did not recall whether he or his attorneys ever received an original note. Nevertheless, he said he had looked for it and it could not be located.
On direct examination, Mr. Plylar testified that a personal loan was obtained in his wife’s name to pay off the note and that he requested Regions Bank to assign the note to Beta, LLC, since Beta was a family company. On cross-examination he was asked about the particulars of the bank transaction and the documentation, specifically, what happened to the original documents, including the note. Pertinent portions of that testimony are as follows:
Q. And you [Mr. Plylar] don’t recall whether the bank ever surrendered a Note or a Change in Terms Agreement to you or a Change in Terms Agreement to you or endorsed it over to you or Beta or anybody else, do you?
A. I don’t—I have—I have supplied what I have.
Q. Okay. Is it your testimony that that Note wasn’t marked “paid in full”?
A. I do not remember those details.
Q. Okay. But you’re not coming here today with a Note that’s endorsed on the back paid to the order of Beta, LLC? Well, you don’t have the original Note?
A. I don’t have the Note.
Q. Okay. You don’t even have a copy of the Note that’s supposed to have been changed by the Change in Terms Agreement?
A. I have—you have what I have.
A photocopy of the Change in Terms Agreement dated October 8, 1999, was introduced and made an exhibit. The Change in Terms Agreement identified Sound Marketing as the “borrower” and Regions Bank as the “lender” of a loan in the principal amount of $500,000.00. The following is excerpted from the Change in Terms Agreement:
Principal Amount: $500,000.00
DESCRIPTION OF EXISTING INDEBTEDNESS. The Promissory Note from Sound Marketing, LLC to Lender dated October 8, 1998 in the amount of $500,000.00.
DESCRIPTION OF COLLATERAL. The Note is secured by . . . a Deed of Trust dated October 10, 1997 from Steve and Deborah Dickerson and Brett Q. and Erin A. Barry on property and improvements known as 3133 Boulder Park Drive, Nashville, Tennessee and Tracts 4 and 5 Eudaily-Covington Road, Williamson County, Tennessee[.]
DESCRIPTION OF CHANGE IN TERMS. The maturity date shall be extended to January 8, 2000.
***
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreements evidenced or securing the obligation(s), remain unchanged and in full force and effect[.]
PRIOR NOTE. The Promissory Note from Sound Marketing, LLC to Lender dated October 8, 1998.
Mr. Plylar’s testimony on direct examination concerning the origin of the Change in Terms Agreement was very succinct:
Q. What is the origin and what’s your description of the history of that?
A. That is the — let’s see. I think that’s the extension to — yeah, that’s the [1999] loan extension.
***
Q. In between that document [the 1999 Change of Terms Agreement] and Exhibit 1 [the original promissory Note], were there other intervening renewals?
A. I don’t — there probably were. I don’t —
Q. My next question is: Do you have copies of all of those?
A. I don’t.
On re-direct, Mr. Plylar’s counsel then attempted to clarify, via a confusing compound question:
Q. Have you conducted a diligent intense search from the time we started this proceeding to try to locate the originals of these documents that you’ve been provided copies of? You flat don’t have them and don’t know where to get them?
A. I don’t.
Q. You don’t remember sending them to these other attorneys; do you remember giving them to any other members, any slight memory about where the — first of all, were the originals ever in your possession?
A. I can’t say for sure, but I — that’s a good point, you know. I may well have sent them to —
Q. You’re sure you don’t have them and you couldn’t get them from any other —
A. No. I’ve got files this thick, and I’ve been through them entirely. But that is a possibility that I did —
At the conclusion of the bench trial the court explained that the real issues in regard to the deed of trust were whether “there is an enforceable obligation and is the person enforcing it the right person to enforce it.” The trial court then ruled in favor of Beta explaining that the decision was based, inter alia, on findings that the October 1999 Change of Terms Agreement sufficiently established the existence of an October 6, 1998 renewal note; that the note and deed of trust were assigned to Beta thereby vesting Beta with the right to enforce the deed of trust; that the Change in Terms Agreement extended the maturity of the note until January 8, 2000; that the ten-year statute of limitations had not lapsed. The relevant portions of the ruling, as they are stated in the final order, read as follows:
4. Although the Dickersons, in their original Petition, aver that the ten-year limitation of T.C.A. § 28-2-111 began to run upon the maturity of the Second Note on October 6, 1998, the Court rejects this argument because it finds that the final maturity of the latest Note secured by the Deed of Trust was January 6, 2000. On October 8, 1999, Sound Marketing executed a “Change in Terms Agreement” in favor of Regions Bank, specifically referencing the subject deed of trust as collateral, and extending until January 6, 2000, the maturity date of a Note from Sound Marketing for $500,000.00 dated October 8, 1998. Although no party produced the original or a copy of an October 8, 1998 Note, the Court finds that the “Change in Terms Agreement” is sufficient to establish an October 8, 1998 Note.
5. The October 8, 1998 Note was negotiated to Beta, LLC. On May 15, 2003, an instrument captioned “Assignment of Note and Deed of Trust” was notarized by a Spartanburg, S.C. notary. The instrument provides in pertinent part that[:]
Regions Bank, hereby sells, assigns, transfers, sets over and conveys unto Beta, LLC, a South Carolina limited liability company * * * that certain Deed of Trust executed by Deborah Dickerson, Steve Dickerson, Brett Q. Barry and Erin Barry, dated October 10, 1997 . . . and also the indebtedness in the original principal sum of $500,000.00 as described in said deed of trust, and secured thereby, the Note evidencing said indebtedness having this day been transferred and assigned to the said assignee, Beta, LLC[.]
The Court finds that this instrument negotiates the October 8, 1998 Note to Beta, LLC.
6. By virtue of said negotiation of the October 8, 1998 Note, Beta, LLC is vested with the right to enforce the Dickersons’ Deed of Trust to the extent of the $98,000.00 security given thereby.
7. Beta, LLC counterclaimed in this action on March 25, 2009, more than ten years after the maturity of the Second Note on October 6, 2008, but less than ten years after the January 6, 2000 maturity of the October 8, 2008 note as extended by the “Change in Terms Agreement.”
ISSUES
Plaintiffs filed a timely appeal and present three issues for our review. We have determined that two of the issues are dispositive of this appeal. These issues are:
1. In the absence of the proof of the existence, terms or disposition of any note that may have been in existence after October 6, 1998, the trial court erred in finding that a “Change in Terms Agreement,” dated October 8, 1999, is sufficient to establish the existence, terms, and disposition of an October 8, 1998 note.
2. In the absence of any proof of negotiation by indorsement or attached allonge of an undischarged note, the trial court erred in holding that a separate “Assignment of Note and Deed of Trust” negotiates the October 8, 1998 note to Beta, LLC.
A deed of trust is an instrument which secures with real property the payment of a debt, typically evidenced by a promissory note. 59 C.J.S. Mortgages, §§15 and 204 (2013). Promissory notes secured by deeds of trust are generally considered negotiable instruments governed by Article 3 of the Uniform Commercial Code.
It is a maxim of the law that the “security follows the debt.” Douglas J. Whaley, Mortgage Foreclosures, Promissory Notes, and the Uniform Commercial Code, 39 W. ST. U. L. REV. 313, 326-27. The United States Supreme Court established this fundamental principle as early as 1873, stating:
The note and mortgage are inseparable; the [note] as essential, the [mortgage] as an incident. An assignment of the note carries the mortgage with it, while an assignment of the [mortgage] alone is a nullity . . . . The mortgage can have no separate existence. When the note is paid the mortgage expires. It cannot survive for a moment the debt which the note represents.
This principle has been reiterated by the Tennessee Supreme Court, which held: “[t]he policy of the law is to treat the note as the principal thing and the mortgage as the incident — the transfer of the note secured as a transfer pro tanto of the incident, the lien of the mortgage.” W.C. Early Co. v. Williams, 186 S.W. 102, 103-04 (Tenn. 1916).
II. JUDICIAL FORECLOSURES
The almost exclusive means of foreclosure in the State of Tennessee has been non-judicial, as outlined in Tennessee Code Annotated §§ 35-5-101 et. seq. Nevertheless, judicial foreclosures in Tennessee, although rarely invoked due to the ease of private sale under Tennessee deeds of trust, are authorized. See Tenn. Code Ann. § 21-1-803; see also William H. Inman, Gibson’s Suits in Chancery, §§ 471-73, at 502-506 and 513-514 (7th ed., 1988) (hereinafter “Inman”).
A lienor is authorized to file a complaint in chancery court and have the property subject to the lien sold in satisfaction of the indebtedness the lien secures. Inman, supra, at 502-06 and 513-14. Although no special form for judicial foreclosure is required, the promissory note is to be attached as an exhibit and made a part of the complaint. Id. If a particular jurisdiction permits both non-judicial or judicial foreclosure, the lender/mortgagee may elect which remedy to pursue. William M. Howard, Ph.D., Annotation, Necessity of Production of Original Note Involved in Mortgage Foreclosure — Twenty-First Century Cases, 86 A.L.R. 6TH 411 (2013) (citing Guardian Depositors Corp. v. Powers, 296 N.W. 675, 678 (Mich. 1941)). Even if the deed of trust contains a power of sale, the lender/mortgagee may resort to foreclosure by judicial proceedings. Id. (citing Carpenter v. Title Ins. & Trust Co., 163 P.2d 73, 75 Dist. 1945).
Prior to 2007, foreclosure did not generate much appellate litigation. Dale A. Whitman & Drew Milner, Foreclosing on Nothing: The Curious Problem of the Deed of Trust Foreclosure Without Entitlement to Enforce the Note, 66 ARK. L. REV. 21, 22 (2013). In the wake of the post-2008 economic climate and housing market crisis, several jurisdictions have experienced significant foreclosure litigation as homeowners attempted to retain their homes. Id. One defense which arose is the so-called “show me the note” defense. Bradley T. Borden, David J. Reiss & W. KeAupuni Akina, Show Me the Note!, 19 NO. 1 WESTLAW J. BANK LENDER LIABILITY 1 (2013). In relying upon this defense, homeowners sought to forestall or revoke foreclosure by requiring the foreclosing party to prove its right to foreclosure via proof of both the mortgage/deed of trust and the underlying promissory note. Id. Although the states appear divided on this issue, some of the controversy is explained by context, namely whether the jurisdiction is called upon to evaluate a non-judicial versus judicial foreclosure. Id at 1-2. The states which decline to recognize “show me the note” typically do so in the setting of non-judicial foreclosure action. Id. at 1-2 and 8-9; See e.g. Hogan v. Wash. Mut. Bank, 277 P.3d 781 (Ariz. 2012),Debrunner v. Deutsche Bank National Trust Co., 138 Cal. Rptr. 3d 830 (Cal. Ct. App. 2012),Preston v. Seterus, Inc., 931 F. Supp. 2d 743 (N.D. Tex. 2013) (applying Texas law), Fedewa v. J.P. Morgan Chase Bank, 921 F. Supp. 2d 504 (E.D. Va. 2013) (applying Virginia law), Hafiz v. Greenpoint Morg. Funding, Inc., 652 F. Supp. 2d 1039 (N.D. Cal. 2009).
The parties acknowledge, and the court agrees, that the law of the State of South Carolina shall apply to issues regarding the promissory note, including the change in terms agreement and assignment of the note. This is because the 1997 promissory note, which was between a South Carolina limited liability company, Sound Marketing, and a South Carolina bank, expressly states that the note shall be governed by the laws of South Carolina. Thus, the validity, assignment, and enforceability of the note shall be determined according to South Carolina law.
As the issues pertain to the enforcement of the deed of trust, however, the parties and the court are also in agreement that the law of the State of Tennessee shall apply to issues regarding the deed of trust because it encumbers Williamson County real property.
A. TITLE 36 OF THE CODE OF LAWS OF SOUTH CAROLINA
Title 36 of the Code of Laws of South Carolina, 1976 Annotated, codifies the Uniform Commercial Code for that state; Chapter 3 of that title applies to negotiable instruments. S.C. Code Ann. § 36-3-102 (2008).
The “negotiation” of a negotiable instrument is statutorily defined to mean “a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer to a person who thereby becomes its holder.” S.C. Code Ann. § 36-3-201(a) (2008). Subsection (b) goes on to provide: “Except for negotiation by a remitter, if an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its indorsement by the holder.” S.C. Code Ann. § 36-3-201(b) (2008) (emphasis added).
The note at issue was payable to an identified person, Regions Bank; thus, under South Carolina law, negotiation of the Sound Marketing promissory note to Beta required “transfer of possession of the instrument” and indorsement by Regions Bank. S.C. Code Ann. § 36-3-204(a) (2008) defines “indorsement” to mean:[7]
[A] signature, other than that of a signer as maker, drawer, or acceptor, that alone or accompanied by other words is made on an instrument for the purpose of (i) negotiating the instrument, (ii) restricting payment of the instrument, or (iii) incurring indorser’s liability on the instrument, but regardless of the intent of the signer, a signature and its accompanying words is an indorsement unless the accompanying words, terms of the instrument, place of the signature, or other circumstances unambiguously indicate that the signature was made for a purpose other than indorsement. For the purpose of determining whether a signature is made on an instrument, a paper affixed to the instrument is a part of the instrument.
S.C. Code Ann. § 36-3-301 (2008) identifies the person entitled to enforce a negotiable instrument to be:
(i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 36-3-309 or 36-3-418(d). A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.
S.C. Code Ann. § 36-3-309 (2008), referenced in the subsection immediately above, pertains to the enforcement of a lost, destroyed, or stolen instrument.[8] It provides in pertinent part:
(a) A person not in possession of an instrument is entitled to enforce the instrument if:
(1) the person seeking to enforce the instrument:
(A) was entitled to enforce the instrument when loss of possession occurred;[9] or
(B) has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred;
(2) the loss of possession was not the result of a transfer by the person or a lawful seizure; and
(3) the person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.
(b) A person seeking enforcement of an instrument under Subsection (a) [which pertains to a person not in possession of an instrument] must prove the terms of the instrument and the person’s right to enforce the instrument. If that proof is made, Section 36-3-308 applies to the case as if the person seeking enforcement had produced the instrument. The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.
(Emphasis added).
Based upon the foregoing South Carolina statutes, we have determined that the dispositive issue is whether Beta proved that it has the right to enforce the lost instrument, that being Sound Marketing’s note. Therefore, if Beta proved that it has the right to enforce the lost instrument, then it is entitled to enforce the deed of trust incident thereto. See S.C. Code Ann. § 36-3-204(a) and (c) and § 36-3-301(i); see also W.C. Early Co., 186 S.W. at 103-04 and Whaley, supra, at 326-27 (holding that the security follows the debt).
B. THE RIGHT TO ENFORCE THE LOST NOTE
Significantly, it is rare for any jurisdiction to permit judicial foreclosure without production of the promissory note. Borden, 19 NO. 1 WESTLAW J. BANK LENDER LIABILITY at 1-2 and 7-8. Indeed, production of the original promissory note has been called by one commentator the “golden rule of foreclosure.” Whaley, supra, at 322. If the original note is not introduced, a satisfactory reason must be given for failure to do so. Id. at 321-22; William M. Howard, Ph.D., Annotation, Necessity of Production of Original Note Involved in Mortgage Foreclosure — Twenty-First Century Cases, 86 A.L.R. 6TH 411 (2013).
It is undisputed that Beta does not have possession of the original promissory note; therefore, to prove that it is the “person entitled to enforce” the promissory note and deed of trust, Beta has the burden to provide a satisfactory reason for not being able to produce the original. See W.C. Early Co., 186 S.W. at 103-04; Whaley, supra, at 326-27 (stating that the note is “the principal thing” and the deed of trust is “incident” to the note).
There is no evidence in this record concerning how, when, or under what circumstances the original of any of the promissory notes were lost. The only evidence concerning the missing notes came through the testimony of Mr. Plylar, which is of little to no value. All Mr. Plylar could say is that he does not have any of the originals, Beta does not have them, and he does not know if he or Beta ever had possession of any original note.
In addition to not having the original promissory note, Mr. Plylar testified that he did not have an original of any of the documents, including the change in terms agreement and the Assignment. Mr. Plylar also testified that Beta acquired the note and deed of trust from Regions Bank pursuant to the May 15, 2003 Assignment of Note and Deed of Trust; however, Mr. Plylar does not recall whether he received an original note. Therefore, he is unable to provide any evidence of the loss or destruction of the promissory note.
IV. BETA’S BURDEN OF PROOF
The statutory burden of proof placed on Beta to establish the lost note appears in Tenn. Code Ann. § 24-8-101, which reads:
Any lost instrument may be supplied by affidavit of any person acquainted with the facts, stating the contents thereof, as near as may be, and that such instrument has been unintentionally lost or mislaid, and is still the property of the person claiming under it, unpaid and unsatisfied.
The statute states that such proof may be supplied by affidavit but such proof may also be provided through competent testimony provided in court. See Barr & Company, Inc. v. Commercial Union Ins. Companies, 1997 WL 656386, at * 3 (Tenn. Ct. App. Oct. 22, 1997) (citing Pearson v. McCallum, 173 S.W.2d 150, 158 (Tenn. Ct. App. 1941) (“As to the sufficiency of the evidence, the law requires that the evidence offered to prove by parol the execution and the contents of a written instrument which is not produced shall be of the most satisfactory character, or what is known as clear, cogent and convincing evidence.”)).
As the statute directs, Beta carried the burden to provide competent evidence, meaning testimony provided by a “person acquainted with the facts,” who can state, inter alia, “that such instrument has been unintentionally lost or mislaid,” and that the lost instrument “is still the property of the person claiming under it[.]” Although Beta contends that the note was still the property of Regions Bank when the note was purportedly assigned to Beta, Mr. Plylar is not a person “acquainted” with that fact and thus he is not competent to testify as to whether Regions Bank was the owner of the lost note when it was assigned to Beta. The only evidence concerning the lost note was provided by Mr. Plylar, but he does not recall ever seeing the original instrument, he does not know who lost it, and he does not know when it was lost. Thus, the record is devoid of any evidence regarding the circumstance under which the purported note was unintentionally lost or mislaid.
Moreover, the following excerpts from Mr. Plylar’s testimony reveal the little value of his testimony to the ultimate issue. When asked on direct examination about the execution of the Change in Terms Agreement executed in 1999 that purportedly extended the maturity of the note to 2000, he said he recognized the document, but in response to the very next question, which asked about the origin and history of the document, he replied: “I think that’s the extension to — yeah, that’s the loan extension,” but he gave no response regarding the origin or history of the Change in Terms Agreement. The next question asked him about “other intervening renewals,” referring to those between the Change in Terms Agreement and the original 1997 note, to which he stated: “I don’t — there probably were. I don’t —.” He then said he did not have copies of any such documents other than those already provided.
Mr. Plylar’s testimony on cross examination is even more compelling. Mr. Plylar testified that he was the only person who would have dealt with Regions Bank about the notes or the assignment of the notes to Beta, but then he stated that he did not recall those events. When asked if he went to the bank and paid off the loan he stated: “It was — it would have been at a closing, a typical closing, so I wouldn’t — it wouldn’t have even been in a bank. It would have been in an attorney’s office, most likely, not a bank.” He was then asked if he recalled whether the bank ever surrendered a Note or a Change in Terms Agreement to him or endorsed the note over to Beta, him, or anybody else, to which he replied: “I don’t — I have — I have supplied what I have.” The next question to Mr. Plylar, which could be described as the $500,000 question, was: “Is it your testimony that that Note wasn’t marked `paid in full’?” He answered that important question: “I do not remember those details.” The next two questions and Mr. Plylar’s answers were as follows:
Q. But you’re not coming here today with a Note that’s endorsed on the back paid to the order of Beta, LLC? Well, you don’t have the original Note?
A. I don’t have the Note.
Q. You don’t even have a copy of the Note that’s supposed to have been changed by the Change in Terms Agreement?
A. I have — you have what I have.
For the foregoing reasons, we have determined that the evidence in this record is woefully inadequate to establish the facts or circumstances identified in Tenn. Code Ann. § 24-8-101.[10] Our conclusion is consistent with other cases that are instructive on the issue of the requisite proof necessary to prove a lost instrument such as a promissory note, including Buckner v. Geodeker, 45 S.W. 448, 449 (Tenn. Ch. App. 1897). The issue in Buckner was whether the evidence was sufficient to prove a lost instrument; specifically, whether there was sufficient evidence regarding its loss and who possessed it at that time. Id. The issue was based on the code in effect at the time, which stated: “any lost instrument may be supplied by affidavit of any person acquainted with the facts, stating the contents thereof as near as may be, and that such instrument has been unintentionally lost or mislaid, and is still the property of the person claiming under it, unpaid and unsatisfied.” Id. The evidence at issue in Buckner was provided by affidavit and the court found the affidavit deficient for several reasons.
In the first place, the word “unintentional” is omitted. It is stated that the notes have been misplaced or lost, but there is no statement that they were unintentionally lost or misplaced. In the next place, the statute requires that the affidavit shall state that the lost instrument is still the property of the person claiming under it, unpaid and unsatisfied. This affidavit fails to state this fact. The only statement is that Buckner & Co. received from Kate Geodeker these notes, and there is no intimation that the notes were still the property of H. B. Buckner, who brought the suit thereon, or of Buckner & Co.[.]
Id.[11]
S.C. Code Ann. § 36-3-309(a) provides, in pertinent part, that a person not in possession of an instrument is entitled to enforce the instrument if the person seeking to enforce the instrument has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred; the loss of possession was not the result of a transfer by the person or a lawful seizure; and the person cannot reasonably obtain possession of the instrument because the instrument was destroyed or its whereabouts cannot be determined. The statute goes on to provide that the person seeking enforcement of an instrument under Subsection (a) must prove his right to enforce the instrument. S.C. Code Ann. § 36-3-309(a)(2). Further, the statute provides “if that proof is made, Section 36-3-308 applies to the case as if the person seeking enforcement had produced the instrument.” Id.
Nevertheless, as noted earlier, production of the original promissory note has been called by one commentator the “golden rule of foreclosure,” Whaley, supra, at 322, and it is rare for any jurisdiction to permit judicial foreclosure without production of the promissory note. Borden, 19 NO. 1 WESTLAW J. BANK LENDER LIABILITY at 1-2. Therefore, if the original note is not introduced, a satisfactory reason must be given for failure to do so. See Id. Beta has not proved that the purported October 8, 1998 note, which may have extended the maturity date to 2000, ever existed or that Beta or Regions Bank ever had possession of this note. Beta has also not proved that anyone had personal knowledge that the note was in Regions Bank’s files when it disappeared, that it was unintentionally lost or mislaid, that it was the property of the person claiming under it (Regions Bank) when it was lost, or that it was unpaid and unsatisfied when lost. See Tenn. Code Ann. § 24-8-101; see also Third Nat. Bank in Knoxville v. Wilson, 1986 WL 2539, at *1.
The trial court concluded that the Change in Terms Agreement dated October 8, 1999, was sufficient to establish the existence, terms, and disposition of the purported October 8, 1998 promissory note, of which there is no original or photocopy. We are unable to agree with that legal conclusion.
We have determined the trial court erred in finding that the Change in Terms Agreement dated October 8, 1999, was sufficient to establish the existence, terms, and disposition of the purported October 8, 1998 promissory note, and we have also determined that the record does not contain other competent evidence to prove the lost instrument. Therefore, Beta, as the foreclosing party, failed to carry its burden of proof to establish that it is entitled to enforce the missing or lost note and, thus, it failed to carry its burden of proof to establish that it is entitled to enforce the deed of trust incident thereto.
For the foregoing reasons, we reverse the judgment of the trial court in which it dismissed Plaintiffs petition to quiet title to their property by releasing the deed of trust and ruling in favor of Beta on its judicial foreclosure claim.
V. PLAINTIFFS’ PRAYER FOR RELEASE OF THE DEED OF TRUST
Plaintiffs filed this action to quiet title, specifically to obtain the release of the deed of trust encumbering their property. The trial court denied Plaintiffs’ claim for relief finding that Beta was entitled to enforce the deed of trust. We have determined Beta failed to establish that it is the person entitled to enforce the note; accordingly, Beta is not entitled to enforce the thing that is incident to the note, the deed of trust. See S.C. Code Ann. § 36-3-204(a) and (c) and § 36-3-301(i); see also W.C. Early Co., 186 S.W. at 103-04 and Whaley, supra, at 326-27 (holding that the security follows the debt).
For the foregoing reasons, we respectfully reverse the dismissal of Plaintiffs’ claim for relief and, therefore, Plaintiffs’ complaint to quiet title is reinstated and is remanded to the trial court for further proceedings consistent with this opinion.
IN CONCLUSION
The judgment of the trial court is reversed, and this matter is remanded. Costs of appeal assessed against the Appellees, Sound Marketing, LLC., and Beta, LLC.
[1] Mr. Street’s correspondence to Mr. Wright dated August 9, 2007 and December 1, 2008, were attached to the Verified Complaint but were not introduced into evidence. We have mentioned them to provide a more complete explanation of the activities of the parties prior to suit; however, we do not consider them as evidence.
[2] Although Mr. Wrights’ letter to attorney Street dated March 6, 2007, stated that one of the enclosures was the “Assignment of Note by Regions to Sound Marketing, LLC,” the Assignment states that Beta, LLC, not Sound Marketing, was the assignee.
[3] The record does not expressly state that Regions Bank was voluntarily dismissed, however, the briefs and oral argument suggest Regions Bank was voluntarily dismissed and it is acknowledged that the trustee is merely a nominal party; neither is a party to this appeal.
[4] Neither Beta or Sound Marketing sought to sue on the note, merely to enforce the deed of trust.
[5] The missing document, a purported October 6, 1998 renewal note [not to be confused with the April 8, 1998 note] that purportedly extended the maturity date to 1999, of which there is no photocopy in the record, would logically have been identified chronologically between items (2) and (3). Whether a purported October 6, 1998 renewal note ever existed is discussed in detail later in this opinion.
[6] The May 15, 2003 Assignment reads in pertinent part:
For Value Received, Regions Bank, hereby sells, assigns, transfers, sets over and conveys unto Beta, LLC, a South Carolina limited liability company, whose address is 955 Nazareth Church Road, Moore, SC, 29369, its successors and/or assigns, that certain Deed of Trust executed by Deborah Dickerson, Steve Dickerson, Brett Q. Barry and Erin A. Barry, dated October 10, 1997, and recorded in Book 1582, page 294, Register’s Office of Williamson County, Tennessee and Book 10662, page 40, Register’s Office of Davidson County, Tennessee, together with the real property therein described; and also the indebtedness in the original principal sum of $500,000.00 as described in said Deed of Trust, and secured thereby, the Note evidencing said indebtedness having this day been transferred and assigned to the said assignee, Beta, LLC, together with all right, title and interest in and to the said Deed of Trust, the property therein described and the indebtedness secured; and the said assignee, Beta, LLC, is hereby subrogated to all rights, powers, privileges and securities vested in the Trustee, James T. Oglesby of Williamson County, under and by virtue of the aforesaid deed of trust.
[7] Subsection (c) of S.C. Code Ann. § 36-3-204 further states: “For the purpose of determining whether the transferee of an instrument is a holder, an indorsement that transfers a security interest in the instrument is effective as an unqualified indorsement of the instrument.”
[8] We have determined that S.C. Code Ann. § 36-3-418(d), which is also referenced in the subsection immediately above, is not applicable; thus, it shall not be discussed.
[9] Prior to a 2008 amendment, S.C. Code Ann. § 36-3-309(a)(1) stated that a person not in possession of an instrument is entitled to enforce the instrument if “the person was in possession of the instrument and entitled to enforce it when loss of possession occurred. . . .” (emphasis added). The words “in possession of the instrument and” were removed in the 2008 amendment to reject the reasoning in Dennis Joslin Co., LLC v. Robinson Broad. Corp., 977 F. Supp. 491, 494 (D.D.C. 1997). The South Carolina statute now reads: “if the person seeking to enforce the instrument was entitled to enforce the instrument when loss of possession occurred. . . .” S.C. Code Ann. § 36-3-309(a)(1)(A).
[10] There is other evidence in the record that undermines Beta’s claim that it is entitled to enforce the deed of trust. Even the trial court found facts pertaining to the assignment of the note and deed of trust “suspicious” and “somewhat concerning to the court.” For example, the assignment from Regions Bank to Beta was not on bank stationary; the bank was a South Carolina bank, but the assignment was prepared by a Williamson County, Tennessee title company; copies of the assignment provided by Mr. Plylar were different, in one copy the notary acknowledgment was blank, while in the other copy the name and title of the officer of the bank was written; the 2003 assignment of the note and deed of trust was not recorded until 2008, five years later. Like the trial court, we find some of the facts upon which Beta relies suspicious, but choose not to pursue that inquiry and rely on the analysis provided in this opinion.
[11] Reading the quote above makes it readily apparent that the code at issue in Buckner is identical to Tenn. Code Ann. § 24-8-101 quoted earlier.
UNITED STATES COURT OF APPEALS FILED FOR THE NINTH CIRCUIT MAR 27 2014
MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS
HELEN GALOPE, an individual, No. 12-56892
Plaintiff – Appellant, D.C. No. 8:12-cv-00323-CJC- RNB v.
DEUTSCHE BANK NATIONAL TRUST MEMORANDUM* COMPANY, as Trustee under Pooling and Servicing Agreement dated as of May 1, 2007 Securitized Asset Backed Receivables LLC Trust 2007-BR4; et al.,
Defendants – Appellees.
Appeal from the United States District Court for the Central District of California Cormac J. Carney, District Judge, Presiding
Argued and Submitted February 11, 2014 Pasadena, California
Before: D.W. NELSON, PAEZ, and NGUYEN, Circuit Judges.
Helen Galope appeals the district court’s grant of summary judgment in
favor of Deutsche Bank National Trust Company (“DBNTC”), Ocwen Loan
* This disposition is not appropriate for publication and is not precedent except as provided by 9th Cir. R. 36-3. Servicing, and Western Progressive, LLC (“WPT”) (collectively, “DBNTC
Defendants”) and dismissal of her claims against Barclays Bank PLC and Barclays
Capital Real Estate Inc. d/b/a HomEq Servicing (collectively, “Barclays
Defendants”). We affirm in part, reverse in part, and remand for further
proceedings.
1. We reverse the district court’s ruling that Galope failed to establish injury-
in-fact necessary for Article III standing on her LIBOR-based claims. Galope
adequately alleged that she would not have purchased her loan had she known that
the Defendants were manipulating the LIBOR rate. Article III standing exists
when a plaintiff purchases a product she would not have otherwise purchased but
for the alleged misconduct of the defendant. Hinojos v. Kohl’s Corp.,
718 F.3d 1098
, 1104 n.3 (9th Cir. 2013) (citing Mazza v. Am. Honda Motor Co.,
666 F.3d 581
, 595 (9th Cir. 2012)); Maya v. Centex Corp.,
658 F.3d 1060
, 1069 (9th Cir.
2011). Contrary to the dissent’s assertion, Galope’s standing does not turn on
whether she actually made interest payments that were adjusted in response to the
allegedly manipulated LIBOR rate. Galope’s cognizable injury occurred when she
2 purchased the loan, not upon payment of LIBOR-affected interest.1 Maya, 658
F.3d at 1069.
We therefore reverse and remand for further proceedings on Galope’s
LIBOR claims against the Barclays Defendants under the Sherman Antitrust Act,
15 U.S.C. §§ 1–2, and her state law claims for breach of the covenant of good faith
and fair dealing, and fraud. However, we conclude that the district court properly
granted summary judgment on all LIBOR-based claims against the DBNTC
Defendants because Galope failed to present any evidence that DBNTC was
involved in, or conspired in, the alleged LIBOR manipulation.
2. We reverse the district court’s ruling that Galope lacks statutory standing to
pursue her LIBOR-based Unfair Competition Law (“UCL”), Cal. Bus. & Prof.
Code § 17200, and False Advertising Law (“FAL”), Cal. Bus. & Prof. Code §
17500, claims against the Barclays Defendants and remand for further proceedings.
Galope has statutory standing to pursue these claims because she alleged that she
1 At oral argument, the Barclays Defendants argued for the first time that Galope’s LIBOR-based claims were not traceable to their misconduct because they did not actually sell the loan to Galope. Galope, however, adequately alleged in her complaint that Barclays PLC simply contracted with another entity to sell the LIBOR-based loan product that is the subject of this litigation. At the motion-to- dismiss stage, Galope’s allegations are sufficient to satisfy the traceability requirement of Article III standing. See Lujan v. Defenders of Wildlife,
504 U.S. 555
, 561 (1992).
3 purchased a loan that she would not have otherwise purchased but for the Barclays
Defendants’ alleged misconduct. See Kwikset Corp. v. Superior Court,
3. We affirm the district court’s rulings on all claims associated with the
“missing-fax-page scheme.” Galope stated in her Third Amended Complaint
(“TAC”) that the portions of the fax transmission that she received put her on
notice that her payments would increase. This admission directly undermines her
allegations that the Barclays Defendants and DBNTC deceived her into believing
that the initial payment amounts were fixed throughout the term of the loan.
4. We reverse the district court’s rulings that Galope’s wrongful foreclosure2
and UCL claims based on the DBNTC Defendants’ violation of the bankruptcy
court’s automatic stay are not justiciable. Although rescission of the sale—almost
seven months after the violation—mooted Galope’s claims for injunctive and
declaratory relief, it did not affect her claim for damages. See Wilson v. State of
Nev.,
666 F.2d 378
, 380-81 (9th Cir. 1982). Further, regardless of whether Galope
2 Although Galope’s seventh claim in her TAC is styled as a “wrongful foreclosure” claim, the content of the claim is exclusively focused on violation of the automatic stay under 11 U.S.C. § 362. The panel thus construes this as a claim for damages under 11 U.S.C. § 362(k)(1).
4 has equity in the home, 11 U.S.C. § 362(k)(1) provides a statutory basis for
damages.3
5. We reverse the district court’s grant of summary judgment on Galope’s
claim for breach of the covenant of good faith and fair dealing associated with
violation of the automatic stay. The covenant of good faith and fair dealing “finds
particular application in situations where one party is invested with a discretionary
power affecting the rights of another.” Hicks v. E.T. Legg & Associates, 108 Cal.
Rptr. 2d 10, 19 (Ct. App. 2001). Discretionary power of this kind “must be
exercised in good faith.” Carma Developers (Cal.), Inc. v. Marathon Dev.
California, Inc.,
826 P.2d 710
, 726 (Cal. 1992). The power of sale in the deed of
trust provided the DBNTC Defendants with discretionary authority to foreclose
upon Galope’s home in the event of default. Contrary to the DBNTC Defendants’
argument, there is sufficient evidence in the record to support a reasonable
inference that the DBNTC Defendants had notice of the automatic stay when they
3 The DBNTC Defendants’ alternative argument that Galope released her right to pursue her UCL claim when she signed her loan modification agreement fails, in part, because the release only purports to apply to “claims, damages or liabilities . . . existing on the date of this Agreement . . . .” The loan modification agreement is dated April 17, 2008. The alleged violation of the automatic stay did not occur until September 1, 2011.
5 executed the trustee’s sale, and that they refused to rescind it upon Galope’s
request.
6. Galope argues on appeal that the district court erred because it did not
provide her with leave to amend her complaint. On remand, Galope may seek
further leave to amend at the district court’s discretion. However, leave to amend
is foreclosed on all claims associated with the alleged missing-fax-page scheme.
No additional allegations will change the fact that the portion of the document
Galope received and signed provided her with notice that her payments were
subject to change after five years and would increase. See Bonin v. Calderon,
59 F.3d 815
, 845 (9th Cir. 1995) (“Futility of amendment can, by itself, justify the
denial of a motion for leave to amend.”).
7. The parties shall bear their own costs on appeal.
REVERSED, IN PART, AFFIRMED, IN PART, AND REMANDED.
6 FILED Galope v. Deutsche Bank, 12-56892 MAR 27 2014
MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS NGUYEN, Circuit Judge, dissenting in part:
Because I conclude that Galope failed to establish standing on her
LIBOR-based claims, I respectfully dissent from the majority’s decision reversing
these claims as to the Barclays Defendants. Galope does not allege that she
suffered any loss due to the Barclays Defendants’ purported deceptive conduct, nor
does she allege that any loss is traceable to a misrepresentation related to the
LIBOR-rate manipulation or to the LIBOR-rate manipulation itself. See, e.g.,
Hinojos v. Kohl’s Corp.,
718 F.3d 1098
, 1104 (9th Cir. 2013) (concluding that the
plaintiff adequately had alleged standing where, “because of the misrepresentation
the consumer (allegedly) was made to part with more money than he or she
otherwise would have been willing to expend” (quoting Kwikset Corp. v. Superior
Court,
120 Cal. Rptr. 3d 741
, 757 (2011))); Mazza v. Am. Honda Motor Co.,
666 F.3d 581
, 594 (9th Cir. 2012) (“To the extent that class members were relieved of
their money by Honda’s deceptive conduct—as Plaintiffs allege—they have
suffered an ‘injury in fact’” under Article III (citing Stearns v. Ticketmaster Corp.,
655 F.3d 1013
, 1021 (9th Cir. 2011))); Maya v. Centex Corp.,
658 F.3d 1060
, 1070
(9th Cir. 2011) (“To survive a motion to dismiss for lack of constitutional standing,
plaintiffs must establish a ‘line of causation’ between defendants’ action and their
alleged harm that is more than ‘attenuated.’” (citing Allen v. Wright,
468 U.S. 737
,
1 757 (1984))). Indeed, as the majority concedes, Galope’s payments never were
affected—she paid a fixed interest rate and defaulted before the allegedly
manipulated LIBOR rate went into effect on her loan; she then was granted a loan
modification with a (lower) fixed interest rate that likewise was unrelated to the
LIBOR rate and defaulted again. Although Galope alleges that she would not have
purchased the loan but for the Barclays Defendants’ alleged manipulation of the
LIBOR rate, Galope alleges no loss from the alleged manipulation—or any related
misrepresentation or omission. Therefore, Galope’s alleged injury is far too
attenuated to establish Article III standing.1
1 For the same reasons, Galope lacks statutory and antitrust standing. See, e.g., Rebel Oil Co. v. ARCO,
51 F.3d 1421
, 1433 (9th Cir. 1995) (“To show antitrust injury, a plaintiff must prove that his loss flows from an anticompetitive aspect or effect of the defendant’s behavior, since it is inimical to the antitrust laws to award damages for losses stemming from acts that do not hurt competition.” (citation omitted)). The interest rates on Galope’s loan were unaffected by the Barclays Defendants’ anticompetitive behavior.
Press has it confused, as the reporters assume everything filed in court is “lawsuit”. Here is what actually happened, Attorney Linda Tirelli was provided the Attorney Manual by a colleague in NC who got it from a colleague in FL who found it on the internet. Linda needed to verify it so she attached the manual to a RFA in one of my cases ( In re Mota) and instead of admitting or denying the document, Wells Fargo’s attorney sent a letter claiming its confidential – taken that to be an admission its authentic, you could read it however you like. Linda next submitted page 17 of the manual to an Emergency Mot to Reopen Discovery POST- Trial in another case re:Franklin.
If you regularly see bogus indorsements, allonges, affidavits of lost note, assignments etc,. look at pgs 15-17 and 20-24to start and tell me what you make of it.
A motion to reopen discovery in Mota last night now available on PACER, the hearing is 4/8 and trial is 4/22.
Franklin Mot to Reopen Is set for a hearing on 4/21.
Hope this helps clear the confusion.
In case you would like to reach Linda Tirelli below is her contact information.
The only solace for Isabel Santos as she spends her evenings huddled over stacks of yellowed foreclosure notices is that her parents are not alive to watch their ranch-style house in Pleasant Hill, Calif., slipping away.
Ms. Santos, 61, along with a growing number of baby boomers, is confronting a bitter inheritance: The same loans that were supposed to help their elderly parents stay in their houses are now pushing their children out. “My dad had nothing when he came here from Cuba and worked so hard to buy this house,” Ms. Santos said, her voice quivering.
Similar scenes are being played out throughout an aging America, where the children of elderly borrowers are learning that their parents’ reverse mortgages are now threatening their own inheritances. Reverse mortgages, which allow homeowners 62 and older to borrow money against the value of their homes that need not be paid back until they move out or die, have long posed pitfalls for older borrowers.
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA CASE NO. 13-62821-CIV-ZLOCH
WALEED B. HAMID, Plaintiff,
vs.
OCWEN LOAN SERVICING, LLC, et al., Defendants. /
ORDER
THIS MATTER is before the Court upon Defendant Wells Fargo Bank, National Association, as Trustee for American Home Mortgage Investment Trust 2004-1 Mortgage-backed Notes, Series 2004-1’s Motion To Strike Jury Trial Demand (DE 6) and Defendant Ocwen Loan Servicing, LLC’s Motion To Strike Jury Trial Demand (DE 7). The Court has carefully reviewed said Motions, the entire court file and is otherwise fully advised in the premises.
On November 13, 2013, Plaintiff commenced the above-styled cause in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida, alleging violations of the Truth in Lending Act, 15 U.S.C. § 601, et seq. (hereinafter “TILA”) against Defendant Wells Fargo Bank, National Association, as Trustee for American Home Mortgage Investment Trust 2004-1 Mortgage-backed Notes, Series 2004-1 (hereinafter, “Wells Fargo”) and Ocwen Loan Servicing, LLC. DE 1, pp. 5-14. On December 30, 2013, Defendants removed the above-styled cause to the District Court for the Southern District of Florida. See DE 1. According to the Complaint, Defendant Wells Fargo owns a mortgage on Plaintiff’s residence, and Defendant Ocwen Loan Servicing, LLC, is the loan servicer for the mortgage at issue. See DE 1, pp. 6-7.
In Count I of his Complaint, Plaintiff seeks declaratory relief from this Court that Defendant Ocwen Loan Servicing, LLC, violated two sections of the TILA, namely, 15 U.S.C. §§ 1641(f)(2) and 1639(1)(2). Count II of the Complaint claims that Defendant Wells Fargo has substantial control over Ocwen Loan Servicing, LLC, by virtue of a Servicing Agreement, and that Defendant Wells Fargo is therefore vicariously liable for Defendant Ocwen’s alleged violation of 15 U.S.C. § 1641(f)(2). Plaintiff demands a jury 1 trial on all issues so triable.
The Court notes that the alleged violations of the TILA surround the Mortgage assigned to Defendant Wells Fargo. See DE 1, p. 7, ¶¶ 15 & 16. Further, Section 25 of the Mortgage contains a jury trial waiver, which provides as follows: 25. Jury Trial Waiver. The Borrower hereby waives any right to a trial by jury in any action, proceeding, claim or counterclaim, whether in contract or tort, at law or in equity, arising out of or in any way related to this Security Instrument or the Note. DE 6, p. 29 (“Exhibit A”).
By the instant Motions (DE Nos. 6 & 7), Defendants ask the Court to strike Plaintiff’s demand for a jury trial, asserting that Plaintiff waived his demand for a jury trial by the knowing and voluntary execution of the Mortgage at issue. Plaintiff does not contest the validity and enforceability of Section 25 of the subject Mortgage (hereinafter, “the Waiver”) against Defendant Wells Fargo. Therefore, the Court will grant Defendant Wells Fargo’s Motion To Strike Jury Trial Demand (DE 6) as to the only remaining count against said Defendant, Count II.
However, Plaintiff opposes the enforcement of the Waiver as to Defendant Ocwen Loan Servicing, LLC. DE 12. Specifically, Plaintiff argues that because Defendant Ocwen is a non-party the Mortgage, it cannot enforce the Waiver therein. Plaintiff points to two similar cases in support of his argument, Omega v. Deutsche Bank Trust Co. Americas, 920 F. Supp. 2d 1298 (S.D. Fla. 2013), and Williams v. Wells Fargo Bank N.A., Case No. 11-cv-21233-RNS, 2011 WL 4901346 (S.D. Fla. Oct. 14, 2011). In both of these actions, the District Court for the Southern District of Florida enforced a jury-trial waiver contained in a mortgage against the lender, but refused to enforce said waiver against the loan servicer. In each case, the District Court found that the loan servicers could not enforce the jury trial waivers because they were non-parties to the mortgages. See Omega, 920 F. Supp. 2d 1298 (holding loan servicer could not invoke a jury trial waiver contained in a mortgage to which it was a non-party); Williams, 2011 WL 4901346, at * 13 (citing Paracor Fin., Inc. V. Gen. Elec. Capital Corp., 96 F.3d 1151, 1166 (9th Cir. 1996)(noting that “a jury waiver is a contractual right and generally may not be invoked by one who is not a party to the contract”). The Court agrees and will, therefore, deny Defendant Ocwen Loan Servicing, LLC’s, Motion To Strike Jury Trial Demand (DE 7).
Plaintiff further requests that the Court try the above-styled cause with an advisory jury, even if the Court finds the Waiver enforceable by Defendant Wells Fargo, pursuant to Federal Rule of Civil Procedure 39(c). “In an action not triable of right by a jury, the court . . . may try any issue with an advisory jury.” Fed. R. Civ. P. 39(c)(1). The Court finds that judicial economy will be served by trying both of Plaintiffs’ claims together. Therefore, the jury will provide a binding verdict as to Count I against Defendant Ocwen Loan Servicing, LLC, and will advise the Court as to Count II against Defendant Wells Fargo.
Accordingly, after due consideration, it is ORDERED AND ADJUDGED as follows:
1. Defendant Wells Fargo Bank, National Association, as Trustee for American Home Mortgage Investment Trust 2004-1 Mortgage-backed Notes, Series 2004-1’s Motion To Strike Jury Trial Demand (DE 6) be and the same is hereby GRANTED; and
2. Defendant Ocwen Loan Servicing, LLC’s, Motion To Strike Jury Trial Demand (DE 7) be and the same is hereby DENIED. DONE AND ORDERED in Chambers at Fort Lauderdale, Broward County, Florida, this 26th day February, 2014.
WILLIAM J. ZLOCH United States District Judge Copies furnished: All Counsel of Record
Single-Family Rental Home Leaders Launch Industry Trade Group, National Rental Home Council (NRHC)
“Major owner-operators in the single-family rental home industry today launched the National Rental Home Council (NRHC), a non-partisan coalition focused on increasing education about the professionally managed single-family rental industry and advocating for the benefits brought by this sub-sector of today’s rental market. … The NRHC offers a wealth of information at www.rentalhomecouncil.org and will serve as a resource for policymakers, media, market observers, industry leaders and local officials…
Bank of America agreed to pay $9.3 billion to settle claims that it sold Fannie Mae and Freddie Mac faulty mortgage bonds, helping the bank to end one of the largest legal headaches it still faced from the financial crisis.
The settlement, announced on Wednesday, includes $6.3 billion in cash and $3.2 billion in securities that Bank of America will purchase from the two housing finance entities.
The second-largest U.S. bank by assets said it had now resolved around 88 percent of its total exposure to securities at issue in the mortgage bond litigation it has faced.
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS
COUNTY OF COOK, Plaintiff, vs.
HSBC NORTH AMERICA HOLDINGS INC., HSBC FINANCE CORPORATION, HSBC MORTGAGE CORPORATION (USA HSBC MORTGAGE SERVICES INC., HSBC USA INC., HSBC BANK USA, NATIONAL ASSOCIATION, BENEFICIAL COMPANY LLC, DECISION ONE MORTGAGE COMPANY, LLC, HFC COMPANY LLC Defendants.
Table of Contents Introduction ……………………………………………………………………………………..3 Jurisdiction & Venue ……………………………………………………………………………13 Parties ……………….……………………………………………………………………….….14 Facts ………………………………………………………………………………………..…..16 A. Defendants Intended to Engage in Predatory & Discriminatory Lending to Drive Growth ….……………………………………………………………………….16 B. The Federal Government Has Found That Discrimination Was Pervasive In Subprime Mortgage Lending During 2003 Through 2007………………………………..18 C. Defendants Discriminated Against FHA Protected Minority Borrowers In Originating Predatory Mortgage Loan Products ……………………………………….23 i. Defendants Targeted Marketing To Minorities……………….………..27 ii. Defendants Used Discretionary Pricing Policies……………….….……36 iii. Defendants Used Uniform Underwriting Policies…………….………..40 iv. Defendant, Decision One, Used Discriminatory Appraisal & Override Practices ………………………………………………………………42 v. Defendants Enforced And Incentivized Their Discriminatory Pricing, And Underwriting Appraisal Policies Through Employees ….………………….44 vi. Empirical Data Evidences Defendants’ Discriminatory Practices …..…..45 D. Defendants’ Fostered, Enabled And Otherwise Encouraged Discrimination Against FHA Protected Minority Borrowers In Predatory Loan Products Originated Within Defendants’ Wholesale Channel Of Broker And Correspondent Lenders…………………………………………………………………..………………..47 E. The Securitization Model, Corporate Structure & MERS: Linchpins To Defendants’ Predatory & Discriminatory Lending Scheme..……………………..…….58 i. Defendants’ Structure Isolated & Concealed Risk .…………….…….. 60 ii. Defendants Concealed & Obfuscated Liability with MERS…………….65 iii. Defendants Passed Financial Risks to Third Parties With Securitization……………………………………………………………………68 iv. Defendants’ Subprime & Securitization Caused The Financial Crisis….72 F. Predatory & Discriminatory Lending Caused the Foreclosure Crisis …….……….76 G. The Foreclosure Crisis Disparately Impacts Minorities ………………………….. 83 H. Defendants’ Continuing Mortgage Servicing & Foreclosure Practices Are Predatory and Discriminatory ……………………………………………….……….. 88 I. Defendants’ Predatory & Discriminatory Mortgage Lending, Servicing & Foreclosure Practices Have Injured the Plaintiff ……………………..…….………….. 96 Cause of Action (Federal Fair Housing Act) ……………………………………………….…104 Demand for Jury Trial ………………………………………………………………….……. 107 Prayer for Relief ……………………………………………………………………….……. 107
Louis Ragusa, who hasn’t paid his mortgage in two years, says he now has a chance to save his Blackwood, New Jersey, home from foreclosure after a hedge fund bought the loan.
American Homeowner Preservation, a Chicago-based investment firm, purchased the mortgage for less than half of what Ragusa owed. Chief Executive Officer Jorge Newbery called the father of three in August with an offer: Pay $5,000 and the company will drop the foreclosure case and erase the more than $100,000 of unpaid principal and penalties amassed.
“They’re a lot more flexible than a bank,” said Ragusa, 48, who ran into financial trouble after losing his job in collections for a cable company in 2007. “They can work with you because they’re a private company and they can basically set their own rules.”
How retired corporate attorney Thomas Cox found purpose in his second act helping low-income families fight wrongful foreclosures
Fortune-
Thomas Cox, 70, is not a professional homebuilder. Nonetheless, Cox found himself working in construction in Maine for about six years during the 2000s. Those were some of the more rewarding years of his career, he says.
Cox’s inspiration to build homes hit him suddenly after spending decades watching them get destroyed. A former managing partner at a prominent Maine law firm, Cox worked for 25 years helping banks engineer foreclosures. When the savings and loans crisis hit the U.S. in the late 1980s, Cox worked with the Federal Deposit Insurance Corporation collecting faulty loans from members of his small Maine community.
“It was really difficult, dark work, but it needed to be done,” says Cox. “Taking people’s homes is extremely unpleasant. Shutting down their businesses when they are fighting like crazy to keep them open is worse.”
Justice is supposed to be blind. But what happens when it turns out to be blind, deaf and dumb?
Sadly, there is not enough space here to tell you the entire 7-year saga of whistleblower Michael Winston, but the bottom line is this: He got royally screwed by the California judicial system.
Winston, 62, is a mild-mannered Ph.D. and a veteran leadership executive who has held top jobs at elite corporations such as McDonnell Douglas, Motorola and Merrill Lynch. After taking time off to nurse his ailing parents, Winston was recruited by Countrywide Financial to help polish their corporate Image. He was quickly promoted — twice — and had a team of 200 employees.
Pierre N. Ostiguy, ELAINE R. THOMAS, “JOHN DOE #1” to “JOHN DOE No.10,”, the last 10 names being fictitious and unknown to the plaintiff, the persons or parties intended being the persons or parties, if any, having or claiming an interest in or lien upon the mortgaged premises described in the verified complaint, Defendants.
4064-12
Hogan Lovells US LLP
David Dunn, Esq., and
Robin L. Muir, Esq., of counsel
875 Third Avenue
New York, New York 10022
Kim DSouza, Esq.
Attorney for Defendants
2 Bordi Lane
Highland, New York 12528
Henry F. Zwack, J.
DECISION/ORDER
Zwack, J. [*2]
Wells Fargo Bank, NA moves for an order pursuant to CPLR § 2221 for leave to renew and reargue its prior motion for summary judgment. That prior motion resulted in a Decision and Order dated August 27, 2013, which denied plaintiff’s motion for summary judgment dismissing defendants Answer, and granted defendants’ cross-motion for dismissal of the complaint for lack of standing. Defendants Pierre N. Ostiguy and Elaine R. Thomas oppose the motion to renew or reargue.
In its Decision and Order of August 27, 2013, this Court found that the plaintiff’s ownership of in the loan was sold to Freddie Mac with insufficient evidence that plaintiff retained an interest in the mortgage sufficient to establish standing. Plaintiff’s prior affidavit in support of summary judgment dismissing the Answer made no mention of the salient fact that the loan had been sold and or transferred, calling into question the entire affidavit. Plaintiff now seeks to renew based upon a more specific affidavit that addresses the very question that got the complaint dismissed in the first place—the issue of who is the holder of the note. Defendants argue that the introduction of this new affidavit is impermissible, as it is neither new information nor has a reasonable excuse been proffered for plaintiff’s failure to produce it on the original summary judgment motion.
CPLR § 2221 governs motions affecting prior orders, and such motions are either motions to reargue or for leave to renew, and the statute requires that they be identified as one or the other. Here, according to plaintiff, the motion is both.
A motion to reargue is based upon matters or fact or law allegedly overlooked or misapprehended by the Court in determining a prior motion, but shall not include any mattersof fact not offered on the prior motion (Diorio v City of New York, 202 AD2d 625 [2d Dept 1994]; CPLR 2211 [d][2]). It is well established that reargument does not provide a party with the opportunity to advance arguments different from those tendered in the original application, and renewal is not a second chance freely given to parties who have not exercised due diligence in making their factual presentation (Rubenstein v Goldman, 225 AD2d 328 [lst Dept 1996]; Tibbets v Verizon, 40 AD3d 1300 [3d Dept 2007]).
As a motion for leave to renew, it “must be based upon new facts, not offered on the prior motion, that would change the prior determination and the party seeking renewal must have a reasonable justification’ for the failure to present such facts on the original motion” (Joseph v Simmons, 979 N.Y.S.2d 675, 2014 NY Slip Op. 00634 [2d Dept 2014], citing CPLR 2221[e][3]; Matter of Korman v Bellmore Pub. Schools, 62 AD3d 882, 884 [2d Dept 2009]). The moving party must articulate the specific reasons why the new evidence it seeks to introduce could not have been discovered at the time of the original motion (Binghamton Plaza, Inc. v Fashion Bug No. 2470 of Binghamton, Inc., 252 AD2d 870 [3d Dept 1998]). It is also well established “that successive motions for summary judgment should not be made in the guise of motions to renew where the new’ material’ could have been submitted with the original motion for summary judgment'” (Laxrand Construction Corp v R.S.C.A. Realty Corp., 135 AD2d 685, 686 [2d Dept 1987], quoting Rose v La Joux, 93 AD2d 817, 818 [2d Dept 1983]).
As a motion to renew, plaintiff urges the Court to accept as fact the information contained in the new affidavit of its Vice President of Loan Documentation, Angela Frye. Plaintiff asserts that it verily believed the affidavit it submitted on the original motion was sufficient to establish that it was the holder of the note, but as the Court was not satisfied with the original affidavit it proffered, it has now submitted a more detailed affidavit. The affidavit of Angela Frye avers that plaintiff has physical possession of the note, and has had possession with the exception of a period of time it was [*3]in the possession of plaintiff’s counsel. The Court is not persuaded by the new affidavit, finding that the failure to refer to the sale of the loan to Freddie Mac on the original motion was more than an insignificant oversight. Here, plaintiff was well aware that standing was a contested issue, having been raised in the Answer, and proof of the same having been requested by defendants through discovery.[FN1] When defendants cross-moved to dismiss the complaint for lack of standing, clearly plaintiff was on notice that it’s affidavit was insufficient — and it was at that point that an affidavit such as Ms. Frye’s (presenting the requisite facts then known to plaintiff) should have been produced (Rose, 93 AD2d 817).
That plaintiff got it wrong on the original motion — whether it believed it had sufficiently addressed standing — or, as it claims, “the evidentiary standing required to demonstrate standing in a mortgage foreclosure action is a relatively new issue and the case law is constantly evolving, however erroneous, are inadequate justification for leave to renew and allow the submission of the “new” information (Whitaker v McGee, 95 AD2d 984 [3d Dept 1983]).
Instead of proving its case on the original summary judgment motion, now plaintiff is impermissibly attempting to cure a defect in its prior moving papers which due diligence could have prevented (Orchard Hotel, LLC v D.A.B. Group, LLC, 2014 WL 593182 [N.Y.A.D. 1 Dept. 2014], citing Weinstock v Handler, 251 AD2d 184 [lst Dept 1998], lv dismissed 92 NY2d 946 [1998]).
As a motion to reargue, the Court is unpersuaded by the arguments that it overlooked or misapprehended the law. Plaintiff argues that as the holder of the note it was entitled to enforce it. The Court does not disagree, but again points out that plaintiff’s summary judgment motion was denied because plaintiff then failed to establish that it was the holder of the note. Remarkably absent from Ms. Frye’s affidavit is any explanation as to what the Court viewed as a serious discrepancy — that the loan was transferred or sold or no longer belonged to Wells Fargo, and yet the Note remained it its possession.
Accordingly, it is
ORDERED, that the motion by plaintiff Wells Fargo Bank, N.A. for leave to renew and reargue the prior motion for summary judgment, and for summary judgment on its Complaint is denied.
This constitutes the Decision and Order of the Court. This original Decision and Order is returned to the attorney for the defendants. All other papers are delivered to the Supreme Court Clerk for transmission to the County Clerk. The signing of this Decision and Order shall not constitute entry or filing under CPLR 2220. Counsel is not relieved from the applicable provisions of this rule with regard to filing, entry and Notice of Entry.
Dated:February 24, 2014
Troy, New York
________________________________________ [*4]
Henry F. Zwack
Acting Supreme Court Justice
Papers Considered:
1.Notice of Motion dated October 31, 2013; Affidavit of Angela M. Freye, sworn to October 30, 2013, together with Exhibits “1” through “2”; Affirmation by Robin L. Muir, Esq., dated October 31, 2013, together with Exhibits “1” through “5”; Memorandum of Law by David Dunn, Esq., and Robin L. Muir, Esq., dated October 31, 2013;
2.Affirmation in Opposition by Kim DSouza, Esq., dated November 7, 2013;
3.Reply Memorandum of Law by David Dunn, Esq., and Robin L. Muir, Esq., dated November 19, 2013.
Footnotes
Footnote 1:Plaintiffs objected to the discovery request that it provide proof that it was the holder of the note.
IN THE CIRCUIT COURT OF THE EIGHTH JUDICIAL CIRCUIT IN AND FOR ALACHUA COUNTY, FLORIDA
BANK OF NEW YORK AS TRUSTEE FOR THE CIRTIFICATES HOLDERS CWABS, INC., ASSET-BACKED CERTIFICATES SERIES 2005-14, Plaintiff,
v.
OLIVIA HANNIBLE, et al., Defendants.
ORDER GRANTING MOTION FOR RELIEF AND VACATING FINAL JUDGMENT AND JUDICIAL SALE
THIS CAUSE came before the Court on Defendant Olivia Parler’s (formerly Olivia Hannible) motion and amended motion to stay writ of possession, motion for relief from final judgment, and motion to set aside judicial sale. All parties were properly noticed. Attorney Glorimil Walker appeared on behalf of Defendant Olivia Parler, and Attorneys Bruce Brashear and Peter Focks appeared on behalf of Jonphe Guilamo, the movant for writ of possession (as assignee of the subject property from Plaintiff following judicial sale). By separate Order, the Court has granted the Defendant’s motion to stay writ of possession.
Defendant’s present motion for relief from final judgment is essentially the renewal of a motion made by Defendant much earlier in this litigation that has never been ruled upon. The complaint in this mortgage foreclosure action was filed on December 28, 2007. The Defendants, Olivia Hannible and James Hannible, did not answer the complaint after it was served upon them, and a default was entered as to both of them on March 27, 2008. Thereafter, the Plaintiff moved for summary final judgment. Despite having included in its complaint a count for re-establishment of a lost note, Plaintiff filed what it purported to be the original adjustable rate note and original mortgage. Plaintiff is not the original payee and mortgagee, but claimed to be the owner and holder thereof.
Plaintiff’s motion for summary judgment was set for hearing, canceled and rescheduled several times. Eventually the case was referred to a general magistrate. At a conference with the general magistrate, the Plaintiff appeared1 and a date was set for a non-jury trial before the general magistrate. It appears that the notice setting this non-jury trial which was sent to Defendant Olivia Parler was returned due to an insufficient address. Thereafter, Plaintiff set and served notice of a hearing on its motion for summary judgment, setting it for the same date and time as the non-jury trial, but indicating that its motion would be heard by a circuit judge, not the general magistrate. This notice was sent to Defendant at an address which appears to be the same address at which Defendant was originally served with process. Then, approximately ten days before the scheduled hearing and non-jury trial, Plaintiff’s counsel served a notice of cancellation of the hearing which it had scheduled before the judge. The non-jury trial before the magistrate, however, was held, and the transcript indicates that the Defendant, who did not receive proper notice, did not appear. Thereafter the magistrate filed a report and recommendation and a final judgment of foreclosure, which included items of unliquidated damages, was entered by the Court. Approximately three weeks after service of the final judgment of foreclosure, the Defendant filed a “Motion to Cancel Sale”,2 pro se. In this motion, the Defendant claimed that she was not afforded the opportunity to be present at the non-jury trial because she had received a notice from Plaintiff’s counsel that the only hearing she knew about had been canceled. Shortly thereafter, Plaintiff also filed a motion to cancel the sale because it needed additional time to assure compliance with a consent order entered in a matter involving the U.S. Department of Justice and the Florida Attorney General’s office. Although both parties were at that time requesting the cancellation of the foreclosure sale, the Plaintiff’s motion was denied. There is no indication, however, of any ruling with respect to the Defendant’s motion to cancel sale (or for relief from judgment entered without notice).
Perceiving that the Court’s denial of the Plaintiff’s motion to cancel sale was an indication that the sale would not be canceled, the pro se Defendant then filed an appeal on the day before the scheduled sale. It was described as an appeal of the denial of the motion to cancel sale. Nonetheless, the sale took place on the following day, and the schedule of bids indicates that Plaintiff was the successful bidder. This first appeal by the pro se Defendant was eventually dismissed because the Defendant could not comply with the requirement that she file a conformed copy of the order being appealed. There never having been an order entered on her motion to cancel sale, this would have been impossible to do. Regardless, Defendant tried in various inartful ways to request that the sale and the certificate of sale be “revoked”, repeating her claim that she had never had an opportunity to be present at the non-jury trial which resulted in entry of the final judgment of foreclosure.
A second appeal was filed with respect to denial of another post-judgment motion by Defendant. This appeal was initially dismissed and then reinstated. As part of that pending appeal, an order requiring Defendant to post a $5,000 bond to avoid a writ of possession was reviewed and approved. Both parties agree that the matters under present consideration by this court would not interfere with the issues pending in the appellate court, although that appeal would certainly be impacted and rendered moot if the final judgment (which is not on appeal) was vacated. Although defaulted, and precluded from contesting liability, the Defendant is still entitled to be heard on the issue of unliquidated damages. Donohue v. Brightman, 939 So. 2d 1162 (Fla. 4th DCA 2006). No motion has ever been made which seeks to challenge or set aside the entry of default against the Defendant, and the time to do so based on excusable neglect has expired.
Accordingly, it is hereby ORDERED AND ADJUDGED:
1. The final judgment of foreclosure is vacated and set aside. The judicial sale is likewise set aside.
2. This matter will be set for a case management conference for the purpose of establishing a new non-jury trial date on the issue of damages and any other issues not otherwise precluded by entry of default.
3. Until further order of the Court, all remaining issues herein will be set before and resolved by the undersigned judge unless and until reassigned.
DONE AND ORDERED in Chambers, at Gainesville, Alachua County, Florida on this 21 day of March 2014. __________________________________ TOBY S. MONACO, CIRCUIT JUDGE
I HEREBY CERTIFY that copies have been furnished by e-mail delivery and/or U.S. Mail on March 21, 2014, to the following:
Dolan Co. (DOLN), a provider of legal-support services and publishing, filed for bankruptcy after agreeing to be taken over by lenders to cut debt linked to its former mortgage foreclosure-processing business.
The Minneapolis-based company listed debt of $185.9 million and assets of $236.2 million as of Sept. 30 in a Chapter 11 petition filed today in Wilmington, Delaware.
“This reorganization step is necessary to unlock these current businesses from the weight of debt principally associated with its previous mortgage foreclosure processing businesses,” Kevin Nystrom, Dolan’s chief restructuring officer, said in a March 20 statement.
This is a re-post but below in the pdf image are the actual emails from this investigation.
Denver Post-
Colorado’s two biggest foreclosure law firms, Castle Law Group and Aronowitz & Mecklenburg, appear to have manipulated and influenced the foreclosure process — in practice and at the Capitol — in a way that guaranteed themselves millions of dollars in profits at the expense of homeowners and taxpayers, according to state investigators.
In a stunning court filing made public Thursday, Attorney General John Suthers’ office lays out a theory of conspiracy and price-fixing that investigators say the two firms allegedly engaged in to corner a lucrative piece of the state’s foreclosure market.
An attorney for Aronowitz denied Friday the firm colluded with Castle or influenced the legislative process. Attorneys for Castle would not comment.
Because the firms for years controlled the bulk of the foreclosure work in Colorado, they could profit handsomely and easily on a state law requiring legal notices to be posted on homeowners’ properties by steering that work to companies they owned or had a heavy interest in.
A federal judge in New York blasted mega-bank Wells Fargo for submitting a “fraudulent” foreclosure document to the court under penalty of perjury, according to a hearing transcript.
Robert Drain, a US Bankruptcy Judge in White Plains, slammed the bank at a March 1, 2012, hearing that was part of the Chapter 13 bankruptcy case of Westchester resident Cynthia Carssow Franklin.
Earlier this month, Carssow Franklin’s attorney, Linda Tirelli, put forward an emergency request to reopen the discovery phase of the trial in light of the existence of two watershed documents: a Wells Fargo Foreclosure Attorney Procedures Manual, and a foreclosure-paperwork order form on Wells Fargo letterhead.
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