in re: CARSSOW-FRANKLIN | Wells Fargo Beatdown over endorsements that are not “genuine”

Categorized | STOP FORECLOSURE FRAUD

in re: CARSSOW-FRANKLIN | Wells Fargo Beatdown over endorsements that are not “genuine”

in re: CARSSOW-FRANKLIN | Wells Fargo Beatdown over endorsements that are not “genuine”

H/T Gary Dubin / Liberty Road Media

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 1 of 29

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

In re:
CYNTHIA CARSSOW-FRANKLIN,

Debtor.
————————————————————-X
WELLS FARGO BANK, N.A.,

Appellant,
-v-
CYNTHIA CARSSOW-FRANKLIN,
Appellee.

Case No. 15-CV-1701 (KMK)
OPINION AND ORDER

Appearances:

Linda M. Tirelli, Esq.
Linda M. Tirelli and Westchester Legal Credit Solutions Inc.
White Plains, NY

Counsel for Debtor-Appellee

David Dunn, Esq.
Nicole E. Schiavo, Esq.
Hogan Lovells US LLP
New York, NY

Counsel for Appellant

KENNETH M. KARAS, District Judge:

Wells Fargo Bank, N.A., (“Wells Fargo” or “Appellant”) appeals from the bankruptcy
court’s “Order Disallowing and Expunging Claims of Wells Fargo Bank, NA,” (“Disallowance
Order”), dated February 9, 2015. (See Dkt. No. 1.) More specifically, Wells Fargo challenges
the bankruptcy court’s May 21, 2012 Order granting the partial summary judgment motion of
Cynthia Carssow-Franklin (“Debtor”) on the issue of Wells Fargo’s standing to file a proof of

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 2 of 29

claim on behalf of Freddie Mac, and the bankruptcy court’s January 28, 2015 decision granting
Debtor’s claim objection on the ground that Wells Fargo was not a holder of Debtor’s note. (Id.)
For the reasons given herein, the judgment of the bankruptcy court is affirmed in part and
reversed in part.

I. Factual and Procedural Background
On or about October 30, 2000, Debtor executed a promissory note (the “Note”) in the
principal amount of $145,850, in favor of Mortgage Factory Inc. (“Mortgage Factory”). (A108–
A110.)1 The loan was secured by a deed of trust on real property located in Round Rock, Texas
(the “Deed of Trust”). (A111–A126.)2 An “Assignment of Lien,” dated October 30, 2000,
purports to assign the Deed of Trust from Mortgage Factory to ABN Amro Mortgage Group, Inc.
(“ABN Amro”). (A139–A140.)3

At the heart of much of this appeal is the Parties’ dispute over what happened next.
According to Wells Fargo, Mortgage Factory, in addition to assigning the Deed of Trust, also
specifically indorsed the Note to ABN Amro. (Br. for Appellant Wells Fargo Bank, N.A.

1 While October 30, 2000 appears as the date on both the Note and Deed of Trust, a
notary acknowledgement indicates that the Deed of Trust was signed on November 2, 2000, and
Debtor testified that she signed the Note on November 2, 2000. (See Br. for Appellee Cynthia
Carssow-Franklin (“Appellee Br.”) 22 n.3 (Dkt. No. 22).) The exact date is immaterial to this
Appeal.

2 Citations beginning with the letter “A” are citations to the Appellant’s Appendix, filed
with its opening brief, at Dkt. No. 19, unless otherwise noted.

3 Debtor has questioned the validity of this assignment. After Wells Fargo filed its initial
proof of claim, Debtor’s counsel notified Wells Fargo’s counsel that the Assignment of Lien,
dated October 30, 2000, “pre-dates the notarized signature of . . . Debtor on the [N]ote and
[D]eed of [T]rust by three days.” (Appellee Br. 2.)

2

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 3 of 29

(“Appellant Br.”) 3 (Dkt. No. 19).) ABN Amro further transferred Debtor’s loan to Washington
Mutual Bank, N.A. (“Washington Mutual”), “indorsing the [N]ote in blank and executing a
written assignment of [Debtor’s] [D]eed of [T]rust, including ‘all beneficial interest in and title
to said Deed of Trust’ to the Mortgage Electronic Registration Systems, Inc. (‘MERS’) as
nominee.” (Id. at 3–4 (citing A110, A141–A142).) Later, Wells Fargo obtained the servicing
rights to Debtor’s loan, effective February 16, 2007, from Washington Mutual. (Id. at 4.) Wells
Fargo maintains that it services the loan for Freddie Mac, the owner of Debtor’s loan. (Id. at 4,
13–14.) Around that time, Wells Fargo sent Debtor what it calls a “Hello” letter, which advised
Debtor that Wells Fargo would begin servicing her loan on February 16, 2007. (Id. at 4 (citing
A286).) In conjunction with the servicing transfer, the Note, “bearing the in-blank indorsement
from ABN Amro,” and the Deed of Trust, were delivered to Wells Fargo. (Id.) A written
assignment, which was not executed until July 12, 2010, memorialized the Deed of Trust’s
transfer from MERS to Wells Fargo. (Id. (citing A143–A145).) Finally, about a year after Wells
Fargo began servicing the loan, Debtor and Wells Fargo agreed to modify the loan. (Id. (citing
A134–A136).) The loan-modification agreement states that Debtor “requested, and [Wells
Fargo] has agreed, . . . to a modification in the payment” of Debtor’s loan, and that Debtor
promises “to pay the unpaid principal balance plus interest, to the order of [Wells Fargo].”
(A135.)

Debtor disputes much of this narrative. Most pertinent to the pending appeal, Debtor
argued, and the bankruptcy court agreed, both that the blank indorsement was actually forged,
that is, the indorsement was stamped on the Note after Wells Fargo filed its initial proof of claim
in Debtor’s bankruptcy in an attempt to improve the record with respect to Wells Fargo’s

3

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 4 of 29

standing to enforce the Note, and that Wells Fargo had failed to provide sufficient evidence that
it was the servicer of Debtor’s loan authorized to file a proof of claim to enforce the Note. (See
generally Br. for Appellee Cynthia Carssow-Franklin (“Appellee Br.”) (Dkt. No. 22).) Although
Debtor notes that “[t]he original loan modification was never produced and never authenticated,”
(Appellee Br. 24), she does not dispute that she entered into a loan modification with Wells
Fargo.

On June 1, 2010, Debtor petitioned for Chapter 13 bankruptcy relief in the United States
Bankruptcy Court for the Southern District of New York. (See A1–A2.) On July 15, 2012,
Wells Fargo filed a proof of claim, Claim No. 1-1, asserting an indebtedness of $170,072.60,
including prepetition arrears of $38,163.16. (See Mem. of Decision on Debtor’s Objection to
Claim of Wells Fargo Bank, NA (“Order”) 1 (Dkt. No. 109, 10-20010 Dkt. (Bankr. S.D.N.Y.)).)
The proof of claim attached a number of documents, including a copy of the Note, dated October
30, 2000, payable to Mortgage Factory in the amount of $145,850, which was signed by Debtor.
(See Order 2; see also A67–A105.) The version of the Note attached to Claim No. 1-1 bears a
specific indorsement by Mortgage Factory to ABN Amro and no other indorsements. (Id.; see
also A71.) Claim No. 1-1 also attached the aforementioned assignments, including the
Assignment of Lien, dated October 30, 2000, pursuant to which Mortgage Factory assigned its
rights under the Note and related liens to ABN Amro, and the “Assignment of Deed of Trust” by
ABN Amro, dated June 20, 2002, pursuant to which ABN Amro assigned “all beneficial interest
in” the Deed of Trust securing the Note, “together with the [N]ote,” to MERS, “as nominee for
Washington Mutual Bank, FA.” (See A100–A102; Order 2.) Also attached to Claim No. 1-1
was an “Assignment of Mortgage,” pursuant to which MERS purported to assign to Wells Fargo

4

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 5 of 29

“a certain mortgage” made by Debtor pertaining to the Note. (See A104–A105.) The
Assignment of Mortgage is dated July 12, 2010, which is three days before Wells Fargo filed
Claim No. 1-1, and is executed on behalf of MERS “as nominee for Washington Mutual,” by
John Kennerty (“Kennerty”), who is identified only as an “Assistant Secretary.” (See A105; see
also Order 3.)4

In the underlying Claim Objection, Debtor’s counsel represented without dispute that
after reviewing Claim No. 1-1, she contacted Wells Fargo’s then-counsel with questions
regarding Wells Fargo’s standing to assert Claim No. 1-1. (Order 3.) Eventually, on September
23, 2010, Wells Fargo filed another proof of claim, amended Claim No. 1-2, which was the same
as Claim No. 1-1 in all respects, except that the copy of the Note attached to Claim No. 1-2 had a
second indorsement (in addition to the specific indorsement from Mortgage Factory to ABN
Amro): a blank indorsement, signed by Margaret A. Bezy, Vice President, for ABN Amro.
(Order 4; compare A110, with A71.)

Debtor filed a Claim Objection, asserting a number of reasons as to why Claim No. 1-2
should be disallowed under 11 U.S.C. § 502 and Fed. R. Bankr. P. 3007. (Order 4; see also
A20–A57.) The two arguments relevant to this appeal are that Wells Fargo lacked standing to
assert the claim because it did not own the loan upon which the claim was based, yet filed the
claim on its own behalf, and that the blank indorsement that appears in the version of the Note
attached to Claim No. 1-2 was forged to solidify Wells Fargo’s right to enforce the Note. (Order
4–5.)

4 It is undisputed that when he executed the Assignment of Mortgage, Kennerty was an
employee of Wells Fargo and MERS. (See Order 3 & n.3.)

5

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 6 of 29

With discovery ongoing, Debtor moved for summary judgment under Fed. R. Bankr. P.
7056, primarily on the grounds that Wells Fargo did not own the Note and yet had not filed
Claim No. 1-2 in a representative capacity. (Order 5–6; see also A360.) In a bench ruling on
March 1, 2012, memorialized by an Order dated May 21, 2012, the bankruptcy court granted in
part and denied in part Debtor’s summary judgment motion. (Order 6–7; see also A908–A979.)
The motion was granted to the extent that Claim No. 1-2 sought to assert the claim in a
representative capacity on behalf of Freddie Mac; the bankruptcy court found, as a matter of law,
that Wells Fargo was “not the servicer of the loan” and, thus, that Claim No. 1-2 was “not filed
in Wells Fargo[’s] . . . capacity as servicer or agent for the holder of the Claims or the underlying
[N]ote and [D]eed of [T]rust, including, without limitation, on behalf of Freddie Mac.” (A428.)
However, the bankruptcy court denied Debtor’s motion for an order declaring that Wells Fargo
lacked standing to assert Claim No. 1-2, finding that Debtor did not establish, as a matter of law,
that Wells Fargo lacked standing to bring Claim No. 1-2 “as principal and holder of the Claims,
the [N]ote[,] and the [D]eed of [T]rust.” (Id. (emphasis added).) Rather, the bankruptcy court
concluded that, under Texas law, if Wells Fargo was the holder of the Note properly indorsed in
blank by ABN Amro, Wells Fargo could personally enforce the Note and Deed of Trust. (Order
6.) Because discovery on the issue had not yet been completed, the bankruptcy court further
scheduled an evidentiary hearing to address the bona fides of the blank indorsement. (Id. at 7–
8.)

After the completion of discovery and an evidentiary hearing, the bankruptcy court issued
a Memorandum of Decision on Debtor’s Objection to Claim of Wells Fargo Bank, NA, ruling
that, on the evidence provided by the Parties, Wells Fargo did not satisfy its burden to show that

6

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 7 of 29

the blank indorsement on the Note attached to Claim No. 1-2 was genuine. (Id. at 29–30.) As a
result, on February 9, 2015, the bankruptcy court issued an Order disallowing and expunging
Claim No. 1-1 and Claim No. 1-2. (A564–A565.)

Wells Fargo filed a Notice of Appeal, appealing the bankruptcy court’s order disallowing
and expunging the proofs of claim. (Notice of Appeal (Dkt No. 1).)

II. Discussion
A. Standard of Review
1. Review of Bankruptcy Court’s Order
The Court has jurisdiction to hear this appeal pursuant to 28 U.S.C. § 158(a). A district
court reviews a bankruptcy court’s findings of fact for clear error and reviews conclusions of law
de novo. See In re Bayshore Wire Prods. Corp., 209 F.3d 100, 103 (2d Cir. 2000) (“Like the
[d]istrict [c]ourt, we review the Bankruptcy Court’s findings of fact for clear error, [and] its
conclusions of law de novo . . . .” (citation and italics omitted)); In re Enron Corp., 307 B.R.
372, 378 (S.D.N.Y. 2004) (“A bankruptcy court’s conclusions of law are reviewed de novo and
its findings of fact for clear error.” (italics omitted)).

“A bankruptcy court’s decision to grant summary judgment is reviewed de novo because
the existence of issues of material fact is a question of law.” In re Enron N. Am. Corp., 312 B.R.
27, 28–29 (S.D.N.Y. 2004) (italics omitted); see also Baranek v. Baranek, No. 12-CV-5090,
2013 WL 4899862, at *4 (E.D.N.Y. Sept. 11, 2013) (same), aff’d sub nom. In re Baranek, 579 F.
App’x 57 (2d Cir. 2014).

Under the clear error standard, “[t]here is a strong presumption in favor of a trial court’s
findings of fact if supported by substantial evidence,” and a reviewing court will not upset a

7

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 8 of 29

factual finding “unless [it is] left with the definite and firm conviction that a mistake has been
committed.” Travellers Int’l, A.G. v. Trans World Airlines, Inc., 41 F.3d 1570, 1574 (2d Cir.
1994) (first alteration in original) (internal quotation marks omitted); see also Anderson v. City of
Bessemer City, 470 U.S. 564, 573 (1985) (“[A] finding is clearly erroneous when although there
is evidence to support it, the reviewing court on the entire evidence is left with the definite and
firm conviction that a mistake has been committed.” (internal quotation marks omitted)); Ceraso

v. Motiva Enters., LLC, 326 F.3d 303, 316 (2d Cir. 2003) (stating that an appellate court should
not overturn a trial judge’s choice “between permissible competing inferences”). “Where there
are two permissible views of the evidence, the factfinder’s choice between them cannot be
clearly erroneous.” Travellers Int’l, 41 F.3d at 1574–75 (internal quotation marks omitted); see
also UFCW Local One Pension Fund v. Enivel Props., LLC, 791 F.3d 369, 372 (2d Cir. 2015)
(same); In re CBI Holding Co., Inc., 419 B.R. 553, 563 (S.D.N.Y. 2009) (“In reviewing findings
for clear error, [an appellate court] is not allowed to second-guess . . . the trial court’s . . . choice
between competing inferences. Even if the appellate court might have weighed the evidence
differently, it may not overturn findings that are not clearly erroneous.” (alterations in original)
(internal quotation marks omitted)).
2. Summary Judgment Standard
Summary judgment is appropriate where the movant shows that “there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.

R. Civ. P. 56(a); see also Psihoyos v. John Wiley & Sons, Inc., 748 F.3d 120, 123–24 (2d Cir.
8

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 9 of 29

2014) (same).5 “In determining whether summary judgment is appropriate,” a court must
“construe the facts in the light most favorable to the non-moving party and . . . resolve all
ambiguities and draw all reasonable inferences against the movant.” Brod v. Omya, Inc., 653
F.3d 156, 164 (2d Cir. 2011) (internal quotation marks omitted); see also Borough of Upper
Saddle River v. Rockland Cty. Sewer Dist. No. 1, 16 F. Supp. 3d 294, 314 (S.D.N.Y. 2014)
(same). Additionally, “[i]t is the movant’s burden to show that no genuine factual dispute
exists.” Vt. Teddy Bear Co. v. 1-800 Beargram Co., 373 F.3d 241, 244 (2d Cir. 2004); see also
Aurora Commercial Corp. v. Approved Funding Corp., No. 13-CV-230, 2014 WL 1386633, at
*2 (S.D.N.Y. Apr. 9, 2014) (same).

“However, when the burden of proof at trial would fall on the nonmoving party, it
ordinarily is sufficient for the movant to point to a lack of evidence to go to the trier of fact on an
essential element of the nonmovant’s claim,” in which case “the nonmoving party must come
forward with admissible evidence sufficient to raise a genuine issue of fact for trial in order to
avoid summary judgment.” CILP Assocs., L.P. v. Pricewaterhouse Coopers LLP, 735 F.3d 114,
123 (2d Cir. 2013) (alteration and internal quotation marks omitted). Further, “[t]o survive a
[summary judgment] motion . . . , [a nonmovant] need[s] to create more than a ‘metaphysical’
possibility that [her] allegations were correct; [s]he need[s] to ‘come forward with specific facts
showing that there is a genuine issue for trial,’” Wrobel v. Cty. of Erie, 692 F.3d 22, 30 (2d Cir.
2012) (emphasis omitted) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574, 586–87 (1986)), and “cannot rely on the mere allegations or denials contained in the

5 Fed. R. Bankr. P. 7056 makes Fed. R. Civ. P. 56 applicable in bankruptcy cases.

9

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 10 of 29

pleadings,” Walker v. City of N.Y., No. 11-CV-2941, 2014 WL 1244778, at *5 (S.D.N.Y. Mar.
26, 2014) (internal quotation marks omitted) (citing, inter alia, Wright v. Goord, 554 F.3d 255,
266 (2d Cir. 2009)).

B. Analysis
Wells Fargo’s Statement of Issues Presented on Appeal lists the following five issues:
1.
Whether the Bankruptcy Court improperly sustained Debtor’s objection to
Wells Fargo’s claim, and based thereon disallowed and expunged that claim.
2.
Whether the Bankruptcy Court erred in concluding that the Debtor had
overcome the presumption of authenticity that attaches to a signed
[i]ndorsement on commercial paper.
3.
Whether the Bankruptcy Court erred in concluding that Wells Fargo did not
have standing to enforce the Debtor’s note because it had not authenticated the
indorsements on the note.
4.
Whether the Bankruptcy Court erred in concluding that Wells Fargo had waived
or failed to assert its claim of equitable estoppel, thus precluding a finding that
the Debtor was estopped from contesting the enforceability of her note, or Wells
Fargo’s entitlement to enforce it as holder and servicer for the owner.
5.
Whether the Bankruptcy Court erred in concluding that Wells Fargo was not
the servicer of Debtor’s note.
(Designation of Record and Statement of Issues Presented on Appeal (“Statement of Issues”) at
unnumbered 1–2 (Dkt. No. 2).) Put more directly, the appeal challenges the bankruptcy court’s
ruling as to (1) the authenticity of the blank indorsement, and (2) whether Wells Fargo
established its standing to assert a claim on behalf of Freddie Mac as the servicer of Debtor’s
loan. The Court will consider each in turn.

10

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 11 of 29

1. Indorsement Authenticity
As explained by the bankruptcy court, and not disputed by Debtor on appeal, under Texas

law, a holder of a note indorsed in blank has standing to enforce the note. (Order 6–7.)6

Accordingly, the critical question before the bankruptcy court was the authenticity of the blank

indorsement on the Note attached to Claim No. 1-2; if the indorsement is authentic, Wells Fargo

has standing to enforce the Note. The bankruptcy court first found that Debtor provided

sufficient evidence to overcome the Texas UCC’s presumption in favor of the authenticity of

indorsements. (See Order 12–22.) Having found the presumption defeated, the bankruptcy court

then determined that Wells Fargo did not carry its burden to establish the authenticity of the

indorsement. (Id. at 22–30.)7 The factual findings underpinning the bankruptcy court’s ruling

6 The Deed of Trust contains a Texas choice-of-law provision, (A120), and thus the claim
objection is governed by Texas law. Regardless, because the Note and Deed of Trust were
signed in Texas and concern property located in Texas, under New York conflict of law
principles, Texas law would govern even in the absence of the choice of law provision. See, e.g.,
Cavendish Traders, Ltd. v. Nice Skate Shoes, Ltd., 117 F. Supp. 2d 394, 398–99 (S.D.N.Y. 2000)
(noting that, “[u]nder New York conflict of law rules, the law of the jurisdiction having the
greatest interest in the litigation will be applied,” and that “choice of law clauses in contracts and
loan documents are generally honored in New York” (internal quotation marks omitted)).

7 Wells Fargo does not challenge this finding on appeal. Although one of the issues on
appeal identified by Wells Fargo is “[w]hether the Bankruptcy Court erred in concluding that
Wells Fargo did not have standing to enforce . . . Debtor’s note because it had not authenticated
the indorsements on the note,” (Statement of Issues at unnumbered 2), which could possibly be
read as challenging the bankruptcy court’s finding with respect to Wells Fargo’s burden
described above, Wells Fargo’s briefing challenges only the bankruptcy court’s decision at step
one of the analysis, (see, e.g., Appellant Br. 2 (stating as the relevant issue “[w]hether the
Bankruptcy Court erred in concluding that [Debtor] had rebutted the presumption of authenticity
that attaches to signatures on commercial paper”); Reply Br. for Appellant Wells Fargo Bank,

N.A. 6 (Dkt. No. 24) (“[B]ecause the presumption was unrebutted, [Debtor’s] claim that Wells
Fargo did not prove the indorsement’s authenticity . . . has no relevance to the case.”)); see also
In re Residential Capital, LLC, 552 B.R. 50, 62 n.9 (S.D.N.Y. 2015) (noting that issues not
included in argument section of appellant’s brief are waived).
11

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 12 of 29

on the authenticity issue are reviewed for clear error, but its application of those facts to draw its
conclusion that Debtor overcame the presumption is reviewed de novo. See United States v.
Aumais, 656 F.3d 147, 154 (2d Cir. 2011) (reviewing district court’s findings of fact for clear
error, but reviewing “de novo a district court’s application of the facts to draw conclusions of
law, including a finding of liability” (alteration and internal quotation marks omitted)).

a. Applicable Law
Under Texas law, “[t]o recover on a promissory note, the plaintiff must prove: (1) the
existence of the note in question; (2) that the party sued signed the note; (3) that the plaintiff is
the owner or the holder of the note; and (4) that a certain balance is due and owing on the note.”
SMS Fin., Ltd. Liab. Co. v. ABCO Homes, Inc., 167 F.3d 235, 238 (5th Cir. 1999) (emphasis
added); see also Roberts v. Roper, 373 S.W.3d 227, 232 (Tex. App. 2012) (same). Accordingly,
an entity can enforce a note so long as it is the “holder” of the note, even if it does not own the
note. See Tex. Bus. & Com. Code (“BCC”) § 3.301 (“‘Person entitled to enforce’ an instrument
[includes] the holder of the instrument . . . [and a] person may be a person entitled to enforce the
instrument even though the person is not the owner of the instrument . . . .”). A “holder” of a
note includes “the person in possession of a negotiable instrument that is payable either to bearer
or an identified person that is the person in possession.” BCC § 1.201(b)(21)(A). A person may
become the holder of a note either at issuance or negotiation. See Johnson v. JPMorgan Chase
Bank, N.A., No. 12-CV-285, 2013 WL 2554415, at *11 (E.D. Tex. June 7, 2013), aff’d, 570 F.
App’x 404 (5th Cir. 2014). When the instrument is payable to an identified entity, negotiation of
the instrument requires transfer of possession of the instrument and its indorsement by the
holder. BCC § 3.201(b). However, “[i]f an instrument is payable to bearer, it may be negotiated

12

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 13 of 29

by transfer of possession alone.” Id. An instrument bearing a “blank indorsement” is payable to
bearer and, accordingly, may be transferred by possession alone. BCC § 3.205(b). Thus, if the
blank indorsement that appears on the Note attached to Claim No. 1-2 is authentic, Wells Fargo
is the holder of an instrument payable to bearer and is entitled to enforce the Note. See In re
Pastran, No. 06-CV-34728, 2010 WL 2773243, at *3 (N.D. Tex. July 30, 2010) (“Thus, since
AMHS is in possession of a promissory note indorsed in ‘blank,’ it is, by definition, a ‘holder,’
under [§] 3.201(a)[,] . . . assum[ing] that all of the indorsements on the [n]ote are authentic and
authorized.”).

Under Texas law (and the UCC more generally), indorsements on negotiable instruments
are presumed to be authentic. Specifically:

In an action with respect to an instrument, the authenticity of, and authority to

make, each signature on the instrument are admitted unless specifically denied in

the pleadings. If the validity of a signature is denied in the pleadings, the burden

of establishing validity is on the person claiming validity, but the signature is

presumed to be authentic and authorized . . . .
BCC § 3.308(a) (emphasis added). The presumption of authenticity “rests upon the fact that in
ordinary experience forged or unauthorized signatures are very uncommon, and normally any
evidence is within the control of, or more accessible to, the defendant.” BCC § 3.308 cmt. 1. To
the extent “that a fact is ‘presumed,’ the trier of fact must find the existence of the fact unless and
until evidence is introduced that supports a finding of its nonexistence.” BCC § 1.206. Thus, in
the context of indorsements, the bankruptcy court was required to find the blank indorsement to
be authentic “unless and until evidence [was] introduced that support[ed] a finding of”
inauthenticity. Id. Because the ultimate “burden of establishing validity [of the indorsement] is
on the person claiming validity,” BCC § 3.308(a), if sufficient evidence is introduced by Debtor

13

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 14 of 29

to overcome the presumption, the burden shifts back to Wells Fargo to establish the validity of
the indorsement “by a preponderance of the total evidence,” id. cmt. 1; see also In re Pastran,
2010 WL 2773243, at *3 (“[The claimant] is not required to prove that the indorsements on the
[n]ote are valid and authentic unless and until the [d]ebtor overcomes the presumption by putting
on evidence that supports a finding that the indorsements on the [n]ote were somehow forged or
unauthorized.”). The showing necessary to overcome the presumption of authenticity is
described in the official comment as “some sufficient showing.” BCC § 3.308 cmt. 1. The
evidence “need not be sufficient to require a directed verdict, but it must be enough to support
the denial by permitting a finding in the defendant’s favor.” Id.

b. Analysis
The bankruptcy court’s conclusion that Debtor overcame the presumption of authenticity
afforded to the blank indorsement was based on the following evidence: (1) that the version of
the Note attached to Wells Fargo’s initial Claim No. 1-1 did not contain the blank indorsement,
(Order 15–16), (2) the existence of the Assignment of Mortgage from MERS to Wells Fargo,
executed by Kennerty, an officer of Wells Fargo, only three days before Claim No. 1-1 was filed,
(id. at 16–17), and (3) testimony by Kennerty of the general indorsement and assignment
practices of the Wells Fargo indorsement and assignment teams, which showed “a general
willingness and practice on Wells Fargo’s part to create documentary evidence, after-the-fact,
when enforcing its claims,” (id. at 17–20).8 Wells Fargo contends that, despite this evidence,

8 Although Wells Fargo states in its brief that it objected to the admission of the Kennerty
deposition and that the bankruptcy court “never actually admitted it” and should not have
admitted it because the testimony “was not relevant to the issue being tried, and clearly was more
prejudicial than it was probative,” (Appellant Br. 16, 20), Wells Fargo does not directly

14

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 15 of 29

Debtor “produced no actual proof that the ABN Amro indorsement was forged.” (Appellant Br.
11.) Rather, according to Wells Fargo, the bankruptcy court “relied on inferences drawn from
circumstantial evidence, but those inferences were either not probative, unsupported by the
record, or wholly speculative.” (Id.)

As discussed above, Texas’s version of the UCC required the bankruptcy court to accept
the validity of the blank indorsement on the Note unless Debtor made “some sufficient showing”
that the indorsement is invalid. BCC § 3.308 & cmt. Debtor’s evidence “must be enough to
support the denial [of validity] by permitting a finding in the defendant’s favor.” Id. As the
bankruptcy court concluded, and neither party appears to challenge, the comment “suggests that
the required evidentiary showing to overcome the presumption is similar to that needed to defeat
a summary judgment motion: the introduction of sufficient evidence so that a reasonable trier of
fact in the context of the dispute could find in [Debtor’s] favor.” (Order 13–14.) Cf. Romano’s
Carryout, Inc. v. P.F. Chang’s China Bistro, Inc., 964 N.E.2d 1102, 1107 (Ohio Ct. App. 2011)
(explaining that, under Ohio’s identical provision, “[t]o rebut the presumption, the defendant
need not present the quantum of evidence necessary for the grant of a directed verdict; rather, the
defendant must only present evidence sufficient to permit the trier of fact to make a finding in

challenge the use of the testimony in its Statement of Issues Presented on Appeal. Regardless,
the testimony was relevant to the issue of whether the indorsement was authentic. Seeing as he
signed the Assignment of Mortgage, Kennerty obviously had some role with respect to Debtor’s
loan. He also testified based on personal knowledge as to the practices of the assignment and
indorsement teams at Wells Fargo. The fact that Wells Fargo had assignment and indorsement
teams that, as the bankruptcy court found, would act to improve the record with respect to
various notes and deeds of trust in Wells Fargo’s possession, makes the fact that the indorsement
at issue here was added after-the-fact to improve Wells Fargo’s standing more probable “than it
would be without the evidence.” Fed. R. Evid. 401(a).

15

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 16 of 29

the defendant’s favor”); Guardian Bank v. San Jacinto Sav. Ass’n, 593 S.W.2d 860, 862–63
(Tex. App. 1980) (“In the absence of . . . competent summary judgment evidence contesting [an
indorsement’s] genuineness, the presumption [under the Texas Business Code] that the
[i]ndorsements are genuine stands.”); Freeman Check Cashing, Inc. v. State, 412 N.Y.S.2d 963,
964 (Ct. Cl. 1979) (under identical language in New York’s version of the UCC, overcoming the
presumption of validity is not a question of “substantial evidence” or quantity of evidence, but
rather that of “legal sufficiency”).

Wells Fargo contends that the evidence relied upon by the bankruptcy court consisted
entirely of unjustified speculation and conclusory allegations that cannot serve as the competent
evidence necessary to overcome the indorsement’s presumption of validity. (See, e.g., Appellant
Br. 20 (“The Bankruptcy Court’s assumption . . . that Kennerty must have forged indorsements is
precisely the sort of speculation that cannot rise to the level of ‘competent evidence’ that the
[blank] indorsement . . . was forged.”); Reply Br. for Appellant Wells Fargo Bank, N.A. (“Reply
Br.”) 2 (Dkt. No. 24) (“Speculative and conclusory assertions are all that the Bankruptcy Court
and [Debtor] could point to.”).) Wells Fargo is correct that if Debtor’s evidence merely raised
some “metaphysical doubt” as to the validity of the indorsement, Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 586 (1986), Debtor would not have satisfied its burden and
thus would not have overcome the presumption of validity in § 3.308, see, e.g., In re Connelly,
487 B.R. 230, 244 (Bankr. D. Ariz. 2013) (holding that the plaintiff, who challenged the
authenticity of a deed of trust and other relevant documents but only “promised to bring forth
additional evidence at a later date,” relied on “metaphysical doubt [rather] than evidence
deserving all reasonable inference”).

16

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 17 of 29

Here, however, Debtor has not relied on mere speculation and conclusory assertions to
overcome the presumption. Rather, Debtor offered specific evidence from which the bankruptcy
court found that a reasonable juror could draw the inference that the blank indorsement was not
genuine. Wells Fargo’s arguments to the contrary are not persuasive.

First, Wells Fargo contends that “a difference in copies [of notes attached to various court
filings] is not probative evidence of forgery.” (Appellant Br. 15.) Although Wells Fargo is
correct that some courts have held that evidence of differences among notes attached to various
court filings, on its own, and in certain circumstances, does not constitute a sufficient showing to
overcome the presumption of genuineness, the Court disagrees that the sequence of events in this
case is not in any way probative evidence of forgery, particularly in conjunction with the other
evidence relied upon by the bankruptcy court. It is undisputed that Wells Fargo’s first proof of
claim, Claim No. 1-1, contained a copy of the Note containing no blank indorsement. (See A71.)
Wells Fargo does not dispute the bankruptcy court’s finding that Debtor’s counsel contacted
Wells Fargo’s counsel after reviewing Claim No. 1-1, “with questions regarding Wells Fargo’s
standing to assert the claim.” (Order 3.) Wells Fargo eventually filed the amended proof of
claim, Claim No. 1-2, which was the exact same as the previous claim in all respects except that
the copy of the Note attached to the claim contained the blank indorsement. (Id. at 4.) While
certainly not conclusive of forgery, this sequence of events sufficiently distinguishes the present
case from others in which the later-filed note containing the relevant indorsement appeared in
filings before any issues were raised with respect to the claimant’s standing. For example, in In
re Phillips, 491 B.R. 255 (Bankr. D. Nev. 2013), relied upon by Wells Fargo, the entity seeking
to enforce a note did not attach a copy of the note or the relevant allonge to its initial proof of

17

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 18 of 29

claim, but did attach the note and allonge to later filings. See id. at 259. The debtor argued that
since the note and allonge were not produced at filing, and since the proof of claim was never
amended formally, the subsequent appearance of the allonge later in the proceeding meant that
the allonge was forged at some point in between. Id. at 273. The court found that the relevant
“sequence of events . . . d[id] not constitute a threshold showing of fraud or forgery.” Id. Of
particular note, although the initial proof of claim did not include the note or allonge, a separate
motion to lift a stay did attach copies of the note and allonge, and the motion to lift the stay “was
filed . . . long before [the debtor] objected to the [p]roof of [c]laim.” Id. Thus, in that case, the
relevant indorsement appeared before doubts had been raised as to the standing of the entity
seeking to collect. See also In re Stanley, 514 B.R. 27, 40 (Bankr. D. Nev. 2012) (same
sequence of events as In re Phillips).

The Court need not determine, however, whether the particular sequence of events here is
sufficient on its own to overcome the presumption of genuineness because the bankruptcy court
relied on evidence beyond just the different versions of the Note, including the Assignment of
Mortgage signed by Kennerty purporting to assign the Deed of Trust securing Debtor’s loan
from MERS to Wells Fargo. (See Order 16–17.) The bankruptcy court was troubled by the
following aspects of the Assignment of Mortgage: (1) the Assignment of Mortgage authorizing
the assignment from MERS to Wells Fargo was signed by Kennerty, who was an employee of
Wells Fargo; (2) the earlier assignment of the Deed of Trust by ABN Amro to MERS assigned
the Deed of Trust to MERS “as nominee” of Washington Mutual (without mention of
Washington Mutual’s successors and assigns), an entity that had since ceased to exist, and so
MERS and/or Kennerty were unauthorized to assign the Deed of Trust to Wells Fargo; and (3)

18

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 19 of 29

the Assignment of Mortgage was dated July 12, 2012, just three days before Wells Fargo filed
Claim No. 1-1. (Id. at 3, 6 n.7, 16.) To the bankruptcy court, this assignment was evidence of
efforts to improve the record surrounding Wells Fargo’s standing to file a proof of claim
enforcing the Note.

Wells Fargo objects to Debtor’s and the bankruptcy court’s reliance on the Assignment of
Mortgage. Wells Fargo stresses that employees of MERS member entities often sign documents
on MERS’s behalf and that there was, therefore, nothing untoward about Kennerty’s execution
of the Assignment of Mortgage. (Appellant Br. 16–17.) Even granting Wells Fargo this point,
the Assignment of Mortgage remains probative evidence of the possible invalidity of the blank
indorsement because of MERS’s apparent lack of authority to assign the Deed of Trust in light of
Washington Mutual’s non-existence and, more importantly, the assignment’s timing. The
Assignment of Mortgage was signed July 12, 2010, just three days before Proof of Claim No. 1-1
was filed. (See A104–A105; see also A67.) If Wells Fargo already possessed the Note with a
blank indorsement, which would be sufficient to confer standing to enforce the Note three days
later, what would have necessitated the Assignment of Mortgage three days before filing the
proof of claim? The decision to execute such an assignment is even more unusual given the
likelihood that MERS lacked authority to assign a Deed of Trust as nominee for a defunct entity.
Based on the timing of the Assignment of Mortgage and the lack of authority (as well as
Kennerty’s deposition testimony, discussed below), the Court cannot find that the bankruptcy
court’s factual finding that the Assignment of Mortgage “was prepared by Wells Fargo’s then
counsel to ‘improve’ the record supporting Wells Fargo’s right to file a secured claim,” (Order
16), was clearly erroneous.

19

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 20 of 29

The situation here is quite similar to that in In re Tarantola, No. 09-BK-9703, 2010 WL
3022038 (Bankr. D. Ariz. July 29, 2010). In that case, Deutsche Bank filed a motion for relief
from stay on December 8, 2009, on the grounds that the debtor was in default and that Deutsche
Bank was the holder of the relevant note secured by debtor’s property. Id. at *1. Deutsche Bank
attached to that filing a note containing no indorsements and no allonges. Id. at *2. Just under a
month later, Deutsche Bank filed a new exhibit in support of its motion that included an allonge
that purported to assign the note from the originator of the loan to Deutsche Bank. Id. at *2.
Finally, at an evidentiary hearing on the issue of Deutsche Bank’s standing, Deutsche Bank
introduced the original note, which now bore two indorsements, the later-dated indorsement
being a blank indorsement. Id. At the hearing, a Deutsche Bank witness admitted that the
allonge was “created after the [motion was filed] to ‘get the attorneys the information they
needed.’” Id. at *3. Addressing whether the blank indorsement provided Deutsche Bank with
standing to seek relief from the stay, the court chose not to “apply the usual evidentiary
presumptions of validity to the [i]ndorsements” because the claimant failed to provide a
“credible explanation” for differences between various versions of the relevant note filed with
the court and because Deutsche Bank admitted that the allonge was created after the fact to
improve the record with respect to its standing. Id. at *4.

The Court acknowledges that the circumstances in this case are not identical to those in
In re Tarantola. Unlike the allonge in that case, which was created after the motion for relief
from stay was filed, the Assignment of Mortgage executed by Kennerty was filed three days
before Claim No. 1-1 was filed. However, such assignment, like the allonge in In re Tarantola,
remains evidence of the fact that Wells Fargo felt compelled to create a better record regarding

20

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 21 of 29

its standing, despite purportedly possessing a note indorsed in blank, which, under Texas law,
provided Wells Fargo standing to enforce the Note as a holder.9

Finally, although Kennerty did not expressly testify that the Assignment of Mortgage was
executed to improve the record with respect to Debtor’s loan, the bankruptcy court did find that
his deposition testimony established that Wells Fargo had a “general willingness and
practice . . . to create documentary evidence, after-the-fact, when enforcing its claims,” (Order
17–18; see also id. at 22 (concluding that, based on Kennerty’s testimony, “[it] is more
reasonable to infer . . . that . . . Wells Fargo was improving its own position by creating new
documents and indorsements from third parties to itself to ensure that it could enforce its
claims”)), a finding that this Court does not believe is clearly erroneous. Kennerty repeatedly
testified to a process whereby Wells Fargo’s outside enforcement counsel would inquire of
Kennerty and his “assignment team” whether or not a certain assignment existed and if it did not
the attorney would draft the assignment and someone, possibly Kennerty, would sign it. (See,
e.g., A1191 (“[I]f the assignment needed to be created they would have advised
the . . . requesting attorney . . . that we did not have the assignment in the collateral file, then they
needed to draw up the appropriate document.”); A1231 (“[I]f there was not an assignment in
there then they would . . . advise the attorney that we did not have it, that they would need to
draft the . . . appropriate document.”); A1236 (“[I]f it’s something that was not in the file or it

9 Also, as with MERS’s/Kennerty’s lack of authority to assign the Deed of Trust in light
of the fact Washington Mutual had ceased to exist, the In re Tarantola court found that the after-
the-fact allonge would have been ineffective to transfer the note because the party executing it
“had no authority to do so.” In re Tarantola, 2010 WL 3022038, at *4. It stands to reason that a
claimant who is willing to execute an unauthorized document to create standing is more likely
willing to forge a blank indorsement to create standing as well.

21

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 22 of 29

was something that was in the file, but couldn’t be used[,] then they would advise the requesting
attorney to go ahead and draft the actual document.”); A1238 (“The attorney
would . . . determine that an assignment was needed, then they would reach out to the assignment
team to request an assignment for A to B, [and if] we d[idn’t] have it, [we would tell the
attorney], you need to prepare it.”).) Kennerty also testified to a seemingly similar process with
respect to indorsements. “The request would come in” and the indorsement team “would check
to see if [they] had the collateral file” and the note and once they located the note they would
“check to see if there was any [i]ndorsement on the back of the note.” (A1250.) Kennerty did
not specifically recall how the indorsement team would go about indorsing the note if there was
no indorsement, but, to the best of his recollection, “a stamp was involved but then it had to be
signed.” (A1251.)

The Court agrees with the bankruptcy court that, while “it is conceivable that all of Wells
Fargo’s newly created mortgage assignments and newly created indorsements were
proper . . . that interpretation certainly does not leap out from . . . Kennerty’s testimony.” (Order
21.) As such, the Court cannot say that it is “left with the definite and firm conviction that a
mistake has been made,” Travellers, 41 F.3d at 1574 (internal quotation marks omitted), and thus
cannot say that the bankruptcy court’s findings with respect to the testimony were clearly
erroneous. Although on its own this testimony as to the general practices of Wells Fargo’s
assignment and indorsement teams may not have been especially probative as to whether the
blank indorsement on the Note in particular was forged, the sequencing of the two claims and the
versions of the attached Notes and the dubious, last-minute Assignment of Mortgage make it

22

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 23 of 29

plausible that Wells Fargo’s general efforts to “improve the record” with respect to its various
mortgages led to the forgery of the blank indorsement on the Note.

Therefore, when the evidence is considered together, the Court concludes that the
bankruptcy court did not err in finding that Debtor does not rely merely on speculation or
conjecture, and that a reasonable fact-finder could infer that the blank indorsement was not
genuine, eliminating the indorsement’s presumption of validity. Cf., e.g., Nguyen v. Fed. Nat’l
Mortg. Ass’n, 958 F. Supp. 2d 781, 788–89 (S.D. Tex. 2013) (holding that “no genuine fact issue
material to determining the [i]ndorsements’ validity arises” based on the debtor’s allegations that
the alleged indorsements “appear very different and contain glaring discrepancies” (internal
quotation marks omitted)); Patrick v. Bank of N.Y. Mellon, No. 11-CV-1304, 2012 WL 934288,
at *12 (D. Colo. Mar. 1, 2012) (finding that the fact that the debtor “is ‘suspicious’ and ‘has
doubts’ about” the validity of a signature is insufficient to overcome presumption of validity);
Nw. Bank Minn. v. Diaz, No. 96-CV-5335, 1998 WL 30677, at *4 (N.D. Ill. Jan. 21, 1998)
(concluding that the debtor did not overcome the presumption of genuineness where the evidence
“consisted of a self-serving denial that he had signed the Guaranty along with a far-fetched story
about how other unknown or unnamed individual(s) might have forged his signature”); In re
Bass, 738 S.E.2d 173, 177 (N.C. 2013) (the debtor’s “bare assertion,” that “We don’t know who
had authority” and that “You have to have something more than a mere stamp” was insufficient
to overcome the presumption in favor of the signature (alteration and internal quotation marks

23

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 24 of 29

omitted)).10 As such, the evidence shifted the burden to Wells Fargo to establish the authenticity

of the blank indorsement by a preponderance of the evidence.11

This is not a finding that Wells Fargo did, in fact, forge the blank indorsement, or that

Wells Fargo has a general practice of forging indorsements in situations akin to this one. Rather,

the Court has only found that the bankruptcy court’s factual findings with respect to the blank

10 Though not directly analogous to the situation here, the Court notes that some courts
have found that merely a defendant’s denial that he or she signed the document along with
alleged differences in signatures was sufficient to overcome the presumption. See, e.g.,
Mortgage Lenders Network, USA, Inc. v. Adkins, No. 04-CV-7767, 2007 WL 963212, at *4–5

(N.D. Ohio Mar. 28, 2007) (noting that signatures are “presumptively valid” but holding that
“the burden [to establish validity] now shifts to [the] [p]laintiff to provide evidence that [the
defendant’s] signatures are in fact valid,” based on the defendant’s deposition testimony which
“repeatedly stated that [someone] ‘forged my name, forged my signature,’” and “detailed the
way in which the signatures on the appraisals differ from her bona fide signature” (alterations,
italics, and internal quotation marks omitted)); First Nat’l Bank v. A.A. Blackhurst, 345 S.E.2d
567, 572 (W. Va. 1986) (“In the present case, [the defendant] denied the genuineness of his
signature and introduced a financial statement bearing his signature into evidence. Accordingly,
this evidence was substantial enough to remove the presumption in favor of the bank.”).
11 Moreover, it bears noting that the justifications underpinning the presumption of
validity are not particularly apt in situations like Debtor’s. As noted earlier, the official comment
to the BCC explains that the presumption is warranted because (1) “in ordinary experience
forged or unauthorized signatures are very uncommon,” and (2) “normally any evidence is
within the control of, or more accessible to, the [party challenging the signature’s authenticity].”
BCC § 3-308 cmt. 1. In the wake of the recent foreclosure crisis, and the dubiousness of the
common robo-signing practices of various banks and other foreclosing entities, see, e.g.,
Matthew Petrozziello, Who Can Enforce? The Murky World of Robo-Signed Mortgages, 67
Rutgers U. L. Rev. 1061, 1068–70 (2015), it may be time to reconsider whether “forged or
unauthorized signatures” remain “very uncommon,” see Eric A. Zacks & Dustin A. Zacks, A
Standing Question: Mortgages, Assignments, and Foreclosure, 40 J. Corp. L. 705, 706 (2015)
(“[I]n the face of an overwhelming volume of foreclosures to be processed, mortgagees and their
assignees often failed to assign the mortgages properly, and, in some instances, committed fraud
or other unauthorized acts in order to correct the assignment paper trail.”). Also, this is not a
case where evidence regarding the validity of the indorsement would be in the control of, or
more accessible to, Debtor. One would expect that a large banking and financial services
company would have readily accessible evidence by which it could establish the timing and
validity of the blank indorsement.

24

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 25 of 29

indorsement are sufficient to overcome the relatively modest presumption of validity that
attaches to the indorsement. The burden thus shifted to Wells Fargo to establish, by a
preponderance of the evidence, that the indorsement was genuine. The bankruptcy court found
that Wells Fargo failed to do so. As noted above, Wells Fargo did not argue in its briefing before
this Court that it made such a showing in the event the presumption of authenticity was
overcome. Accordingly, the Court affirms the bankruptcy court’s ruling that Wells Fargo lacks
standing to file its proof of claim as a holder of the Note.

2. Servicer Standing
Despite not being a holder of the Note, Wells Fargo argues that it can still file a proof of
claim in a representative capacity on behalf of Freddie Mac, as a servicer of Debtor’s loan.
Ruling from the bench, Judge Drain held that there was no genuine issue of material fact that
“dispute[s] the proposition that Wells Fargo is not the servicer of th[e] loan or that it is, in fact, a
loan owned by Freddie Mac, either based on its ownership of the [N]ote or the . . . [D]eed of
[T]rust.” (A960.) In support of this ruling, Judge Drain noted that Wells Fargo did not sign the
relevant claims as Freddie Mac’s agent, but actually named itself as the creditor, and that Wells
Fargo was unable to produce either an “enforceable servicing agreement or contract between it
and Freddie Mac,” or any evidence of “any record of having any payments [made] by Wells
Fargo to Freddie Mac in connection with collections on this loan.” (A958–A960.) Considering
Wells Fargo’s evidence in support of the servicing relationship, Judge Drain was not swayed by
“a letter, apparently from Freddie Mac, . . . authorizing a loan modification . . . that Wells Fargo
ha[d] negotiated,” as well as “very general testimony by Wells Fargo’s 30(b)(6) witness that

25

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 26 of 29

there is in fact a loan servicing relationship between Freddie Mac and Wells Fargo.” (A959–
A960.)12

a. Applicable Law
To file a proof of claim, a claimant must be a real party in interest, which means that the
claimant is “a ‘creditor or the creditor’s authorized agent.’” In re Minbatiwalla, 424 B.R. 104,
108 (Bankr. S.D.N.Y. 2010) (quoting Fed. R. Bankr. P. 3001(b)); see also In re Thalmann, 469

B.R. 677, 683 (Bankr. S.D. Tex. 2012) (same); In re Simmerman, 463 B.R. 47, 59 (S.D. Ohio
2011) (same). In other words, “[t]o have an allowed proof of claim, the claimant must prove an
initial fact: that it is the creditor to whom the debt is owed or, alternatively, that it is the
authorized agent of the creditor.” In re Parrish, 326 B.R. 708, 719 (Bankr. N.D. Ohio 2005).
The real party in interest “with respect to a mortgage proof of claim is the party entitled to
enforce the note and its accompanying mortgage.” In re Simmerman, 463 B.R. at 59 (internal
quotation marks omitted); see also In re Hunter, 466 B.R. 439, 448 (Bankr. E.D. Tenn. 2012)
(same); In re Wright, No. 10-3893, 2012 WL 27500, at *2 (Bankr. D. Haw. Jan. 5, 2012) (same),
reconsideration denied, 2012 WL 260744 (Bankr. D. Haw. Jan. 27, 2012). Accordingly, Wells
Fargo is a real party in interest with standing to assert the proof of claim if it is either an entity
entitled to enforce the Note or it is the “authorized agent” of an entity that is entitled to enforce
the Note.
Wells Fargo contends that it was “entitled to file [the] proof of claim on behalf of Freddie
Mac as the servicer of [Debtor’s] loan.” (Appellant Br. 12.) “Mortgage servicers have been

12 With respect to the letter, Judge Drain stated that the letterhead “doesn’t look like any
letterhead I’ve ever seen before.” (A959.)

26

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 27 of 29

determined to constitute authorized agents with standing to file proofs of claim or seek stay
relief.” In re Sia, No. 10-41873, 2013 WL 4547312, at *12 (Bankr. D. N.J. Aug. 27, 2013); see
In re Minbatiwalla, 424 B.R. at 109 (same); In re Conde-Dedonato, 391 B.R. 247, 250 (Bankr.

E.D.N.Y. 2008) (“A servicer of a mortgage is . . . a creditor and has standing to file a proof of
claim against a debtor pursuant to its duties as a servicer.”); see also Greer v. O’Dell, 305 F.3d
1297, 1302 (11th Cir. 2002) (“A servicer is a party in interest in proceedings involving loans
which it services.”).
b. Analysis
Wells Fargo does not dispute that it failed to produce any executed agreement governing
its servicing relationship with Freddie Mac or evidence of any payments made from Wells Fargo
to Freddie Mac in its alleged role as servicer. Rather, Wells Fargo argues that it was not required
to produce any servicing agreement or remittance reports, (see Appellant Br. 23–24; Reply Br.
6), and points to a host of other evidence that it argues establishes that Wells Fargo “was Freddie
Mac’s servicer” with respect to Debtor’s loan, (see Appellant Br. 23). In particular, Wells Fargo
relies on: (1) the deposition testimony of Ellen Brust, Wells Fargo’s corporate representative,
(see A568–A878); (2) a loan modification between Wells Fargo and Debtor, (see A134–A136);

(3) a letter purportedly from Freddie Mac to Wells Fargo that identified Debtor’s loan and
approved the loan modification between Wells Fargo and Debtor, (see A137–A138); and (4)
correspondence dated after Claim No. 1-1 was filed: an email from the address
“web_inquiries@freddiemac.com,” dated July 27, 2010, stating that Freddie Mac’s “records
show that Freddie Mac is the owner of [Debtor’s] mortgage,” (see A226), and an August 18,
27

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 28 of 29

2010 letter, in which Wells Fargo informs Debtor’s counsel that “[t]he investor of the loan is
Freddie Mac,” (see A222).

The Court acknowledges that Wells Fargo’s evidence is not overwhelming, and, indeed,
its inability to produce the servicing agreement outlining the exact contours of its relationship
with Freddie Mac with respect to Debtor’s loan is troubling. However, at the summary judgment
stage, Wells Fargo need only proffer “evidence sufficient to raise a genuine issue of fact for trial
in order to avoid summary judgment.” CILP Assocs., 735 F.3d at 123 (internal quotation marks
omitted). The Court finds that, based on the evidence submitted, Wells Fargo has satisfied its
burden. Wells Fargo has provided some evidence indicating that it operated in a servicer role
with respect to Debtor’s loan, including that Wells Fargo sent Debtor the “Hello” letter advising
Debtor that Wells Fargo would begin servicing her loan on February 16, 2007, (A286), and a
loan modification agreement subsequently entered into by Wells Fargo and Debtor, (A134–
A136). Moreover, a reasonable factfinder could conclude that Wells Fargo serviced the loan for
Freddie Mac, based on the letter from Freddie Mac to Wells Fargo referencing and approving the
loan modification. (See A137–A138.) In that letter, Freddie Mac lists Debtor as the
“Borrower[]” of the loan, and the loan is identified with a “Freddie Mac Loan [Number]” and a
“Servicer Loan [Number].” (A137.) Therefore, a reasonable factfinder could conclude that
Wells Fargo serviced Debtor’s loan for Freddie Mac, and therefore could determine that Wells
Fargo had standing to file the proof of claim on Freddie Mac’s behalf. See, e.g., In re Sia, 2013
WL 4547312, at *12; In re Minbatiwalla, 424 B.R. at 109.

Ultimately, Wells Fargo has submitted sufficient evidence to create a genuine issue of
fact as to its authorization to act on Freddie Mac’s behalf in the context of Debtor’s loan. The

28

Case 7:15-cv-01701-KMK Document 26 Filed 09/30/16 Page 29 of 29

Down Load PDF of This Case

© 2010-17 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



Comments

comments

This post was written by:

- who has written 8446 posts on FORECLOSURE FRAUD | by DinSFLA.

CONTROL FRAUD | ‘If you don’t look; you don’t find, Wherever you look; you will find’ -William Black

Contact the author

Leave a Reply

GARY DUBIN LAW OFFICES FORECLOSURE DEFENSE HAWAII and CALIFORNIA
Kenneth Eric Trent, www.ForeclosureDestroyer.com

Archives