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FDIC vs THE BANK OF NEW YORK MELLON | BNY breached its duties as trustee of 12 RMBS trusts that issued approximately $2 billion in certificates

FDIC vs THE BANK OF NEW YORK MELLON | BNY breached its duties as trustee of 12 RMBS trusts that issued approximately $2 billion in certificates

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR GUARANTY BANK
Plaintiff,

-against-

THE BANK OF NEW YORK MELLON,
Defendant.

NATURE OF ACTION

1. This is an action for damages against BNY Mellon for its breaches of contractual and statutory duties under the governing agreements, the New York Streit Act, N.Y. Real Property Law § 124, et seq. (the “Streit Act”), and under the federal Trust Indenture Act of 1939 (the “TIA”), 15 U.S.C. § 77aaa, et seq.1 as Trustee for 12 securitization trusts (the “Covered Trusts”), identified below, which issued residential mortgage-backed securities (“RMBS”) purchased by investors, including Guaranty Bank (“Guaranty”).

2. This action seeks to hold BNY Mellon accountable for abdicating its fundamental duties as the trustee to certificateholders such as Plaintiff. Under the agreements governing the Covered Trusts, BNY Mellon accepted virtually all of the powers designed to protect the certificateholders and was compensated for that role. BNY Mellon was essentially Plaintiff’s sole source of protection against breaches of the governing agreements by the other parties to those agreements, including the sponsors that sold the loans to the Covered Trusts and the servicers tasked with servicing the mortgage loans. BNY Mellon, however, shirked its duty to exercise its powers to protect Plaintiff and instead attempted to shorn itself of the responsibilities that trusteeship imports. While BNY Mellon stood idly for years, the sponsors kept defective mortgage loans in the Covered Trusts, servicers reaped excessive fees for servicing the defaulted loans from the Covered Trusts, and Plaintiff was left to suffer enormous losses.

3. The Covered Trusts were created to facilitate RMBS transactions sold to investors from 2005 to 2006. Eight of the RMBS transactions were sponsored by Countrywide Home Loans, Inc. (the “Countrywide Trusts”), and four were sponsored by EMC Mortgage Corporation (the “EMC Trusts”) (EMC Mortgage Corporation and Countrywide Home Loans, Inc., are referred to as “Countrywide” and “EMC” respectively, or collectively as the “Sponsors”).

[…]

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Determinants of Mortgage Default and  Consumer Credit Use: The Effects of  Foreclosure Laws and Foreclosure Delays | Federal Reserve Bank of New York Staff Reports, no. 732

Determinants of Mortgage Default and Consumer Credit Use: The Effects of Foreclosure Laws and Foreclosure Delays | Federal Reserve Bank of New York Staff Reports, no. 732

Federal Reserve Bank of New York
Staff Reports

Determinants of Mortgage Default and
Consumer Credit Use: The Effects of
Foreclosure Laws and Foreclosure Delays

Sewin Chan
Andrew Haughwout
Andrew Hayashi
Wilbert van der Klaauw

Staff Report No. 732

June 2015

This paper presents preliminary findings and is being distributed to economists
and other interested readers solely to stimulate discussion and elicit comments.
The views expressed in this paper are those of the authors and do not necessarily
reflect the position of the Federal Reserve Bank of New York or the Federal
Reserve System. Any errors or omissions are the responsibility of the authors.

Abstract

The mortgage default decision is part of a complex household credit management problem. We
examine how factors affecting mortgage default spill over to other credit markets. As home
equity turns negative, homeowners default on mortgages and HELOCs at higher rates, whereas
they prioritize repaying credit cards and auto loans. Larger unused credit card limits intensify the
preservation of credit cards over housing debt. Although mortgage non-recourse statutes increase
default on all types of housing debt, they reduce credit card defaults. Foreclosure delays increase
default rates for both housing and non-housing debts. Our analysis highlights the
interconnectedness of debt repayment decisions.

[…]

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Grant v. The Bank of New York Mellon Trust Co. | How often the banks stick Pro Se with the res judicata ploy. This time the Banksters get the SHAFT || The trial court is directed on remand to vacate the grant of summary judgment and dismiss the Bank’s complaint

Grant v. The Bank of New York Mellon Trust Co. | How often the banks stick Pro Se with the res judicata ploy. This time the Banksters get the SHAFT || The trial court is directed on remand to vacate the grant of summary judgment and dismiss the Bank’s complaint

H/T Court Listener

IN THE
COURT OF APPEALS OF INDIANA

Demetrius L. Grant, and April 6, 2015
Vickie O. Grant Court of Appeals Case No.
49A05-1404-MF-139
Appellant-Defendant,
Appeal from the Madison Superior
v. Court
Honorable Michael D. Keele, Special
Judge
The Bank of New York Mellon Case No. 49D07-1006-MF-028352
Trust Co.,
Appellee-Plaintiff

Friedlander, Judge.

[1] Demetrius and Vickie Grant appeal the trial court’s denial of their motion to

dismiss and grant of summary judgment in favor of The Bank of New York

Mellon Trust Company (the Bank). The Grants present the following

dispositive issue for review: Was dismissal of the Bank’s second foreclosure

action against the Grants required where the first action was dismissed under

Indiana Trial Rule 41(E)?
Court of Appeals of Indiana | Opinion 49A05-1404-MF-139 | April 6, 2015 Page 1 of 9
[2] We reverse and remand.

[3] The Grants have lived in their Indianapolis home for over thirty years. On

January 28, 2004, they executed a note in the principal amount of $127,500

with Paragon Home Lending, LLC. To secure payment of the note, the Grants

executed a mortgage. At some point, the mortgage and note were assigned to

the Bank.

[4] The Grants filed bankruptcy in 2007, and the bankruptcy court granted them

discharge from the mortgage debt that same year. Thereafter, the Grants did

not make their August 2007 mortgage payment or any subsequent payments.

[5] On November 26, 2007, the Bank filed an In Rem Complaint on Note and to

Foreclose Mortgage and Reformation of Mortgage and Deed (the First

Foreclosure Action). The Bank took no action on the complaint for over a year

and a half, so Judge S.K. Reid of the Superior Court of Marion County set the

cause for call of the docket on July 29, 2009. Demetrius Grant appeared for the

hearing, but the Bank did not. Accordingly, Judge Reid dismissed the cause

pursuant to T.R. 41(E) for failure to prosecute.

[6] Eight months later, on March 29, 2010, the Bank filed a motion to reinstate the

First Foreclosure Action, which the court initially granted. Upon the Grants’

motion, Judge Reid returned the case to disposed status on April 23, 2010,

citing Natare Corp. v. Cardinal Accounts, Inc.,

874 N.E.2d 1055

(Ind. Ct. App.

2007) (reversing reinstatement where plaintiff filed an unverified motion with

Court of Appeals of Indiana | Opinion 49A05-1404-MF-139 | April 6, 2015 Page 2 of 9
no supporting affidavits and presented no admissible evidence at the hearing on

the reinstatement motion). The Bank did not appeal this ruling.

[7] Two months after unsuccessfully attempting to reinstate the First Foreclosure

Action, the Bank filed a new lawsuit against the Grants asserting the same

allegations and seeking the same relief (the Second Foreclosure Action). The

Grants subsequently filed a motion to dismiss, invoking as its basis Indiana

Trial Rule 12(B)(6). In their pro-se motion, the Grants argued that the First

Foreclosure Action had been dismissed for failure to prosecute and could not be

reinstated in this separate action. In opposition, the Bank argued in part that

despite the T.R. 41(E) dismissal, it was allowed to refile a separate action in the

future. The Grants replied that the motion to dismiss was proper under T.R. 41

and that “the bank [sic] attempt to refile this lawsuit is barred by the doctrine of

res judicata”. Appellants’ Appendix at 68. Following a hearing, the trial court

denied the Grants’ motion to dismiss. The Grants appealed the denial, but this

court dismissed the appeal because it was not from a final appealable order and

the Grants had not sought certification of the interlocutory order. Grant v. Bank

of New York, Cause No. 49A02-1104-MF-485 (March 22, 2012).

[8] After dismissal of the appeal, nothing happened in the case for several months

and the trial court issued a call of the docket notice to the parties in November

 

2012. The Bank sought leave to amend its complaint in February 2013, which

the trial court granted after a T.R. 41(E) hearing. The amendment, filed March

7, 2013, added the State as a party defendant and changed one date. The

Court of Appeals of Indiana | Opinion 49A05-1404-MF-139 | April 6, 2015 Page 3 of 9
Grants then sought a change of judge, which was granted, and Special Judge

Michael Keele was appointed.

[9] On July 10, 2013, the Bank filed a motion for summary judgment. In their

memorandum in opposition to summary judgment, the Grants noted the T.R.

41(E) dismissal of the First Foreclosure Action and that the case was not

reinstated pursuant to T.R. 41(F). The Grants further developed their T.R. 41

argument in a supplemental response, which they urged should be treated as a

belated motion to dismiss under T.R. 12(B)(8).

[10] The trial court held a summary judgment hearing on January 23, 2014. At the

conclusion of the hearing, the court directed the Bank to file a response to the

Grants’ T.R. 12(B)(8) motion. In its written response, the Bank’s sole argument

was that T.R. 41(F) does not require a party to petition the original court to

reinstate a case following dismissal for failure to prosecute. The Bank asserted,

without citing any authority, “[a] Plaintiff is well-within its rights to instead re-

file the Complaint at any time of its choosing.” Appellants’ Appendix at 330.

[11] On March 26, 2014, the trial court summarily denied the Grants’ motion to

dismiss. The court also entered a separate order for In Rem Entry of Summary

Judgment and Decree of Foreclosure in favor of the Bank. The Grants now

appeal.

[12] In support of their argument, the Grants direct us to Zavodnik v. Richards,

984 N.E.2d 699

(Ind. Ct. App. 2013), aff’d on reh’g,

988 N.E.2d 806

(Ind. Ct. App.

2013), a case with procedural facts almost identical to those at hand. In

Court of Appeals of Indiana | Opinion 49A05-1404-MF-139 | April 6, 2015 Page 4 of 9
Zavodnik, the plaintiff’s complaint was dismissed under T.R. 41(E) for failure to

prosecute and the plaintiff unsuccessfully attempted to reinstate the original

lawsuit pursuant to T.R. 41(F). The plaintiff then filed a new lawsuit with

allegations nearly identical to those of the originally-dismissed complaint. The

new court granted the defendant’s motion to dismiss.1

[13] The defendant argued that the filing of an entirely new complaint in a different

court contravened T.R. 41(E) and (F) and that the plaintiff should not be

allowed to avoid the rule’s reinstatement requirement simply by filing a new

complaint before a different judge.

[14] Subsections (E) and (F) of T.R. 41 provide:

(E) Failure to prosecute civil actions or comply with rules.
Whenever there has been a failure to comply with these rules or when
no action has been taken in a civil case for a period of sixty [60] days,
the court, on motion of a party or on its own motion shall order a
hearing for the purpose of dismissing such case. The court shall enter
an order of dismissal at plaintiff’s costs if the plaintiff shall not show
sufficient cause at or before such hearing. Dismissal may be withheld
or reinstatement of dismissal may be made subject to the condition
that the plaintiff comply with these rules and diligently prosecute the
action and upon such terms that the court in its discretion determines
to be necessary to assure such diligent prosecution.
(F) Reinstatement following dismissal. For good cause shown and
within a reasonable time the court may set aside a dismissal without
prejudice. A dismissal with prejudice may be set aside by the court for
the grounds and in accordance with the provisions of Rule 60(B).

 

1
The trial court in Zavodnik also sua sponte dismissed, on the same grounds, another complaint involving
two other defendants.

Court of Appeals of Indiana | Opinion 49A05-1404-MF-139 | April 6, 2015 Page 5 of 9
Thus, “when a trial court has involuntarily dismissed a case without prejudice

pursuant to Trial Rule 41(E), subsection (F) of that rule ascribes to the

dismissing trial court the discretion to consider whether a complaint should be

reinstated.” Zavodnik v. Richards, 984 N.E.2d at 703.

[15] In holding that the plaintiff’s only remedy was to obtain reinstatement of his

first complaint under its original cause number, we explained:

We [] presume that the Indiana Supreme Court, in drafting Trial Rule
41, did not intend to place a nullity in the rule by adding subsection
(F)’s explicit procedure for how to go about reinstatement of a
complaint dismissed without prejudice. Zavodnik’s position, that such
complaints can be re-filed in a different court without following the
reinstatement procedure, would render that provision meaningless. By
re-filing complaints before Judge Dreyer that were substantially
similar, if not identical, to complaints that Judge Oakes had already
dismissed, Zavodnik was improperly attempting to circumvent Judge
Oakes’s authority and discretion to decide whether Zavodnik had good
cause to reinstate his original complaint(s). Judge Dreyer apparently
recognized this and acted properly in dismissing the re-filed
complaints, which dismissal served the interests of fairness to litigants,
judicial comity, and judicial efficiency.
Id. On rehearing, we reiterated, “if Zavodnik is unsuccessful in having his

original complaints reinstated, he may not circumvent that ruling by filing

entirely new complaints raising identical legal and factual issues as the original

complaints.” Zavodnik v. Richards, 988 N.E.2d at 807-08.

[16] In this appeal, the Bank makes no attempt to distinguish Zavodnik and, in fact,

does not even cite the case. The Bank, rather, relies on two arguments in an

attempt to avoid the clear mandate of Zavodnik: (1) the First Foreclosure Action

Court of Appeals of Indiana | Opinion 49A05-1404-MF-139 | April 6, 2015 Page 6 of 9
and the Second Foreclosure Action are not the same because they seek different

relief and (2) the Grants waived their T.R. 41 argument.

[17] Before addressing these arguments, we observe one key difference between this

case and Zavodnik. The latter was dismissed without prejudice, while the

present was dismissed with prejudice.2 In Zavodnik, we reached the T.R. 41(F)

analysis only after observing that the T.R. 41(E) dismissal without prejudice had

no res judicata effect. The same cannot be said for a dismissal with prejudice,

such as in the case at hand. See Afolabi v. Atl. Mortgage & Inv. Corp.,

849 N.E.2d 1170

, 1173 (Ind. Ct. App. 2006) (“a dismissal with prejudice is conclusive of the

rights of the parties and is res judicata as to any questions that might have been

litigated”).

[18] In any case, however, we must address the Bank’s assertion that the two actions

are not the same. Citing Afolabi, the Bank argues that the Grants’ obligations

under the note and mortgage were ongoing and any subsequent default created

a new and independent right to initiate foreclosure. The Bank continues, “[t]he

Second Action seeks relief for defaults that could not have been contemplated

by the First Action because the Second Action sought to recover amounts based

2
T.R. 41(B) provides in relevant part as follows: “Unless the court in its order for dismissal otherwise
specifies, a dismissal under this subdivision or subdivision (E) of this rule…operates as an adjudication upon
the merits.” In this case, because Judge Reid did not otherwise specify, the dismissal of the First Foreclosure
Action was with prejudice.

Court of Appeals of Indiana | Opinion 49A05-1404-MF-139 | April 6, 2015 Page 7 of 9
on defaults that had accrued only after the dismissal of the First Action.”

Appellant’s Brief at 13.

[19] The Bank’s argument ignores the undisputed fact that the Grants’ personal

liability under the note and mortgage had been discharged in bankruptcy.

Accordingly, the relief sought in both foreclosure actions was precisely the same

and the First Foreclosure Action fully contemplated nonpayment due to the

bankruptcy. A review of the respective complaints, in fact, reveals that they

were based on the same alleged default. Cf. Afolabi v. Atl. Mortgage & Inv. Corp.,

849 N.E.2d at 1175 (“the facts necessary to establish a default in the first

foreclosure action are different from the facts necessary to establish a default in

the second foreclosure action”); Deutsche Bank Nat’l Trust Co. v. Harris,

985 N.E.2d 804

, 816 (Ind. Ct. App. 2013) (“subsequent and separate alleged

defaults under the note create a new and independent right in the mortgagee to

accelerate payment on the note in a subsequent foreclosure action”).

Unsatisfied with Judge Reid’s refusal to reinstate the First Foreclosure Action

and apparently unwilling to appeal that ruling, the Bank chose to re-institute the

exact same claim in a new lawsuit. This was improper.

[20] Finally, we turn to the Bank’s claim that the Grants have waived their T.R. 41

argument. From the beginning of this cause, the Grants have insisted (on

various grounds) that the Bank could not refile a new lawsuit to avoid dismissal

of the First Foreclosure Action. This issue was litigated on res judicata grounds

as a result of the Grants’ T.R. 12(b)(6) motion to dismiss filed in 2010. The

Grants raised the issue again in 2013 in response to the Bank’s summary

Court of Appeals of Indiana | Opinion 49A05-1404-MF-139 | April 6, 2015 Page 8 of 9
judgment motion, invoking T.R. 12(b)(8) and T.R. 41(F). At the summary

judgment hearing, the issue was once again litigated and the trial court

expressly requested that the Bank file a written response to the Grants’

arguments. In its written opposition to the motion to dismiss, the Bank

addressed the merits of the T.R. 41 issue and did not argue waiver. On the

record before us, we find the Bank’s belated waiver argument disingenuous and

without merit.3

[21] The Bank improperly attempted to circumvent Judge Reid’s T.R. 41 ruling by

filing an entirely new complaint raising identical legal and factual issues. This

violated both T.R. 41 and principles of res judicata. Accordingly, the trial court

erred when it granted summary judgment in favor of the Bank. The trial court

is directed on remand to vacate the grant of summary judgment and dismiss the

Bank’s complaint.

[22] Judgment reversed and cause remanded with instructions.

Kirsch, J., and Crone, J. concur.

3
In support of its waiver argument, the Bank relies on a number of cases applying Indiana Appellate Rule
46(C), which provides that no new issues shall be raised in a reply brief. This rule applies to appellate briefs
and, of course, has no applicability to trial court filings. We are perplexed by the Bank’s reliance on these
cases with respect the Grants’ summary judgment filings.

Court of Appeals of Indiana | Opinion 49A05-1404-MF-139 | April 6, 2015 Page 9 of 9

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Lloyd v. The Bank of New York Mellon | FL 4DCA – it cannot be said that the assignment of the note and the mortgage took place “prior to instituting the complaint.”

Lloyd v. The Bank of New York Mellon | FL 4DCA – it cannot be said that the assignment of the note and the mortgage took place “prior to instituting the complaint.”

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT

SUSAN LLOYD and JAMES LLOYD,
Appellants,

v.

THE BANK OF NEW YORK MELLON f/k/a THE BANK OF NEW YORK, as Trustee for the Certificate Holders of CWABS, INC., Asset-Backed Certificates, Series 2006-6,
Appellee.

No. 4D13-3799

[March 25, 2015]

Appeal from the Circuit Court for the Fifteenth Judicial Circuit, Palm Beach County; Kenneth D. Stern, Judge; L.T. Case No. 502009CA 032165AW.

Bonnie S. Satterfield, Coral Springs, for appellants.
David W. Rodstein of Padula Hodkin, PLLC, Boca Raton, for appellee.

KLINGENSMITH, J.

Susan and James Lloyd (“Defendants”) executed a mortgage agreement and a promissory note with ACCU Funding Corporation (“ACCU”) for a loan, but later defaulted on their mortgage by failing to make any payments. The Bank of New York Mellon f/k/a The Bank of New York, as Trustee for the Certificate Holders of CWABS Inc., Asset-Backed Certificates, Series 2006-6 (“Plaintiff”) filed its complaint against Defendants containing one count for foreclosure of the mortgage and one count to enforce a lost instrument. Defendants claim the Plaintiff failed to prove standing to bring this action. We agree.

A copy of the mortgage agreement between Defendants and ACCU was attached to the complaint, along with a copy of the promissory note bearing an undated blank endorsement from ACCU. Before trial, the Plaintiff filed the original promissory note with the court. The endorsement in blank on the version of the note filed with the initial complaint was altered on the second version of the note, to reflect an endorsement from ACCU to Countrywide Bank, N.A.1

Along with the original note, Plaintiff filed an assignment of mortgage from ACCU to Plaintiff dated one month after suit was filed, although the document also stated that the assignment was intended to “relate back” to the month preceding Plaintiff’s filing of the initial complaint. The trial court ruled that Plaintiff had standing to file the lawsuit, and entered a final judgment of foreclosure in favor of Plaintiff. We review the sufficiency of the evidence to prove standing to bring a foreclosure action de novo. Boyd v. Wells Fargo Bank, N.A., 143 So. 3d 1128, 1129 (Fla. 4th DCA 2014).

“A crucial element in any mortgage foreclosure proceeding is that the party seeking foreclosure must demonstrate that it has standing to foreclose.” See McLean v. JP Morgan Chase Bank Nat’l Ass’n, 79 So. 3d 170, 173 (Fla. 4th DCA 2012). Standing must exist at the time the foreclosure suit is filed. Id.; see also Vidal v. Liquidation Props., Inc., 104 So. 3d 1274, 1276 (Fla. 4th DCA 2013); GMAC Mortg., LLC v. Choengkroy, 98 So. 3d 781, 781 (Fla. 4th DCA 2012). A plaintiff may satisfy this burden by submitting “the note bearing a special endorsement in favor of the plaintiff, an assignment from payee to the plaintiff or an affidavit of ownership proving its status as holder of the note.” Rigby v. Wells Fargo Bank, N.A., 84 So. 3d 1195, 1196 (Fla. 4th DCA 2012).

When a plaintiff asserts standing based on an undated endorsement of the note, it must show that the endorsement occurred before the filing of the complaint through additional evidence, such as the testimony of a litigation analyst. See Sosa v. U.S. Bank Nat’l Ass’n, 153 So. 3d 950, 951 (Fla. 4th DCA 2014). In Sosa, this court held the bank failed to establish standing, because its litigation analyst did not clearly testify as to when the bank became the owner of the note. Id. at 951-52. Where a later-filed promissory note does not include the date upon which the endorsement was made, the plaintiff must provide “record evidence proving that it had the right to enforce the note on the date the complaint was filed.” McLean, 79 So. 3d at 174.

1 Where the endorsement on the promissory note attached to the initial complaint had nothing written on the “pay to the order of” line, that space on the original note contained a “Countrywide Bank, N.A.” stamp. None of the endorsements on either version of the note were dated, and there is no other information in the record that sheds any light on when these endorsements were made.

Here, Plaintiff called a witness who testified that while assignments do not always strictly occur on the dates shown on the document, he was unable to say whether the note attached to the initial complaint was the most recent copy of that document, and could only assume that was the case. He also did not provide any information definitively establishing that Plaintiff had possession of the note prior to the time it filed its initial complaint. As a result, Plaintiff was unable to prove it had “standing to bring a mortgage foreclosure complaint by establishing an assignment or equitable transfer of the note and mortgage prior to instituting the complaint.” Joseph v. BAC Home Loans Servicing, LP, No. 4D12-4137, 2015 WL 71842, at *1 (Fla. 4th DCA Jan. 7, 2015) (emphasis added) (citing McLean, 79 So. 3d at 173).

Plaintiff’s evidence supporting its claim that the assignment of the mortgage “related back” to before the suit commenced was also insufficient to prove standing in this case. The witness testified that he did not have any information, other than the document itself, to verify when the assignment took place. In situations where mortgage assignments have been back-dated to pre-date the filing of the initial complaint, this court has stated that:

[T]wo inferences can be drawn from the effective date language. One could infer that ownership of the note and mortgage were equitably transferred [on the earlier date], but one could also infer that the parties to the transfer were attempting to backdate an event to their benefit. Because the language yields two possible inferences, proof is needed as to the meaning of the language, and a disputed fact exists.
Vidal, 104 So. 3d at 1277 (footnote omitted).

As such, “[a]llowing assignments to be retroactively effective would be inimical to the requirements of pre-suit ownership for standing in foreclosure cases.” Id. at 1277 n.1.

Because neither the information included in the record nor the witness’s testimony resolved the issue of when the assignments to the Plaintiff occurred, it cannot be said that the assignment of the note and the mortgage took place “prior to instituting the complaint.” Joseph, 2015 WL 71842, at *1 (citing McLean, 79 So. 3d at 173). Since the trial court’s conclusion that Plaintiff had standing to foreclose is not supported by competent substantial evidence, we hereby reverse the final judgment of foreclosure entered in favor of Plaintiff, and remand this case to the trial court for entry of a judgment in favor of the Defendants. De Groot v.

Sheffield, 95 So. 2d 912, 916 (Fla. 1957) (stating that “the evidence relied upon to sustain the ultimate finding should be sufficiently relevant and material that a reasonable mind would accept it as adequate to support the conclusion reached”).

Reversed and Remanded with instructions.

GROSS and CONNER, JJ., concur.

* * *

Not final until disposition of timely filed motion for rehearing.

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BANK OF NEW YORK MELLON v. Carson, Wis: Supreme Court | Bank Must Sell Foreclosure Property Within a Reasonable Time if Abandoned

BANK OF NEW YORK MELLON v. Carson, Wis: Supreme Court | Bank Must Sell Foreclosure Property Within a Reasonable Time if Abandoned

 

The Bank of New York Mellon, fka The Bank of New York, as Trustee for CWABS, Inc. Asset-Backed Certificates, Series 2007-13, Plaintiff-Respondent-Petitioner,
v.
Shirley T. Carson, Defendant-Appellant,
Bayfield Financial LLC and Collins Financial Services, Defendants.

No. 2013AP544.
Supreme Court of Wisconsin.
Opinion Filed: February 17, 2015.
Oral Argument: September 23, 2014.
For the plaintiff-respondent-petitioner, there were briefs by Valerie L. Bailey-Rihn, Katherine Maloney Perhach and Quarles & Brady LLP, Madison and Milwaukee; and James W. McGarry, Keith Levenberg, and Goodwin Procter LLP, Boston and Washington. Oral argument by Valerie L. Bailey-Rihn.

For the defendant-appellant, there was a brief by April A.G. Hartman, Jeffrey R. Myer, and Legal Action of Wisconsin, Inc. Oral argument by April A.G. Hartman.

An amicus curiae brief by Grant F. Langley city attorney; Danielle M. Bergner, deputy city attorney; and Kail J. Decker, assistant city attorney, on behalf of the City of Milwaukee.

An amicus curiae brief by Catherine M. Doyle, Amanda E. Adrian, and Legal Aid Society of Milwaukee, Inc., on behalf of the Legal Aid Society of Milwaukee.

PROSSER, ZIEGLER, GABLEMAN, JJJ., concur.

ANN WALSH BRADLEY, J.

¶1 Petitioner, Bank of New York Mellon (“the Bank”), seeks review of a published decision of the court of appeals that reversed the circuit court’s denial of Shirley Carson’s motion to amend a judgment of foreclosure on her former home.[1] She requested that the court find the property to be abandoned and that it order a sale of the property upon expiration of five weeks from the date of entry of the amended judgment. The court of appeals concluded that the circuit court erroneously determined that it was without authority to grant the motion.

¶2 The Bank asserts that Wis. Stat. § 846.102 (2011-12)[2], the statute governing foreclosure of abandoned properties, does not require it to sell a property after it obtains a judgment of foreclosure and the redemption period has passed. It maintains that the statute is permissive, not mandatory, and that it cannot be required to sell a property. The Bank further contends that even if the statute does mandate that the Bank sell the abandoned property after the redemption period, it provides no deadline for doing so. Thus, the Bank concludes that it is free to execute on its judgment at any time within five years after rendition of the judgment, and the circuit court is without authority to order it to sell the property at a specific time.

¶3 Based on the statute’s plain language and context, we conclude that when the court determines that a property is abandoned, Wis. Stat. § 846.102 authorizes the circuit court to order a mortgagee to bring the property to sale after the redemption period. We further conclude, consistent with the purpose of the statute, that the circuit court shall order the property to be brought to sale within a reasonable time after the redemption period. The circuit court’s determination of what constitutes a reasonable time should be based on the totality of the circumstances in each case.

¶4 In this case, the circuit court did not reach the issue of whether the property had been abandoned. Accordingly, we affirm the court of appeals and remand the cause to the circuit court for such a determination and further proceedings.

I

¶5 In 2007, Countrywide Home Loans loaned $52,000 to Carson. As security for the debt, Carson mortgaged her home on Concordia Avenue in Milwaukee, Wisconsin. After Carson defaulted on her payments, Countrywide and Carson entered an agreement modifying the terms of the loan. Subsequently, Carson again defaulted on the loan payments.

¶6 The Bank, as trustee for Countrywide, filed a complaint against Carson, seeking a judgment of foreclosure and sale of the mortgaged premises. Attempts to serve Carson at the Concordia Avenue property were unsuccessful. In his affidavit, the process server observed that the house appeared to be vacant. On his first visit he reported that the garage had been boarded, that the snow was not shoveled, there were no footprints in it, and there was no furniture in the house. Notes from his successive visits state that the snow was still not shoveled and there were still no footprints around the house.

¶7 Thereafter, the Bank published notice of the foreclosure action in a local newspaper. Carson, who was physically and financially unable to care for the property, did not file an answer or otherwise dispute the foreclosure. In April 2011, BAC Home Loan Servicing, LP, apparently a loan servicer for Countrywide, filed a City of Milwaukee Registration of Abandoned Property in Foreclosure form for the property.[3]

¶8 The circuit court entered a judgment in favor of the Bank. It determined that Carson owed the Bank $81,356.59. After acknowledging that the property was not owner occupied, the court directed that the property “shall be sold at public auction under the direction of the sheriff, at any time after three month(s) from the date of entry of judgment.” The judgment also enjoined both parties from committing waste on the premises and specified that in the event the property is abandoned by the defendants, the Bank “may take all necessary steps to secure and winterize the subject property.”

¶9 After the judgment was entered, the Bank did not take steps to secure the property. It was repeatedly burglarized and vandalized. At one point someone started a fire in the garage. Despite an order from the City of Milwaukee Department of Neighborhood Services to maintain the property, the Bank did not do so. Carson received notices of accumulated trash and debris, as well as notices of overgrown weeds, grass, and trees. The City imposed approximately $1,800 in municipal fines on her and she made payments of approximately $25 per month toward the fines.

¶10 By November 2012, more than 16 months after the judgment of foreclosure was entered, the Bank had not sold the property and had no plans to sell it. Carson filed a motion to amend the judgment to include a finding that the property was abandoned and an order that the sale of the premises be made upon expiration of five weeks from the date of entry of the amended judgment, pursuant to Wis. Stat. § 846.102.[4]

¶11 In support of her motion, Carson referenced the affidavit from the process server indicating that the house appeared vacant. She produced her own affidavit stating that she had terminated her utility accounts, that the property had been vandalized, that the doors and windows on the house had been boarded, and that the garage had been damaged by fire. She also produced the form the loan servicer filed with the City of Milwaukee registering the premises as an abandoned property, violation notices from the City indicating that there was trash and debris on the property, a copy of the complaint record from the City, and a re-inspection fee letter from the City.

¶12 The circuit court denied Carson’s motion. It observed that Wis. Stat. § 846.102 did not specifically grant it authority to order the Bank to sell the property at a specific time. It explained “I can’t find anywhere in the statute [Wis. Stat. § 846.102] that I have the authority to grant the relief that [Carson is] requesting.” The court further noted that the statute contemplates that the redemption period be elected by the mortgagee, not the borrower, and questioned whether a mortgagee could be compelled to execute a judgment when someone else is seeking the order. Accordingly, it stated, “I’m specifically finding that I don’t have the authority . . . so the motion is denied on those grounds.”

¶13 Carson appealed, arguing that under Wis. Stat. § 846.102 the circuit court did have the authority to order sale of the property upon expiration of the redemption period. The court of appeals agreed with Carson. Bank of New York v. Carson, 2013 WI App 153, ¶9, 352 Wis. 2d 205, 841 N.W.2d 573. It determined that “the plain language of the statute directs the court to ensure that an abandoned property is sold without delay, and it logically follows that if a party to a foreclosure moves the court to order a sale, the court may use its contempt authority to do so.” Id., ¶13. Accordingly, it reversed the circuit court and remanded the case. Id., ¶16.

II

¶14 This case presents two issues. First, we are asked to determine whether Wis. Stat. § 846.102 authorizes a circuit court to order a mortgagee to bring a property to sale. Second, we are asked whether a court can require a mortgagee to bring a property to sale at a certain point in time. Both questions require us to determine the scope of authority granted to the circuit court by Wis. Stat. § 846.102. Statutory interpretation is a question of law that we review independently of the determinations rendered by the circuit court and the court of appeals. Bank Mut. v. S.J. Boyer Constr., Inc., 2010 WI 74, ¶21, 326 Wis. 2d 521, 785 N.W.2d 462.

¶15 Our goal in statutory interpretation is to determine what the statute means so that it may be given its full, proper, and intended effect. State ex rel. Kalal v. Circuit Court for Dane Cnty., 2004 WI 58, ¶44, 271 Wis. 2d 633, 681 N.W.2d 110. Interpretation of a statute begins with an examination of the statutory language. Id., ¶45. “Statutory language is given its common, ordinary, and accepted meaning, except that technical or specially-defined words or phrases are given their technical or special definitional meaning.” Id.

¶16 In seeking to give a statute its intended effect, we are cognizant that “[a] statute’s purpose or scope may be readily apparent from its plain language or its relationship to surrounding or closely-related statutes—that is, from its context or the structure of the statute as a coherent whole.” Id., ¶49. Thus, statutory language is interpreted “in the context in which it is used; not in isolation but as part of a whole; in relation to the language of surrounding or closely-related statutes.” Id., ¶46.

¶17 Where the statutory language is ambiguous we turn to extrinsic sources, such as legislative history, to help us discern the meaning of a statute. Id., ¶51. “[A] statute is ambiguous if it is capable of being understood by reasonably well-informed persons in two or more senses.” Id., ¶47 (citations omitted).

III

¶18 We begin with the language of the statute at issue. Wisconsin Stat. § 846.102 governs actions for enforcement of mortgage liens on abandoned properties.[5] Under the statute, if the court makes an affirmative finding that a property has been abandoned, it shall enter a judgment stating that “the sale of such mortgaged premises shall be made upon the expiration of 5 weeks from the date when such judgment is entered.” Wis. Stat. § 846.102(1). It states:

(1) In an action for enforcement of a mortgage lien if the court makes an affirmative finding upon proper evidence being submitted that the mortgaged premises have been abandoned by the mortgagor and assigns, judgment shall be entered as provided in s. 846.10 except that the sale of such mortgaged premises shall be made upon the expiration of 5 weeks from the date when such judgment is entered. Notice of the time and place of sale shall be given under ss. 815.31 and 846.16 and placement of the notice may commence when judgment is entered.

Wis. Stat. § 846.102(1) (emphasis added).

¶19 The statute further permits entities other than the mortgagee to present evidence that a property had been abandoned and describes what type of evidence should be considered:

(2) In addition to the parties to the action to enforce a mortgage lien, a representative of the city, town, village, or county where the mortgaged premises are located may provide testimony or evidence to the court under sub. (1) relating to whether the premises have been abandoned by the mortgagor. In determining whether the mortgaged premises have been abandoned, the court shall consider the totality of the circumstances, including the following:

(a) Boarded, closed, or damaged windows or doors to the premises.

(b) Missing, unhinged, or continuously unlocked doors to the premises.

(c) Terminated utility accounts for the premises.

(d) Accumulation of trash or debris on the premises.

(e) At least 2 reports to law enforcement officials of trespassing, vandalism, or other illegal acts being committed on the premises.

(f) Conditions that make the premises unsafe or unsanitary or that make the premises in imminent danger of becoming unsafe or unsanitary.

Wis. Stat. § 846.102(2).

¶20 The plain language of the statute grants the circuit court the authority to order a bank to sell the property. Indeed, under the statute the court’s judgment must include a requirement that the property be sold. It provides that if the court makes a finding of abandonment then “judgment shall be entered as provided in s. 846.10 except that the sale of such mortgaged premises shall be made upon the expiration of 5 weeks from the date when such judgment is entered.”[6] Wis. Stat. § 846.102(1) (emphasis added).

¶21 Generally, “the word `shall’ is presumed mandatory when it appears in a statute.” Karow v. Milwaukee Cnty. Civil Serv. Comm’n, 82 Wis. 2d 565, 570, 263 N.W.2d 214 (1978); see also Norman J. Singer & J.D. Shambie Singer, 3 Sutherland Statutory Construction § 57:2 (7th ed. 2008) (“`Shall’ is considered presumptively mandatory unless there is something in the context or the character of the legislation which requires it to be looked at differently.”). We have previously interpreted “shall” as mandatory when used in Wis. Stat. ch. 846. GMAC Mortgage Corp. v. Gisvold, 215 Wis. 2d 459, 478, 572 N.W.2d 466 (1998).


¶22 We acknowledge, however, that although the word “shall” suggests that a statutory provision is mandatory, the legislature’s use of the word “shall” is not governed by a per se rule. See State v. R.R.E., 162 Wis. 2d 698, 707, 470 N.W.2d 283 (1991). This court has previously explained that “`[s]hall’ will be construed as directory if necessary to carry out the intent of the legislature.” Id.; see also State ex rel. Marberry v. Macht, 2003 WI 79, ¶15, 262 Wis. 2d 720, 665 N.W.2d 155 (court considers legislative intent in determining whether a statutory provision is mandatory or directory); State v. Thomas, 2000 WI App 162, ¶9, 238 Wis. 2d 216, 617 N.W.2d 230 (noting that factors to consider in determining whether a statute is mandatory include “the statute’s nature, the legislative objective for the statute, and the potential consequences to the parties, such as injuries or wrongs.”).

¶23 The context in which “shall” is used in Wis. Stat. § 846.102(1) indicates that the legislature intended it to be mandatory. First, when the legislature uses the terms “shall” and “may” in the same statutory section, it supports a mandatory reading of the term “shall” as the legislature is presumed to be aware of the distinct meanings of the words. GMAC Mortgage Corp., 215 Wis. 2d at 478; Karow, 82 Wis. 2d at 571; Singer 7 Singer, Sutherland Statutory Construction § 57:3. In Wis. Stat. § 846.102(1) the legislature used both “shall” and “may” indicating its intent that the words have different meanings.

¶24 Second, a comparison with the neighboring statutes also suggests that the term “shall” in Wis. Stat. § 846.102 was intended to be mandatory. The statutes on both sides of Wis. Stat. § 846.102 address mortgage foreclosures in other circumstances. Wisconsin Stat. § 846.101 addresses foreclosures on 20-acre properties.[7] Wisconsin Stat. § 846.103 addresses foreclosures on commercial properties and multifamily residences.[8] Under both statutes it is up to the mortgagee to elect whether to seek a foreclosure judgment. See Wis. Stat. § 846.101 (court enters judgment if mortgagee waives judgment of deficiency and permits the mortgagor to remain in possession of the property until it is sold); Wis. Stat. § 846.103 (same). In contrast to these neighboring statutes, Wis. Stat. § 846.102 does not require action by the mortgagee after it has initiated a foreclosure proceeding. It specifically permits entities other than the mortgagee to appear and submit evidence of abandonment. Wis. Stat. § 846.102(2). As the court of appeals stated, once a mortgagee has filed a foreclosure action, the focus of the proceeding is on the condition of the property, not the mortgagee’s preference. Bank of New York, 352 Wis. 2d 205, ¶12.

¶25 The Bank contends that the court of appeals’ interpretation of Wis. Stat. § 846.103 in Arch Bay Holdings LLC-Series 2008B v. Matson, No. 2013AP744, unpublished slip op. (Wis. Ct. App. Mar. 18, 2014), and Deutsche Bank Nat. Trust Co. v. Matson, No. 2012AP1981, unpublished slip op. (Wis. Ct. App. July 30, 2013), is dispositive on the issue of whether the court can require a mortgagee to sell an abandoned property. In Deutsche Bank, the court of appeals determined that the language in Wis. Stat. § 846.103 permitted the mortgagee to sell the property once the statutory prerequisites were met, but did not require it. No. 2012AP1981, ¶20. In Arch Bay, the court reached the same conclusion when interpreting a judgment containing the same language as the statute. No. 2013AP744, ¶17.

¶26 The Bank maintains that because the court of appeals determined that the language of Wis. Stat. § 846.103 was not mandatory, the same construction should be applied to Wis. Stat. § 846.102. However, as discussed above, Wis. Stat. § 846.103 and Wis. Stat. § 846.102 are significantly different statutes.[9] See supra ¶20. Further, Arch Bay and Deutsche Bank are unpublished and have no precedential authority. Wis. Stat. § 809.23(3)(b). Although they may be cited as persuasive authority, given the above discussion, they do not persuade us that the language in Wis. Stat. § 846.102 is permissive.

¶27 Considering the statute’s clear language and its context, the Bank’s argument that it cannot be required to sell a property under Wis. Stat. § 846.102 is unpersuasive. Wisconsin Stat. § 846.102 mandates that the court order a sale of the mortgaged premises if certain conditions are met. Those conditions do not depend on action by the mortgagee alone and are not dependent on its acquiescence or consent.

IV

¶28 Having determined that Wis. Stat. § 846.102 authorizes a court to order a mortgagee to bring a property to sale, we turn to consider whether a court can also require a mortgagee to bring a property to sale at a certain point in time.


¶29 Again, we begin with the words of the statute. It provides that “the sale of such mortgaged premises shall be made upon the expiration of 5 weeks from the date when such judgment [of foreclosure] is entered.” Wis. Stat. § 846.102(1). This language is indicative of the time frame a court must impose for the sale: “upon expiration of 5 weeks.”

¶30 The Bank asserts that even if Wis. Stat. § 846.102 mandates that the circuit court order a sale of the property after the redemption period, it provides no time limit for the sale. Absent any specific timeline, the Bank contends that it has five years to execute its judgment under Wis. Stat. § 815.04.[10]

¶31 We decline to adopt the Bank’s argument. We acknowledge that the word “upon” in Wis. Stat. § 846.102 is ambiguous as “upon expiration of 5 weeks from the date when such judgment is entered” could be read to mean any time after the five weeks but before the five years. It could also be interpreted to mean immediately upon expiration of five weeks or something in between. In discerning the answer to our inquiry, we examine here the context of the statute, its legislative history, and the purpose of the statute.

¶32 When considered in light of its neighboring statutes, the context of Wis. Stat. § 846.102 suggests that the legislature intended a prompt sale. Wisconsin Stat. § 846.101, addressing 20-acre properties, provides that if the mortgagee waives judgment of deficiency and permits the mortgagor to remain in the property until it is sold, the court shall enter a judgment that the property be sold after the expiration of six months from the date of the judgment. Wisconsin Stat. § 846.103, addressing foreclosures of commercial properties and multifamily residences, provides that the mortgagee waives judgment of deficiency and permits the mortgagor to remain in the property until it is sold, the court shall enter a judgment that the property be sold after the expiration of three months from the date of the judgment. Wis. Stat. § 846.103(2).

¶33 The statute at issue in this case, Wis. Stat. § 846.102, prompts faster sales with fewer requirements for abandoned premises than its neighboring statutes. It provides that upon finding abandonment, the court shall enter a judgment that the premises shall be sold after the expiration of five weeks. Wis. Stat. § 846.102(1). Unlike its neighboring statutes, Wis. Stat. § 846.102 does not contain the requirements that the mortgagee waive deficiency judgment and permit the mortgagor to remain on the premises in order for the court to order a sale. When viewed in light of its neighboring statutes, the loosened requirements in Wis. Stat. § 846.102 evince an intent to ensure a prompt sale of the property.

¶34 The contrary statutory intent asserted by the Bank is unconvincing. Referencing the redemption periods in Wis. Stat. §§ 846.101, 846.102 and 846.103, the Bank contends that the purpose behind the statute is to create delay so that defaulted borrowers will have one last chance to retain their properties. However, the Bank’s assertion ignores the differences between Wis. Stat. § 846.102 and those neighboring statutes. Wisconsin Stat. § 846.102 addresses properties that have been abandoned, properties which borrowers no longer have an interest in retaining. Thus, the policy concern of creating a delay does not appear to be implicated.

¶35 The legislative intent for a prompt sale is also supported by the legislative history of Wis. Stat. § 846.102. In 2011, Wis. Stat. § 846.102 was amended to shorten the redemption period for abandoned properties from two months to five weeks, to add subsection (2) permitting the city, town, village, or county to provide testimony or evidence of abandonment, and to indicate what sort of evidence of abandonment a court should consider. 2011 WI Act 136, §§ 1r, 2 (enacted Mar. 21, 2012). The Act was introduced as 2011 Senate Bill 307 with bipartisan support. Four individuals spoke at the public hearing on the bill: its sponsor, a representative of the City of Milwaukee, a representative of Legal Action of Wisconsin, and a representative of the Wisconsin Bankers Association. 2011 Senate Bill 307, Hearing before the Senate Committee on Financial Institutions and Rural Issues, 2011 Regular Session, Nov. 30, 2011. Each individual referenced that the bill’s intent was to help municipalities deal with abandoned properties in a timely manner.[11]

¶36 Two of the speakers explained that abandoned properties were a significant problem in Milwaukee. Such properties increase the crime rate and have a destabilizing impact on neighborhoods. This testimony echoes researchers’ findings that home abandonment leads to blight:

Abandoned homes substantially decrease the value of neighboring properties, which in turn lowers the tax revenue cities can collect to help alleviate the blight caused by abandonment. Moreover, abandoned homes become public nuisances, such as fire hazards, that can endanger the community.

Creola Johnson, Fight Blight: Cities Sue to Hold Lenders Responsible for the Rise in Foreclosures and Abandoned Properties, 2008 Utah L. Rev. 1169, 1171.[12]

¶37 Interpreting Wis. Stat. § 846.102 as permitting sale at any time within five years after judgment is entered would exacerbate the problem that the statute was meant to ameliorate. Such an interpretation would allow mortgagees to initiate foreclosures, but fail to bring the properties to sale for an extended period of time, leaving the properties in legal limbo.[13]

¶38 Multiple studies have remarked upon the negative impact of such a scenario. For example, a study by the Government Accountability Office determined that abandoned foreclosures create unsightly and dangerous properties that contribute to neighborhood decline. GAO, Mortgage Foreclosures: Additional Mortgage Servicer Actions Could Help Reduce the Frequency and Impact of Abandoned Foreclosures, GAO-11-93 at 29 (Nov. 2010). “[A]s a result of vandalism, exposure, and neglect, vacant properties can become worthless. . . . abandoned foreclosures that remain vacant for extended periods pose significant health, safety, and welfare issues at the local level.” Id. at 31.

¶39 Another study has observed that “[t]he result of these abandoned foreclosures has been devastating to cities and consumers throughout the country.” Judith Fox, The Foreclosure Echo: How Abandoned Foreclosures are Reentering the Market through Debt Buyers, 26 Loy. Consumer L. Rev. 25, 29-30 (2013). “With no threat of citation for nuisance violations, and thus little incentive to maintain the premises, many lenders very well may allow the properties they control to deteriorate.” Kristin M. Pinkston, In the Weeds: Homeowners Falling Behind on their Mortgages, Lenders Playing the Foreclosure Game, and Cities Left Paying the Price, 34 S. Ill. U.L.J. 621, 633 (2009). Failing to interpret Wis. Stat. § 846.102 as enabling a court to require a prompt sale would inhibit its use as a tool to address abandoned properties.

¶40 Because its context and the legislative history of Wis. Stat. § 846.102 clearly indicate that the statute was intended to help municipalities deal with abandoned properties in a timely manner, we decline to interpret it so as to permit properties to languish abandoned for five years. Cf. Waller v. Am. Transmission Co., 2013 WI 77, ¶108, 350 Wis. 2d 242, 833 N.W.2d 764 (construing statute in a manner to further the statutory purpose); Bank Mut., 326 Wis. 2d 521, ¶¶71-76 (interpreting Wis. Stat. § 846.103 in a manner consistent with the statute’s goals).

¶41 In order to give effect to the statute’s purpose, we interpret the requirement in Wis. Stat. § 846.102 that a court order an abandoned property to be brought to sale after the five week redemption period as a requirement that the court order the property to be brought to sale within a reasonable time after the redemption period. Admittedly, what is considered a reasonable time will vary with the circumstances of each case. The circuit court is in the best position to consider arguments and evidence on this issue. Thus, we leave it to the circuit court’s discretion to determine, after considering the totality of the circumstances, what a reasonable period of time may be for each case, in light of the statute’s purpose.

V

¶42 In this case, the circuit court did not determine whether the property on Concordia Avenue was abandoned. Rather, it denied Carson’s motion after concluding that it did not have the authority to order the mortgagee to bring the property to sale as requested by Carson. Given that we have concluded that the circuit court does have such authority, a finding as to whether the property has been abandoned is needed here. Absent a finding of abandonment, sale of the property cannot be ordered under Wis. Stat. § 846.102.

¶43 Accordingly, we remand the case to the circuit court to determine whether the Concordia property has been abandoned. If the court finds that the property has been abandoned, it shall consider the totality of the circumstances and, consistent with the statutory purpose, enter an order stating the reasonable time after the redemption period in which the mortgagee must bring the property to sale.

VI

¶44 In sum, based on the statute’s plain language and context we conclude that when the court determines that the property is abandoned, Wis. Stat. § 846.102 authorizes the circuit court to order a mortgagee to bring a mortgaged property to sale after the redemption period.

¶45 We further conclude, consistent with the purpose of the statute, that the circuit court shall order the property to be brought to sale within a reasonable time after the redemption period. The circuit court’s determination of what constitutes a reasonable time should be based on the totality of the circumstances in each case.

¶46 In this case, the circuit court did not reach the issue of whether the property had been abandoned. Accordingly, we affirm the court of appeals and remand the case to the circuit court for such a determination and further proceedings.

By the Court.—The decision of the court of appeals is affirmed and the cause is remanded to the circuit court.

¶47 DAVID T. PROSSER, J. (concurring).

I agree with the majority’s decision to affirm the court of appeals. I do not agree with the majority’s reasoning in support of this decision. In my view, the owner of real property may seek a judicial sale of the property when the owner’s authority to sell is impeded or otherwise in doubt. Wis. Stat. § 840.03(1)(g). However, the ultimate availability of this judicial “remedy” is dependent upon the equities involved, including recognition of the “interests in real property” of others. Wis. Stat. § 840.01. For the reasons stated below, I respectfully concur.

I

¶48 The majority opinion is preoccupied with an interpretation of Wis. Stat. § 846.102, which is part of the chapter on Real Estate Foreclosure. Chapter 846 is a detailed and vitally important chapter of the Wisconsin Statutes. Section 846.102, entitled “Abandoned premises,” is a significant provision within the chapter. A mistaken interpretation of this section is likely to have profound ramifications on real estate financing in Wisconsin.

¶49 The early sections of Chapter 846 set out foreclosure procedure in a variety of situations. Before examining these sections, I believe it is useful to reiterate several fundamental principles.

¶50 A mortgage has been defined as “any agreement or arrangement in which property is used as security.” Wis. Stat. § 851.15. “Wisconsin is a lien-theory state with regard to mortgages. A mortgage creates a lien on real property but does not convey title to the property to the mortgagee (lender).” Lawrence Sager, Wisconsin Real Estate Practice & Law 137 (11th ed. 2004).

¶51 In simple terms, a “mortgage conveys an interest in the real estate to the lender as security for the debt, while the mortgage note is a promise to repay the debt. Mortgages are the most common form of loan instruments in Wisconsin.” Id.

¶52 The foreclosure provisions of Chapter 846 are invoked by mortgagees (lenders) when a mortgagor (borrower) fails to repay a debt. The law provides protections for the mortgagor, so that a mortgagee cannot move too quickly against the mortgagor, and the mortgagor has a period to redeem the property after foreclosure.

¶53 As a practical matter, a mortgagee invokes the foreclosure provisions of Chapter 846 when its loan is not being repaid. However, foreclosure does not transfer ownership of the property to the mortgagee. Thus, the mortgagee does not control the mortgaged property after foreclosure, and it may end up receiving no payment on its loan until the property is sold and the sale is confirmed. As a result, the mortgagee normally has a strong incentive for a prompt sale after foreclosure.

¶54 The mortgagee is usually entitled to a deficiency judgment against the mortgagor in the event that sale of the property does not satisfy the debt. In truth, however, many mortgagors do not have the wherewithal to satisfy a deficiency judgment. This is one reason why the mortgagee may waive its right to a deficiency judgment in order to speed up sale of the property. There is no reason for the mortgagee to delay sale of the property unless there is a rational economic reason to do so.

¶55 Wisconsin Stat. § 846.10 is the basic foreclosure statute. It reads in part:

(1) If the plaintiff recovers the judgment shall describe the mortgaged premises and fix the amount of the mortgage debt then due and also the amount of each installment thereafter to become due, and the time when it will become due, and whether the mortgaged premises can be sold in parcels and whether any part thereof is a homestead, and shall adjudge that the mortgaged premises be sold for the payment of the amount then due and of all installments which shall become due before the sale, or so much thereof as may be sold separately without material injury to the parties interested, and be sufficient to pay such principal, interest and costs; and when demanded in the complaint, direct that judgment shall be rendered for any deficiency against the parties personally liable and, if the sale is to be by referee, the referee must be named therein.

Wis. Stat. § 846.10(1).

¶56 Subsection (2) then reads:

(2) . . . No sale involving a one- to 4-family residence that is owner-occupied at the commencement of the foreclosure action . . . may be held until the expiration of 12 months from the date when judgment is entered, except a sale under s. 846.101 or 846.102. . . . In all cases the parties may, by stipulation, filed with the clerk, consent to an earlier sale.

Wis. Stat. § 846.10(2).

¶57 Section 846.101 deals with foreclosure sales (primarily of residential property under 20 acres) in which the mortgagor has agreed to a shorter period of time for sale and redemption (six months) and the “plaintiff” (mortgagee) has elected in its complaint to waive its right to a deficiency judgment against the mortgagor.

¶58 Section 846.102 permits an even shorter period between foreclosure and sale (five weeks) when the court finds that the mortgagor has abandoned the property—that is, “relinquishment of possession or control of the premises whether or not the mortgagor or the mortgagor’s assigns have relinquished equity and title.” Wis. Stat. § 846.102(1).

¶59 Section 846.103 relates to “Foreclosures of commercial properties and multifamily residences.”

¶60 The mortgagee is the “plaintiff” under these four sections. The mortgagor does not need to sue the mortgagee because the mortgagor may stipulate to a sale without initiating litigation. Wis. Stat. § 846.10(2).

¶61 That the mortgagee is the “plaintiff” under Wis. Stat. § 846.102 is clear from the opening phrase of the section: “In an action for enforcement of a mortgage lien. . . .” The mortgagee has the “mortgage lien” on mortgaged property as well as standing to enforce the lien; the mortgagor does not have either. Moreover, although § 846.102 does not use the word “plaintiff,” as surrounding §§ 846.10, 846.101, and 846.103 do, § 846.102 refers back to § 846.10: “judgment shall be entered as provided in s. 846.10. . . .”

¶62 Any notion that a municipality could bring an action under § 846.102 is belied by the language in subsection (2), which limits the role of “a representative” of a municipality to providing testimony or evidence of abandonment.[1]

II

¶63 In this case, the Bank of New York brought suit against Shirley Carson under Wis. Stat. § 846.101. The Bank waived its right to a deficiency judgment. The complaint, filed January 25, 2011, reads in part:

6. The mortgagors expressly agreed to the reduced redemption period provisions contained in Chapter 846 of the Wisconsin Statutes; the plaintiff hereby elects to proceed under section 846.101 with a six month period of redemption, thereby waiving judgment for any deficiency against every party who is personally liable for the debt, and to consent that the owner, unless he or she abandons the property, may remain in possession and be entitled to all rents and profits therefrom to the date of confirmation of the sale by the court.

¶64 The Milwaukee County Circuit Court, Mel Flanagan, Judge, entered a default judgment (Findings of Fact, Conclusions of Law and Judgment) on June 13, 2011. The court found that “the mortgaged premises . . . shall be sold at public auction under the direction of the sheriff, at any time after three month(s) from the date of entry of judgment.” (Emphasis added.) The court also found “THAT NO DEFICIENCY JUDGMENT MAY BE OBTAINED AGAINST ANY DEFENDANT.” The court determined that the mortgagor’s indebtedness totaled $81,356.59.

¶65 The mortgagor made no effort to redeem the property. In fact, she abandoned the property, according to an affidavit she filed with the court on November 6, 2012.


¶66 On the same date, the mortgagor filed a motion in the original foreclosure case. The mortgagor brought the motion under Wis. Stat. §§ 806.07(g) & (h) and 846.102. The motion sought to reopen the foreclosure judgment pursuant to Wis. Stat. § 806.07 and to compel the Bank to sell the mortgaged property “upon the expiration of 5 weeks from the date of entry of the amended judgment” under Wis. Stat. § 846.102.

¶67 As the majority opinion notes, the Milwaukee County Circuit Court, Jane Carroll, Judge, denied the motion. The court “observed that Wis. Stat. § 846.102 did not specifically grant it authority to order the Bank to sell the property at a specific time.” Majority op., ¶12.

It explained “I can’t find anywhere in the statute [Wis. Stat. § 846.102] that I have the authority to grant the relief that [Carson is] requesting.” The court further noted that the statute contemplates that the redemption period be elected by the mortgagee, not the borrower, and questioned whether a mortgagee could be compelled to execute a judgment when someone else is seeking the order. Accordingly, it stated, “I’m specifically finding that I don’t have the authority . . . so the motion is denied on those grounds.”

Id.

¶68 The court of appeals reversed. Bank of New York v. Carson, 2013 WI App 153, 352 Wis. 2d 205, 841 N.W.2d 573. The court of appeals criticized the Bank (mortgagee) for not maintaining the property. Id., ¶5. More important, the court of appeals concluded that a mortgagor could rely on Wis. Stat. § 846.102 to compel a sale of the mortgagor’s property:

We . . . conclude that the trial court erred as a matter of law when it concluded that only the Bank could elect the five-week abandonment period provided in the statute. The trial court could have . . . decided to amend the judgment to a foreclosure of an abandoned property as described by § 846.102.

Id., ¶12. The court of appeals added:

The statutory language also makes clear that the trial court did have the power to order the Bank to sell the property upon the expiration of the redemption period. . . . We conclude that the plain language of the statute directs the court to ensure that an abandoned property is sold without delay, and it logically follows that if a party to a foreclosure moves the court to order a sale, the court may use its contempt authority to do so.

Id., ¶13.

¶69 The majority affirms the court of appeals without disavowing these pronouncements. On the contrary, the majority adopts the method of statutory interpretation used by the court of appeals, see majority op., ¶¶18, 20, 21, 23, 24, to reach the following conclusions:

(1) “The plain language of [Wis. Stat. § 846.102] grants the circuit court the authority to order a bank to sell the property.” Id., ¶20. “[I]f the court makes a finding of abandonment then `judgment shall be entered as provided in s. 846.10 except that the sale of such mortgaged premises shall be made upon the expiration of 5 weeks from the date when such judgment is entered.’ Wis. Stat. § 846.102(1) (emphasis added).” Id. (footnote omitted).

(2) “The context in which `shall’ is used in Wis. Stat. § 846.102(1) indicates that the legislature intended it to be mandatory.” Id., ¶23.

(3) “Wis. Stat. § 846.102 does not require action by the mortgagee after it has initiated a foreclosure proceeding. . . . As the court of appeals stated, . . . the focus of the proceeding is on the condition of the property, not the mortgagee’s preference.” Id., ¶24.

(4) “Considering the statute’s clear language and its context, the Bank’s argument that it cannot be required to sell a property under Wis. Stat. § 846.102 is unpersuasive. Wisconsin Stat. § 846.102 mandates that the court order a sale of the mortgaged premises if certain conditions are met. Those conditions do not depend on action by the mortgagee alone and are not dependent on its acquiescence or consent.” Id., ¶27.

(5) “[W]e turn to consider whether a court can also require a mortgagee to bring a property to sale at a certain point in time.” Id., ¶28. “[W]e begin with the words of the statute. . . . This language is indicative of the time frame a court must impose for the sale: `upon expiration of 5 weeks.'” Id., ¶29.

(6) “[T]he context of Wis. Stat. § 846.102 suggests that the legislature intended a prompt sale.” Id., ¶32. “The legislative intent for a prompt sale is . . . supported by the legislative history. . . .” Id., ¶35.

¶70 I acknowledge that the majority opinion softens its holdings by requiring a court acting under Wis. Stat. § 846.102 to order mortgaged property to be “brought to sale within a reasonable time after the redemption period.” Id., ¶41. But this statement is inconsistent with the majority’s overall interpretation of the statute.

III

¶71 The majority opinion radically revises the law on mortgage foreclosure. Under Wisconsin law, a lending institution like the Bank of New York does not own the property upon which it holds a mortgage as security for a debt. The mortgagee’s obvious goal is to be repaid on its loan, with interest for the use of its money. When this goal becomes infeasible, the mortgagee prudently seeks to minimize its loss. Sometimes the mortgagee delays the sale of foreclosed property in the expectation that the circumstances for sale will improve. The majority opinion substantially impairs the mortgagee’s ability to minimize or mitigate a loss.

¶72 The opinion shifts to the circuit court the authority to set the date for sale of abandoned property. It gives the court authority to disregard the preferences of the mortgagee as to the timing of the sale when the mortgagee files for foreclosure under Wis. Stat. §§ 846.10, 846.101, or 846.102.

¶73 Because of this loss in flexibility, mortgagees are likely to act to protect their interests. For instance, the costs of borrowing money to finance residential real estate transactions are likely to go up, and some potential borrowers will be denied loans altogether.

¶74 Under the new regime, thousands of foreclosed properties statewide may have to be scheduled for sale within a few months of this decision because they have already been held by mortgagees without sale for an “unreasonable” period after foreclosure.

¶75 These consequences are not discussed by a majority that is a bit too eager to depict mortgage lenders as the source of the problem.

¶76 Knowing what they face if they file for foreclosure when the timing is not propitious, many mortgagees may choose not to file foreclosure actions. If mortgagees forego filing, leverage will transfer from mortgagees to non-paying mortgagors.

¶77 Still, some mortgagors may wish to extricate themselves from their continuing ownership responsibilities.

¶78 The majority attempts to preclude a mortgagor from becoming a plaintiff under Wis. Stat. § 846.102, majority op.,


¶18 n.5, by suggesting that only a mortgagee may initiate an action under Chapter 846. This is a correct interpretation of the chapter. However, it does not account for Wis. Stat. § 840.03.

¶79 Wisconsin Stat. § 840.01(1) defines the term “interest in real property.”[2] The definition implicates those who own or hold title to land (like Shirley Carson) and those with “security interests and liens on land” (like the Bank of New York).

¶80 Wisconsin Stat. § 840.03 then provides: Real property remedies. (1) Any person having an interest in real property may bring an action relating to that interest, in which the person may demand the following remedies singly, or in any combination, or in combination with other remedies not listed, unless the use of a remedy is denied in a specified situation:

(a) Declaration of interest.

(b) Extinguishment or foreclosure of interest of another.

(c) Partition of interest.

(d) Enforcement of interest.

(e) Judicial rescission of contract.

(f) Specific performance of contract or covenant.

(g) Judicial sale of property and allocation of proceeds.

(h) Restitution.

(i) Judicial conveyance of interest.

(j) Possession.

(k) Immediate physical possession.

(l) Restraint of another’s use of, or activities on, or encroachment upon land in which plaintiff has an interest.

(m) Restraint of another’s use of, activities on, or disposition of land in which plaintiff has no interest; but the use, activity or disposition affect plaintiff’s interest.

(n) Restraint of interference with rights in, on or to land.

(o) Damages.

(2) The indication of the form and kind of judgment in a chapter dealing with a particular remedy shall not limit the availability of any other remedies appropriate to a particular situation.

(Emphasis added.)

¶81 Section 840.03 includes in its listed remedies “Judicial sale of property” and “Judicial conveyance of interest.” Mortgagors may seek to secure one of these remedies to escape the responsibilities of ownership.

¶82 As I read the statute, the owner of property may “bring an action” for a judicial sale or a judicial conveyance of interest. Although a mortgagor may not be able to serve as plaintiff in a foreclosure action under any of the foreclosure statutes, e.g., Wis. Stat. §§ 846.10, 846.101, 846.102, and 846.103, the mortgagor may be able to invoke the new principles this court has discovered in Wis. Stat. § 846.102 when it “brings an action” for judicial sale or conveyance of interest under Wis. Stat. § 840.03(1).

¶83 Wisconsin Stat. § 840.03(1) has been part of Wisconsin law for 40 years. See § 16, Chapter 189, Laws of 1973 (creating Wis. Stat. § 840.03(1) (1974)). It has been interpreted as creating substantive rights. SJ Props. Suites v. Specialty Fin. Grp., LLC, 864 F. Supp. 2d 776 (E.D. Wis. 2012). Nonetheless, a mortgagor seeking the sale of his or her property or the conveyance of his or her property under Wis. Stat. § 840.03(1) would heretofore have been required to show that the mortgagor was entitled equitably to this remedy, inasmuch as it is clear that a defaulting mortgagor does not have the same powers and prerogatives as a mortgagee under Wis. Stat. § 846.102.

¶84 “An action to foreclose a mortgage is equitable in nature.” Wis. Brick & Block Corp. v. Vogel, 54 Wis. 2d 321, 327, 195 N.W.2d 664 (1972) (citing Frick v. Howard, 23 Wis. 2d 86, 96, 126 N.W.2d 619 (1964)); see also Harbor Credit Union v. Samp, 2011 WI App 40, ¶19, 332 Wis. 2d 214, 796 N.W.2d 813; JP Morgan Chase Bank, NA v. Green, 2008 WI App 78, ¶11, 311 Wis. 2d 715, 753 N.W.2d 536; First Fin. Sav. Ass’n v. Spranger, 156 Wis. 2d 440, 444, 456 N.W.2d 897 (Ct. App. 1990). This equity prevails throughout the proceedings. GMAC Mortg. Corp. v. Gisvold, 215 Wis. 2d 459, 480, 572 N.W.2d 466 (1998). The court’s discretion should be exercised so that “no injustice shall be done to any of the parties.” Strong v. Catton, 1 Wis. 408, 424 (1853).

¶85 Considering equity, a mortgagee may want to delay the sale of mortgaged property that has been abandoned for legitimate economic reasons. Admittedly, the mortgagee might be forced to recognize that such a delay will constitute a burden on the mortgagor in terms of maintenance and taxes. Consequently, it is not inherently unreasonable for a mortgagor to seek relief from such a burden, inasmuch as it is unrealistic to expect that a mortgagor will properly maintain and pay the taxes on property it has abandoned. At the same time, however, if the mortgagee is expected to assume responsibility for abandoned property, the mortgagee must be given reasonable options, even if unpalatable, rather than be forced into an unwanted sale without the protection of the equitable principles upon which mortgage foreclosures rest.

¶86 The majority opinion alters these principles by its interpretation of Wis. Stat. § 846.102. It forces prompt public sales despite the objection of the mortgagee. This interpretation of Wis. Stat. § 846.102 does not comport with the statute’s language or its legislative history and will often be inequitable to the mortgagee. Even a mortgagee that conscientiously maintains abandoned property may be forced to sell it quickly at the direction of the court.

¶87 I agree that the mortgagor here is entitled to seek the statutorily recognized remedy of “sale,” but only as provided under Wis. Stat. § 840.03(1)(g), prior to the court’s mistaken interpretation of Wis. Stat. § 846.102. For the reasons set forth, I respectfully concur.

¶88 I am authorized to state that Justice ANNETTE KINGSLAND ZIEGLER and Justice MICHAEL J. GABLEMAN join this concurrence.

[1] Bank of New York v. Carson, 2013 WI App 153, 352 Wis. 2d 205, 841 N.W.2d 573 (reversing judgment of the circuit court for Milwaukee County, Jane V. Carroll, judge).

[2] All subsequent references to the Wisconsin Statutes are to the 2011-12 version unless otherwise indicated.

[3] “Loan servicers are the entities that collect payments for mortgages, provide billing and tax payments to the homeowners, and have sole control over the modification of a loan.” Andrew Peace, Coming Up for Air: The Constitutionality of Using Eminent Domain to Condemn Underwater Mortgages, 54 B.C. L. Rev. 2167, 2178 n.82 (2013).

[4] Wisconsin Stat. § 846.102(1) states:

In an action for enforcement of a mortgage lien if the court makes an affirmative finding upon proper evidence being submitted that the mortgaged premises have been abandoned by the mortgagor and assigns, judgment shall be entered as provided in s. 846.10 except that the sale of such mortgaged premises shall be made upon the expiration of 5 weeks from the date when such judgment is entered.

[5] The language of the statute and its placement within chapter 846 indicate that it governs only foreclosure actions initiated by mortgagees.


[6] Wisconsin Stat. § 846.10 states, in relevant part:

(1) If the plaintiff recovers the judgment shall describe the mortgaged premises and fix the amount of the mortgage debt then due and also the amount of each installment thereafter to become due, and the time when it will become due, . . . and shall adjudge that the mortgaged premises be sold for the payment of the amount then due . . . and when demanded in the complaint, direct that judgment shall be rendered for any deficiency against the parties personally liable. . . . (2)

[7] Wisconsin Stat. § 846.101 states:

(1) If the mortgagor has agreed . . . to the provisions of this section, and the foreclosure action involves a one- to 4-family residence that is owner-occupied at the commencement of the action . . . the plaintiff in a foreclosure action of a mortgage on real estate of 20 acres or less . . . may elect . . . to waive judgment for any deficiency which may remain due to the plaintiff after sale of the mortgaged premises . . . and to consent that the mortgagor, unless he or she abandons the property, may remain in possession of the mortgaged property and be entitled to all rents, issues and profits therefrom to the date of confirmation of the sale by the court.

(2) When plaintiff so elects, judgment shall be entered as provided in this chapter, except that . . . the sale of such mortgaged premises shall be made upon the expiration of 6 months from the date when such judgment is entered.

[8] Wisconsin Stat. § 846.103 provides:

(1) No foreclosure sale involving real property other than a one- to 4-family residence that is owner-occupied at the commencement of the foreclosure action. . . may be held until the expiration of 6 months from the date when judgment is entered except a sale under sub. (2). . . .

(2) If the mortgagor of real property other than a one- to 4-family residence that is owner-occupied at the commencement of the foreclosure action . . . has agreed . . . to the provisions of this section, the plaintiff in a foreclosure action of a mortgage. . . may elect by express allegation in the complaint to waive judgment for any deficiency which may remain due to the plaintiff after sale of the mortgaged premises . . . and to consent that the mortgagor, unless he or she abandons the property, may remain in possession of the mortgaged property and be entitled to all rents, issues and profits therefrom to the date of confirmation of the sale by the court. When the plaintiff so elects, judgment shall be entered as provided in this chapter, except that . . . the sale of the mortgaged premises shall be made upon the expiration of 3 months from the date when such judgment is entered.

[9] We decline to interpret the similar sale language in Wis. Stat. §§ 846.101 and 846.103 as it is not at issue in this case.

[10] Wisconsin Stat. § 815.04(1)(a) provides:

Upon any judgment of a court of record perfected as specified in s. 806.06 or any judgment of any other court entered in the judgment and lien docket of a court of record, execution may issue at any time within 5 years after the rendition of the judgment. When an execution has been issued and returned unsatisfied in whole or in part other executions may issue at any time upon application of the judgment creditor.

[11] The hearing can be viewed online at: http://www.wiseye.org/Programming/VideoArchive/ArchiveList.aspx? cm=152.

[12] The City of Milwaukee submitted an amicus brief detailing the scope of the City’s abandoned property problem. It noted that there are currently 4,900 vacant buildings in the City. According to the City’s records, approximately 400 of those 4,900 properties are currently in some stage of mortgage foreclosure.

Abandoned properties in Milwaukee are a magnet for crime and create unsafe conditions. The City explained that since 2011, its police department has responded to at least 2,025 burglaries, 93 aggravated assaults, 84 robberies, 44 sexual assaults, 36 sudden deaths, and 7 homicides at vacant buildings. Further, the City’s fire department reported a 163% increase in the number of fires occurring in vacant residential buildings between 2005 and 2012.

[13] Various terms are used to describe this situation, including: “abandoned foreclosure,” “bank walkaway,” “zombie title/property,” and “limbo loan.” See Judith Fox, The Foreclosure Echo: How Abandoned Foreclosures are Reentering the Market Through Debt Buyers, 26 Loy. Consumer L. Rev. 25, 31 (2013).

[1] The principal author of the bill creating subsection (2) of Wis. Stat. § 846.102, Senator Glenn Grothman, explained that the purpose of the legislation was to shorten the redemption period in abandonment cases from two months to five weeks and to permit municipalities to present evidence of abandonment. He testified: “The effects of this bipartisan bill will be modest, but they are an attempt to better balance the needs of municipalities and responsible homeowners while still protecting the rights of property owners who may have fallen on hard times.” Legislative Council File for 2011 S.B. 307, Letter from Sen. Glenn Grothman to Members of the Assembly Committee on Financial Institutions (Feb. 1, 2012), available at http://legis.wisconsin.gov/lc/comtmats/old/11files/sb0307_201112 01084222.pdf.

[2] Wisconsin Stat. § 840.01(1) reads:

(1) Except as provided in sub. (2), “interest in real property” includes estates in, powers under ch. 702 over, present and future rights to, title to, and interests in real property, including, without limitation by enumeration, security interests and liens on land, easements, profits, rights of appointees under powers, rights under covenants running with the land, powers of termination and homestead rights. The interest may be an interest that was formerly designated legal or equitable. The interest may be surface, subsurface, suprasurface, riparian or littoral.

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Gorel v. BANK OF NEW YORK MELLON | FL 5DCA – Bank failed to establish that it was entitled to summary judgment because it failed to properly refute their affirmative defense alleging Bank’s failure to provide them with pre-acceleration notice

Gorel v. BANK OF NEW YORK MELLON | FL 5DCA – Bank failed to establish that it was entitled to summary judgment because it failed to properly refute their affirmative defense alleging Bank’s failure to provide them with pre-acceleration notice

 

ADIEL GOREL AND FLCA TROPICAL HOLDINGS, LLC, Appellants,
v.
THE BANK OF NEW YORK MELLON, ETC., Appellee.

Case No. 5D13-165.
District Court of Appeal of Florida, Fifth District.
Opinion filed December 19, 2014.
Michael E. Rodriguez, of Foreclosure Defense Law Firm, PL, Tampa, for Appellants.

Elizabeth T. Frau and Jeffrey M. Gano, of Ronald R. Wolfe & Associates, PL, Tampa, for Appellee.

PER CURIAM.

Adiel Gorel and FLCA Tropical Holdings, LLC appeal the Final Summary Judgment of Mortgage Foreclosure in favor of The Bank of New York Mellon (Bank). Gorel and FLCA contend that Bank failed to establish that it was entitled to summary judgment because it failed to properly refute their affirmative defense alleging Bank’s failure to provide them with pre-acceleration notice as required by the terms of the mortgage. We agree, reverse the summary judgment under review, and remand this case for further proceedings. See Pavolini v. Williams, 915 So. 2d 251, 253 (Fla. 5th DCA 2005) (“`[T]he plaintiff must either disprove those defenses by evidence or establish their legal insufficiency. Thus, summary judgment is appropriate only where each affirmative defense has been conclusively refuted on the record.'” (citation omitted) (quoting The Race, Inc. v. Lake & River Recreational Props., Inc., 573 So. 2d 409, 410 (Fla. 1st DCA 1991))); see also Haven Fed. Sav. & Loan Ass’n v. Kirian, 579 So. 2d 730, 733 (Fla. 1991) (“A court cannot grant summary judgment where a defendant asserts legally sufficient affirmative defenses that have not been rebutted.”); Gray v. Union Planters Nat’l Bank, 654 So. 2d 1288, 1288 (Fla. 3d DCA 1995) (“`[W]here a defendant pleads an affirmative defense and the plaintiff does not by affidavit contradict or deny that defense, the plaintiff is not entitled to a summary judgment.'” (quoting Johnson & Kirby, Inc. v. Citizens Nat’l Bank of Ft. Lauderdale, 338 So. 2d 905, 906 (Fla. 3d DCA 1976))).

REVERSED and REMANDED.

SAWAYA, PALMER, and LAMBERT, JJ., concur.

NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND DISPOSITION THEREOF IF FILED.

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COMPLAINT | MONTGOMERY COUNTY, PENNSYLVANIA, RECORDER OF DEEDS v THE BANK OF NEW YORK MELLON et al | $100+ Million Dollar Suit Against Big Banks Due to MERS System

COMPLAINT | MONTGOMERY COUNTY, PENNSYLVANIA, RECORDER OF DEEDS v THE BANK OF NEW YORK MELLON et al | $100+ Million Dollar Suit Against Big Banks Due to MERS System

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA

MONTGOMERY COUNTY, PENNSYLVANIA,
RECORDER OF DEEDS, by and through
NANCY J. BECKER, in her official capacity as
the Recorder of Deeds of Montgomery County,
Pennsylvania, on its own behalf and on behalf
of all others similarly situated,
Plaintiff,

vs.

THE BANK OF NEW YORK MELLON, THE
BANK OF NEW YORK MELLON TRUST
COMPANY, N.A., CITIBANK, N.A., DEUTSCHE
BANK NATIONAL TRUST COMPANY,
DEUTSCHE BANK TRUST COMPANY
AMERICAS, HSBC BANK USA, N.A.,
JPMORGAN CHASE BANK, N.A., and WELLS
FARGO BANK, N.A.,
Defendants.

I. NATURE OF THE ACTION

1. The Montgomery County, Pennsylvania, Recorder of Deeds, by and through
Nancy J. Becker, the Montgomery County Recorder of Deeds, brings this action on its own
behalf and on behalf of a class of all other similarly situated Pennsylvania County Recorders of
Deeds (collectively, the “Recorders” or the “Class”) against The Bank of New York Mellon, The
Bank of New York Mellon Trust Company, N.A., Citibank N.A., Deutsche Bank National Trust
Company, Deutsche Bank Trust Company Americas, HSBC Bank, N.A., JPMorgan Chase N.A.,
and Wells Fargo Bank, N.A. (“Defendants”) to remedy Defendants’ failures to properly and
timely record mortgage assignments as required by Pennsylvania law.

2. Defendants have been among the most active participants in the mortgage-backed
securities (“MBS”) industry, including as trustees for numerous MBS trusts into which the
securitized mortgage loans are ultimately conveyed. In a securitization, a mortgage loan typically
is transferred multiple times before it is conveyed to the trustee on behalf of the MBS trust. Each
of the Defendants has engaged in transfers of mortgage loans secured by real property located in
Montgomery County and throughout Pennsylvania,

3. Each of the Defendants is also a member of, and participates in, the “MERS
System,” a private, members-only electronic registry for recording and tracking transfers of
mortgage loans without recording mortgage assignments in public land records offices.

4. In Montgomery County, Pa. v. MERSCORP, Inc., l1-CV-6968, 2014 WL
2957494 (E.D. Pa. Jun. 30,2014), this Court, per the Honorable 1. Curtis Joyner, entered a
declaratory judgment in Plaintiffs favor, finding that the failure to create and record mortgage
assignments evincing the transfers of promissory notes secured by mortgages on Pennsylvania
real estate, under the MERS System and otherwise, violates Pennsylvania recording statutes,
including 21 P.S. §§ 351,444 and 623-1.

5. Each of the Defendants has systematically failed to create and timely record mortgage
assignments in connection with transfers of promissory notes secured by mortgages on Pennsylvania
real estate, both when operating within the MERS System and otherwise. These failures to record
mortgage assignments have damaged the integrity of Pennsylvania’s public land records by
creating gaps in the chain of title and creating confusion amongst property owners and others
about the identity of the owners of their mortgages, and have wrongfully deprived the
Montgomery County Recorder of Deeds and all of the other Pennsylvania Recorders of millions
of dollars in recording fees, in violation of21 P.S. §§ 351,444 and 623-1 (together, the
“Pennsylvania Recording Statutes”). Plaintiff seeks an award of damages for these violations, to quiet
title on all of the adversely affected Pennsylvania properties by requiring Defendants to record the
missing mortgage assignments and pay the related recording fees, restitution for Defendants’ unjust
enrichment, and for declaratory and permanent injunctive relief

[…]

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MAGLOIRE v. Bank of New York, Fla: Dist. Court of Appeals, 4th Dist. 2014 | A trial court lacks jurisdiction to hear a case once it has been dismissed

MAGLOIRE v. Bank of New York, Fla: Dist. Court of Appeals, 4th Dist. 2014 | A trial court lacks jurisdiction to hear a case once it has been dismissed

 

MORIN MAGLOIRE and GERMAIN JEAN CLAUDE, Appellants,
v.
THE BANK OF NEW YORK as Trustee for the certificate holders CWABS, INC. ASSET-BACKED CERTIFICATES, SERIES 2006-23, Appellee.

No. 4D11-4540.
District Court of Appeal of Florida, Fourth District.
September 10, 2014.
S. Tracy Long of Law Offices of S. Tracy Long, P.A., Deerfield Beach (withdrawn as counsel after filing brief); Morin Magloire and Germain Jean-Clause, Lauderdale Lakes, pro se.

Michael P. Bruning of Connolly, Geaney, Ablitt & Willard, P.C., West Palm Beach, for appellee.

PER CURIAM.

The homeowners appeal the trial court’s order granting final summary judgment of foreclosure in favor of the bank. The homeowners argue that the trial court erred in granting the bank’s motion for summary judgment after the trial court previously dismissed the case for lack of prosecution. We agree.

On October 10, 2008, the bank filed a mortgage foreclosure complaint based on a mortgage and note executed by the homeowners in September of 2006. On October 15, 2008, the homeowners filed an answer to the complaint, in the form of a letter to the court, explaining that they had “experienced a serious hardships [sic] that have prevented [them] from making the mortgage payments on [their] primary residence.” Additionally, they stated that they were trying to work with the leader “to work out a re-instatement or re-payment plan.”

On November 19, 2009, the trial court filed a notice of intent to dismiss the bank’s complaint after there had been no record activity in the case since November 5, 2008. The trial court set a hearing on the issue, and the bank filed a statement asserting good cause as to why the action should remain pending.[1] Within its response, the bank stated that it was currently evaluating the homeowner’s loan to determine if the homeowners would qualify for a settlement offer, and asked the court to allow the case to remain open until the bank could complete negotiations with the homeowners. On December 16, 2009, the trial court entered a final order of dismissal of the bank’s complaint, because there was “no record activity > 1 yr (since 11/5/2008) and no good cause.”

On June 28, 2010, the bank filed a motion for summary judgment. Then, on November 9, 2011, a hearing was held on the bank’s motion for summary judgment. On the same date, the trial court entered a summary final judgment of foreclosure in favor of the bank. The homeowners appeal this order.

There were no transcripts provided of the motion for summary judgment hearing, and it is therefore unknown whether the homeowners raised the issue of the previous dismissal of the case and the trial court’s subsequent lack of jurisdiction over the case. However, “the issue of subject-matter jurisdiction . . . may be raised for the first time on appeal.” Rudel v. Rudel, 111 So. 3d 285, 291 (Fla. 4th DCA 2013).[2]

“Whether a court has subject matter jurisdiction is a question of law reviewed de novo.” Sanchez v. Fernandez, 915 So. 2d 192, 192 (Fla. 4th DCA 2005).

A trial court lacks jurisdiction to hear a case once it has been dismissed. See Gardner v. Nioso, 108 So. 3d 1122, 1123 (Fla. 1st DCA 2013) (“[B]y the trial court’s dismissal of the action against them, and the subsequent affirmance of that dismissal, the trial court no longer has jurisdiction over Appellees.”); Harrison v. La Placida Cmty. Ass’n, 665 So. 2d 1138, 1141 (Fla. 4th DCA 1996) (“Once [the defendat] was dismissed, the trial court no longer had jurisdiction over her.’); Ludovici v. McKiness, 545 So. 2d 335, 336 n.3 (Fla. 3d DCA 1989) (“A trial court lacks jurisdiction to vacate an order of dismissal without prejudice after the order becomes final. An exception to this finality is a Rule 1.540 motion. The trial court has jurisdiction to entertain a timely motion for rehearing or to revisit the cause on the court’s own initiative within the time allowed for a rehearing motion.”) (internal citations omitted); Derma Lift Salon, Inc v. Swanko, 419 So. 2d 1180, 1180-81 (Fla. 3d DCA 1982). (“The trial court’s order of dismissal entered May 11, 1982, albeit `without prejudice,’ was a final appealable order, subject to the further jurisdiction of the trial court only upon a timely filed motion for rehearing under Florida Rule of Civil Procedure 1.530.”) (internal citation omitted). Since there was no motion for rehearing or motion to vacate filed or ruled upon regarding the order of dismissal in the instant case, the trial court did not have jurisdiction to enter an order granting the bank’s subsequently-filed motion for summary judgment. Additionally, although the trial court’s final order of dismissal was entered “without prejudice to refile,” the bank never refiled the complaint prior to filing its motion for summary judgment.

The bank argues that the trial court’s order should be allowed to stand because it exercised its powers of “equitable jurisdiction” in granting the bank’s motion for summary judgment. However, we find the bank’s argument, basically that equitable jurisdiction can replace subject-matter jurisdiction, unconvincing. See Black’s Law Dictionary 18(c) (9th ed. 2009) (quoting William Q. de Funiak, Handbook of Modern Equity 38 (2d ed. 1956)) (“[T]he term equity jurisdiction does not refer to jurisdiction in the sense of the power conferred by the sovereign on the court over specified subject-matters or to jurisdiction over the res or the persons of the parties in a particular proceeding but refers rather to the merits. The want of equity jurisdiction does not mean that the court has no power to act but that it should not act, as on the ground, for example, that there is an adequate remedy at law.”) (emphasis added) (internal quotation marks omitted).

Therefore, we reverse the trial court’s order granting the bank’s motion for summary judgment and remand the case to the trial court for proceedings consistent with this opinion.

Reversed and remanded.

GROSS, GERBER and CONNER, JJ., concur.

Not final until disposition of timely filed motion for rehearing.

[1] “[T]he action shall be dismissed by the court on its own motion or on the motion of any interested person, whether a party to the action or not, after reasonable notice to the parties, unless a party shows good cause in writing at least 5 days before the hearing on the motion why the action should remain pending. Mere inaction for a period of less than 1 year shall not be sufficient cause for dismissal for failure to prosecute.” Fla. R. Civ. P. 1.420(e) (emphasis added).

[2] The type of jurisdiction at issue in the instant case is that of subject-matter jurisdiction. See Bernard v. Rose, 68 So. 3d 946, 948 (Fla. 3d DCA 2011) (referring to the trial court’s jurisdiction over a case after a dismissal for lack of prosecution as that of subject-matter jurisdiction).

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BANK OF NEW YORK MELLON v. Lopes, NM: Court of Appeals 2014 | Another Bad Day for MERS–This Time in New Mexico (MERS cannot assign the note and thus create standing in RMBS Trust)

BANK OF NEW YORK MELLON v. Lopes, NM: Court of Appeals 2014 | Another Bad Day for MERS–This Time in New Mexico (MERS cannot assign the note and thus create standing in RMBS Trust)

THE BANK OF NEW YORK MELLON f/k/a THE BANK OF NEW YORK, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS TRUSTEE FOR THE BENEFIT OF THE CERTIFICATE HOLDERS OF THE CWABS INC., ASSET-BACKED CERTIFICATES, SERIES 2006-16, Plaintiff-Appellee,
v.
SUZANNE LOPES, Defendant-Appellant, and
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. (SOLELY AS NOMINEE FOR LENDER AND LENDER’S SUCCESSOR AND ASSIGNS) and OSCAR D. FREITES, Defendants.

Docket No. 32,310.
Court of Appeals of New Mexico.

July 22, 2014.
The Castle Law Group, LLC, Peggy A. Whitmore, Elizabeth Mason, Albuquerque, NM, for Appellee.

Suzanne Lopes, Albuquerque, NM, Pro Se Appellant.

OPINION

VIGIL, Judge.

{1} Defendant, Suzanne Lopes (Homeowner), appeals from the district court order granting summary judgment in favor of Plaintiff, The Bank of New York Mellon (the Bank). Homeowner contends, among other things, that the Bank failed to show that it had standing to bring its foreclosure claim. We agree with Homeowner and reverse.

I. BACKGROUND

{2} Homeowner executed a promissory note to Countrywide Home Loans, Inc. (Countrywide), in the amount of $140,000 for the purchase of a home. Homeowner also signed a mortgage contract with Mortgage Electronic Registration Systems (MERS), as nominee for Countrywide, as security for the loan. On July 6, 2011, MERS assigned Homeowner’s mortgage to the Bank. On August 4, 2011, the Bank filed a complaint for foreclosure, asserting that the loan was in default. The complaint asserted that “[the Bank] is the owner of the [m]ortgage and the holder in due course of the [n]ote.” The Bank attached to the complaint copies of the mortgage and the mortgage assignment. Representing herself, Homeowner answered, asserting that to bring the action, the Bank was required to own both the mortgage and the promissory note. Because there was no evidence that the Bank owned the note, Homeowner contended that the Bank had no standing.

{3} On September 22, 2011, as an exhibit to the Bank’s response to a motion filed by Homeowner to disqualify counsel, the Bank attached a copy of a promissory note from Homeowner to Countrywide. The note was indorsed in blank by Michelle Sjolander, Executive Vice President of Countrywide. The indorsement was undated and appears to be signed by stamp rather than by hand. No evidence was presented to show when or how the Bank came into possession of the note. In any case, the Bank asserted that the assignment of the mortgage by MERS “effectively assign[ed] the [n]ote as well because . . . the [n]ote is secured by the [m]ortgage.” The Bank then filed a motion for summary judgment, which the district court granted, and it filed a decree of foreclosure on the home in favor of the Bank.

{4} Homeowner appeals, arguing that the Bank has no right to foreclose, which we construe to mean it has no standing to bring the action. In its amended answer brief, the Bank asserts that a copy of the mortgage and assignment of mortgage were attached to the original complaint and that substantial evidence supports the finding by the district court that it was a holder under the New Mexico Uniform Commercial Code (UCC) of Homeowner’s note.

II. DISCUSSION

{5} On appeal, Homeowner raises several issues in addition to standing. Because our disposition of the standing issue is dispositive, we do not reach the merits of the other issues.

A. Standard of Review

{6} “Summary judgment is appropriate where there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law.” Self v. United Parcel Serv., Inc., 1998-NMSC-046, ¶ 6, 126 N.M. 396, 970 P.2d 582. We review issues of law de novo. Id. “The movant need only make a prima facie showing that he is entitled to summary judgment. Upon the movant making a prima facie showing, the burden shifts to the party opposing the motion to demonstrate the existence of specific evidentiary facts which would require trial on the merits.” Roth v. Thompson, 1992-NMSC-011, ¶ 17, 113 N.M. 331, 825 P.2d 1241. Because we hold that there are material issues of fact and matters of law that preclude summary judgment, we reverse the order granting summary judgment to the Bank.

B. The Bank Lacks Standing

{7} Our Supreme Court “clarified that standing is a jurisdictional prerequisite.” Deutsche Bank Nat’l Trust Co. v. Beneficial N.M. Inc., 2014-NMCA-___, ___ P.3d ___, ¶ 8 (No. 31,503, May 1, 2014); see also Bank of N.Y. v. Romero, 2014-NMSC-007, ¶ 15, 320 P.3d 1 (“[L]ack of standing is a potential jurisdictional defect.” (alteration, internal quotation marks, and citation omitted)). Therefore, standing must be established as of the commencement of a suit. Bank of N.Y., 2014-NMSC-007, ¶ 17 (“[S]tanding is to be determined as of the commencement of suit.” (alteration in original) (internal quotation marks and citation omitted)); Deutsche Bank, 2014-NMCA-___, ¶ 8 (“[S]tanding . . . must be established at the time the complaint is filed.”); Lujan v. Defenders of Wildlife, 504 U.S. 555, 570 n.5 (1992) (“[S]tanding is to be determined as of the commencement of suit[.]”).

{8} In order for the Bank to establish standing to bring a suit for foreclosure against Homeowner, it was required to demonstrate the right to enforce both the promissory note and the mortgage lien on the property at the time it filed its complaint. See Bank of N.Y., 2014-NMSC-007, ¶ 17 (stating that the bank had the burden of establishing ownership of the note and the mortgage under the UCC at the time it filed suit); see also Deutsche Bank, 2014-NMCA-___, ¶ 8 (stating that in order to demonstrate standing in a foreclosure case, a lender must establish at the time of the complaint: “(1) a right to enforce the note, which represents the debt, and (2) ownership of the mortgage lien upon the debtor’s property”). The standing issue in this case pivots on whether the Bank demonstrated that it was entitled to enforce the note.

{9} The right to enforce negotiable instruments, which include notes for home loans like that of Homeowner, is governed by the UCC. See Bank of N.Y., 2014-NMSC-007, ¶ 19 (stating that notes for home loans are negotiable instruments and that the UCC governs enforcement of negotiable instruments). To establish the right to enforce Homeowner’s note under the UCC, the Bank was required to prove that at the time suit was filed, it was: “(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.” NMSA 1978, § 55-3-301 (1992). Because the Bank asserted in its complaint that it was a “holder in due course[,]” and on appeal argues that it was a holder,[1] we consider only whether the Bank had standing to bring suit as a holder, the first of the three ways to establish the right to enforce a negotiable instrument under the UCC.

{10} “Holder” is a term of art within the UCC. While it is necessary to possess a negotiable instrument to qualify as a holder, possession of a negotiable instrument is not of itself necessarily sufficient. See Bank of N.Y., 2014-NMSC-007, ¶ 21 (“The first requirement of being a holder is possession of the instrument. However, possession is not necessarily sufficient to make one a holder.” (internal quotation marks and citation omitted)). Because Homeowner’s note was originally made payable to Countrywide, not the Bank, this case concerns a non-payee to a note asserting the right to enforce as a holder. The UCC provides two paths by which a third party to a note can establish the right to enforce as a holder: (1) possession of the note properly indorsed specifically to the third party; or (2) possession of the note properly indorsed in blank—that is, properly indorsed but not to an identified person or entity. See NMSA 1978 § 55-1-201(b)(21) (2005) (stating that a holder is a person in possession of a negotiable instrument payable: (1) to bearer, or (2) to an identified person and who is that person); see § 55-1-201(b)(5) (identifying bearer paper as a negotiable instrument that has an indorsement in blank).

{11} The Bank argues that because it attached the assignment of mortgage made to the Bank by MERS that the Bank was entitled to enforce the note. This is not consistent with Bank of N.Y., which was decided by our Supreme Court while this case was pending. In Bank of N.Y., our Supreme Court concluded that MERS “is merely a nominee for [the lender] in the underlying [m]ortgage” and, as such, “lacked any authority to assign [the homeowners’] note.” 2014-NMSC-007, ¶ 35 (internal quotation marks omitted). The Court observed that a note and a mortgage serve distinct contractual functions—the note is the debt while the mortgage is a pledged security for the debt. Id. ¶ 17. Accordingly, the MERS assignment of mortgage to the Bank was ineffective to establish the Bank’s right to enforce the note.

{12} Neither the Bank’s attachment of a copy of Homeowner’s note, indorsed in blank, to its September 22, 2011 pleading nor its production of that note at the summary judgment hearing on July 17, 2012 established the Bank’s standing to bring the suit for foreclosure against Homeowner on July 6, 2011. Under the UCC, possession of a note properly indorsed in blank establishes the right to enforce that note. See id. ¶ 24 (stating a blank indorsement makes the negotiable instrument bearer paper and therefore payable to the person who is in possession). But again, in order to establish standing to bring a suit for foreclosure, the right to enforce the note must be established at the time the complaint is filed. See id. ¶ 17 (“Standing is to be determined as of the commencement of the suit . . . . the [bank] had the burden of establishing timely ownership of the note and the mortgage to support its entitlement to pursue a foreclosure action.” (alteration, internal quotation marks, and citation omitted)). In Deutsche Bank, we concluded that a note with an undated indorsement in blank, which was not produced at the time the complaint was filed, but only at trial, was insufficient to establish a bank’s standing to foreclose. 2014-NMCA-___, ¶ 13. As in Deutsche Bank, the Bank’s failure to establish that it had the right to enforce Homeowner’s note as of the date the complaint for foreclosure was filed constitutes a failure to establish the Bank’s standing to bring the suit and a jurisdictional defect.

{13} Because the Bank failed to establish that it had the right to enforce Homeowner’s note as of the time of the complaint, the Bank lacked standing to file a suit for foreclosure against Homeowner.

CONCLUSION

{14} The district court order is reversed, and this case is remanded for further proceedings consistent with this Opinion.

{15} IT IS SO ORDERED.

JAMES J. WECHSLER, Judge and TIMOTHY L. GARCIA, Judge, concurs.

[1] Holders in due course under the UCC are a subset of holders who “took the instrument (i) for value, (ii) in good faith, [and] (iii) without notice that the instrument is overdue or has been dishonored[,]” among other requirements. NMSA 1978, Section 55-3-302(a)(2) (1992). Holders in due course are immunized from certain “personal defenses” generally available to the maker of a note. See Cadle Co., Inc. v. Wallach Concrete, Inc., 1995-NMSC-039, ¶ 8, 120 N.M. 56, 897 P.2d 1104. We do not consider the Bank’s assertion of holder in due course status because the parties ignore it and because disposition of the case does not require our consideration thereof.

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Burt v. Bank of New York Mellon | California Ruling Supporting Glaski Case Issues and the Homeowners

Burt v. Bank of New York Mellon | California Ruling Supporting Glaski Case Issues and the Homeowners

Tentative Rulings for Department 403

3 Tentative Ruling

Re: Burt v. Bank of New York Mellon
Case No. 14CECG00641

Hearing Date: June 4th, 2014 (Dept. 403)

Motion: Defendants’ Demurrer to Complaint

Tentative Ruling:
To overrule the demurrer to the complaint, in its entirety. (Code Civ. Proc. §
430.10(e).) Defendants shall serve and file their answer within ten days of the date of
service of this order.

Explanation:
Defendants have demurred to the entire complaint on the ground that it fails to
state facts sufficient to constitute a cause of action. Their first argument is that plaintiffs
are required to allege that they are ready, willing and able to tender the entire amount
they owe under the loan in order to state a claim for wrongful foreclosure, or related
causes of action.

In Arnolds Management Corp. v. Eischen (1984) 158 Cal.App.3d 575, the Court of
Appeal stated, “It is settled that an action to set aside a trustee’s sale for irregularities in
sale notice or procedure should be accompanied by an offer to pay the full amount of
the debt for which the property was security.” (Arnolds Management Corp. v. Eischen
(1984) 158 Cal.App.3d 575, 578-579, emphasis added.)

Here, however, plaintiffs are not attempting to set aside a completed trustee’s
sale. They are instead trying to prevent the foreclosure sale from happening at all.
Thus, the rule stated in Arnolds Management does not apply here, because the
trustee’s sale has not yet taken place.

Also, in Glaski v. Bank of America, N.A. (2013) 218 Cal.App.4th 1079, the Fifth
District Court of Appeal held that a plaintiff who challenges a pending foreclosure
proceeding based on alleged defects in the assignment of the note and deed of trust
that render the assignment void does not have to allege tender in order to state a valid
claim for wrongful foreclosure and related claims.

“Tender is not required where the foreclosure sale is void, rather than voidable,
such as when a plaintiff proves that the entity lacked the authority to foreclose on the
property. [¶] Accordingly, we cannot uphold the demurrer to the wrongful foreclosure
claim based on the absence of an allegation that Glaski tendered the amount due
under his loan.” (Id. at 1100, internal citations omitted.)

Here, plaintiffs have alleged that the assignment of the note and deed of trust is
void because it was completed after the closing date of the trust. (Complaint, ¶¶ 21-
26.) Thus, plaintiffs are not required to allege tender of the full amount due under the
loan in order to support their claims. The court declines to sustain the demurrer to the
extent it is based on the tender rule.

Next, defendants argue that plaintiffs have not stated a claim under Civil Code
section 2923.6 because the statute only applies to “owner-occupied residential”
properties (Civil Code § 2924.15(a)), and plaintiffs have admitted that their property is
not residential. Plaintiffs have alleged that the County of Fresno refused to recognize
their property as residential, and County records only show a “mobile home” on the
property. (Complaint, ¶ 29.)

Section 2924.15(a) does not define what “residential” property is, but it does
state that “‘owner-occupied’ means that the property is the principal residence of the
borrower and is security for a loan made for personal, family, or household purposes.”
(Civ. Code, § 2924.15(a).) Here, the plaintiffs have alleged that the property is their
principal residence, and that it was security for the loan made for the personal, family
or household purposes. (Complaint, ¶¶ 28, 62.) While the property may not be
recognized as containing a residence in the County’s records, the plaintiffs have
adequately alleged that they are actually residing on the property, and that the loan
was made to purchase their family home. Therefore, plaintiffs have sufficiently alleged
that the property is “owner-occupied residential real property” for the purpose of
section 2923.6(a).

Defendants also argue that plaintiffs have not alleged any actual violation of
section 2923.6, because section 2923.6 only bars foreclosure proceedings when a loan
modification application is pending, and here the plaintiffs admit that they did not
submit their loan modification application until after the notice of default was issued.

Civil Code section 2923.6(c) states, in part, “If a borrower submits a complete
application for a first lien loan modification offered by, or through, the borrower’s
mortgage servicer, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized
agent shall not record a notice of default or notice of sale, or conduct a trustee’s sale,
while the complete first lien loan modification application is pending. A mortgage
servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice
of default or notice of sale or conduct a trustee’s sale until any of the following occurs:
(1) The mortgage servicer makes a written determination that the borrower is not
eligible for a first lien loan modification, and any appeal period pursuant to subdivision
(d) has expired.”

Here, plaintiffs allege that they were attempting to obtain a loan modification
application in June of 2013, but they did not actually receive the application until July
3rd, 2013. (Complaint, ¶¶ 38, 40.) They completed and submitted the loan modification
application on July 24th, 2013 by Federal Express. (Id. at ¶ 40.) However, the notice of
default was issued on June 21st, 2013, before the loan modification application was
completed or sent out. (Request for Judicial Notice, Exhibit 3. The court intends to take
judicial notice of the notice of default and the other documents attached to the
request for judicial notice as officially recorded documents.) Thus, plaintiffs cannot
show that the notice of default was issued in violation of section 2923.6.

On the other hand, plaintiffs also allege that defendants issued the notice of
trustee’s sale on February 12th, 2014, while the loan modification process was still
pending. (Complaint, ¶¶ 41-55.) The Bank appears to claim that the notice of trustee’s
sale was sent out after the first application for loan modification had been denied, and
before plaintiffs resubmitted a new application. However, the allegations of the
complaint appear to indicate that the first loan modification application was pending
at the time the notice of trustee’s sale was served on plaintiffs. (Complaint, ¶¶ 51, 55.)
Defendants have not shown that there was a written denial of the application before
the notice of trustee’s sale was issued. Therefore, the plaintiffs have sufficiently alleged
that the defendants violated section 2923.6 by issuing the notice of trustee’s sale while
the loan modification application was pending.

With regard to the second cause of action for wrongful foreclosure, defendants
argue that the plaintiffs cannot show that they were injured by the alleged irregularities
in the assignment process, as there was no change in their obligations under the note.
They also contend that plaintiffs have no standing to allege defects in the assignment,
because they were not parties to the assignment. However, the Fifth District Court of
Appeal rejected these arguments in Glaski v. Bank of America, supra, 218 Cal.App.4th
1079.

In Glaski, the Court of Appeal found that the plaintiff had alleged sufficient facts
to support claims for wrongful foreclosure, quiet title, declaratory relief, cancellation of
instruments, and unfair business practices under Business and Professions Code section
17200 based on alleged defects in the assignment of the note and deed of trust.
(Glaski, supra, at 1101.) The Glaski court found that the allegation that the assignment
was made after the closing date of the trust was sufficient to show that the assignment
was void, and thus the lender had no authority to foreclose on the property. (Id. at
1096-1097.) The Glaski court also rejected the argument that the borrower has no
standing to challenge the assignment because the borrower was not a party to the
assignment. (Id. at 1094-1095.)

Here, plaintiffs’ allegations are similar to those in Glaski, since plaintiffs are
alleging that the deed of trust and note were not transferred or assigned properly
before the closing date for the trust. (Complaint, ¶¶ 23-25.) Therefore, under Glaski, the
plaintiffs have stated a valid claim for wrongful foreclosure, because Bank of America
and Bank of New York allegedly have no standing to foreclose on the note.
Conversely, plaintiffs do have standing to assert the improper assignment, because
they are alleging that the assignment is void, and not just voidable. (Glaski, supra, at
1094-1095.) The court in Glaski did not require any showing that the borrower suffered
actual prejudice from the improper assignment, since the improper assignment
rendered the entire assignment void. (Ibid.) Therefore, the court intends to overrule the
demurrer to the second cause of action for wrongful foreclosure.

Likewise, the third cause of action for cancellation of the notice of default,
assignment of the deed of trust, and notice of trustee’s sale is also sufficiently alleged.

In Glaski, the court specifically found that plaintiff could state a claim for, among other
things, cancellation of the allegedly invalid instruments based on the defects in the
assignment. (Glaski, supra, at 1101.) Here, plaintiffs have made allegations that the
assignment was void, so the court will permit plaintiffs to proceed with their cancellation
of instruments cause of action and overrule the demurrer to the third cause of action.
For the same reasons, plaintiffs have adequately alleged their quiet title claim in
the fourth cause of action. Glaski specifically held that plaintiff could allege a quiet title
claim based on the same theory alleged in the present case. (Glaski, supra, at 1101.)
Defendants argue that plaintiffs cannot state a quiet title claim against them because
plaintiffs have not alleged full payment of the note. However, plaintiffs have alleged
that defendants have no authority to collect payments on the note or foreclose on the
property because of the improper assignment. (Complaint, ¶ 84.) Therefore, plaintiffs
do not have to allege that they paid the note in order to allege a quiet title claim
against defendants.

Finally, defendants demur to the plaintiffs’ fifth cause of action for unfair business
practices under Business and Professions Code section 17200, contending that plaintiffs
have not alleged a predicate violation of any statute, or that they have suffered any
loss of money or property as a result of defendants’ actions. However, as discussed
above, plaintiffs have adequately alleged violations of Civil Code section 2923.6 by
proceeding with the foreclosure while the loan modification application was pending,
as well as falsely claiming that they were entitled to collect on the note when allegedly
the assignment of the note and deed of trust was invalid. Thus, plaintiffs have
sufficiently alleged predicate violations of other laws to support their UCL claim. In
addition, plaintiffs have alleged that they are in danger of losing their home due to
defendants’ unfair business practices. Therefore, plaintiffs have sufficiently alleged their
claim under the UCL, and the court intends to overrule the demurrer to the fifth cause
of action.

Pursuant to CRC 3.1312 and CCP §1019.5(a), no further written order is necessary.
The minute order adopting this tentative ruling will serve as the order of the court and
service by the clerk will constitute notice of the order.

Tentative Ruling
Issued By: KCK on 6/3/2014 .
(Judge’s initials) (Date)

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BANK OF NEW YORK AS TRUSTEE vs HANNIBLE | FL 8th JUD. Cir. – ORDER GRANTING MOTION FOR RELIEF AND VACATING FINAL JUDGMENT AND JUDICIAL SALE

BANK OF NEW YORK AS TRUSTEE vs HANNIBLE | FL 8th JUD. Cir. – ORDER GRANTING MOTION FOR RELIEF AND VACATING FINAL JUDGMENT AND JUDICIAL SALE

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:

Peter C. Focks, Esq.
pfocks@nflalaw.com

Michael Bruning, Esq
mbruning@acdlaw.com

Tricia J. Druthiers, Esq.
tjd@lgplaw.com

J. Raldolph Liebler, Esq.
service@lgplaw.com

Smith, Hiatt & Diaz, P.A.
answers@shdlegalgroup.com

Glorimil R. Walker, Esq.
Three Rivers Legal Services
Gloria.walker@trls.org

_____________________________________
Mary A. Jarvis, Judicial Assistant

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THE BANK OF NEW YORK MELLON v PRECIADO | CA Supreme Court – Unlawful Detainer, Judgments Reversed

THE BANK OF NEW YORK MELLON v PRECIADO | CA Supreme Court – Unlawful Detainer, Judgments Reversed

Filed 8/19/13 (ordered published by Supreme Ct. 3/19/14)

SUPERIOR COURT OF CALIFORNIA
COUNTY OF SANTA CLARA
APPELLATE DIVISION

THE BANK OF NEW YORK MELLON,
Plaintiff and Respondent,

v.

VIDAL A. PRECIADO et al.,
Defendants and Appellants.

THE BANK OF NEW YORK MELLON,
Plaintiff and Respondent,

v.

ROLAND LUKE et al.,
Defendants and Appellants.

EXCERPTS:

THE COURT*
The appeal by appellants Vidal Preciado (“Preciado”), Roland Luke (“Luke”), and Kenneth Henderson (“Henderson”) (collectively, “Appellants”) from the unlawful detainer judgments entered on March 16, 2012, came on regularly for hearing and was heard and submitted on August 16, 2013. We hereby hold as follows:

[…]

Conclusion
The judgments entered on March 16, 2012, are REVERSED and the trial court is instructed to entered judgments in favor of Appellants. Appellants are the prevailing party and are entitled to costs on appeal. (See Cal. Rules of Court, rule 8.891(a)(2).)

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Bank of New York v. Romero | NM KICK ASS CASE – BONY did not introduce any evidence demonstrating that it was a party with the right to enforce the Romeros’ note either by an indorsement or proper transfer

Bank of New York v. Romero | NM KICK ASS CASE – BONY did not introduce any evidence demonstrating that it was a party with the right to enforce the Romeros’ note either by an indorsement or proper transfer

Bank of New York v. Romero, 33,224 (N.M. 2014)
New Mexico Supreme Court

Date Filed: February 13th, 2014

Status: Precedential

Docket Number: 33,224

Fingerprint: 3c58b2ff03a9ac5d37f59ef968e78224f47b5eb0

IN THE SUPREME COURT OF THE STATE OF NEW MEXICO

Opinion Number:

Filing Date: February 13, 2014

Docket No. 33,224

BANK OF NEW YORK as Trustee for POPULAR
FINANCIAL SERVICES MORTGAGE/PASS
THROUGH CERTIFICATE SERIES #2006,

Plaintiff-Respondent,

v.

JOSEPH A. ROMERO and MARY ROMERO,
a/k/a MARY O. ROMERO, a/k/a MARIA ROMERO,

Defendants-Petitioners.

ORIGINAL APPEAL ON CERTIORARI
James A. Hall, District Judge

Joshua R. Simms, P.C.
Joshua R. Simms
Albuquerque, NM

Frederick M. Rowe
Daniel Yohalem
Katherine Elizabeth Murray
Santa Fe, NM

for Petitioners

Rose Little Brand & Associates, P.C.
Eraina Marie Edwards
Albuquerque, NM

Severson & Werson
Jan T. Chilton
San Francisco, CA

for Respondents

1
Gary K. King, Attorney General
Joel Cruz-Esparza, Assistant Attorney General
Karen J. Meyers, Assistant Attorney General
Santa Fe, NM

for Amicus Curiae New Mexico Attorney General

Nancy Ana Garner
Santa Fe, NM

for Amicus Curiae Civic Amici

Rodey, Dickason, Sloan, Akin & Robb, P.A.
Edward R. Ricco
John P. Burton
Albuquerque, NM

James J. White
Ann Arbor, MI

for Amicus Curiae New Mexico Bankers Association

OPINION

DANIELS, Justice.

{1} We granted certiorari to review recurring procedural and substantive issues in home
mortgage foreclosure actions. We hold that the Bank of New York did not establish its
lawful standing in this case to file a home mortgage foreclosure action. We also hold that a
borrower’s ability to repay a home mortgage loan is one of the “borrower’s circumstances”
that lenders and courts must consider in determining compliance with the New Mexico
Home Loan Protection Act, NMSA 1978, §§ 58-21A-1 to -14 (2003, as amended through
2009) (the HLPA), which prohibits home mortgage refinancing that does not provide a
reasonable, tangible net benefit to the borrower. Finally, we hold that the HLPA is not
preempted by federal law. We reverse the Court of Appeals and district court and remand
to the district court with instructions to vacate its foreclosure judgment and to dismiss the
Bank of New York’s foreclosure action for lack of standing.

I. FACTUAL AND PROCEDURAL BACKGROUND

{2} On June 26, 2006, Joseph and Mary Romero signed a promissory note with Equity
One, Inc. to borrow $227,240 to refinance their Chimayo home. As security for the loan, the
Romeros signed a mortgage contract with the Mortgage Electronic Registration Systems

2
(MERS), as the nominee for Equity One, pledging their home as collateral for the loan.

{3} The Romeros allege that Equity One cold-called them and urged them to refinance
their home for access to their home’s equity. The terms of the Equity One loan were not an
improvement over their current home loan: Equity One’s interest rate was higher (starting
at 8.1 percent and increasing to 14 percent compared to 7.71 percent), the Romeros’ monthly
payments were greater ($1,683.28 compared to $1,256.39), and the loan amount due was
greater ($227,240 compared to $176,450). However, the Romeros would receive a cash
payout of nearly $43,000, which would cover about $12,000 in new closing costs and
provide them with about $30,000 to pay off other debts.

{4} Both parties agree that the Romeros’ loan was a no income, no assets loan (NINA)
and that documentation of their income was never requested or verified. The Romeros owned
a music store in Espanola, New Mexico, and Mr. Romero allegedly told Equity One that the
store provided him an income of $5,600 a month. Also known as liar loans because they are
based solely on the professed income of the self-employed, NINA loans have since been
specifically prohibited in New Mexico by a 2009 amendment to the HLPA and also by
federal law. See NMSA 1978, § 58-21A-4(C)-(D) (requiring a creditor to document a
borrower’s ability to repay); 15 U.S.C.A. § 1639c(a)(1) (2010) (requiring creditors to make
a reasonable and good-faith effort to determine a borrower’s ability to repay); see also Pub.
L. No. 111-203, § 1411(a)(1), 124 Stat. 2142 (2010) (same). The Romeros stated that they
did not read the note or the mortgage contracts thoroughly before signing them, allegedly
because of limited time for review, the complexity of the documents, and their own limited
education. They admit having signed a document prepared by Equity One reciting that the
home loan provided them a “reasonable tangible net benefit” based on the $30,000 cash
payout.

{5} The Romeros soon became delinquent on their increased loan payments. On April
1, 2008, a third party—the Bank of New York, identifying itself as a trustee for Popular
Financial Services Mortgage—filed a complaint in the First Judicial District Court seeking
foreclosure on the Romeros’ home and claiming to be the holder of the Romeros’ note and
mortgage with the right of enforcement.

{6} The Romeros responded by arguing, among other things, that the Bank of New York
lacked standing to foreclose because nothing in the complaint established how the Bank of
New York was a holder of the note and mortgage contracts the Romeros signed with Equity
One. According to the Romeros, Securities and Exchange Commission filings showed that
their loan certificate series was once owned by Popular ABS Mortgage and not Popular
Financial Services Mortgage and that the holder was JPMorgan Chase. The Romeros also
raised several counterclaims, only one of which is relevant to this appeal: that the loan
violated the antiflipping provisions of the New Mexico HLPA, Section 58-21A-4(B) (2003).

{7} The Bank responded by providing (1) a document showing that MERS as a nominee
for Equity One assigned the Romeros’ mortgage to the Bank of New York on June 25, 2008,

3
three months after the Bank filed the foreclosure complaint and (2) the affidavit of Ann
Kelley, senior vice president for Litton Loan Servicing LP, stating that Equity One intended
to transfer the note and assign the mortgage to the Bank of New York prior to the Bank’s
filing of the foreclosure complaint. However, the Bank of New York admits that Kelley’s
employer Litton Loan Servicing did not begin servicing the Romeros’ loan until November
1, 2008, seven months after the foreclosure complaint was filed in district court.

{8} At a bench trial, Kevin Flannigan, a senior litigation processor for Litton Loan
Servicing, testified on behalf of the Bank of New York. Flannigan asserted that the copies
of the note and mortgage admitted as trial evidence by the Bank of New York were copies
of the originals and also testified that the Bank of New York had physical possession of both
the note and mortgage at the time it filed the foreclosure complaint.

{9} The Romeros objected to Flannigan’s testimony, arguing that he lacked personal
knowledge to make these claims given that Litton Loan Servicing was not a servicer for the
Bank of New York until after the foreclosure complaint was filed and the MERS assignment
occurred. The district court allowed the testimony based on the business records exception
because Flannigan was the present custodian of records.

{10} The Romeros also pointed out that the copy of the “original” note Flannigan
purportedly authenticated was different from the “original” note attached to the Bank of New
York’s foreclosure complaint. While the note attached to the complaint as a true copy was
not indorsed, the “original” admitted at trial was indorsed twice: first, with a blank
indorsement by Equity One and second, with a special indorsement made payable to
JPMorgan Chase. When asked whether either of those two indorsements included the Bank
of New York, Flannigan conceded that neither did, but he claimed that his review of the
records indicated the note had been transferred to the Bank of New York based on a pooling
and servicing agreement document that was never entered into evidence.

{11} The district court also heard testimony on the circumstances of the loan, the points
and fees charged, and the calculus used to determine a reasonable, tangible net benefit.
Following trial, the district court issued a written order finding that the Flannigan testimony
and the assignment of the mortgage established the Bank of New York as the proper holder
of the Romeros’ note and concluding that the loan did not violate the HLPA because the cash
payment to the Romeros provided a reasonable, tangible net benefit. The district court also
determined that because the Bank of New York was a national bank, federal law preempted
the protections of the HLPA.

{12} On appeal, the Court of Appeals affirmed the district court’s rulings that the Bank
of New York had standing to foreclose and that the HLPA had not been violated but
determined as a result of the latter ruling that it was not necessary to address whether federal
law preempted the HLPA. See Bank of N.Y. v. Romero, 2011-NMCA-110, ¶ 6,

150 N.M. 769

,

266 P.3d 638

(“Because we conclude that substantial evidence exists for each of the
district court’s findings and conclusions, and we affirm on those grounds, we do not address

4
the Romeros’ preemption argument.”).

{13} We granted the Romeros’ petition for writ of certiorari.

II. DISCUSSION

A. The Bank of New York Lacks Standing to Foreclose

1. Preservation

{14} As a preliminary matter, we address the Bank of New York’s argument that the
Romeros waived their challenge of the Bank’s standing in this Court and the Court of
Appeals by failing to provide the evidentiary support required by Rule 12-213(A)(3) NMRA.
See Bank of N.Y., 2011-NMCA-110, ¶¶ 20-21 (dismissing the Romeros’ challenge to
standing as without authority and based primarily on the note’s bearer-stamp assignment to
JPMorgan Chase); see also Rule 12-213(A)(3) (“A contention that a verdict, judgment or
finding of fact is not supported by substantial evidence shall be deemed waived unless the
summary of proceedings includes the substance of the evidence bearing upon the
proposition.”).

{15} We have recognized that “the lack of [standing] is a potential jurisdictional defect
which ‘may not be waived and may be raised at any stage of the proceedings, even sua
sponte by the appellate court.’” Gunaji v. Macias, 2001-NMSC-028, ¶ 20,

130 N.M. 734

,

31 P.3d 1008

(citation omitted). While we disagree that the Romeros waived their standing
claim, because their challenge has been and remains largely based on the note’s indorsement
to JPMorgan Chase, whether the Romeros failed to fully develop their standing argument
before the Court of Appeals is immaterial. This Court may reach the issue of standing based
on prudential concerns. See New Energy Economy, Inc. v. Shoobridge, 2010-NMSC-049, ¶
16,

149 N.M. 42

,

243 P.3d 746

(“Indeed, ‘prudential rules’ of judicial self-governance, like
standing, ripeness, and mootness, are ‘founded in concern about the proper—and properly
limited—role of courts in a democratic society’ and are always relevant concerns.” (citation
omitted)). Accordingly, we address the merits of the standing challenge.

2. Standards of Review

{16} The Bank argues that under a substantial evidence standard of review, it presented
sufficient evidence to the district court that it had the right to enforce the Romeros’
promissory note based primarily on its possession of the note, the June 25, 2008, assignment
letter by MERS, and the trial testimony of Kevin Flannigan. By contrast, the Romeros argue
that none of the Bank’s evidence demonstrates standing because (1) possession alone is
insufficient, (2) the “original” note introduced by the Bank of New York at trial with the two
undated indorsements includes a special indorsement to JPMorgan Chase, which cannot be
ignored in favor of the blank indorsement, (3) the June 25, 2008, assignment letter from
MERS occurred after the Bank of New York filed its complaint, and as a mere assignment

5
of the mortgage does not act as a lawful transfer of the note, and (4) the statements by Ann
Kelley and Kevin Flannigan are inadmissible because both lack personal knowledge given
that Litton Loan Servicing did not begin servicing loans for the Bank of New York until
seven months after the foreclosure complaint was filed and after the purported transfer of the
loan occurred. For the following reasons, we agree with the Romeros.

{17} The Bank of New York does not dispute that it was required to demonstrate under
New Mexico’s Uniform Commercial Code (UCC) that it had standing to bring a foreclosure
action at the time it filed suit. See NMSA 1978, § 55-3-301 (1992) (defining who is entitled
to enforce a negotiable interest such as a note); see also NMSA 1978, § 55-3-104(a), (b), (e)
(1992) (identifying a promissory note as a negotiable instrument); ACLU of N.M. v. City of
Albuquerque, 2008-NMSC-045, ¶ 9 n.1,

144 N.M. 471

,

188 P.3d 1222

(recognizing standing
as a jurisdictional prerequisite for a statutory cause of action); Lujan v. Defenders of Wildlife,

504 U.S. 555

, 570-71 n.5 (1992) (“[S]tanding is to be determined as of the commencement
of suit.”); accord 55 Am. Jur. 2d Mortgages § 584 (2009) (“A plaintiff has no foundation in
law or fact to foreclose upon a mortgage in which the plaintiff has no legal or equitable
interest.”). One reason for such a requirement is simple: “One who is not a party to a contract
cannot maintain a suit upon it. If [the entity] was a successor in interest to a party on the
[contract], it was incumbent upon it to prove this to the court.” L.R. Prop. Mgmt., Inc. v.
Grebe, 1981-NMSC-035, ¶ 7,

96 N.M. 22

,

627 P.2d 864

(citation omitted). The Bank of
New York had the burden of establishing timely ownership of the note and the mortgage to
support its entitlement to pursue a foreclosure action. See Gonzales v. Tama, 1988-NMSC-
016, ¶ 7,

106 N.M. 737

,

749 P.2d 1116

(“One who holds a note secured by a mortgage has
two separate and independent remedies, which he may pursue successively or concurrently;
one is on the note against the person and property of the debtor, and the other is by
foreclosure to enforce the mortgage lien upon his real estate.” (internal quotation marks and
citation omitted)).

{18} Because the district court determined after a trial on the issue that the Bank of New
York established standing as a factual matter, we review the district court’s determination
under a substantial evidence standard of review. See Sims v. Sims, 1996-NMSC-078, ¶ 65,

122 N.M. 618

,

930 P.2d 153

(“We have many times stated the standard of review of a trial
court’s findings of fact: Findings of fact made by the district court will not be disturbed if
they are supported by substantial evidence.”). “‘Substantial evidence’ means relevant
evidence that a reasonable mind could accept as adequate to support a conclusion.” Id. “This
Court will resolve all disputed facts and indulge all reasonable inferences in favor of the trial
court’s findings.” Id. However, “[w]hen the resolution of the issue depends upon the
interpretation of documentary evidence, this Court is in as good a position as the trial court
to interpret the evidence.” Kirkpatrick v. Introspect Healthcare Corp., 1992-NMSC-070, ¶
14,

114 N.M. 706

, 845 P.2d 800; see also United Nuclear Corp. v. Gen. Atomic Co., 1979-
NMSC-036, ¶ 62,

93 N.M. 105

,

597 P.2d 290

(“‘Where all or substantially all of the
evidence on a material issue is documentary or by deposition, the Supreme Court will
examine and weigh it, and will review the record, giving some weight to the findings of the
trial judge on such issue.’” (citation omitted)).

6
3. None of the Bank’s Evidence Demonstrates Standing to Foreclose

{19} The Bank of New York argues that in order to demonstrate standing, it was required
to prove that before it filed suit, it either (1) had physical possession of the Romeros’ note
indorsed to it or indorsed in blank or (2) received the note with the right to enforcement, as
required by the UCC. See § 55-3-301 (defining “[p]erson entitled to enforce” a negotiable
instrument). While we agree with the Bank that our state’s UCC governs how a party
becomes legally entitled to enforce a negotiable instrument such as the note for a home loan,
we disagree that the Bank put forth such evidence.

a. Possession of a Note Specially Indorsed to JPMorgan Chase Does Not Establish
the Bank of New York as a Holder

{20} Section 55-3-301 of the UCC provides three ways in which a third party can enforce
a negotiable instrument such as a note. Id. (“‘Person entitled to enforce’ an instrument means
(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 [lost, destroyed, stolen, or mistakenly transferred] instrument pursuant to [certain
UCC enforcement provisions].”); see also § 55-3-104(a)(1), (b), (e) (defining “negotiable
instrument” as including a “note” made “payable to bearer or to order”). Because the Bank’s
arguments rest on the fact that it was in physical possession of the Romeros’ note, we need
to consider only the first two categories of eligibility to enforce under Section 55-3-301.

{21} The UCC defines the first type of “person entitled to enforce” a note—the “holder”
of the instrument—as “the person in possession of a negotiable instrument that is payable
either to bearer or to an identified person that is the person in possession.” NMSA 1978, §
55-1-201(b)(21)(A) (2005); see also Frederick M. Hart & William F. Willier, Negotiable
Instruments Under the Uniform Commercial Code, § 12.02(1) at 12-13 to 12-15 (2012)
(“The first requirement of being a holder is possession of the instrument. However,
possession is not necessarily sufficient to make one a holder. . . . The payee is always a
holder if the payee has possession. Whether other persons qualify as a holder depends upon
whether the instrument initially is payable to order or payable to bearer, and whether the
instrument has been indorsed.” (footnotes omitted)). Accordingly, a third party must prove
both physical possession and the right to enforcement through either a proper indorsement
or a transfer by negotiation. See NMSA 1978, § 55-3-201(a) (1992) (“‘Negotiation’ means
a transfer of possession . . . of an instrument by a person other than the issuer to a person
who thereby becomes its holder.”). Because in this case the Romeros’ note was clearly made
payable to the order of Equity One, we must determine whether the Bank provided sufficient
evidence of how it became a “holder” by either an indorsement or transfer.

{22} Without explanation, the note introduced at trial differed significantly from the
original note attached to the foreclosure complaint, despite testimony at trial that the Bank
of New York had physical possession of the Romeros’ note from the time the foreclosure
complaint was filed on April 1, 2008. Neither the unindorsed note nor the twice-indorsed

7
note establishes the Bank as a holder.

{23} Possession of an unindorsed note made payable to a third party does not establish the
right of enforcement, just as finding a lost check made payable to a particular party does not
allow the finder to cash it. See NMSA 1978, § 55-3-109 cmt. 1 (1992) (“An instrument that
is payable to an identified person cannot be negotiated without the indorsement of the
identified person.”). The Bank’s possession of the Romeros’ unindorsed note made payable
to Equity One does not establish the Bank’s entitlement to enforcement.

{24} The Bank’s possession of a note with two indorsements, one of which restricts
payment to JPMorgan Chase, also does not establish the Bank’s entitlement to enforcement.
The UCC recognizes two types of indorsements for the purposes of negotiating an
instrument. A blank indorsement, as its name suggests, does not identify a person to whom
the instrument is payable but instead makes it payable to anyone who holds it as bearer
paper. See NMSA 1978, § 55-3-205(b) (1992) (“If an indorsement is made by the holder of
an instrument and it is not a special indorsement, it is a ‘blank indorsement.’”). “When
indorsed in blank, an instrument becomes payable to bearer and may be negotiated by
transfer of possession alone until specially indorsed.” Id.

{25} By contrast, a special indorsement “identifies a person to whom it makes the
instrument payable.” Section 55-3-205(a). “When specially indorsed, an instrument becomes
payable to the identified person and may be negotiated only by the indorsement of that
person.” Id.; accord Baxter Dunaway, Law of Distressed Real Estate, § 24:105 (2011)
(“When an instrument is payable to an identified person, only that person may be the holder.
A person in possession of an instrument not made payable to his order can only become a
holder by obtaining the prior holder’s indorsement.”).

{26} The trial copy of the Romeros’ note contained two undated indorsements: a blank
indorsement by Equity One and a special indorsement by Equity One to JPMorgan Chase.
Although we agree with the Bank that if the Romeros’ note contained only a blank
indorsement from Equity One, that blank indorsement would have established the Bank as
a holder because the Bank would have been in possession of bearer paper, that is not the
situation before us. The Bank’s copy of the Romeros’ note contained two indorsements, and
the restrictive, special indorsement to JPMorgan Chase establishes JPMorgan Chase as the
proper holder of the Romeros’ note absent some evidence by JPMorgan Chase to the
contrary. See Cadle Co. v. Wallach Concrete, Inc., 1995-NMSC-039, ¶ 14,

120 N.M. 56

,

897 P.2d 1104

(“[A] special indorser . . . has the right to direct the payment and to require the
indorsement of his indorsee as evidence of the satisfaction of own obligation. Without such
an indorsement, a transferee cannot qualify as a holder in due course.” (omission in original)
(internal quotation marks and citation omitted)). Because JPMorgan Chase did not
subsequently indorse the note, either in blank or to the Bank of New York, the Bank of New
York cannot establish itself as the holder of the Romeros’ note simply by possession.

{27} Rather than demonstrate timely ownership of the note and mortgage through

8
JPMorgan Chase, the Bank of New York urges this Court to infer that the special
indorsement was a mistake and that we should rely only on the blank indorsement. We are
not persuaded. The Bank provides no authority and we know of none that exists to support
its argument that the payment restrictions created by a special indorsement can be ignored
contrary to our long-held rules on indorsements and the rights they create. See, e.g., id.
(rejecting each of two entities as a holder because a note lacked the requisite indorsement
following a special indorsement); accord NMSA 1978, § 55-3-204(c) (1992) (“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.”).

{28} Accordingly, we conclude that the Bank of New York’s possession of the twice-
indorsed note restricting payment to JPMorgan Chase does not establish the Bank of New
York as a holder with the right of enforcement.

b. None of the Bank of New York’s Evidence Demonstrates a Transfer of the
Romeros’ Note

{29} The second type of “person entitled to enforce” a note under the UCC is a third party
in possession who demonstrates that it was given the rights of a holder. See § 55-3-301
(“‘Person entitled to enforce’ an instrument means . . . a nonholder in possession of the
instrument who has the rights of a holder.”). This provision requires a nonholder to prove
both possession and the transfer of such rights. See NMSA 1978, § 55-3-203(a)-(b) (1992)
(defining what constitutes a transfer and vesting in a transferee only those rights held by the
transferor). A claimed transferee must establish its right to enforce the note. See § 55-3-203
cmt. 2 (“[An] instrument [unindorsed upon transfer], by its terms, is not payable to the
transferee and the transferee must account for possession of the unindorsed instrument by
proving the transaction through which the transferee acquired it.”).

{30} Under this second category, the Bank of New York relies on the testimony of Kevin
Flannigan, an employee of Litton Loan Servicing who maintained that his review of loan
servicing records indicated that the Bank of New York was the transferee of the note. The
Romeros objected to Flannigan’s testimony at trial, an objection that the district court
overruled under the business records exception. We agree with the Romeros that Flannigan’s
testimony was inadmissible and does not establish a proper transfer.

{31} As the Bank of New York admits, Flannigan’s employer, Litton Loan Servicing, did
not begin working for the Bank of New York as its servicing agent until November 1,
2008—seven months after the April 1, 2008, foreclosure complaint was filed. Prior to this
date, Popular Mortgage Servicing, Inc. serviced the Bank of New York’s loans. Flannigan
had no personal knowledge to support his testimony that transfer of the Romeros’ note to the
Bank of New York prior to the filing of the foreclosure complaint was proper because
Flannigan did not yet work for the Bank of New York. See Rule 11-602 NMRA (“A witness
may testify to a matter only if evidence is introduced sufficient to support a finding that the

9
witness has personal knowledge of the matter. Evidence to prove personal knowledge may
consist of the witness’s own testimony.”). We make a similar conclusion about the affidavit
of Ann Kelley, who also testified about the status of the Romeros’ loan based on her work
for Litton Loan Servicing. As with Flannigan’s testimony, such statements by Kelley were
inadmissible because they lacked personal knowledge.

{32} When pressed about Flannigan’s basis of knowledge on cross-examination,
Flannigan merely stated that “our records do indicate” the Bank of New York as the holder
of the note based on “a pooling and servicing agreement.” No such business record itself was
offered or admitted as a business records hearsay exception. See Rule 11-803(F) NMRA
(2007) (naming this category of hearsay exceptions as “records of regularly conducted
activity”).

{33} The district court erred in admitting the testimony of Flannigan as a custodian of
records under the exception to the inadmissibility of hearsay for “business records” that are
made in the regular course of business and are generally admissible at trial under certain
conditions. See Rule 11-803(F) (2007) (citing the version of the rule in effect at the time of
trial). The business records exception allows the records themselves to be admissible but not
simply statements about the purported contents of the records. See State v. Cofer,
2011-NMCA-085, ¶ 17,

150 N.M. 483

,

261 P.3d 1115

(holding that, based on the plain
language of Rule 11-803(F) (2007), “it is clear that the business records exception requires
some form of document that satisfies the rule’s foundational elements to be offered and
admitted into evidence and that testimony alone does not qualify under this exception to the
hearsay rule” and concluding that “‘testimony regarding the contents of business records,
unsupported by the records themselves, by one without personal knowledge of the facts
constitutes inadmissible hearsay.’” (citation omitted)). Neither Flannigan’s testimony nor
Kelley’s affidavit can substantiate the existence of documents evidencing a transfer if those
documents are not entered into evidence. Accordingly, Flannigan’s trial testimony cannot
establish that the Romeros’ note was transferred to the Bank of New York.

{34} We also reject the Bank’s argument that it can enforce the Romeros’ note because
it was assigned the mortgage by MERS. An assignment of a mortgage vests only those rights
to the mortgage that were vested in the assigning entity and nothing more. See § 55-3-203(b)
(“Transfer of an instrument, whether or not the transfer is a negotiation, vests in the
transferee any right of the transferor to enforce the instrument, including any right as a
holder in due course.”); accord Hart & Willier, supra, § 12.03(2) at 12-27 (“Th[is] shelter
rule puts the transferee in the shoes of the transferor.”).

{35} Here, as Equity One and MERS explained to the district court in a joint filing seeking
to be dismissed as third parties to the Romeros’ counterclaims, “MERS . . . is merely the
nominee for Equity One, Inc. in the underlying Mortgage and was not the actual lender.
MERS is a national electronic registry which keeps track of the changes in servicing and
ownership of mortgage loans.” See also Christopher L. Peterson, Foreclosure, Subprime
Mortgage Lending, and the Mortgage Electronic Registration System, 78 U. Cin. L. Rev.

10
1359, 1361-63 (2010) (explaining that MERS was created by the banking industry to
electronically track and record mortgages in order to avoid local and state recording fees).
The Romeros’ mortgage contract reiterates the MERS role, describing “MERS [a]s a
separate corporation that is acting solely as a nominee for Lender and Lender’s successors
and assigns.” A “nominee” is defined as “[a] person designated to act in place of another,
usu. in a very limited way.” Black’s Law Dictionary 1149 (9th ed. 2009). As a nominee for
Equity One on the mortgage contract, MERS could assign the mortgage but lacked any
authority to assign the Romeros’ note. Although this Court has never explicitly ruled on the
issue of whether the assignment of a mortgage could carry with it the transfer of a note, we
have long recognized the separate functions that note and mortgage contracts perform in
foreclosure actions. See First Nat’l Bank of Belen v. Luce, 1974-NMSC-098, ¶ 8,

87 N.M. 94

,

529 P.2d 760

(holding that because the assignment of a mortgage to a bank did not
convey an interest in the loan contract, the bank was not entitled to foreclose on the
mortgage); Simson v. Bilderbeck, Inc., 1966-NMSC-170, ¶¶ 13-14,

76 N.M. 667

,

417 P.2d 803

(explaining that “[t]he right of the assignee to enforce the mortgage is dependent upon
his right to enforce the note” and noting that “[b]oth the note and mortgage were assigned
to plaintiff. Having a right under the statute to enforce the note, he could foreclose the
mortgage.”); accord 55 Am. Jur. 2d Mortgages § 584 (“A mortgage securing the repayment
of a promissory note follows the note, and thus, only the rightful owner of the note has the
right to enforce the mortgage.”); Dunaway, supra, § 24:18 (“The mortgage only secures the
payment of the debt, has no life independent of the debt, and cannot be separately
transferred. If the intent of the lender is to transfer only the security interest (the mortgage),
this cannot legally be done and the transfer of the mortgage without the debt would be a
nullity.”). These separate contractual functions—where the note is the loan and the mortgage
is a pledged security for that loan—cannot be ignored simply by the advent of modern
technology and the MERS electronic mortgage registry system.

{36} The MERS assignment fails for several additional reasons. First, it does not explain
the conflicting special indorsement of the note to JPMorgan Chase. Second, its assignment
of the mortgage to the Bank of New York on June 25, 2008, three months after the
foreclosure complaint was filed, does not establish a proper transfer prior to the filing date
of the foreclosure suit. Third, except for the inadmissible affidavit of Ann Kelley and trial
testimony of Kevin Flannigan, nothing in the record substantiates the Bank’s claim that the
MERS assignment was meant to memorialize an earlier transfer to the Bank of New York.
Accordingly, neither the MERS assignment nor Flannigan’s testimony establish the Bank
of New York as a nonholder in possession with the rights of a holder by transfer.

c. Failure of Another Entity to Claim Ownership of the Romeros’ Note Does Not
Make the Bank of New York a Holder

{37} Finally, the Bank of New York urges this Court to adopt the district court’s inference
that if the Bank was not the proper holder of the Romeros’ note, then third-party-defendant
Equity One would have claimed to be the rightful holder, and Equity One made no such
claim.

11
{38} The simple fact that Equity One does not claim ownership of the Romeros’ note does
not establish that the note was properly transferred to the Bank of New York. In fact, the
evidence in the record indicates that JPMorgan Chase may be the lawful holder of the
Romeros’ note, as reflected in the note’s special indorsement. As this Court has recognized,

The whole purpose of the concept of a negotiable instrument under
Article 3 [of the UCC] is to declare that transferees in the ordinary course of
business are only to be held liable for information appearing in the
instrument itself and will not be expected to know of any limitations on
negotiability or changes in terms, etc., contained in any separate documents.

First State Bank at Gallup v. Clark, 1977-NMSC-088, ¶ 10,

91 N.M. 117

, 570 P.2d 1144.
In addition, the UCC clarifies that the Bank of New York is not afforded any assumption of
enforcement without proper documentation:

Because the transferee is not a holder, there is no presumption under Section
[55-]3-308 [(1992) (entitling a holder in due course to payment by production
and upon signature)] that the transferee, by producing the instrument, is
entitled to payment. The instrument, by its terms, is not payable to the
transferee and the transferee must account for possession of the unindorsed
instrument by proving the transaction through which the transferee acquired
it.

Section 55-3-203 cmt. 2. Because the Bank of New York did not introduce any evidence
demonstrating that it was a party with the right to enforce the Romeros’ note either by an
indorsement or proper transfer, we hold that the Bank’s standing to foreclose on the
Romeros’ mortgage was not supported by substantial evidence, and we reverse the contrary
determinations of the courts below.

B. A Lender Must Consider a Borrower’s Ability to Repay a Home Mortgage Loan
in Determining Whether the Loan Provides a Reasonable, Tangible Net Benefit,
as Required by the New Mexico HLPA

{39} For reasons that are not clear in the record, the Romeros did not appeal the district
court’s judgment in favor of the original lender, Equity One, on the Romeros’ claims that
Equity One violated the HLPA. The Court of Appeals addressed the HLPA violation issue
in the context of the Romeros’ contentions that the alleged violation constituted a defense
to the foreclosure complaint of the Bank of New York by affirming the district court’s
favorable ruling on the Bank of New York’s complaint. As a result of our holding that the
Bank of New York has not established standing to bring a foreclosure action, the issue of
HLPA violation is now moot in this case. But because it is an issue that is likely to be
addressed again in future attempts by whichever institution may be able to establish standing
to foreclose on the Romero home and because it involves a statutory interpretation issue of
substantial public importance in many other cases, we address the conclusion of both the

12
Court of Appeals and the district court that a homeowner’s inability to repay is not among
“all of the circumstances” that the 2003 HLPA, applicable to the Romeros’ loan, requires a
lender to consider under its “flipping” provisions:

No creditor shall knowingly and intentionally engage in the unfair act
or practice of flipping a home loan. As used in this subsection, “flipping a
home loan” means the making of a home loan to a borrower that refinances
an existing home loan when the new loan does not have reasonable, tangible
net benefit to the borrower considering all of the circumstances, including the
terms of both the new and refinanced loans, the cost of the new loan and the
borrower’s circumstances.

Section 58-21A-4(B) (2003); see also Bank of N.Y., 2011-NMCA-110, ¶ 17 (holding that
“while the ability to repay a loan is an important consideration when otherwise assessing a
borrower’s financial situation, we will not read such meaning into the statute’s ‘reasonable,
tangible net benefit’ language”).

{40} “Statutory interpretation is a question of law, which we review de novo.” Hovet v.
Allstate Ins. Co., 2004-NMSC-010, ¶ 10,

135 N.M. 397

, 89 P.3d 69. “[W]hen presented with
a question of statutory construction, we begin our analysis by examining the language
utilized by the Legislature, as the text of the statute is the primary indicator of legislative
intent.” Bishop v. Evangelical Good Samaritan Soc., 2009-NMSC-036, ¶ 11,

146 N.M. 473

,
212 P.3d 361. Under the rules of statutory construction, “[w]hen a statute contains language
which is clear and unambiguous, we must give effect to that language and refrain from
further statutory interpretation.” State ex rel. Helman v. Gallegos, 1994-NMSC-023, ¶ 18,

117 N.M. 346

,

871 P.2d 1352

(internal quotation marks and citation omitted).

{41} The New Mexico Legislature passed the HLPA in 2003 to combat abusive home
mortgage procurement practices, with special concerns about non-income-based loans. See
§ 58-21A-2(A)-(B) (finding that “abusive mortgage lending has become an increasing
problem in New Mexico, exacerbating the loss of equity in homes and causing the number
of foreclosures to increase in recent years” and that “one of the most common forms of
abusive lending is the making of loans that are equity-based, rather than income-based”).
“The [HLPA] shall be liberally construed to carry out its purpose.” Section 58-21A-14.

{42} In 2004, regulations were adopted to clarify that “[t]he reasonable, tangible net
benefit standard in Section 58-21A-4 B NMSA 1978, is inherently dependent upon the
totality of facts and circumstances relating to a specific transaction,” 12.15.5.9(A) NMAC,
and that “each lender should develop and maintain policies and procedures for evaluating
loans in circumstances where an economic test, standing alone, may not be sufficient to
determine that the transaction provides the requisite benefit,” 12.15.5.9(B) NMAC. See also
12.15.5.9(C) NMAC (stating that evaluation of compliance with the HLPA’s loan-flipping
provision “will focus on whether a lender has policies and procedures in place . . . that were
used to determine that borrowers received a reasonable, tangible net benefit in connection

13
with the refinancing of loans”).

{43} The Court of Appeals expressed that it was significant that the Legislature did not
specifically recite the ability to repay as a factor to be considered in the undefined
“borrower’s circumstances” addressed in the antiflipping provisions of Section 58-21A-4(B)
(2003) while the Legislature did specifically recite that factor in a separate section of the
HLPA prohibiting equity stripping in high-cost loans. See Bank of N.Y., 2011-NMCA-110,
¶¶ 11, 17 (noting that the 2003 HLPA “sets forth limitations and prohibited practices for
‘high-cost’ mortgages”); see also § 58-21A-5(H) (2003) (“No creditor shall make a high-cost
home loan without due regard to repayment ability.”). The Court of Appeals inferred from
the specific additional wording in the 2003 statutory provisions for high-cost loans that
“when it enacted Section 58-21A-4(B)” in 2003 the Legislature “chose not to require
consideration and documentation of a borrower’s reasonable ability to repay the loan when
determining what tangible benefit, if any, the borrower would receive from a mortgage
loan.” Bank of N.Y., 2011-NMCA-110, ¶ 17. While comparisons between sections of a
statute can be helpful in determining legislative intent where the statutory language or the
legislative purpose is unclear, we cannot ignore the commands of either the broad plain
language of the HLPA antiflipping provisions, identical in both the 2003 statute and its 2009
amendment and requiring consideration of all circumstances including those of the borrower,
or the express legislative purpose declarations of what the HLPA was enacted to avoid,
including abusive mortgage loans not based on income that result in the loss of borrowers’
homes. We have been presented with no conceivable reason why the Legislature in 2003
would consciously exclude consideration of a borrower’s ability to repay the loan as a factor
of the borrower’s circumstances, and we can think of none. Without an express legislative
direction to that effect, we will not conclude that the Legislature meant to approve mortgage
loans that were doomed to end in failure and foreclosure. Apart from the plain language of
the statute and its express statutory purpose, it is difficult to comprehend how an
unrepayable home mortgage loan that will result in a foreclosure on one’s home and a
deficiency judgment to pay after the borrower is rendered homeless could provide “a
reasonable, tangible net benefit to the borrower.”

{44} In light of the remedial purposes of the HLPA, the broadly inclusive language of the
2003 antiflipping provisions requiring home refinancing to provide a “reasonable, tangible
net benefit to the borrower considering all of the circumstances,” and the reiteration in the
same sentence that “all of the circumstances” includes specific consideration of “the
borrower’s circumstances,” we hold that the ability of a homeowner to have a reasonable
chance of repaying a mortgage loan must be a factor in the “reasonable, tangible net benefit”
analysis required by the antiflipping provisions of the HLPA since the original 2003
enactment. While it is theoretically possible that other factors of a particular buyer’s
individual situation might support a finding of a reasonable, tangible benefit in the totality
of the circumstances despite the difficulty a buyer might have repaying the new loan, neither
court below considered the Romeros’ ability to repay the loan at all in reviewing the totality
of their circumstances, and it is inappropriate for us to make that factual determination on
appeal.

14
{45} Because the Romeros’ mortgage and others like it may come before our courts in the
future, we make some observations to provide guidance in assessing a borrower’s ability to
repay. The lender in this case claimed to rely solely on the Romeros’ unexplained assertion
on a form that they earned $5,600 a month, but the lender did not review tax returns or other
documents that easily would have clarified earning $5,600 as a one-time occurrence. The
Bank argues that the lender was not required to ask the borrowers for proof of their income
but rather that the Romeros were required to provide it, citing 12.15.5.9(G) NMAC
(“Borrowers are responsible for the disclosure of information provided on the application
for a home loan. Truthful disclosure of all relevant facts and financial information
concerning the borrower’s circumstances is required in order for lenders to evaluate and
determine that the refinance loan transaction provides a reasonable, tangible net benefit to
the borrower.”). But under the very next provision in the regulation, a lender cannot avoid
its own obligation to consider real facts and circumstances that might clarify the inaccuracy
of a borrower’s income claim. Id. (“Lenders cannot, however, disregard known facts and
circumstances that may place in question the accuracy of information contained in the
application.”) A lender’s willful blindness to its responsibility to consider the true
circumstances of its borrowers is unacceptable. A full and fair consideration of those
circumstances might well show that a new mortgage loan would put a borrower into a
materially worse situation with respect to the ability to make home loan payments and avoid
foreclosure, consequences of a borrower’s circumstances that cannot be disregarded.

{46} We acknowledge that the Romeros signed their names to a document prepared by the
lender reciting the conclusion that the loan provided them with a reasonable, tangible net
benefit. But if the inclusion of such boilerplate language in the mass of documents a
borrower must sign at closing would substitute for a lender’s conscientious compliance with
the obligations imposed by the HLPA, its protections would be no more than empty words
on paper that could be summarily swept aside by the addition of yet one more document for
the borrower to sign at the closing.

{47} The lender’s own benefit analysis questionnaire in this case should have put the
lender on notice that the loan might not have provided a reasonable, tangible net benefit.

{48} Step one of the questionnaire required the lender to weigh the Romeros’ new loan
against their existing loan and respond to seven questions by comparing factors such as the
loans’ monthly payments and interest rates, determining the time between the original loan
and the refinancing, and indicating whether the borrower received cash. If the new loan
provided five of seven potential benefits as indicated by graded responses to the seven
questions, then the lender’s own formula would result in the finding of a reasonable, tangible
net benefit and no further evaluation would be necessary. Because the Equity One analysis
indicated only one of the seven benefits, net cash to the Romeros at the time of closing,
Equity One was not yet authorized by its own policies to make the loan and needed to
proceed with step two.

{49} Step two required the lender to (1) provide a written “verification or documentation”

15
that the loan was “appropriate for the borrower” and (2) indicate on a preprinted checklist
any of eight reasonable, tangible net benefits the borrower would be receiving. Although
Equity One responded to the second requirement by indicating that the loan refinanced some
of the Romeros’ debt, it left the first blank, offering no verification that the loan was
appropriate for the Romeros based on their ability to repay—a required element of Equity
One’s own benefit analysis. Equity One’s benefit analysis worksheet reviewed and approved
by an Equity One manager on June 26, 2006, speaks for itself, providing unbiased,
documentary evidence of Equity One’s own disregard of the Romeros’ financial
circumstances in violation of the HLPA, whether or not the Romeros signed Equity One’s
document reciting that they received a reasonable, tangible net benefit. See 12.15.5.9(H)
NMAC (“An appropriate analysis reflected in the loan documentation can be helpful in
determining that a lender satisfies the statutory requirement. As part of a lender’s analysis,
a lender may wish to obtain and document an explanation from the borrower regarding any
non-economic benefits the borrower associates with the loan transaction. It should be noted,
however, that because it is incumbent on the lender to conduct an analysis of whether the
borrower received a reasonable, tangible net benefit, a borrower certification, standing alone,
would not necessarily be determinative of whether a loan provided that benefit.”).

{50} Borrowers are certainly not blameless if they try to refinance their homes through
loans they cannot afford. But they do not have a mortgage lender’s expertise, and the
combination of the relative unsophistication of many borrowers and the potential motives
of unscrupulous lenders seeking profits from making loans without regard for the
consequences to homeowners led to the need for statutory reform. See § 58-21A-2
(discussing (A) “abusive mortgage lending” practices, including (B) “making . . . loans that
are equity-based, rather than income based,” (C) “repeatedly refinanc[ing] home loans,”
rewarding lenders with “immediate income” from “points and fees” and (D) victimizing
homeowners with the unnecessary “costs and terms” of “overreaching creditors”). The
HLPA was enacted to prevent the kinds of practices the Romeros allege Equity One engaged
in here: actively soliciting vulnerable homeowners and offering tempting incentives such as
up-front cash to induce them to refinance their mortgages with unfavorable terms or without
regard for the borrowers’ ability to repay the loans and avoid loss of their homes. Whether
the Romeros’ allegations are accurate is not before us, but a court must consider the
allegations in order to determine whether the lender violated the HLPA.

C. Federal Law Does Not Preempt the Protections of the HLPA

{51} Although the Court of Appeals did not review the conclusion of the district court that
federal law preempts the HLPA, see Bank of N.Y., 2011-NMCA-110, ¶ 6, our discussion of
the applicability of the HLPA to New Mexico home mortgage loans would be incomplete
without our addressing the issue.

{52} “The doctrine of preemption is an outgrowth of the Supremacy Clause of Article VI
of the United States Constitution.” Self v. United Parcel Serv., Inc., 1998-NMSC-046, ¶ 7
n.3,

126 N.M. 396

,

970 P.2d 582

(“‘This Constitution, and the Laws of the United States . . .

16
shall be the supreme Law of the Land.’” (quoting Article VI of the United States
Constitution)). “We review issues of statutory and constitutional interpretation de novo.”
State v. Lucero, 2007-NMSC-041, ¶ 8,

142 N.M. 102

, 163 P.3d 489.

{53} The Bank of New York’s argument that federal law preempts the HLPA relies on
regulatory provisions of the New Mexico Regulation and Licensing Department’s Financial
Institutions Division recognizing that “[e]ffective February 12, 2004, the [federal Office of
the Comptroller of Currency] published a final rule that states, in pertinent part: ‘state laws
that obstruct, impair, or condition a national bank’s ability to fully exercise its federally
authorized real estate lending powers do not apply to national banks’ (the ‘OCC
preemption’)” and concluding that “[b]ased on the OCC preemption, since January 1, 2004,
national banks in New Mexico have been authorized to engage in certain banking activities
otherwise prohibited by the [HLPA].” 12.16.76.8(G)-(H) NMAC. These administrative
provisions have not been updated since 2004. See 12.16.76.8 NMAC (noting only one
amendment, on June 15, 2004, since the January 1, 2004, effective date of the regulation).

{54} While the Bank is correct in asserting that the OCC issued a blanket rule in January
2004, see 12 C.F.R. § 34.4(a) (2004) (preempting state laws that impact “a national bank’s
ability to fully exercise its Federally authorized real estate lending powers”), and that the
New Mexico Administrative Code recognizes this OCC rule, neither the Bank nor our
administrative code addresses several actions taken by Congress and the courts since 2004
to disavow the OCC’s broad preemption statement.

{55} In 2007, the United States Supreme Court reiterated its position on preemption by
the National Bank Act (NBA), stating that

[i]n the years since the NBA’s enactment, we have repeatedly made clear that
federal control shields national banking from unduly burdensome and
duplicative state regulation. Federally chartered banks are subject to state
laws of general application in their daily business to the extent such laws do
not conflict with the letter or the general purposes of the NBA.

Watters v.Wachovia Bank, N.A.,

550 U.S. 1

, 11 (2007) (citation omitted). Relying primarily
on an earlier case, Barnett Bank of Marion Cnty., N.A. v. Nelson,

517 U.S. 25

(1996), the
Watters Court clarified that “[s]tates are permitted to regulate the activities of national banks
where doing so does not prevent or significantly interfere with the national bank’s or the
national bank regulator’s exercise of its powers.” Watters, 550 U.S. at 12. “But when state
prescriptions significantly impair the exercise of authority, enumerated or incidental under
the NBA, the State’s regulations must give way.” Id.

{56} Two years later, in Cuomo v. Clearing House Ass’n, L.L.C.,

557 U.S. 519

, 523-24
(2009), the United States Supreme Court specifically addressed “whether the [OCC’s]
regulation purporting to pre-empt state law enforcement can be upheld as a reasonable
interpretation of the National Bank Act.” The Cuomo Court ultimately rejected part of the

17
OCC’s broad statement of its preemption powers as unsupported. See Cuomo, 557 U.S. at
525, 528-29 (distinguishing the power to enforce the law against a national bank, which a
state retains notwithstanding the NBA, from visitorial powers—including audits, general
supervision and control, and oversight of national banks—which the NBA preempts as
exclusive to the OCC). Although the Cuomo Court did not specifically address the
preemption rule on real-estate lending at issue here, its rationale is nonetheless dispositive
in its acknowledgment that “[n]o one denies that the [NBA] leaves in place some state
substantive laws affecting banks,” id. at 529, and in its recognition that states “have enforced
their banking-related laws against national banks for at least 85 years,” id. at 534.

{57} In addition, in 2010, Congress explicitly clarified state law preemption standards for
national banks in Pub. L. No. 111-203, § 1044, 124 Stat. 1376 (2010) of the Dodd-Frank
Wall Street Reform and Consumer Protection Act. The Dodd-Frank Act preempts state
consumer financial law in only three circumstances: (1) if application of the state law “would
have a discriminatory effect on national banks, in comparison with the effect of the law on
a bank chartered by that State,” (2) in accordance with the legal standard set forth in Barnett
Bank when the state law “prevents or significantly interferes with the exercise by the
national bank of its powers,” or (3) by explicit federal preemption. See id.; 12 U.S.C.A. §
25b(b)(1)(A)-(C) (2010).

{58} In response to this legislation, the OCC corrected its 2004 blanket preemption rule
to conform to the legislative clarifications. See Dodd-Frank Act Implementation, 76 Fed.
Reg. 43549-01, 43552 (July 21, 2011) (proposing changes to “the OCC’s regulations relating
to preemption (12 CFR . . . 34.4) (2004 preemption rules) . . . to implement the provisions
of the Dodd-Frank Act that affect the scope of national bank . . . preemption” by removing
from Subsection a the blanket clause, “‘state laws that obstruct, impair or condition a
national bank’s ability to fully exercise its Federally authorized [real estate lending] powers
do not apply to national banks’” and by clarifying in Subsection b that “state law is not
preempted to the extent . . . consistent with the Barnett decision”). Compare 12 C.F.R. §
34.4(a) & (b) (2011), with 12 C.F.R. § 34.4(a) & (b) (2004). Neither Dodd-Frank nor the
corrected OCC regulations created new law concerning the scope of national bank
preemption but instead clarified preexisting requirements of the NBA and the 1996 opinion
of the United States Supreme Court in Barnett.

{59} Applying the Dodd-Frank standard to the HLPA, we conclude that federal law does
not preempt the HLPA. First, our review of the NBA reveals no express preemption of state
consumer protection laws such as the HLPA. Second, the Bank provides no evidence that
conforming to the dictates of the HLPA prevents or significantly interferes with a national
bank’s operations. Third, the HLPA does not create a discriminatory effect; rather, the
HLPA applies to any “creditor,” which the 2003 statute defines as “a person who regularly
[offers or] makes a home loan.” Section 58-21A-3(G) (2003). Any entity that makes home
loans in New Mexico must follow the HLPA, regardless of whether the lender is a state or
nationally chartered bank. See § 58-21A-2 (providing legislative findings on abusive
mortgage lending practices that the HLPA is meant to discourage).

18
{60} Accordingly, we hold that the HLPA is a state law of general applicability that is not
preempted by federal law. We recommend that New Mexico’s Administrative Code be
updated to reflect clarifications of preemption standards since 2004.

III. CONCLUSION

{61} For the reasons stated herein, we reverse the decisions below and remand this matter
to the district court with instructions to vacate its judgment of foreclosure.

{62} IT IS SO ORDERED.

____________________________________
CHARLES W. DANIELS, Justice

WE CONCUR:

____________________________________
PETRA JIMENEZ MAES, Chief Justice

____________________________________
RICHARD C. BOSSON, Justice

____________________________________
EDWARD L. CHÁVEZ, Justice

____________________________________
BARBARA J. VIGIL, Justice

19

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Posted in STOP FORECLOSURE FRAUD1 Comment

WASHINGTON | Stephanie Tashiro-Townley v. Bank of New York Mellon (9th Cir. 2014) | AFFIRMED in part, VACATED in part, and REMANDED. | Mortgage Electronic Registration System Inc. was unfairly or deceptively characterized as the beneficiary of a deed of trust

WASHINGTON | Stephanie Tashiro-Townley v. Bank of New York Mellon (9th Cir. 2014) | AFFIRMED in part, VACATED in part, and REMANDED. | Mortgage Electronic Registration System Inc. was unfairly or deceptively characterized as the beneficiary of a deed of trust

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

STEPHANIE TASHIRO-TOWNLEY;
SCOTT C. TOWNLEY,
Plaintiffs – Appellants,

v.

BANK OF NEW YORK MELLON, as
Trustee for the Certificateholders CWL,
Inc. Asset Backed Certificates, Series
2005-10, FKA Bank of New York; et al.,
Defendants – Appellees.

EXCERPT:

However, Washington law provides an exception to the waiver doctrine for claims for damages alleging violations of the Washington Consumer Protection Act (“CPA”). See Wash. Rev. Code § 61.24.127(1)(b). After the district court dismissed plaintiffs’ CPA claim, the Washington Supreme Court decided Bain v. Metropolitan Mortgage Group, Inc., 285 P.3d 34, 51 (Wash. 2012), which held that a plaintiff may meet the public interest element of a CPA claim by alleging that Mortgage Electronic Registration System Inc. was unfairly or deceptively characterized as the beneficiary of a deed of trust. See id. at 49 (elements of a CPA claim). Because the district court did not have the benefit of Bain when it issued its order of dismissal, we remand to allow the court to reconsider plaintiffs’ CPA claim.

AFFIRMED in part, VACATED in part, and REMANDED.

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Bank of New York Mellon v Perricone | NYSC – Pursuant to CPLR 3211 (a)(5) to dismiss the reformation claim based on statute of limitations is GRANTED

Bank of New York Mellon v Perricone | NYSC – Pursuant to CPLR 3211 (a)(5) to dismiss the reformation claim based on statute of limitations is GRANTED

SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF RICHMOND

THE BANK OF NEW YORK MELLON F/K/A
THE BANK NEW YORK, AS SUCCESSOR TO
JP MORGAN CHASE BANK, N.A., AS INDENTURE
TRUSTEE, ON BEHALF OF THE HOLDERS OF THE
TERWIN MORTGAGE TRUST 2006-6,
ASSET-BACKED SECURITIES, SERIES 2006-6,
Plaintiff

against

BARBARA PERRICONE A/K/A BARBARA ANN
PERRICONE, SILVER FALCON PROPERTIES, LLC.,
CITY OF NEW YORK ENVIRONMENTAL CONTROL
BOARD; CITY OF NEW YORK PARKING VIOLATIONS
BUREAU; CITY OF NEW YORK TRANSIT ADJUDICATION
BUREAU, ET AL.,
Defendants
.
Upon the foregoing cited papers, the Decision and Order on this Motion is as follows:
Defendant Silver Falcon Properties moves for an order pursuant to CPLR 3211 (a)(5) to
dismiss the cause of action for reformation based on statute of limitations, CPLR 3211 (a)(7) to
dismiss for failure to state a cause of action, and pursuant to CPLR 3211 (a)(1) for dismissal based
on documentary evidence. Defendant Barbara Perricone cross moves for an order pursuant to CPLR
3211 (a)(5) to dismiss the reformation claim based on statute of limitations and pursuant to CPLR
3211 (a)(7) to dismiss for failure to state a cause of action upon which relief can be granted. The
motion and cross motion are granted.

Facts

This is a foreclosure action whereby plaintiffs seek to divest defendant Perricone of her
equitable interest in the premises known as 1027 Hylan Boulevard, Staten Island, New York due to
a default on the accompanying mortgage note. On or about April 6, 2006, defendant Perricone
executed a mortgage on what the instrument describes as 1027 Hylan Boulevard, Staten Island, New
York. The mortgage application filed in connection with the instrument states defendant Perricone’s
current address as 1027 Hylan Boulevard and further identifies the same as the subject property
address. The application indicates it is for a refinance loan originally acquired in 1977 for a cost of
$60,000. Defendant Perricone is also the record owner of additional piece of land known as 131
Radcliff Road, Staten Island, New York. The Radcliff Road and Hylan Boulevard location are both
listed on the application, with 131 Radcliff Road having an existing mortgage or lien of $752,172
and 1027 Hylan Boulevard having an existing $2,821 mortgage or lien. The mortgage itself contains
a property description in the “Transfer Of Rights In The Property” section which states it is the first
mortgage lien on the premises and identifies the street address as 1027 Hylan Boulevard. However,
the legal description in “Schedule A” reads as follows:

BEGINNING at a point on the Northerly side of Radcliff Road distant
80 feet Westerly from the corner formed by the intersection of the Northerly
side of Radcliff Road and the Westerly side of Briarcliff Road; RUNNING
THENCE South 57 degrees 09 Minutes 19 seconds East, along the Northerly
side of Radcliff Road 80 feet; RUNNING THENCE North 32 degrees 50 minutes
41 seconds East, 100 feet; RUNNING THENCE South 57 degrees 09 minutes
19 seconds West, 80 feet; RUNNING THENCE North 32 degrees 50 minutes
41 seconds East, 100 feet to the Northerly side of Radcliff Road to the point
or place of beginning

The description also refers to the premises as 131 Radcliff Road, Staten Island, New York
and identifies the block and lot as 3232 and 30, respectively. Plaintiffs contend this legal description
was recorded with the mortgage in error and is not otherwise incorporated into the mortgage
contract. To this end, they submitted defendant Perricone’s initial application and a different
“Schedule” which reads as follows:

BEGINNING at a point on the Northerly side of Hylan Boulevard, distant
61.47 feet Westerly from the corner formed by the intersection of the Westerly
side of Briarcliff Road and the said Northerly side of Hylan Boulevard;

RUNNING THENCE North 32 degrees 50 minutes 41 seconds East
97.14 feet to a point; THENCE South 67 degrees 55 minutes 43 seconds East
84.01 feet to a point; THENCE south 12 degrees 46 minutes 48 seconds West
101.83 feet to a point on the Northerly side of Hylan Boulevard; THENCE
along the said Northerly side of Hylan Boulevard on a curve deflecting to the
right having a central angle of 3 degrees 40 minutes 22 seconds a distance
of 49.68 feet to the point or place of beginning

Plaintiff’s obtained the note in question via an assignment from Mortgage Electronic
Registration Systems which was recorded with the Clerk of Richmond County on May 8, 2013. This
assignment purported to transfer Block 3230 Lot 44 which describes the Hylan Boulevard premises
and not the Radcliff Road Location. Plaintiffs thereafter filed this action seeking to 1) reform the
legal description of the premises recorded with the mortgage and then 2) foreclose on the reformed
mortgage. Plaintiff’s main contention is that defendant Perricone intended to mortgage the Hylan
Boulevard premises. However, plaintiffs do not submit any affidavits that suggest the parties intent
was to ever mortgage the Hylan Boulevard premises. Instead, they rely on the mortgage application
which lists 1027 Hylan Boulevard as the subject premises and argue the legal description contained
in “Schedule A” was inadvertently included during the closing process without providing evidence
suggesting that the mortgagor intended to encumber the Hylan Boulevard location.

In defendant’s verified answer to the plaintiff’s complaint, defendant Perricone denied that
1027 Hylan Boulevard was the subject premises of the disputed mortgage. Defendants also submitted
the affidavit of Mr. Achilles Gatanas, a mortgage loan processor for Real Estate Mortgage Network,
who averred that he assisted defendant in obtaining the Home Equity line of credit and that defendant
intended to mortgage the 131 Radcliff Road location. He further indicated that defendant Perricone
had told him the loan documentation incorrectly identified 1027 Hylan Boulevard and wished the
loan documentation be changed to reflect the Radcliff Road property. Thereafter, defendants filed
a motion pursuant to CPLR 3212(a) (1), (5) and (7) seeking to dismiss the cause of action based on
reformation inasmuch as they argue the evidence provided by plaintiffs was insufficient to suggest
the mutual agreement of the parties was incorrectly expressed in the written agreement. Defendant
Silver Falcon contends they have a money judgement on the 1027 Hylan Boulevard property entered
by the Supreme Court, Kings County on May 29, 2012 and that plaintiff’s interest is limited solely
to the Radcliff Road location inasmuch as the legal description filed with the mortgage at issue
identifies that premises and omits the metes and bounds description of 1027 Hylan Boulevard.

Discussion

CPLR 3211(a)(7)

“A claim for reformation of a written instrument must be grounded upon either a mutual
mistake or fraudulently induced unilateral mistake” contained within the recorded document. 1 This
is because the purpose of reformation is to “restate the intended terms of an agreement” when the
written agreement does not reflect the original intention of the parties.2 It is presumed that “a
deliberately prepared and executed document manifests the true intentions of the parties” so much
so that “the proponent of reformation is required to proffer evidence, which in no uncertain terms,
evinces fraud or mistake and the intended agreement between the parties.”3 Motions based on CPLR
3211 (a)(1) and (a)(5) both require a cognizable claim before one may apply a defense based on
documentary evidence or claim the action is untimely.4 Thus, it is proper to evaluate whether the
plaintiff’s have stated a cause of action upon which relief may be granted first. A CPLR 3121(a)(7)
motion predicated on the plaintiff’s failure to state a claim requires the court to “accept the facts as
alleged in the complaint as true, accord plaintiffs the benefit of every possible inference, and
determine only whether the facts as alleged fit within any cognizable legal theory.”5 While a court
may consider evidentiary material submitted by a defendant, so long as the motion is not converted
into one for summary judgement, and, “unless it has been shown that a material fact as claimed by
the [plaintiff] to be one is not a fact at all and unless it can be said that no significant dispute exists,”
dismissal is inappropriate.6 Although plaintiff’s complaint does not specify whether the alleged
mistake in the legal description of the premises was based on either fraud, mutual mistake or a
scriveners error, the liberal pleading standard allows the court to find the existence of any cognizable
theory.

Reformation based on a scrivener’s error requires “proof of a prior agreement between
parties” which was not accurately reduced to writing. If “the only mistake alleged is in the reduction
of that agreement to writing,” then such an error may be corrected, no matter how it occurred.7 Here,
plaintiff’s contend that “the description to Borrower’s other property was somehow inadvertently
placed in and amongst” the closing papers such that the legal description referred to 131 Radcliff
Road instead of accurately describing the intended premises of 1027 Hylan Boulevard. As stated in
the facts, defendant Perricone’s verified answer to the plaintiff’s complaint denied that 1027 Hylan
Boulevard was the subject premises of the disputed mortgage. The affidavit of Mr. Gatanas further
erodes the plaintiff’s position since he indicated that defendant had told him the loan documentation
incorrectly identified 1027 Hylan Boulevard and wished the loan documentation be changed to
reflect the Radcliff Road property. Plaintiff’s have not submitted any evidence which would suggest
the parties in fact agreed and intended that the Hylan Boulevard premises was the subject of the loan.
Thus, it is clear that the requisite standard of showing prior agreement has not been met. As such,
the equitable relief of reformation due to scrivener’s error is unavailable to the plaintiffs.8

Generally, where a written instrument fails to conform to an agreement between parties, a
court will reform said instrument to conform it to the intentions of the parties provided the mistake
concerns a fundamental assumption of the contract.9 However, reformation based on mutual mistake
“requires proof, by clear and convincing evidence,” that the document incorrectly expresses the
intentions of either party.10 “In the case of unilateral mistake, it must be alleged that one party to the
agreement fraudulently misled the other, and that the subsequent writing does not express the
intended agreement.”11 Claims for unilateral mistake cannot be substantiated by conclusory
allegations but require pleading misrepresentation of a material fact, falsity, intent and deception.12
Here, it is clear that no cause of action for unilateral mistake has been made out in as much as the
plaintiff’s complaint does not specify with any particularity the required elements.

As the legal description of a property contained within a document trumps a conflicting street
address13, plaintiffs would need to establish that the intent of the mortgagor and mortgagee was to
identify 1027 Hylan Boulevard as the subject premises and that this intent was not carried out in the
ultimate memorialization of the agreement. Plaintiffs fail to provide any non-hearsay evidence other
than an attorney affidavit which would suggest the intent of either party was to encumber the 1027
Hylan Boulevard premises. This is especially true considering defendant’s verified answer and
affidavit of Mr. Gatanas which together indicate that defendant Perricone’s intent entering into the
process was to mortgage the Radcliff Road premises. It would be improper to reform the deliberately
executed document because plaintiff is unable to show exactly what was agreed upon by the parties
and thus is unable to meet the heavy burden required to allow reformation.14 The plaintiff’s have
failed to make out a cause of action based on any theory of reformation. Therefore, defendant’s
motion based on CPLR 3211(a)(7) is granted.

CPLR 3211 (a)(5)

Assuming, arguendo, that plaintiffs have made out a viable cause of action for reformation,
it is otherwise barred by the applicable statute of limitations period which is six years from the date
the mistake was made.15 “On a motion to dismiss a complaint pursuant to CPLR 3211(a)(5) on
statute of limitations grounds, the moving defendant must establish, prima facie, that the time in
which to commence the action has expired.”16 According to plaintiff’s submissions, the mistake was
made at the closing when the errant description of the premises inadvertently became part of the
executed mortgage. As the closing took place in 2006, in order for the action to be timely filed, it
must have initiated by 2012.

CPLR 3211 (a)(1)

To prevail on a CPLR 3212(a)(1) motion, a moving party must demonstrate that “the
documentary evidence utterly refutes plaintiff’s factual allegations, conclusively establishing a
defense as a matter of law.”17 In order to be considered documentary, the proffered evidence “must
be unambiguous” and “essentially unassailable.”18 It is axiomatic that when presented with a
discrepancy between the street address and legal description of a piece of property, the legal
description controls.19 The legal description attached to the mortgage unequivocally refers to 131
Radcliff Road. Therefore, it trumps any conflicting street addresses contained in the documentation
and would warrant dismissal based on CPLR 3211 (a)(1).

Foreclosure

Even though the action for reformation is hereby dismissed, plaintiff may still maintain their
foreclosure action on the mortgage they do hold. In order to substantiate a foreclosure action, the
plaintiff must establish that the defendant was a party to the mortgage and that she failed to make
the required payments inasmuch as the essential elements of a cause of action for breach of a
mortgage contract are “the existence of a contract, the plaintiff’s performance under the contract, the
defendant’s breach of that contract, and resulting damages.”20 Here, plaintiff has submitted sufficient
evidence to buttress their foreclosure claim. The record reveals the existence of a signed and
executed mortgage, as well as a mortgage application signed by defendant on April 6, 2006 and
required her to “make Minimum Payments” in one-hundred and twenty equal monthly installments
until the maturity date of April 1st, 2026. Defendant was further required to pay the entire
outstanding balance at the maturity date. The mortgage language also preserved the right of the
lender to foreclose on the property by stating that default in payment may result in a loss of the
secured premises. The information contained in the record indicates that a principal balance of
$398,650.83 remained and that the last monthly installment payed was on August 5, 2011.

Furthermore, any foreclosure action would be timely inasmuch as the statute of limitations
for an action “upon a mortgage of real property” is six years.21 This period begins to run “from the
due date for each unpaid installment, or from the time mortgagee is entitled to demand full payment,
or from the date the mortgage debt has been accelerated.”22 In other words, accrual of the limitations
period only begins “when the claim becomes enforceable, i.e. when all elements of the [cause of
action] can be truthfully alleged in a complaint.”23 Thus, an action for foreclosure would be timely
until September 5, 2017, which is six years from the date of the first unpaid installment.

Accordingly, it is hereby:

ORDERED, that the motions and cross motions to dismiss The Bank Of New York
Mellon’s foreclosure action made by Silver Falcon Properties, LLC and Barbara Perricone,
respectively are granted.

ENTER,
DATED: November 22, 2013
Joseph J. Maltese
Justice of the Supreme Court

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ABUBO vs THE BANK OF NEW YORK MELLON | DC of Hawaii – Oder Denying MSJ, Genuine issues of material fact remain as to whether Countrywide complied with TILA

ABUBO vs THE BANK OF NEW YORK MELLON | DC of Hawaii – Oder Denying MSJ, Genuine issues of material fact remain as to whether Countrywide complied with TILA

via: Gary Dubin

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII

EDWARD YUZON ABUBO, and
SARANNE KAGEL ABUBO,
Plaintiffs,

vs.

THE BANK OF NEW YORK
MELLON; COUNTRYWIDE HOME
LOANS, INC.; MORTGAGE
ELECTRONIC REGISTRATION
SYSTEMS, INC.; BANK OF
AMERICA, N.A.; and DOES 1-50.
Defendants.

ORDER DENYING DEFENDANT BANK OF NEW YORK MELLON’S
MOTION FOR SUMMARY JUDGMENT

I. INTRODUCTION

This action is again before the court after two prior dispositive Orders.
Defendant Bank of New York Mellon (“Defendant” or “BONYM”) moves for
summary judgment on Plaintiffs Edward and Saranne Abubo’s (the “Abubos” or
“Plaintiffs”) only remaining Count — a claim for damages under 15 U.S.C.
§ 1640(a) for BONYM’s alleged failure to honor Plaintiffs’ notice of rescission
under 15 U.S.C. § 1635. Based on the following, the Motion is DENIED.

[…]

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COMPLAINT | SEGARRA v THE FEDERAL RESERVE BANK of NEW YORK – Because Carmen refused to change her findings, Defendants terminated her

COMPLAINT | SEGARRA v THE FEDERAL RESERVE BANK of NEW YORK – Because Carmen refused to change her findings, Defendants terminated her

courtesy of Propublica

IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK

CARMEN M. SEGARRA,

Plaintiff,

V.

THE FEDERAL RESERVE BANK of
NEW YORK; MICHAEL SILVA;
MICHAEL KOH; and JOHNATHON
KIM,

Defendants.

COMPLAINT

Plaintiff Carmen M. Segarra (hereinafter “Carmen” or “Carmen Segarra”), by and
through her attorney, Linda . Stengle, Esq., brings this action against Defendants Federal
Reserve Bank of New York, Michael Silva, Michael Koh, and Johnathon Kim

(hereinafter “Defendants”). Plaintiff Carmen Segarra alleges as follows:

I. INTRODUCTION

1. This action arises out of Defendants’ violations of 12 U.S.C. 183] and other
laws prohibiting obstruction and interference with a bank examiner’s examination
and retaliation for her preliminary examination findings.

2. On October 31, 2011, Carmen Segarra accepted full time employment offered to
her by Defendant Federal Reserve Bank of New York. Carmen’s title was Senior
Bank Examiner, and she was assigned to examine the Legal and Compliance
divisions of the Goldman Sachs Group (hereinafter “Goldman” or “Goldman
Sachs”).

Through their misconduct, Defendants repeatedly obstructed and interfered with
Carmen’s examination of Goldman over several months. Finally, in May 2012,
Defendants directed Carmen to change the findings of her examination. Carmen
refused. Because Carmen refused to change her findings, Defendants terminated
her three business days later, on May 23, 2012.

In addition, Defendants improperly caused Carmen Segarra reputational and
professional harm by firing her for cause. Specifically, they fired her because
they suddenly, after months receiving evidence, changed their position and said
Carmen’s finding that Goldman Sachs had no conflict of interest policy in
compliance with SR 08-08 was not credible.

Defendants caused Carmen Segarra’s career in banking to be irreparably
damaged.

Plaintiff Carmen Segarra seeks reinstatement to her position as Senior Bank
Examiner, back pay, compensation for lost benefits, compensatory damages,
punitive damages, and attorney’s fees, costs, and expenses, in an amount
determined by the Court, to redress Defendants’ illegal and improper conduct.

[…]

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FULL COMPLAINT w/ EMAILS

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Bank of New York Mellon v. Preciado | Sup. Ct of CA – trustee’s deed upon sale identifies one trustee, but the DOT identifies another…§ 2924

Bank of New York Mellon v. Preciado | Sup. Ct of CA – trustee’s deed upon sale identifies one trustee, but the DOT identifies another…§ 2924

SUPERIOR COURT OF CALIFORNIA

COUNTY OF SANTA CLARA
APPELLATE DIVISION

CCP § 1162 Notice Requirements; CCP § 1161a’s Required Compliance with CC § 2924

Bank of New York Mellon v. Preciado, Nos. 1-12-AP-001360 & 1-12-AP-001361 (Cal. App. Div. Super. Ct. Aug. 19, 2013): To be effective, UD notices to quit must be properly served: 1) by personal service; 2) or if personal service failed, by leaving the notice with a person of “suitable age and discretion” at the residence or business of the tenant (or former borrower) and then mailing a copy; 3) or if the first two methods failed, by posting a notice at the residence and mailing a copy. CC § 1162. Here, the process server’s affidavit stated that “after due and diligent effort,” he executed “post and mail” service. The trial court accepted this statement as evidence of compliance with CC § 1162, but the appellate division reversed. The statute indicates that “post and mail” is the last available method of service, not the first. Since the affidavit does not specifically assert that personal service was ever attempted, the trial court erred in assuming that service complied with CC § 1162. Further, defendants’ appeal based on defective service was not barred because they failed to assert it as an affirmative defense. Proper service is an “essential [UD] element” and tenants’ “general denial” of each statement in the complaint put service at issue.

Post-foreclosure UD plaintiffs must also demonstrate duly perfected title and compliance with CC § 2924 foreclosure procedures. CCP § 1161a. “Duly” perfected title encompasses all aspects of purchasing the property, not just recorded title. The trial court relied on plaintiff’s trustee’s deed upon sale, showing plaintiffs purchased the property at the foreclosure sale. The court ignored contradicting testimony alleging that the property was sold to the loan’s servicer, not plaintiff. Further, “to prove compliance with section 2924, the plaintiff must necessarily prove the sale was conducted by the trustee.” Here, the trustee’s deed upon sale identifies one trustee, but the DOT identifies another. The trial court erred in accepting the recorded trustee’s deed upon sale as conclusive evidence of compliance with § 2924, and the appellate division reversed.

_________________________________________________________________________________

 . . .

Sale in Compliance with Civil Code § 2924 et seq, and the Deed of Trust

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Bank of New York v Mungro | NYSC – Lack of Standing, MERS tried to implicately transfer Note and Court said No…No…NOOOO!

Bank of New York v Mungro | NYSC – Lack of Standing, MERS tried to implicately transfer Note and Court said No…No…NOOOO!

Why is MERS listed as a defendant if it was assigning for the Plaintiff?? Exactly…conflicts here too!

 

SUPREME COURT – STATE OF NEW YORK
IAS PART 48 – SUFFOLK COUNTY

PRESENT: Hon. HECTOR D. LASALLE
Justice of the Supreme Court
x .

The Bank of New York fka The Bank of New York
as successor to JPMorgan Chase Bank, N.A. as
Trustee for Holders of SAM1 I1 Trust 2006-AR7,

Plaintiff,

v.

-against-

Jason Mungro, Mortgage Electronic Registration
Systems, Inc., acting solely as a nominee for
Countrywide Bank, N.A., its successors and
assigns, and “JOHN DOE #1” through “JOHN
DOE #10”, the last ten names being fictitious and
unknown to the plaintiff, the person or parties,
if any, having or claiming an interest in or lien
upon the mortgaged premises described in the
Complaint,

Defendants.

<snips>
In opposition to the motion, the defendant submits, inter alia, an affidavit by the defendant mortgagor and an affirmation by counsel. In his affidavit, the defendant mortgagor concedes that he executed the mortgage in favor of Countrywide and delivered it to MERS as nominee for Countrywide. He also concedes that a foreclosure settlement conference pursuant to CPLR 3408 has been conducted, but that his loan was not modified and this action was not settled. In his affirmation, counsel requests that the motion be denied, arguing that there may be an issue as to standing since MERS as nominee for Countrywide lacked the authority to assign the note to the plaintiff. Counsel also asserts that the assignment of the mortgage to the plaintiff was not recorded at the time this action was commenced. 
Parenthetically, in what appears to be a scrivener’s error, and in contradiction to the defendant mortgagor’s concession, counsel asserts that a foreclosure settlement conference pursuant to CPLR 3408 has never been held.
.  .  .
Where the issue of standing is raised by a defendant, a plaintiff must prove its standing in order
to be entitled to relief (see, CitiMortgage, Inc. v Rosentlial, 88 AD3d 759, 931 NYS2d 638 [2d Dept
20 1 I]). A plaintiff has standing where it is the holder or assignee of both the subject mortgage and of the
underling note at the time the action is commenced (see, Bank of N. Y. v Silverberg, 86 AD3d 274,926
NJ’S2d 532 [3d Dept 201 11; US. Bank, N.A. v Collymore, 68 AD3d 752, 890 NYS2d 578 [2d Dept
20001). “‘4s a general matter, once a promissory note is tendered to and accepted by an assignee, the
mortgage passes as ai1 incident to the note” (Bank of N. Y. v Silverberg, 86 AD3d 274, supra at 280; see,
Mortgage Elec. Registration Sys., Inc. v Conkley, 41 AD3d 674,838 NYS2d 622 [2d Dept 20071). “By
contrast, a transfer of a mortgage without an assignment of the underlying note or bond is a nullity, and
no interest is acquired by it” (Bank of N. Y. v Silverberg, 86 AD3d 274, supra at 280; see, LaSalle Bank
Natl. Assn. v, Ahearn, 59 AD3d 91 1, 875 NYS2d 595 [3d Dept 20091). “Either a written assignment of
the underlying note or the physical delivery of the note prior to the commencement of the foreclosure
action is sufficient to transfer the obligation” (US. Bank, N.A. v Collymore, 68 AD3d 752, supra at 754).

In the instant case the plaintiff failed to establish, prima facie, that it had standing as its evidence did not demonstrate that the note was physically delivered to it prior to the commencement of the action (see, Deutsche Bank Nntl. Trust Co. v Rivas, 95 AD3d 1061, 945 NYS2d 328 [2d Dept 20121: HSBC Brink USA v Hernandez, 92 AD3d 843,939 NYS2d 120 [2d Dept 20121). In his affidavits, the plaintiffs servicing agent did not give any factual details of a physical delivery of the note and thus, failed to…
‘The plaintiff. therefore, is awarded partial summary judgment against the defendant mortgagor striking all affirmative defenses, except the first affirmative defense to the extent that it asserts standing as an affirmative defense, and dismissing all of the counterclaims…

[…]

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Amina et al v. The Bank Of New York Mellon | Hawaii Fed. District Court Applies Rules of Evidence: BONY/Mellon, US Bank, JP Morgan Chase Failed to Prove Sale of Note

Amina et al v. The Bank Of New York Mellon | Hawaii Fed. District Court Applies Rules of Evidence: BONY/Mellon, US Bank, JP Morgan Chase Failed to Prove Sale of Note

H/T Living Lies

 IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII

MELVIN KEAKAKU AMINA and DONNA MAE AMINA, Husband and Wife, Plaintiffs,
v.
THE BANK OF NEW YORK MELLON, FKA THE BANK OF NEW YORK; U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR J.P. MORGAN MORTGAGE ACQUISITION TRUST 2006-WMC2, ASSET BACKED PASS-THROUGH CERTIFICATES, SERIES 2006-WMC2 Defendants.
Civil No. 11-00714 JMS/BMK.

United States District Court, D. Hawaii.

ORDER DENYING DEFENDANTS THE BANK OF NEW YORK MELLON, FKA THE BANK OF NEW YORK AND U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR J.P. MORGAN MORTGAGE ACQUISITION TRUST 2006-WMC2, ASSET BACKED PASS-THROUGH CERTIFICATES, SERIES 2006-WMC2’S MOTION FOR SUMMARY JUDGMENT

J. MICHAEL SEABRIGHT, District Judge.

I. INTRODUCTION

This is Plaintiffs Melvin Keakaku Amina and Donna Mae Amina’s (“Plaintiffs”) second action filed in this court concerning a mortgage transaction and alleged subsequent threatened foreclosure of real property located at 2304 Metcalf Street #2, Honolulu, Hawaii 96822 (the “subject property”). Late in Plaintiffs’ first action, Amina et al. v. WMC Mortgage Corp. et al., Civ. No. 10-00165 JMS-KSC (“Plaintiffs’ First Action”), Plaintiffs sought to substitute The Bank of New York Mellon, FKA the Bank of New York (“BONY”) on the basis that one of the defendants’ counsel asserted that BONY owned the mortgage loans. After the court denied Plaintiffs’ motion to substitute, Plaintiffs brought this action alleging a single claim to quiet title against BONY. Plaintiffs have since filed a Verified Second Amended Complaint (“SAC”), adding as a Defendant U.S. Bank National Association, as Trustee for J.P. Morgan Mortgage Acquisition Trust 2006-WMC2, Asset Backed Pass-through Certificates, Series 2006-WMC2 (“U.S. Bank”). This quiet title claim against U.S. Bank and BONY (collectively, “Defendants”) is based on the assertion that Defendants have no interest in the Plaintiffs’ mortgage loan, yet have nonetheless sought to foreclose on the subject property.

Currently before the court is Defendants’ Motion for Summary Judgment, arguing that Plaintiffs’ quiet title claim fails because there is no genuine issue of material fact that Plaintiffs’ loan was sold into a public security managed by BONY, and Plaintiffs cannot tender the loan proceeds. Based on the following, the court finds that because Defendants have not established that the mortgage loans were sold into a public security involving Defendants, the court DENIES Defendants’ Motion for Summary Judgment.

II. BACKGROUND

A. Factual Background
Plaintiffs own the subject property. See Doc. No. 60, SAC ¶ 17. On February 24, 2006, Plaintiffs obtained two mortgage loans from WMC Mortgage Corp. (“WMC”) — one for $880,000, and another for $220,000, both secured by the subject property.See Doc. Nos. 68-6-68-8, Defs.’ Exs. E-G.[1]

In Plaintiffs’ First Action, it was undisputed that WMC no longer held the mortgage loans. Defendants assert that the mortgage loans were sold into a public security managed by BONY, and that Chase is the servicer of the loan and is authorized by the security to handle any concerns on BONY’s behalf. See Doc. No. 68, Defs.’ Concise Statement of Facts (“CSF”) ¶ 7. Defendants further assert that the Pooling and Service Agreement (“PSA”) dated June 1, 2006 (of which Plaintiffs’ mortgage loan is allegedly a part) grants Chase the authority to institute foreclosure proceedings. Id. ¶ 8.

In a February 3, 2010 letter, Chase informed Plaintiffs that they are in default on their mortgage and that failure to cure default will result in Chase commencing foreclosure proceedings. Doc. No. 68-13, Defs.’ Ex. L. Plaintiffs also received a March 2, 2011 letter from Chase stating that the mortgage loan “was sold to a public security managed by [BONY] and may include a number of investors. As the servicer of your loan, Chase is authorized by the security to handle any related concerns on their behalf.” Doc. No. 68-11, Defs.’ Ex. J.

On October 19, 2012, Derek Wong of RCO Hawaii, L.L.L.C., attorney for U.S. Bank, submitted a proof of claim in case number 12-00079 in the U.S. Bankruptcy Court, District of Hawaii, involving Melvin Amina. Doc. No. 68-14, Defs.’ Ex. M.

Plaintiffs stopped making payments on the mortgage loans in late 2008 or 2009, have not paid off the loans, and cannot tender all of the amounts due under the mortgage loans. See Doc. No. 68-5, Defs.’ Ex. D at 48, 49, 55-60; Doc. No. 68-6, Defs.’ Ex. E at 29-32.

>B. Procedural Background
>Plaintiffs filed this action against BONY on November 28, 2011, filed their First Amended Complaint on June 5, 2012, and filed their SAC adding U.S. Bank as a Defendant on October 19, 2012.

On December 13, 2012, Defendants filed their Motion for Summary Judgment. Plaintiffs filed an Opposition on February 28, 2013, and Defendants filed a Reply on March 4, 2013. A hearing was held on March 4, 2013.
At the March 4, 2013 hearing, the court raised the fact that Defendants failed to present any evidence establishing ownership of the mortgage loan. Upon Defendants’ request, the court granted Defendants additional time to file a supplemental brief.[2] On April 1, 2013, Defendants filed their supplemental brief, stating that they were unable to gather evidence establishing ownership of the mortgage loan within the time allotted. Doc. No. 93.

III. STANDARD OF REVIEW

Summary judgment is proper where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The burden initially lies with the moving party to show that there is no genuine issue of material fact. See Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007) (citing Celotex, 477 U.S. at 323). If the moving party carries its burden, the nonmoving party “must do more than simply show that there is some metaphysical doubt as to the material facts [and] come forwards with specific facts showing that there is a genuine issue for trial.” Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586-87 (1986) (citation and internal quotation signals omitted).

An issue is `genuine’ only if there is a sufficient evidentiary basis on which a reasonable fact finder could find for the nonmoving party, and a dispute is `material’ only if it could affect the outcome of the suit under the governing law.” In re Barboza,545 F.3d 702, 707 (9th Cir. 2008) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). When considering the evidence on a motion for summary judgment, the court must draw all reasonable inferences on behalf of the nonmoving party. Matsushita Elec. Indus. Co., 475 U.S. at 587.

IV. DISCUSSION

As the court previously explained in its August 9, 2012 Order Denying BONY’s Motion to Dismiss Verified Amended Complaint, see Amina v. Bank of New York Mellon,2012 WL 3283513 (D. Haw. Aug. 9, 2012), a plaintiff asserting a quiet title claim must establish his superior title by showing the strength of his title as opposed to merely attacking the title of the defendant. This axiom applies in the numerous cases in which this court has dismissed quiet title claims that are based on allegations that a mortgagee cannot foreclose where it has not established that it holds the note, or because securitization of the mortgage loan was defective. In such cases, this court has held that to maintain a quiet title claim against a mortgagee, a borrower must establish his superior title by alleging an ability to tender the loan proceeds.[3]

This action differs from these other quiet title actions brought by mortgagors seeking to stave off foreclosure by the mortgagee. As alleged in Plaintiffs’ pleadings, this is not a case where Plaintiffs assert that Defendants’ mortgagee status is invalid (for example, because the mortgage loan was securitized, Defendants do not hold the note, or MERS lacked authority to assign the mortgage loans). See id. at *5. Rather, Plaintiffs assert that Defendants are not mortgagees whatsoever and that there is no record evidence of any assignment of the mortgage loan to Defendants.[4] See Doc. No. 58, SAC ¶¶ 1-4, 6, 13-1 — 13-3.

In support of their Motion for Summary Judgment, Defendants assert that Plaintiffs’ mortgage loan was sold into a public security which is managed by BONY and which U.S. Bank is the trustee. To establish this fact, Defendants cite to the March 2, 2011 letter from Chase to Plaintiffs asserting that “[y]our loan was sold to a public security managed by The Bank of New York and may include a number of investors. As the servicer of your loan, Chase is authorized to handle any related concerns on their behalf.” See Doc. No. 68-11, Defs.’ Ex. J. Defendants also present the PSA naming U.S. Bank as trustee. See Doc. No. 68-12, Defs.’ Ex. J. Contrary to Defendants’ argument, the letter does not establish that Plaintiffs’ mortgage loan was sold into a public security, much less a public security managed by BONY and for which U.S. Bank is the trustee. Nor does the PSA establish that it governs Plaintiffs’ mortgage loans. As a result, Defendants have failed to carry their initial burden on summary judgment of showing that there is no genuine issue of material fact that Defendants may foreclose on the subject property. Indeed, Defendants admit as much in their Supplemental Brief — they concede that they were unable to present evidence that Defendants have an interest in the mortgage loans by the supplemental briefing deadline. See Doc. No. 93.

Defendants also argue that Plaintiffs’ claim fails as to BONY because BONY never claimed an interest in the subject property on its own behalf. Rather, the March 2, 2011 letter provides that BONY is only managing the security. See Doc. No. 67-1, Defs.’ Mot. at 21. At this time, the court rejects this argument — the March 2, 2011 letter does not identify who owns the public security into which the mortgage loan was allegedly sold, and BONY is the only entity identified as responsible for the public security. As a result, Plaintiffs’ quiet title claim against BONY is not unsubstantiated.

V. CONCLUSION

Based on the above, the court DENIES Defendants’ Motion for Summary Judgment.

IT IS SO ORDERED.

[1] In their Opposition, Plaintiffs object to Defendants’ exhibits on the basis that the sponsoring declarant lacks and/or fails to establish the basis of personal knowledge of the exhibits. See Doc. No. 80, Pls.’ Opp’n at 3-4. Because Defendants have failed to carry their burden on summary judgment regardless of the admissibility of their exhibits, the court need not resolve these objections.

Plaintiffs also apparently dispute whether they signed the mortgage loans. See Doc. No. 80, Pls.’ Opp’n at 7-8. This objection appears to be wholly frivolous — Plaintiffs have previously admitted that they took out the mortgage loans. The court need not, however, engage Plaintiffs’ new assertions to determine the Motion for Summary Judgment.

[2] On March 22, 2013, Plaintiffs filed an “Objection to [87] Order Allowing Defendants to File Supplemental Brief for their Motion for Summary Judgment.” Doc. No. 90. In light of Defendants’ Supplemental Brief stating that they were unable to provide evidence at this time and this Order, the court DEEMS MOOT this Objection.

[3] See, e.g., Fed Nat’l Mortg. Ass’n v. Kamakau, 2012 WL 622169, at *9 (D. Haw. Feb. 23, 2012);Lindsey v. Meridias Cap., Inc., 2012 WL 488282, at *9 (D. Haw. Feb. 14, 2012)Menashe v. Bank of N.Y., ___ F. Supp. 2d ___, 2012 WL 397437, at *19 (D. Haw. Feb. 6, 2012)Teaupa v. U.S. Nat’l Bank N.A., 836 F. Supp. 2d 1083, 1103 (D. Haw. 2011)Abubo v. Bank of N.Y. Mellon, 2011 WL 6011787, at *5 (D. Haw. Nov. 30, 2011)Long v. Deutsche Bank Nat’l Tr. Co., 2011 WL 5079586, at *11 (D. Haw. Oct. 24, 2011).

[4] Although the SAC also includes some allegations asserting that the mortgage loan could not be part of the PSA given its closing date, Doc. No. 60, SAC ¶ 13-4, and that MERS could not legally assign the mortgage loans, id. ¶ 13-9, the overall thrust of Plaintiffs’ claims appears to be that Defendants are not the mortgagees (as opposed to that Defendants’ mortgagee status is defective). Indeed, Plaintiffs agreed with the court’s characterization of their claim that they are asserting that Defendants “have no more interest in this mortgage than some guy off the street does.” See Doc. No. 88, Tr. at 9-10. Because Defendants fail to establish a basis for their right to foreclose, the court does not address the viability of Plaintiffs’ claims if and when Defendants establish mortgagee status.

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Posted in STOP FORECLOSURE FRAUD0 Comments

SUAREZ vs BANK OF NEW YORK MELLON | CA Superior Court – MERS Assignment, BONY Summary Judgment and Summary Adjudication Denied

SUAREZ vs BANK OF NEW YORK MELLON | CA Superior Court – MERS Assignment, BONY Summary Judgment and Summary Adjudication Denied

via BERGMAN & GUTIERREZ

This is another great ruling… The last time we wrote, the judge had overruled the Defendant’s demurrer. This time, they filed for Summary Judgment/Adjudication, and the judge denied their motion! One of the core issues in this case is whether MERS can assign an interest in a mortgage loan in an Assignment of Deed of Trust in its own name. In other words, whether MERS was required to disclose on whose behalf it was “assigning” the mortgage loan as required under the statute of frauds.

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Posted in STOP FORECLOSURE FRAUD2 Comments

BALL v THE BANK OF NEW YORK | Missouri homeowners have a right to sue securitization trusts for wrongful foreclosure

BALL v THE BANK OF NEW YORK | Missouri homeowners have a right to sue securitization trusts for wrongful foreclosure

via: Gregory Leyh, leyhlaw.com

Readers may be interested in the attached opinion holding that, despite defendants’ claim of lack of standing, Missouri homeowners have a right to sue securitization trusts for wrongful foreclosure.

THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
CENTRAL DIVISION

CHARLES AND NICOLE BALL, on
behalf of themselves and all others similarly
situated, et al.,

Plaintiffs,

v.

THE BANK OF NEW YORK, AS
TRUSTEE FOR CWALT, INC., et al.,

Defendants.

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Posted in STOP FORECLOSURE FRAUD4 Comments

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Dave Krieger CHAIN OF TITLE ASSESSMENT AND QUIET TITLE WORKSHOPS FORT MYERS
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