David J. Reiss, Brooklyn Law School Bradley T. Borden, Brooklyn Law School
Abstract
We review the differences between two visions for the residential mortgage markets, one driven by the goal of efficiency and the other driven by the goals of efficiency and consumer protection. Both visions advocate for structural reform, but one advocates for industry-led change and the other advocates for input from a wider array of stakeholders. Broader input is not only important to ensure that a broad range of interests are represented but also to ensure the long-term legitimacy of the new system. This is a response to Joshua Stein, Dirt Lawyers Versus Wall Street: A Different View, PROBATE AND PROPERTY (forthcoming 2013), which in turn is a response to Bradley T. Borden & David J. Reiss, Dirt Lawyers and Dirty REMICs, PROBATE AND PROPERTY 12 (May/June 2013).
Last last week, Sen. Elizabeth Warren (D-MA) delivered a masterful defense of her proposed update to the bank-regulating Glass-Steagall Act on CNBC’s “Squawk Box,” effectively shutting down co-anchor Brian Sullivan’s claim that government can’t do anything to rein in financial risk.
A clip of the interview went viral earlier this week after it was posted on Sen. Warren’s official YouTube account, amassing some 700,000 views in a matter of days.
And that’s when NBC Universal decided to have it removed.
STATE OF OHIO IN THE COURT OF APPEALS NINTH JUDICIAL DISTRICT COUNTY OF LORAIN
FANNIE MAE (“FEDERAL NATIONAL MORTGAGE ASSOCIATION”) Appellee
v.
KELLY ANN TRAHEY, et al. Appellants
C.A. No. 12CA010209
APPEAL FROM JUDGMENT ENTERED IN THE COURT OF COMMON PLEAS COUNTY OF LORAIN, OHIO
CASE No. 11CV172390
DECISION AND JOURNAL ENTRY
Dated: July 15, 2013
WHITMORE, Judge.
{¶1} Appellant, Robert Trahey, appeals from the judgment of the Lorain County Court of Common Pleas. This Court reverses.
{¶2} In May 2008, Robert and Kelly Ann Trahey executed a promissory note in favor of Sirva Mortgage, Inc. (“Sirva”) to purchase a property in North Ridgeville, Ohio. At the same time, the Traheys signed a mortgage granting a security interest in the property to Mortgage Electronic Registration Systems, Inc. (“MERS”) acting solely as nominee for Sirva. In May 2011, MERS assigned the mortgage to Federal National Mortgage Association (“Fannie Mae”).
{¶3} In June 2011, Fannie Mae filed a complaint for foreclosure against the Traheys. Fannie Mae listed the Traheys, their unknown spouses, and Waterbury Homeowners Association as defendants. Attached to its complaint, Fannie Mae included copies of the promissory note and mortgage executed in favor of Sirva and a copy of the assignment of mortgage from MERS to Fannie Mae. Sirva had indorsed the promissory note in blank. There is no indication of when this indorsement was made.
{¶4} In September 2011, Fannie Mae filed an amended complaint “to attach the fully negotiated note with all [i]ndorsements.” The promissory note attached showed Sirva had indorsed the note to CitiMortgage, Inc. and that CitiMortgage, Inc. had indorsed the note in blank. Unlike the note attached to the original complaint, this copy of the note did not include an indorsement from Sirva in blank. There are no dates associated with either of the indorsements.
{¶5} Fannie Mae filed a motion for summary judgment, which Robert Trahey opposed, arguing that there is a genuine issue of material fact as to whether Fannie Mae had standing to maintain the action. A magistrate issued a decision recommending the court grant default judgment against Kelly Ann Trahey, the unknown spouses of both Kelly Ann and Robert Trahey, and the Waterbury Homeowners Association for failure to file an answer or other responsive pleading. The magistrate further recommended that the court grant the motion for summary judgment. That same day, the trial court adopted the magistrate’s decision. Robert Trahey now appeals and raises two assignments of error for our review.
II Assignment of Error Number One THE TRIAL COURT COMMITTED PREJUDICIAL ERROR WHEN IT GRANTED THE MOTION FOR SUMMARY JUDGMENT WITHOUT SUMMARY JUDGMENT EVIDENCE DEMONSTRATING THAT FANNIE MAE WAS THE REAL PARTY IN INTEREST ENTITLED TO ENFORCE THE NOTE AND THE MORTGAGE.
{¶6} In his first assignment of error, Trahey argues that the court erred in granting summary judgment in favor of Fannie Mae because it did not establish that it had standing to maintain the foreclosure action.
{¶7} To prevail on a motion for summary judgment, the moving party must show: (1) there is no genuine issue of material fact; (2) the moving party is entitled to judgment as a matter of law; and (3) it appears from the evidence that reasonable minds can come to but one conclusion when viewing evidence in favor of the nonmoving party, and that conclusion is adverse to the nonmoving party. Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 105 (1996).
{¶8} An action may only be brought by the real party in interest. See Civ.R. 17(A). “[A] party lacks standing to invoke the jurisdiction of the court unless he has, in an individual or representative capacity, some real interest in the subject matter of the action.” (Emphasis deleted.) Fed. Home Loan Mtge. Corp. v. Schwartzwald, 134 Ohio St.3d 13, 2012-Ohio-5017, ¶ 22, quoting State ex rel. Dallman v. Franklin Cty. Court of Common Pleas, 35 Ohio St.2d 176, 179 (1973). Standing is determined at the time the complaint is filed. Schwartzwald at ¶ 3.
{¶9} “In foreclosure actions, the real party in interest is the current holder of the note and mortgage.” U.S. Bank, N.A. v. Richards, 189 Ohio App.3d 276, 2010-Ohio-3981, ¶ 13 (9th Dist.), quoting Everhome Mtge. Co. v. Rowland, 10th Dist. Franklin No. 07AP-615, 2008-Ohio- 1282, ¶ 12. Thus, if a bank seeks to foreclose it must establish that, at the time of the filing of the complaint, it was the holder of the note and mortgage. Obtaining a subsequent assignment of a promissory note and mortgage from the real party in interest does not cure a lack of standing. Schwartzwald at ¶ 3.
{¶10} One of the persons entitled to enforce a negotiable instrument is the holder of that instrument. R.C. 1303.31(A)(1). If the instrument has been indorsed in blank, “the instrument becomes payable to bearer and may be negotiated by transfer of possession alone” until specially indorsed. R.C. 1303.25(B). An instrument that is specially indorsed is one that identifies a specific payee, and “may be negotiated only by the indorsement of that person.” R.C. 1303.25(A).
{¶11} Here, Fannie Mae filed two copies of the promissory note, each containing different indorsements. The first note, attached to the original complaint, was indorsed by Sirva to blank. Therefore, Fannie Mae could have established that it was the real party in interest by proving that it had possession of the note. See R.C. 1303.25(B). However, a second copy of the promissory note, attached to the amended complaint, reflects that Sirva indorsed the note to CitiMortgage, and CitiMortgage indorsed the note to blank. Neither copy indicates when the various indorsements were made.
{¶12} The inconsistencies between the indorsements contained in the two copies of the promissory notes raises a genuine issue of material fact. In reviewing the record, we cannot determine what the status of the note was at the time the complaint was filed. Because there is a genuine issue of material fact as to whether Fannie Mae was a holder of the promissory note at the time the complaint was filed, the court erred in granting Fannie Mae’s motion for summary judgment. Accordingly, Trahey’s first assignment of error is sustained.
Assignment of Error Number Two THE TRIAL COURT COMMITTED PREJUDICIAL ERROR WHEN IT GRANTED THE SUMMARY JUDGMENT WITHOUT SUMMARY JUDGMENT EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
{¶13} In his second assignment of error, Trahey argues that the trial court erred in granting Fannie Mae’s motion for summary judgment because it had failed to establish that it had fulfilled its obligations of notice and acceleration. In light of our resolution of Trahey’s first assignment of error, this argument is not ripe for review and we decline to address it.
III
{¶14} Trahey’s first assignment of error is sustained. His second assignment of error is not yet ripe for review. The judgment of the Lorain County Court of Common Pleas is reversed, and the cause is remanded for further proceedings consistent with the foregoing opinion.
Judgment reversed, and remanded.
There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common Pleas, County of Lorain, State of Ohio, to carry this judgment into execution. A certified copy of this journal entry shall constitute the mandate, pursuant to App.R. 27. Immediately upon the filing hereof, this document shall constitute the journal entry of judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the period for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is instructed to mail a notice of entry of this judgment to the parties and to make a notation of the mailing in the docket, pursuant to App.R. 30. Costs taxed to Appellee.
BETH WHITMORE FOR THE COURT BELFANCE, P. J. HENSAL, J. CONCUR.
APPEARANCES: JOHN J. GILL and GEOFFREY R. SMITH, Attorneys at Law, for Appellant.
U.S. federal prosecutors are considering a new strategy for criminally charging Wall Street bankers who packaged and sold bad mortgage loans at the height of the housing bubble, according to a federal official familiar with the investigation.
The official said federal authorities are finding new evidence they say indicates intent to commit fraud over the packaging and sale of mortgage bonds backed by subprime home loans in some of the civil lawsuits plaintiffs’ lawyers have filed against large banks.
And they are exploring whether they can build criminal cases against bankers by using a 1984 law intended to punish individuals for scamming commercial banks.
The threat posed by too-big-to-fail banks should be eradicated by year’s end, and if not, more restrictive measures targeting large financial groups may be necessary, U.S. Treasury Secretary Jack Lew said Wednesday.
Lew’s remarks during a panel discussion in New York create perhaps the first marker by which to judge the Obama administration’s efforts to forever end the perception that policymakers would never allow a select group of financial institutions to fail because of the risk to the economy. It also represents a slight break from the Treasury Department’s previous positions, in which agency officials have sought to trump the end of too-big-to-fail and have disputed claims that it still exists.
“It’s unacceptable to be in a place where too-big-to-fail has not been ended,” Lew said. “If we get to the end of this year and we cannot, with an honest, straight face, say that we have ended too-big-to-fail, we are going to have to look at other options.”
THE BANK OF NEW YORK MELLON F/K/A THE BANK OF NEW YORK 3476 STATEVIEW BOULEVARD FT. MILL, SC 29715, Plaintiff, v. CARL DEANE, JESSE DEANE, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. AS NOMINEE FOR RBC MORTGAGE COMPANY, NEW YORK CITY ENVIRONMENTAL CONTROL BOARD, NEW YORK CITY TRANSIT ADJUDICATION BUREAU, NEW YORK MERCHANTS PROTECTIVE CO., INC., JOHN DOE (SAID NAME BEING FICTITIOUS, IT BEING THE INTENTION OF Plaintiff TO DESIGNATE ANY and ALL OCCUPANTS OF PREMISES BEING FORECLOSED HEREIN, and ANY PARTIES, CORPORATIONS OR ENTITIES, IF ANY, HAVING OR CLAIMING AN INTEREST OR LIEN UPON THE MORTGAGED PREMISES.), Defendants.
Plaintiff was represented by David Dunn, Esq. and Leah Rabinowitz, Esq. of Hogan Lovells US LLP.
JACK M. BATTAGLIA, J.
In this mortgage foreclosure action commenced on July 2, 2009, plaintiff The Bank of New York Mellon f/k/a The Bank of New York moves for an order, among other things, granting summary judgment on its Complaint as against defendants Carl Deane and Jesse Deane, the mortgagors of the subject property; judgment by default against non-appearing defendants Mortgage Electronic Registration Systems, Inc. as Nominee for RBS Mortgage Company, New York City Environmental Control Board, New York City Transit Adjudication Bureau, New York Merchants Protective Co., Inc., and John Doe; and issuing an order of reference.
“When the issue of standing is raised by a defendant, a plaintiff must prove its standing in order to be entitled to relief.” (GRP Loan, LLC v Taylor, 95 AD3d at 1173.) Here, in their Verified Answer, defendants Carl Deane and Jesse Deane (the “Deane Defendants”) allege as a Second Affirmative Defense that “Plaintiffs [sic] … lack standing and capacity to sue and are unknown creditors to Defendants” (see Verified Answer ¶ 5.)
Where a defendant fails to answer the complaint and does not make a pre-answer motion to dismiss the complaint, the defendant is deemed to have “waived the defense of lack of standing.” (See HSBC Bank USA, N.A. v Taher, 104 AD3d 815, 817 [2d Dept 2013].)
In the context of a mortgage foreclosure action, “standing” must mean entitlement to enforce the note and mortgage. One might question whether a plaintiff who is not entitled to enforce the note and mortgage should be able to obtain a judgment by default, whereas that plaintiff would be required to make a prima facie showing on its entitlement to enforce where it seeks summary judgment against a defendant who merely raises the issue. That is, however, the current law in the Second Department.
As recently summarized by the Second Department:
“In order to commence a foreclosure action, the plaintiff must have a legal or equitable interest in the subject mortgage … A plaintiff has standing where it is both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note prior to commencement of the action with the filing of the complaint … 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, and the mortgage passes with the debt as an inseparable incident.” (GRP Loan, LLC v Taylor, 95 AD3d at 1173 [internal quotation marks and citations omitted] [emphasis added].)
“As a general matter, once a promissory note is tendered to and accepted by an assignee, the mortgage passes as an incident to the note.” (Bank of New York v Silverberg, 86 AD3d 274, 280 [2d Dept 2011.) “By contrast, a transfer of the mortgage without the debt is a nullity, and no interest is acquired by it’.” (Id. [quoting Merritt v Bartholick, 36 NY 44, 45 (1867)].) “[A]n assignment of a note and mortgage need not be in writing and can be effectuated by physical delivery.” (Id.)
This action rests on an Adjustable Rate Note dated April 27, 2005 in the principal amount of $340,000, executed by the Deane Defendants in favor of RBC Mortgage Company (“Note”), and, as security for payment of the Note, a Mortgage of the same date on real property at 9315 Schenck Street, Brooklyn. The Note was specially indorsed, without a date, to the order of JPMorgan Chase Bank, N.A., as Trustee. The Mortgage identified Mortgage Electronic Registration Systems, Inc. (“MERS”) “acting solely as a nominee for Lender and Lender’s successors and assigns,” and as “Mortgagee of Record.”
In its Complaint, plaintiff The Bank of New York Mellon alleges that it is “the owner and holder of the note and mortgage being foreclosed” (see Complaint, FIRST), and that the mortgage was assigned to it “by assignment dated the 17th day of June, 2009” (see id., THIRD.) Plaintiff submits with this motion a copy of an Assignment of Mortgage dated June 17, 2009 from MERS to Plaintiff, transferring the Mortgage given by the Deane Defendants to RBC Mortgage Company. The Assignment of Mortgage does not purport to assign the underlying Note, nor is there any showing that MERS would have had the power or authority to do so. (See Bank of New York vSilverberg, 86 AD3d at 281-82.) There is no evidence of “MERS’s right to, or possession of, the actual underlying promissory note” (see id. at 279), and, if based only upon the Assignment of Mortgage, Plaintiff would lack standing to maintain this foreclosure action (see id. at 283.)
Plaintiff also submits however (1) excerpts from a Pooling and Servicing Agreement dated as of July 1, 2005 among Structured Asset Mortgage Investments II Inc. as “Depositor,” JP Morgan Chase, National Association as “Trustee,” Wells Fargo Bank, National Association as “Master Servicer” and “Securities Administrator,” and EMC Mortgage Corporation as “Seller”; a copy of an Agreement of Resignation and Assumption dated as of October 1, 2006 by and among JPMorgan Chase, National Association as “Resigning Trustee” and The Bank of New York as “Successor Trustee”; and affidavit of Angela Frye, described as “a Vice President Loan Documentation for Wells Fargo Bank, N.A…. d/b/a Americas Servicing Company, as servicing agent for The Bank of New York Mellon, fka The Bank of New York as Successor in interest to JP Morgan Chase Bank NA as Trustee for Structured Asset Mortgage Investments II Inc. Bear Sterns ALT-A Trust 2005-7, Mortgage Pass-Through Certificates, Series 2005-7.”)
Neither the affidavit of Angela Frye, nor the affirmation of counsel, nor counsel’s memorandum of law, attempts to describe the transactions purportedly reflected in the submitted agreements, nor does any of them cite to specific language or provisions that purportedly have the legal effects ascribed to them in conclusory fashion. Indeed, the cursory treatment of the standing question in the memorandum of law evidences a misunderstanding of the general law of negotiable instruments in its equation of the status as “holder” to mere possession of the instrument (see Plaintiff’s Memorandum of Law in Support of its Motion for Summary Judgment and to Amend the Caption Nunc Pro Tunc [“Plaintiff’s Memorandum”] at 7-8.)
The core of the law of negotiable instruments is found in Article 3 of the Uniform Commercial Code, adopted in New York in 1962 (“NYUCC”.) In 1990, The National Conference of Commissioners on Uniform State Laws proposed a revision of Article 3 that has been adopted in all of the states except New York. Amendments to Revised Article 3 were proposed in 2002, and have been adopted in 10 states. The provisions of these later versions of Article 3 (“Revised UCC”) can be helpful in interpreting and applying the former version, still effective in New York. (See Lawyers’ Fund for Client Protection v Bank Leumi Trustm Co., 94 NY2d 398, 406 [2000]; Gabriel v Kost, 2001 NY Slip Op 40288 [U] [Civ Ct, Kings County 2001].)
New York’s version of Article 3 does not in terms define “standing” or otherwise set out those persons who are entitled to enforce a “note” (see NYUCC § 3-104 [2] [d]) or a “draft” (see NYUCC § 3-104 [2] [a]), the two most common forms of negotiable instruments. Revised UCC Article 3 sets out those persons entitled to enforce an instrument, including, in the first instance, “the holder of the instrument” (see Revised UCC § 301 [i]), and “a nonholder in possession of the instrument who has the rights of a holder” (see Revised UCC § 301 [ii].)
The concept of a “holder” and the related concept of “negotiation” are central to one of the unique features of the law of negotiable instruments, i.e., the concept of “holder in due course” (see NYUCC § 3-302) and the immunity from claims and defenses that comes with that status (see NYUCC § 3-305.) “The holder of an instrument … may … enforce payment in his own name.” (See NYUCC § 3-301.)
A “holder” is “a person who is in possession of … an instrument … issued or indorsed to him or to his order or to bearer or in blank.” (See NYUCC § 1-201 [20].) “Negotiation is the transfer of an instrument in such form that the transferee becomes a holder.” (NYUCC § 3-202 [1].) The mechanism of negotiation depends upon the form in which the instrument was originally made or drawn, or in which it has been subsequently indorsed (see NYUCC § 3-204.) Thus, “[i]f the instrument is payable to order it is negotiated by delivery with any necessary indorsement; if payable to bearer it is negotiated by delivery.” (NYUCC § 3-202 [1].)
Here, the Note when made was payable to the order of RBC Mortgage Company (see NYUCC § 3-110 [1]), and was specially indorsed to JP Morgan Chase Bank, N.A. as Trustee (see NYUCC § 3-204 [1].) Assuming that the Note was also delivered to JP Morgan Chase, the Note was negotiated to JP Morgan Chase, which became its holder and entitled to enforce it. “Delivery” of a negotiable instrument “means voluntary transfer of possession.” (See NYUCC § 1-201 [14].)
“Any instrument specially indorsed becomes payable to the order of the special indorsee and may be further negotiated only by his indorsement.” (NYUCC § 3-204 [1].) Assuming, therefore, delivery to JP Morgan Chase Bank, N.A., further negotiation, and conferring of status as holder of the Note, required the indorsement of JP Morgan Chase Bank, N.A., either to the order of another special indorsee, or in blank, with no particular indorsee, in the latter case transforming the Note to an instrument payable to bearer that could be further negotiated “by delivery alone” (see NYUCC § 3-204 [2].)
It is clear that plaintiff The Bank of New York Mellon has not established that it is the holder of the Note. There is no indorsement on the Note by JP Morgan Chase Bank, N.A., and Plaintiff submits no evidence that the Note was ever delivered by the indorser, RBC Mortgage Company, to the indorsee, so that it could be further indorsed and negotiated by the indorsee.
It is also clear, however, that a person need not be the holder of an instrument in order to be a person entitled to enforce it. As noted above, an instrument may also be enforced by “a nonholder in possession … who has the rights of a holder” (see Revised UCC § 301 [ii].) “Transfer of an instrument vests in the transferee such rights as the transferor has therein.” (NYUCC § 3-201 [1].)
New York’s Article 3 does not contain a definition of “transfer.” Revised UCC § 3-203 (a) provides, “An instrument is transferred when it is delivered by a person other than the issuer for the purpose of giving to the person receiving delivery the right to enforce an instrument.” “The right to enforce an instrument and ownership of the instrument are two different concepts,” with ownership “determined by principles of the law of property, independent of Article 3.” (See Comment 1 to Revised UCC § 3-203.) Assuming a transfer “for value” (see NYUCC § 3-303), if the instrument is not then payable to bearer, the transferee has “the specifically enforceable right to have the unqualified indorsement of the transferor,” but “[n]egotiation takes effect only when the indorsement is made and until that time there is no presumption that the transferee is the owner.” (See NYUCC § 3-201 [3]; see also NYUCC § 3-307 [2].)
Language in recent Second Department decisions creates some question as to whether delivery of the instrument by the holder, and, therefore, possession by the putative transferee, is necessary to entitle the putative transferee to claim the rights of the holder, including entitlement to enforce the instrument. As quoted above, it is said that “[a] plaintiff has standing where it is … the holder or assignee of the underlying note prior to commencement of the action” (see GRP Loan, LLC v Taylor, 95 AD3d at 1173 [emphasis added].) Without a definition of transfer, Article 3 does not expressly address the question. Under Revised Article 3, the only occasions for allowing a person not in possession of an instrument to enforce it are where the instrument has been lost, destroyed or stolen, or where the instrument has been paid by mistake and the payment is recovered. (See Revised UCC § 3-301 [iii], §§ 3-309, 3-418 [d].)
Further complicating the issue of entitlement to enforce an instrument are the statements, quoted above, that “[e]ither a written assignment of the underlying note or the physical delivery of the note … is sufficient to transfer the obligation” (see GRP Loan, LLC v Taylor, 95 AD3d at 1173 [internal quotation marks and citation omitted]); and that “an assignment of a note … can be effectuated by physical delivery” (see Bank of New York v Silverberg, 86 AD3d at 45.)
New York’s Uniform Commercial Code speaks of “transfer” of a negotiable instrument that is not a negotiation (see NYUCC § 3-201), as did the Negotiable Instruments Law on which it was based (see Negotiable Instruments Law § 79, quoted in Meuer v Phenix Nat. Bank, 94 AD 331, 334-35 [1st Dept 1904], aff’d183 NY 511 [1905]), while New York courts have spoken primarily in terms of “assignment,” as did, apparently, the common law “law-merchant.” And so, “[w]hen … [a negotiable ] instrument is transferred but without an indorsement, it is treated as a chose in action assigned to the purchaser [, who] … acquires all the title of the assignor and may maintain an action thereon in his own name” (see Goshen Nat. Bank v Bingham, 118 NY 349, 354 [1890]; see also Wagner v Grimm, 169 NY 421, 428 [1902].) Indeed, quotation of the Code, or even its citation, has virtually disappeared from the caselaw on this part of negotiable instruments law, at least where addressed in mortgage foreclosure actions.
Perhaps as a result, the meaning of terms that have particular effect in negotiable instruments law can become blurred. For example, in a recent opinion the Second Department held that the plaintiff “failed to establish how or when it became the lawful holder of the note either by delivery or valid assignment.” (See Citimortgage, Inc. v Stosel, 89 AD3d 887, 888 [2d Dept 2011]; see also Deutsche Bank Nat. Trust Co. v Rivas, 95 AD3d 1061 [2d Dept 2012]; Morrison v Sheman, 166 AD 264, 266 [1st Dept 1915] [“plaintiff holds the bond and mortgage by written assignment”].) Whatever the rights of a person to enforce an instrument by reason of delivery or assignment, a person is not a “holder” by reason of delivery or assignment alone, unless delivery is made of a bearer instrument.
Physical delivery of a note is sufficient as a transfer “without a written instrument of assignment” (see Flyer v Sullivan, 284 AD 697, 699 [1st Dept 1954]), or, indeed “without any written words of transfer at all” (see Blake v Weiden, 291 NY 134, 139 [1943].) But, again, “delivery” requires “voluntary transfer of possession” (see NYUCC § 1-201 [14].) Moreover, under Revised Article 3, “An instrument is transferred when it is delivered … for the purpose of giving to the person receiving delivery the right to enforce the instrument” (see Revised UCC § 3-203 [a].) Although the qualification is not found in New York’s Article 3, which contains no definition of “transfer,” this Court has seen nothing that would suggest that such a purpose need not accompany the “voluntary transfer of possession” (see NYUCC § 1-201 [14].) When there is no assignment or other “written words of transfer” (see Blake v Weiden, 291 NY at 139), evidence of such purpose might easily be found in the nature and structure of the overall or related transaction(s) between the transferor and the transferee.
Perhaps a more difficult question is whether an assignment alone, i.e., without possession of the note, is sufficient to constitute a “transfer,” so as to allow the transferee to enforce it. As just noted, Revised Article 3 would require delivery of the note (see Revised UCC § 3-203 [a]), and, as noted above, would allow enforcement of a note without possession only when the note is lost, stolen, or destroyed, or where it has been paid (see Revised UCC § 301 [iii].) Recent Second Department opinions can be read as holding that the assignment alone, without possession, is sufficient. (See GRP Loan LLC v Taylor 95 AD3d at 1174; Deutsche Bank Trust Co. v Codio, 94 AD3d 1040, 1041 [2d Dept 2012].)
This Court is aware of only one appellate decision that has recognized an assignee’s entitlement to enforce a note while expressly recognizing continued possession of the note by the assignor. In that case, the plaintiff had been assigned only one-third of the assignor’s interest under the note; the plaintiff was permitted to sue for his interest because he had joined his “co-assignees” in the action. (See Kronman v Palm Mgmt. Assocs. Ltd. Pshp., 276 AD2d 338, 338-39 [1st Dept 2000].)
Except, perhaps, where there is a common agent, it is not possible for more than one person to have possession of an instrument, which would explain why only an entire instrument can be negotiated (see NYUCC § 3-202 [3]; Hewett v Marine Midland Bank, N.A., 86 AD2d 263, 267 [2d Dept 1982].) Nonetheless, the result in the “co-assignees” case is supported by Blake v Weider (291 NY 134, 138 [1943]), although, in that case, the Court of Appeals found “at least a constructive delivery” to the three indorsees (see id. at 139.)
Requiring possession of the note even where there is an assignment would serve the important purpose of protecting the maker of the note who pays an assignee from a subsequent claim by a holder in due course (see NYUCC § 3-305), against whom a defense of discharge upon payment is not available (see NYUCC §§ 602, 603.) (See also National Bank of Bay Ridge v Albers, 244 AD 127, 128 [2d Dept 1935]; Morrison v Schmeman, 166 AD 264, 266 [1st Dept 1915].) To the contrary, allowing recovery on an assignment without possession would be inconsistent with current Article 3 protections that are imposed when enforcement is sought of a lost, destroyed or stolen instrument (see NYUCC § 3-804; Sills v Waheed Entrs., 253 AD2d 351, 352 [1st Dept 1998].)
The question is somewhat addressed in the Official Comment to Revised Article 3, § 3-203; Transfer of Instrument; Rights Acquired By Transfer:
“The right to enforce an instrument and ownership of the instrument are two different concepts … Ownership rights in instruments may be determined by principles of the law of property, independent of Article 3, which do not depend upon whether the instrument was transferred under Section 3-203. Moreover, a person who has an ownership right in an instrument might not be a person entitled to enforce the instrument. For example, suppose X is the owner and holder of an instrument payable to X. X sells the instrument to Y but is unable to deliver immediate possession to Y. Instead, X signs a document conveying all of X’s right, title, and interest in the instrument to Y. Although the document may be effective to give Y a claim to ownership of the instrument, Y is not a person entitled to enforce the instrument until Y obtains possession of the instrument. No transfer of the instrument occurs under Section 3-203 (a) until it is delivered to Y.” (Official Comment 1 to Revised UCC § 3-203.)
To allow an assignee to sue without possession of the note, therefore, would be inconsistent with Revised Article 3, and put New York out-of-step with the 49 states that have adopted the revision, including, in particular, a conception of “transfer” as “deliver[y] by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument” (see Revised UCC § 3-203 [1].) That misstep, however, if such it is, has apparently already been taken. The caselaw quoted and cited above clearly speaks, in the disjunctive, of standing obtained by “assignment” or “physical delivery” of the note before commencement of the action; if “assignment” must be accompanied by possession of the note, then it seems little different from “physical delivery.” Indeed, where possession before commencement could be established, with a purpose to allow the transferee to enforce the instrument, the assignment would appear superfluous in most cases. There is no evidence that the Second Department has been using the terms synonymously.
One might reconcile these conflicting principles and policies to an extent by taking the Second Department at its words, and finding “standing” to commence and prosecute an action to enforce a note (and related mortgage) with proof only of an assignment before commencement, but to require surrender of the note at judgment, either after trial or accelerated by summary judgment (see CPLR 3212) or judgment by default (see CPLR 3215.) Pending further clarification from the Second Department, this Court will adopt that approach. (See National Bank of Bay Ridge v Albers, 244 AD at 128.)
There is nothing in recent Second Department mortgage foreclosure caselaw that changes this. (See Bank of New York v Silverberg, 86 AD3d at 282.) Where a plaintiff, therefore, is not a holder of the note, but establishes “standing” pursuant to transfer, either by assignment or delivery, the plaintiff must show that its transferor had the right to enforce the note before transfer.
In sum, in the usual case, a plaintiff has “standing” to prosecute a mortgage foreclosure action where, at the time the action is commenced: (1) the plaintiff is the holder of the note (see NYUCC § 1-201 [20]); or (2) the plaintiff has possession of the note by delivery (see NYUCC § 1-201[14]), from a person entitled to enforce it, for the purpose of giving the plaintiff the right to enforce it; or (3) the plaintiff has been assigned the note, by a person entitled to enforce it, for the purpose of giving the plaintiff the right to collect the debt evidenced by the note, and the plaintiff tenders the note at the time of any judgment.
Here, Plaintiff The Bank of New York Mellon has not established prima facie with evidence in admissible form either assignment or delivery of the Note from a holder, sufficient to allow Plaintiff to enforce the Note and related Mortgage.The only “evidence” of assignment of the Note to Plaintiff are excerpts from a Pooling and Servicing Agreement consisting of a title page, a table of provisions and exhibits, and 11 pages of provisions, indicating a document of more than 76 pages. There are no signature pages, and, therefore, no authentication of the document by acknowledged signatures(see Prince, Richardson on Evidence § 9-101 [Farrell 11th Ed]; Stein v Doukas, 78 AD3d 1026, 1029 [2d Dept 2012]; NYCTL 1998-2 Trust v Santiago, 30 AD3d 572, 573 [2d Dept 2006] [“a private document offered to prove the existence of a valid contract cannot be admitted into evidence unless its authenticity and genuineness are first established“].)
Even ignoring the evidentiary threshold, the provision headed “Conveyance of Mortgage Loans to Trustee” states that “[t]he Depositor … sells, transfers and assigns to the Trust without recourse all its right, title and interest in and to … the Mortgage Loans identified in the Mortgage Loan Schedule,” but no Mortgage Loan Schedule is provided, and, in any event, the “Depositor” is Structured Asset Mortgage Investments II Inc., which is not shown to have had any power or authority to transfer the subject Note.
TheAgreement of Resolution and Assumption between JP Morgan Chase Bank, National Association and The Bank of New York provides that JP Morgan as Resigning Trustee “assigns, transfers, delivers and confirms to [The Bank of New York as] Successor Trustee all right, title and interest in and to each of the Agreements” listed on a Scheduled A and “all rights, powers and trusts of the Resigning Trustee, as trustee or otherwise, under each of the Agreements,” but nowhere on Schedule A is the subject Note or Mortgage listed, nor is there any showing that any listed Agreement transferred the Note from JP Morgan to Plaintiff. (Also, only one of the two signatures to the Agreement of Resignation and Assumption is acknowledged.)
The affidavit of Angela Frye states that, “[t]o memorialize the transfer of the mortgage loan to Plaintiff, as successor trustee, a written assignment … was subsequently executed on or about June 17, 2009” (see ¶ 12), but, as stated above, the Assignment of Mortgage to Plaintiff by MERS, even if effective, says nothing about the Note, and a transfer of a mortgage does not carry the underlying note(see Bank of New York v Silverberg, 86 AD3d at 280.)
As to delivery and possession, the affidavit of Angela Frye states that “Wells Fargo’s regularly maintained records … reflect that both the Mortgage and Note were physically delivered to Wells Fargo … prior to commencement of this action … [and] further reflect that Wells Fargo … was in physical possession of the Note and Mortgage at the time this action was commenced,” but also states that “Plaintiff is in possession of the Promissory Note, … duly indorsed to JP Morgan Chase Bank, NA as Trustee” (see ¶ 11.) There are no details as to the delivery to Wells Fargo, and, if there was a subsequent delivery to Plaintiff, which would explain the apparent inconsistency, it is not described.
Although Plaintiff’s failure to establish prima+ facie that it is entitled to enforce the Note and Mortgage is enough to require denial of its motion for summary judgment against the Deane Defendants (see Aurora Loan Serv., LLC v Weisblum, 85 AD3d at 108-10), denial of summary judgment is warranted on other grounds.The evidentiary deficiencies in the affidavit of Angela Frye, noted above with respect to delivery and possession of the Note, infect as well other elements of Plaintiff’s claim, including default, acceleration of the loan, and the amount due.
Section 22 of the Mortgage states that “Lender may require Immediate Payment in Full … only if all [specified] conditions are met,” including that “Lender sends … a notice” that complies with the Section. Giving the requisite notice of default is a condition precedent to acceleration, which is a requirement for seeking the equitable remedy of foreclosure. (See HSBC Mtge. Corp. [USA] v Gerber, 100 AD3d 966, 966-67 [2d Dept 2012]; Wells Fargo Bank, N.A. v Burke, 94 AD3d 980, 982-84 [2d Dept 2012]; G.E. Capital Mortg. Servs. v Mittleman, 238 AD2d 471, 471 [2d Dept 1997]; Moet, II, Inc. v McCarthy, 229 AD2d 876, 877 [3d Dept 1996];
To the extent that Plaintiff’s motion seeks judgment by default against Defendants other than the Deane Defendants, as stated above Plaintiff is not required to show its “standing.” The other noted deficiencies in Plaintiff’s showing as against the Deane Defendants, however, preclude a finding that it has shown “proof of the facts constituting the claim” (see CPLR 3215 [f]) as against the other Defendants to the extent that Plaintiff’s claims against those Defendants depend upon foreclosure of the Mortgage. Indeed, Plaintiff makes no showing at all as against any of the other Defendants.
As to “proof of the facts constituting the … default” (see id.), the respective affidavits of service fail to show proper service on defendant Mortgage Electronic Registration Systems, Inc. pursuant to CPLR 311 (a) (1), or upon defendants New York City Environmental Control Board or New York City Transit Adjudication Bureau pursuant to CPLR 311 (a) (2). Service upon defendant New York Merchants Protective Co., Inc. by service upon the Secretary of State pursuant to CPLR 311 (a) (1) and Business Corporation Law § 306 would be appropriate if Defendant is a corporation, but no evidence is submitted that it is, and, in any event, there is no service of the additional service required by CPLR 3215 (g).
Plaintiff also submits an affidavit of service upon Lynn Deane as “John Doe” by delivery to defendant “Carl Deane (Husband),” but the affidavit does not show the required mailing in accordance with CPLR 308 (2). In any event, the non-military affidavit, included as part of the affidavit of service, is premature. (See Emigrant Mtge. Corp. Inc. v Daniels, 2010 NY Slip Op 32720 [U], * 4- * 5 [Sup Ct, NY County 2010]; DLJ Mortgage Capital, Inc. v Lawrence, 2009 NY Slip Op 30554 [U], * 6 [Sup Ct, Nassau County 2009]; Sunset 3 Realty v Booth, 12 Misc 3d 1184 [A], 2006 NY Slip Op 51441 [U], * 3 [Sup Ct, Suffolk County 2006] [Sgroi, J.]; U.S. Bank NA v Coaxum, 2003 NY Slip Op 51384 [U], * 2- * 3 [Sup Ct, Westchester County 2003].)
The Court notes that, althoughno Defendant opposed Plaintiff’s motion, Plaintiff is not relieved of its burden of making a sufficient showing for summary judgment(see Yonkers Ave. Dodge, Inc. v BZ Results, LLC, 95 AD3d 774, 774-75 [1st Dept 2003] [“an unopposed summary judgment motion will be denied upon a movant’s failure to establish prima facie entitlement to summary judgment or when the evidence creates a question of fact”]; or for judgment by default (see Superior Dental Care, P.C. v Hoffman, 81 AD3d 632, 634 [2d Dept 2011] [“There is no mandatory ministerial duty to enter a default judgment against a defaulting party”] [internal quotation marks and citation omitted].)
Finally, Plaintiff moves to amend the caption (and, presumably to amend the Complaint to conform) in two respects: to substitute for the name of the plaintiff “The Bank of New York Mellon f/k/a The Bank of New York, as Trustee for Structured Asset Mortgage Investments II Inc. Bear Sterns ALT-A Trust, Mortgage Pass-Through Certificates Series 2005-7”; and to substitute “Lynn Deane” for defendant “John Doe.” As to the latter, counsel offers no explanation in either her affirmation or the memorandum of law, and the Court will not speculate.
As to the identification of Plaintiff, counsel explains that The Bank of New York Mellon “is the proper plaintiff in its capacity as Trustee for the Trust, which … is the holder of the Deanes’ loan” (see Plaintiff’s Memorandum at 15.) But the affidavit of Angela Frye states, “Wells Fargo, as custodian for and on behalf of the Trust, is the current holder of the Mortgage loan, pursuant to the PSA” (see ¶ 13.) Since a person cannot be a “holder” of a negotiable instrument without possession, both statements cannot be literally accurate. It may be that Plaintiff does not use “holder” as it is understood in the law of negotiable instruments, but the term and concept “holder” is too important to “standing” and a plaintiff’s ability to maintain this action for there to be risk of further confusion.
Plaintiff’s motion is denied, with leave to renew with papers that cure, or otherwise resolve, the deficiencies noted above.
DOVER, Del. – Under heavy pressure from the banking industry, Delaware state lawmakers ended their 2013 session Sunday without voting on a financial-reform measure.Lobbyists from J.P. Morgan Chase and Bank of America weighed in against Senate Resolution…
The top federal prosecutor in Manhattan has a message for financial wrongdoers: Don’t try to run out the clock.
Thanks to the Dodd-Frank Act, which turns three years old this month, prosecutors have more time to bring charges in securities fraud cases. The statute of limitations was increased to six years from five, Preet Bharara, the United States attorney for the Southern District of New York, noted at a conference in Manhattan on Wednesday.
“People shouldn’t be waiting for time to run out. That’s not a good way to behave,” Mr. Bharara said at the Delivering Alpha conference, which is hosted by CNBC and Institutional Investor. “I don’t even wear a watch.”
ORDER DENYING DEFENDANT’S MOTION TO DISMISS PLAINTIFF’S COMPLAINT [DOC. 6-1]
THOMAS J. WHELAN, District Judge.
Pending before the Court is Defendant Bank of America, N.A.’s (“BANA”) motion to dismiss Plaintiff Vicente A. Roche’s (“Roche”) complaint under Federal Rule of Civil Procedure 12(b)(6). (MTD [Doc. 6-1].) Roche opposes. (Pl.’s Opp’n [Doc. 8].) The Court decides the matter on the papers submitted and without oral argument. See Civ. L. R. 7.1(d.1). For the reasons discussed below, the Court DENIES Defendant BANA’s motion.
I. BACKGROUND
On July 2, 2004, Roche entered into a written promissory note agreement with Countrywide Home Loans, Inc. (“Countrywide”) and secured a deed of trust (collectively referred to as the “Loan”) in order to finance the purchase of a condominium located at 830 South Sierra Avenue, Solana Beach, California (the “Residence”). (Compl. [Doc. 1], ¶ 9.) Roche agreed to pay a principal sum of $460,000.00, in monthly installments of $2,795.01, to Countrywide. (Id. at ¶ 10.) However, prior to March 16, 2012,[1] and without Roche’s knowledge, Countrywide sold and/or transferred all of its rights, titles, and interests to BANA. (Id. at ¶ 11.) Thus, BANA assumed all of Countrywide’s rights and obligations of the Loan, and Roche dealt solely with BANA regarding the Loan. (Id. at ¶¶ 12-13).
In May 2011, Roche failed to pay the property tax assessment on the Residence due to an inadvertent oversight. (Id. at ¶ 15.) BANA paid the assessment and established an escrow account for both he property tax it paid and for the payment of future property tax assessments. (Id. at ¶ 16.) BANA charged Roche $7,600.39 to fund the escrow account: $2,600.39 for the escrowed taxes and $5,000.00 for projected unfunded tax payments. (Id.) As of July 2011, BANA increased Roche’s monthly payments to $4,183.15. (Id.) Roche learned of this increase when he received a letter from BANA dated August 16, 2011, which informed him that the July 2011 payment was insufficient. (Id. at ¶ 17.) The letter advised Roche that he still owed $4,460.31 to bring his loan up to date. (Id.)
On August 16, 2011, Roche’s attorneys sent two checks to BANA for Roche’s July and August payments, each in the amount of $4,500.00. (Id. at ¶ 19.) Upon discovering that BANA did not credit one check toward the August payment, Roche requested a correction of BANA’s misallocations and information as to how he could satisfy and eliminate the escrow account. (Id. at ¶¶ 20-21.) Shortly thereafter, on or about September 6, 2011, a BANA employee, Sharon, stated that if Roche paid $11,291.00, the escrow would be removed.[2] (Id. at ¶¶ 22-23.) Sharon also told Roche he needed to send a letter to BANA’s payment research department requesting correction of the loan account. (Id. at ¶ 24.)
Roche sent BANA a letter, stating that BANA was not crediting Roche’s payments toward the Loan and requesting a correction of the account and the return of his original payment amount. (Id. at ¶ 26.) Roche also sent BANA two checks totaling $11,291.30. (Id. at ¶ 27.) BANA did not credit Roche’s September payment, remove the escrow account, or return Roche’s payments to their original amount. (Id. at ¶ 29.)
In October, Roche attempted to make a payment at a BANA branch in the amount of $2,795.01, his original payment amount. (Id. at ¶ 30.) The branch did not accept the payment, and Roche learned that BANA still had not reduced the payment amount, but also had assessed additional penalties. (Id.) Roche then contacted BANA’s customer service and spoke with John, who stated that Sharon’s directions were incorrect and that she had no authority to make the statements. (Id. at ¶ 31.) Roche asked John for BANA to provide an accounting on the Loan account, but BANA never responded to the request. (Id.)
In December, Roche again contacted customer service and spoke with Kristen, who advised that the escrow account could not be removed as suggested by Sharon. (Id. at ¶ 32.) Kristen told Roche that $3,198.22 was needed to bring the Loan current as of October 2011 and that subsequent monthly payments, inclusive of the escrow payments, would be $3,433.03. (Id. at ¶¶ 33-34.) Accordingly, Roche paid $3,198.22 for October and $3,433.03 for November. (Id. at ¶ 35.) BANA, however, still did not correct Roche’s account or accept the agreed-upon payment amount of $3,433.03 and continued to report Roche as delinquent to national credit bureaus. (Id. at ¶¶ 36-37.)
On or about December 6, 2011, Roche sent BANA another letter, detailing the errors in his account and requesting immediate correction of the account and the credit reports.[3] (Id. at ¶ 38.) BANA did not correct the account or respond to Roche’s request. (Id.) On May 23, 2012, counsel for Roche sent a letter to BANA disputing the accounting of the Loan and demanding its correction. (Id. at ¶ 40.) Counsel also demanded retraction of BANA’s negative credit reports and restoration of the original payment amount. (Id.) BANA responded to counsel’s letter on August 2, 2012, admitting it misapplied Roche’s August 2011 payment. (Id. at ¶ 41.) BANA did not mention or respond to Roche’s remaining requests. (Id.)
On August 13, 2012, Roche filed the instant action alleging (1) breach of written contract, (2) breach of oral contract, (3) negligent misrepresentation, (4) fraud, (5) violation of the Rosenthal Fair Debt Collection Practices Act, (6) violation of the Real Estate Settlement Procedures Act, (7) violation of the California Business and Professions Code, and (8) violation of the California Consumer Credit Reporting Agencies Act. The Complaint also requests an accounting and injunctive relief. On September 20, 2012, BANA moved to dismiss the Complaint in its entirety.
However, the Court is not “required to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff’s obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted). Instead, the allegations in the complaint must “contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 570). “The plausibility standard is not akin to a `probability requirement,’ but rather asks for more than a sheer possibility that a defendant has acted unlawfully.” Id.
BANA moves to dismiss Roche’s first claim for breach of written contract for failure to allege a breach of contract or damages. (MTD 4.) Roche counters, arguing that his complaint “alleges all necessary elements and facts to support [his] breach of contract claim.” (Opp’n 6.)
In California, “[a] cause of action for breach of contract requires proof of the following elements: (1) existence of a contract; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach; and (4) damages to plaintiff as a result of the breach.” CDF Firefighters v. Maldonado, 158 Cal. App. 4th 1226, 1239 (2008). “Resolution of contractual claims on a motion to dismiss is proper if the terms of the contract are unambiguous.” Monaco v. Bear Stearns Residential Mortgage Corp., 554 F. Supp. 2d 1034, 1040 (C.D. Cal. 2008). “A contract provision will be considered ambiguous when it is capable of two or more reasonable interpretations.” Id. (citing Bay Cities Paving & Grading, Inc. V. Lawyers’ Mut. Ins. Co., 5 Cal. 4th 854, 867 (1993). “[T]he language of a contract should be interpreted most strongly against the party who caused the uncertainty to exist.” Cal. Civ. Code § 1654.
1. Roche has properly plead a breach of written contract.
BANA first argues that Roche’s failure to timely pay his property taxes triggered a series of BANA actions that were all authorized by the Loan. (MTD 4.) These actions included (1) creating and funding an escrow account, (2) increasing Roche’s monthly payments to payoff this escrow account, and (3) charging late fees in light of Roche’s partial payments on his newly increased monthly payments. (Id.) According to BANA, because these actions were authorized by the Loan, Roche cannot claim that they constitute a breach of contract. (Id.) BANA’s argument is flawed, as it oversimplifies Roche’s claims.
There is no debate that Loan “explicitly authorizes BANA to create and fund an escrow account subsequent to a borrower’s failure to pay insurance or taxes.” (MTD 4.) Indeed, the parties do not dispute that Roche’s admitted failure to timely pay property taxes triggered this escrow account clause. (Compl. ¶ 15; MTD 4.) However, Roche’s breach of written contract claims are more numerous than BANA suggests. Apart from the challenged actions listed above, Roche also claims that BANA refused to accept payments, failed to credit payments, and assessed late charges and penalties in violation of the Loan. (Compl. ¶¶ 41, 45.) Such actions are not authorized by the Loan and therefore constitute properly pled breaches of contract.
In its reply, BANA argues that “plaintiff’s checks were credited to his account, but the checks were insufficient to satisfy the principal and interest due under the note in addition to the escrow allocation, and thus BANA charged plaintiff late fees for the amount due and unpaid.” (Reply 2.) BANA points to the payment history Roche attached to his complaint to support this theory. (Id.) However, the payment history is unclear as presented, and BANA has failed to clarify it in any meaningful way.
For example, Roche deposited two $4,500 checks on August 16, 2011. (Tab 2 [Doc. 1-2] 61, 62.[4]) Yet, only $4,500 was credited to the account on August 16, 2011. (Id. 59, 60.) Even more confusing is the fact that the $4,500 deposit was split into a “regular payment” of $4,183.15 and a “misc. posting” of $316.85. (Id. 59.) Then, curiously, less than a month later that “misc. posting” of $316.85 was removed from the account. (Id.) A similar split occurred when Roche deposited $11,221.30 on September 21, 2011. (Id. 60.) The reasons behind these splits is unclear from the account statement and BANA has provided no explanation as to why these splits occurred. Due to this lack of clarity, the Court is unwilling to accept BANA’s claims that Roche’s “checks were credited to his account” but were “insufficient” to avoid late fees.
2. Roche has properly plead damages.
BANA next argues that Plaintiff has failed to properly allege damages because his monthly payment increases, late fees, and negatively impacted credit scores were all due to his failures under the Loan. (MTD 4.) In essence, BANA suggests that because Roche has failed to plead a breach of the Loan, he has failed to plead damages. However, as explained above, BANA has properly plead numerous breaches of the Loan.
In light of the foregoing, BANA’s motion to dismiss Roche’s written contract claims is DENIED.
B. Breach of Oral Contract
BANA moves to dismiss Roche’s breach of oral contract claim as well. It claims that the alleged modification is barred by the statute of frauds. (MTD 4.) Roche claims that the alleged oral modification falls within an exception to the statute of frauds. (Opp’n 7.)
Under California law, “(b) [a] contract in writing may be modified by an oral agreement to the extent that the oral agreement is executed by the parties.” Cal. Civ. Code § 1698(b). “If there exists sufficient consideration for an oral modification agreement, then full performance by the promisee alone would suffice to render the agreement `executed’ within the meaning of section 1698.” Raedeke v. Gibraltar Sav. & Loan Assn., 10 Cal. 3d 665, 698 (1974).
Here, Roche’s allegations satisfy the requirements of Cal. Civ. Code § 1698(b). First, Roche has alleged sufficient consideration: he claims that the oral modification was reached after “Mr. Roche expended significant time and energy to negotiate and arrange for payment of the requested amount in full performance of his obligations.” (Compl. ¶ 51); see Ansanelli v. JP Morgan Chase Bank, N.A., C 10-3892 WHA, 2011 WL 1134451, at *4 (N.D. Cal. March 28, 2011). Second, he has alleged an oral modification of the Loan. (Compl. ¶ 49.) Third, he has alleged that he fully performed his obligations under the agreement. (Compl. ¶¶ 50-52.)
Both parties attempt to apply Cal. Civ. Code § 1698(c) to the case at bar. However, application of subdivision (c) is unnecessary because the oral modification, as plead, satisfies § 1698(b). “The introductory clause of subdivision (c) recognizes that the parties may prevent enforcement of executory oral modifications by providing in the written contract that it may only be modified in writing.” Cal. Civ. Code § 1698, law revision commission comments. However, the law revision commission explained that subdivision (c) is inapplicable to an alleged oral modification if it were otherwise valid under subdivision (b). As explained above, Roche has plead a valid oral modification under subdivision (b), and thus subdivision (c) is irrelevant here.
In light of the foregoing, BANA’s motion to dismiss Roche’s oral modification claims is DENIED.
C. Rosenthal Fair Debt Collection Practices Act
BANA also moves to dismiss Roche’s claims under the RFDCPA. It argues that it is not a “debt collector” as defined by the RFDCPA. (MTD 5.) It further argues that Plaintiff’s mortgage is not a “debt” under the RFDCPA. (Id. 6.)
First, Defendant is a “debt collector” under the RFDCPA. The definition of the “debt collector” under the RFDCPA includes any person who, “in the ordinary course of business, regularly, on behalf of himself or herself or others, engages in debt collection.” See Cal. Civ. Code § 1788.2(c). In this case, because Defendant is collecting a debt that it originated, and because it does so “in the ordinary course of business,” it is a “debt collector” under the RFDCPA. See id.
BANA cites a number of cases for the proposition that BANA, as a loan servicer, is not considered a “debt collector” under the RFDCPA. First and foremost, this argument directly contradicts the language of the RFDCPA. Nowhere does the RFDCPA indicate that “loan servicers” are outside the purview of the statute. Second, the Court disagrees with the reasoning of the courts in the cases upon which Defendant relies.
Under the FDCPA, the term “debt collector” does not include:
[A]ny person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity … (ii) concerns a debt which was originated by such person [or] (iii) concerns a debt which was not in default at the time it was obtained by such person.
15 U.S.C. § 1692a(6)(G). “The legislative history of section § 1692a(6) indicates conclusively that a debt collector does not include the consumer’s creditors, a mortgage servicing company, or an assignee of a debt, as long as the debt was not in default at the time it was assigned.” Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th Cir. 1985). The RFDCPA includes no such exclusion for loan servicers. Specifically, the RFDCPA does not exclude banks which collect debts owed on debts which they originated. Thus, this Court concludes that the “debt collector” in the state statute is broader than the definition in the federal statute, and includes BANA in this case. See Cal. Civ. Code § 1788.2(c).
Second, Roche’s mortgage is a “debt” as defined by the RFDCPA. The definition of “debt” under the RFDCPA is “money, property or their equivalent which is due or owing or alleged to be due or owing from a natural person to another person.” Cal. Civ. Code § 1788.2(d). Nothing in the plain meaning of this statutory definition suggests that a mortgage, which is money owing to a person (defined as “a natural person, partnership, corporation, limited liability company, trust, estate, cooperative, association or other similar entity”), is outside the purview of the RFDCPA. Id. at §1788(g).
In light of the foregoing, BANA’s motion to dismiss Roche’s RFDCPA claims is DENIED.
D. California Consumer Credit Reporting Agencies Act
BANA next moves to dismiss Roche’s claims under the California Consumer Credit Reporting Agencies Act (“CCCRAA”). It argues that Roche has not alleged, and cannot allege “a falsity” as required under the CCCRAA. (MTD 6.)
As an initial matter, a review of the CCCRAA section at issue reveals no requirement that a putative plaintiff allege a “falsity.” See § 1785.25(a). Instead, § 1785.25(a) states that “[a] person shall not furnish information on a specific transaction or experience to any consumer credit reporting agency if the person knows or should know the information is incomplete or inaccurate.” Roche alleges that BANA has done precisely what the statute forbids. Specifically, Roche alleges that BANA, “[o]n multiple occasions . . . furnished information to third party credit bureaus it knew or should have known was incomplete or inaccurate regarding specific transactions and/or experiences [BANA] had with Mr. Roche in relation to Mr. Roche’s Loan with [BANA].” (Compl. ¶ 115.) These allegations are sufficient to survive a motion to dismiss.
BANA’s argument that it did not report incomplete or inaccurate information to credit bureaus because the Loan authorized BANA to advance funds for taxes, demand repayment from Roche, and assess late fees is incomplete. (MTD 7.) While it is true that such activity was authorized by the Loan, Roche also claims that BANA refused to accept payments, failed to credit payments, and assessed late charges and penalties in violation of the Loan. (Compl. ¶ 45.) Moreover, Roche has alleged that BANA should not have reported that he was delinquent on his mortgage payments because “Mr. Roche took all steps requested by [BANA] to bring his Loan current and that [BANA] continually failed to correct its own errors to Mr. Roche’s Loan account, and reported Mr. Roche as delinquent . . . because of [BANA]’s own errors after being informed” of these errors. (Compl. ¶ 92.) These allegations directly contradict BANA’s claim that Roche’s delinquencies were all his own fault and instead suggested that BANA is partly to blame. (See, e.g., MTD 6-7.)
In light of the foregoing, BANA’s motion to dismiss Roche’s CCCRAA claims is DENIED.
E. Negligent Misrepresentation and Fraud
BANA also moves to dismiss Roche’s fifth and sixth causes of action for negligent misrepresentation and fraud. According to BANA, Roche has failed to allege inducement, reliance, or damages. (MTD 7.) BANA also argues that Roche’s negligent misrepresentation claims fail because it owes no duty of care to Roche. (Id. 8.)
First, BANA argues that Roche “did not rely on the alleged misrepresentations regarding his monthly loan payment because he paid more than he was allegedly told he was owed.” (MTD 7.) However, a closer examination of the payment history contradicts this claim. Roche alleged that on September 6, 2011, BANA told him that a payment of $11,291.00 would return him to status quo on his mortgage payments. (Compl. ¶66.) Later that month, he appears to have deposited $11,291.30. (Tab 2 60.) Although this deposit is 30 cents higher than allegedly owed, it seems that Roche was attempting to comply with the alleged representations BANA made on the September 6 phone call. Therefore, the Court finds this argument unpersuasive.
Second, BANA argues that Roche “cannot allege detrimental reliance on any alleged statement regarding removal of the escrow account” because he was “always obligated to make monthly payments regardless of the existence of the escrow account.” (MTD 8.) This argument is misguided; although Roche was obligated to make monthly payments, he was not obligated to make monthly payments that exceed what BANA was due under the Loan. Again, BANA oversimplifies Roche’s claims by assuming that they only attack the creation of the escrow account when in reality they attack BANA’s alleged refusal to accept payments, failure to credit payments, and assessment of late charges and penalties in violation of the Loan.
Third, BANA argues that Roche cannot allege reliance on BANA’s alleged statement that “all negative reports to the credit bureaus would be corrected if Mr. Roche made the [October 2011 and November 2011] payments” because he was always obligated to make monthly loan payments and repay the property taxes. (Compl. ¶ 71; MTD 8.) However, as explained above, Roche was never obligated to pay BANA overages caused by BANA’s alleged failures.
BANA next maintains that it cannot be liable for negligent misrepresentation “because it owes plaintiff no duty of care” because the loan transaction between BANA and Roche does not exceed the scope of its conventional role as a money lender. (MTD 8-9.) Roche states that BANA exceeded its conventional role as lender when it offered Roche an opportunity to modify the escrow and payment terms of the loan. (Compl. ¶ 72.)
“The rule that a lender does not have a duty to a borrower is only a `general rule,’ and only applies to situations where a lender plays its conventional role. Johnson v. HSBC Bank USA, Nat. Ass’n, No. 11-CV-2091-JM-WVG, 2012 WL 928433, at *4 (S.D. Cal. March 19, 2012). In Johnson, the court found that a lender went beyond its conventional role when it “established a loan modification plan with Plaintiff, made excessive interest charges and made `derogatory credit reports to credit bureaus.'” Id.
Here, Roche has alleged that BANA went beyond its conventional role in a manner very similar to the defendant in Johnson. First, Roche alleges that BANA offered him an opportunity to modify the escrow account and payment terms of the loan. (Compl. ¶ 72.) Second, he alleges that BANA charged excessive unauthorized interest based on its own errors. (Compl. ¶ 75.) Third, he alleges that BANA made derogatory credit reports to credit bureaus. (Id.) Contrary to BANA’s argument, this is precisely “beyond the domain of a usual money lender.” Ansanelli, 2011 WL 1134451, at *7; Johnson, 2012 WL 928433, at *4. Roche’s allegations constitute “sufficient active participation to create a duty of care to plaintiffs to support a claim for negligence.” Id.
In light of the foregoing, BANA’s motion to dismiss Roche’s negligent misrepresentation and fraud claims is DENIED.
F. Real Estate Settlement Procedures Act
BANA moves to dismiss Roche’s claims for violations of the Real Estate Settlement Procedures Act (“RESPA”). BANA argues that Roche “has not alleged any damages as a result of the alleged failure to properly respond to the purported QWRs [“Qualified Written Requests”].” (MTD 9.) BANA also argues that the alleged damages were caused by Roche’s failure to pay his taxes and loan on time. (MTD 10.) Contrary to BANA’s suggestions, the complaint states that due to BANA’s failure to respond to Roche’s QWRs on at least three separate occasions, Roche suffered damages including higher monthly payments, unauthorized charges, negative impacts on his credit, and severe emotional distress. (Compl. ¶¶ 95-105, 108.) These allegations of damages are sufficient under RESPA at this stage.
In light of the foregoing, BANA’s motion to dismiss Roche’s RESPA claims is DENIED.
G. Business and Professions Code
BANA next moves to dismiss Plaintiff’s Business & Professions Code § 17200 claim. First, BANA argues that Roche’s claim is “derivative of the many other failed causes of action in the complaint,” and therefore fails because the entire “complaint is baseless.” (MTD 10-11.) In essence, BANA is arguing that for the same reasons stated in its arguments for dismissal of Roche’s other claims, the § 17200 claim should be dismissed as dependent on those claims. This argument fails as Roche’s other claims survive BANA’s motion.
Second, BANA again argues that Roche’s claim is deficient because Roche was obligated to make loan payments and tax payments in a timely matter, and his failure to do so was the sole cause of his alleged injuries. (MTD 11.) As explained in detail above, Roche does not dispute that he was obligated to pay his taxes and mortgage in a timely manner, but instead that BANA breached the Loan in a variety of ways when Roche was trying to bring his payments back to status quo.
In light of the foregoing, BANA’s motion to dismiss Roche’s § 17200 claim is DENIED.
H. Accounting
Roche asks this Court to perform an accounting to determine the amount of money he owes BANA. (Compl. ¶¶ 60-64.) Under California law, a plaintiff may assert a claim for accounting if a fiduciary relationship between the plaintiff and defendant exists, or if “`the accounts are so complicated that an ordinary legal action demanding a fixed sum is impracticable.'” Wolf v. Super. Ct., 106 Cal. App. 4th 625, 34-35 (2003); Civic W. Corp. v. Zila Indus. Inc., 66 Cal. App. 3d 1, 14 (1977) (quoting 3 Witkin, Cal. Proc. 2d (1971) Plead, § 674, p. 2300-01).
While Roche’s claim for accounting does not expressly allege a fiduciary relationship exists between the parties, it does explain that due to “a number of accounting errors . . . Roche is unable to determine the principal owed on the Loan.” (Compl. ¶¶ 60-62.) Not only does Roche claim that he is unable to determine the principal owed on the loan, he also claims that numerous accounting errors committed by BANA necessitate the accounting. (Id. ¶¶ 62-63.) Moreover, as explained in detail above, the account history is unclear at best. Accordingly, the Court finds the allegations in the Complaint sufficient to establish that the account is “complicated” at this stage of litigation. See Civic W. Corp., 66 Cal. App. 3d at 14.
BANA’s argument that Roche’s accounting claim does not arise from relevant actionable claims fails as well, since the Court has not dismissed any of Roche’s claims. (MTD 11; Reply 8.) In light of the foregoing, BANA’s motion to dismiss Roche’s accounting claim is DENIED.
I. Declaratory Relief
Finally, BANA moves to dismiss Roche’s declaratory relief claim. However, BANA’s argument that Roche’s declaratory relief claim does not arise from “any potentially valid claim” fails, since the Court has not dismissed any of his claims. (MTD 11.) In light of the foregoing, BANA’s motion to dismiss Roche’s declaratory relief claim is DENIED.
IV. CONCLUSION
For the foregoing reasons, the Court DENIES Defendant BANA’s motion [Doc. 6-1].
IT IS SO ORDERED.
[1] Roche does not know on what date Countrywide sold and/or transferred its interest to BANA, but the transfer to BANA was recorded on March 16, 2012. (Id. at ¶ 11.)
[2] $7,425.00 would go toward the escrow account, and $3,866.00 would cover the September 2011 payment. (Id. at ¶ 23.)
[3] Roche asserts his credit score dropped from 790 to 625. (Id. at ¶ 46.)
[4] The exhibit is not consecutively paginated, so the Court refers to the page numbers assigned by the Court’s electronic filing system.
Senator Elizabeth Warren (D-MA) discusses the 21st Century Glass-Steagall Act on CNBC’s “Squawk Box” on July 12, 2013. Senator Warren introduced the legislation with Senators John McCain (R-AZ), Maria Cantwell (D-WA), and Angus King (I-ME).
Natalia Peysina, et al., Appellants, v. Deutsche Bank National Trust Company, as Trustee for American Home Mortgage Assets Trust 2006-Mortgage-Backed Pass-Through Certificates Series 2006-6, Appellee.
District Court of Appeal of Florida, Third District.
Opinion filed July 10, 2013.
Parrish & Yarnell and Jon D. Parrish (Naples), for appellant.
Albertelli and Caeden S. Drayton (Tampa); Siegfried, Rivera, Lerner, De La Torre & Sobel and Maryvel DeCastro Valdes, for appellee.
Before CORTIÑAS, EMAS and LOGUE, JJ.
CORTIÑAS, J.
Natalia Peysina (the “Borrower”) seeks review of the trial court’s entry of final judgment of foreclosure in favor of Deutsche Bank National Trust Company, as Trustee for American Home Mortgage Company (the “Bank”), as well as the trial court’s denial of her motion to dismiss for improper service of process.
On or about October 27, 2011, the Bank filed its foreclosure action against the Borrower. After the Bank was unsuccessful at serving process upon the Borrower, the bank filed an affidavit of diligent search and inquiry and purported to serve the Borrower by publication. The Borrower asserts that she learned of the pending foreclosure action shortly before the matter was set for trial and consequently filed her motion to dismiss for improper service of process and to strike the case from the trial calendar on or about November 19, 2012. On November 26, 2012, the Borrower appeared specially to argue the motion to dismiss, which was denied by the trial court. The case immediately proceeded to trial, and the trial court entered the final judgment of foreclosure. We reverse.
It is well-established that “[c]onstructive service of process is proper only if personal service cannot be obtained and only in the kinds of cases listed in section 49.011, Florida Statutes.” Giron v. Ugly Mortg., Inc., 935 So. 2d 580, 582 (Fla. 3d DCA 2006). However, “[i]f there is a challenge to constructive service, the trial court has the duty of determining not only if the affidavit of diligent search is legally sufficient but also whether the plaintiff conducted an adequate search to locate the defendants.” Id. (citing Southeast & Assocs. v. Fox Run Homeowners Ass’n, 704 So. 2d 694 (Fla. 4th DCA 1997)) (emphasis added). We review the trial court’s decision and determine whether it is supported by competent substantial evidence. See Giron, 935 So. 2d at 582. When a plaintiff such as the Bank “seeks service of process by publication, `an honest and conscientious effort, reasonably appropriate to the circumstances, must be made to acquire the information necessary to fully comply with the controlling statutes.'” Gans v. Heathgate-Sunflower Homeowners Ass’n, 593 So. 2d 549, 551-52 (Fla. 4th DCA 1992) (citation omitted). While there is no bright-line rule for what constitutes a diligent search, generally, in reference to the diligent search and inquiry requirement of section 49.041, Florida Statutes, “the test is whether the complainant reasonably employed the knowledge at his command, made diligent inquiry, and exerted an honest and conscientious effort appropriate to the circumstance to acquire the information necessary to enable him to effect personal service on the defendant.” Canzoniero v. Canzoniero, 305 So. 2d 801, 803 (Fla. 4th DCA 1975) (citation omitted). Here, the trial court did not hold an evidentiary hearing, and the record does not demonstrate that the Bank “reasonably employed the knowledge at its command” or exerted an effort “appropriate to the circumstance” to be able to effectuate personal service upon the Borrower. Accordingly, we reverse the trial court’s final judgment of foreclosure and remand with instructions that the trial court hold an evidentiary hearing to determine whether the Bank conducted an adequate search to locate the Borrower.
Reversed and remanded.
Not final until disposition of timely filed motion for rehearing.
The top Republican on the House Financial Services Committee has tucked a provision into his mortgage finance reform bill that would create a privately held “National Mortgage Data Repository.” The repository would basically look like MERS, the bank-owned electronic database tracking mortgage transfers. The difference is that, while MERS’ activities have drawn legal challenges across the country, the National Mortgage Data Repository would have the force of statute to carry out the exact same behavior. According to the bill text, any document arising from this repository would be seen as presumptively legal, pre-empting state and federal laws on demonstrating the right to foreclose.
Jeb Hensarling, the chair of the House Financial Services Committee, introduced the bill last Thursday. Hensarling has already gotten into trouble this year for taking a ski vacation/fundraiser with Wall Street lobbyists, including an official from the American Securitization Forum, just six weeks after getting the Financial Services Committee gavel. Financial interests donated over $1 million to Hensarling in the last election cycle. It’s not a stretch to suggest that legislation offered by Hensarling at least has the stamp of approval from Wall Street, if it’s not directly written by their lobbyists.
The bill is called the Protecting American Taxpayers and Homeowners (PATH) Act, and it’s the House Republican response to a series of bills and initiatives to resolve Fannie Mae and Freddie Mac, and set a course for the future of mortgage finance. Most of the bill deals with that: in Hensarling’s vision, Fannie and Freddie are totally dismantled within five years, and private actors take up the slack with virtually no government guarantee. While in the past I’ve trashed the idea of just reconstituting Fannie and Freddie under a different name, in reality, expecting private actors to recreate a secondary mortgage market without any guarantee (or even with one, in my view) is wishful thinking.
But that’s not what’s interesting about Hensarling’s bill, which sprouts from the same “GSEs caused the housing crisis” rhetoric that conservatives have parroted for years. No, it’s this revelation of the banks’ true desire to wrap up the documentation failures of the bubble years that should raise alarms.
“The foreclosure of a mortgage cannot be pursued by one who has no demonstrated right to the debt.” (Bank of New York v Silverberg, 86 AD3d 274, 280 [2d Dept 2011]).
…
In the instant action, MERS, as nominee for COUNTRYWIDE, not only had no authority to assign the CEPEDA mortgage, but no evidence was presented to the Court to demonstrate COUNTRYWIDE’s knowledge or assent to the assignment by MERS to plaintiff BNY.
In Bank of New York v Silverberg (86 AD3d 274 [2d Dept 2011]), the Court instructed, at 281-282:
the assignment of the notes was thus beyond MERS’s authority as nominee or agent of the lender (see Aurora Loan Servs., LLC v Weisblum, AD3d, 2011 NY Slip Op 04184, *6-7 [2d Dept 2011]; HSBC Bank USA v Squitteri, 29 Misc 3d 1225 [A] [Sup Ct, Kings County, F. Rivera, J.]; ; LNV Corp. v Madison Real Estate, LLC, 2010 NY Slip Op 33376 [U] [Sup Ct, New York County 2010, York, J.]; LPP Mtge. Ltd. v Sabine Props., LLC, 2010 NY Slip Op 32367 [U] [Sup Ct, New York County 2010, Madden, J.]; Bank of NY v Mulligan, 28 Misc 3d 1226 [A] [Sup Ct, Kings County 2010, Schack, J.]; One West Bank, F.S.B., v Drayton, 29 Misc 3d 1021 [Sup Ct, Kings County 2010, Schack, J.]; Bank of NY v Alderazi, 28 Misc 3d 376, 379-380 [Sup Ct, Kings County 2010, Saitta, J.] [the “party who claims to be the agent of another bears the burden of proving the agency relationship by a preponderance of the evidence”]; HSBC Bank USA v Yeasmin, 24 Misc 3d 1239 [A] [Sup Ct, Kings County 2010, Schack, J.]; HSBC Bank USA, N.A. v Vasquez, 24 Misc 3d 1239 [A], [Sup Ct, Kings County 2009, Schack, J.]; Bank of NY v Trezza, 14 Misc 3d 1201 [A] [Sup Ct, Suffolk County 2006, Mayer, J.]; La Salle Bank Natl. Assn. v Lamy, 12 Misc 3d 1191 [A] [Sup Ct, Suffolk County, 2006, Burke, J.]; Matter of Agard, 444 BR 231 [Bankruptcy Court, ED NY 2011, Grossman, J.]; but see U.S. Bank N.A. v Flynn, 27 Misc 3d 802 [Sup Ct, Suffolk County 2011, Whelan, J.]).
Moreover, the Silverberg Court concluded, at 283, that “because MERS was never the lawful holder or assignee of the notes described and identified in the consolidation agreement, the . . . assignment of mortgage is a nullity, and MERS was without authority to [*8]assign the power to foreclose to the plaintiff.” Further, the Silverberg Court observed, at 283, that “the law must not yield to expediency and the convenience of lending institutions. Proper procedures must be followed to ensure the reliability of the chain of ownership, to secure the dependable transfer of property, and to assure the enforcement of the rules that govern real property [Emphasis added].”
…
Carpenter v. Longan (1872) case: “An assignment of a mortgage, apart from the debt, is a nullity. “a transfer of the mortgage without the debt is a nullity, and no interest is acquired by it” (Merritt v Bantholick, 36 NY 44, 45; see Carpenter v Longan, 83 US 271, 274 [an assignment of the mortgage without the note is a nullity]; US Bank N.A. v Madero, 80 AD3d 751, 752; U.S. Bank, N.A. v Collymore, 68 AD3d at 754; Kluge v Fugazy, 145 AD2d 537, 538 [plaintiff, the assignee of a mortgage without the underlying note, could not bring a foreclosure action]; Flyer v Sullivan, 284 App Div 697, 698 [mortgagee’s assignment of the mortgage lien, without assignment of the debt, is a nullity]; Beak v Walts, 266 App Div 900). A “mortgage is merely security for a debt or other obligation and cannot exist independently of the debt or obligation” (FGB Realty Advisors v Parisi, 265 AD2d 297, 298). Consequently, the foreclosure of a mortgage cannot be pursued by one who has no demonstrated right to the debt (id.; see Bergman on New York Mortgage Foreclosures § 12.05[1][a][1991]).
[…]
Even though MERS’ status as the nominal beneficiary of the DOT may have allowed it to assign that limited status, this authority does not convey a right to enforce the Loan. An assignment of a mortgage without assignment of the corresponding debt is a nullity under controlling law. Carpenter v. Longan, 83 U.S. 271, 275 (1872); Kelley v. Howarth, 39 Cal. 2d 179, 192 (1952); Johnson v. Razy, 181 Cal. 342, 344 (1919) (“A mortgage is mere security for the debt, and it cannot pass without transfer of the debt.”); Polhemus v. Trainer, 30 Cal. 686, 688 (1866) (interest in the collateral subject to the mortgage does not pass “unless the debt itself [is] assigned.”). Within California’s comprehensive statutory nonjudicial foreclosure scheme found at Civil Code sections 2920-2955, four separate statutes corroborate that the secured debt must be assigned with the deed of trust.
…
“Bycontrast, a transfer of a mortgage without an assignment of the underlying note or bond is a nullity, andno interest is acquired by it” (Bank of N. Y. v Silverberg, 86 AD3d 274, supra at 280; see, LaSalle BankNatl. Assn. v, Ahearn, 59 AD3d 91 1, 875 NYS2d 595 [3d Dept 20091).
…
Thus, in the instant action, MERS, as nominee for COUNTRYWIDE, is an agent of COUNTRYWIDE for limited purposes. It only has those powers given to it and authorized by its principal, COUNTRYWIDE. Plaintiff BNY failed to submit documents authorizing MERS, as nominee for COUNTRYWIDE, to assign the subject mortgage to plaintiff BNY. Therefore, MERS lacked authority to assign the CEPEDA mortgage and note, making the assignment to plaintiff BNY defective. In Bank of New York v Alderazi, 28 Misc 3d 376 [Sup Ct Kings County 2010], Justice Saitta, at 379-380, BONY v CEPEDA
I can go on and on and on til I wear the keys off my keyboards…
2013-Ohio-2968
BAC HOME LOANS SERVICING, L.P., Plaintiff-Appellee, v. CURTIS MAPP, Defendant-Appellant.
Court of Appeals of Ohio, Twelfth District, Butler County.
July 8, 2013.
Laurito & Laurito, LLC, Colette S. Carr, 7550 Paragon Road, Dayton, Ohio 45459, for plaintiff-appellee.
Law Office of Joseph C. Lucas, LLC, Tyler W. Kahler, P.O. Box 36736, Canton, Ohio 44735, for defendant-appellant.
OPINION
M. POWELL, J.
{¶ 1} Defendant-appellant, Curtis Mapp, appeals a decision of the Butler County Court of Common Pleas denying his Civ.R. 60(B) motion for relief from judgment.
{¶ 2} In July 2008, Mapp executed a promissory note in favor of Countrywide Bank, SFB, in the principal amount of $284,200. The note was secured by a mortgage which designated Mapp as mortgagor, and Mortgage Electronic Registration Systems, Inc. (MERS) as mortgagee. MERS was identified in the mortgage as a corporation acting “solely as nominee for [Countrywide] * * * and [Countrywide’s] successors and assigns.” The promissory note does not mention MERS. On May 28, 2010, MERS, “acting solely as nominee for Countrywide,” assigned the mortgage and promissory note to plaintiff-appellee, BAC Home Loans Servicing, L.P., f.k.a. Countrywide Home Loans Servicing, L.P. (BAC). Effective July 1, 2011, BAC was merged into Bank of America, N.A.[1]
{¶ 3} On September 28, 2010, BAC filed a complaint against Mapp and Jane Doe, the unknown spouse of Mapp, demanding judgment on the note in the amount of $276,924.21 plus late fees and interest, and seeking foreclosure of the property. Ten days later, Mapp filed a letter in the trial court which the trial court construed as an answer to BAC’s complaint. On September 28, 2011, BAC moved for default judgment against Doe and for summary judgment against Mapp. Neither Mapp nor Doe responded to BAC’s motions. On November 2, 2011, the trial court granted BAC’s motions for default judgment and summary judgment, entered a judgment in favor of BAC in the amount of $276,924.21 plus interest, and ordered the sale of the property. Mapp’s subsequent pro se motion to dismiss was overruled by the trial court.
{¶ 4} On October 25, 2012, Mapp filed a motion for relief from judgment pursuant to Civ.R. 60(B)(1), (3), and (5). Mapp asserted three meritorious defenses: (1) he was not properly credited with some of the mortgage payments he made; (2) documents attached to BAC’s complaint were forged, altered, or tampered with; and (3) BAC lacked standing to bring the foreclosure action and/or was not the real party in interest.
{¶ 5} Mapp asserted that his neglect of the case was excusable under Civ.R. 60(B)(1). Mapp also asserted that given the forgery, alteration, or tampering of the documents attached to BAC’s complaint, he was entitled to relief under Civ.R. 60(B)(3). Finally, Mapp challenged the amount of damages awarded by the trial court to BAC, pursuant to Civ.R. 60(B)(5), on the ground the award was not supported by the record.
{¶ 6} On December 5, 2012, the trial court denied Mapp’s Civ.R. 60(B) motion without a hearing. The trial court found that although the motion was filed within a reasonable time, Mapp failed to establish he had meritorious defenses, and he was not entitled to relief under Civ.R. 60(B)(1), (3), or (5).
{¶ 7} Mapp appeals, raising three assignments of error.
{¶ 8} Assignment of Error No. 1:
{¶ 9} THE TRIAL COURT ABUSED ITS DISCRETION WHERE IT DENIED THE MOTION MADE PURSUANT TO CIV.R. 60(B)(1), WHICH ASSERTED THAT CURTIS MAPP HAD EXCUSABLY NEGLECTED THE CASE AND HAD MERITORIOUS DEFENSES TO PRESENT IF RELIEF WAS GRANTED, INCLUDING (1) THAT THE AMOUNT OF THE JUDGMENT WAS IN EXCESS OF ANY AMOUNT OWED, (2) THAT PLAINTIFF LACKED STANDING OR WAS NOT THE REAL PARTY IN INTEREST, AND (3) THAT THE MORTGAGE AND NOTE DOCUMENTS WERE FORGED OR TAMPERED WITH TO THE EXTENT THAT THE DOCUMENTS PURPORT TO PERTAIN TO MORE THAN ONE PARCEL OF LAND.
{¶ 10} Mapp argues the trial court’s denial of his Civ.R. 60(B)(1) motion was an abuse of discretion because his neglect of the case was excusable and he presented three meritorious defenses, including that BAC lacked standing to bring the foreclosure action and/or was not the real party in interest. In its decision, the trial court rejected this defense as follows:
Finally, Mapp asserts that he has a meritorious defense because BAC “lacks standing and/or is not the real party in interest.” He alleges that the mortgage was assigned to BAC on May 28, 2010, which “was after Countrywide FSB had been converted into a national bank and merged into Bank of America, NA.” Therefore, according to Mapp, Countrywide was out of exist[e]nce at the time of the purported assignment. This argument presupposes, however, that Countrywide Bank, FSB was the transferor. According to the evidence in the record, the deed to the property at issue was assigned by Mortgage Electronic Registration Systems, Inc. (“MERS”) to BAC. Mapp has made no allegation with regard to MERS. Therefore, BAC’s alleged lack of standing does not constitute a meritorious defense.
{¶ 11} We note that although Mapp’s Civ.R. 60(B) motion was captioned “Motion for Relief from Judgment,” the portion of his motion challenging BAC’s standing was in substance a motion to vacate a void judgment because it challenged the trial court’s jurisdiction. See In re Adoption of Goldberg, 12th Dist. No. CA2001-04-026, 2001 WL 1079032 (Sept. 17, 2001) (construing a motion for relief from judgment as a motion to vacate a void judgment for lack of jurisdiction). A motion to vacate a void judgment need not satisfy the requirements of Civ.R. 60(B), which permits equitable relief from a jurisdictionally valid judgment. Id. at *2, citing Demianczuk v. Demianczuk, 20 Ohio App.3d 244, 245 (8th Dist.1984). An Ohio court has inherent power to vacate its own void judgment irrespective of Civ.R. 60(B). Patton v. Diemer, 35 Ohio St.3d 68 (1988), paragraph four of the syllabus; Demianczuk at 245. Therefore, it was not incumbent upon Mapp to establish a basis for relief under Civ.R. 60(B) by showing a meritorious defense. Rather, what is at issue is whether the trial court had jurisdiction over the foreclosure proceeding or whether it lacked such jurisdiction because BAC lacked standing to file the foreclosure complaint. See Goldberg.
{¶ 12} In a recent decision involving a foreclosure action, the Ohio Supreme Court held that standing is jurisdictional, and that because standing to sue is required to invoke the jurisdiction of the common pleas court, standing is to be determined as of the filing of the complaint. Fed. Home Loan Mtge. Corp. v. Schwartzwald, 134 Ohio St.3d 13, 2012-Ohio-5017, ¶ 22, 24, 27. The court emphasized that Civ.R. 17(A), which requires actions to be prosecuted in the name of the real part in interest, does not address standing but rather, simply concerns proper party joinder. Id. at ¶ 33. Accordingly, “a lack of standing at the outset of litigation cannot [subsequently] be cured by receipt of an assignment of the claim.” Id. at ¶ 41. Likewise, “a common pleas court cannot substitute a real party in interest for another party if no party with standing has invoked its jurisdiction in the first instance.” Id. at ¶ 38.
{¶ 13} In the case at bar, Mapp alleged that BAC lacked standing to file the foreclosure complaint because Countrywide no longer existed when the mortgage was assigned to BAC. The trial court rejected Mapp’s allegation on the ground it was MERS, not Countrywide, that assigned the mortgage to BAC. However, as Mapp notes, the assignment of mortgage clearly states: “(MERS) Mortgage Electronic Registration Systems, Inc., acting solely as nominee for Countrywide Bank, FSB, * * * does hereby sell, assign, transfer, and set over unto BAC Home Loans Servicing, LP * * * a certain mortgage deed * * * together with the Promissory Note[.]” (Emphasis added.) The trial court’s decision does not address Mapp’s allegation that Countrywide no longer existed when MERS, “acting solely as nominee for Countrywide,” assigned the mortgage to BAC. There is no evidence in the record as to when Countrywide ceased to exist and/or was merged into Bank of America.
{¶ 14} We therefore reverse the trial court’s finding that “BAC’s alleged lack of standing does not constitute a meritorious defense” and remand the case to the trial court for a hearing to determine BAC’s standing to sue, and correspondingly whether the trial court had jurisdiction over the foreclosure proceedings. On remand, the trial court must determine whether MERS had the authority to assign the mortgage and/or the note as the nominee for Countrywide in light of the claim that Countrywide was no longer in existence when the mortgage was assigned to BAC. In this regard, we observe that Schwartzwald only requires a party to establish an interest in either the note or the mortgage at the time the complaint is filed in order to have standing to prosecute a foreclosure action. Schwartzwald, 2012-Ohio-5017 at ¶ 28.
{¶ 15} In light of the foregoing, we decline to address whether Mapp’s neglect of the case was excusable under Civ.R. 60(B)(1). We also decline to address his two other meritorious defenses (that he was not properly credited with some of the mortgage payments he made, and that documents attached to BAC’s complaint were forged, altered, or tampered with). Mapp’s first assignment of error is sustained to the extent indicated.
{¶ 16} Assignment of Error No. 2:
{¶ 17} THE TRIAL COURT ABUSED ITS DISCRETION WHERE IT DENIED THE MOTION MADE PURSUANT TO CIV.R. 60(B)(3) WHERE FRAUD, MISREPRESENTATION AND/OR MISCONDUCT OF AN ADVERSE PARTY IS PRESENT BASED UPON THE PURPORTED MORTGAGE OF TWO PARCELS, WHERE THE MORTGAGE WAS TO BE FOR ONLY ONE PARCEL, AS DEMONSTRATED BY THE SECOND PAGE OF THE OPEN-END MORTGAGE.
{¶ 18} Assignment of Error No. 3:
{¶ 19} THE TRIAL COURT ABUSED ITS DISCRETION WHERE IT DENIED THE MOTION MADE PURSUANT TO CIV.R. 60(B)(5), WHICH CHALLENGED THE AMOUNT OF THE JUDGMENT.
{¶ 20} Given our holding on Mapp’s first assignment of error, we decline to address his second and third assignments of error as they are not ripe for review at this time. If, upon remand, the trial court determines that BAC had standing to file the foreclosure complaint, Mapp may appeal that decision and renew his arguments pertaining to the trial court’s denial of his Civ.R. 60(B) motion, and in particular, the trial court’s ruling on his several Civ.R. 60(B) claims and meritorious defenses.
{¶ 21} Judgment reversed and remanded for further proceedings in accordance with this opinion.
RINGLAND, P.J., and S. POWELL, J., concur.
[1] By entry filed on September 28, 2011, the trial court substituted “Bank of America, N.A., successor by merger to BAC Home Loans Servicing, L.P. fka Countrywide Home Loans Servicing, L.P.” as the plaintiff.
Bank of America is fighting back in court against former employees who claim the bank encouraged them to push homeowners into foreclosure instead of the government’s mortgage-relief program.
In a court filing on Friday seeking to keep homeowners from teaming up to file a class-action lawsuit, Bank of America’s lawyers said that the whistleblowers had “wildly misrepresented their duties at the bank” and declared that the claims they made were “impossible.”
Last month, in support of the homeowners’ lawsuit, seven former bank employees filed sworn affidavits claiming that Bank of America had encouraged them to push delinquent mortgage borrowers looking for relief under the government’s Home Affordable Modification Program (HAMP) into foreclosures or in-house mortgage modifications instead, so the bank could make more money. Some of the whistleblowers said that they had seen the bank offer rewards to employees, including $500 cash bonuses and gift cards to Target and Bed Bath and Beyond, for excellence in making borrowers’ lives miserable.
In connection with the pending acquisition (the “Acquisition”) of Lender Processing Services, Inc., a Delaware corporation (“LPS”) by Fidelity National Financial, Inc., a Delaware corporation (“FNF”), FNF received on July 12, 2013, a request for additional information and documentary material, often referred to as a “Second Request”, from the United States Federal Trade Commission (the “FTC”) in connection with the FTC’s Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”) regulatory review of the Acquisition. The effect of the Second Request is to extend the waiting period imposed by the HSR Act until 30 days after FNF and LPS have substantially complied with the Second Request, unless that period is extended voluntarily by the parties or terminated sooner by the FTC. FNF has been working, and will continue to work, cooperatively with the FTC and continues to expect the Acquisition to close in the fourth quarter of 2013. Completion of the Acquisition remains subject to approval by FNF and LPS stockholders, approvals from applicable federal and state regulators and satisfaction of other customary closing conditions.
Massachusetts Predatory Home Loan Practices Act. Consumer Protection Act, Mortgage of real estate. Real Property, Mortgage. Mortgage, Assignment. Assignment.
CIVIL ACTION commenced in the Superior Court Department on May 28, 2009.
The case was heard by Robert A. Cornetta, J., on motions for summary judgment.
The Supreme Judicial Court granted an application for direct appellate review.
Martha Coakley, Attorney General, Glenn Kaplan, Aaron Lamb, & Gabriel O’Malley, Assistant Attorneys General, for the Commonwealth, amicus curiae, submitted a brief.
In 2006, the plaintiffs, Susanne and Peter Drakopoulos, [FN5] refinanced their family home in Haverhill through Aegis Lending Corporation (lender), entering into a stated income home mortgage loan secured by a first mortgage on the home. [FN6] The total monthly payment on this loan proved to be approximately $600 greater than the plaintiffs’ total monthly income. Less than six months after the mortgage was funded, it was sold and assigned to the defendant U.S. Bank National Association (bank) as trustee of the Credit Suisse First Boston Mortgage Securities Corp., Home Equity Pass-Through Certificates, Series 2007-1 (trust). The loan was serviced by the defendant Select Portfolio Servicing, Inc. (servicer). The plaintiffs fell behind in their payments and defaulted on the loan; in November, 2008, the bank foreclosed on the mortgage.
The plaintiffs thereafter brought this action, asserting, inter alia, violations of the Predatory Home Loan Practices Act, G.L. c. 183C (act); the Consumer Protection Act, G.L. c. 93A; and the Borrower’s Interest Act, G.L. c. 183, § 28C, The plaintiffs also asserted that the loan was unenforceable because it was unconscionable, and they sought damages and rescission for predatory lending practices. A Superior Court judge granted the defendants’ motions for summary judgment on all claims, based in large part on the ground that the defendants, as assignees, had no liability for the acts of the lender. The plaintiffs appealed. Because we conclude that the bank is not shielded from liability as a matter of law by virtue of its status as an assignee, and because it has not established the absence of material issues of disputed fact entitling it to judgment on any individual claim,the entry of summary judgment in its favor must be reversed.Because the servicer has not been shown to be an assignee, however, and because the plaintiffs offer no alternative basis on which the servicer might be held liable, we affirm the entry of summary judgment as to it.
FULL ORDER BELOW:
NOTICE: The slip opinions and orders posted on this Web site are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports. This preliminary material will be removed from the Web site once the advance sheets of the Official Reports are published. If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us
Susanne DRAKOPOULOS & another [FN1] vs. U.S. BANK NATIONAL ASSOCIATION,
trustee, [FN2] & another. [FN3], [FN4]
SJC-11271.
Essex. March 4, 2013. – July 12, 2013.
Massachusetts Predatory Home Loan Practices Act. Consumer Protection Act, Mortgage of real estate. Real Property, Mortgage. Mortgage, Assignment. Assignment.
CIVIL ACTION commenced in the Superior Court Department on May 28, 2009.
The case was heard by Robert A. Cornetta, J., on motions for summary judgment.
The Supreme Judicial Court granted an application for direct appellate review.
Paul R. Collier, III (Pamela A. Lebowitz & Max Weinstein with him) for the plaintiffs.
Peter F. Carr, II, for the defendants.
Martha Coakley, Attorney General, Glenn Kaplan, Aaron Lamb, & Gabriel O’Malley, Assistant Attorneys General, for the Commonwealth, amicus curiae, submitted a brief.
In 2006, the plaintiffs, Susanne and Peter Drakopoulos, [FN5] refinanced their family home in Haverhill through Aegis Lending Corporation (lender), entering into a stated income home mortgage loan secured by a first mortgage on the home. [FN6] The total monthly payment on this loan proved to be approximately $600 greater than the plaintiffs’ total monthly income. Less than six months after the mortgage was funded, it was sold and assigned to the defendant U.S. Bank National Association (bank) as trustee of the Credit Suisse First Boston Mortgage Securities Corp., Home Equity Pass-Through Certificates, Series 2007-1 (trust). The loan was serviced by the defendant Select Portfolio Servicing, Inc. (servicer). The plaintiffs fell behind in their payments and defaulted on the loan; in November, 2008, the bank foreclosed on the mortgage.
The plaintiffs thereafter brought this action, asserting, inter alia, violations of the Predatory Home Loan Practices Act, G.L. c. 183C (act); the Consumer Protection Act, G.L. c. 93A; and the Borrower’s Interest Act, G.L. c. 183, § 28C, The plaintiffs also asserted that the loan was unenforceable because it was unconscionable, and they sought damages and rescission for predatory lending practices. A Superior Court judge granted the defendants’ motions for summary judgment on all claims, based in large part on the ground that the defendants, as assignees, had no liability for the acts of the lender. The plaintiffs appealed. Because we conclude that the bank is not shielded from liability as a matter of law by virtue of its status as an assignee, and because it has not established the absence of material issues of disputed fact entitling it to judgment on any individual claim, the entry of summary judgment in its favor must be reversed. Because the servicer has not been shown to be an assignee, however, and because the plaintiffs offer no alternative basis on which the servicer might be held liable, we affirm the entry of summary judgment as to it.
1. Standard of review. “In considering a motion for summary judgment, we review the evidence and draw all reasonable inferences in the light most favorable to the nonmoving party.” Premier Capital, LLC v. KMZ, Inc., 464 Mass. 467, 474-475 (2013). “Because our review is de novo, we accord no deference to the decision of the motion judge.” DeWolfe v. Hingham Ctr., Ltd., 464 Mass. 795, 799 (2013) (DeWolfe ). The defendants, as the moving parties, “have the burden of establishing that there is no genuine issue as to any material fact and that they are entitled to judgment as a matter of law.” Id. “Once the moving party establishes the absence of a triable issue, the party opposing the motion must respond and allege specific facts establishing the existence of a material fact in order to defeat the motion.” SCA Servs., Inc. v. Transportation Ins. Co., 419 Mass. 528, 531 (1995).
2. Background. a. Facts. We summarize the largely undisputed facts in the summary judgment record, viewed in the light most favorable to the plaintiffs, reserving certain facts for later discussion. The plaintiffs owned a house in Haverhill which Susanne inherited from her mother. Prior to closing on the mortgage loan at issue, the plaintiffs had several times borrowed against the equity in their home. Approximately nine months prior to the subject refinancing, the plaintiffs had obtained a thirty-year adjustable rate mortgage in the principal amount of $155,000, with a base interest rate of 9.24 per cent, for an initial three-year period and monthly payments of $1,224.
In the early fall of 2006, a representative of the lender visited the plaintiffs’ home, at their request, and obtained from them income information, including Internal Revenue Service Forms W-2 and wage stubs from Peter’s employer, showing that Peter earned approximately $1,900 each month as a shipper and receiver at a warehouse facility. The lender was made aware that Susanne did not have a job. [FN7] The loan application, which the lender prepared and the plaintiffs signed that day, however, listed Peter as having a monthly income from wages of $5,900, and set forth a proposed monthly mortgage payment of $2,573.02. The lender processed the loan as a stated income loan,
[FN8] notwithstanding the receipt of documented borrower income information.
The plaintiffs maintain that they were unaware of the interest rate on the loan, the amount of the monthly payments, and the nature of the mortgage loan. They asserted in deposition testimony that they were rushed to sign the loan documents, not given an opportunity to read them, and told to “just sign the documents.” They maintained that they did not know anything about this type of loan, were never informed that they had received one, were not aware that Peter’s income was inflated on the loan application, and were not informed that such loans come with a higher interest rate than loans based on fully documented income.
The lender’s underwriting income standards at the time required that the stated income “must be reasonable for the profession.” The plaintiffs submitted evidence that Peter’s stated income of $5,900 was over 170 per cent higher than the wage earned by the ninetieth percentile of shippers and receivers. The lender’s underwriting reviewer, who conducted a review on the day of the closing, noted “PAYMENT SHOCK CONCERN: Proposed housing payment is greater than 150 percent of current housing payment. Borrower must demonstrate ability to handle increased payments.” Nothing in the record indicates that the lender required the plaintiffs to make such a showing.
The closing took place on October 26, 2006. The lender provided the plaintiffs a loan in the amount of $249,000, with a fixed interest rate of 10.315 per cent, secured by a first mortgage on their home. The monthly payment on the loan was $2,573.02, over $600 more than the plaintiffs’ total monthly income. After paying off their existing mortgage and other indebtedness, the transaction left the plaintiffs in receipt of $73,532.31.
An apparent affiliate of the lender, Aegis Mortgage Corporation, [FN9] acted as a loan originator for the trust. The plaintiffs’ mortgage and note was sold and assigned to the bank, as trustee for the trust, on April 26, 2007; the assignment was duly recorded on April 29, 2008. The bank arranged for the servicer to service the plaintiffs’ loan. After defaulting on their loan payments, on May 2, 2008, the plaintiffs entered into a forbearance agreement with the servicer, but ultimately were unable to comply with its terms. In November, 2008, the bank foreclosed on the mortgage and sold the property at auction.
b. Prior proceedings. On May 28, 2009, the plaintiffs filed their complaint in the Superior Court against the bank and the servicer, seeking money damages and rescission of the 2006 mortgage loan. The complaint asserted six claims: (1) wrongful foreclosure in violation of G.L. c. 244, § 35A, and G.L. c. 183, § 21; (2) violation of the Predatory Home Loan Practices Act, G.L. c. 183C; (3) violation of the Consumer Protection Act, G.L. c. 93A; (4) violation of the Borrower’s Interest Act, G.L. c. 183, § 28C; (5) unconscionability; and (6) negligent and intentional infliction of emotional distress.
The parties stipulated to dismissal of the claim for wrongful foreclosure and the defendants’ first motion for summary judgment was allowed on the claim for intentional infliction of emotional distress; the plaintiffs do not appeal from that decision. Following the completion of discovery, the defendants filed their second motion for summary judgment on the remaining four claims, and the plaintiffs filed a cross motion for partial summary judgment. The judge granted the defendants’ motion, denied the plaintiffs’ cross motion, and denied the plaintiffs’ motion to alter or amend the judgment pursuant to Mass. R. Civ. P. 59(e), 365 Mass. 827 (1974). The plaintiffs appealed and we allowed their petition for direct appellate review.
3. Discussion. a. Assignee liability. The defendants maintain on appeal, as they did in their motion for summary judgment, that they are entitled to judgment as a matter of law on all four remaining claims primarily because they are not liable for the lender’s allegedly predatory lending practices during the origination of the loan, prior to its assignment. While the Predatory Home Loan Practices Act (act), G.L. c. 183C, provides that “[a]ny person who purchases or is otherwise assigned a high-cost home mortgage loan shall be subject to all affirmative claims and any defenses with respect to the loan that the borrower could assert against the original lender or borrower of the loan,” G.L. c. 183C, § 15 (a ), the defendants maintain that the plaintiffs cannot establish that the loan at issue is a “high-cost home mortgage loan.”
[FN10]
Concluding that the plaintiffs’ loan did not qualify as a high-cost home mortgage loan, the judge allowed the defendants’ motion with respect to the act, a decision that we view as being unwarranted on this record and that, accordingly, must be reversed. See part 3.b, infra. To the extent that the bank may thus have liability as an assignee by virtue of the act, it would extend to “all affirmative claims and defenses with respect to the loan” that the plaintiffs could assert against the lender, including the statutory claims asserted under the Consumer Protection Act, G.L. c. 93A; and the Borrower’s Interest Act, G.L. c. 183, § 28C, as well as the affirmative defense of unconscionability. [FN11] Given this, allowing summary judgment in the bank’s favor on those three claims, to the extent that it is based on the bank’s status as assignee, is premature. However, because nothing in the record permits us to conclude that the servicer was an assignee of the loan and would have liability as such, and because the plaintiffs failed to establish any other basis for the servicer’s liability, summary judgment in its favor correctly was allowed. [FN12]
b. Predatory Home Loan Practices Act. The act prohibits lenders from making “high-cost home mortgage loan[s]” unless certain statutory criteria are met.
[FN13] The act defines a “[h]igh-cost home mortgage loan” as “a home mortgage loan that meets [one] of the following conditions:–
“(i) the annual percentage rate at consummation will exceed by more than [eight] percentage points for first-lien loans, or by more than [nine] percentage points for subordinate-lien loans, the yield on United States Treasury securities….
“(ii) Excluding either a conventional prepayment penalty or up to [two] bona fide discount points, the total points and fees exceed the greater of [five] per cent of the total loan amount or $400….”
G.L. c. 183C, § 2.
The judge concluded that the plaintiffs’ loan did not satisfy the first condition. On appeal, the plaintiffs do not contest this determination, but maintain that the loan qualifies as a high-cost home mortgage loan pursuant to the second condition, since the points and fees charged by the lender exceeded five per cent of the total loan amount. Although it was raised in the plaintiffs’ cross motion for partial summary judgment, the motion judge did not address this argument.
The total amount of the plaintiffs’ loan was $249,000; five per cent of that amount is $12,450. The record contains two documents showing differing calculations of the charges assessed to the plaintiffs for origination of the loan. The first, a United States Department of Housing and Urban Development Settlement Statement (HUD statement), states the fees to be $14,048.04–in excess of the five per cent mark. The second document, entitled “Massachusetts High Cost Worksheet” (high cost worksheet), states that the total fees assessed to the plaintiffs were $12,267.94–$182.06 less than five per cent of the loan. The reason for the difference in these two calculations is readily discernible. The act specifies which costs charged to borrowers must be considered as a “point” or “fee.” See G.L. c. 183C, § 2. The HUD statement, which is not prepared for purposes of compliance with the act, lists as fees several charges which are not defined as points or fees under the terms of the act. [FN14] The high cost worksheet does not include these charges, thereby accounting for the significant gap in the total fees stated in the two documents. The plaintiffs maintain that the calculation of fees charged on the high cost worksheet is nonetheless incorrect because it omits a charge of $215 for a title examination; had that charge been included, the points and fees would have exceeded the $12,450 (five per cent) threshold.
Ordinarily, the fee assessed for a title examination need not be included as a point or fee under the provisions of the act, so long as it is “bona fide and reasonable in amount” (emphasis in original). 209 Code Mass. Regs. § 32.04(3)(g) (2010). The plaintiffs assert, however, that the lender never provided any title examination services, and thus that the $215 charge was neither bona fide nor reasonable. Accordingly, the plaintiffs maintain that the fee should be included in the calculation of points and fees.
Rather than proffer evidence showing that a title examination was completed, and hence that the fee is bona fide, the bank instead asserts that the plaintiffs have provided no evidence to the contrary. As the party seeking summary judgment, however, the bank “bears the burden of affirmatively demonstrating that there is no triable issue of fact.” Ng Bros. Constr., Inc. v. Cranney, 436 Mass. 638, 644 (2002). See Lev v. Beverly Enterprises-Mass., Inc., 457 Mass. 234, 237 (2010) (moving party “bears the burden of affirmatively demonstrating the absence of a triable issue”).
Even were we to assume that the bank could somehow satisfy its burden merely by relying on the plaintiffs’ asserted failure to establish that no title examination occurred, its characterization of the record in this regard is inaccurate. The HUD statement lists Advantage Equity Service (Advantage) as the entity paid to perform the title examination. The attorney hired by Advantage to conduct the closing testified during a deposition that, “When it came to refinancings, it was all about the insurance. There [were] no title-related services I needed to provide.” While this statement alone may not be conclusive on the point, it supports the plaintiffs’ claim that Advantage did not perform a title examination and the reasonable inference, which we draw in the plaintiffs’ favor, that no title examination was done.
It was incumbent on the bank to counter this with evidence that someone actually did the title work for which the plaintiffs were charged $215. Instead, the record is devoid of any documentary evidence demonstrating that the examination occurred, and of any deposition testimony averring that it did. Therefore, whether the title examination was conducted, i.e., is bona fide, is an issue of disputed material fact. The bank, having failed to meet its burden of showing the absence of a triable issue, is not entitled to summary judgment on the claim alleging a violation of the act. See DeWolfe, supra.
c. Claim under the Consumer Protection Act, G.L. c. 93A. The plaintiffs maintain that the lender violated G.L. c. 93A by committing unfair or deceptive acts in originating the mortgage. The judge granted the bank’s motion for summary judgment motion as to the G.L. c. 93A claim in part based on his conclusion that “since the plaintiffs’ loan was a fixed rate loan, they are afforded no relief under the theory of presumptively unfair/predatory loans as enunciated in Commonwealth v. Fremont [Inv. &] Loan, 452 Mass. 733 (2008)” (Fremont ). [FN15] Because the judge’s reading of that case is unduly narrow, the entry of summary judgment in favor of the bank on the plaintiffs’ G.L. c. 93A claim cannot stand on this basis.
In Fremont, we held that a lender may be liable under G.L. c. 93A for “the origination of a home mortgage loan that the lender should recognize at the outset that the borrower is not likely to be able to repay.” Id. at 748- 749. In that case, the judge determined that the mortgage loans offered were unfair based on four characteristics, among them that the loans had adjustable rates and an introductory rate period of three years or less. Id. at 739.
Here, the judge determined that the plaintiffs’ loan was not predatory under the Fremont analysis because it was a fixed-rate loan, and thus did not meet one of Fremont ‘s enumerated characteristics. Nothing in our decision in Fremont, however, was intended to suggest that the universe of predatory home loans is limited only to those meeting the four criteria present in that case. Rather, “[t]he holding of Fremont was that [G.L. c.] 93A prohibits ‘the origination of a home mortgage loan that the lender should recognize at the outset that the borrower is not likely to be able to repay.’ ” Frappier v. Countrywide Home Loans, Inc., 645 F.3d 51, 56 (1st Cir.2011), quoting Fremont, supra at 748-749.
Accordingly, that the plaintiffs’ mortgage had a fixed interest rate does not, standing alone, remove it from the purview of liability pursuant to G.L. c. 93A. Rather, the question is whether the lender should have recognized at the outset that the plaintiffs were unlikely to be able to repay the loan. The answer to this question is hardly a matter of undisputed material fact. See DeWolfe, supra. To the contrary, the record contains undisputed documentation that the lender artificially inflated Peter’s income to $5,900 per month, despite having written documentation that he earned only $1,900 per month, and that, while in possession of documents showing Peter’s monthly and annual income, the lender issued a loan with monthly payments exceeding the plaintiffs’ total monthly income. Accordingly, a determination whether the lender acted unfairly or deceptively, in violation of G.L. c. 93A, when originating the plaintiffs’ loan is properly left to the finder of fact.
[FN16]
d. Unconscionability. The plaintiffs allege that their mortgage was unconscionable because the lender was in a superior bargaining position and placed them “in an unaffordable mortgage loan that was doomed to foreclosure from the start.” “Unconscionability must be determined on a case-by-case basis, with particular attention to whether the challenged provision could result in oppression and unfair surprise to the disadvantaged party….” Waters v. Min Ltd., 412 Mass. 64, 68 (1992). Among the factors that could render a contract unconscionable are “gross disparity in the consideration,” “[h]igh pressure sales tactics and misrepresentations,” and “[i]f the sum total of the provisions of a contract drive too hard a bargain.” Id.
The judge concluded that the defendants’ motion for summary judgment on this claims should be allowed because “there is no evidence from which a finder of fact could determine that the transaction was unconscionable.” In reaching this conclusion, the judge determined that the plaintiffs were “reasonably sophisticated” and “knew what they were doing.” Such comments indicate that the judge inappropriately weighed the evidence and made credibility assessments adverse to the nonmoving party. See O’Connor v. Redstone, 452 Mass. 537, 550 (2008) (“In deciding whether summary judgment is appropriate…. [t]he judge views the evidence indulgently in favor of the nonmoving party and without considering witness credibility, weighing the evidence, or making findings of fact”).
It is undisputed that Susanne suffered from significant intellectual disability, see note 7, supra, and evidence in the record suggests that Peter suffered from bipolar disorder. [FN17] The plaintiffs assert that they were rushed to sign the documents at closing and were unaware of the loan interest rate, the amount of their monthly payments, or the nature of the mortgage loan. The record demonstrates that the lender artificially inflated Peter’s salary on underwriting documents, notwithstanding documents in its possession, such as tax forms from Peter’s employer, and disregarded concerns expressed by its own underwriters concerning the plaintiffs’ ability to repay the loan based on their actual income. The terms of the loan itself, which required monthly payments that were roughly $600 more than the plaintiffs’ total monthly income, also raise a question as to unconscionability that belongs properly to the trier of fact. Because the bank has not established the absence of a triable issue as to the plaintiffs’ claim of unconscionability, it is not entitled to summary judgment on this claim. [FN18]
e. Borrower’s Interest Act. The Borrower’s Interest Act, G.L. c. 183, § 28C, prohibits lenders from originating certain home refinancing loans that are not in the borrower’s interest. The statute provides:
“A lender shall not knowingly make a home loan if the home loan pays off all or part of an existing home loan that was consummated within the prior 60 months or other debt of the borrower, unless the refinancing is in the borrower’s interest.”
G.L. c. 183, § 28C (a ). The statute also mandates that
“[t]he ‘borrower’s interest’ standard shall be narrowly construed, and the burden is upon the lender to determine and to demonstrate that the refinancing is in the borrower’s interest.” [FN19]
It is undisputed that the loan originated by the lender, refinancing a home loan consummated roughly nine months earlier, required the plaintiffs to make monthly payments that exceeded their total monthly income. Given this, we cannot say there is no triable issue as to whether the refinancing was in the plaintiffs’ interest. [FN20]
f. Jury trial. Finally, the plaintiffs ask us to address whether they are entitled to a trial by jury on their surviving claims. We decline to do so, since no Superior Court judge has yet had the opportunity to rule on the issue. See Greco v. Probate and Family Court Dept., 422 Mass. 7, 9 (1996) (ordinarily “appellate review is not appropriate until there has been a final order, judgment, or decree”).
4. Conclusion. The order granting judgment in favor of Select Portfolio Servicing, Inc., is affirmed. The order granting judgment in favor of U.S. Bank National Association is vacated and set aside. The matter is remanded to the Superior Court for further proceedings consistent with this opinion.
So ordered.
FN1. Peter Drakopoulos.
FN2. On behalf of the holders of the Credit Suisse First Boston Mortgage Securities Corp., Home Equity Pass-Through Certificates, Series 2007-1.
FN3. Select Portfolio Servicing, Inc.
FN4. Orlans/Moran, the law firm that handled the foreclosure, had also been a named defendant. Following a successful motion to dismiss the claims against it, which the plaintiffs do not challenge, it is not a party to this appeal.
FN5. Since they share a last name, we refer to husband and wife Susanne and Peter Drakopoulos by their first names.
FN6. We acknowledge the amicus brief of the Attorney General on behalf of the Commonwealth.
FN7. While the plaintiffs apparently have graduated from high school and can read and understand English, Susanne has suffered since the age of two from a seizure disorder and related temporal lobe damage, has an intelligence quotient of sixty-six, third- to fourth-grade equivalent reading and word recognition, and long-term memory and nonverbal reasoning abilities in the borderline range. Peter appears to suffer from bipolar disorder.
FN8. Unlike a fully documented loan, which requires verification of income and assets, a stated income loan “involves little verification [and] is based largely on the borrowers’ credit score and asserted income.” See Frappier v. Countrywide Home Loans, 645 F.3d 51, 53 (1st Cir.2011). Cf. Commonwealth
v. Fremont Inv. & Loan, 452 Mass. 733, 736 & n. 7 (2008), discussing Commonwealth v. Fremont Inv. & Loan, 23 Mass. L. Rptr. 567, 570, modified in part, 24 Mass. L. Rptr. 12 (2008) (in stated income loan, “the borrower was permitted to state his income without having to provide the usual verifying documentation, such as income tax returns, W-2s, or pay stubs…. Since there was a substantially greater risk that the borrower had inflated his income with ‘stated-income’ loans, the borrower paid a higher interest rate than for the documented loans”).
The plaintiffs submitted affidavits from Thomas A. Tarter and Carolyn Couillard, both of whom attest to having years of experience in the residential mortgage industry. Tarter indicated that stated income loans “are considered appropriate only for borrowers whose income is not reasonably susceptible to normal verification procedures…. [W]here the [b]orrower is a wage-earner, as Mr. Drakopoulos was, and his entire income is verifiable from his W-2, wage stubs and income tax returns, the only purposes served by processing a mortgage on a ‘stated income’ basis are to inflate the [b]orrower’s income to enable approval of an objectively unaffordable loan and to increase the interest rate on that loan.” Couillard opined, “If [the mortgage] was a Stated Income product, it was misused since this product was meant for a self-employed borrower whose income was difficult to calculate not an hourly employee whose income was quite easy to discern from documents readily available to the
borrower such as W2’s and pay stubs.”
FN9. Nine months after the origination of the plaintiffs’ loan, the Commissioner of Banks revoked both Aegis Mortgage Corporation’s and Aegis Lending Corporation’s licenses to do business in the Commonwealth. In August, 2007, each filed for bankruptcy protection.
FN10. The assignee of a high-cost home mortgage loan can avoid the Predatory Home Loan Practices Act’s (act’s) imposition of assignee liability if it demonstrates by a preponderance of the evidence that it:
“(1) has in place at the time of purchase or assignment of the subject loans, policies that expressly prohibit its purchase or acceptance of assignment of any high-cost home mortgage loans;
“(2) requires by contract that a seller or assignor of home loans to the purchaser or assignee represents and warrants to the purchaser that either (i) the seller or assignor will not sell or assign any high-cost home mortgage loans to the purchaser or assignee or (ii) that the seller or assignor is a beneficiary of a representation and warranty from a previous seller or assignor to that effect; and
“(3) exercises reasonable due diligence at the time of purchase or assignment of home loans or within a reasonable period of time after the purchase or
assignment of the home loans, intended by the purchaser or assignee to prevent the purchaser or assignee from purchasing or taking assignment of any high-cost home mortgage loans; provided, however, that reasonable due diligence shall provide for sampling and shall not require loan by loan review.”
G.L. c. 183C, § 15 (a ). On this record, U.S. Bank National Association (bank) has not made such a showing.
FN11. While we have not previously had the opportunity to construe this provision of the act, the plain language of the provision, subjecting assignees to “all” affirmative claims, not just claims brought under the act, see G.L. c. 183C, § 15 (a ), demonstrates that the Legislature intended a broad scheme of liability for assignees of high-cost home mortgage loans. This is in harmony with the analogous provision of the Federal Truth In Lending Act (TILA), 15 U.S.C. § 1641(d)(1) (2006), which has been read to make “assignees [of high-cost home mortgage loans] subject to all claims and defenses, whether under [TILA] or other law, that could be raised against the original lender.” See Cooper v. First Gov’t Mtge. & Investors Corp., 238 F.Supp.2d 50, 55 (D.D.C.2002).
FN12. It is undisputed that the plaintiffs’ loan was assigned from the Mortgage Electronic Registration Systems to the bank by way of an assignment
dated April 26, 2007, and therefore that the bank is an assignee of the plaintiffs’ loan. It is also undisputed that “[t]he authority of [Select Portfolio Servicing, Inc. (servicer),] to take any action with regard to the [plaintiffs’] property arises solely from the authority of and its relationship with [the bank]” Suzanne Johnstone, a document control officer for the servicer, agreed at a deposition that with regard to the plaintiffs’ property, “the only entity with whom [the servicer] has a legal relationship authorizing it to take action is the trust and the [bank].” Based on the record before us, the servicer appears to have been connected to the plaintiffs’ loan only through its work on behalf of the bank. Its role was limited to ordinary duties carried out by servicers.
FN13. “A creditor may not make a high-cost homemortgage loan without first receiving certification from a counselor with a third-party nonprofit organization approved by the United States Department of Housing and Urban Development, a housing financing agency of this [S]tate, or the regulatory agency which has jurisdiction over the creditor, that the borrower has received counseling on the advisability of the loan transaction.” G.L. c. 183C, § 3. Additionally, “[a] lender shall not make a high-cost home mortgage loan unless the lender reasonably believes at the time the loan is consummated that [one] or more of the obligors, will be able to make the scheduled payments to repay
the home loan….” G.L. c. 183C, § 4.
FN14. Those charges include title insurance premiums, fees for flood certification, and recording fees. See G.L. c. 183C, § 2.
FN15. The judge held also that “any suggestion that these defendants may have negligently inflicted emotional distress also fails since G.L. [c.] 93A claims require intent on the part of an actor to proceed” (emphasis in original). It is unclear whether the judge understood all G.L. c. 93A claims to require intent, or only those claims predicated on the negligent infliction of emotional distress. To the extent it is the former, such a conclusion would be erroneous. We have stated repeatedly that negligence, where it results in an unfair or deceptive act, may give rise to liability under G.L. c. 93A. See Aspinall v. Philip Morris Cos., 442 Mass. 381, 394 (2004) (“A successful G.L. c. 93A action based on deceptive acts or practices doe not require proof … that the defendant intended to deceive the plaintiff, see Swanson v. Bankers Life Co., 389 Mass. 345, 349 [1983], or even knowledge on the part of the defendant that the representation was false”); Maillet v. ATF-Davidson Co., 407 Mass. 185, 193-194 (1990), quoting Linthicum v. Archambault, 379 Mass. 381, 388 & n. 12 (1979) (“it is not a defense to a [G.L.] c. 93A claim that the defendant’s conduct was negligent rather than
intentional…. Neither intent to engage in an unlawful act nor knowledge of its unlawfulness is required in order to establish liability”).
FN16. Because the plaintiffs’ surviving claim under the act subjects the bank to potential liability for the plaintiffs’ G.L. c. 93A claim due to its status as an assignee, see part 3.a, supra, the bank’s argument that its assignee status entitles it to summary judgment on the plaintiffs’ G.L. c. 93A claim necessarily fails. Moreover, as a matter of common law, assignees are not shielded from liability under G.L. c. 93A by virtue of their assignee status.
It is well established that an assignee “stands in no better position than the assignor, and any defence which the defendant could raise against the latter may also be raised against the former.” Quincy Trust Co. v. Pembroke, 346 Mass. 730, 732 (1964). Where an assignee played no part in the unfair or deceptive acts of an assignor, principles of assignee liability ordinarily will not render the assignee liable for affirmative damages for those acts. See Ford Motor Credit Co. v. Morgan, 404 Mass. 537, 545 (1989) (“The common law principle that the assignee stands in the assignor’s shoes means only that the debtor can raise the same defenses against the assignee as he could have raised against the assignor…. It has never been interpreted to mean that the assignee will be liable for all the assignor’s
wrongs”).
Even where the unfair or deceptive acts were committed wholly by an assignor, based on common law principles of assignee liability, assignees may be liable under G.L. c. 93A for equitable remedies such as cancellation of a debt or rescission of a contract. See id. at 540, 545-546 (judge did not err in ordering counterclaims, including counterclaim brought under G.L. c. 93A, § 2, to be used only defensively to extinguish assignee creditors’ claim for remaining debt).
FN17. A psychiatrist retained by the defendants, who conducted a court-ordered examination of Peter on the defendants’ motion, determined that he suffered from bipolar disorder and that “the October 2006 refinancing itself was an overt manifestation of an active manic phase.”
FN18. As with the plaintiffs’ G.L. c. 93A claim, the bank’s argument that its assignee status precludes it from liability on the plaintiffs’ unconscionability claim is not tenable in light of the plaintiffs’ surviving claim under the act. See part 3.a., supra. Additionally, common-law principles of assignee liability mandate that a party to a contract be able to raise the contractual defense of unconscionability, see St. Fleur v. WPI Cable Sys./Mutron, 450 Mass. 345, 350 (2008), irrespective of whether it is
raised against the assignor or assignee. See Quincy Trust Co. v. Pembroke, supra. A contract that is unenforceable because it is unconscionable does not become enforceable simply by virtue of being assigned from one party to another.
FN19. The Borrower’s Interest Act “does not specifically set forth a remedy for a violation of any of its provisions, but nevertheless suggests that a borrower would be entitled to costs and attorney’s fees for successfully bringing such an action against a lender.” In re DiMare, 462 B.R. 283, 304 (Bankr.D.Mass.2011), citing G.L. c. 183, § 28C (b ). The Borrower’s Interest Act also does not create explicitly a private right of action by which borrowers may assert alleged violations, and we have not considered previously whether the Legislature intended to provide such a right. See Salvas v. Wal-Mart Stores, Inc., 452 Mass. 337, 373 (2008) (“Where the Legislature has not expressly provided for a private right of action, we may nonetheless infer an implied private right of action unless the Legislature explicitly prohibits us from doing so”). Because neither party raised or briefed the issue, and because the claimed violation of the Borrower’s Interest Act may be litigated as a predicate to the plaintiffs’ G.L. c. 93A claim, we leave for another day the question whether the Borrower’s Interest Act creates a private right of action. See Whitehall Co. Ltd. v. Merrimack Valley Distr. Co., 56
Mass.App.Ct. 853, 858 (2002) (“Violation of a specific statute that does not itself permit private recovery may give rise to a private claim under [G.L.] c. 93A if the violation amounts to an unfair method of competition or an unfair or deceptive practice independently prohibited by G.L. c. 93A, § 2, and if recovery under [G.L.] c. 93A is compatible with the objectives and enforcement mechanisms the underlying statute contains”).
FN20. As with the preceding claims, the bank’s argument that it is entitled to summary judgment on the Borrower’s Interest Act claim based on its assignee status must fail where the bank may face liability by virtue of the plaintiffs’ claim under the act. See part 3.a, supra.
Where the act is not implicated, however, an assignee who took no part in the making of a home loan would not fall within the scope of liability of the Borrower’s Interest Act, since its plain language concerns only lenders who “make a home loan.” See Commonwealth v. Jones, 417 Mass. 661, 664 (1994) (where “the explicit language of the statute unambiguously manifests a legislative intent,” the court is “not free to ignore or tamper with that clear expression”). Nonetheless, where an assignee in some way facilitates or encourages an assignor’s making of a home loan, the remedial purpose of the Borrower’s Interest Act is effectuated by placing such assignees within its ambit. See Roberts v. Enterprise Rent-A-Car Co. of Boston, 438 Mass. 187,
192 (2002), S. C., 445 Mass. 811 (2006) (“we interpret consumer protection statutes broadly to effectuate their remedial purposes”); Batchelder v. Allied Stores Corp., 393 Mass. 819, 822 (1985) (remedial statutes “entitled to liberal construction of [their] terms”).
A lawsuit in federal court in Colorado accuses Charlotte-based Bank of America of racketeering, in what amounts to more fallout for the bank stemming from a federal mortgage-modification program.
The suit, filed Wednesday, claims violations of the federal Racketeer Influenced and Corrupt Organizations Act, also known as RICO. It cites statements that former Bank of America employees made last month in a separate, ongoing federal lawsuit in Massachusetts. Those former employees, including at least one who worked in Charlotte, claim the bank awarded cash and gift cards to them if they denied mortgage modifications to homeowners through the Home Affordable Modification Program.
Pointing to those statements, Wednesday’s lawsuit alleges that the bank and a contractor ran a “scheme” to deny the modifications. The Colorado lawsuit, brought by three homeowners who sought HAMP modifications from Bank of America, names as a co-defendant Urban Lending Solutions, a Broomfield, Colo., contractor to whom the bank sent HAMP work.
The bank ended up settling with Jane McCarthy after the Judge (John McBryde) ordered BofA to cough up the evidence to prove how they got the note and when. BofA obviously couldn’t do it, so they settled. MERS was involved in this. […] The judge quoted Carpenter v. Longan, amongst other similar cases!
IN THE UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS FORT WORTH DIVISION
JANE McCARTHY Plaintiff
VS. NO. 4:11-CV-356-A
BANK OF AMERICA, NA, BAC HOME LOANS SERVICING I LP I and FEDERAL HOME LOAN MORTGAGE CORPORATION Defendants.
[…]
SETTLEMENT
DENIED ORDER
Defendant has until 10:00 a.m. on July 11, 2013, to provide evidence that it owns the note at issue in this action.
PROVIDENCE — U.S. District Court John J. McConnell Jr. on Wednesday heard legal arguments for and against issuing an injunction to prevent foreclosures and/or evictions from proceeding in more than 800 pending foreclosure cases.
He did not immediately issue an opinion after listening for nearly two hours to legal arguments from lawyers representing borrowers and lenders. The hearing did not include the presentation of evidence.
“The court did not expect to hear 800 evidentiary cases today,” McConnell said.
The hearing was required by a recent appeals court ruling prompted by lenders who objected to McConnell’s 2011 order staying foreclosures or evictions in the pending cases.
A federal judge is considering how to move forward on nearly 800 mortgage foreclosure cases after an appeals court noted problems with how he set up an order designed to deal with the state’s mortgage crisis.
U.S. District Judge Jack McConnell heard arguments Wednesday in a courtroom filled nearly to capacity with lawyers for financial institutions and borrowers. He said he would issue a ruling later.
The 1st U.S. Circuit Court of Appeals said last month that McConnell did not follow proper procedures when he halted all foreclosure cases before the court and ordered financial institutions to try to settle with homeowners behind on their mortgage payments before allowing them to foreclose.
A special master appointed by the court to oversee mediation in the cases said in a report filed Wednesday that nearly 200 cases had been settled or otherwise dismissed under the program as of June 30.
JACKSONVILLE, Fla., July 9, 2013 — /PRNewswire/ — Lender Processing Services, Inc. (NYSE: LPS), a leading provider of innovative technology, services, data and analytics to the mortgage and real estate industries, today announced that Vicki Vidal has joined the company as a senior vice president of product management for LPS’ Servicing Solutions and Technology division.
In this role, Vidal will work with LPS’ product management team to review regulatory requirements and help to identify enhancements LPS can make to its servicing systems to support the needs of its clients as they respond to significant and frequent regulatory changes.
“Vicki will add strength and depth to our leadership team,” said Joe Nackashi, CIO and executive vice president of the LPS Servicing Solutions and Technology division. “She is a well-respected industry leader, and her addition to LPS reinforces the continued investments we are making to ensure our technologies meet the evolving regulatory needs of our clients.”
“Vicki’s extensive servicing and public policy experience will enhance our product management team’s ability to make the strategic investments necessary to ensure LPS solutions meet the changing industry landscape,” said George FitzGerald, senior vice president of product management for the LPS Servicing Solutions and Technology division.
Vidal came to LPS from the Mortgage Bankers Association, where she was the associate vice president of loan administration in the Public Policy and Industry Relations department. She was responsible for residential servicing policy, covering a variety of servicing areas including default, loss mitigation and foreclosure, mortgage insurance, escrow administration and compliance with federal laws affecting servicers. Vidal has a B.A. degree from Sweet Briar College and earned her J.D. degree from George Mason University School of Law.
“LPS is known throughout the mortgage industry for its leadership and innovation in addressing compliance requirements for lenders, servicers and other stakeholders. I’m looking forward to helping LPS support the mortgage industry’s high standard of compliance excellence,” said Vidal.
About Lender Processing Services Lender Processing Services (NYSE: LPS) delivers comprehensive technology solutions and services, as well as powerful data and analytics, to the nation’s top mortgage lenders, servicers and investors. As a proven and trusted partner with deep client relationships, LPS offers the only end-to-end suite of solutions that provides major U.S. banks and many federal government agencies the technology and data needed to support mortgage lending and servicing operations, meet unique regulatory and compliance requirements and mitigate risk. These integrated solutions support origination, servicing, portfolio retention and default servicing. LPS’ servicing solutions include MSP, the industry’s leading loan-servicing platform. The company also provides proprietary data and analytics for the mortgage, real estate and capital markets industries. LPS is a Fortune 1000 company headquartered in Jacksonville, Fla., and employs approximately 7,500 professionals. For more information, please visit www.lpsvcs.com.
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