Via: William A. Roper

MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., AS NOMINEE FOR GREENSPOINT FUNDING, Appellant,
v.
NANCY GROVES, Appellee.

No. 14-10-00090-CV.

Court of Appeals of Texas, Fourteenth District, Houston.

Memorandum Opinion filed April 12, 2011.

Panel consists of Justices Brown, Boyce and Jamison.

MEMORANDUM OPINION

WILLIAM J. BOYCE, Justice.

Nancy Groves sued Mortgage Electronic Registration Systems, Inc. (MERS), as nominee for Greenspoint Funding, to invalidate a deed of trust securing MERS’s alleged lien on Groves’s property. The trial court entered a default judgment against MERS, which then filed this restricted appeal. We affirm.

BACKGROUND

Groves filed her original petition against MERS on May 8, 2009. She alleged that she owns a certain tract of land subject to a lien secured by a deed of trust “accepted and recorded” by MERS. She further alleged that the deed of trust is invalid and asked the trial court to remove it and quiet title in Groves. MERS was served with process but failed to file an answer, and Groves filed a motion for default judgment. The trial court signed a default judgment against MERS stating that (1) Groves owns the property in question; (2) the deed of trust is “void and of no force or effect;” and (3) the deed of trust be removed from the property title.

MERS filed a timely notice of restricted appeal, arguing that (1) “Groves failed to properly state a cause of action and such failure is plain on the face of Groves’s petition;” and (2) “no justiciable controversy is alleged in Groves’s petition.”

ANALYSIS

A restricted appeal is available when (1) it is filed within six months after the trial court signed the judgment; (2) by a party to the suit; (3) who, either in person or through counsel, did not participate at trial and did not timely file any post-judgment motions or requests for findings of fact and conclusions of law; and (4) error is apparent from the face of the record. Tex. R. App. P. 26.1(c), 30; Alexander v. Lynda’s Boutique, 134 S.W.3d 845, 848 (Tex. 2004). The face of the record consists of all papers on file in the appeal. Osteen v. Osteen, 38 S.W.3d 809, 813 (Tex. App.-Houston [14th Dist.] 2001, no pet.).

MERS, a party to this suit, did not participate in the trial court and did not file any post-judgment motion or request for findings of fact or conclusions of law. MERS filed its notice of restricted appeal on January 26, 2010, less than six months after the trial court signed the default judgment on September 25, 2009. Accordingly, the only issue in this restricted appeal is whether error is plain on the record’s face. See Tex. R. App. P. 26.1(c), 30; Alexander, 134 S.W.3d at 848.

I. Groves’s Pleadings

MERS argues in its first issue that error is plain on the record’s face because Groves’s pleading does not properly raise a claim for which the trial court could grant relief. According to MERS, Groves’s pleading does not raise a viable claim because Groves (1) failed to base her claim on the superiority of her own title to the property; and (2) requested only declaratory relief under the Declaratory Judgment Act.

Groves stated in her petition:

Nancy Groves, Plaintiff, petitions the court pursuant to the Declaratory Judgment Act . . . for a declaration of the invalidity of certain documents and claim held by the Defendant, [MERS], in order to quiet title to the property in which Plaintiff has an interest, and for cause of action shows:

* * *

3. Plaintiff’s Interest in Property. The plaintiff is the owner of a certain tract of land located in Harris County, Texas, as shown in the Assessment Lien Deed recorded under document number V230924 in the official Public records of Tarrant County, Texas, and more particularly described as Lot Thirteen (13), in Block Two (2), of Summerwood, Section 4, Seven Oaks Village, an addition in Harris County, Texas, according to the map or plat thereof recorded in Film Code No. 388 of the Map Records of Harris, County, Texas.

* * *

5. Invalidity of Defendant’s Claim. The Deed of Trust under which the Defendant or the Lender or Lender’s assigns asserts an interest that interferes with Plaintiff’s title, although appearing valid on its face, is in fact invalid and of no force or effect. The Plaintiff will show that Defendant nor the Lender’s assigns is not the holder of the original Real Estate Lien note that is secured by the Deed of Trust.

Groves also requested “other and further relief for which Plaintiff may be justly entitled” based on allegations that (1) she owns the property in question; (2) MERS accepted and recorded a deed of trust securing an alleged lien on the property; and (3) the deed of trust “is in fact invalid and of no force or effect.”

The trial court’s judgment states:

[T]he court Orders and Adjudges, that [Groves] is the owner of [the property].

The court further Orders and Adjudges that the Deed of Trust filed is void and has no force or effect.

The court further orders the deed of trust removed from the title to the property made the subject of this litigation.

A. Strength of Title

MERS first argues that the judgment was in error because Groves pleaded “a quiet title (or trespass-to-try-title) claim” but did not “base her claim solely on the strength of her own title.” MERS argues that suits to quiet title must be based on the strength of the claimant’s own title, rather than the weakness of the adverse claimant’s title. See, e.g., Fricks v. Hancock, 45 S.W.3d 322, 327 (Tex. App.-Corpus Christi 2001, no pet.). Resolution of this contention requires consideration of the different types of claims that have been characterized as suits to quiet title. The case law is not entirely consistent on this issue.

A suit to quiet title is equitable in nature, and the principal issue in such suits is “`the existence of a cloud on the title that equity will remove.'” Florey v. Estate of McConnell, 212 S.W.3d 439, 448 (Tex. App.-Austin 2006, pet. denied)Bell v. Ott, 606 S.W.2d 942, 952 (Tex. Civ. App.-Waco 1980, writ ref’d n.r.e.)). A “cloud” on legal title includes any deed, contract, judgment lien or other instrument, not void on its face, that purports to convey an interest in or makes any charge upon the land of the true owner, the invalidity of which would require proof. Wright v. Matthews, 26 S.W.3d 575, 578 (Tex. App.-Beaumont 2000, pet. denied). A suit to quiet title “`enable[s] the holder of the feeblest equity to remove from his way to legal title any unlawful hindrance having the appearance of better right.'” Florey, 212 S.W.3d at 448 (quoting Thomson v. Locke, 1 S.W.112, 115 (Tex. 1886)). (quoting

Courts have used the term “suit to quiet title” to refer to legal disputes regarding

(1) title to and possession of real property; and (2) the validity of other “clouds” on an undisputed owner’s title to real property. Compare Alkas v. United Sav. Ass’n of Tex., Inc., 672 S.W.2d 852, 855-56 (Tex. App.-Corpus Christi 1984, writ ref’d n.r.e.) (suit to adjudicate ownership of property to determine whether creditors of original owner retained interest in property purportedly conveyed to new owner was action “to quiet title”), with Sw. Guar. Trust Co. v. Hardy Rd. 13.4 Joint Venture, 981 S.W.2d 951, 956-57 (Tex. App.-Houston [1st Dist.] 1998, pet. denied) (undisputed property owner’s action to invalidate lien and deed of trust securing lien constituted suit “to quiet title”); see also Florey, 212 S.W.3d at 449 (distinguishing between “suits to quiet title that are equivalent to trespass-to-try-title actions” and suits to quiet title involving interests that only “indirectly impact” title to and possession of real property).^[1]

The first type of claim, which involves title to and possession of real property, is essentially “the equivalent to [a] trespass-to-try-title action[].” See Florey, 212 S.W.3d at 449; see also Sani v. Powell, 153 S.W.3d 736, 746 (Tex. App.-Dallas 2005, pet. denied) (quiet title claim involving allegedly invalid tax sale of property characterized as trespass to try title action). “A trespass to try title action is the method of determining title to lands, tenements, or other real property.” Tex. Prop. Code Ann. § 22.001 (Vernon 2000). A trespass to try title action “is typically used to clear problems in chains of title or to recover possession of land unlawfully withheld from a rightful owner.” See Martin v. Amerman, 133 S.W.3d 262, 265 (Tex. 2004), superseded by statute, Tex. Civ. Prac. & Rem. Code Ann. § 37.004 (Vernon 2008) (reversing Martin‘s holding that relief under the Declaratory Judgment Act was unavailable for boundary dispute). It is the exclusive remedy by which to resolve competing claims to property. Jordan v. Bustamante, 158 S.W.3d 29, 34 (Tex. App.-Houston [14th Dist.] 2005, pet. denied). Courts require claimants bringing this type of “suit to quiet title” to base their claims on the strength of their own title. See Kennedy Con., Inc. v. Forman, 316 S.W.3d 129, 135 (Tex. App.-Houston [14th Dist.] 2010, no pet.); Alkas, 672 S.W.2d at 857. To recover, a claimant must establish a prima facie right of title by proving one of the following: (1) a regular chain of conveyances from the sovereign; (2) a superior title out of a common source; (3) title by limitations; or (4) prior possession, which has not been abandoned. Kennedy Con., Inc., 316 S.W.3d at 135.

The second type of claim, which involves other “clouds” on an undisputed owner’s title to real property, challenges an adverse interest that impacts title and possession only indirectly. See Florey, 212 S.W.3d at 449; see also Max Duncan Family Inv., Ltd. v. NTFN Inc., 267 S.W.3d 447, 453-54 (Tex. App.-Dallas 2008, pet. denied) (undisputed property owner’s suit to invalidate promissory note and lien securing note “involve[d] more than just title and possession of real property”); Cadle Co. v. Ortiz, 227 S.W.3d 831, 837-38 (Tex. App.-Corpus Christi 2007, pet. denied) (undisputed property owner’s post-foreclosure suit to invalidate mechanic’s lien distinguished from trespass to try title action); Sw. Guar. Trust Co., 981 S.W.2d at 957 (undisputed property owner’s action to declare lien invalid was “really one to quiet title”). A claim is sufficiently adverse if its assertion would cast a cloud on the owner’s enjoyment of the property. See Katz v. Rodriguez, 563 S.W.2d 627, 629 (Tex. Civ. App.-Corpus Christi 1977, writ ref’d n.r.e.). To remove such a cloud, a plaintiff must “allege right, title, or ownership in herself with sufficient certainty to enable the court to see she has a right of ownership that will warrant judicial interference.” Wright, 26 S.W.3d at 578.

MERS does not dispute that Groves holds title to the property subject to the deed of trust; Groves does not dispute that the deed of trust securing the lien belongs to MERS. Groves’s claim that the deed is invalid does not directly implicate any issues to be resolved by a trespass to try title suit. See Tex. Prop. Code Ann. § 22.001 (Vernon 2000) (“A trespass to try title action is the method of determining title to lands, tenements, or other real property.”); Martin, 133 S.W.3d at 265 (trespass to try title statute is “typically used to clear problems in chains of title or to recover possession of land unlawfully withheld from a rightful owner”); see also Deutsche Bank Nat’l Trust Co. v. Stockdick Land Co., No. 14-09-00617-CV, 2011 WL 321742, at *10 (Tex. App.-Houston [14th Dist.] Feb. 3, 2011, no pet.) (“If the Bank succeeds in its arguments . . . then the Property is subject to the Bank’s lien. If not, then the Property is not subject to the lien. In any event, title to the Property or to the liens is not in question . . . . [The Bank] is not required to pursue a trespass-to-try-title action.”). Therefore, Groves’s claim is not in the nature of a trespass to try title action and she was not required to base her claim upon the strength of her own title.

Groves alleged in her pleading that she owns the property by virtue of her recorded deed. This satisfies the requirement that she “allege right, title, or ownership in herself with sufficient certainty to enable the court to see she has a right of ownership that will warrant judicial interference” in the issue of the deed of trust’s validity. Wright, 26 S.W.3d 575.^[2] Therefore, Groves’s pleadings do not establish error on the face of the record.

B. Relief under Declaratory Judgment Act

MERS alternatively argues that “the trespass-to-try-title statutes [are] Groves’s sole remedy” and complains that Groves “did not raise a cause of action under those statutes” because she requested only declaratory relief under the Declaratory Judgment Act. MERS bases its argument on Martin v. Amerman, 133 S.W.3d at 267-68. The holding in Martin rested upon the court’s characterization of section 22.001 of the Texas Property Code as the exclusive remedy for trespass to try title actions. See id.

We need not decide whether Martin precludes Groves’s request for declaratory relief under the Declaratory Judgment Act in this case.^[3] Groves requested relief under the Declaratory Judgment Act, as well as “other and further relief to which [she] may be justly entitled.” The trial court’s judgment does not indicate that it granted her request to “quiet title” exclusively under the Declaratory Judgment Act. Accordingly, no error appears on the face of this record. SeeAlexander, 134 S.W.3d at 848. Tex. R. App. P. 26.1(c), 30;

We overrule MERS’s first issue.

II. Justiciable Controversy

MERS argues in its second issue that the trial court lacked jurisdiction over the action because Groves “failed to allege a justiciable controversy under the Declaratory Judgment Act.”

A justiciable controversy between the parties must exist at every stage of the legal proceedings. Williams v. Lara, 52 S.W.3d 171, 184 (Tex. 2001). We cannot decide moot controversies. Nat’l Collegiate Athletic Ass’n v. Jones, 1 S.W.3d 83, 86 (Tex. 1999). “In order to maintain a suit to quiet title, there must be an assertion by the defendant of a claim to some interest adverse to plaintiff’s title; and the claim must be one that, if enforced, would interfere with the plaintiff’s enjoyment of the property.” Mauro v. Lavlies, 386 S.W.2d 825, 826-27 (Tex. Civ. App.-Beaumont 1964, no writ) (internal quotation omitted) (no justiciable controversy existed because the judgments defendants obtained against plaintiffs asserted no claims against plaintiffs’ property and defendants made no attempt to create a lien upon property or to have property sold to satisfy judgments).

Groves alleged in her petition that MERS’s deed of trust “purported to create a lien for security purposes on Plaintiff’s property as described.” This alleged lien constitutes an adverse interest to Groves’s title, which, if enforced, would interfere with her enjoyment of the property. See id. Therefore, a justiciable controversy existed, and the trial court had subject matter jurisdiction over the case. See Williams, 52 S.W.3d at 184; Mauro, 386 S.W.2d at 826-27.^[4]

We overrule MERS’s second issue.

CONCLUSION

Having overruled both of MERS’s issues on appeal, we affirm the trial court’s judgment.

[1] Other decisions have stated that a suit to quiet title is distinct from a trespass to try title action. See, e.g., Longoria v. Lasater, 292 S.W.3d 156, 165 n.7 (Tex. App.-San Antonio 2009, pet. denied); Fricks v. Hancock, 45 S.W.3d 322, 327 (Tex. App.-Corpus Christi 2001, no pet.); McCammon v. Ischy, No. 03-06-00707-CV, 2010 WL 1930149, at *7 (Tex. App.-Austin May 12, 2010, pet. denied) (mem. op.).

Wall Street Journal-

F. Dana Winslow, a N.Y. State Supreme Court Justice in Long Island’s Nassau County, said there has been only “a marginal improvement in what is being submitted to the court.”

For example, financial institutions are “showing a better chain of title” about who owns the debt, he said. “But I’m not seeing any additional clarity on who has control over the actual mortgage note signed by the borrower and lender and where the note is.”

Are we seeing a pattern here?

Excerpt:

This case before the court sua sponte. It has come to the court’s attention that the order from which this appeal is taken is not final and appealable, On March 10, 2011, the Erie County Court of Common Pleas dismissed plaintiff’s complaint without prejudice for failure to allege it was both the owner and holder of the subject note.

Continue reading…

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Excerpt:

This case before the court sua sponte. It has come to the court’s attention that the order from which this appeal is taken is not final and appealable, On March 7, 2011, the Erie County Court of Common Pleas dismissed plaintiff’s complaint without prejudice for failure to allege it was both the owner and holder of the subject note.

Continue below…

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Decided on April 11, 2011

Supreme Court, Kings County

The Bank of New York, as Trustee for the Benefit of the Certificateholders, CWABS, Inc., Asset Backed Certificates, Series 2007-2, Plaintiff,

against

Sameeh Alderazi, Bank of America, NA, New York City Environmental Control Board, new York City Parking Violations Bureau, New York City Transit Adjudication Bureau, and “John Doe No.1” through “John Doe #10”, Defendants.

21739/2008

Plaintiff Attorney
Hiscock & Barclay
1100 M & T Center
3 Fountain Plaza
Buffalo, New York 14203-1486
Charles C. Martorana, Esq.

Plaintiff Former Attorney –
Frenkel, Lambert, Weiss, Weisman & Gordon, LLP
20 West Main Street
Bayshore, New York 11706 (631) 969-3100
Todd Falasco, Esq.

Wayne P. Saitta, J.

The Plaintiff renews its motion for an appointment of a referee in the underlying foreclosure action.

Upon reading the Notice of Motion and Affirmation of Charles C. Martorana Esq., of counsel to Hiscock and Barclay, LLP attorneys for Plaintiff, dated September 28 2010, and the exhibits annexed thereto; the Affirmation of Charles C. Martorana Esq., dated January 7, 2011; the Affirmation of Todd Falasco Esq., of counsel to Frenkel, Lambert, Weiss, Weisman, & Gordon, LLP,. Former attorneys for Plaintiff and the exhibits annexed thereto; the Affidavit of Jonathan Hyman sworn to February 10, 2011, and the exhibits annexed thereto; and upon all the proceedings heretofore had herein, and after hearing oral argument by Plaintiff’s counsel on March 3, 2011, and after due deliberation thereon, the motion is denied for the reasons set forth below.

The underlying action is a residential foreclosure action on a property located at 639 East 91st St. In Brooklyn. Plaintiff’s original application for the appointment of a referee to compute was denied by order of this court dated April 19, 2010. The Court denied the application because the Plaintiff, could not demonstrate that the original mortgagee, Countrywide Home Loans Inc., (doing business as America’s Wholesale Lender), had authorized the assignment of the mortgage to the Plaintiff.

The assignment to Plaintiff was executed by Mortgage Electronic Reporting System (MERS) as nominee for America’s Wholesale Lender.

Black’s Law Dictionary defines a nominee as “[a] person designated to act in place of another, usually in a very limited way”.

In its Memoranda to its original motion , Plaintiff quoted the Court in Schuh Trading Co., v. Commissioner of Internal Revenue, 95 F.2d 404, 411 (7th Cir. 1938), which defined a nominee as follows:

The word nominee ordinarily indicates one designated to act for another as his representative in a rather limited sense. It is used sometimes to signify an agent or trustee. It has no connotation, however, other than that of acting for another, or as the grantee of another.. Id. ( Emphasis added).

An assignment by an agent without authority from the principal is a nullity. Plaintiff failed to provide any evidence that Countrywide had authorized MERS to assign its mortgage to Plaintiff. The Court denied the application with leave to renew upon a showing that Countrywide had authorized MERS to assign its mortgage to Plaintiff.

Plaintiff has again moved for an order of reference, and submitted in addition to the MERS assignment, what it purports to be an endorsed note and a corporate resolution of MERS showing that MERS had appointed all officers of Countrywide Financial Corporation as assistant secretaries and vice presidents of MERS.

This present motion must fail for the same reason as the prior motion as Plaintiff has failed to provide documentation from the lender that it authorized the assignment.

Plaintiff also submits an affidavit from Jonathan Hyman, an officer of BAC, based on BAC’s records. Hyman asserts in his affidavit that the mortgage was assigned to Bank of New York and that “the original note was delivered and endorsed to the plaintiff with endorsement in the name of the plaintiff.” Hyman appends to his affidavit a copy of what purports to be an endorsed note.

The note contains a stamped endorsement which states, “Pay to the Order of * * without recourse Countrywide Home Loans Inc., A New York Corporation Doing Business As America’s Wholesale Lender By: Michele Sjolander Executive Vice President”. Under the stamp is handwritten ” * * The Bank of New York, as Trustee for the Benefit of the Certificate, CWABS, Inc. Asset Backed Certificates, Series 2007-2″. The endorsement is undated.

However, the note that was appended to the summons and complaint filed in court on July 25, 2008 does not bear any endorsement. Plaintiff has offered no explanation, from anyone with knowledge, as to why, had the note had been endorsed and in its possession when it commenced the suit, that the note filed when the suit was commenced did not bear an endorsement.

Significantly, counsel for Plaintiff stated in oral argument before the Court on March 3 2011 that “There is nobody left to speak at to Countrywide”.

The affidavits of Hyman and Mason, which were based on the books and records of the plaintiff and BAC, are insufficient to establish ownership of the note in light of the fact that the note originally submitted bore no endorsement, and the fact that purported endorsement is undated. The affidavits are based on books and records, not on personal knowledge. Yet the affiants did not produce any of the records on which they based their assertion that Plaintiff possessed an endorsed note at the time the action was commenced.

In his affidavit Hyman also asserts that, Keri Selman, the person who signed the assignment, served as an officer of both Countrywide and MERS. He appended a copy of a MERS corporate resolution which appointed all officers of Countrywide Financial Corporation as assistant secretaries and vice presidents of MERS.

Even putting aside the fact that there is no evidence that Countrywide Financial Corporation and Countrywide Home Loans Inc., are the same entity, the fact that MERS authorized Countrywide officers to act on its behalf, is not evidence of the converse. It is no evidence that Countrywide authorized MERS officers to act as officers of Countrywide. Further, the fact that Selman may have been an officer of both Countrywide and MERS does not alter the fact that she executed the assignment on behalf of MERS.

The face of the assignment indicates that MERS is assigning the mortgage as nominee of America’s Wholesale Lender (a trade name of Countrywide), and more [*3]importantly that Selman executed the assignment as assistant vice president of MERS.

Hyman’s assertion that the assignment incorrectly lists Selman’s title as assistant vice president of MERS, instead of assistant secretary and vice president of MERS, is of no relevance other than to demonstrate the casual and cavalier manner in which these transactions have been conducted.

While Hyman further asserts in his affidavit that Selman “under her authority as an Assistant Secretary and Vice president of MERS, expedited the Assignment of Mortgage process on behalf of MERS, with the approval and for the benefit of Countrywide,” he provides no evidence that Countrywide in fact approved or authorized the assignment.

Similarly, William C. Hultman, Secretary and Treasurer of MERS, states in a conclusory fashion in paragraph 8 of his affidavit that Countrywide “instructed MERS to assign the Mortgage to Bank of New York” without offering the basis for that assertion, other than it role as nominee.

Plaintiff claims, that by the terms of the mortgage MERS as nominee, was granted the right “(A) to exercise any or all of those rights, including, but not limited to the right to foreclose and sell the Property, and (B) to take any action required of the Lender including, but not limited to, releasing and canceling this Security Instrument.” However, this language is found on page two of the mortgage under the section “BORROWER’S TRANSFER TO LENDER OF RIGHTS IN THE PROPERTY” and therefore is facially an acknowledgment by the borrower. The fact that the borrower acknowledged and consented to MERS acting as nominee of the lender has no bearing on what specific powers and authority the lender granted MERS as nominee. The problem is not whether the borrower can object to the assignees’ standing, but whether the original lender, who is not before the Court, actually transferred its rights to the Plaintiff.

Furthermore, while the mortgage grants some rights to MERS it does not grant MERS the specific right to assign the mortgage. The only specific rights enumerated in the mortgage are the right to foreclose and sell the Property. The general language “to take any action required of the Lender including, but not limited to, releasing and canceling this Security Instrument” is not sufficient to give the nominee authority to alienate or assign a mortgage without getting the mortgagee’s explicit authority for the particular assignment.

Plaintiff also argues that the agreement between MERs and its members grants MERS the authority to assign the mortgages of its members. However a reading of the MERS agreement reveals only that MERS can execute assignments on behalf of its members when directed to do so by the member or its servicer.

Plaintiff cites Rules of MERS membership, Rule 2 section 5. However what that rule requires is that a member to warrant to MERS that the mortgage either names MERS as mortgagee or that they prepare an assignment of mortgage naming MERs as mortgagee.

In this case MERS was named in paragraph (c) of the mortgage as Mortgagee of record for the purpose of recording the mortgage. Being the mortgagee of record for the [*4]purpose of recording the mortgage does not confer the right to assign the mortgage absent an instruction to do so from the lender. Paragraph 2 of the MERS terms and conditions provide that “MERS shall serve as mortgagee of record with respect to all such mortgage loans solely as a nominee in an administrative capacity”, and that “MERS agrees not to assert any rights (other than rights specified in the governing documents) with respect to such mortgage loans or mortgaged properties”. Assigning or alienating a mortgage without an explicit instruction from a lender to do so, is not acting in an administrative capacity.

Further, paragraph 6 of the terms and conditions provides that, “the MERS system is not a vehicle for creating or transferring beneficial interests in mortgage loans.” (emphasis added)

Lastly, Section 6 of the MERS agreement provides that MERS shall comply with the instructions from the holder of the notes and that in the absence of instructions from the holder may rely on instructions from the servicer with respect to transfers of beneficial ownership.

What the MERS agreements and terms and conditions provide, is that MERS may execute an assignment when instructed to do so by the lender or its servicer. This is nothing

more than saying that if granted authority by the lender, or its agent, to assign a mortgage, MERs can assign the mortgage on behalf of the lender.

To read the MERS agreement as granting MERS authority to assign any of the mortgages of its thousands of members, on its own volition, without the instruction or consent of the member would lead to a nonsensical result.

Plaintiff has failed to meet the very basic requirement that proof of an agent’s authority must be shown from the mouth of the principal not from the agent. Lexow & Jenkins, P.C. v. Hertz Commercial Leasing Corp., 122 AD2d 25, 504 N.Y.S.2d 192 (2nd Dept 1986), Siegel v. Kentucky Fried Chicken of Long Island, Inc., 108 AD2d 218, 488 N.Y.S.2d 744 (2nd Dept 1985).

As Plaintiff has not shown that it owned the note and mortgage, it has no standing to maintain this foreclosure action. Therefore the renewed motion for an order of reference must be denied and the action dismissed.

The Court has raised the standing issue sua sponte because, in this case, it goes to the integrity of the entire proceeding. For the court to allow a purported assignee to foreclose, in the absence of some proof that the original lender authorized the assignment of the mortgage to them, would cast doubt upon the validity of the title of any subsequent purchasers, should the original lender or successor challenge the assignment at a future date.

WHEREFORE it is hereby Ordered that Plaintiff’s motion for an Order of Reference is denied and the action is dismissed. This constitutes the decision and order of the Court.

[*5]

J.S.C.

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SHAKIL KHAN AND DINA KHAN,
Appellant,

v. Case No. 5D10-3288

BANK OF AMERICA, N.A.,
Appellee.

Opinion filed April 8, 2011

Non-Final Appeal from the Circuit Court
for Orange County,
Emerson R. Thompson, Jr., Senior Judge.

Craig R. Lynd, Matthew D. Valdes and
Jonathon C. Blevins, of Kaufman, Englett
& Lynd, PLLC, Orlando, for Appellant.

No Appearance for Appellee.

ORFINGER, J.

Shakil and Dina Khan appeal a final summary judgment of foreclosure entered in favor of Bank of America, N.A. We reverse.

In its amended complaint to foreclose a mortgage on the Khans’ home, Bank of America alleged that it was the owner and holder of the note and mortgage. However, the copy of the note attached to the amended complaint bears an endorsement from Bank of America to Wells Fargo Bank, N.A. as trustee for the holders of Banc of America Mortgage Securities, Inc. Mortgage Pass-Through Certificates, Series 2006-B.

The Khans correctly raised the issue of Bank of America’s standing to prosecute the foreclosure based on the assignment of the note to Wells Fargo Bank.

The proper party with standing to foreclose a note and mortgage is the holder of the note and mortgage or the holder’s representative. See Taylor v. Deutsche Bank Nat. Trust. Co., 44 So. 3d 618, 622 (Fla. 5th DCA 2010); BAC Funding Consortium Inc. ISAOA/ATIMA v. Jean-Jacques, 28 So. 3d 936, 938 (Fla. 2d DCA 2010). While Bank of America alleged in its unverified complaint that it was the holder of the note and mortgage, the copy of the note attached to the amended complaint contradicts that allegation. When exhibits are attached to a complaint, the contents of the exhibits control over the allegations of the complaint. See Hunt Ridge at Tall Pines, Inc. v. Hall, 766 So. 2d 399, 401 (Fla. 2d DCA 2000). Because the exhibit to Bank of America’s amended complaint conflicts with its allegations concerning standing, Bank of America did not establish that it had standing to foreclose the mortgage as a matter of law. As a result, the trial court acted prematurely in entering the final summary judgment of foreclosure in favor of Bank of America. We, therefore, reverse the final summary judgment of foreclosure and remand for further proceedings.

REVERSED and REMANDED for further proceedings.

PALMER and EVANDER, JJ., concur.

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Thanks to Foreclosure Hamlet for this opinion!

Special Thanks to Lynn’s attorney Mark Cullen!

Via Palm Beach Post

At a brief hearing Tuesday, Circuit Judge Jack Cook dismissed the case after finding that the note for the loan was not attached to the original foreclosure complaint. Deutsche Bank filed the foreclosure case in 2008, shortly after a dispute with her lender, Option One Mortgage, over her adjustable rate mortgage.

An attorney for Deutche Bank declined to comment on whether the bank would refile the foreclosure case. However, if the bank does so, it will have to comply with new, court-ordered guidelines that require lenders to verify the truthfulness of the documents. Those rules were not in effect in 2008 when Deutsche Bank filed to foreclose on Szymoniak’s home.

Click link below in case you missed 60 Minutes…

EXPLOSIVE VIDEO | CBS 60 MINUTES: Lynn Szymoniak ESQ, LPS, DOCx, FDIC Sheila Bair, Robo-Signing, Linda Green, Tywanna Thomas, Chris Pendley

U.S. BANK NATIONAL
ASSOCIATION, AS TRUSTEE FOR
J.P. MORGAN ACQUISITION CORP.
2006-FRE2, ASSET BACKED PASSTHROUGH
CERTIFICATES, SERIES
2006-FRE2,

V.

ARTHUR SPENCER, MRS. ARTHUR
SPENCER, HIS WIFE; JOHN M.
ALFIS,

Argued: March 18, 2011
Decided: March 22, 2011
Amended: March 28, 2011
Honorable Peter E. Doyne, A.J.S.C.

John Habermann, Esq. appearing on behalf of the plaintiff, U.S. Bank National
Association, as trustee for J.P. Morgan Acquisition Corp. 2006-FRE2, asset backed passthrough
certificates, series 2006-FRE2 (Phelan Hallinan & Schmieg, PC).

Gary E. Stern, Esq. appearing on behalf of the defendant, Arthur Spencer (Gary E. Stern, Esq.).

EXCERPT:

Analysis

A. Standing

Defendant’s counsel argued plaintiff did not have standing to sue as there was a break in the chain of title by the U.S. Bank assignment. Counsel specified the Fremont Investment assignment was by Fremont to Fremont Investment; the U.S. Bank assignment was by Fremont to U.S. Bank. The break was said to occur when Fremont, and not Fremont Investment, assigned the note and mortgage to U.S. Bank. Defendant’s counsel contended no explanation or turnover of documentation justified plaintiff’s right to prosecute the current foreclosure proceeding.19 However, the U.S. Bank assignment was from MERS as nominee for FGC d/b/a Fremont and its successors and/or assigns. As Fremont Investment was an assignee of Fremont pursuant to the Fremont Investment assignment, there appears to be no break in title when the mortgage and note were transferred pursuant to the U.S. Bank assignment. Nevertheless, plaintiff has provided no documentation or support for its position it is the trustee for J.P. Morgan, and therefore has not established its right to sue on behalf of JP Morgan.

Of greater import was defendant’s counsel’s argument plaintiff did not have standing as there was no proof the named plaintiff ever took physical possession of the note. Plaintiff’s counsel countered the original note was forwarded to him upon request for the location of the note but was inadvertently returned by counsel to plaintiff. It is though surprising the reply did not set forth, competently, plaintiff possessed the note on filing of the complaint.20

Without establishing physical possession of the note, plaintiff may not be an entity which may foreclose pursuant to the first and second categories in section 301, namely, as a (1) holder of the instrument or (2) a nonholder in possession of the instrument who has the rights of the holder.21 N.J.S.A. 12A:3-301. As plaintiff has not alleged, let alone established, the loss of possession of the instrument or the instrument was paid or accepted by mistake and the payor or acceptor recovered payment or revoked acceptance, plaintiff may not be a party who may foreclose pursuant to the third category in section 301, namely, a person not in possession of the instrument who is entitled to enforce the instrument. N.J.S.A. 12A:3-301; 12A:3-309(a); 12A:3-418(d). Therefore, plaintiff failed to establish standing as it is not a person entitled to enforce the note.N.J.S.A. 12A:3-301.

Plaintiff has failed to establish standing as its relationship as trustee to JP Morgan was not set forth; more importantly, though, plaintiff has failed to establish it had or has physical possession of the note and/or failed to demonstrate the note was indorsed. As such, summary judgment for plaintiff is denied and the cross-motion for summary judgment is granted. Although both motions may have been decided on the basis of lack of standing alone, for purposes of completeness, the court also shall analyze whether the evidence presented in support of plaintiff’s motion was competent and thereafter whether plaintiff has set forth a prima facie case in foreclosure.

B. Admissibility of evidence

Defendant’s counsel correctly asserted no competent witness has brought forth admissible evidence. Yoder does not claim to be a person with personal knowledge. R. 1:6-6. Furthermore, the exhibits attached to the Yoder Cert. do not fall within the business records exception as Yoder does not claim be a person with actual knowledge or to have produced the exhibits by obtaining information from such a person.22 N.J.R.E. 803(c)(6). Therefore, the exhibits submitted on plaintiff’s behalf were inadmissible hearsay and the court may not consider them. This is particularly perplexing as this issue was squarely put forth in defendant’s opposition and cross-motion, was not addressed in plaintiff’s reply, and follows shortly after the publication of Ford, supra.

As plaintiff has failed to justify the relief sought by competent, admissible evidence, plaintiff’s motion for summary judgment is denied. Lastly, the court shall analyze whether plaintiff has set forth a prima facie case in foreclosure.

C. Material issues in foreclosure proceeding

While plaintiff’s counsel conceded the circumstances surrounding the alleged default were “unfortunate,” he asserted it “did not create the fire to the premises nor . . . change the zoning of the subject property.” Plaintiff’s counsel set forth defendant failed to make payments pursuant to the executed note, and the mortgage was executed and recorded. However, as issues of fact remain concerning the fact-sensitive allegations of (1) unclean hands (2) breach of the duty of good faith and fair dealing,23 and, (3) as restoration was not “feasible,” why the proceeds were not applied to the sums secured, plaintiff’s motion for summary judgment is further denied.24 Had defendant’s crossmotion for summary judgment been brought solely upon the allegations of unclean hands and breach of the duty of good-faith and fair dealing, the court would have denied the cross-motion and the matter would have proceeded in the normal course to further explore the facts underlying the defenses; however, summary judgment for defendant is appropriate on the basis of lack of standing.

Conclusion

Some are more empathetic than others to mortgagors who are no longer paying their contractual committed amount in a manner consistent with their obligations. Motions for summary judgment or oppositions to motions for summary judgment based on technical deficiencies or defenses are coming before the chancery courts at an ever increasing rate. This case, though, is distinct from the “run of the mill” motion where defendant’s attorney raises “technical objections” in an effort to delay the seemingly inevitable in an attempt to garner for clients as much time in the home as the law will
permit without paying outstanding obligations.

Here, not only has plaintiff failed to establish standing to bring the instant foreclosure action or present admissible evidence by a competent witness, defendant’s competent assertions have also given rise to fact-sensitive defenses.

Defendant’s crossmotion is granted as plaintiff has failed to establish standing and has failed to comply with the court’s January 25, 2011 order.25 Plaintiff’s motion for summary judgment is denied on three grounds: (1) lack of standing, (2) failure to present a prima facie case by presenting admissible evidence by a competent witness, (3) and defenses raised would be in need of further exploration.

The action is dismissed without prejudice.26 The court’s order shall be sent under separate cover.

19At oral argument defendant’s counsel argued there is a hole in the chain of title “big enough to drive a truck through.” Counsel alleged there was no documentation or support indicating the note was assigned by Fremont Investment. This was the same argument counsel made on the papers.

Continue below…

[ipaper docId=51863302 access_key=key-13o8p1s6xaf9gjcd95gw height=600 width=600 /]

Come hungry…close a loan electronically within 15 minutes and with doughnuts. Not like it took any longer the paper route!

Providing all the ‘errors’ and ‘mistakes’ currently happening in foreclosure land, just hope your eNote/eMortgage doesn’t get deleted by accident.

via Housing Wire:

Harry Gardner, president of SigniaDocs, said the perfect infrastructure is one that manages all mortgage documents electronically, but the number of loans in the Mortgage Electronic Registration Systems’ eRegistry is about 200,000, or “a small fraction of mortgages written in the last 10 years.”

“And by eMortgage, we mean truly paperless not some hybrid of some paper and some electronic documentation,” Gardener said. “Ten years ago, we were saying mainstream eMortgage documentation was three to five years away, and I’m happy to say that mainstream eMortgage documentation is now three to five years away.”

continue reading….  Housing Wire

For you to understand the plan the financial institutions have you need to grasp the following. Will MERS patterns continue? Imagine the price you will pay when these files are hacked or manipulated.

Everyone knows by now that MERS was ‘invented’ to keep costs low for the banks, reduce the risk of record-keeping errors and make it easier to keep track of loans for the banks not the borrowers. By these actions, not only has MERS eliminated crucial chain in title documents, has proven in many court cases to assign absolutely nothing because it had no power to negotiate the note but also eliminated an enormous amount of county revenues.

Last week SFF wrote about the latest invention planned to coexist with MERS called SmartSAFE, which will be used for creating, signing, storing, accessing and managing the lifecycle of electronic mortgage documents. According to Wave’s eSignSystems Executive VP Kelly Purcell, “Mortgages are sold several times throughout the life of a loan, and electronic mortgages address the problem of the ‘lost note,’ while improving efficiency in the process.”

This goes a step forward of what MERS can do today.

Will this process eliminate recording paper mortgages/deeds from county records? Eliminate fees that counties in trouble desperately need? THIS IS VERY DANGEROUS.

Still with me? Finally, according to CUinsight, a sample eNote in the form of a MRG Category 1 classified SMARTDoc, was successfully delivered to Xerox’s BlitzDocs eVault, a virtual repository that connects directly to the MERS^® eRegistry and eDelivery systems, where it was electronically signed and registered.

Adding the finishing touches to permit MERS access to future eNotes? I say this is the master plan.

Looking forward to what MA John O’Brien, the Essex County register of deeds, NC Register of deeds Jeff Thigpen and NY Suffolk County, former county clerk Ed Romaine’s approach is after they read what they plan on doing to land records. If they thought it was limited to the elimination of recording fees for assignments of mortgage, they are mistaken.

Questions remain as to why replace something that has been working for so long? Why continue with MERS, a system which has failed in many ways? MERS is under investigation for fraud is it not? Why in a time where mortgage fraud is wide spread, will anyone even trust using electronic devices to manage possibly future trillions of dollars worth?

Say farewell to a tradition that has been here for well over 300 years. Eliminating ‘paper’ will put promissory notes and  mortgage related documents in great jeopardy. No computer system in the world is secure [PERIOD].

In re: KATHLEEN THOMAS, Chapter 7, Debtor.
KATHLEEN THOMAS, Plaintiff
v.
CITIMORTGAGE, INC., FLAGSTAR BANK, FSB and ALLIED HOME MORTGAGE CAPITAL CORPORATION, Defendants.

Case No. 10-40549-MSH, Adv. Pro. No. 10-04086.

United States Bankruptcy Court, D. Massachusetts, Central Division.

February 9, 2011.

MEMORANDUM OF DECISION ON THE MOTION TO COMPEL ARBITRATION OF ALLIED HOME MORTGAGE CAPITAL CORPORATION, THE MOTION TO DISMISS OF FLAGSTAR BANK, FSB AND THE MOTION FOR JUDGMENT ON THE PLEADINGS OF FLAGSTAR BANK, FSB AND CITIMORTGAGE, INC.

MELVIN S. HOFFMAN, Bankruptcy Judge.

Before me is a motion of defendant Allied Home Mortgage Capital Corporation (“Allied”) to compel arbitration, a motion of defendant Flagstar Bank, FSB (“Flagstar”) to dismiss this adversary proceeding pursuant to Fed. R. Civ. P. 12(b)(6), made applicable to this proceeding by Fed. R. Bankr. P 7012 and a motion of Flagstar and CitiMortgage, Inc. (“CitiMortgage”) for judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c), made applicable by Fed. R. Bankr. P. 7012. Because the motions involve the same facts and underlying transaction, I will address them together.

Background

In 2006, the plaintiff, who is the debtor in the main bankruptcy case, engaged Allied to assist her in refinancing the mortgage on her home. On April 26, 2006, the plaintiff signed an arbitration agreement in which she agreed that any disputes with Allied would be resolved through arbitration. The refinancing transaction occurred on May 8, 2006, at which time the plaintiff executed a promissory note payable to Allied in the amount of $153,000, and a mortgage to secure her obligations under the note. Mortgage Electronic Registration Systems, Inc. (“MERS”), acting solely as a nominee for Allied and its successors and assigns, was named as mortgagee. The note was subsequently indorsed to defendant Flagstar. Flagstar and CitiMortgage claim that Flagstar indorsed the note in blank by way of an allonge and sold the plaintiff’s loan to CitiMortgage. CitiMortgage attached a copy of the note to its motion for judgment on the pleadings to support this claim.^[1] The last page of the note is blank except for the following legend:

PAY TO THE ORDER OF WITHOUT RECOURSE FLAGSTAR BANK, FSB

There are two entirely illegible signatures under this legend. On August 3, 2009, MERS executed an instrument entitled “Assignment of Mortgage” which purported, inter alia, to assign to CitiMortgage the “mortgage and the note and claim secured thereby.”

The plaintiff eventually fell behind in her mortgage payments and CitiMortgage began foreclosure proceedings. On February 2, 2010, the plaintiff filed a petition for relief under Chapter 7 of the Bankruptcy Code, 11 U.S.C. §§ 101-1532, in this court. On February 12, 2010, CitiMortgage filed a motion for relief from the automatic stay provisions of the Bankruptcy Code in order to proceed to foreclose its mortgage on the plaintiff’s property. At a hearing on the motion for relief, I ordered the plaintiff to make adequate protection payments of $925 per month to CitiMortgage and upon the plaintiff’s filing of her complaint, consolidated the motion for relief with this adversary proceeding.

The plaintiff alleges that the May 8, 2006 loan transaction violated the Massachusetts Predatory Home Loan Practices Act, Mass. Gen. Laws. ch. 183C (“Chapter 183C”). The plaintiff also alleges that the promissory note was never properly negotiated to CitiMortgage and that CitiMortgage may not assert a secured claim in her bankruptcy case.

On July 1, 2010, Flagstar filed a motion to dismiss the adversary proceeding. On July 2, 2010, Allied filed a motion to compel arbitration and to dismiss, arguing that pursuant to the arbitration agreement signed by the plaintiff, she is required to submit to arbitration with respect to her claims against Allied. On October 4, 2010, CitiMortgage filed a motion for judgment on the pleadings. On October 7, 2010, I held a hearing on Flagstar’s motion to dismiss and Allied’s motion to compel arbitration. On December 1, 2010, I held a hearing on CitiMortgage’s motion for judgment on the pleadings. Flagstar subsequently moved to join CitiMortgage’s motion and on December 23, 2010, I entered an order allowing Flagstar to do so.

Analysis

Allied’s Motion to Compel Arbitration

Allied argues that the arbitration agreement of April 20, 2006 obligates the plaintiff to submit her claims against Allied to binding arbitration and, therefore, seeks dismissal and an order compelling arbitration. Through the affidavit of Joseph James, Allied’s senior counsel, Allied submitted a copy of the agreement on which it relies. The plaintiff has contested the enforceability of the agreement. The agreement is signed by the plaintiff only and not by Allied. In fact, there is no reference to Allied by name anywhere in the agreement. Rather than identifying Allied by name, the agreement consistently refers to the plaintiff’s counterparty obscurely using the pronouns “we”, “our” and “us.” The second paragraph of the agreement states that “[t]his Agreement is effective and binding on both you and your heirs, successors and assigns and us when it is signed by both parties.”

Allied correctly observes that in Massachusetts a contract may be enforceable if signed by only one party if the other party manifests acceptance. Haufler v. Zotos, 446 Mass. 489, 498-99, 845 N.E.2d 322, 331(2006). Allied also notes specific cases in which courts enforced arbitration agreements lacking one party’s signature. Samincorp South American Minerals & Merchandise Corp. v. Lewis, 337 Mass. 298, 302-03, 149 N.E.2d 385, 388 (1958); Gvonzdenovic v. United Airlines, Inc., 933 F.2d 1100, 1105 (2d Cir. 1991).

While the law in Massachusetts may permit the enforcement of an arbitration agreement that is not signed by both parties, such would not be the case when the express language of the agreement requires the signature of both parties. In All State Home Mortgage, Inc. v. Daniel, 187 Md. App. 166, 977 A.2d 438 (2009), the Court of Special Appeals of Maryland addressed this issue with respect to a form of agreement nearly identical to the one in the present case. The court held that while a signature may not always be required for an arbitration agreement to be enforceable, an arbitration agreement that specifically provided for it to be “effective and binding to [sic] you and your heirs, successors and assigns and us when both parties sign it” established that execution by both parties was a condition precedent to enforcement of the contract. Id. at 171. Because the language of the arbitration agreement was unambiguous and because it was not signed by the lender, the court refused to enforce it. Id. at 183. Massachusetts contract law appears to be no different than Maryland’s in this regard. See Tilo Roofing Co. v. Pellerin, 331 Mass. 743, 7456, 122 N.E.2d 460, 462 (1954) (holding that if a condition precedent to the enforcement of a contract is “shown not to have been performed, the writing does not become a binding obligation.”). The arbitration agreement between the plaintiff and Allied is explicit—both parties must sign before the agreement is “effective and binding.” Because Allied did not sign the agreement, it never became binding on the parties and is unenforceable.

Flagstar’s Motion to Dismiss

In deciding a motion to dismiss under Fed. R. Civ. P. 12(b)(6), made applicable here by Fed. R. Bankr. P. 7012, a court must review the complaint and the documents attached to it to determine if the complaint contains sufficient facts, accepted as true, to state a claim to relief that is plausible on its face. Bell Atlantic v. Twombley, 550 U.S. 544, 570, 127 S. Ct. 1955, 1966, 167, L. Ed. 2d 929 (2007); Rederford v. U.S. Airways, Inc., 589 F.3d 30, 35 (1st Cir. 2009). A court must accept as true the factual allegations of the complaint but not the legal conclusions, even if couched as facts. Ashcroft v. Iqbal, — U.S. –, 129 S. Ct. 1937, 1947, 173 L. Ed.2d 868 (2009). Recitations of the elements of a cause of action supported only by legal conclusions are insufficient to withstand a motion to dismiss. Id.

In its motion, Flagstar seeks dismissal of Count I (violation of Chapter 183C) and Count II (determination of extent of mortgage lien due to Chapter 183C violation) of the plaintiff’s complaint on the grounds that Chapter 183C is preempted by federal law because Flagstar is a federal savings bank. Flagstar notes that the Home Owners’ Loan Act, 12 U.S.C. §§ 1461-70 (2009) (“HOLA”), authorized the Office of Thrift Supervision (“OTS”) (formerly the Federal Home Loan Bank Board) to promulgate regulations providing “for the organization, incorporation, examination, operation, and regulation” of federal savings associations and federal savings banks (collectively referred to as “federal thrifts”) such as Flagstar. Id. § 1464(a).

The OTS received broad rulemaking authority to preempt state laws that would otherwise govern the banking activities of federal thrifts. Id. § 1465; Fidelity Fed. Say. & Loan Ass’n v. de la Cuesta, 458 U.S. 141 (1982). Accordingly the OTS promulgated a regulation, 12 C.F.R. § 560.2, occupying the field in connection with the lending operations of federal thrifts. This regulation expressly preempts state laws like Chapter 183C which regulate loan-related fees.^[2] The OTS has issued interpretive letters concluding that the anti-predatory lending laws of New York, New Mexico, New Jersey, and Georgia are preempted by the federal scheme,^[3] and courts have generally adopted the preemption approach. See, e.g., Jarbo v. BAC Home Loan Servicing, 2010 WL 5173825, (E.D. Mich.); Coppes v. Wachovia Mortg. Corp., 2010 WL 4483817 (E.D. Cal.). It is clear, therefore, that federal thrifts are not subject to Chapter 183C with respect to loans they originate.

The calculus changes, however, when a federal thrift does not originate a loan but merely acquires it from a non-federal thrift lender. If a non-federal thrift lender could “cleanse” a predatory loan by selling it to a federal thrift, a vital component of many states’ consumer protection regimes would be undermined. The OTS could not have intended this result when it promulgated its preemption regulation. See, e.g. Viereck v. Peoples Sav. & Loan Ass’n., 343 N.W.2d 30 (Minn. 1984) (preemption does not apply when a federal thrift purchases a loan from an institution not subject to preemption); Garrison v. First Fed. Sav. & Loan Ass’n of S.C., 402 S.E.2d 25 (Va. 1991) (a federal thrift, as assignee of mortgage company which originated loan, is not entitled to preemption even though loan was one of large pool sold to it).

So if Flagstar were the originator of the plaintiff’s loan, then federal preemption would dispossess the plaintiff from her Chapter 183C claims against it, but if Flagstar were an assignee who purchased the loan, then the plaintiff’s state law claims against Flagstar survive preemption.

The loan documents attached to the plaintiff’s complaint indicate that Allied, not Flagstar, was the lender in this transaction. In its motion to dismiss Flagstar supports this characterization stating that there “are no allegations that Flagstar originated the loan.” Mot. to Dismiss at 4. Surprisingly, however, at one of the hearings on defendants’ motions, Flagstar’s counsel seemed to take a contrary position. He indicated that the loan had been “table-funded,” meaning that Allied was the lender in name only, but really acted as the broker in the transaction on behalf of Flagstar, who actually funded the loan. Loans which are table-funded by federal thrifts would be subject to the federal preemption scheme of HOLA. See, e.g., Comptroller of the Currency, Interpretive Letter # 1002 (May 13, 2004) (finding that a national bank would be considered the lender, and not subject to state anti-predatory lending laws, in a loan transaction table-funded by the national bank with a non-national bank broker listed as the lender).^[4] Flagstar’s curious inconsistencies notwithstanding, my field of vision with respect to a motion to dismiss is confined to the pleadings and the attachments thereto. Reviewing these in the light most favorable to the plaintiff, I conclude that the plaintiff has stated a claim that Flagstar was an assignee of the plaintiff’s lender, Allied. Therefore, Chapter 183C is not preempted with respect to this transaction and I must deny Flagstar’s motion to dismiss Counts I and II of the complaint.

CitiMortgage and Flagstar’s Motion for Judgment on the Pleadings

Having declined to grant Flagstar’s motion to dismiss on preemption grounds, I turn to the motion for judgment on the pleadings.^[5] The standard in deciding a motion for judgment on the pleadings under Rule 12(c) is similar to that applied to a motion to dismiss under Rule 12(b)(6). Gray v. Evercore Restructuring L.L.C., 544 F.3d 320, 324 (1st Cir. 2008) (noting that the standard is the same for Rule 12(b)(6) and 12(c) motions).

Counts I and II of the Complaint

Chapter 183C, §§ 2 and 3 categorize certain consumer home mortgage loans as high cost home mortgage loans (“high cost loans”) and render them unenforceable unless an approved housing agency certifies to the lender or broker that the borrower received pre-closing counseling on the advisability of the transaction. The plaintiff alleges that her loan is unenforceable because it is a high cost loan made in the absence of the required counseling.

The defendants do not dispute the fact that the plaintiff received no counseling. Rather, the dispute is over whether the loan is a high cost loan. The plaintiff argues that her mortgage loan meets the definition of a high cost loan because the “points and fees” associated with the loan, as defined by Chapter 183C, § 2,^[6] net of up to two bona fide discount points, exceeded five percent of the total loan amount. To support this allegation, the plaintiff included in her complaint a list of charges from the loan settlement statement that she argues qualify as points and fees. The total of these charges is $10,446.44, which exceeds five percent of the $153,000 loan. CitiMortgage and Flagstar argue that many of these charges do not qualify as points and fees, and the ones that do total significantly less than $7650, which is five percent of the loan amount.^[7]

There is no dispute that $4879 of charges constitute points and fees under the statute. If the pleadings support a minimum of $2772 in additional points and fees then the plaintiff will have stated a claim which survives the defendants’ motion.

Line 802 of the settlement statement reflects a charge in the amount of $2255.22 described as “Loan Discount to Allied Home Mortgage Capital Corp.” All compensation to a lender or mortgage broker, “including a broker that originates a home loan in its own name in a table funded transaction,” is included in the definition of points and fees under the statute, with the exception of up to two “bona fide discount points.” Chapter 183C, § 2. The defendants argue that the $2255.22 loan discount charge, which amounts to 1.474% of the loan, or 1.474 discount points, falls within the exception. The plaintiff argues that whether these discount points are bona fide is a question of fact that may not be decided as part of a motion for judgment on the pleadings.

To be a bona fide discount point, a charge must be “(1) knowingly paid by the borrower; (2) paid for the express purpose of lowering the benchmark [interest] rate; and (3) in fact reduc[es] the interest rate or time-price differential applicable to the loan from an interest rate which does not exceed the benchmark rate.” Chapter 183C, § 2. Nothing in the record indicates whether the plaintiff was aware of the loan discount charge, whether she knowingly paid the fee for the purpose of getting a discounted interest rate, or, most significantly, whether the interest rate reflected in the note was in fact discounted from the benchmark rate in effect at the time. For the purpose of the motion for judgment on the pleadings, therefore, I must find that the loan discount fee is not excluded from the points and fees used in determining whether the loan is a high cost loan.

Line 1107 reflects a $460 charge described as “Attorney’s fees to Viera & DiGianfilippo, Ltd.” While Chapter 183C, § 2 provides that certain fees commonly charged by closing attorneys, defined as “real-estate related fees” by 12 C.F.R. § 226.4(c)(7) and 209 Mass. Code Regs. § 32.04(3)(g), are not counted as points and fees, legal fees generally are included in the definition of points and fees. Cf. Official Staff Interpretations to 12 C.F.R. § 226.4(c)(7), 12 C.F.R. Pt. 226, Supp. I (explaining that for the purpose of calculating a loan’s finance charge under the federal Truth in Lending Act, if a settlement statement includes a single line item representing attorney’s fees where only a portion of the services rendered were real-estate related fees as defined by § 226.4(c)(7), the portion of the fees not covered by § 226.4(c)(7) must be included in the finance charge.). In addition to the $460 attorney’s fee, the settlement statement includes charges for “Document preparation” and “Title examination,” both of which are clearly real-estate related fees that are excluded from the points and fees calculation. The fact that these charges have been listed separately on the settlement statement is evidence that the generic attorney’s fee charge is not a real-estate related fee. The defendants argue unconvincingly that because attorneys are officers of the court, their fees fall under the statutory exclusion for “fees paid to or to be paid to a public official for determining the existence of or for perfecting, releasing or satisfying a security interest.” 12 C.F.R. § 226.4(e)(1). While attorneys are officers of the court, they are not public officials nor are the fees paid to them for legal services merely for perfecting, releasing or satisfying a security interest. Thus I find that the entire $460 charge for attorney’s fees constitutes points and fees.

Line 1205 of the settlement statement includes a $65 charge to “Record Municipal Lien Certif[icate] to Commonwealth of MA.” The complaint alleges that no municipal lien certificate was ever recorded with respect to this transaction. Thus, at this stage of the proceeding, this charge too must be included in points and fees.

The sum of the loan discount charge, the attorney’s fees and lien certificate recording fee is $2780.22. Adding this to the undisputed charges of $4879 brings the total points and fees to $7659.22, which is more than five percent of the total loan amount. Thus, I need not determine whether any of the remaining charges alleged by the plaintiff qualify as points and fees. The plaintiff has stated a prima facie claim that her loan is a high cost loan made in violation of Chapter 183C, and, therefore, I must deny the motion for judgment on the pleadings with respect to Counts I and II of the complaint.

Count III of the Complaint

In Count III of the complaint, the plaintiff alleges that her promissory note payable to Allied was never properly transferred to CitiMortgage, and as a result, CitiMortgage has no valid secured claim against her bankruptcy estate. The allegation is based on the fact that the copy of the note attached to CitiMortgage’s motion for relief from stay in the main bankruptcy case includes no indorsement transferring the note CitiMortgage. CitiMortgage attached a different version of the note to its motion for judgment on the pleadings, which includes an additional page containing the “pay to the order” language quoted at the outset of this memorandum. CitiMortgage and Flagstar claim that the last page is an “allonge” by which Flagstar indorsed the note in blank and then transferred the note to CitiMortgage, giving CitiMortgage the right to enforce it. The Plaintiff argues that the existence of this second copy of the note raises the question as to whether the allonge effectively transferred Flagstar’s rights in the note to CitiMortgage.

Under Mass. Gen. Laws ch. 106, the Massachusetts version of the Uniform Commercial Code (the “UCC”), for a negotiable instrument to be transferred by indorsement, the indorsement must be on the instrument itself. UCC § 3-204(a). A “paper affixed to the instrument” is considered to be part of the instrument for purposes of § 3-204(a). Id.affixed to a promissory note. See, e.g., In re Shapoval, 2010 WL 4811786, *2 (Bankr. D. Mass. 2010). If the purported allonge signed by Flagstar is not affixed to the note, then despite having possession of the note, CitiMortgage lacks the status of “holder” as defined by UCC § 1-201(20).^[8] Given that CitiMortgage has produced two different copies of the note—one with and one without the purported allonge—the plaintiff argues that there is a question of fact as to whether the allonge is affixed to the note, and therefore whether CitiMortgage has a valid claim in her bankruptcy case. To be effective, therefore, an allonge must be

Even if it is not the “holder” of the note, however, CitiMortgage may be entitled to enforce the note. UCC § 3-203(2) provides that the transfer of a negotiable instrument, “whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument.” The official commentary to this section explains that while the transferee of an instrument may enforce the instrument without being its holder, the transferee, unlike a holder, is not entitled to the presumption of the right of enforcement, and must prove the transaction through which the instrument was acquired. UCC § 3-203, § 2, cmt. 1 (1999).^[9]

In its answer, CitiMortgage asserts that it has physical possession of the note indorsed in blank by Flagstar. If the allonge is not effective because it was not affixed to the note, CitiMortgage must then prove the transaction through which it acquired the note from Flagstar. It did not plead any facts about this transaction in its answer, however. With no allegation in the pleadings to support how CitiMortgage acquired the note, I must rely on the plaintiff’s well-pleaded allegations that the note was not properly transferred to CitiMortgage.^[10]

Furthermore, CitiMortgage may not rely on the recorded assignment of the plaintiff’s mortgage from MERS to CitiMortgage as evidence that the note was transferred to it. While the assignment purports to assign both the mortgage and the note, MERS, which is a registry system that tracks the beneficial ownership and servicing of mortgages, was never the holder of the note, and therefore lacked the right to assign it. While MERS was the mortgagee of record, it was acting only as nominee for Allied, its successors and assigns. MERS is never the owner of the obligation secured by the mortgage for which it is the mortgagee of record. See, e.g., Landmark Nat. Bank v. Kesler, 289 Kan. 528, 536, 216 P.3d 158, 164 (2009) (providing a profile of MERS).

The plaintiff’s claim that CitiMortgage lacks a valid secured claim, therefore, survives the motion for judgment on the pleadings.

Conclusion

Based on the foregoing, I will deny the motion to compel arbitration, the motion to dismiss and the motion for judgment on the pleadings. Separate orders shall enter.

[1] This copy differs from the copy attached to CitiMortgage’s motion for relief from stay. See discussion below.

[2] The Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. 111-203 (2010) considerably reduced the degree to which HOLA and its regulations may preempt state consumer financial protection laws. See Dodd-Frank §§ 1044, 1046 (providing that HOLA preemption no longer occupies the field of banking regulation, and limiting preemption to specific conflicts between state and federal law). Because the plaintiff’s loan was consummated before Dodd-Frank was enacted, the new preemption standard is inapplicable to this case.

[3] See generally Legal Opinions, Office of Thrift Supervision, available at http://www.ots.treas.gov/?p=LegalOpinions.

[4] National banks are established by the National Bank Act, 12 U.S.C. §§ 21-216d (2009), which has a similar preemption regime to that of HOLA, which applies to federal thrifts. See, e.g., Aguayo v. U.S. Bank, 658 F.Supp.2d 1226, 1234 (S.D. Cal. 2009) (quoting the Office of the Comptroller of the Currency’s view that the similarity between the preemption regimes of the National Bank Act and HOLA “warrants similar conclusions about the applicability of state laws to the conduct of the Federally authorized activities of both types of entities.” 69 Fed. Reg. at 1912 n. 62). In light of the OTS’ policy of maximizing the preemptive effect of its regulations, it follows that the OTS, like the Comptroller of the Currency, would conclude that a federal thrift in a table-funded transaction is considered to be the lender for purposes of preemption analysis.

[5] In doing so, I will address Flagstar’s arguments from its motion to dismiss with respect to Count III of the complaint together with those of CitiMortgage.

[6] Section 2 provides as follows:

“Points and fees”, (i) items required to be disclosed pursuant to sections 226.4 (a) and 226.4 (b) of Title 12 of the Code of Federal Regulations or 209 CMR 32.04(1) and 209 CMR 32.04(2) of the Code of Massachusetts Regulations, as amended from time to time, except interest or the time-price differential; (ii) charges for items listed under sections 226.4 (c) (7) of Title 12 of the Code of Federal Regulations or 209 CMR 32.04(3)(g) of the Code of Massachusetts Regulations, as amended from time to time, but only if the lender receives direct or indirect compensation in connection with the charge, otherwise, the charges are not included within the meaning of the term “points and fees”; (iii) the maximum prepayment fees and penalties that may be charged or collected under the terms of the loan documents; (iv) all prepayment fees of [sic] penalties that are incurred by the borrower if the loan refinances a previous loan made or currently held by the same lender; (v) all compensation paid directly or indirectly to a mortgage broker, including a broker that originates a home loan in its own name in a table-funded transaction, not otherwise included in clauses (i) or (ii); (vi) the cost of all premiums financed by the creditor, directly or indirectly for any credit life, credit disability, credit unemployment or credit property insurance, or any other life or health insurance, or any payments financed by the creditor directly or indirectly for any debt cancellation or suspension agreement or contract, except that insurance premiums or debt cancellation or suspension fees calculated and paid on a monthly basis shall not be considered financed by the creditor. Points and fees shall not include the following: (1) taxes, filing fees, recording and other charges and fees paid to or to be paid to a public official for determining the existence of or for perfecting, releasing or satisfying a security interest; and, (2) fees paid to a person other than a lender or to the mortgage broker for the following: fees for flood certification; fees for pest infestation; fees for flood determination; appraisal fees; fees for inspections performed before closing; credit reports; surveys; notary fees; escrow charges so long as not otherwise included under clause (i); title insurance premiums; and fire insurance and flood insurance premiums, if the conditions in sections 226.4 (d) (2) of Title 12 of the Code of Federal Regulations or 209 CMR 32.04(4)(b) of the Code of Massachusetts Regulations, as amended from time to time, are met. For open-end loans, the points and fees shall be calculated by adding the total points and fees known at or before closing, including the maximum prepayment penalties that may be charged or collected under the terms of the loan documents, plus the minimum additional fees the borrower would be required to pay to draw down an amount equal to the total credit line.

[7] In her complaint, the plaintiff incorrectly calculated that five percent of the loan amount is $7950.

[8] The “holder” of a negotiable instrument is “the person in possession if the instrument is payable to bearer or, in the case of an instrument payable to an identified person, if the identified person is in possession. UCC § 1-201(20).

[9] The commentary states:

Subsection (b) states that transfer vests in the transferee any right of the transferor to enforce the instrument “including any right as a holder in due course.” If the transferee is not a holder because the transferor did not indorse, the transferee is nevertheless a person entitled to enforce the instrument under Section 3-301 if the transferor was a holder at the time of transfer. Although the transferee is not a holder, under subsection (b) the transferee obtained the rights of the transferor as holder. Because the transferee’s rights are derivative of the transferor’s rights, those rights must be proved. Because the transferee is not a holder, there is no presumption under Section 3-308 that the transferee, by producing the instrument, is entitled to payment. The instrument, by its terms, is not payable to the transferee and the transferee must account for possession of the unindorsed instrument by proving the transaction through which the transferee acquired. it. Proof of a transfer to the transferee by a holder is proof that the transferee has acquired the rights of a holder. At that point the transferee is entitled to the presumption under Section 3-308.

[10] Flagstar filed the affidavit of Sharon Morgan, its assistant vice president, in support of its motion to dismiss. In the affidavit, Ms. Morgan claims that the plaintiff’s loan was sold to CitiMortgage on September 16, 2006. I note that Fed. R. Civ. P. 12(d), made applicable by Fed. R. Bankr. P. 7012, provides that when matters outside the pleadings are presented to the court, and not excluded, a motion for judgment on the pleadings is to be treated as a motion for summary judgment. CitiMortgage waived this right, however, at the hearing on the motion for judgment on the pleadings by declining my offer to treat the motion as one for summary judgment. Given that I am limited on a motion for judgment on the pleadings to reviewing the pleadings and documents attached thereto, I have not considered Ms. Morgan’s affidavit in this analysis.

[ipaper docId=51535817 access_key=key-10r94qo87j3jfsonoop height=600 width=600 /]

Before you go down to the “New Device” take a look back when THE FLORIDA BANKER’S ASSOCIATION ADMITTED THAT NOTES ARE DESTROYED:

This is a direct quote from the Florida Banker’s Association Comments to the Supreme Court of Florida files September 30, 2009:

“It is a reality of commerce that virtually all paper documents related to a note and mortgage are converted to electronic files almost immediately after the loan is closed. Individual loans, as electronic data, are compiled into portfolios which are transferred to the secondary market, frequently as mortgage-backed securities.

The reason “many firms file lost note counts as a standard alternative pleading in the complaint” is because the physical document was deliberately eliminated to avoid confusion immediately upon its conversion to an electronic file. See State Street Bank and Trust Company v. Lord, 851 So. 2d 790 (Fla. 4th DCA 2003). Electronic storage is almost universally acknowledged as safer, more efficient and less expensive than maintaining the originals in hard copy, which bears the concomitant costs of physical indexing, archiving and maintaining security. It is a standard in the industry and becoming the benchmark of modern efficiency across the spectrum of commerce—including the court system.”

Now if there is no issues surrounding what everyone is shouting from their roof tops, then why integrate a new software that was suppose to have been implemented already to “Improves Efficiency & Transparency of Electronic Mortgage Transactions” within MERS itself?

THEY KNOW THEY HAVE A PROBLEM!

Now from SYS-CON on SmartSAFE

“During the foreclosure crisis of the last few years we saw many instances where the original and subsequent paperwork was lost, destroyed or misfiled when loans were bought and sold,” commented Kelly Purcell, Executive Vice President for Wave’s eSignSystems division. “Mortgages are sold several times throughout the life of a loan, and electronic mortgages address the problem of the ‘lost note,’ while improving efficiency in the process.”

This will debut during next week’s MBA National Technology in Mortgage Banking Conference and Expo 2011 (at the Westin Diplomat Resort & Spa in Ft. Lauderdale, Fla.).

Will this be the new system that will eventually take over MERS as MOM?

This one is both “Smart & Safe” <wink>

via: Mario Kenny

Excerpts:

Q. Would Litton have reached out to — I’m going to
13 call it MERS in place of Mortgage Electronic
14 Registration Systems. Would Litton have reached out to
15 MERS to execute this assignment?
16 A. Actually, Marti Noriega and Denise Bailey are
17 employed by Litton Loan Servicing. They have authority
18 to sign on behalf of MERS.
19 Q. Does either of those parties have authority to
20 sign on behalf of Accredited Home Lenders?
21 A. No, not to my knowledge.
22 Q. Do you know if Accredited Home Lenders was still
23 in place on the date that this assignment of mortgage
24 was executed?

THE WITNESS: I’m not certain of Accredited
2 Home Lenders’ status at this time.
3 BY MR. KORTE:
4 Q. As of April of 2009, are you aware if Accredited
5 Home Lenders was in bankruptcy?
6 A. I don’t know what their status was.
7 Q. Are there any other assignments of mortgage other
8 than this one as Composite Exhibit C that you’re aware
9 of?
10 A. No.

<SNIP>

Q. Well, is this Allonge a copy of the Allonge; or
3 is this the original Allonge copied with the correct
4 endorsement?
5 A. The only way I could verify that is to see the
6 actual, original note which is on file with the court.
7 Q. Do you know why the Allonges are different from
8 the one that was filed with the complaint and the one
9 that was filed with the court several months later?
10 A. No, I do not.

Continue below to the Depo…

[ipaper docId=51195445 access_key=key-1bsict46c55yuol0q8ge height=600 width=600 /]

EXCERPTS:

Q Have you reviewed the Pooling and
Servicing Agreement in this case?
A No, I haven’t.
Q It’s my understanding I believe it was
objected to being produced. So up till today, have
you reviewed any document that allows you to speak
on behalf of Bank of New York?
A I haven’t.
Q Have you spoken to anyone at Bank of New
York to confirm that you are allowed to speak on
behalf of a separate corporate entity here today?
A No.

Q So as you sit here, do you know whether
you have the authority from the Bank of New York to
testify to these matters and to bind the Bank of New
York as a corporation?
A No.

Q Okay. And let me go back before I get
into the question one. You are not an officer of
the Bank of New York, correct?
A That’s correct.
Q You’re not a director of the Bank of New
York?
A Correct.
Q You’re not a managing agent of the Bank of
New York?
A Correct.

<SNIP>

Q What I’m getting at is the ownership of
the actual note and mortgage, not the servicing, but
the ownership. Do you have any other document that
would either confirm or contest whether

NationsCredit Mortgage Corporation of Florida owned
this note and mortgage in order to assign it as set
forth in Exhibit 2?
A Not that I know of

<SNIP>

Q So again, do you have anything at all that
suggests that NationsCredit Home Equity Services
Corporation ever owned this note?
A I don’t.

<SNIP>

Q Do you agree that the Bank of New York
lacked standing to file the 2004 case?
A Can you be more specific on your question?
Q Do you agree that the Bank of New York did
not own the note and mortgage at the time it filed
the 2004 case?
A Well, I can say that there’s no recorded
document showing that date.

<SNIP>

Q Do you agree that the lack of standing was clear?
A No.
Q Why not?
A Because of the overlapping of dates and
the obvious issues with the assignment chain, it’s not clear that it was straightforward.

Continue below…
[ipaper docId=51043744 access_key=key-17hvwa3aj1m8rwatd7fb height=600 width=600 /]

Affidavit of Professor Ira Mark Bloom for U.S. Bank v. Congress

A Must Read…

[ipaper docId=50548037 access_key=key-25qgb0tuzzditckbm77s height=600 width=600 /]

CA Retired Judge Samuel L. Bufford said it best …

“Lenders passed around the deed to Vargas’ house as if it were a whiskey bottle at a frat party”

Jp MORGAN CHASE BANK, N.A. f/k/a Jp
MORGAN CHASE BANK f/k/a THE CHASE
MANHA TTAN BANK, AS TRUSTEE,

against

INDI flRA RAMIREZ, JOSEPH JAMES, KEISH
McCLOUD a/k/a KEISHA McLEOD, MYRNA
JAMES, NORTH FORK BANK,

Excerpt:

Finally, a court may vacate a note of issue at any time on its own motion if it appears that a material fact in the certificate of readiness is incorrect (see, 22 NYCRR 202.21 [e]; Simon v City of Syracuse Police Dept., 13 AD3d 1228, 787 NYS2d 577 [4th Oept 2004], Iv dismissed 5 NY2d 746, 800 NYS2d 375 [2005]). Here, based on the evidence submitted with the moving papers and the confusion regarding plaintiff’s standing and prosecution of this foreclosure action, the Court concludes that the certificate of readiness contains a misstatement of material fact, namely, that
disclosure is complete and the action is ready for trial. Accordingly, the Court, sua sponte, vacates the note of issue filed by plaintiff and strikes this action from the trial calendar (see 22 NYCRR 202.21 [e]).

This is a MUST read below…

[ipaper docId=50325156 access_key=key-25hut0sqsr8f7xi6zfvm height=600 width=600 /]

Don’t you just love it when links and posts go missing for absolutely NO reason whatsoever!

REPOST-

Fed. Deposit Ins. Corp., as Receiver of WAMU v. TRAVERSARI, 2010 Ohio 2406 – Ohio: Court of Appeals, 11th Dist., Geauga 2010
dinsfla | June 5, 2010 at 9:49 am |

2010-Ohio-2406

Federal Deposit Insurance Corporation, as Receiver of Washington Mutual Bank, Plaintiff-Appellee,
v.
Robert Traversari, et al., Defendants-Appellants.
No. 2008-G-2859.

Court of Appeals of Ohio, Eleventh District, Geauga County.

May 28, 2010.

Karen L. Giffen and Kathleen A. Nitschke, Giffen & Kaminski, L.L.C., 1300 East Ninth Street, #1600, Cleveland, OH 44114 and Donald Swartz, Lerner, Sampson & Rothfuss, P.O. Box 580, Cincinnati, OH 45210-5480 (For Plaintiff-Appellee).

Edward T. Brice, Newman & Brice, L.P.A., 214 East Park Street, Chardon, OH 44024 (For Defendants-Appellants).

OPINION
COLLEEN MARY O’TOOLE, J.

{¶1} Appellants, Robert Traversari (“Traversari”) and B & B Partners (“B & B”), appeal from the August 5, 2008 judgment entry of the Geauga County Court of Common Pleas, granting summary judgment in favor of appellee, Washington Mutual Bank, and entitling appellee to a judgment and decree in foreclosure.

{¶2} In 1994, appellant Traversari borrowed $190,000 from Loan America Financial Corporation which was memorialized by a promissory note and further secured by a mortgage on property located at 9050 Lake-in-the-Woods Trail, Bainbridge Township, Geauga County, Ohio. Appellant Traversari obtained the loan individually and/or in his capacity as the sole member and principal of appellant B & B, a real estate based company. The mortgage at issue was subsequently assigned to appellee.

{¶3} On January 8, 2007, appellee filed a complaint in foreclosure against appellants and defendants, JP Morgan Chase Bank, N.A., Charter One Bank, N.A., Jesse Doe, and Geauga County Treasurer. In count one of its complaint, appellee alleges that it is the holder and owner of a note in which appellant Traversari owes $149,919.96 plus interest at the rate of 7.75 percent per year from September 1, 2006, plus costs. In count two of its complaint, appellee alleges that it is the holder of a mortgage, given to secure payment of the note, which constitutes a valid first lien upon the real estate at issue. Appellee maintains that because the conditions of defeasance have been broken, it is entitled to have the mortgage foreclosed. Appellee indicated that appellant B & B may have claimed an interest in the property by virtue of being a current titleholder.

{¶4} Appellants filed an answer and counterclaim on February 16, 2007. In their defense, appellants maintain that appellee failed to comply with Civ.R. 10(D) and is estopped from asserting a foreclosure by its waiver of accepting payment. According to their counterclaim, appellants allege the following: on or about September 25, 2006, appellant Traversari sent a check in the amount of $150,889.96 to appellee for payment in full on the loan, which included the principal of $149.919.96 plus $970 of interest; on or about November 17, 2006, appellee issued a new home loan statement to appellant Traversari indicating the amount due was $5,608.95; appellant Traversari contacted appellee stating that a check had been sent for payment in full; appellee failed to respond; appellant Traversari mailed a check to appellee in the amount of $155,000; no stop payment was issued on the first check; because the house was vacant, appellant Traversari went to check the residence on December 26, 2006, and discovered that it had been broken into; an orange placard was placed on the premises indicating that a representative from appellee would secure the home; appellant Traversari immediately purchased new lock sets, secured the premises, and called and left a message for appellee to inform them to not enter the home; on December 31, 2006, electronic transmission was sent to appellee concerning the break-in and requested appellee to stop breaking into the home as well as to locate the two checks and to send a copy of a letter to a credit bureau; appellee did not respond; appellant Traversari then mailed a check from a separate account in the amount of the last payment demanded by appellee; appellee sent the $155,000 check back with a form letter to the address of the vacant property stating that personal checks were not accepted for payoff; appellee also rejected the $5,674.41 check; appellant Traversari then contacted appellee regarding the rejected checks; on January 11, 2007, appellant Traversari went to the home again, finding the kitchen door open, furnace running, new lock set taken out, garage door openers unplugged, and worse dings in the steel door; and appellant Traversari emailed appellee again, however, appellee indicated it could not give appellants any information because the case had been moved to foreclosure.

{¶5} Appellee filed a reply to appellants’ counterclaim on March 19, 2007, and an amended reply on September 6, 2007.

{¶6} According to the deposition of Maritza Torres (“Torres”), an employee of appellee in its senior asset recovery, loss prevention department, she was assigned to appellants’ case. Torres testified that appellee has no record of having received a check in the amount of $150,889.96 from appellant Traversari on September 25, 2006. However, she indicated that appellee received a check from appellant Traversari on September 30, 2006, in the amount of $102,538.74 (“Check #1?), which was returned to him due to appellee’s policy not to accept checks for early payoffs that are not certified funds.

{¶7} According to the deposition of Linda Rae Traversari (“Linda”), appellant Traversari’s wife, she is the handler of the family assets. Following the return of Check #1, appellee forwarded a delinquency letter to appellant Traversari in early November of 2006. Later that month, appellee sent a second default letter to him. Linda testified that on or around November 30, 2006, appellant Traversari sent another personal check for early payoff to appellee in the amount of $155,000 (“Check #2?). Appellee returned Check #2 with a letter explaining that noncertified funds are not accepted for early payoff. Linda stated that on January 2, 2007, appellant Traversari sent a third personal check via certified mail to appellee in the amount of $5,674.41 (“Check #3?). By the time appellee received Check #3, the loan had been referred to foreclosure. Check #3 was returned to appellant Traversari as “insufficient.”

{¶8} On March 14, 2008, appellee filed a motion for summary judgment pursuant to Civ.R. 56(b). Appellants filed a response on April 21, 2008.

{¶9} In its July 3, 2008 order, the trial court found, inter alia, that appellee was within its legal rights to reject the personal checks; appellee had the right to institute and maintain the foreclosure because appellants did not cure their default; and appellee had the right to enter the premises. Thus, the trial court indicated that appellee’s motion for summary judgment would be granted in its favor as to all issues and claims against appellants upon appellee’s presentation of an appropriate entry to be provided to the court.

{¶10} Appellee filed a “Motion For Submission Of Its Entry Granting Motion For Summary Judgment And Decree In Foreclosure” on July 11, 2008, and an amended entry on July 21, 2008. Appellants filed objections to appellee’s proposed amended entry the following day.

{¶11} Pursuant to its August 5, 2008 “Amended Entry Granting Summary Judgment And Decree In Foreclosure,” the trial court granted summary judgment in favor of appellee, entitling appellee to a judgment and decree in foreclosure. The trial court ordered, inter alia, that unless the sums found due to appellee are fully paid within 3 days from the date of the decree, the equity of redemption shall be foreclosed, the property sold, and an order of sale issued to the Sheriff directing him to appraise, advertise, and sell the property. The trial court further ordered that the proceeds of the sale follow the following order of priority: (1) to the Clerk of Courts, the costs of the action, including the fees of appraisers; (2) to the County Treasurer, the taxes and assessments, due and payable as of the date of transfer of the property after Sheriff’s Sale; (3) to appellee, the sum of $149,919.96, with interest at the rate of 7.75 percent per annum from September 1, 2006 to February 29, 2008, and 7.25 percent per annum from March 1, 2008 to present, together with advances for taxes, insurance, and costs; and (4) the balance of the sale proceeds, if any, shall be paid by the Sheriff to the Clerk of Court to await further orders. It is from that judgment that appellants filed the instant appeal, raising the following assignment of error for our review:

{¶12} “THE TRIAL COURT ERRED TO THE PREJUDICE OF DEFENDANTSA-PPELLANTS IN ITS ORDER GRANTING IN PLAINTIFF-APPELLEE’S FAVOR AS TO ALL ISSUES AND CLAIMS AND AGAINST DEFENDANTS, AND ITS AMENDED ENTRY GRANTING SUMMARY JUDGMENT AND DECREE IN FORECLOSURE TO PLAINTIFF-APPELLEE AGAINST DEFENDANTS-APPELLANTS.”

{¶13} In their sole assignment of error, appellants argue that the trial court erred by granting summary judgment in favor of appellee, and entitling appellee to a judgment and decree in foreclosure.

{¶14} “This court reviews de novo a trial court’s order granting summary judgment.” Hudspath v. Cafaro Co., 11th Dist. No. 2004-A-0073, 2005-Ohio-6911, at ¶8, citing Hapgood v. Conrad, 11th Dist. No. 2000-T-0058, 2002-Ohio-3363, at ¶13. “`A reviewing court will apply the same standard a trial court is required to apply, which is to determine whether any genuine issues of material fact exist and whether the moving party is entitled to judgment as a matter of law.’” Id.

{¶15} “Since summary judgment denies the party his or her `day in court’ it is not to be viewed lightly as docket control or as a `little trial.’ The jurisprudence of summary judgment standards has placed burdens on both the moving and the nonmoving party. In Dresher v. Burt [(1996), 75 Ohio St.3d 280, 296,] the Supreme Court of Ohio held that the moving party seeking summary judgment bears the initial burden of informing the trial court of the basis for the motion and identifying those portions of the record before the trial court that demonstrate the absence of a genuine issue of fact on a material element of the nonmoving party’s claim. The evidence must be in the record or the motion cannot succeed. The moving party cannot discharge its initial burden under Civ.R. 56 simply by making a conclusory assertion that the nonmoving party has no evidence to prove its case but must be able to specifically point to some evidence of the type listed in Civ.R. 56(C) that affirmatively demonstrates that the nonmoving party has no evidence to support the nonmoving party’s claims. If the moving party fails to satisfy its initial burden, the motion for summary judgment must be denied. If the moving party has satisfied its initial burden, the nonmoving party has a reciprocal burden outlined in the last sentence of Civ.R. 56(E) to set forth specific facts showing there is a genuine issue for trial. If the nonmoving party fails to do so, summary judgment, if appropriate shall be entered against the nonmoving party based on the principles that have been firmly established in Ohio for quite some time in Mitseff v. Wheeler (1988), 38 Ohio St.3d 112 ***.” Welch v. Ziccarelli, 11th Dist. No. 2006-L-229, 2007-Ohio-4374, at ¶40.

{¶16} “The court in Dresher went on to say that paragraph three of the syllabus in Wing v. Anchor Media, Ltd. of Texas (1991), 59 Ohio St.3d 108 ***, is too broad and fails to account for the burden Civ.R. 56 places upon a moving party. The court, therefore, limited paragraph three of the syllabus in Wing to bring it into conformity with Mitseff. (Emphasis added.)” Id. at ¶41.

{¶17} “The Supreme Court in Dresher went on to hold that when neither the moving nor nonmoving party provides evidentiary materials demonstrating that there are no material facts in dispute, the moving party is not entitled a judgment as a matter of law as the moving party bears the initial responsibility of informing the trial court of the basis for the motion, `and identifying those portions of the record which demonstrate the absence of a genuine issue of fact on a material element of the nonmoving party’s claim.’ Id. at 276. (Emphasis added.)” Id. at ¶42.

{¶18} In the case at bar, the record establishes that appellant Traversari sent personal checks to appellee for payment on the loan at issue. However, appellee returned the checks with letters indicating they would not be accepted as payment because they were not certified, and foreclosure proceedings commenced.

{¶19} There is no genuine issue of material fact that appellants executed and delivered a note and mortgage to appellee. However, a genuine issue of material fact does exist with regard to the fact that appellant Traversari tendered the entire principal payment and appellee rejected it because the payment was made by personal check. See Chase Home Fin., LLC v. Smith, 11th Dist. No. 2007-P-0097, 2008-Ohio-5451, at ¶19. The dates and amounts of the personal checks are conflicting due to the testimony and/or evidence submitted by the parties.

{¶20} “A cause of action exists on behalf of a damaged mortgagor when, in conformity with the terms of his note, he offers to the mortgagee full payment of the balance of the principal and interest, and the mortgagee refuses to present the note and mortgage for payment and cancellation.” Cotofan v. Steiner (1959), 170 Ohio St. 163, paragraph one of the syllabus.

{¶21} Appellant Traversari did not place any conditions on the personal checks tendered to appellee. We note that “[t]he essential characteristics of a tender are an unconditional offer to perform, coupled with ability to carry out the offer and production of the subject matter of the tender.” Walton Commercial Enterprises, Inc. v. Assns. Conventions, Tradeshows, Inc. (June 11, 1992), 10th Dist. No. 91AP-1458, 1992 Ohio App. LEXIS 3081, at 5. (Emphasis sic.)

{¶22} “It is an implied condition of every contract that one party will not prevent or impede performance by the other. If he does prevent or impede performance, whether by his prior breach or other conduct, he may not then insist on performance by the affected party, and he cannot maintain an action for nonperformance if the promises are interdependent.” Fed. Natl. Mtge. Assns. v. Banks (Feb. 20, 1990), 2d Dist. No. 11667, 1990 Ohio App. LEXIS 638, at 8-9, citing 17 American Jurisprudence 2d, Contracts, Sections 425, 426.

{¶23} In the instant matter, paragraph 3 of the Open-End Mortgage provides:

{¶24} “3. Application of Payments. Unless applicable law provides otherwise, all payments received by Lender under paragraphs 1 and 2 shall be applied: first, to any prepayment charges due under the Note; second, to amounts payable under paragraph 2; third; to interest due; fourth, to principal due; and last, to any late charges due under the Note.”

{¶25} Here, there was no new note and mortgage, nor agreement for application of payments, when the mortgage at issue was subsequently assigned from Loan America Financial Corporation to appellee. Rather, it was the policy of appellee to require mortgagors to pay by certified check for any amounts over $5,000. According to appellee’s employee, Torres, she indicated that any amount over $5,000 not paid by certified funds puts the company at risk because it can take anywhere between 7 to 10 days for a personal check to clear. We note, however, that the mortgagee has up to 90 days to verify the sufficiency of the underlying funds before satisfying and releasing its recorded mortgage. R.C. 5301.36(B). In the instant case, it would have been reasonable for appellee to have either waited 7 to 10 days for appellant Traversari’s checks to clear or to have inquired with his bank, see, generally, Hunter Sav. Assn. v. Kasper (Sept. 25, 1979), 10th Dist. No. 78AP-774, 1979 Ohio App. LEXIS 11777, at 13, if there were sufficient funds before returning any of his 3 personal checks and commencing foreclosure proceedings.

{¶26} The lender in this case unilaterally refused the debtor’s payment by check due to itsinternal policy that an amount over $5,000 had to be made by certified check. The terms and conditions of the mortgage, however, do not impose such a requirement. Under paragraph 3 of the Open-End Mortgage, it appears the lender had an obligation to apply the payment tendered, by personal check or otherwise. Its refusal to present the check for clearance and apply the payment on the ground of internal policy appears to have violated the debtor’s rights.

{¶27} Construing the evidence submitted most strongly in favor of appellants, we must conclude that genuine issues of material fact remain. Again, a genuine issue of material fact exists with regard to the fact that appellant Traversari tendered the entire principal payment and appellee rejected it because the payment was made by personal check. Also, the dates and amounts of the personal checks are conflicting due to the testimony and/or evidence submitted by the parties. Thus, the trial court erred by granting appellee’s motion for summary judgment.

{¶28} For the foregoing reasons, appellants’ sole assignment of error is well-taken. The judgment of the Geauga County Court of Common Pleas is reversed and the matter is remanded for further proceedings consistent with this opinion. It is ordered that appellee is assessed costs herein taxed. The court finds there were reasonable grounds for this appeal.

Trapp, P.J., Rice, J., concur.

Defendants are not named parties to the instant appeal.

The matter was stayed. On November 26, 2008, the Federal Deposit Insurance Corporation was substituted for appellee Washington Mutual Bank. This court instructed the Clerk of Courts to correct the docket by removing “Washington Mutual Bank” and substituting “Federal Deposit Insurance Corporation, as Receiver of Washington Mutual Bank” as appellee in this appeal. The stay order automatically dissolved on August 29, 2009.

[ipaper docId=49949158 access_key=key-16gs2rj75pcangydg3mz height=600 width=600 /]

A Utah House committee Tuesday voted down a bill that would have given homeowners the name of someone with whom they could try to renegotiate a loan during the foreclosure process.

The Business and Labor Committee voted 6-5 to recommend against HB326 despite sponsor Rep. LaVar Christensen’s assurance it was tilted in favor of banks, mortgage lenders and note holders.

At the time a default notice is filed, the bill would have required the holder of the mortgage note to register the name and contact information of a “special servicer” who had authority to renegotiate the terms of a loan before a property could be sold. It also would have required the servicer to give “reasonable consideration” to a home-owner’s request for relief.

The bill pushed by the Draper Republican was created in response to thousands of foreclosures and threatened foreclosures in Utah, the result of the bursting of the real estate bubble in 2007. Home-owners say lenders have failed to negotiate loan modifications with them and, in some cases, they cannot even find anyone to speak to about their loans.

Continue reading … The Salt Lake Tribune

H.B. 326 Substitute
Trust Deed Foreclosure Changes — Christensen, L.

Drafting Attorney: Robert H. Rees

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Similar Bills: Mortgage Business Real Estate

This bill has been substituted. The substitute is H.B. 326 Second Substitute

This bill is a substitute bill. The bill that was substituted is H.B. 326

Bill Status/Votes
Last Action: 01 March 2011, Bill Substituted by Standing Committee
Last Location: House Business and Labor Committee
Bill Status/Votes Last Updated: 1 March 2011, 11:23 AM

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Introduced HTML | PDF | WP Zipped 71K  Last Updated: 24 February 2011, 8:13 AM
Compare H.B. 326 Substitute to H.B. 326

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Fiscal Note HTML | PDF Last Updated: 24 February 2011, 7:59 AM

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SFF took a challenge and wanted to see if there were any cases in past years identical to what is plaguing the court systems today. Sure enough the following cases below are ONLY a fraction of what was in store. Just imagine if someone was paying any attention to these cases, perhaps something could have changed the way the lending industry used an electronic device that without a doubt bifurcated the mortgage (deed of trust) from the note!

Same players, same tricks, years later…

Excerpt from MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC. v. DUVAL 2004

The moving papers reflect that the plaintiff is not the owner of the subject mortgage nor the note for which said mortgage was given as security. Nor is the plaintiff the lender named in the note and mortgage attached the moving papers. In addition, there is no evidence that the plaintiff was the owner of the note and mortgage at the time this action was commenced by reason of assignment or otherwise. The failure to establish the plaintiff’s ownership of the note and mortgage at the time of the commencement of this action precludes the granting of the instant motion since the plaintiff is unable to establish “the facts constituting the claim(s)” against the known defendants as required by CPLR 3215(f) (Kluge u Fugaqy, 145 AD2d 537,53 6 NYS2d 92; cJ, Federal National Mortgage Association v Yonkelsone, 303 AD2d 546,755 NYS2d 730).

2004

AURORA v. FITZGERALD 2004

MERS v. BAXTER 2004

MERS v. DUVAL 2004

MERS v. EDWARDS 2004

MERS v. PALERMO 2004

MERS v. PARKER 2004

MERS v. POBLETE 2004

MERS v. SCHOENSTER 2004

Excerpt from MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC. v. DELZATTO 2005

The moving papers reflect that the above named plaintiff, a/k/a MERS, is not the owner of the subject mortgage nor the note for which said mortgage was given as security. The plaintiff was not the named as the lender in either the note or mortgagee sought to be foreclosed herein. Instead, the plaintiff is identified in the mortgage indenture as a “separate corporation acting solely as nominee for the Lender and Lender’s successors and assigns” and “FOR PURPOSES OF RECORDING THIS MORTGAGE, MERS IS THE MORTGAGEE OF RECORD”

Nor is there any proof that the plaintiff was the owner of the note and mortgage at the time this action was commenced by reason of assignment or otherwise. The failure to establish the plaintiffs ownership of the note and mortgage at the time of the commencement of this action precludes the granting of the instant motion since the plaintiff is unable to establish “the facts constituting the claim(s)” against the defaulting defendants as required by CPLR 3215(f) (Kluge v Fugazy, 145 AD2d 5 37,536 NYS2d 92; a:, Federal National MortgageAssociation v Youkelsone, 303 AD2d 546,755 NYS2d 730).

2005

Aurora v. Fitzgerald 2005

MERS v. DELZATTO 2005

MERS v. GARCIA 2005

MERS v. ROMERO 2005

MERS v. Trapani 2005

Excerpt from MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC. v. RAMDOOLAR 2006

As indicated in a prior order dated December 6, 2005 (Burke, J.), the plaintiff, Mortgage Electronic Registration Systems, Inc., was not the owner of the note and mortgage at the titme this action was commenced. The court thus found that the plaintiffs complaint failed to state cognizable claims against the defendants (Kluge v Fugazy, 145 AD2d 537, 536 NYS2d 92; see, also, Katz v East-Ville Realty Company, 249 AD2d 243, 672 NYS2d 308) and that the plaintiff was thus not entitled to the default judgment it demanded on is prior application (CPLR 3215[f1).

On the instant application, the plaintiff purportedly assigned its interest in this subject note and mortgage to an entity known as HSBC Bank USA, National Association as Trustee for MLMI Series 2005-WMC. Since, however, the plaintiff, Mortgage Electronic Services, Inc. was not the owner of the note and mortgage at the time of the purported assignment, the named assignee, HSBC Bank USA, National Association as Trustee for MLMI Series 2005-WMC, acquired no title thereto. The plaintiffs demand for substitution of said entity as the plaintiff in this action is thus denied.

In addition, a substitution of a party plaintiff, such as that demanded here, may not be accomplished by a mere caption amendment. Rather, the substitution of a new party plaintiff would require its participation by its consent andor its formal joinder in this action as contemplated by CPLR 1003 and the filing of an amended complaint by the proposed new plaintiff wherein it alleges facts which constitute cognizable claims against the defendants. Since there was no joinder of the proposed new plaintiff, by consent or service, nor was that any demand by it for leave to serve an amended complaint, the substitution of HSBC Bank USA, National Association as Trustee for MLMI‘ Series 2005-WMC as a party plaintiff would have been precluded even if a valid and recorded assignment by the owner of the note and mortgage had been attached to the moving papers.

2006

MERS v. BIAS 2006

MERS v. Hatwood 2006

MERS v. LONG 2006

MERS v. MORRIS 2006

MERS v. RAMDOOLAR 2006

MERS v. SANFILIPPO 2006

MERS v. WELLS 2006

Excerpt from MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC. v. WILLIAMS 2007

The claimant, J.P. Morgan Chase Bank as Trustee for the Home Equity Trust Series 2004- 3, purports to be the assignee, pursuant to a corporate assignment of mortgage/deed of trust executld by Mortgage Electronic Registration Systems, Inc. (“MERS”), as nominee for Decision One Mortgage Company, LLC, of a certain mortgage executed by defendant-mortgagor JULIA WILLIAMS and delivered to MERS as nominee for Intervale Mortgage Corp., which mortgage is alleged to be a subordinate lien to the mortgage previously foreclosed in this action. The claimant’s submissions do not establish the chain of assignments from the original mortgagee, Intervale Mortgage Corp., and the proofs submitted by the claimant are insufficient to establish that it .s the current owner and holder of the note and mortgage that purportedly entitle it to the surplus monics deposited with the Suffolk County Treasurer. The Court notes that even if MERS has authority to assign the subject mortgage (which is not apparent from the submissions), there is no prod2fof its authority to assign the underlying note, which it apparently does not own. Since a mortgage may not be separated from the underlying debt (Merritt v. Bartholick, 36 N.Y. 44,45, 34 HOW. Pr. 129 (1 867), the issue of the claimant’s standing to claim the surplus monies is not established by the record before the Court.

2007

EMC v. WINK-THILMAN 2007

MERS v. WILLIAMS 2007

U.S. BANK v. MOSS 2007

WELLS FARGO v. GISONDA 2007

WELLS FARGO v. GOLDEN 2007

WHOA! Don’t stop here the image below will take you to 2008, 2009, 2010 and 2011 cases…

[ipaper docId=48247103 access_key=key-29sa497rygd5a5lbevqy height=600 width=600 /]

* Allegations Deutsche Bank filed false documents

* Inquiry could affect foreclosures across United States

* Testimony demanded from Deutsche Bank officials

By Scot J. Paltrow

NEW YORK, Jan 28 (Reuters) – A branch of the U.S. Department of Justice is investigating whether Deutsche Bank (DBKGn.DE) filed false documents and attempted to mislead a bankruptcy judge in a foreclosure action.

Although the investigation involves the case of only one homeowner in Connecticut, a court document filed on Jan. 26 by the United States Trustee’s Office said it wants to elicit information about Deutsche Bank’s practices in general in foreclosure cases.

The inquiry involves Deutsche Bank National Trust Co, the Deutsche Bank unit that acts as trustee for thousands of trusts that invested in mortgage-backed securities. The U.S. Trustees’ Office is a division of the Department of Justice responsible for overseeing administration of bankruptcy cases.

In recent months, the office has stepped up efforts around the United States to block banks and law firms from using false or fabricated documents in home foreclosure actions. The effort follows disclosures in October 2010 of large-scale “robo-signing”, the mass signing of foreclosure affidavits containing “facts” that had never been checked, and wide production of false mortgage assignments.

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